Westminster Hall Sitting of 5 July 2000

Preamble
[SIR ALAN HASELHURST in the Chair]

Euro
Motion made, and Question proposed, That the sitting be now adjourned.—[Mr. Dowd.]
9.30 am
Mr. Geoffrey Clifton-Brown: I am delighted to have secured this debate in this parallel Chamber on the cost of changeover to the euro. I welcome my hon. Friends and the Minister.
The debate is especially timely. The press is full of spin and counterspin on whether the euro should be debated in public. The only time I have ever agreed with the Secretary of State for Trade and Industry was when he said that a proper debate should be held on the subject. I wholeheartedly agree, as do most of my constituents, who feel that a debate should be held to enable the general public to be thoroughly familiar with the issues involved so that, when a referendum is held, they can make a properly informed decision.
Eleven countries met the Maastricht criteria. Phase 3, to lock irrevocably the national currencies of the 11 countries, took place on 1 January 1999. The currencies of those countries will cease to exist on 1 January 2002. Interestingly, Greece, too, has now been admitted to the system. Denmark will hold a referendum on 28 September, the result of which will be eagerly awaited by the peoples and Governments of not only this country but Sweden, where Danish developments are anxiously watched.
In October 1997, the Government set out five economic tests that must be met before we can join the euro. I refer to box 2.1 on page 21 of the Government's Budget 2000 Red Book—interestingly enough, there is just three quarters of a page on the euro in the entire book. It is almost as though Mr. Brown personally wrote the Red Book to ensure little discussion of the matter.
Mr. Deputy Speaker: Order. The hon. Gentleman should know how to refer to other right hon. and hon. Members of the House.
Mr. Clifton-Brown: It is almost as though the Chancellor personally wrote the Red Book to ensure little discussion of the euro. That scant three quarters of a page sets out the five economic tests that must be met before a decision to join can be made. They are:
whether the UK has achieved sustainable convergence with the economies of the single currency; whether there is sufficient flexibility in the UK economy to adapt to change and unexpected economic events; whether joining the single currency would create better conditions for business to make long term decisions to invest in the UK; the impact membership would have on our financial services…and, ultimately, whether the single currency would be good for employment.
Those five tests could be stretched to mean almost anything to anyone. I suppose that the first test is the most important and regularly cited. It relates to the
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problem with our exchange rate and the fact that our economy is out of synch with those of other European countries.
Some of my constituents who advocate joining the euro say that that will be a magical way to ensure either that the euro rises or the pound drops, placing us in a realistic position to accede to phase three. Commentators generally estimate that we need an exchange rate of DM2.60 to DM2.70 before it would be feasible for us to join. Surely if we magically achieved that exchange rate, the argument that manufacturing businesses would be put out of business would cease to exist. The core economic argument about whether to join the euro would then be the exchange rate of the euro against the United States dollar and the other major currencies of the world. It is worth noting that an exchange rate is an expression of the economic performance of a country or a group of countries. It is not some artificial mechanism.
That is where the argument becomes difficult. Economic tests have been set as to why we should join the euro, but on the major tests it seems that the United Kingdom economy does better outside the euro than it would inside it. The euro has dropped and our exchange rate has remained relatively strong against the dollar, the currency of our major trading nation. On inflation, which is one of the major reasons for wanting to join the euro, our rate is lower than those in all 11 countries on an adjusted basis. More importantly, our unemployment is favourable in comparison with that in other countries, and considerably so when one remembers that the average rate of unemployment in the European Community among those aged 25 and under was a staggering 18.4 per cent., almost twice our rate. On the major economic tests, there is good evidence to show that there is no urgency to join the euro.
The Government's case has been shot out of the water by some helpful figures from the Invest in Britain Bureau. One of the Government's major arguments is that we are losing out on inward investment, but an article in Sunday Business of 2 July blows a hole in that. It states:
More than 40% of US investment in the European Union locates in the UK. And more than 25% of all investment in the EU comes to the UK.
It goes on to state that
70% of US businesses succeed in the UK compared with just 42% in Europe.
Some of those points will be made at a conference later this week that the Chancellor will attend, so no doubt he will get into an even more dormant mode about publicising the benefits of the euro.
The Government have announced the second outline national changeover plan, which said that preparations for joining should continue in the public and private sectors. I want to concentrate on those aspects. Through the introduction of secondary legislation on negative procedure, which is difficult to challenge in the House, the Government have given themselves wide powers to spend almost unlimited and certainly unspecified sums—whatever is necessary—on the changeover to the euro. That especially applies in terms of spending by the Inland Revenue and the Commissioners of Customs and Excise.
Each Department has produced its own outline changeover plan. By the end of February, £6.3 million will have been spent in planning. Her Majesty's

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Customs and Excise and the Department of Social Security will have invested £20 million in planning by the end of the year. That is a thoroughly good thing. The conclusion of the report of the Select Committee on the Treasury that was published on 22 April 1998 states that if we are going to go into the euro, proper planning will be absolutely essential.
Paragraph 9 of the report draws a useful parallel, stating that the European Commission frequently cites the UK's decimalisation programme as a good example of the implementation of a complex programme of change. The Committee recalled that one feature of its success was the fact that the decimalisation board consulted closely with retailers throughout and implemented the lessons that it learned.
Paragraph 9.2 reflects on the fact that preparations were in hand for five years, with no change for the value of the pound. Very few coins had to be replaced on decimalisation day itself, and there was general popular support. Despite all those factors, people working in shops in February 1972 say that that day was the worst of their working lives. The challenge of the euro is significantly greater, and one would expect people working in shops to find it difficult. Similar difficulty was anticipated on euro changeover day on 1 January 1999 but, despite the considerable numbers working in the City, the change itself was smooth. Whatever happens, everyone would admit that, in the unlikely event that the British people decide, in a referendum, that we should go into phase 3 of the euro, it is essential that the Government carry out proper planning. There is no doubt that considerable planning is taking place behind the scenes.
If the euro could be phased in over a longer period, costs to the taxpayer and private industry could be reduced. Existing systems would expire over their natural life, rather than being replaced prematurely in an accelerated programme to join the euro. The greater the warning before we join the euro, the lower the cost will be.
What is happening out there in the private and public sectors? It is worth examining the situation out there on the ground. In the past year, only 40,000 euro accounts were opened, only 4 per cent. of the total number of business accounts. London has 20 per cent. of the euro deposit market—my source is the Wholesale Market Brokers Association. London's global share of foreign exchange, at 32 per cent., compares with Germany at 5 per cent. In derivatives, London's share is 35 per cent., France's 10 per cent. and Germany's 7 per cent. My source for those figures is the Bank of International Settlements. People say that we are missing out by not joining the euro, but take-up of the euro is small in trade terms, especially among non-euro nations. The City of London is not at a disadvantage because we have not joined the euro, although it is often cited as being so. People can trade perfectly securely in a range of markets in London, which continues to have the lion's share of that trade.
Dr. Julian Lewis: I apologise because a Select Committee engagement means that I will miss the last part of my hon. Friend's speech. It is hardly surprising that large firms and the City are
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making so few preparations for changeover, given that everybody knows that between 60 and 70 per cent. of the British people are opposed to scrapping the pound and replacing it with the euro. Why should businesses or the City want to spend great sums of money when they know that, if the referendum is ever held, the Government will lose it?
Mr. Clifton-Brown: I am grateful to my hon. Friend for making that point, which I was going to make myself later. There is also a more pragmatic reason for not making preparations. If there is no necessity to spend money on the changeover because business systems or trading patterns work perfectly well outside the euro, what is the incentive to spend on huge preparations for something that may or may not happen, on an uncertain time scale?
The Bank of England produces updated reports about practical issues, and it monitors the financial effects of the euro alongside the euro preparation units within the Treasury. Another problem, beyond the preparedness of the private and public sectors, is the production of euro notes and coins, which will have to take place in the 11 eurozone countries by 1 January 2002. Minting of all eight denominations of euro coins is also under way throughout those countries, and production is broadly on track to meet the requirement for 56 billion coins on the changeover date. Nine billion notes will need to be in circulation to meet transactions in the first fortnight after that date. It is a huge operation by the 11 eurozone countries, and it may be fortunate that we are not part of it. Those countries can allow their systems to settle down, and, should we ever want to go into the euro, we will be able to learn from their experience and see what the problems are.
What are the practical implications for Britain remaining outside the eurozone? The December 1999 edition of the Bank of England's "Practical Issues" report, to which I referred, states:
All the available evidence indicates that, since the launch of the euro, London has fully maintained its market share. Statistics for the change in London's market share are not yet available in every market. However, the latest figures serve to demonstrate the extent to which the City is not just a UK asset but an asset for the EU as a whole.
That applies whether we are in or out of the eurozone. In a number of aspects, London is transacting the lion's share of the eurozone business. For example, it has more foreign banks and subsidiaries—537—than Frankfurt, Paris and New York, which have 242, 187 and 275 respectively.
I want to deal with the technical aspect of preparation in the public sector, as well as the private sector, money-handling sectors and opinion on the ground. This month was the deadline for all national health service trusts, which run our hospitals, to create a product initiation document. I have referred to the changeover document that every Department was required to produce, and trusts will be required to produce such documents by the end of this month. At a time when trusts are financially and physically stretched—outpatient lists, and waiting lists to get on to waiting lists, are growing every day—they are being saddled with the additional responsibility of producing a changeover

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plan. A document was presented to the Salisbury Health Care NHS trust by its finance director, who said, devastatingly:
there are no known benefits from this project just a great deal of hard work.
Perhaps more importantly, no additional funding has been made available to pay for the huge amount of work and new equipment involved. That is an indictment of this Government, who are making preparations in the health service for something that may or may not happen, on a time scale that may or may not be certain, yet people's lives are at risk every day. It is incumbent on the Government to provide the trusts, and every other Government Department whose work is being hampered by changeover plans, with the proper funding and expertise to do the necessary work. It should not expect it to be funded out of existing budgets.
From my work on the Public Accounts Committee, I know the huge amount of money that has been wasted on highly expensive information technology systems that do not work properly. People's pensions were affected by the huge delay in getting the IRS2 computer up and running in the Benefits Agency. It is still not up and running properly. There have been problems with IT systems in the Crown Prosecution Service, the health service, the Ministry of Defence and the Passport Agency, just to mention a few. The Government grant of £20 million to update IT systems for the change to the euro, which is far bigger than any envisaged for those systems, is a drop in the ocean. It will be an interesting project to work out the true cost to the public sector.
Mr. John Bercow: The United Kingdom is variously rated as the fourth or fifth largest economy in the world, the second biggest overseas investor in the world, and the third most attractive location for inward investment in the world. Does my hon. Friend therefore agree that it is absurd that the Government are spending vast public sums on such an ill-conceived project? In the circumstances, should the Chancellor of the Exchequer be subject to a cash point fine?
Mr. Clifton-Brown: The sums to be spent on a changeover plan must be considered carefully. In the public domain, two tranches of £20 million have already been spent and considerably more will doubtless be spent. I shall concentrate on the total spent by the private and public sectors as well as the cash-dispensing and note businesses because future and uncertain benefit could be gained against the present cost.
I have dealt at length with public sector costs and I shall now refer to private sector costs. Various studies have been undertaken into those costs. For example, Chantrey Vellacott, a firm of accountants in the City, has produced a well-founded plan showing that the costs to the private sector have already been £36 billion or 4.2 per cent. of gross domestic product. Some have criticised the company's figure as being unreliable, but KPMG's recent study of the 600 largest companies in the country shows that £12 billion has already been spent—and that was just by the 600 largest companies. It is reasonable to suppose that costs are at least double that, and that they probably amount to £24 billion. If we add to that figure the costs that have been spent in the
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public sector and the £1.7 billion that will need to be spent by the coins and note business, we will see that the costs amount to a significant proportion of GDP.
The costs represent 10 per cent. of the total wealth of the economy in one year. On 27 January 2000, the Daily Mail compared the cost of changeover of the euro with the Y2K problem and the necessity for business to invest in new IT and other systems to deal with the growing trade of e-commerce. All such matters must be put into context because they are all costs that business will have to bear and which will come off their bottom-line profits. The article stated:
Y2K is a known cost, whereas EMU estimates have been increasing over time, so it is likely that EMU will represent an even higher multiple of Y2K costs.
It admits that the costs of preparing for the euro could divert companies from developing e-commerce strategies. Europe is already lagging behind the US in selling products on the internet.
There does not seem to be a particular imperative why the Government's five key economic tests should be met. On exchange rates, inward investment, employment, inflation and growth, it appears that no damage is being done to the UK economy. Indeed, there is ample evidence to show that trade with the United States and the far east has been growing since 1 January 1999, when the 11 eurozone countries came together. Britain could continue to be a magnet for inward investment throughout the world. It should trade with the rest of the world
One of my great fears is what will happen once we lock ourselves in. Under the Maastricht treaty, we would make an irrevocable decision to lock our exchange rate reserves into the system once we agreed to drop our opt-out against joining. The British people will need to think long and hard about the economic benefits. However, the economic benefits will not ultimately be the test. There will be a referendum. The British people will have to decide whether they want to join a system that will lead inexorably to a single European economy, following which we will have gone a long way towards having one European state. If, in the referendum, the British people decide to join, they would be taking one of the most far-reaching decisions made by the country since the second world war. No doubt the Government, through their spinning machine, will try their level best to persuade us that that is the right thing to do but there is much evidence on the other side to show that there is not necessarily any advantage to joining.
9.56 am
Mr. Tony Baldry: British business wants certainty, on which it can base investment decisions, as do potential overseas investors in Britain. A Conservative Government would bring certainty. It is certain that a Conservative Government would not introduce a referendum on the single currency during the lifetime of the next Parliament. That is settled Conservative policy, and it would be the outcome of a Conservative win at the next election.
We have, however, no clear indication of the consequences of a Labour win at the next election. There is an effective policy vacuum on the issue. I have no doubt that the Minister will say that the Government

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have set five tests, but they are not tests and they do not constitute a line to be taken. The five economic tests are merely a policy mantra. I suspect that there are five of them because a Minister in difficulty on the "Today" programme or the "World at One" can simply recite them so that even the commentator becomes bored and moves on to something else. The Government's tests are merely a mantra.
As everyone now appreciates that there is no policy but only a mantra, leaks are inevitably emerging throughout Whitehall, from the Department of Trade and Industry to the Foreign and Commonwealth Office. The British people perceive that the Labour party and the Government want no debate whatsoever on the subject, this side of an election. The Room that we are in provides clear evidence of that: unfortunately, under the guidelines set up by the relevant Committee, the television cameras can focus only on the hon. Member who is speaking, and that means that they cannot show the area in which one would expect to see Labour Back Benchers, which is entirely empty. Not a single Labour member of the Select Committee on the Treasury, the Select Committee on Trade and Industry or the Select Committee on Education and Employment has managed to tear himself out of bed or from other activities to attend the debate.
The Labour party does not wish to engage in debate on the euro. It has sent the Minister, who of course draws his pay and rations from the Treasury, and I am sure that he will elegantly and eloquently recite the mantra of the five economic tests—but that will be it. That is all that we will hear from the Labour party, despite the fact that senior officials in the Department of Trade and Industry are talking about a meltdown. Andrew Fraser, the chief executive of the Invest in Britain Bureau—today renaming itself Invest UK—has referred to a manufacturing meltdown. Having given advice to the permanent secretary and others, the poor man was allowed to go to the media—not to renege on his advice that there would be an economic meltdown in manufacturing if we did not settle a policy on our membership of the single currency, but simply to apologise for the leak.
Our ambassador to Japan in a memo to the Foreign Secretary commented:
we flagged up increasing concern about the level of Sterling and uncertainty about British policy on the Euro. We assessed that "in the absence of new developments, Japanese companies in the UK will probably sit tight for another year or so in the hope that the Government will succeed in moving public opinion towards acceptance of Euro membership.
This is broadly what has happened, but with two new negative factors. First, we have seen some actual closures and moves to source outside the UK as a result of price pressure. Secondly, as prospects for early entry into the Euro are perceived through media coverage to be receding, companies are beginning to see £/ Euro unpredictability as a long term disincentive to investment in Britain.
More generally, a perception has been spreading among economic opinion formers that the UK is not at present a safe bet. For example a former vice minister of finance said at a Welsh seminar on the Euro recently that "Until the UK decides to join the Euro, there is an element of risk which makes the UK a difficult choice for investment."
Against that background, Madam Deputy Speaker, all Ministers can do is repeat the five economic tests. From whichever perspective one comes, a debate is needed on
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this issue. The London chamber of commerce recently carried out a survey that found that almost three quarters of London businesses want Britain to join the single currency. Nine out of 10 executives who feel that a decision matters to their own company back entry. Yet not a single London Labour Member of Parliament is present to express the concerns of those businesses.
Mr. Andrew Rowe: The relevance of what my hon. Friend is saying is borne out particularly strongly by what is happening to companies like the big brewer in my constituency, Shepherd Neame, which must decide within the next two or three months whether to have tills capable of taking euro coins and notes. In Kent, particularly, places like Leeds castle and Shepherd Neame pubs will be forced to take the coins and notes, whether or not we join the single currency. If we cannot debate these issues, how can companies make an informed decision?
Mr. Baldry: I entirely agree with my hon. Friend's comments. I fear that the British people will feel that the Government are involving them in one of the greatest spins ever. It is a deception, and it is disingenuous to have no public debate on the single currency between now and the next general election, and beyond. The electors suspect a sleight of hand, and, if and when a referendum is held on the single currency, they will feel that they have been cheated of a debate. Even worse, if, perchance, there were a Labour Government after the next general election and if they held a referendum, the public would feel that it was part of some plan in which they were expected to take the role of patsies. We all know that our constituents dislike that role and would reject those who put them into that position.
As Peter Riddell wrote in The Times yesterday, in some wise words that everyone should read,
What the Gomersall memorandum really reveals is that the debate on euro entry is already alive, and kicking, and cannot be put off until after the next general election.
Our discussion shows that the debate is alive and kicking only in the Conservative party, while the Labour party is running from debate. Labour Members want to do nothing more than recite the five tests as a mantra. Those tests are meaningless and politically self-seeking, and Labour Members could suddenly decide at any time that they were being met.
Mr. John Bercow: Does my hon. Friend agree that Ministers are divided only over tactics, and not over their absolute determination to abolish the pound and join the euro? Does he also agree that the Prime Minister is hell-bent on dragging Britain into the euro at a cost that he cannot calculate, for a benefit that he cannot quantify and at a risk to the self-government of the British people that he dare not admit? It is a pity that the Prime Minister does not have the decency to reveal those crucial facts to the British people.
Mr. Baldry: I should not necessarily use exactly the language that my hon. Friend employs, but if that is the Government's collective view, it would be much healthier for democracy and the United Kingdom if they said so and initiated a decent debate. All that we have

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now is some shadow boxing in the Cabinet and elsewhere. A proper debate is not taking place. That is disingenuous and dishonest, and discredits UK politics.
Mr. Clifton-Brown: I am grateful to my hon. Friend for giving way, especially as I have had the Floor for the bulk of our debate. Does he agree that when the Government participate in the debate, they will have a duty not to put a highly pro-euro case, but to balance the argument properly, in our schools and elsewhere?
Mr. Baldry: There will be no difficulty in having a proper public debate. I have no doubt that people in business, public life and politics will speak robustly for and against our membership of the single currency.
Whether we join the euro is one of the most important questions facing the country in the early part of the millennium yet we are in a policy vacuum, in which the only people with the guts to speak up are officials and ambassadors, who are then immediately chastised and accused of deliberate and orchestrated leaks. I do not believe that those people leaked, but if an honest and open public debate is not led by Ministers, who have a responsibility to make clear the view of Her Majesty's Government, leaks from officials and others are inevitable, because that is the only way in which they can vent their frustration with the Government.
Madam Deputy Speaker, my hon. Friend the Member for Cotswold (Mr. Clifton-Brown) has done us a service by initiating the debate, which has provided the graphic picture of the empty Labour Benches. Labour Members are engaging in a conspiracy of silence to ensure that a proper public debate does not take place.
Mrs. Marion Roe (in the Chair): Order. I remind hon. Members that when I am in the Chair I should be addressed as Mrs. Roe, not as Madam Deputy Speaker.
10.8 am
Dr. Vincent Cable: Mrs. Roe, I welcome the opportunity to contribute to the debate. I shall refer only to the narrowly defined issue of the costs of euro preparation.
A couple of years ago, the Chancellor of the Exchequer established a committee on euro preparation, in which all parties were invited to participate. It is unfortunate that the Conservatives opted out, because that committee is questioning expert witnesses on many of the valid questions that Conservatives ask about the costs to the Government and the private sector. Participating in the committee at least removes some of the mystery and the elements of conspiracy that the hon. Member for Cotswold (Mr. Clifton-Brown) saw. I amicably ask the Conservatives to take a fresh look at their participation.
At the most recent meeting, for example, we had a perfectly businesslike discussion with a Government nominee and the leader of the Welsh nationalists. I represented the Liberal Democrats. The fact that the Conservatives were not present robbed the debate of much of the flow for which one would have hoped. Their complaints about secret information and spin lose much of their legitimacy because they have passed up that opportunity.
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In the broader context, I am not a fundamentalist, as most hon. Members are not. Doubtless there are people who would have us enter economic and monetary union at any time, while others would not join under any circumstances. A sensible approach is to consider the undoubted costs and risks of entry and those of exclusion, and to balance the two. That is what the debate is really about.
The hon. Member for Cotswold was primarily concerned about costs to the private sector. Attempts have been made to quantify them, and they are well worth considering. The hon. Gentleman mentioned the Chantrey Vellacott study, a useful starting point that suggests substantial figures for the conversion costs. He alluded to a key point in that study: if capital stock is replaced as it becomes obsolete, there is no cost, because a new generation of investments would be required in any event. That is one reason why as much certainty and predictability as possible is desirable.
A whole set of studies has followed, one of which was made available to the Chancellor's sub-committee a couple of weeks ago. It dealt with the costs of preparation in Spain. Some detailed small-firm analysis was undertaken, which suggested that, if the UK experience was similar to Spain's, the cost would be a maximum of £1,000 each for about three quarters of companies—most of the small companies. We are talking about very small sums, although a lot more work clearly needs to be done.
The big question—this is where we get into the big debate about the five conditions—is whether the benefits of joining or the costs of exclusion are sufficiently large to outweigh the undoubted predictable conversion costs. As a result of the past two or three years' experience, we have a better understanding of the costs to the UK of both exchange rate instability and highly inappropriate exchange rates. Despite recent adjustments, the exchange rate is still, in real terms, higher than it was when we were members of the exchange rate mechanism. The costs of that are felt acutely by manufacturing industry.
Whatever the rate, exchange rate instability is a major cost that manufacturers in particular must bear. There have been fluctuations of 20 to 30 per cent. in both directions in the past few years. Clearly, if a rate can be fixed with trading partners who account for roughly 55 per cent. of our visible trade, one does not eliminate exchange rate instability, but one goes a considerable way towards mitigating its effects.
Mr. Rowe: I understand entirely the hon. Gentleman's concern about manufacturing industry, but it is my perception that the tourism trade, on which so much of our business depends, is also being hit very hard. Is not that also a considerable cost to bear?
Dr. Cable: Yes, the hon. Gentleman is absolutely correct. Perhaps I should more precisely have said that the trading part of the British economy, which is predominantly manufacturing, includes agriculture and tourism. All three sectors have been hit badly by instability and the over-valuation of the pound. The cost of exclusion from EMU is that the trading part of the economy would face indefinitely all that instability.

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The second point—the debate is developing in an interesting way—relates to the impact on foreign direct investment It is true, and this morning's figures show it, that Britain remains an attractive destination for foreign investment.
There was a revealing survey last week of the 10 leading foreign investors—American, Japanese and European—in the UK, nine of which made it clear that, although they were happy to continue to operate in the UK, future investment would be heavily dependent on whether they could see Britain making progress towards entry to EMU. The impact of exclusion on foreign direct investment is unlikely to be viewed dramatically, but Britain's share of new foreign investment flows will decline. We can already see the relative share beginning to tail off. The consequences for jobs and the overall impact on the efficiency of British manufacturing industry—will become increasingly onerous as time goes by.
To add anecdote to statistics, the most telling example last week was Nissan, which has made a major impact in the UK because of high productivity at its Sunderland plant. The Japanese and UK management made it clear that they viewed the future of Nissan in the UK as conditional on participation in EMU within a reasonable time.
Mr. Clifton-Brown: Does the hon. Gentleman agree that exchange rates are not the only factor that companies take into account when they decide whether to invest in Britain? The wider macro-economic situation, including regulations and legal systems, is also important.
Dr. Cable: Exchange rates are only one among several factors, but the hon. Gentleman is complacent if he believes that the UK is far ahead of continental competition in other respects. An increasing percentage of foreign investment is going into France—traditionally regarded as hidebound by dirigiste controls. France is liberalising, at least partly because of the impact of the single market and EMU. For those faced with the brutal choice between liberalising European economies or the UK economy—still attractive in certain respects—EMU could make a decisive difference.
The third respect in which the costs of exclusion will prove important—and they are already making an impact—relates to the workings of the single market. As I enjoy pointing out to Conservative Members, the single market was Mrs. Thatcher's great historic achievement and it is having major consequences on European industry. The combination of the present single market with stable currencies is—as anyone in frequent contact with European business will know—having a major impact on the restructuring of European industry, fuelled by the rapidly growing eurobond market.
EMU has been an important catalyst. Both foreign and indigenous businesses across Europe are radically restructuring to take account of the realities of EMU, but British companies are not part of that process. As long as they are excluded, the long-term consequences on investment will be negative.
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The costs of exclusion can be measured in terms of interest rates. Despite the fact that British short-term rates are moving upwards, the differential is about 2 per cent., which reflects long-term experiences of inflation. That amounts to a real cost for business and for domestic householders. The Government and the private sector will face conversion costs—and we should be honest about that—but the costs of exclusion will become more tangible and apparent as time goes by.
In conclusion, I share some common ground with previous speakers, who are absolutely right about the importance of debating these issues publicly. The Government have done us no favour by stretching out the uncertainty associated with British entry. Major uncertainty remains about when the referendum will be held and its likely results, which could have been reduced if the referendum had been tackled earlier in the Parliament.
Mr. Bercow: May I challenge the hon. Gentleman on what he just said? Interest rates rise and fall, and the proportion of variable rate mortgage finance in this country is substantially greater than in the member states of the eurozone. When calculating the cost of our becoming part of the eurozone, does the hon. Gentleman accept that he must factor in the surrender of our exclusive right to set our interest rates to people whom we do not elect and cannot remove?
Dr. Cable: The hon. Gentleman makes a major point about sovereignty, and a more specific point about interest rates and mortgages. I shall respond to the latter. It is true that there is more exposure to inappropriate interest rates if there is a variable interest rate system in the housing market. The hon. Gentleman, who is interested in finance and economic policy, knows, however, that much experimentation is taking place by British institutions. For example, Standard Life, which survived a proposal for demutualisation last week, is leading the market in introducing fixed-rate mortgages. When that spreads throughout the City, many of the associated risks will disappear.
The Government were remiss in not accepting the challenge of public debate, which those who favour EMU entry would win. They should make it absolutely clear that entry to the EMU is right for the British economy and should not hide behind the five conditions. Secondly, they should state that they will hold a referendum at the earliest opportunity—at the start of the next Parliament. Thirdly, on the basis of the promise of an early referendum, they should set out a timetable to prepare United Kingdom business to join.
10.22 am
Mr. Howard Flight: I congratulate my hon. Friend for Cotswold (Mr. Clifton-Brown) on securing the debate, which affords the Government the occasion to report on the changeover. If the Minister gives a full report of what is going on, we shall learn some interesting truths.
The debate is not about whether we are for or against the euro. First, the citizens of this country are not stupid; they know that, for a long time, the British economy has been broadly in synch with that of the United States, not Europe's, and that our exchange and interest rates

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therefore move in tandem with those of the USA. Secondly, events in Asia have shown how important it is to allow the exchange rate to take the strain, even though doing so may cause pain. It could be argued that that is the reason why the United Kingdom and the United States have enjoyed an extra three years of strong growth.
I take issue with some of the comments of my hon. Friend the Member for Cotswold. Europe is restructuring because that is what its business desperately needed to do; the feebleness of the euro reflected Europe's economic weaknesses. Restructuring in the UK started long ago as part of the Thatcherite supply-side reforms and it continues here, as it does in the USA.
Our debate focuses on the mechanics of the changeover and the costs. The Finance Act 1998 required the Treasury to be transparent about financial matters, and the Government's policy on the euro is relatively clear: they are pledged to join the euro when five conditions have been met. As has been stated several times, it is Government policy to prepare for possible entry by putting in place the necessary mechanisms, so that entry is not delayed by lack of preparation.
Making preparations is consistent with Government policy, but what has been happening in reality? What progress has been made and what are the plans? As with any commercial undertaking, one needs to know first about the costs to the public and private sectors. I acknowledge that capital equipment will need to be replaced, especially where such equipment relates to cash. It will not be difficult to produce figures for gross costs and estimated net costs to the public and private sectors. I hope that the Financial Secretary will take this opportunity to report estimated costs in the light of money spent and efforts made. We have seen only the Chantrey Vellacott report and KPMG estimates. According to Government data, Marks & Spencer estimates a gross figure of £100 million, and Tesco estimates £20 million. Lloyds-TSB estimates the cost of system conversions to be about £300 million. I assume that all that homework will ensure that we leave this Chamber much better informed about estimated costs.
The national changeover plan has allegedly identified the measures necessary to prepare the business sector, but I have read the reports, and to be frank, much of the information is guff. No clear analysis is provided of what is to be done and when. As hon. Members have pointed out, the process cannot compare with decimalisation—a relatively modest process that was successfully planned and executed over five years.
According to current Government figures, £6.3 million was spent on planning to the end of February and there is a further budget of £20 million. Although that may be wasted money, it is not very much to finance the grand changeover plan. The expenditure of such a sum would not prepare this country for joining the euro, were we foolish enough to decide to do so. Some £20 million has been budgeted for the Department of Social Security—what is that about? What will the health service be obliged to spend, given that it often has other, more pressing priorities?
In short, what is the plan? What are the plans for the public and private sectors, and what costs will they incur? Last year, many businesses voiced strong
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objections to being pressed to spend money before a decision has been taken. Last week, I made several inquiries and found to my surprise that very little has been happening. In most cases, there has been all talk and no action. As I shall explain, the perception throughout the private sector is that the matter is on the back burner and, unlike a year ago, is not being addressed actively.
The Bank of England is the one body that soldiers on doing a splendidly professional job. Although its Governor has made it clear that the Bank does not think that it would be a good idea for this country to join the euro, it has set out for the financial sector, both institutional and retail, what would be involved, what needs to be done and what sort of detailed plan needs to be drawn up. I commend the Bank, as ever, for its diligence and professionalism.
The Government formed an organisation called BAG—the business advisers group—to go round visiting private sector businesses to tee them up, tell them what to do and gather information. I have received personal representations from several of the main banks: as far as I can tell, BAG has done precious little and nothing much has happened. Businesses are focusing on and concerned with the regulatory changes, taxes and UK employment burdens that have been imposed on them, but they are certainly not focusing on planning for euro membership. I understand from the banks that they have effectively told the Government that they have no intention of improperly wasting shareholders' money on the necessary technical changes until Government policy has been sharpened up considerably. They have also told me that it would take at least three years from now to put the economy in a financial position suitable for euro membership.
The Government are in exactly the position that they said that they did not want to be in. Even if—unlikely as it now appears—they were to win the next election and hold their referendum, they could not possibly meet the requirements within the time scale that they have set, because the necessary organisation and preparation has not been done.
Mr. Clifton-Brown: Is my hon. Friend aware of an article that was published in The Times on 17 February, which described an ICM survey of 1,001 company chief executives that revealed that 87 per cent. would not make any significant preparations for the euro before a referendum, and that 73 per cent., compared to 63 per cent. last March, were opposed to joining?
Mr. Flight: I thank my hon. Friend for that extremely relevant intervention. He reminds me of another survey—which he has, no doubt, seen—revealing that only 15 per cent. of Japanese businesses that have invested in this country have any material concern about whether we join the euro—they have invested here because of the quality of our law, our language and the fact that we do not have expensive employment taxes. The myth that international investors believe that everything hangs on whether we join the euro is peddled for political reasons by those who want to join the euro, but it is manifestly not true.
The key issue is the Government's timetable. One of the few concrete things to have come out of all their planning is their bold and important argument that, if

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they get back into power, they expect to take four months between proposing to join the single currency and holding a referendum, and 30 months between the referendum and joining. Given the state of organisation in the private sector—and, I assume, the public sector, although we have little knowledge of what it has been doing—it is clear that there is absolutely no way in which that timetable could be met. In 1999, regional forums were held around the country, but little emerged from them, because, as my hon. Friend pointed out, almost 90 per cent. of businesses are, rightly, not prepared to waste their funds until the Government show greater clarity of policy.
The events I describe reflect the fact that the wise people in the Treasury have quite rightly gone cold on the euro. I dare say that they have come to appreciate the sound economic and political reasons for which the Conservative party has, for some time, opposed euro entry. A major division between the Treasury and the Department of Trade and Industry, and between individual Ministers, has become apparent.
The Chancellor recited as usual the mantra of his five principles in his Mansion House speech. However, it is telling that, toward the end of his speech, he said something that struck me as a coded signal against membership of the euro. He stated:
We cannot pre-judge the five economic tests. To do so before we have secured sustainable convergence would risk repeating past failures, mistaking exchange rate stability for stability across the economy and prejudicing our commitment to move Britain from the instabilities of a stop-go economy to greater long-term stability. The Government will not agree to a short-termist approach that would put at risk economic stability or the discipline that has created sustained growth, rising investment and—
so many new jobs.
Despite the coded nature of that statement, the crucial point is that there has been no material development towards convergence. As Europe gradually comes up, and the United States and the United Kingdom go down, as is likely after eight years of growth, there may be some coincidence of interest rates and inflation rates. However, in terms of economic cycles, the United Kingdom is ever more in tandem with the United States, while remaining at a 180-degree variance with continental Europe.
The Financial Secretary to the Treasury (Mr. Stephen Timms): The hon. Gentleman said a moment ago that the Conservative party was opposed to entering the single currency. My understanding of the Conservative party's formal position is that it would not take Britain into the single currency during the life of the next Parliament. Will the hon. Gentleman clarify his party's position?
Mr. Flight: I am glad to hear that the Financial Secretary knows Conservative party policy and that he describes it correctly. The essence of our position is that, on both economic and political grounds, it would be against the interests of this country to join the euro. However, no one can ever claim to have perfect wisdom, so we say, "Let us see what happens." We could be wrong, and the lifetime of a Parliament is a reasonable period in which to determine whether we are wrong. That is common sense.
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Treasury Ministers appear to be moving fast toward the same policies, in complete contradiction of the official policy of the Prime Minister and the Labour party. It is hardly surprising that the pro-euro camp in the Government has resorted in recent weeks to slightly desperate spin and public relations, led by the Secretaries of State for Trade and Industry, for Northern Ireland, and for Foreign and Commonwealth Affairs, who are spinning as hard as they can against the shift in policy that the Chancellor is attempting to initiate and to control.
As I said earlier, the Labour party is committed to entry, and, if it wins the next election, to holding a referendum as soon as possible. It is also committed to ensuring that the country is organised to join the euro if all those conditions are met, and to ensuring that delays do not occur because the pre-planning and organisation have not been carried out. However, if one focuses on reality, not on spin, one can see that little has been done in connection with the national changeover plan. The Government have given no advice to the nation or its businesses about what the true costs are likely to be. If the Minister acknowledges that and says that the approach is not part of a deliberate Treasury slowdown, he will have to say, by default, that incompetence is involved.
Representatives from the real business world, including the Confederation of British Industry, banks, companies and trade representatives, have told me that the issue is definitely on the back burner. The Government's measures mean that they have plenty of other things to do. Last year, they thought that they were being kicked and cajoled into making progress, but that has stopped and they have heard nothing for the past year or so.
I conclude by repeating the request that I put to the Minister at the start of my speech. What is going on? What will the costs be, what are the Government doing in the public sector, and what do they want to achieve in the private sector?
10.41 am
The Financial Secretary to the Treasury (Mr. Stephen Timms): I welcome the fact that the hon. Member for Cotswold (Mr. Clifton-Brown) secured this debate. We have had an interesting discussion, and I congratulate him. To some extent, the discussion has trodden on familiar ground but I am pleased to have this opportunity to set out, once again, the Government's policies on these important matters.
Our policy can be summed up in the slogan, "Prepare and decide". That summarises the policy set out to Parliament by my right hon. Friend the Chancellor of the Exchequer in October 1997 and reiterated by my right hon. Friend the Prime Minister in February 1999. We announced our commitment in principle to economic and monetary union and our belief that the decisive test for United Kingdom membership should be whether there was a clear and unambiguous case for us to join. That is why we set out five economic tests, to which several hon. Members have referred, which will have to be met before any decision to join can be taken.
I remind hon. Members that those tests are: first, whether the UK economy has achieved sustainable convergence with the economies of the single currency;

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secondly, whether there is sufficient flexibility to adapt to economic change; thirdly, whether joining the single currency would create better conditions for businesses to make long-term decisions to invest in the UK; fourthly, the impact that membership would have on the financial services industry; and, fifthly, whether joining the single currency would ultimately be good for employment.
In view of the magnitude of the issue, we have said that, as a matter of principle, if, having assessed those five tests, the Government decide to enter, the decision should be put to the British people in a referendum. If we are to join the single currency, the Government, Parliament and the people must agree. We want to give Britain a genuine option to decide whether to join, if that is what the Government, Parliament and the people want to do.
We are keeping open the option of making a decision early in the next Parliament. That involves ensuring that those parts of the economy that would be central to changeover, such as the Government's revenue Departments, the wholesale financial markets and the retail banks, should continue to plan effectively. I welcome the point made by the hon. Member for Cotswold about the importance of having those plans in hand and of making progress. The second outline national changeover plan makes it clear that, thanks to the targeted work that has been carried out individually and collectively during the past year, the strategy is firmly on course.
I can tell the hon. Member for Arundel and South Downs (Mr. Flight) that we have had continuing discussions with key stakeholders in the private sector. The illustrative timetable—the period of up to 40 months set out in the latest edition of the changeover plan, published in March—remains valid. It has been endorsed by the Confederation of British Industry, the British Chambers of Commerce and the Trades Union Congress, so the fears that the hon. Gentleman expressed are ill founded.
Mr. Flight: Has it been endorsed by the all-important institutions, namely the banks? The Minister will recall that I mentioned that my soundings with the heads of some of our main banks had pointed towards a three-year programme.
Mr. Timms: As I said, the period envisaged in the changeover plan is 40 months. The plans have been endorsed by the banks. The hon. Gentleman said that the Bank of England had done a great deal of work with the financial services industry. Last month, it published a report on the practical issues arising from the euro. Progress has been made, and is continuing satisfactorily.
Our approach to preparing for the possibility of joining the single currency is to co-ordinate planning and facilitate the appropriate level of preparation. That involves, first, identifying areas key to a smooth and cost-effective changeover. Secondly, we will work with the key parties to agree effective ways forward. Thirdly, we will provide a framework within which organisations can take forward their planning. Fourthly, we will set out a critical path for the process. Fifthly, we can give a lead by planning for the public sector.
Following publication of the first outline national changeover plan, Ministers agreed that all Departments should advance internal planning and prepare outline
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changeover plans by the end of 1999. Departments used a template-based planning approach. Officials worked with consultants to design a model—Ernst and Young was involved—that was piloted and rolled out to all Departments and designated key agencies. All Departments prepared internal planning documents before the end of 1999. Departments considered the services that they might provide during changeover and how they might convert their systems to the euro. They identified key planning activities and lead times for carrying them out. That exercise confirmed that only the Department of Social Security and the revenue Departments have lead times that require them to start detailed development before a referendum. Many public sectors are drawing on the experience of member states in the first wave and are working with the private sector in developing their planning.
With the private sector, we have facilitated a series of discussion groups, involving suppliers and users of financial services, to produce a set of common assumptions on the likely pattern of demand for euro services during a UK changeover. Those discussions will form the basis of future work to develop an understanding of the likely pattern of demand. The work will take into account the experiences of first wave member states and the evolving expectations of suppliers and customers.
The process has involved the retail banks, the utilities—through the Utility Buyers Forum—the Inland Revenue, Customs and Excise, the Department of Social Security, the Association of British Insurers and the British Retail Consortium. The City euro group is working on the needs and expectations of those in the wholesale financial markets who rely on retail linkages—for example, the fund management industry. There will be further consultation, including discussions with representatives of the large and small corporate markets. Contrary to the impression that was given earlier, a great deal of work is going on.
We are also learning by monitoring what happened in the first wave member states. We have an opportunity to see how the 11 participating member states managed the changeover to the single currency. They successfully converted their wholesale financial systems in time for the locking of currencies. That evidence backs up what United Kingdom businesses that have considered making a changeover are saying: that demand for euro services early in a transition period would be limited mainly to wholesale financial markets and larger businesses.
Mr. Clifton-Brown: I am sorry to interrupt the Minister, but as well as detailing the considerable amount of consultation, will he speak about the financial cost to the public sector using the Salisbury Health Care NHS trust example that I gave, in which patient care was being put at risk because the health service has received no additional budget to meet the cost of the changeover plans?
Mr. Timms: I shall certainly comment on the financial aspects, but I assure the hon. Gentleman that there has been no diversion of resources from front-line patient care to planning work. I shall speak about the costs that have been incurred by the public sector and respond to his intervention.

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We have continued to give regular updates on our changeover work and, of particular importance in the context of our debate, the cost of the work that we have carried out. We provided details in the second outline changeover plan, published in March, on spending to date on preparations for the possibility of United Kingdom entry, which is some £6.3 million. That includes £1.6 million by the Department of Social Security, £1.8 million by Customs and Excise, £1.3 million by the Inland Revenue, £600,000 by the Bank of England and £500,000 by the Treasury's euro preparations unit. That investment has allowed us to undertake analysis and design work. We recognise that further work will be necessary in the key departments, and legislation has been implemented to allow Departments on the critical path—revenue Departments and the Department of Social Security—to invest in preparation for their large and complex information technology systems. References have been made to £20 million, which has arisen because three Departments—the Department of Social Security, the Inland Revenue and Customs and Excise—plan to invest around £20 million during the current financial year. That will ensure that the public sector is ready for the possibility of a decision to join early in the next Parliament and to follow the illustrative 40-month timetable set out in our published changeover plans, if required.
Mr. Rowe: I do not wish to distract the Minister from his argument and, if I have intervened too early, perhaps he will forgive me. Will he say something about the likely impact on the local economy of the circulation of notes and coins, and their acceptability across counters?
Mr. Timms: The hon. Gentleman makes an interesting point. Major stores in Oxford street already accept notes and coins of other currencies, and I have no doubt that they expect to accept euros. The hon. Gentleman may be right: there may be a wider decision to accept euros in tourist areas in the United Kingdom.
I turn to spending beyond a positive referendum result. We must distinguish between the costs incurred by the public and private sectors. We have not estimated the total cost to the public sector of a changeover because planning is still incomplete, so we are not able to do so. However, the cost of a changeover would essentially depend on the approach adopted by the public sector.
We recognise the importance of continuing to monitor the position closely. In the event of a changeover, any spending would be scrutinised by the Treasury in the usual way, just as departmental spending has been. In the private sector, the cost would depend on the approach taken to a changeover by each firm and the extent to which the euro had been considered in investment decisions prior to joining. Those are commercial decisions for individual companies.
I am a little sceptical about the value and the feasibility of trying to produce overall estimates for the whole private sector. A major survey would certainly be necessary for the production of a robust estimate, the
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conduct of which would place a significant and unnecessary burden on businesses. However, we are working hard to ensure that a changeover would be cost effective. We are consulting widely to establish the key issues in a changeover and how they might be addressed, and we are monitoring the experiences of the first wave countries. We are consulting their key customers and learning from the experience of the first wave member states. The revenue Departments believe that the best use of resources would be to phase in euro services, ensuring that they invest only in those services for which there will be real demand.
I wish to respond to a couple of points that were critical of the Government's position. Hon. Members have asked why businesses should spend on something that might never happen. I agree with the hon. Member for Cotswold that people should take steps to prepare for a changeover. Each company has to decide on its own approach. Some sectors, such as the retail banks, the wholesale financial markets—to which the hon. Member for Arundel and South Downs referred—and retailers are critical of the changeover process, because they provide the infrastructure on which other parts of the economy depend.
Mr. Clifton-Brown: I am grateful to the Minister for being exceptionally courteous during the debate. Are the Government considering whether returns for value added tax and income tax may be filed in euros and, if so, when is that likely to happen?
Mr. Timms: That is one of the issues that the revenue Departments are considering. A gamut of matters will need to be addressed. As the hon. Member for Cotswold said, changeover planning will take money from frontline services. All parts of the public sector must undertake analysis and planning for the possibility of UK entry. The hon. Gentleman was right to support that planning and, by undertaking it now, the Government will ensure that any changeover takes place in a smooth and cost-effective way. It will be a management exercise and such work will be developed to ensure that it does not disrupt front-line patient care, for example. Proper preparation will help to deliver a smooth and cost-effective changeover and ensure that public services will not be significantly disrupted.
Our policy on the single currency can be summed up neatly as being to prepare and to decide—the policy set out by the Chancellor of the Exchequer in October 1997 to Parliament and by the Prime Minister in February last year. I am grateful for the support expressed for preparations to be made in Parliament so that, should the economic tests be met, a decision to join the single currency can be made early in the next Parliament. Without preparation, that would not be a practical option. We need a framework for businesses that want to plan ahead. We have a unique opportunity to learn from the experiences of the first wave member states. Where expenditure might be required in the public sector—for example, in the revenue Departments and the Department for Social Security—legislation has been passed that will allow planning for that.
Parliament should be asked to provide permission for such expenditure. We have been open about our investment in pre-planning work, and our changeover plans set out what we have achieved and invested, the

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direction of our future changeover work and the amount that the public sector has spent on preparations. We cannot estimate the cost of changeover at this stage. Interestingly, even the first wave has not produced official estimates of the cost of changeover work.
Mrs. Marion Roe (in the Chair): Order. We now move to the next debate.

Organic Food and Farming
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Joan Ruddock: I am grateful for the opportunity to introduce a debate on Government support for organic food and farming. I am only sorry that it coincides with the Select Committee on Agriculture's taking evidence in its inquiry into organic agriculture. Perhaps that merely proves the subject's topicality.
My interest is long-standing, and was greatly increased by my involvement with Sustain, the coalition of organisations that drafted the Organic Food and Farming Targets Bill. I first raised the issue in the House as a ten-minute Bill in the previous Session, and the hon. Member for North Cornwall (Mr. Tyler) introduced it this year as a private Member's Bill. I pass on his apologies for his absence for the early part of the debate; he hopes to join us later.
I acknowledge the Government's support for organics, and especially the interest shown by my right hon. and hon. Friends. Last year, more than £11 million was allocated to farmers who wanted to convert to organic production; in 1997, the figure was just £1 million. I was delighted by last month's announcement by my hon. Friend the Parliamentary Secretary to the Ministry of Agriculture, Fisheries and Food that a further £140 million will be made available over the next seven years.
The number of farms that have converted has trebled. In 1994, there were only 715 certified organic farms in the United Kingdom; by November 1999, there were more than 2,000. Research funding has increased, too. I do not know the details of today's announcement by my right hon. Friend the Chancellor of the extra £1 billion for science, but I hope that some of it might find its way into the sector.
As in many other aspects of Government policy, much has been done, but there is much more still to do. The Government's declared policy and strategy is to expand organic farming in an open-ended way as far as the market will allow. I must tell my right hon. Friend that there is great scope.
UK farmers currently supply only 30 per cent. of the organic market—a market that is set to treble by April 2003. Given such a rapidly expanding market, there is an urgent need for more research, for expansion in certification capability and for infrastructure building. Much of the demand for organic produce stems from objections to genetically modified foods. Yet organic farming is set to receive 1.8 per cent. of the research budget allocated to agriculture this year, while biotechnology and genetic modification will receive more than 23 per cent. That equates to £2 million for organic farming and £26 million for biotechnology research, although organic farming has a huge market, and GM foods almost none.
I hope that my right hon. Friend the Minister of State will take the opportunity to tell us how she plans to increase the amount of organic food grown in the UK. Demand is already growing at 40 per cent. per year, and Iceland's welcome decision to go 100 per cent. organic, along with plans to set up dedicated supermarkets all

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over the country in the next four years, suggests an even greater acceleration. The irony is that that demand cannot be met by crisis-ridden UK farmers, as the organic farmers scheme ran out of money eight months ago and will not reopen until April next year. Farmers will naturally hold off until incentives are in place, while other countries take advantage of our growing demand.
The Government's information line has received more than 2,000 inquiries about conversion to organics while the scheme has been closed. Can my right hon. Friend give any encouragement to those who are seeking to convert now? Are there any prospects of additional funding that could enable her to give guarantees of retrospective funding for farmers who could start converting before April 2001. I also invite my right hon. Friend to give us her estimate of market demand and the financial support necessary to achieve the Government's objective of meeting that demand. She will know that I, and the supporters of the Organic Food and Farming Targets Bill, estimate that £90 million per annum, or £70 million more than has been promised, would be necessary for English farmers in the new organic farming scheme if the targets in our Bill were to be met.
I now turn to the wider picture. The current EU average for the percentage of land farmed organically is 2.2 per cent., so we can be pleased that the UK figure of 3 per cent. is above that target. That is partly due to the Government substantially increasing the amount available for conversion. However, we are nowhere near the top of the league table for European countries. In Sweden, more than 11 per cent. of the land is organically farmed. In Austria the figure is 10 per cent., and in Denmark and Finland the figure is around 6 per cent. Some—but not all—countries have had a longer period of conversion, but there are significant funding differences. First, the total funding that is paid to organic farmers in the UK is lower than in many other EU countries. Secondly, two of the 14 countries also pay on-going maintenance payments to farmers after the conversion period has ended. I suggest that we are considering a straightforward competition issue here, which my right hon. Friend might use in any conversations with the Treasury. I would be grateful for her comments on that.
Finally, UK organic farming is at a comparative disadvantage because the four European countries with the most organic farming are those that have set targets and developed a strategy to achieve them. That is no coincidence. My hon. Friend the Parliamentary Secretary has acknowledged that targets can be useful in terms of fixing aspirations and underlying commitment. I guess that our competitors agree.
Organic farming straddles so many sectors and Government Departments that it is increasingly clear that its sustained and balanced development cannot be achieved without one clear target for all interested parties to work towards. Denmark made no fewer than 65 recommendations in its action plan, which resulted in increased investment in research and training, increased agri-environment support and the removal of barriers to increased organic production. We need to do the same. We need to examine the barriers to the development of the organic sector and find ways to overcome them.
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That need not mean extra Government funding in every area. In some cases, the Government could simply act as a catalyst, analysing problems and promoting market support.
What should the Government do to benefit from increased organics demand? How can the Government put the UK among the best in Europe, rather than it being just one of the rest? Many of my right hon. and hon. Friends agree with me that the Government should adopt a target based on projections for the market. We believe that the market will require 30 per cent. of agricultural land to be organic by 2010. A strategy should also be developed to achieve that target, as suggested in the Organic Food and Farming Targets Bill, as proposed by the hon. Member for North Cornwall. The Government's strategy is to expand the organic sector only to the extent that the market will accept. That clearly has an undeniable logic, but it is far too passive. Even a strategy designed to follow the market has already fallen way behind it. Setting targets and a strategy to meet them has many advantages, as the experience of other countries demonstrates.
Most of us believe that farming in this country is in crisis, and farmers have been encouraged to get themselves out of it through Government plans to help them diversify. The last thing farmers need is to plan to diversify by converting to organic farming, only to find six months later that the Government's money has run out again. That could result in financial ruin, and farmers will clearly not undertake the risk. They need to have confidence in the sector, and they need to see that the Government have a strategy and a clear direction.
We need to change from an organic sector that is developing in fits and starts, grinding to a halt when money runs out, to one that is set on a sustainable course of growth. A strategy to ensure that would need to be based on analysis of past demand and trends to predict demand from farmers and consumers. Enough money could then be allocated to the organic farming scheme to guarantee its continuity. The confidence of farmers and the industry in the sector would be raised enormously by a clear Government commitment to targets and a strategy to achieve them.
Such a strategy would also reduce imports. As a result, our farmers, wildlife, environment and economy would begin to benefit from the increased demand for organic production. The Government have found targets useful for procuring progress on many other subjects, such as poverty reduction. Why should organic food and farming be any different? Increasing organic farming through a target will not distort and restrict Government priorities. Instead, it will help to deliver current Government objectives on other matters, such as the environment, health, jobs and animal welfare.
The benefits of organic farming are now being well documented, but I would like to emphasise a few of them. There are major biodiversity benefits. Wildlife figures are plummeting, especially in farmyards, which is a major Government concern. Research carried out by the British Trust for Ornithology found that populations of most farmland bird species were higher on organic than conventional farms. That is one of the main reasons why the well-respected Royal Society for the Protection of Birds supports the Organic Food and Farming Targets Bill.

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There are human health benefits too. Organic food is less prone to synthetic chemical residues. For example, a quarter of conventionally grown new and salad potatoes tested for pesticide residues in 1998 were found to contain them, but none of the organic potatoes tested did. The Ministry of Agriculture, Fisheries and Food still advises the peeling of fruit and vegetables because of concern about pesticides. The continued use of lindane in this country is a specific worry, due to its link to breast cancer. Male fertility levels have fallen by about half since the second world war, and a new Dutch study suggests links to pesticide exposure. The steady rise of food poisoning costs between £1 billion and £3 billion a year, and is thought by many to be caused by some of the methods used in intensive food production. No agriculture debate can take place without reference to the BSE crisis, which cost £4 billion and the loss of 37,000 jobs, while the organic sector was BSE-free.
Organic farming also has benefits for the economy. It is estimated that between 10 per cent. and 30 per cent. more jobs can be created in organic systems. Importantly for the Government, organic farming, through delivering those benefits, eliminates some of the enormous hidden costs of conventional production, which have been estimated by Professor Jules Pretty of Essex university to be about £2.3 billion a year. Water companies estimate that it costs around £120 million a year to remove pesticides from drinking water. I urge my right hon. Friend to attempt some audit to find out how much a widespread take up of organic farming would reduce costs to the Treasury and other Departments and organisations, such as the national health service.
I tabled early-day motion 51 in support of the Organic Food and Farming Targets Bill, which will target 30 per cent. of land to be organic by 2010. That early-day motion has been signed by 221 right hon. and hon. Members. In addition to that support, 71 groups representing more than 3 million people within their membership, also support the Bill. All sectors of society are represented in those groups, as are many private-sector organisations, including four of the largest supermarkets—Asda, Sainsbury, Waitrose and Marks and Spencer. The British public clearly want to green not only the fringes, but all of agriculture, and I believe that it is time for the Government to catch up with them.
The time is right for a total re-evaluation of Government agriculture policy. It would cost £90 million a year to ensure that the targets in the Bill were met in England. Although that represents only 3 per cent. of the £3 billion being spent under the common agricultural policy, it would be a highly constructive investment for the agriculture industry. In only a few years, there has been a colossal change in public attitudes to food standards, animal welfare and the environment. Food processors and retailers have been quick to respond.
As someone who buys as much organic produce as I can find in my local Sainsbury and Tesco—sadly, there is no local Waitrose—I am conscious that the supermarkets are monitoring my purchasing patterns. I am the target of mailshots that give me increasing amounts of information about the organic products that are available so, for a change, I am delighted to receive junk mail.
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There is clearly a risk that expansion in market competition could undermine the benefits that I have extolled today. That is why the Government need to take a lead. Conservation standards and accreditation will undoubtedly become real issues in the continuing expansion, and I hope that my right hon. Friend will have something to say on those matters. Choosing organic food used to be the preserve of a tiny minority of the better-off, but today it enjoys widespread popular support. Research commissioned by Iceland, the food retailer, shows that 53 per cent. of people questioned said that they would like to be able to do a complete organic shop. Iceland mainly serves the less well-off in the community, but it has led the way in organics.
In conclusion, Madam Deputy Speaker, there will be enormous beneficial possibilities for this country if the Government give us a greater lead by embracing the targets in the Organic Food and Farming Targets Bill. I urge them to accept those targets, or some of their own devising, to ensure that we seize on the great opportunity that will deliver real health, environmental and economic benefits. Such a course of action has widespread support.
Mrs. Marion Roe (in the Chair): Before we continue, I remind hon. Members that I should be addressed as Mrs. Roe when I am in the Chair.
Joan Ruddock: On that point, I have previously been told precisely the opposite. That is why I did not follow the previous speaker.
Mrs. Marion Roe (in the Chair): Perhaps I should clarify the position. Deputy Chairmen have been appointed to take the Chair in this Chamber, but I have been nominated from the Chairmen's Panel. That is why hon. Members should address me as Mrs. Roe.
11.20 am
Ms Julia Drown: Thank you, Mrs. Roe, for giving me the opportunity to contribute to the debate. I would like to congratulate my hon. Friend the Member for Lewisham, Deptford (Joan Ruddock) on securing the debate.
My hon. Friend mentioned that the Agriculture Committee is taking evidence, in connection with which it visited a successful and long-established organic farm in my constituency. I want to raise some points mentioned to me by local organic farmers and farmers who are trying to become organic, so that my right hon. Friend the Minister can respond. I acknowledge the huge increase in support that the Government have given to organic farming. I welcome that, but I agree with my hon. Friend the Member for Lewisham, Deptford that more help now could make a huge difference in the future.
The first and most crucial point is that money to help to convert to organic farming has stopped for this year. There is no more available until next April, which is frustrating for farmers who want to get on with the conversion programme. A farmer in my constituency has 80 per cent. of his land already covered by the conversion scheme and wants to get further involved by going 100 per cent. organic. He cannot do that because that extra 20 per cent. of the land cannot be covered by

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any other grant. It is a shame that someone who is enthusiastic cannot get extra support this year. When consumers are crying out for more organic food, and when farming is in such huge difficulties and has a real need to diversify, that situation seems crazy.
There is a growing demand for organic products across the board; the way in which the markets are increasing month after month, with no prospect of the demand falling back, is a salesperson's dream. More support now would make a big difference, especially in light of concerns raised over genetically modified crops and the other directions that farming might take. More support for organic farming would be widely welcomed by communities.
In organic farming, we have a golden opportunity that should not be missed. I say that for three reasons. First, Iceland has bought up supplies of organic food; that retailer would have liked to buy more from this country, but that has not been possible, so it has had to go abroad. Every month the number of GM crop imports increases, exceeding the growth of United Kingdom production in organic food. Therefore, every month the trade deficit widens. I would have thought that the Chancellor might want to consider that; perhaps he should discuss the matter with my right hon. Friend the Minister.
Secondly, the Government should invest more in organic crops because farming makes a huge contribution to biodiversity and would help to achieve the Government's sustainable development targets. As those involve the percentage of land farmed organically and change in the number of farmland birds, having more organic land would help us to achieve them. The Soil Association recently produced a report containing not anecdotal, but real evidence that organic farming contributes to biodiversity. The report brings together the findings of nine studies on biodiversity and organic farming. Lowlands were the main focus, but the study's conclusions can be broadened to other areas. Organic farming was compared to conventional farming systems.
The studies found greater levels of abundance and diversity of species on organic farms. There were five times as many wild plants in arable fields and 57 per cent. more species. Several rare and declining wild arable species were found only on organic farms. As to bird species, 25 per cent. more were found at field edge; 44 per cent. more in field in autumn and winter; and there were 2.2 times as many breeding skylarks.
Greater biodiversity was found in vertebrates; there were 1.6 times as many arthropods, which are important as bird food; three times as many non-pest butterflies in crop areas; one to five times as many spiders and one to two times as many spider species. On crop pests, there were significant decreases in aphid numbers and no change in the number of pest butterflies. Those significant findings provide concrete evidence that organic farming makes a positive contribution to biodiversity.
Farmland represents 76 per cent. of the UK's total area, so organic farming can clearly make a major contribution towards the conservation of our biodiversity. Organic farming is not limited to species
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that we can see in the fields. It also offers huge biodiversity benefits for soil and aquatic ecosystems, while reversing the dangerous trend of falling agriculture and genetic diversity. For all those reasons, we should support a major increase in organic farming.
Another reason for seizing a golden opportunity and finding more money from every budget in MAFF relates to jobs. The Government rightly made the creation of jobs a priority and succeeded in doing so through the new deal. Conversion to organic agriculture could create even more jobs. Sustain, the alliance for better food and farming, estimates that 17,000 more full-time jobs—in rural areas, significantly—could be created. Job creation schemes can be less successful in rural areas, so rural employment is important.
It is widely acknowledged that organic farming creates more jobs—by somewhere between 10 and 30 per cent. Sustain adopted a middle course and estimated that 20 per cent. more agricultural jobs could be created. Increasing the current 3 per cent. of land farmed through organic methods to the 30 per cent. target in the Bill that we all support would create an additional 17,000 jobs—and perhaps even more down the line, through local markets and so forth. That should not be ignored; it could make a real difference.
Finally, I should like to raise a couple of specific issues mentioned by farmers in my constituency. The first is from a farmer who wanted to convert: he received his grant payment, but decided for several reasons not to proceed. One reason was that he did not own his land: he was a tenant and, although the grant came to him as a person, the land was separate from him. If the land were not farmed for the requisite number of years, he, as an individual, would have to pay back the money to the Treasury.
That is unfair because part of the problem is outside his control. If something went terribly wrong, and he had to move off the land, he would be in danger of having to pay back the grant if the next tenant did not want to farm the land organically. Will my right hon. Friend confirm that there might be some flexibility in future to accommodate circumstances in which a farmer unexpectedly cannot continue to farm the land and someone else takes it over?
The farmer's second problem was that the banks put a lot of pressure on him, querying whether the market would exist for organic food. Banks are known to be prudent but that is taking prudence to extremes. They argued that because Iceland is buying up the market, prices would drop. Iceland has said that it does not want to drop the support that it gives to farmers and that it does not intend to drop its prices. The banks, however, were using the mere fact that it has woken up to this and has quite rightly bought up some of the organic supply to argue that they do not know what will happen in future. That is regrettable. There is obviously some concern out there.
The other concern, which has been raised by a dairy farmer who is converting in my constituency, relates to the different time limits. It takes a minimum of two years and three months to convert from milk to organic in the UK. In some other European countries it is possible to convert in three to 18 months. Denmark and the Netherlands were mentioned as areas where conversion takes place more quickly. Surely there should be a level

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playing field. Is it perhaps a question of different accrediting bodies in different countries? Will we get to the point where farmers in Britain go to Denmark or the Netherlands to ask for accreditation? We could end up with two different definitions of organic in this country. Consumers want to know that a product is genuinely organic and properly registered. They would rightly expect organic food from France and organic food from the Netherlands to be the same as that from this country. Any comments that my right hon. Friend the Minister can make on that would be much appreciated.
I am pleased that we are having this debate. It is very timely as the Select Committee on Agriculture is in South Swindon today. I congratulate the Government on everything that they have done on organic farming. There is a golden opportunity: please can we find some more money to convert more farms to get closer and closer to that target of 30 per cent. of land farmed organically in this country?
11.32 am
Mr. David Drew: I am a member of the Agriculture Committee, which is taking evidence at the moment, so, had I not been given leave of absence, I should trying to be in two places at once. I should preface my remarks by saying that I do not intend to go into our investigations, other than in general terms. The Committee is fortunate to have the evidence of the House of Lords inquiry, which looked into organic farming and the European Union a couple of years ago, and I shall dwell on some of the ideas contained therein. A lot of evidence has already been provided by my hon. Friends the Members for Lewisham, Deptford (Joan Ruddock) and for South Swindon (Ms Drown) and I shall not go over that again. Instead, I shall raise some points that my right hon. Friend the Minister of State might want to consider before she and her ministerial colleagues give evidence to the Select Committee.
I support the Bill proposed by the hon. Member for North Cornwall (Mr. Tyler). It is important that we stand up and argue the case for organic food production. That case is clearly gaining momentum, as shown by Iceland's decision and that of millions of individual consumers. They have decided to go organic in part because of the problems with genetically modified organisms—the scandal I could say—and, more particularly, because of the BSE difficulties. There is also a positive aspect, which is that people genuinely want to know what they are eating, where it comes from, and what the possible impact on their own health and general disposition will be. That is a jolly good thing.
One of the arguments against the Bill is that its supporters are setting unrealistic targets that interfere with the natural market mechanism, which is not the right way to go about the problems: if the movement is driven by the consumer and the retailer responds, why are targets needed? That argument is wrong in two respects: first, there are stop-start problems, so there should be some smoothing of the conversion pattern, and to set a target for annual improvements enables the allocation of appropriate sums for the purpose. Secondly, we should take a more humane and sensible approach to agriculture per se than is possible in the madness of the common agricultural policy. We want to discuss the matter with other European Union member
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states and within the World Trade Organisation, so that we can learn the extent to which organic farming can progress, and how it can be measured and encouraged.
Much of the evidence accrued on organic farming is anecdotal. An objective study of its environmental, economic and consumer benefits is needed; a study should also be made of the controversial subject of health benefits. I am in favour of organic farming, but I am not necessarily against conventional farming. There should be no trade-off. The notion that organic farming is good and conventional farming is bad is not the way forward. Objective research can benefit everyone. Besides helping those who wish to go into organic farming, research will also drive up standards in conventional farming, which will be no bad thing. There is much evidence for the benefits of integrated crop management schemes and reduced use of pesticides and fertilisers.
I am confused by the regulation and certification processes. Evidence to the House of Lords inquiry showed that the United Kingdom register of organic food standards—UKROFS, as it is lovingly called—is under pressure. There is a dispute about the role of the state in setting good standards for organic food, and it is argued that UKROFS should become the regulator in such matters. Self-regulation may be all very well, but the role of advocate must be separated from that of regulator if organic farming is not to fall into the same traps as those to which conventional farming has fallen victim. I hope that my right hon. Friend the Minister of State will comment on the role of the regulator.
Finally, I want to give the diversity of the organic movement a quick plug. I have in my constituency a biodynamic farm, Koliska: biodynamic farming is a pure form of organic farming. People use the term "organic farming" to suggest that it entails a massive changeover to a Soviet-style approach, but it is not like that at all. Organic farming is a philosophy and those who believe in it know that there are different types of organic farming, of which biodynamic farming is one.
The debate is timely both because the issue is being investigated by the Select Committee on Agriculture and because of a consumer-led upsurge of interest. We are right, as parliamentarians, to tease out some of the issues. If we are not careful but simply allow events to unfold and arrangements to fall into place, adverse consequences may follow. I support the Bill introduced by the hon. Member for North Cornwall and I congratulate my hon. Friend the Member for Lewisham, Deptford on securing today's debate.
11.40 am
Mr. Colin Breed: I welcome the opportunity to make three brief points on matters that are almost side issues, but which I believe are pertinent to the thrust of the debate.
First, organic farming requires a somewhat higher level of skill than is needed for conventional farming. Therefore, it is essential that we put enough resources into training courses, particularly in places such as Duchy college in my constituency, which now offers people involved in farming more opportunities to acquire the additional skills needed to manage organic farming properly. I hope that we will not forget that it is necessary not only to encourage new entrants to organic

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farming, but to give those farmers that want to change their methods the opportunity to hone their farming skills.
Secondly, many people are switching to organic farming because they can obtain premium prices for produce, so the Government should recognise that the premium should not be eroded. We must ensure that new entrants' margins meet the expectations on which they base their business plans, and that can, in part, be achieved by not allowing supermarkets to attain a dominant position. At present, supermarkets are scrabbling around to find organic produce and they are prepared to pay higher prices than they would normally expect to pay. However, as supply increases to meet demand, the supermarkets will slowly and inexorably reach a dominant position. I hope that the Competition Commission report due out shortly will deal with fair trading contracts, which ensure a fair contractual arrangement between primary produce growers and retailers. We cannot allow the supermarkets to reach a dominant position from which they can squeeze farmers and growers, as they have done in other sectors dependent on supermarket trading.
Thirdly, the danger grows that unscrupulous traders will jump on the wonderful bandwagon and threaten the integrity of the organic farming movement by passing off non-organically grown produce as organic to obtain a much higher price for it. We must ensure that the powers of trading standards organisations are strengthened so that only truly organic produce can be presented as organic. If the public become less supportive because they feel that they are being conned, the process of regulation will be undermined. Trading standards organisations need the powers and the resources to assure consumers that when they choose organic produce, they get organic produce.
11.43 am
Mr. Paul Tyler: I am delighted to contribute to the debate, but I apologise to you, Mrs. Roe, to the Minister and especially to the hon. Member for Lewisham, Deptford (Joan Ruddock) for being a few minutes late, as I was involved in a Select Committee.
If I am the adoptive parent of the Organic Food and Farming Targets Bill, the hon. Member for Lewisham, Deptford undoubtedly is its godmother. I pay tribute to her for all her work and for succeeding in securing the debate. I have not the slightest doubt that if that Bill does not reach the statute book, she, other hon. Members and I will redouble our efforts to ensure that we make real progress.
I am delighted that the Bill has attracted cross-party support. As the Minister will know, it is supported by not only a number of former Ministers, such as the right hon. Members for Bridgwater (Mr. King) and for Chesterfield (Mr. Benn), but a cross-section of all parties and people of wide experience in agriculture and related sectors. I am interested in the subject for a number of reasons, not least because my constituency is agricultural and is suffering a great deal as a result of the decline in mainstream agriculture. Organic food and farming represent an extremely important opportunity for diversification by a hard-hit part of the rural economy.
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I pay tribute to other hon. Members, some of whom have spoken this morning, who do not have a huge number of farmers in their constituencies. However, the Bill has attractions for us all. I have the pleasure of being a neighbour of my hon. Friend the Member for South-East Cornwall (Mr. Breed), who is our party spokesman on food and fanning. In the previous Parliament, I was responsible for that policy. Therefore, I approach it with some experience.
I take as my text—having been properly brought up in a churchy family—the important statement made by the Prime Minister to the annual general meeting of the National Farmers Union on 1 February. He said:
Our plans envisage a trebling of the area under organic farming by 2006.
I have discussed with Ministers whether that is a target, pledge, promise or merely an aspiration. I do not want to play semantic games. I take that statement as an encouraging sign. I think that all hon. Members will acknowledge that organic food and farming is an idea whose time has come. We may differ on the mechanisms by which our objective is achieved. However, we are all concerned to ensure that our fellow citizens, who are crying out for more choice of organic food, get that choice, with the assurance of quality, integrity and, if possible, that the food comes from British sources. I emphasise that point.
At present, British farmers supply less than a third of the organic food that appears on our retailers' shelves. I participated in an extremely interesting conference on 14 June, organised by Marketing Week. As far as I was aware, there were only one or two farmers in the audience of 100, but the representatives of the retail sector were there, clamouring for more choice, sourcing and supply from British producers. That is the challenge that faces the Government and, indeed, Parliament.
For reasons that have been well advanced by hon. Members, it is incredibly important that we enable British producers to meet the demands of the market. It is important to get a sense of the relative investment that has already been made. The hon. Member for Stroud (Mr. Drew), to whom I pay tribute for being a dogged defender of the organic sector of British agriculture and an effective champion on its behalf, referred to research. Organic farming is set to receive 1.8 per cent. of the total research budget allocated to agriculture in the current financial year, while biotechnology and genetic modification will receive £26 million. Organic food has a huge potential market. As we all know, genetically modified food has a very small market and it is probably declining. I would like to know how we should address that discrepancy.
Retailers are making it only too clear that the discrepancy in demand is huge. Unless we can speedily bridge the balance of trade gap, to which the hon. Member for South Swindon (Ms Drown) referred, we shall have a difficult problem. The evidence of retailers speaking at the conference that I mentioned is that they will simply have to source elsewhere.
I take to heart the comments made by a number of hon. Members about quality control. Perhaps the Soil Association can be reasonably confident of comparable standards in other EU states, but I am afraid that we cannot be entirely confident about the current monitoring of food imported from other parts of the

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world. I imply no criticism—that is a fact of life. However, it is clear that we cannot rigorously monitor production methods and the supply chain in distant countries.
It is therefore extremely important that we investigate quality control on imports. Conservative Members have raised this issue in this Parliament, and I support them in that regard. I raised it in the previous Parliament, when the Conservative party was in government and could have made a start on the problem. There must be quality control, so that British farmers can be confident of—to repeat the expression used by the hon. Member for South Swindon—an even playing field.
I shall speak only briefly, because I want to give the Minister maximum time to respond to this debate. There has been no full statement on the Government's position in recent months, but I realise—and hope—that things might be changing. I endorse everything said by the hon. Member for Lewisham, Deptford, who opened the debate, and other hon. Members, but I should add two specific points that relate to my own part of the country, the south-west.
First, as my hon. Friend the Member for South-East Cornwall said, the Duchy of Cornwall has taken a pioneering role, and I welcome the Duke of Cornwall's setting a practical example of what can be achieved. I hope that it will not be taken amiss if I describe the Duchy of Cornwall as a large operation—it is certainly a lot larger than most farms in my constituency. It is easy for such land-owning organisations to take a long view, but given the current state of the market and the profitability levels to which my hon. Friend the Member for South-East Cornwall referred, it is extremely difficult for smaller organisations to take a risk on conversion. In the light of the hiatus in support to which reference was made this morning, diversification by small farmers, who are the backbone of the rural economy in the south-west, presents them with a major problem.
We must put the figures in perspective. Last month, when I asked about the total amount paid under the common agricultural policy to farmers in the United Kingdom in 1999–2000, and what percentage of that money was paid to organic farmers, the Minister produced the following figures. Under the CAP, total forecast UK and EU expenditure on national grants and subsidies was £3,172 million, but the figure for the organic aid scheme was just £11.35 million. I would argue that that discrepancy is too great.
The second issue is of particular significance to the south-west, but it is also important elsewhere. In a number of areas, the relationship between methods of agricultural production and various forms of environmental protection is very close. That is true not only in the south-west but in East Anglia, where pesticide residues in the water supply present a major problem. They raise health concerns, but they are also expensive to deal with; indeed, they could even prove a major problem for water undertakings and water consumers in your constituency, Mrs. Roe.
Water charges in the south-west are already extremely high. I should hate to think that we had to pick up a bigger bill for environmental protection and reduction in pollution simply because we failed to invest positively in a better form of agricultural production. That is an
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important issue, to which reference was made earlier. The rural White Paper, which is due in a matter of weeks, must contain a balance sheet showing the investment in organic food and farming and the benefits of reduced expenditure in other Departments because of the value that organic food and farming can give the rural economy.
In summary, the Bill is a win, win measure. There will be no losers in agriculture, because farmers who continue to farm conventionally will not lose out if some of their neighbours move over to a different form of production. Indeed, there could be a useful spin-off for conventional husbandry at a time when many farmers are really up against it and are seeking opportunities to diversify. There would be huge advantages for them if they could obtain this support, especially after their first conversion. Maintaining and sustaining the organic conversion is so important. Other European Union countries have been a great deal more successful than we have in that area, which is why we are comparatively far down the league table.
Major environmental advantages will be gained by promoting biodiversity, as the hon. Member for South Swindon said, and by reducing pollution and its related costs. There will be huge health advantages for consumers. I have tabled many questions on that subject. I regret that, so far, the health advantages have not received the attention or the research investment that one would have hoped. Water companies will also enjoy great advantages, at a time when they face increasing problems relating to chemical residues.
Rural communities will benefit from the employment opportunities. I would not go to the stake over the figures produced by SUSTAIN, but there are clear advantages in a more labour-intensive form of agriculture. Anyone—such as Mrs. Roe and I—who avidly listens to "The Archers" will know that Tony and Pat Archer work themselves into the ground. Sometimes, I think that they slightly overdo it. If they went to a real, modern organic farm, they would find that it was not quite as bad as we are given to understand.
The biggest single change will be the huge advantage for food retailers and processors. Market demand has leapt in recent months, and I was told by one of the most revered forecasters and analysts in retailing, at the conference to which I referred, that that increase in demand is unprecedented. Nothing has ever hit the retail sector with such speed and on such a scale as the demand for organic produce.
Last but not least, the Government are in a win, win situation. Having set their hands to this plough, they will reap great benefits if they are prepared to go the whole way, and to set clear targets and strategies for the development and expansion of this sector. I have noted hundreds of targets in publications from various Departments. There are so many that I have not managed to count them. Even the Ministry of Agriculture, Fisheries and Food has more targets of various kinds hidden away. I have no doubt that when the rural White Paper emerges in a few weeks, it, too, will contain targets. Those who have sponsored my Bill simply ask that there should be a target for the expansion of organic food production in this country. We have set a realistic time scale of 2010, and we look

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forward with considerable appetite—and, we hope, cheerful digestion—to the approach that the Minister will take.
Finally, if we can do anything to assist the Minister, to strengthen her arm and to give her any support and encouragement that she needs in terms of another statement that the Government will make shortly on the comprehensive spending review, she has only to ask us.
11.59 am
Mr. Malcolm Moss: I congratulate the hon. Member for Lewisham, Deptford (Joan Ruddock) on securing this important debate.
Frankly, the Government's record to date on organic farming is a sorry one. It is characterised by an underestimation of demand, incompetent planning and inadequate resourcing. The Minister of State will doubtless claim that the Government have greatly increased funding for organic farming under the organic aid schemes and the organic farming scheme. However, the Government are being less than honest with us because they compare the situation with that in May 1997, when British consumers' demand for organic produce exploded. Before May 1997, the organic market was tiny, but that did not stop the then Conservative Government setting up the organic aid scheme as far back as 1994.
The real question is whether the Government have capitalised on the opportunities of the organic boom that is taking place or thrown them away and held back the British organic farming sector at a crucial phase of its development. As has already been said, the organic farming scheme in England opened for applications in April 1999. The Government set a budget of £6.5 million for 1999–2000 and of £8.5 million for 2000–01. However, they massively underestimated demand from the farming community. That two-year funding ran out in six months because the scheme was over-subscribed. In October, the Government pulled the plug and said that no more money would be available until April 2001. Incredibly, they slammed the door on the growth of Britain's organic farming sector just when demand for organic produce was booming.
In an excellent briefing paper sent to hon. Members, the Soil Association stated:
To us it seems unacceptable that while UK agriculture is undergoing such a serious crisis and organic farming is one of the few sectors with an undersupplied and growing market, that its development in the UK is now on hold and foreign producers are taking advantage.
Late last October, the Government were shamed into providing £10 million in additional funds for the organic farming scheme, but that was sufficient only to clear the backlog in applications. They have since confirmed that they will not consider further applications until April 2001. By shutting off the flow for the new conversion payments for 18 months, they have ensured that foreign producers will tighten their grip on our organic market.
The Government say that they will reopen the organic farming scheme in April 2001, when they will start providing £18 million or thereabouts each year for the sector through the England rural development plan. During that plan's seven-year period of operation, the
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Government are committed to making £140 million available through the organic farming scheme. The Soil Association says that that is not enough. On 15 June 2000, Simon Brenman stated in Farming News:
At least £25 million a year is needed to meet the demand.
It is interesting to note that £25 million was needed to satisfy demand from farmers during the six months in which the organic farming scheme operated before it was shut down.
Spending under the England rural development plan will amount to £140 million over the next seven years. The Soil Association calculates that that will take the level of organic farming to about only 8.5 per cent. in England by 2010. In view of the fact that domestic supply currently constitutes only one third of the market, which is expected nearly to triple by 2003, there should be enough funding to increase current supply, in the Soil Association's estimate, by 10 times by then if the Government's aim is to be met. Extrapolating forward, the Government should plan for 30 per cent. to be converted by 2010. In the Soil Association's calculations, the English scheme would need annual funding of £87 million a year. The Soil Association estimates that the Government's suggested figures are wildly out.
Mr. Drew: Is the hon. Gentleman saying that the Opposition are committed to the 30 per cent. target and will fund it accordingly?
Mr. Moss: I do not have much time, if the Minister is to respond.
The signs are that the Government are no less complacent now than they were at the outset of the organic farming scheme. Commenting on the first six months, the Parliamentary Secretary to the Ministry of Agriculture, Fisheries and Food told the Farmers Guardian:
There was an enormous rush. But I suspect we have reached a peak in those two years. We think the new money is enough to manage a careful expansion of the sector. We must have a steady increase, because if it is too sudden it could damage the market.
Such comments are patent nonsense. For a start, the peak was not reached in two years, but in six months. In the remaining 18 months, until the OFS is reopened, it is likely that demand for conversion payments will accumulate, not dissipate. Furthermore, as demand for organic produce is increasing at 40 per cent. a year, while British supply increases at only 25 per cent., failure to step up the rate of organic farming will weaken further the share of the domestic market held by British farmers. As a final twist, the Government have confirmed that farmers who start conversion outside the OFS—that is, those who convert during the 18 months for which the scheme is closed—will not be eligible for OFS payments, once the scheme reopens.
The Government's support for organic farming is more than a matter of finance, although the Government fail in that respect, too. Little has been done to control imports of food that calls itself organic, but which falls well below the organic standards legally required of British producers. Most importantly, the Government's incompetent policies on genetically modified crop trials have placed the future of the British organic sector in some doubt. Organic farming is

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threatened by the Government's insistence on pressing ahead with the commercial planting of genetically modified crops, before research into their environmental impact has been completed. A survey by the National Pollen Research Institute puts the risk of cross-pollination as high as one in 93. Organic farmers have the right to farm without such a threat from neighbouring farms. Indeed, the Government do not seem to care about genetic pollution of GM crops. On 18 January 2000, Baroness Hayman told the Select Committee on Agriculture:
The organic movement has to recognise and find a way of living with…contamination from conventional crops.
The organic market is one of the fastest growing sectors of British agriculture, as it attempts to meet consumers' demands for new food sources. Organic farmers should benefit from common agricultural policy reforms that encourage less intensive and more environmentally sustainable methods. All European Union member states support farmers who convert to organic methods, and we feel that the Government should match the help afforded by their continental counterparts. The next Conservative Government will fund increased payments by redirecting the rural development regulation and seeking our share of the redistribution of the tobacco subsidies paid under the CAP. The research and development budget for agriculture has been skewed by the Government's overhasty endorsement of genetic modification. We would redirect the £120 million research and development budget and increase the £2.1 million allocated to organic farming. The Government's mismanagement has obliged farmers to spend money to start the conversion process, only to learn that funding has run out. The next Conservative Government will reform the system to guarantee support to suitably qualified farmers, before they embark on conversion.
As I said, the Government's record on organic farming is sorry indeed. The Soil Association believes that the Government fail on three counts, and we concur with some of its findings. First, there has been no forward planning. Secondly, specific problems have not been addressed—for example, the poor conversion rate in the horticultural sector and the fast-growing imbalance between conversion of the livestock and arable sectors. Thirdly, there are no targets. It is no coincidence that the countries with the highest levels of organic farming in Europe have all adopted targets and a strategy to meet them. Based on an analysis of targets in other countries and the development of the market here, the Soil Association believes that a target of 30 per cent. by 2010 is desirable and practicable. The Organic Food and Farming Targets Bill proposes such a target.
Wherever one turns and whoever one listens to, this is a major opportunity for British agriculture, but the Government are failing agriculture by failing to support the embryonic and fast-developing organic sector.
12.10 pm
The Minister of State, Ministry of Agriculture, Fisheries and Food (Ms Joyce Quin): We have had an interesting and worthwhile debate with a number of thoughtful speeches. I welcome the opportunity to discuss an issue that is important to the future of agriculture and food production.
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I pay tribute to my hon. Friend the Member for Lewisham, Deptford (Joan Ruddock) for introducing the debate. The House recognises that she has considerable knowledge of the sector and that she has taken an interest in it for many years. I am glad that she and most other speakers acknowledge the greatly increased commitment to the organic sector that has been shown by the Government. Like other hon. Members, I welcome the fact that the Select Committee on Agriculture is investigating the issues. We were fortunate to have in attendance the hon. Member for Stroud (Mr. Drew), who is a member of the Select Committee; the Government look forward to the outcome of its investigations.
My hon. Friend said that I might be giving evidence to the Committee, but that is unlikely. My hon. Friend the Parliamentary Secretary, who has shown great commitment to the organic sector, is responsible for the matter in the Department, but he is away at an international conference at the moment. However, I am an enthusiastic supporter of the organic sector and more than happy to be responding to this debate.
The exception to the interesting contributions was that of the hon. Member for North-East Cambridgeshire (Mr. Moss), who speaks for the Conservative party. He could at least have recognised that we are spending more than 10 times the amount that the previous Government spent on the organic sector. It is bizarre to witness, as we so often do, Conservative Front Benchers talking about unspecified but huge increases in spending on whatever subject is under consideration when their party has an apparent tax guarantee policy based on decreasing public expenditure. The figures quoted by the hon. Gentleman this morning do not add up.
One of the obstacles to the Government's providing money for rural development generally has been that we were held back under European rules by the historically low level of funding that our country has spent on that matter and which we inherited from the previous Government. I am glad that my right hon. Friend the Minister of Agriculture, Fisheries and Food was able to increase the amount of European support for rural development measures, including organic production, by around 30 per cent. Those historically low levels; have caused us real problems when trying to reach agreement at European level on the way forward for the rural development regulation.
I hope to respond to several of the issues raised in the debate, especially the detailed points made by the hon. Member for North Cornwall (Mr. Tyler) in connection with his Bill. However, I do not have any dramatic or particularly good news to give him other than that which he has already received.
Organic production has made great strides, especially in the past two years. It has certainly caught the interest of a much wider consumer base and is well placed to consolidate and expand. This is an exciting period in the history and development of the organic movement, which holds great promise for its future development and expansion. We all know that consumers take a considerable and increasing interest in being better informed about the food that they buy. They take a much greater interest in what they eat and in the quality of food, and their considerable purchasing power can

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obviously effect changes in types of food consumption. The degree of that consumer interest must be regarded as a healthy and welcome development.
Consumer pressure can lead to changes in the behaviour of retailers and processors, and in recent months we have witnessed such changes. That is particularly true in respect of the sale of organic food in multiples, through which about 70 per cent. of organic food is sold. We all witnessed a great expansion in the range and quantity of organic produce that they now offer. As well as increased interest from supermarkets and multiples, there has been welcome expansion in the number of specialist outlets, for example through box schemes and farmers markets, to which reference has been made this morning. I recently visited a farmers market in London and it was good to hear the dialogue between farmers and customers, much of which focused on issues such as the safety and quality of the food on offer.
Mr. Breed: Sometimes when people want to set up a farmers market, they are prevented from doing so by an ancient charter relating to a nearby city. Will the Minister not give consideration to such matters? Is it not time to sweep away such arrangements, so that farmers markets can be established where they are wanted?
Ms Quin: I certainly accept that, in some areas, there have been difficulties arising from antiquated arrangements. It is important that we look for ways to encourage farmers markets in areas where people want to establish them. In some cases, changes in legislation are needed, and they take time, but it is sometimes possible to exploit more flexible interpretation of planning guidance and planning rules. I agree that it is a matter to which we should give our attention.
One of the commitments made at the farming summit on 30 March was to work with planning authorities, especially on issues such as farm diversification. Farmers markets are an important part of the diversification of British agriculture, so we need to address and solve the problems that have frustrated the farmers market movement. None the less, we should rejoice in the fact that the number of farmers markets has increased so dramatically: from having almost no farmers markets a couple of years ago, we now have about 100 of them flourishing and doing well, and the movement continues to gather momentum.
Farmers are obviously seeking new ways in which to sustain their livelihoods. Those in the United Kingdom have become more environmentally aware and sensitive in recent years, in part because of financial incentives that encourage them in that direction. It is also part of a wider trend that reflects the growing desire in society as a whole for environmentally benign and environmentally friendly methods of production.
Ms Drown: Is my hon. Friend conscious of the distinction between other agri-environment schemes, which are funded continually and which, I am glad to say, farmers throughout the country have taken up, and
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organic farming, which does not receive any more funding once the farmer has converted? Will the Government consider that issue?
Ms Quin: Organic farmers are eligible for participation in other environmental schemes and some take advantage of such provision. We should not consider aid to organic farmers solely in terms of the organic farming scheme or its successor under the rural development regulation. Several agri-environment and other schemes under the rural development regulation are of interest and benefit to organic farmers.
I stress the worthwhile nature of agri-environment schemes. Yesterday, I visited the Royal show, where I was pleased to see some of the pilot work that is being done in arable stewardship, by which I mean arable farming that promotes bio-diversity, the habitats of farmland birds and a tremendously welcome array of wild flowers and plants. It was a pleasure to see fields of colourful poppies and other flowers that were once prevalent in the English countryside, but which have disappeared in the post-war years. It is important that organic farmers consider such schemes, as they can have a real impact on British agriculture and on the countryside generally.
The demand for aid under the organic farming scheme shows the considerable interest of farmers in organic farming. Organic farming is not necessarily an easy option: it demands commitment. It is not simply a matter of not doing things—for example, not applying synthetic pesticides, herbicides and fertilisers—but one of disciplined and positive management. Close attention must be given to the health of crops and livestock and to the early management of pests and diseases. Above all, it requires the adoption of an holistic approach to the farming enterprise based on an effective rotation that ensures soil health and fertility, and many farmers have grasped that approach with enthusiasm. None the less, organic farming certainly needs to be undertaken with a sense of responsibility and commitment.
The Government's general ambition is for British farming to be prosperous, forward-looking and sustainable. It must be competitive and sufficiently flexible to be able to respond quickly and effectively to market changes and consumer needs.
Mr. Moss: Before the Minister finishes, will she enlighten the Committee on the Government's forward-planning approach for organic farming?
Mr. Deputy Speaker (Mr. Nicholas Winterton): Order. This is Westminster Hall, not a Committee of the House.
Ms Quin: Those are precisely the issues that I intend to address. The Government have a strategy for the organic sector that will have a positive part to play in agriculture in future. However, I accept some of the views expressed about there being a great deal more to do. The area now under organic cultivation in the United Kingdom is modest, as are sales of UK organic farms in our shops and supermarkets. I recognise the potential for replacing imports, to which many hon. Members have referred: we can supply considerable amounts of some organic produce through domestic

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production, but the amount of some other types of produce supplied by the UK industry is disappointingly small—I refer to fruit and vegetables, although some of them grow better in climates warmer than ours. However, I am convinced that a considerable increase in UK organic production is possible, and I hope that it will take place in the next few years.
We want organic farming to prosper and succeed. The schemes that have been in place since the Government took office have channelled a huge increase in money into the organic sector. Under the new scheme and the rural development regulation, the aid available from next year will be more than 20 times that which was available under the previous Government. That sum will increase in the next six years, which is the period of the regulation. The extra money that we have brought in has enabled us to tackle the backlog, which is important. We are aware that several farmers were frustrated by the fact that, especially under the previous Government, money was limited and that the incentive to go organic was therefore not as strong as they would have liked.
It is worth mentioning that some farmers are converting without aid. The sector is so attractive that there is a movement to go organic even among farmers who have not been successful at achieving aid so far. We are conscious of the fact that aid during the conversion period is especially important, as that is when various measures that result in a loss of income to the farm have
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to be taken. Despite the fact that farmers expect increased income once the conversion period is over, there is a difficult period to get through first. We have been especially eager to target aid on the conversion period, rather than on a system of on-going aid, as is the case in other European countries.
The Government have increased aid to research and development in organic farming; that support is now worth slightly more than £2 million a year, and organic farmers benefit from some of the other research programmes that my Ministry administers, for example, some of the £8 million aimed specifically at research into biological methods has a direct and beneficial spin-off for the organic sector. Public expenditure on organic research in the UK is significantly higher than in most European countries. We should welcome that, although I am not averse to hon. Members telling me that we could do more, as that is also true.
The hon. Member for North Cornwall referred at some length to his Bill in respect of targets. He will be aware of the reaction to the Bill of my hon. Friend the Parliamentary Secretary. He referred to the Prime Minister's words at the farming summit—
Mr. Deputy Speaker: Order. Time is up. We now move to the next debate, which is a standard half-hour Adjournment debate initiated by the hon. Member for Birmingham, Selly Oak (Dr. Jones).

Human Rights (Saudi Arabia)
12.30 pm
Dr. Lynne Jones: Two weeks ago, the Minister of State, Foreign and Commonwealth Affairs, my hon. Friend the Member for Neath (Mr. Hain), spoke at the conference on investing in Saudi Arabia held at the Four Seasons hotel in London. He extended an especially warm welcome to Prince Abdullah bin Faisal bin Turki, president of the Saudi General Investment Authority, and expressed his delight at the presence of His Highness in the United Kingdom, which, he told the prince,
we like to think is your second home.
During his speech my hon. Friend made much of the fact that Britain is the second largest investor in Saudi Arabia, with investments $3.5 billion. He listed a string of well known British companies with investments there, and exhorted British business men to regard Saudi Arabia not only as a market for goods and services but as a joint venture and investment partner. He said:
You will have the…Government's full backing,
including Export Credits Guarantee Department support, and added:
There is ample capacity under the Department's Overseas Investment Insurance Scheme to help with projects in Saudi Arabia.
No doubt that would include the export of military equipment, given that almost half of total British arms exports go to Saudi Arabia.
Hospitality to the Saudi royal family continued this week, during the eight-day visit of Prince Salman bin Abdul Aziz, governor of the capital, Riyadh, who was welcomed by the Deputy Prime Minister and received by the Queen at Buckingham palace, as well as by the Lord Mayor of the Corporation of London at a luncheon given in the Prince's honour. I understand that Prince Salman also accompanied Prince Charles to a polo match, at which he presented the prizes, and had meetings with other Ministers, including my right hon. Friend the Foreign Secretary.
Meanwhile, back in Saudi Arabia, a different sort of hospitality was being provided for my constituent, Mr. Mohammed Chaudhry, who continued to languish in a Saudi jail in Riyadh, the area under Prince Salman's jurisdiction, where Mr. Chaudhry has been detained without charge since 23 June last year. As has been well documented by Amnesty International and other organisations, Mr. Chaudhry is just one of many people who have been denied their basic human rights by the Saudi authorities. We must ask why the Government are prepared to subordinate the human rights of people such as Mr. Chaudhry to the interests of the arms trade and other economic considerations? The purpose of this debate is to highlight his plight, which has already been the subject of early-day motion 810, which was signed by 120 Members from all parties, and to give the Government an opportunity to explain to the House what action has been taken to secure justice for that British citizen.
I shall briefly outline the events that led up to my constituent's arrest. From 1988, Mr. Chaudhry was employed on an annually renewable contract as a manager in receipts and storage distribution at Riyadh
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military hospital. Every December, he was responsible for annual stocktaking in the supplies department. Midway during the 1998 stock take, Mr. Chaudhry was mysteriously suspended from duty by his immediate superior, Captain Meshal Al Meshal. No reason was given, but Mr. Chaudhry was asked to return to work after one week. On his return, he found that his job had been taken over, which amounted to constructive dismissal. He felt that he had no option but to hand in his resignation, which was accepted by Captain Meshal.
Mr. Chaudhry believed that Captain Meshal wanted to replace foreign nationals with Saudi staff. He was required to work three months' notice to receive the full benefits of his term of employment, and planned to return home with his wife and two children on 25 March 1999. However, when stocktaking was completed, without further involvement by Mr. Chaudhry, a deficit of 20 million riyal was found. The hospital chief executive, Colonel Musa, dismissed Captain Meshal and reinstated Mr. Chaudhry, who was asked to investigate the deficit. As a result of miscounting by inexperienced staff, which Mr. Chaudhry identified, the deficit was subsequently reduced to 8 million riyal—about £1.5 million. However, the stocktake was never completed as it was cancelled in writing by Colonel Musa.
At about the same time, in February 1999, Shahid Bukhari, a storeman from Pakistan who worked under Mr. Chaudhry, was caught in the act of stealing medical supplies from the warehouse. Everyone working in the supplies department came under suspicion, and Mr. Chaudhry was told that he would not be allowed to leave the country until investigations had been completed. As he was required to remain in Saudi, Mr. Chaudhry's contract, which was due to expire, was renewed until 6 August. He was asked to help with inquiries, which he did willingly. All members of staff, including Mohammed Chaudhry, were questioned by hospital security. During questioning, Shahid Bukhari claimed that one Egyptian and one Saudi national had also been involved in the theft of supplies. The men were arrested and the matter was passed on to the military police, under Colonel Abdullah Al Mughari—the head of security who is believed to be a friend of Captain Meshal—and then to Colonel Ali Johani from the Ministry of Defence.
Mrs. Chaudhry, who is in Westminster today, says that she was told in a telephone conversation with Simon Lovett, then British consul in Riyadh, that Captain Meshal was given a court martial, fined and imprisoned, and that Colonel Musa was arrested. That has since been found to be inaccurate. Colonel Musa remains chief executive at the hospital, but Captain Meshal was moved within the Ministry of Defence.
The investigating authorities never completed the stock take begun by Mohammed Chaudhry to establish the exact value of missing supplies. Instead, the matter was referred to the Saudi Ministry of the Interior, which took the decision to arrest Mr. Chaudhry, apparently at the request of the military hospital. He was detained on 23 June 1999, five months after the irregularities had first been identified. During the first few days of his imprisonment, Mr. Chaudhry was interviewed twice. He co-operated fully and was assured by Saudi officials that there was no evidence against him. He was led to believe that he would be released after answering all

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their questions. Sadly, that was not to be the case. He remains in prison even though no further interrogation has taken place.
The family fear that the involvement of Colonel Musa, who was arrested and then released, brought a political dimension to the case, and that Mr. Chaudhry is being detained as some kind of smokescreen. The conditions in which he was detained at Sulemaniya police station were appalling—a 12 ft sq basement cell with only one toilet, which had to be shared by 22 occupants. After six weeks he had become infested with bugs. Following the involvement of Simon Lovett, who visited Mr. Chaudhry on 4 and 10 July 1999—but who was not allowed to see him when he visited on 23 and 26 June, as it takes five working days for the British consul to obtain permission for each visit—he was transferred to Malaz prison, where conditions were better.
As can be imagined, Mr. Chaudhry's family, by then back in the United Kingdom and expecting him to follow them home, were distraught at news of his arrest. Mrs. Chaudhry has tried to maintain continuous contact with Simon Lovett at the British Embassy, and Liza Gibb, consular desk officer for Saudi Arabia in London, but her efforts at communication have not always been reciprocated. The family has been fortunate that Mr. Chaudhry's brother-in-law who has also been working in Saudi Arabia has been able to visit him and pass on messages. That relative also appointed a lawyer, but the British authorities have not been able to persuade the Saudis to let him see his client, other than on one unofficial occasion when he was not allowed even to discuss the case.
After Mrs. Chaudhry told me of her husband's plight, I, too, began protracted correspondence with the Foreign and Commonwealth Office and received replies from the Ministers responsible for consular matters—first, from Baroness Symons who told me that it was not possible to interfere with the legal process of another country and, subsequently, from Baroness Scotland whom I thank for confirming much of the information given me by Mrs. Chaudhry.
On 29 December 1999, the control and investigation board in Saudi Arabia told the British embassy that Mr. Chaudhry could be released into the custody of his sponsor, the Riyadh military hospital. However, the hospital told the British consul that his contract had been terminated in August, so he was no longer under its sponsorship. The police said that Mr. Chaudhry could be released on bail if an unlimited financial guarantor could be found. None of Mr. Chaudhry's friends was in a position to provide such a guarantee. The embassy wrote to the governor of Riyadh, none other than Prince Salman, asking if one of Mr. Chaudhry's friends could give an appearance guarantee instead.
Eventually, on 22 February, the director of the governor's office, Dr. Nasser Daoud, said that Mr. Chaudhry could be released on bail only on the same conditions as the other defendants in the case, who had somehow managed to secure an unlimited financial guarantor. Meanwhile, I had written to the Saudi ambassador to ask him to meet Mrs. Chaudhry and me. He replied in January 2000, around the time when Mr. Chaudhry was returned to the Sulemaniya police station as discussions about bail were taking place—
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which, to the dismay of the family, came to naught. The ambassador suggested that the matter was best dealt with by the British embassy in Riyadh.
On 18 May this year, as the anniversary of Mr. Chaudhry's detention without charge approached, I wrote again to the Saudi ambassador informing him that, although British consular staff had continued to raise my constituent's case, no progress seemed to have been made either in bringing forward his release or in the Saudi authorities bringing forward any case against him, despite having had 16 months to carry out investigations. I informed the ambassador that preparations were in hand to draw my constituent's plight to the attention of the British Parliament.
I received the ambassador's reply on Monday, in which he noted that the Egyptian and the Saudi who had been arrested had been released on bail after investigations. While the ambassador did not specifically mention it, Mrs. Chaudhry also believes that Shahid Bukhari is free. The ambassador told me that nobody offered bail for Mr. Chaudhry. He said that the British embassy knew about the case and had said that it was not its policy to provide bail. Hence, Mr. Chaudhry remains in custody. The ambassador ended his reply by stating that, because of the unusual situation, Mr. Chaudhry's case is now being expedited.
It would appear that a person caught in the act of stealing and his named accomplices are free, as are Mr. Chaudhry's superiors—the senior military officials who prevented Mr. Chaudhry from properly carrying out the work that he had always completed satisfactorily. At least, however, there is some hope that his case will be expedited. That means that the Saudis are now prepared to release Mr. Chaudhry on an appearance guarantee only, on condition that he remains in Saudi Arabia and is available for questioning while inquiries continue—as if he could go anywhere while his passports and documents are retained.
Understandably, Mr. Chaudhry and his family want to reject that offer. The Saudis have had 18 months to question him and have failed to do so. Furthermore, there is no sign of an investigation taking place. Mrs. Chaudhry is extremely worried that her husband could be kept in Saudi Arabia indefinitely. She wants the whole business brought to a conclusion. She fears for her husband's health if he is left in jail, where he can exercise only once a week. If he is let out, she worries about his safety and wonders how he will survive with no employment. Mr. Chaudhry eventually agreed to bail, but it is still not clear whether he is to be released.
Let us hope that the Saudi ambassador was right when he said that the case was to be expedited. If relations with the Saudis are as cordial as they appear on the basis of the reception given here to members of the ruling family, how can a British citizen be treated as badly as Mr. Chaudhry? Why has it taken 12 months to get bail on reasonable conditions?
Will the Minister explain why the British embassy was not prepared to offer an appearance guarantee for Mr. Chaudhry when another member of staff did so for another British detainee? Why has Mr. Chaudhry had no access to a lawyer? What information has been obtained about the likely length of the continuing inquiry? What guarantee can the Government, who are encouraging better relationships with the Saudi regime,

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give to British citizens that their basic human rights will be protected if they travel to that country? Mrs. Chaudhry, is present today, and I hope that the Minister will respond to those questions.
12.46 pm
The Minister of State, Foreign and Commonwealth Office (Mr. John Battle): It is usual to congratulate an hon. Member on winning an Adjournment debate, as if the choice of topic were an achievement in itself. I certainly want to congratulate my hon. Friend the Member for Birmingham, Selly Oak (Dr. Jones) on her presentation this morning and on the manner in which she set out the facts of the case. I know that she has championed this case assiduously ever since she was informed about the arrest. I have a sheaf of letters in front of me, which were written by my hon. Friend on behalf of her constituent to various Government Departments from 5 July last year. She also tabled an early-day motion. She demonstrates exactly what Adjournment debates should be about—championing the cases of individual constituents, but also highlighting what Members of Parliament view as flaws in the structure of operations.
The case of Mr. Mohammed Chaudhry, who is in prison in Saudi Arabia, is a matter of great concern to me and, indeed, to the Foreign and Commonwealth Office generally. My hon. Friend the Under-Secretary of State has closely followed the case and our ambassador in Riyadh has actively pursued it. I have in front of me a chronology of developments—from Mr. Chaudhry's arrest on 23 June 1999 to the proconsul's visit at the police station on 4 July and beyond—and I am happy to make the information available to my hon. Friend. It shows that more than 40 direct representations have been made, as well as regular contact every other week. I hope that my hon. Friend will accept that we have actively pursued the case.
My right hon. Friend the Foreign Secretary has raised the case at the highest levels in the Saudi Government. On Monday this week, he raised Mr. Chaudhry's case directly and personally with the governor of Riyadh: he asked for the case to be expedited and for due legal process. It is wrong to convey the impression that the Government, the Foreign Office and the embassy have stood idly by. That is not true, as the evidence shows, and as I know my hon. Friend would acknowledge.
I do not accept that it is a case of human rights being made subservient to commercial interests in Saudi Arabia. As my hon. Friend the Minister of State, the hon. Member for Neath (Mr. Hain), said, in a speech to which my hon. Friend the Member for Selly Oak referred, greater openness will improve mutual understanding, develop common values and increase respect for international standards on human rights. That is why my right hon. Friend the Foreign Secretary raised the case personally with Prince Salman on Monday. I hope that the House will accept in good faith that we do not resile from raising such matters when they need to be raised. Our commitment to human rights cannot be reduced to commercial interests.
The case highlights concerns about human rights in Saudi Arabia. It also highlights the difference that can be made by trying to be proactive, firm and sensitive to
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achieve results. I must emphasise to my hon. Friend the Member for Selly Oak that no single international law applies throughout the world. Different countries have different laws. French law is different from UK law, as is Sharia law. I underline that point, because we cannot assume that our law can override everyone else's. I know that that point has been taken.
I will summarise the case that my hon. Friend the Member for Selly Oak has outlined. Mr. Chaudhry was a manager at the military hospital in Riyadh, looking after medical supplies. On 23 June last year, he was arrested, along with three colleagues, following the apparent loss of £3 million-worth of supplies.
Our consul tried to visit Mr. Chaudhry that day, but was not allowed to do so, as the investigating officer was not there. He was unable to see Mr. Chaudhry until after the Saudi weekend, three days later.
The case was investigated twice—once by the police and once by the control and investigation board of the public prosecutor's office. In November, its report was sent to the public prosecutor. In December, it was recommended that all the detained men be freed on bail, pending the final outcome of the investigation. That recommendation did not benefit Mr. Chaudhry. He could not put up the unlimited financial guarantee that the Saudis required, and his former employer, the military hospital, would not sponsor him.
Our embassy lobbied the Saudi authorities at the highest levels to get them to drop the requirement for a financial guarantee. Our ambassador raised the case with Prince Sultan, the Defence Minister ultimately responsible for the hospital in which Mr. Chaudhry worked. The lobbying worked, because the Saudis said that Mr. Chaudhry could be released with only an appearance guarantee. That remains the condition, so the terms changed a little.
Mr. Chaudhry initially rejected that offer. He said that he wanted to be free and allowed to leave the country, or charged. I understand that he has now reconsidered and accepted the offer. We are pressing for his immediate release.
The case raises difficult questions. First, why was Mr. Chaudhry held for almost a year without charge? I emphasise that the Saudi system is radically different from ours: a suspect can be held without charge. We cannot demand that the Saudis change their system. However, we can lobby for our nationals to be given bail, when the length of time in jail becomes unacceptable, as it clearly has in Mr. Chaudhry's case. Therefore, we lobbied hard and our tactics achieved some benefit.
Secondly, why was Mr. Chaudhry not allowed to see his lawyer? We believe that all people charged with criminal offences should have the right to a lawyer to defend them. That is accepted in our law. Speaking to a lawyer is an integral part of our justice system, but that right does not exist in the Saudi justice system of Sharia law. We cannot assume that the Saudis will immediately adopt our practices. We would like that right to be extended internationally to all. In this case, we did what we could to mitigate the problem, meeting frequently but separately with Mr. Chaudhry and his lawyer.
Thirdly, why is the case still going on, given that Mr. Chaudhry has not been reinterviewed since his arrest? Again, we have lobbied the Saudi authorities at

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the highest levels. We have been told that this is a complex fraud investigation and the truth will take time to uncover. We know from our experience in the UK that fraud cases are complex and lengthy. The key point is that Mr. Chaudhry does not now have to stay in prison until the investigation is completed. I think that we can hold that line.
I know that hon. Members wish—as the Government do—that we could do more for Mr. Chaudhry, but there are limits to what we can do. We cannot physically get him out of Saudi Arabia. Mr. Chaudhry is accused of committing a crime in that country. He is therefore subject to Saudi law and justice. We cannot decide whether he is guilty or innocent. That is a matter for the Saudi courts.
Dr. Lynne Jones: May I pick my hon. Friend up on one point? He said that Mr. Chaudhry is considered to have committed a crime, but has not been charged. Surely that is the crucial point.
Mr. Battle: Yes, but there is a difference between the law in the UK and that of Saudi Arabia. In our understanding of law, Mr. Chaudhry has not been charged, but under Sharia law the fact that he has been picked up and accused of a crime is considered part of the process. That is the difference between Sharia law and our law. We cannot simply override the process. We all agree that the situation is unsatisfactory, but what can we do about this man? We cannot give him legal advice. Our consular staff are not lawyers and it is obviously a job for lawyers. Even the legal advice structure is different under Sharia law because there is no habeas corpus in Saudi Arabia. That is the crucial difference. We have built that into our law, but it does not exist there.
We must live with the reality of the situation and press as hard as we can. It does not mean that we can do or have done nothing. Our staff have visited him 38 times and on four other occasions they reached the prison but were not allowed to see him. They have taken him clothes, toiletries and letters from his family. They have supported visa applications for his mother, brother, wife and children to enable them to visit him and arranged for him see a doctor and get medicine. Our embassy in Riyadh has raised his case with the Saudi authorities on 46 separate occasions, often at the highest levels. They have raised the subject of bail. They have urged the Saudis to conclude their investigations. They have complained formally about the quality of some of his food.
Our approach throughout has been determined by the need to do the best we can for Mr. Chaudhry in the constraints of the circumstances. As in the whole of our consular and human rights policy in Saudi Arabia, the key is getting results. We believe that Mr. Chaudhry should soon be able to leave jail on bail as our result of our lobbying. We will continue to press the case and do our utmost for both Mr. Chaudhry and human rights.
Hon. Members may know that we have concerns about human rights in Saudi Arabia. We take, and will continue to take every realistic and responsible step to press for improvements. At bilateral meetings, before, during and after the United Nations Commission on Human Rights in 1999, British officials encouraged the
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Saudi authorities to co-operate more closely with such UN human rights bodies. At the same time we joined our European Union partners in a public statement of concern at the shortcomings in criminal procedures, freedom of expression, assembly and worship and women's rights. We urged Saudi Arabia to become a party to the remaining core international human rights instruments: the international convention on economic, social and cultural rights, the international convention on civil and political rights.
The UN Commission on Human Rights concluded that Saudi Arabia had responded sufficiently to complaints about human rights violations, including its judicial system, for consideration under the 1503 procedure to be discontinued. I can only emphasise that in welcoming the commission's decision to discontinue consideration of Saudi Arabia under the 1503 procedure, the Saudi Arabian Government announced their intention to accede to those international conventions and covenants. We will continue to press for early accession.
Throughout the whole of 1999 we maintained a policy of constructive engagement on human rights with the Saudi Government through frank and private exchanges, meetings and visits. In April 1999, at the invitation of the British Government, the Saudi Minister of Justice attended a British Council seminar in London on "Britain and Islam" which included debates on aspects of human rights, education, gender, race and religion. The Saudi Minister met the Lord Chancellor and my right hon. Friend the Home Secretary to discuss human rights and Sharia law and relations between Muslim and non-Muslim communities in the UK and Saudi Arabia.
During a visit to Saudi Arabia in October 1999, my hon. Friend the Minister of State raised human rights with the Saudi Deputy Foreign Minister. They agreed on further bilateral exchanges. That was followed in December by a debate at the UK-Saudi Joint Cultural Committee in London, a forum specifically established to develop relations between Government and non-Government organisations. We intend to keep up the pressure and to continue to focus on human rights and the differences that Sharia and UK law throw up in particular cases such as this one.
On 22 May at the European Union Gulf Cooperation Council ministerial meeting, my right hon. Friend the Foreign Secretary debated human rights with his Saudi opposite number. My right hon. Friend emphasised the importance of the universal declaration of human, economic and social rights and the UN mechanisms designed to protect individuals.
On 20 June, my hon. Friend the Minister of State spelt out the importance of human rights at the investment conference to which my hon. Friend referred. I hope that she accepts that we want Saudi Arabia to ratify the United Nations conventions and we welcome the efforts to bring its law into line with them; but Saudi Arabia is an Islamic country in which justice is based on Sharia law, which has a major bearing on rights in the kingdom. Of course, we must have a dialogue on human rights—
Mr. Deputy Speaker (Mr. Nicholas Winterton): Order. I regret to tell the Minister that time is up and we must move to the next debate.

Parades Commission
1 pm
Mr. William Thompson: I welcome this opportunity to debate the second report of the Parades Commission. The Minister will recall that the commission was set up following troubles with various parades in Northern Ireland. Parades had previously been a public order matter, and the responsibility of the Chief Constable.
Those of us from Northern Ireland vigorously opposed the Bill setting up the so-called independent commission. The policing of parades is a public order and operational matter for the police; they should take the decisions because they are the people on the ground, who know the local situation.
We objected to the fact that the Parades Commission was a quango—an unelected body not answerable to the people of Northern Ireland. It consisted of people who, in many cases, did not know the facts and were unfamiliar with the situation on the ground.
The fundamental issue relating to the Parades Commission is the right to freedom of expression. That right has been described in many cases in the European Court, which states:
As the Court has consistently held, freedom of expression constitutes one of the essential foundations of a democratic society, one of the basic conditions for its progress and for the development of everyone. Subject to paragraph 2 of Article 10, it is applicable not only to "information" or "ideas" that are favourably received or regarded as inoffensive, or as a matter of indifference, but also to those that shock, offend or disturb the State or any sector of the population. Such are the demands of that pluralism, tolerance and broad mindedness without which there is no "democratic society".
Thus, provided that they act and march peaceably, the Orange Institution and the loyal orders have the right under British and European law to march the highway without let or hindrance.
When the commission was set up, we argued that instead of making the situation better, it would make it worse, and the facts confirm that. Last year's report stated that 132 parades were contested, and as a result, 119 route restrictions were placed on those parades. This year's report shows that the situation is worse. A total of 297 parades were contested and route conditions were imposed on 152 of them. It is therefore obvious that the commission is making the situation worse. There are more contested parades, and more determinations are changing the routes. Those are indisputable facts.
Last year's report at least gave the impression that two sides were involved in the disputes, because it contained a picture of Garvaghy road, on which many flags of a foreign state were flying, as usual. It also contained a photograph that, from the pictures and banners shown, appeared to be of a nationalist march. However, it is difficult to find any pictures of a nationalist march in this year's report. That gives the impression, which we have always contended, that the commission is more interested in curtailing Orange and loyalist marches than nationalist marches. Although, as I have said, it is difficult to find a picture of a nationalist march, I do concede that one is included. I can determine that it is a nationalist or Ancient Order of Hibernians march only because a well-known Member
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of the Northern Ireland Assembly is shown objecting to it. The Parades Commission should be more circumspect with its photographs and show that there are two sides to the dispute, not one.
On publishing its annual report, the Parades Commission issued a statement, which makes clear what it considers to be important. It said:
Finally, we are keen, above all, to promote genuine engagement between parades organisers and those affected by parades. We attach real weight to evidence that people have sought to address the legitimate concerns of others and to accommodate those concerns where it is within their power to do so.
In other words, the Parades Commission attaches great weight to liaison between those who organise parades and those who oppose parades. It attaches such great weight that it has often changed the route of a parade because its organisers had not reached some accommodation with the protesters.
If one has a right, one should not have to seek permission from someone else to exercise it. One should not be prevented from exercising that right because someone has refused to agree with the exercising of that right. That is a fundamental issue.
I shall now deal with some of the Parades Commission's determinations, starting with that relating to Newtownbutler. The commission said:
We note that this is a traditional evening church parade, and that it will not of itself bring about undue disruption in Newtownbutler. We recognise also that the route which the organiser has notified represents a curtailment of a past route, and that the parade proposes to proceed direct from the Orange Hall to the church.
That is a small distance. The commission continues:
However, it is clear that the organiser of this parade continues not to take account of the Commission's consistent message in relation to the parades issue in Newtownbutler. The continuing refusal to come to an agreed form of engagement with the residents' representatives ensures that there can be no possibility of addressing the issue, or resolving it…It is also clear to us that the unchanged position of the loyal orders may place considerable strain on the acceptance by residents, in principle, of the right to parade in Newtownbutler. We therefore consider that for this parade to proceed on both its outward and return routes would have an adverse impact on local community relations.
One must question what is meant by a parade placing
considerable strain on the acceptance by residents, in principle, of the right to parade in Newtownbutler.
If the parade has the right to proceed along the route, it makes little difference whether the residents accept that right in principle: it should retain the right to proceed. However, because those who wish to march did not follow the behest of the commission and enter into dialogue with the residents' group, they will be penalised. They may march to the church, which is a short distance, but they may not march back. That is ridiculous, and shows that members of the commission want to impose their views on the loyal institutions.
I turn now to a Parades Commission determination that relates to a parade in the village of Mountfield, which is in my constituency. The commission states:
We have noted that this is a small traditional annual church parade, comprising 70 people and one pipe band. Previous parades have been conducted in an orderly manner, and the parade in itself would cause minimal disruption to the life of the community.
In issuing a decision in respect of this parade last year, we understood that organisers had expressed a willingness to consider how aspects of the parade which are perceived by some residents

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as problematic might be addressed. We considered that such a willingness represented a significant expression of respect on behalf of the parade organisers and we took this into account when assessing the impact of the parade on relationships within the community. However, we have been informed that no efforts have been made by parade organisers in the interim period to address these concerns. In the absence of any form of dialogue which might address the perceived problems we do not see how a parade as notified could proceed at this time without having a detrimental impact on relationships within the community.
Again, the Parades Commission has used the phrase
a detrimental impact on relationships within the community
If people have the right to march peaceably, it makes no difference what the community thinks.
I know Mountfield well. When the Parades Commission banned the parade in 1998, it took 150 policemen to enforce the ban. Last year, it allowed the parade to go ahead—as it should—and only 12 policemen were needed to police it. This year, the parade was re-routed again, and 130 policemen were needed to enforce the ban. How ridiculous can a situation get? In fact, the police are more adept than the Parades Commission, and we were allowed to march up the footpath, because there is apparently no law to prevent anyone from doing so. The Orangemen consequently got to their church service and returned happily, without any problem.
In the case of the parade at Parkmount Junior Orange Lodge in Portadown, the Parades Commission stated:
We note that this is a very small parade, comprised principally of children and young people accompanied by their parents. The parade has taken place along the notified route for many years, and organisers and parade participants have complied fully with the Code of Conduct. We are aware that there have been considerable disturbances at the parade over the past two years, and are advised that there is the possibility of public disorder irrespective of our decision.
The Parades Commission should be more honest and tell us where the disturbance at that parade is likely to come from. It will not be from the parade, but from those who do not like the parade and who wish, by breaking the law and creating a public disturbance, to get the Parades Commission to stop it. Any action taken should be directed towards those who act against the parade rather than the parade itself. Happily, on that occasion, the Parades Commission allowed the parade to go ahead, having asked its organisers
to take all reasonable steps to ensure that the parade disperses no later than 5.30 pm.
Another decision taken by the Parades Commission relates to the Altnaveigh LOL 37 parade in Newry, and states:
The Commission notes that the purpose of this parade, following a religious service, is to dedicate a new banner, and as such is not a traditional parade. The parade is scheduled to begin between 8.30 pm and 9 pm and to last for a maximum of one hour. As the parade occurs on an evening when there is late night shopping in Newry there will be a level of disruption to the life of the community. We are informed however that the parade organisers will co-operate with police to ensure that this disruption is kept to the minimum extent possible. The Commission is aware that there is no record of disorder or damage having been caused by participants in this parade. There are however significant sensitivities about loyal order parades in Newry, a largely nationalist town. While we note that the Newry community have generally shown a greater tolerance of church parades than for other loyal order parades, there remains a significant degree of opposition to parades in the locality…The
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Commission does not feel that this parade could take place at this time along the entire notified route without having a detrimental impact on relationships within the community.
The commission therefore placed a condition on the parade that it should not proceed along a certain part of the route, despite the fact that there was no likelihood of any trouble being caused by the parade.
I turn now to the decisions relating to the most important areas, in terms of trouble at parades. I shall refer particularly to the Ormeau road, where there has been a great deal of trouble, and which has been in the news constantly. The decision made in relation to the Belfast Walker Club Apprentice Boys of Derry parade stated:
The Commission has noted that this is a traditional parade held by the Belfast Walker Club of the Apprentice Boys of Derry…prior to their departure to the Annual Easter Monday Apprentice Boys of Derry Parade, due to be held this year in Tobermore. The Commission notes that this is a small parade, comprising 50 participants including one band, and that the outward journey is scheduled to leave Ballynafeigh Orange Hall at 8.15 am, proceeding by way of Ormeau Road, Donegall Pass, Charlotte Street, Lindsey Street, Maryville Street and Ormeau Avenue to Linenhall Street. The return journey is notified to proceed from Dunnes Store at Annadale Embankment at 6.30 pm via the Ormeau Road to return to Ballynafeigh Orange Hall…The Commission has set out its position in relation to loyal order parades along the Ormeau Road in its document—"Lower Ormeau Road"…In the Commission's determination in relation to the parade notified by the Belfast Walker Club along the Lower Ormeau Road on Saturday 14 August 1999, the Commission noted the evidence it had received of meetings between the representatives of Belfast Walker Club ABOD and the Lower Ormeau Concerned Community (LOCC) between 10 May 1999 and 20 July 1999. The Commission noted the stated willingness of the Belfast Walker Club ABOD representatives to address the legitimate concerns of the residents of the lower Ormeau community, where they were able to do so. The Commission further noted undertakings made by the Belfast Walker Club, both with regard to the parade notified to take place on 14 August 1999, and, notably, to a winter programme of dialogue with residents, regardless of the decision reached by the Commission regarding the 14 August 1999 parade. While the Commission regretted that a mutually acceptable solution had not been possible, it was satisfied that the direct dialogue that had been entered into represented "substantive, sustained and genuine engagement". With conditions imposed to ensure, so far as possible, that the parade could be carried out in a peaceful and dignified manner, the Commission decided not to impose route conditions. The event did not pass off peacefully and there were scenes of violence. We note that the parade was conducted with dignity and that it was the unlawful actions of persons sitting on the road so as to block the passage of the parade that caused the intervention of the police. We would add that unlawful protest effectively and on that occasion, dramatically, detracts from any engagement that has been entered into by the party engaged in that unlawful protest.
The determination continues
We, as members of the recently appointed Parades Commission, have read further minutes detailing a series of meetings between the Belfast Walker Club ABOD and the Lower Ormeau Concerned Community on 5 August 1999. 16 September 1999, 25 October 1999, 19 November 1999, 24 January 2000, 8 February 2000, 28 February 2000, and 14 March 2000. In addition we have read the previous minutes and papers relating to the earlier meetings. We acknowledge that our decision on the August parade was a difficult one for the LOCC, and while particularly disappointed with the events which ensued on the day of the parade, we are pleased that the talks between the two parties resumed again in September.
It goes on to state:
We have spoken to representatives of both the Belfast Walker Club ABOD and the LOCC, as well as other interested parties, including elected representatives, about the parade notified on

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Monday 24 April 2000. From the evidence available to us it is clear that there is no room for optimism that any agreed solution may be imminent.
Mr. Deputy Speaker (Mr. Nicholas Winterton): Order. The hon. Member for West Tyrone (Mr. Thompson) is presenting a very detailed case, and we respect that. However, a half-hour Adjournment debate is supposed to allow for a full ministerial response, and there are only eight minutes left.
Mr. Thompson: I am conscious of that, Mr. Deputy Speaker. That is why I am rushing as fast as I can to get finished.
The determination concludes:
In the absence of local agreement, and following consultation with the police, we are aware of the very real danger of serious public disorder should the parade proceed as notified. While disruption to the life of the community would be minimal in terms of the timing and size of the parade, there would be a negative impact on relationships within the whole community.
That parade was banned. The commission realised that the residents had put in for two parades, which, it said, was to stop this legitimate parade.
The determinations show that the Parades Commission is acting unreasonably in many ways, and is doing more harm than good. I await the Minister's reply to see what he proposes to do about that.
1.23 pm
The Minister of State, Northern Ireland Office (Mr. Adam Ingram): I am grateful to the hon. Member for West Tyrone (Mr. Thompson) for the opportunity to comment on the work of the Parades Commission in its second year as a statutory body. It would be appropriate for me to begin by commenting on events since last Sunday, which emanate from a determination of the Parades Commission.
Since the Drumcree parade on 2 July, we have seen disgraceful scenes both in Portadown, and more widely throughout Northern Ireland, in defiance of the lawful rulings of the Parades Commission. That violence could easily have led to death and serious injury. Blast bombs have been found and used, acid has been thrown at police, vehicles hijacked and acts of sectarian intimidation carried out. The police and the Army are well prepared for that sort of violence, which is, regrettably, familiar from previous years.
If the rioters believe that their actions will bring about a change in the determination of the Parades Commission or the Government, they are very much mistaken. The Secretary of State has made it clear that we will not be bullied into a change of course by such thuggery. The violence should stop now before it descends into an even worse climate of public disorder.
I turn to the substance of our debate, although I doubt whether I shall cover all the issues raised—
Mr. Thompson: I endorse all the Minister's comments on violence. We do not want any violence in Northern Ireland—we want peaceful parades. I hope that people
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will eventually accept that and that there will be tolerance in Northern Ireland. I condemn any violence, from whatever source.
Mr. Ingram: I gave way because I thought that the hon. Gentleman would respond in that way.
The hon. Gentleman and I were perhaps never likely to agree on the commission's merits and role, about which we have argued time and again. I express the Government's support for the commission and the way in which it set out to deal with the fundamental issues that were so comprehensively analysed in the North report, which gave birth to the commission.
When the North report was published in January 1997, decisions about parades and marches rested with the Chief Constable and were based on the provisions of the Public Order (Northern Ireland) Order 1987. The North report agreed that it was inappropriate to focus solely on the public order consequences of parades. It took that view because it argued that doing so ignored the right to peaceful assembly, the rights of those in the areas through which parades passed and the rights of the wider community. Moreover, the report considered that it was undesirable for the police to be seen to decide whether conditions should be imposed and to enforce them. Accordingly, it set out the case for an independent body that would take views from interested parties, encourage local agreement and, where that was not forthcoming, come to a view on what, if any, conditions should be imposed on what are called contentious parades. Furthermore, it would base its decisions on a broader range of factors than was previously the case, including the impact of a parade on relationships within the community, in addition to its impact on public order and the likely disruption. In one of their earliest actions in Northern Ireland, the Government legislated for the conclusions reached by the North report.
The Parades Commission is taking forward the objectives that were so clearly identified in the North report. It is doing so on the basis that determinations are a last resort, and should be made only when local agreement has not been possible. The Parades Commission takes all such factors into account when it responds to parades and marches—that matter was discussed by the hon. Member for West Tyrone.
When the commission makes a determination, it has to balance a complex series of conflicting rights. It recognises the right to march, and the competing rights of others. In a democratic society, rights are not absolute when they collide. The hon. Gentleman read out details from a European judgment. I shall write to him explaining my response to the issues that he raised.
As the North report observes, events surrounding parade disputes, such as those in Portadown, continue to dominate the public's awareness of parades. That inevitably colours the public's perception of the commission and its role. However, the report, and the previous year's report, show that the number of parades on which route restrictions had to be imposed represented a tiny proportion of those that were notified. The hon. Gentleman said that there were 132 cases last year and 152 this year. It is interesting to note that 52 of this year's 152 cases involved marches and parades in the Portadown area. He said that the Parades Commission had made the situation worse. The

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absolute number of parades that the commission has had to consider overall was 3,198 last year and 3,403 this year. There was a substantial increase in the total number of parades over which it has had to give a determination.
The Commission does not underestimate—indeed, it understands only too well—the difficulties that are inherent in dealing with the parade from Drumcree church down the Garvaghy road. That understanding is reflected in its determination on the parade notified by the Portadown district Loyal Orange Lodge No. 1 for this coming Sunday, 9 July. In its own way, the
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commission is addressing both sides of the debate. It continues in its efforts to find an equitable resolution of the Drumcree situation and it contributes to the increasing stability of relationships elsewhere in the Province.
The hon. Member for West Tyrone recited a whole range of parades over which he said that there could be a debate about how they were dealt with. He did not refer in detail to the Drumcree—
Mr. Deputy Speaker: Order. I must stop the Minister because time is up and we must move on to the next debate.

Asylum Seekers (Inner London)
1.30 pm
Mr. Iain Coleman: The central point that I want to bring to the Government's attention today is narrow, but vital to inner London boroughs. Before doing so, I want to make clear the climate in which we are operating.
The issue of asylum seekers and the way in which the Government have tried to deal with the backlog of applications have caused considerable controversy in recent times. This sensitive area of policy has been subject to disgraceful and dangerous propaganda by some newspapers and by some of the tactics employed by the Opposition. A proportionally large number of asylum seekers have settled in the London borough of Hammersmith and Fulham and I am aware from my contact with many of them that the majority have been through deeply scarring and traumatic experiences. I do not have time today to detail the brutalising and often horrific treatment to which many of them have been subjected, but I believe that the majority that I have seen are genuine asylum seekers who have a right to expect to be treated fairly and with the proper dignity that is enshrined in the 1951 convention to which our country is a signatory.
I regret to say that some of the measures in the Immigration and Asylum Act 1999 are unnecessarily harsh and reactionary and caused considerable disappointment and even shock to many supporters of our Government. In particular, the decision to operate a stigmatising and inefficient voucher system, which is expensive to administer and open to fraud was a serious policy mistake. The level at which support for such vulnerable people has been set is unacceptably low and many of my constituents who are seeking asylum are suffering as a consequence, especially many of the innocent young children who have been caught up in the system. I want to make it clear that I dissociate myself from the language of the Opposition and much of our national press who have covered the matter so hysterically and dangerously.
The central issue that I want to raise is the fact that clear evidence demonstrates that a number of local authorities have not secured full funding from the Government for the care of asylum seekers. I shall demonstrate that with evidence gleaned largely from my constituency, although I am aware of a similar pattern of underfunding in other inner London boroughs.
On 2 June this year, the Audit Commission published a report that was concerned principally with the dispersal arrangements and the impact on asylum seekers and the areas receiving them. A careful analysis of the report clearly supports the case in some instances for additional funding over the current maximum available grant. Page 16 of the report states:
Local Authorities that have been unable to support Asylum Seekers with current grant thresholds will continue to subsidise this expenditure from their General Revenue Budget, as Authorities will not have made provision for this in their 2000/2001 budget since they expected this duty to be passed on to the national Asylum Support Service from Aril 2000.
That is beyond doubt.
Page 82 of the report refers to the immense pressure on local authorities and the importance of ensuring that the funding regime for asylum seekers meets the
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reasonable costs of key local services. In Hammersmith and Fulham, the average cost of supporting asylum seekers with children for the previous financial year was £370 a week. The maximum grant available is currently £240 a week. The council has been supporting an average of 500 such families a week, leaving a shortfall of £130 a week for each family. A simple mathematical calculation shows that that leaves an overall bill above the grant available from central Government to my local authority of approximately £3.25 million a year—just for social services. Page 85 of the report refers to the variable costs of different local authorities. Average accommodation costs in Hammersmith and Fulham are £230 a week and with subsistence costs the figure ranges between £350 and £380 a week per family.
The Government have correctly and justifiably asked why the costs in Hammersmith and Fulham, and other inner-London boroughs such as Camden, Wandsworth and Westminster, are significantly higher than those in other areas of the country. There are several reasons. First—and crucially—the boroughs in question easily have the highest accommodation costs in the UK, if not the whole of Europe. They have a high number of asylum seekers and the uncertainty about the legislative position and Home Office policy on asylum seekers means that it has been very difficult to forward plan strategically. Another factor that places great pressure on Hammersmith and Fulham, which has made it difficult to place families in potentially cheaper boroughs or in immediately neighbouring boroughs, are families who, as port-of-entry applicants, were initially accepted as a housing responsibility but who were transferred to the responsibility of social services.
The regulations published by the Government made it clear—regrettably in my judgment—that councils should entirely disregard choice of placement, but other regulations require the councils to take into account the welfare of the families concerned. I know many families in my constituency who have been in their accommodation for well over 12 months. There is clear legal advice, which councils are bound to consider, that the longer the family has been in a particular area, with the children in a particular school, the more inevitably powerful are the arguments, on welfare and compassionate grounds, for not moving them to another area.
The uncertainty about the strategy for supporting asylum seekers has undeniably led to other problems, particularly in such areas as Hammersmith and Fulham and Westminster, where temporary accommodation of any kind is at a premium. Potential providers of block accommodation sought long-term contracts that the council was unable to negotiate because of uncertainty about how long its duty would last.
What reason have the Government given for failing to pay the bills submitted by local authorities that have exceeded the set expenditure maximum? The one possibly hopeful reference for the Government in the Audit Commission report is at paragraph 88, which states that
service provision for asylum seekers should be subject to the same value for money scrutiny as other services.
I agree with that. However, the Government have been paying £300 a week or more per family for accommodation in Glasgow. The costs in

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Hammersmith and Fulham have been the subject of both internal and external audit, although the Government have not said, as far as I am aware, that the costs are bogus; they accept that they were genuinely incurred in supporting asylum seekers and their families. The last annual district auditors management letter in Hammersmith and Fulham was entirely positive and particularly praised the authority's sound financial management. The district auditor said that
the council continues to adopt a financially prudent approach to the management of its affairs. The authority secures tight control to keep within spending limits and demonstrates effective arrangements for ensuring value for money.
There is no question of irresponsible or lavish spending occurring and no hint of the figures having been massaged. The council has not hesitated to open up its books for close and careful scrutiny. Indeed, it has said that it would welcome an inspection of its expenditure. The Audit Commission report, if read comprehensively, strongly supports the inner-London boroughs' case for additional funding.
My concerns are twofold. First, central Government must clearly take responsibility for support for asylum seekers. It is central Government who set down the rules governing the support mechanisms that local authorities have been allowed to use. The aggregate of external finance in my borough has been set to increase by just 1.5 per cent. in the current financial year. Over £16 million of cuts, in a budget of less than £200 million, have been made in just five years. There is little or no scope for use of balances, which stand at less than £2 million. If the council is now obliged to cut services to the local community yet further, or to raise the council tax significantly, local people will not understand why the situation has been allowed to arise. I plead with the Government to think again about the extra costs incurred by the inner-London boroughs.
The Association of London Government has calculated that the expenditure incurred by the boroughs in question above the grant level last year was £27 million. In inner London, authorities have worked hard to provide a quality service within the boundaries set out by central Government, and they believe that they have been financially penalised for seriously tackling the brief that the Government gave them. In other areas, no such financial penalty has applied when local authorities have been less willing and less enthusiastic to carry out their duty. The inner-London boroughs hold the view that he who provides least and complains most has been treated best. That cannot be right.
The effect of the shortfall could be serious for the financial position of some local authorities affected, including my own. The chair of the Association of London Government, Councillor Robin Wales, has pointed out that the current levels of grant do not reflect the actual cost to the borough. The London boroughs currently support 63,000 destitute asylum seekers. That is a difficult job, and it has been made more so by the underfunding that I have sought to highlight. I urge the Government to consider the issue again, and pay in full the real and actual costs incurred to all the local authorities that now find themselves out of pocket to such a large amount, through no fault of their own.
Mr. Deputy Speaker (Mr. Nicholas Winterton): Order. Two hon. Members have said that the initiator of the
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debate has given them permission to speak, and that they have notified the Minister of that. I shall be happy to call them both if they will be extremely brief, but I want an opportunity for the Minister to reply in full to this important debate.
1.41 pm
Ms Karen Buck: I am grateful to you, Mr. Deputy Speaker, and to my hon. Friends the Member for Hammersmith and Fulham (Mr. Coleman) and the Minister for giving me a few moments to contribute to the debate. I endorse the comments of my hon. Friend the Member for Hammersmith and Fulham about the general aspects of asylum-seeker policy. I was and remain unhappy about many aspects of the operation of asylum legislation.
I differ from my hon. Friend in one respect, in that I support the general principle of a dispersal programme. I believe that a national solution is necessary, given the numbers of people seeking asylum. Like him, I represent an area with a large number of asylum seekers, many of whom are highly traumatised individuals with tragic histories. My experience is of victims of torture, families torn apart by war and shattered lives.
I congratulate the Government on having made progress on meeting the cost and policy issues connected with asylum seekers since 1997. Progress was made immediately after the election in dealing with the shortfall of costs bequeathed to us by the disastrous Asylum and Immigration Act 1996. For the reasons outlined by my hon. Friend, several inner-London authorities still carry a significant shortfall.
I shall give figures for the two boroughs that I represent in part. The total net expenditure after Government grant borne by the royal borough of Kensington and Chelsea in 1999–2000 was £1,493,000 in direct costs of housing and supporting asylum seekers, and an additional £1.7 million in indirect costs. Those costs are recognised by the Government as being spent on matters such as the assessment and the administration of asylum applicants. The royal borough of Kensington and Chelsea is, unfortunately, excluded from the otherwise extremely welcome grant from the Department of Health for unaccompanied asylum-seeking children. That has left it with an additional shortfall of £593,000.
In the London borough of Westminster, the net cost to social services was £4.6 million in 1999–2000 for adults and families, and £4.3 million for asylum seekers for whom the council had a housing duty. The 2000–01 estimates offer a £6 million and £3.9 million shortfall respectively, assuming that the National Asylum Support Service takes over responsibilities for new adult and family applicants in the near future.
As my hon. Friend explained, the inner-London boroughs are now in competition with the National Asylum Support Service for accommodation. That has been intensified by the extreme shortage of temporary accommodation in the capital. Boroughs cannot negotiate long-term contracts for temporary accommodation as the National Asylum Support Service can, and that has added dramatically to their costs. The inner-London boroughs cannot sustain the costs of running void properties, which has made it extremely difficult for them to achieve the cost savings

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available to NASS. That helps to explain why the unit costs are so much higher for those London authorities than for others.
I have not always seen eye to eye with Westminster city council about asylum seekers, just as I have not on virtually every other policy. However, the council, along with the other London boroughs and the Association of London Government has been supportive of the Government's dispersal strategy. Politicians there have responded to the issue in a commendably restrained manner, given the intense pressure on their finances and services.
I do not believe that either of the local authority areas that I partially represent, both of which are controlled by the Conservative party, are relaxed in principle about the costs that they have to bear and the provision that they must make for asylum seekers. They and other London authorities are struggling to find reasonable quality accommodation and support services at a reasonable cost, and should be fully remunerated for doing so.
1.46 pm
Mrs. Teresa Gorman: I endorse much that has been said during the debate. I was formerly a member of Westminster city council, and served on the housing committee. I saw the problem in the light of the dilemma not only over the increase in asylum seekers, but over homelessness in general. People would focus on Westminster and the central boroughs and refuse to move across the river to places such as Peckham, where accommodation was available. I should like the Minister to deal with that in her response. Reserve powers are there to require the regions and even outer London boroughs to offer accommodation, which is in short supply, because very few regions have taken up the opportunity to contribute a solution to the problem. The Minister might also comment on the possibility that we could require asylum seekers to move to outer London boroughs and the regions.
I endorse what was said by the hon. Member for Regent's Park and Kensington, North (Ms Buck). The National Asylum Support Service is competing with inner-London boroughs in attempts to persuade outer areas such as Glasgow to take asylum seekers. The Government programme allows contracts of several years to be offered in those areas, whereas boroughs such as Westminster cannot countenance that owing to their budgetary system and because they cannot afford to pay for voids, which are inevitable when a contract is taken out for three to five years.
The housing problem is not simply an asylum-seeker issue. Persuading homeless people or seekers of public help with housing to go even as far as across the river, where there is often spare accommodation, has always been a problem.
1.48 pm
The Minister of State, Home Office (Mrs. Barbara Roche): I congratulate my hon. Friend the Member for Hammersmith and Fulham (Mr. Coleman) on raising this issue. He is right to say that it is an important
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matter, and I will do my best to address the issues that he and other hon. Members have addressed during the debate.
I understand my hon. Friend's interest in these matters, and I know that he showed considerable interest when the legislation was passing through the House. He has some experience in these matters, and will know that I also represent a London constituency with high numbers of people seeking asylum.
The Government have a clear policy. We are committed to honouring our obligations under the 1951 convention, to which my hon. Friend the Member for Hammersmith and Fulham referred. We seek to ensure that, when people have a genuine claim under that convention, we recognise that claim as quickly as we can and give them the full package of refugee integration. However, we have a policy to deal as quickly as possible with people who make unfounded claims.
When the Government took office we faced a chaotic situation. That was due solely to the previous Government's removal of access to cash benefits for one category of asylum seekers—those who had applied for asylum in-country—without making any provision for their support pending the outcome of their asylum claim. Subsequent court cases determined that local authorities were responsible for those people. Given the pattern of asylum claims, the main share of the responsibility fell to local authorities in London and the south-east. Of course, the situation was not helped by people claiming asylum at the port, who still had access to cash benefits but could only turn to local authorities for help with housing. That exacerbated the problem.
At an early stage, the Government determined that that could not continue. As hon. Members will know, we devised a national asylum support scheme that would lead to the transfer of responsibility for the support of destitute asylum seekers from local to central government. As the scheme rolls out—it started on 3 April—we will gradually help with and remove the immediate responsibilities on local authorities for supporting new asylum seekers. Local authorities in London recognise that those measures will help them.
Of course, the question remains about the role of central Government, and what more they can do to help local government with the costs of supporting asylum seekers. Local authorities in London have done good work generally, and dedicated council officials have played their part. NASS works closely with local authorities, up and down the country, to ensure that dispersal away from London and the south-east is a reality, and that it provides an appropriate environment for asylum seekers.
I am pleased to say that more than 3,000 asylum seekers and their dependants who rely on the National Asylum Support Service have been dispersed outside London and the south-east. That is in addition to those whom local authorities were able to disperse under the voluntary scheme introduced in advance of the new provisions. I am not just talking about the ad hoc dispersal by local authorities—the figure of 3,000 is in addition to those dispersed under the voluntary arrangements that started on 6 December under the new legislation. I thank all those involved in the voluntary scheme, in which local government played its part. The

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reception of asylum seekers in the dispersed areas has involved a combination of work by the Government, local authorities and the voluntary sector.
All those measures, and the success of NASS so far, will bring welcome relief for local authorities in London and the south-east. Many local authorities will still accommodate asylum seekers who secured support prior to the introduction of the new scheme. In those cases, reimbursement will continue to be provided through grant aid. I cannot yet give details of this year's grant arrangements, which we are still in the process of finalising. The National Asylum Support Service currently applies to all new port asylum applicants and in-country applicants in Kent, and will shortly be extended to other in-country applicants. That will mean that there will soon be additional relief for local authorities as they will no longer have the job of providing housing to new claimants on a case-by-case basis.
My hon. Friend the Member for Hammersmith and Fulham rightly concentrated on the costs incurred by his authority. The whole picture for London boroughs, based on last year's grant claims, is surprisingly varied. The figures are still subject to audit adjustments, but the wide range of costs that they reveal is interesting. Some boroughs have significant difficulty living within the unit costs. For example, Hammersmith and Fulham spent nearly £13 million on asylum-seeker support in 1999–2000, but only £10 million of that was recoverable under the weekly cost limits of the grant regime. That placed the borough second in the league of support cost shortfalls behind Westminster, which recovered £10 million from a total spend of £15 million. Five London boroughs, including Hammersmith and Fulham, and Westminster, accounted for more than half the London unreimbursed costs, but only a fifth of the total support costs for London. While some boroughs had difficulty living within the grant limits, seven London boroughs had their costs fully reimbursed, and that included two of the top five spenders on asylum support, Newham and Lambeth.
Hammersmith and Fulham's weekly unit costs were £144 for adult singles and £367 for families compared with the weekly grant levels of £140 and £240. At the
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other end of the cost spectrum, nearly half the London boroughs were able to support adult asylum seekers for £140 per week or less and, in some cases, weekly costs were well under £100. Thirteen London boroughs could support families for £240 or less. The picture is complex.
Given that many of the boroughs, including Hammersmith and Fulham, and Westminster, are dispersing asylum seekers out of their areas, it is difficult to understand why there is such a great variation. We have asked the Audit Commission to look further into cost variations between local authorities to see if any lessons can be learnt on ways in which to reduce them.
When we can announce it, I hope that the extension of NASS to cover in-country London cases will ease the pressure on authorities such as those that we have heard about today. We are taking the matter seriously, which is why we are investing resources in setting up a system that removes the responsibility from a few and coordinates a national approach to meeting our international and humanitarian obligations, to which my hon. Friend the Member for Regent's Park and Kensington, North (Ms Buck) referred.
We are not in a position in which the unfair share of the responsibility should fall on just a few boroughs. Along with all other European Union member states, we are facing a national problem, which demands a national solution. We are moving on from the mess created by the previous Administration. It has taken us time to do so, not least because we have had to introduce a major piece of legislation. We have set up the National Asylum Support Service and entered into contracts for the provision of a national voucher scheme, accommodation around the United Kingdom and provision of other support services. That was a major undertaking. We have engaged people from all sectors in meeting this challenge.
It is time that we recognised the enormous strides that have been made in the past 18 months. I certainly look forward to the benefits that will result from better management and co-ordination. We want to make sure that those whose asylum claims are being processed are treated with respect and dignity during that period.
Question put and agreed to.
Adjourned accordingly at one minute to One o'clock.