Westminster Hall Sitting of 24 May 2000

Preamble
[MR. MICHAEL LORD in the Chair]

Public Employees (London Weighting)
Motion made, and Question proposed, That the sitting be now adjourned.—[Mr. Betts.]
9.30 am
Mr. Tom Brake: I am pleased to have secured this important debate. I wish that more London Members were present; perhaps they will arrive shortly. The debate will interest anyone who is concerned about the continually falling number of police officers in the Metropolitan police, the recruitment crisis in the national health service and the recruitment and retention of teachers. Those are, of course, national issues, but the problems in London are much more acute, because of the cost of living there.
One difficulty affecting our consideration of the problem is that, although many of us are aware of the issues facing public sector workers in London, much of our evidence is anecdotal, being drawn from friends, family and constituents who contact us through our constituency offices or surgeries. Without a cost of living index for London, the scale of the problem is unknown.
In 1974, the Labour Government's pay board introduced a London weighting index, which was published regularly until the Conservatives abolished it in 1982. Since then, no official measure of the cost of living and working in London has been collected or published. An unofficial London weighting index has been published privately, but although the pay board recommended that the formula should be revised every five years, that revision has never taken place. There has been no adjustment to take into account greater travel-to-work distances and the changes to relative house prices. The retail prices index is adjusted every year to reflect changes in products and consumer tastes, but the weighting index presupposes that we live in the London of 30 years ago. As a result, according to Bargaining Report:
it seriously underestimates the extra costs it is supposed to measure.
The unofficial London weighting index, produced by the London research department, shows that, from an index of 100 in 1974, London's cost of living had risen by last year to 768.1 in inner London and 515.7 in outer London. The value of the index is more than £3,000 for inner London and more than £1,000 for an area such as Carshalton and Wallington, where I live. Despite that, the London allowance received by nurses, teachers and police officers is well below those levels.
Recruitment to public services has suffered all over the country and has been widely reported in the past few years. Nowhere has it suffered more than in London. In its recruitment report issued in October last year, the Metropolitan police reported that it faced
an increasingly difficult job market, in which the Service is not a first choice career for many and one in which the pay and conditions offered are not competitive with those of other employers.
206WH
That description could equally be applied to the teaching and nursing professions. Recruitment has deteriorated in London in recent years because of lower unemployment, faster growth, greater earnings growth and longer travel-to-work times than those in the rest of the United Kingdom. In particular, rising house prices in London have made a bad situation worse. According to Tony Travers of the London School of Economics, the result has been
both long distance commuting and London employees who are of a lower quality than they would be elsewhere, in both the public and private sector…No teacher in their right mind would stay in London when property costs 80 per cent. more than in Gloucester or Carlisle.
The most recent figures on house prices—the Halifax housing prices index—support that view. House prices in London are now 76 per cent. above the UK average. That is the biggest differential since the Halifax index began in 1983. London is now the only region in the United Kingdom where prices are currently above their 15-year average in relation to earnings. In Greater London, the Halifax housing prices index records a 54.5 per cent. increase in house prices since 1990, whereas the increase in South Yorkshire is 5.71 per cent. A recent glance at the Homes Online website revealed that the cheapest one-bedroomed flat in east London costs £55,000 and that the cheapest one-bedroomed flat in south London costs £80,000, whereas a small three-bedroomed, terraced house in South Yorkshire costs between £25,000 and £35,000.
Such factors are taking their toll. Recruitment to the teaching profession is worse in London than elsewhere in the country, although, unfortunately, the lack of reliable statistics means that it is difficult to judge precisely how bad the situation is. Staff shortages are often bridged by the use of agency staff. The only statistics on the use of supply staff that are collected and published regularly by the Government are the occasional teacher figures: an occasional teacher is one who teaches in the same post for up to one month. Figures show that occasional staff are heavily concentrated in schools in London and the south-east. A teacher working for more than one month in post counts as a regular teacher, whether or not he or she is, in fact, a temporary supply teacher. I am sure that the Financial Secretary will correct me if I am wrong, but statistics are not published on the number and location of all supply staff, nor is there any independent means of assessing the whereabouts or the concentration of supply or overseas staff.
The school teacher review body has noted the lack of such data. It states:
The DfEE vacancy figures do not include some posts that schools may have been forced to fill on a temporary basis and provide no indication of the quality of those appointed to vacant posts. Schools may have had to accept a candidate of poorer quality than they would have liked because, in words we often hear, "We must have a teacher in front of the class."
As a result of those concerns, the review body conducted its own survey last year and found that, nationally, one in 20 advertised teacher vacancies was not filled, but that in inner London, the figure was one in eight. Other figures also tell a sorry tale. In 1999, 39.5 per cent. of all teaching vacancies in English primary schools and 33.9 per cent. of all teaching vacancies in English secondary schools were in London. All that must be seen against the backdrop of teaching in London, which is certainly

207WH
not easier than in other parts of the country and is often more challenging. Gareth Bevan, the head teacher at one school in my constituency, Carshalton high school for boys, was so worried about the situation that he considered buying a house locally to house the school's incoming young staff. However, the cost was too prohibitive for the school. Commenting on the current situation, Mr. Bevan said:
In thirty years at this school, I can only remember one person who has come into a position of responsibility at the school from outside London. The outer London weighting of £1,524 is a paltry sum; it's nonsensical. Ten years ago, the LEA offered relocation packages. Now, I know of no school or local authority that could even contemplate relocation packages.
In their recent housing paper, the Government identified assistance that could be given to key workers. I hope that the Financial Secretary will put a little more flesh on the bones of that proposal today.
In recent months, the needs of the health service have had a higher profile than those of education; none the less, there is a similar tale to tell in the national health service. There are no longer any official figures giving the number of agency and overseas staff in different health trusts. While national vacancy rates are published regularly, local vacancy rates are not. However, approximately, one third of the 15,000 nursing vacancies in England are in London: a survey taken for the Evening Standard at the end of last year showed that there were nearly 5,000 vacancies. My local trust has had to look abroad for nursing staff and has told me, informally, that the vacancy rate could be up to 20 per cent.—although, on the record, it estimated the figure to be closer to 6 per cent. Clearly, there are local problems. The three-month vacancy rates obtained from the Library show that the vacancy rate in England for nursing and midwifery is 2.6 per cent.; in London, the rate is twice as high, at 5.1 per cent., and in my local health authority it is 4.9 per cent., close to the London average of 5.1 per cent.
I shall illustrate the difficulties that the NHS is experiencing in recruiting and retaining staff with an example of a hospital just across the river—St. Thomas's. St. Thomas's hospital relies heavily on biomedical scientists to carry out a range of screening tests. After five years of training and an honours degree, a graduate in that profession can expect to earn about £9,500 to £10,000; after qualification, he might earn a couple of thousand pounds more. Given those circumstances, it is hardly surprising that staff are leaving the profession. Yesterday, I spoke to Judy Copestake, a biomedical scientist with 40 years' experience as of yesterday. Until just a few days ago, she was a biomedical scientist grade 2; she had management responsibilities, but continued to supervise other biomedical scientists working on the bench in the laboratory. Her leaving salary was the princely sum of £22,000. She feels that her profession has been abandoned by the Government. She has been told by the Minister of State, Department of Health, the hon. Member for Southampton, Itchen (Mr. Denham), that biomedical scientists cannot constitute a special case—but it would appear that nurses can. She has also been told that there is no chance of a pay increase until after
208WH
"Agenda for Change" has been implemented. That means that, in all likelihood, there will be no change until 2002.
The same Health Minister said that 6,000 biomedical scientists have received a 7 per cent. pay increase. I should be grateful for confirmation in writing, from either that Minister or the Financial Secretary, of exactly how many of the 21,000 biomedical scientists have received that increase. Judy Copestake and her colleagues do not know of a single biomedical scientist, including colleagues at St. Thomas's hospital and others, who has received that 7 per cent. settlement. Their view is that, if the increase had been available to 6,000 biomedical scientists, they would know at least one person who had received it. They know of many who have received a 3 per cent. increase and a small number of trainees who have received a more substantial increase, but none who have received a 7 per cent. increase.
Perhaps the Government calculate that the impact on public services—in this case, the testing of medical samples—will be minimal. However, unfortunately it is not. I have a press release that speaks of an accident and emergency service; it is not in London, but if Llandudno is experiencing problems, I am sure that the problems in London are just as acute. Apparently, Llandudno hospital has been forced to close its accident and emergency service at 4 pm each day, owing to insufficient biomedical scientists to carry out important laboratory tests on patients. That is obviously a source of concern, for if those circumstances were to be replicated in London, I am sure that my constituents would contact me in large numbers.
The problems are no different in relation to the Metropolitan police. We know that finding new recruits is hard work and that the Macpherson report, rightly, put further pressure on the Met to recruit more ethnic minority police officers. Higher academic and health standards now apply to entry to the force. Police numbers are continuing to fall due to a combination of recruitment and retention problems. I ask Conservative Members, who talk vociferously about the need to recruit more police officers, to consider the effect on recruitment and retention of the Conservative Government's decision to stop the police housing allowance. The Financial Times recently reported that pay talks between the Home Office and police representatives, which are regarded as a critical component of the Government's pledge to boost recruitment by the next general election, have broken down. There are clear signs of an impending crisis in the police service as well.
I have focused on the problems of three key groups of public sector worker—teachers, nurses and police officers—but they are not the only public sector workers in London who experience difficulties. If the Government cannot recruit and retain key public sector workers in our capital city, it is clear that they cannot hope to achieve the improvements in public services that, during the general election, they promised to Londoners and others.
I hope that the Minister will agree that the first thing that must be done is to assess accurately the scale of the problem. The London Research Centre, now under the control of the Greater London Authority, should be given the task of compiling a new index to measure the

209WH
cost of working and living in London. Such an index should be published annually and presented to the teaching and nursing pay review bodies, the police negotiating board and other relevant Government Departments and public sector bodies. New research into all aspects of recruitment and retention of public sector staff in London is needed urgently: we need estimates of the number and net cost of supply and agency staff in schools and hospitals, and accurate figures on the cost of failing to retain trained staff and of recruitment to the Metropolitan police. That key research that is not available at the moment.
Does the Minister agree that it is time for an annual report to be produced on the state of public services in London, and that its contents should be debated by the House of Commons? If that were done, today's Adjournment debate could be the first of many.
9.46 am
Mr. Simon Burns: I begin by congratulating the hon. Member for Carshalton and Wallington (Mr. Brake) on securing this important debate. I am not a London Member of Parliament, but I want to contribute because events in London have a ripple effect on the home counties, and in my county, Essex, that effect is significant.
I shall concentrate on the subject of police officers. As the hon. Gentleman said, there is a significant problem regarding recruitment and retention of police officers in the Met. I do not think that he would disagree if I said that figures show that the Metropolitan police is 1,000 officers understaffed. That is a considerable problem. When talking to the Essex police last week, I discovered that, if a Member of Parliament tables a question to the Home Secretary asking, for example, how many officers the Metropolitan police had on 31 March 2000, the answer given is not the number of officers employed by the Met on that day, but the number for which it has been funded. Those are very different figures. The answer to the same question about the Essex force would be 60 officers more than the real number.
Police officers in the Met receive a London allowance of approximately £3,000, because London is clearly far more expensive to live in than Somerset, the west country or parts of the north of England, especially in terms of housing costs. I understand that the Home Secretary proposes to increase that allowance to £6,000, and that the Police Federation believes that even that figure is too low and should be slightly higher. As the Home Secretary told the hon. Member for Watford (Ms Ward) at Home Office questions on Monday, the figure is currently at arbitration. We shall have to await the results of that process.
So that my comments cannot be misinterpreted, I should say that I do not question the need to acknowledge and make provision for problems specific to London, which is infinitely more expensive to live in than other parts of the country; nor do I question that those problems have had an impact on recruitment in public services. I am not saying that the London allowance should be cut out entirely. However, unless other measures are taken, a London allowance is itself a problem that has a significant impact on counties that adjoin London, such as Essex.
I shall use the example of the police to make my point. With a London allowance, a police officer working in London earns approximately £3,000 more than a police
210WH
officer working across the boundary in Essex. The allowance does not significantly affect the employment of police officers in Essex, as, depending on where those officers live, the commuting costs of getting to London diminish the attractiveness of that £3,000. However, if the London allowance increases to £6,000 as the Home Secretary wants—or if it is increased further as a result of arbitration—the impact will become significant. Many people in Essex who want a career in the police service will find it more financially beneficial to get a job in the Metropolitan police, where their income will be £6,000 more, than in the Essex constabulary.
There is a double whammy. Many police officers who currently serve in the Essex constabulary—especially those living in Epping, Loughton or elsewhere in the south of the county, who would have to travel only a few miles into London—on suddenly discovering that their colleagues in the Met are being paid an additional £6,000 will resign from the Essex police and seek a job in the Metropolitan police, which is crying out for new recruits. Therefore, any distortion of pay structures in the Metropolitan police has serious implications for the recruitment and retention of police officers in Essex.
Mr. Edward Davey: The hon. Gentleman is worried that a higher London weighting for police officers would have that effect, but how would he solve the problem of the severe shortage of police officers in London, if not through the index approach?
Mr. Burns: I specifically said at the beginning of my remarks that I was not going to suggest the removal of the London allowance. If the hon. Gentleman will wait, I shall answer his question.
The problem is not exclusive to Essex. It affects all of the home counties surrounding London, as the hon. Member for Watford said when she questioned the Home Secretary. The Home Secretary acknowledged that three chief constables in the home counties had already been in touch with the Home Office because of the significant and adverse impact that a large increase in the allowance would have on home counties police establishments.
The hon. Member for Kingston and Surbiton (Mr. Davey) asks how the problem could be solved without increasing or exacerbating recruitment problems in London. The answer is that serious consideration should be given to creating a home counties indexation. Although the hon. Member for Carshalton and Wallington rightly drew attention to the significant increases in housing costs in the capital, those costs do not drop away at the borders of the Greater London area. Housing in the home counties is also expensive compared with other parts of the country. In my constituency, house prices are relatively high and they have increased significantly during the past two years or so, with the result that, even in an area such as Chelmsford, people have found it difficult to buy or even rent private housing on the sort of salaries that they command if they work in Essex, rather than commute down to the City of London or the west end to work. There is a haemorrhage of the work force from Essex to London, of which one example is that of people who want to work for the Metropolitan police force, not for the Essex constabulary.

211WH
The problems caused by London's magnetism could be minimised by creating an outer-band allowance or a home counties allowance. We should not try to solve London's problems merely by enhancing the financial benefits for those who work there, because that simply shifts the problem away from the capital to the band of counties that surround it. Those counties have a diminishing standard of public services because they cannot recruit people—at least, not of the standard that they want—and they cannot retain those whom they have recruited.
I appreciate that the Financial Secretary is a London Member of Parliament, but his constituency is on the outer boundaries of the London area, so he will be familiar with what is happening in areas such as Essex, which adjoin his own local authority area. Will he consider the matter, draw it to the attention of his right hon. Friend the Home Secretary, and ensure that the Government give it urgent consideration? If we wait and argue for too long and set up committees or working parties to find solutions, damage will continue to be done as those committees drag on and politicians and others talk. The matter is one of urgency and grave concern, and it needs to be seriously and swiftly addressed.
9.57 am
Mr. Edward Davey: I congratulate my hon. Friend the Member for Carshalton and Wallington (Mr. Brake) on obtaining this debate. Liberal Democrat Members have sought such a debate for some time, because we believe that the issue is one of the most important that affects public services in our London constituencies. We want to make it clear to the Financial Secretary that, like the hon. Member for West Chelmsford (Mr. Burns), we believe that this urgent problem requires instant Government attention.
My hon. Friend the Member for Carshalton and Wallington put well the argument that we need more information about the problem. One of the concerns expressed by the hon. Member for West Chelmsford was that we do not know about the effects of measures outside London, as well as inside the capital city. If we had better information about relative staff shortages in various public sector professions, not only in London, but outside it and in its environs, we could sensibly judge correct relative weightings. However, we do not have that information.
Mr. Burns: The hon. Gentleman and his hon. Friend the Member for Carshalton and Wallington are right to make the point about the lack of information. However, we have information about the scale of the problem for police forces: we know the funded numbers for each constabulary, and if individual constabularies keep records, as they often do, they can tell us how many officers are actually serving at a given time.
Mr. Davey: I am grateful for that intervention. We know some of the funded numbers, but it takes time to discover the actual numbers serving. As the hon. Gentleman rightly said, the figures can be obtained, but
212WH
they are not easily got. When conducting research for today's debate, I found that information is not available about many professions in the public sector. Many statistics held by Departments are inaccurate, being based on funding and expectations rather than on what is happening. In addition, with such high staff turnover in hospitals, police stations and schools, figures change quickly.
I shall highlight the significant turnover problem affecting London schools. My hon. Friend the Member for Carshalton and Wallington referred to vacancy rates, which provide an important indicator of the supply of employees not meeting the demand. High turnover is another such indicator—on that, in many ways, shows the damage done to the quality of service that our constituents receive. However, turnover figures are not readily available. My hon. Friend mentioned anecdotal figures and surveys such as those carried out by institutions such as the Royal College of Nursing.
When trying to build a picture from anecdotal evidence, I found that there are large potential costs for the taxpayer arising from the problems that we are discussing, because of the extra costs of more frequent recruitment and of management in integrating new employees into the work force, whether on a hospital ward, in a police division or in a classroom. Extra costs also result from having to pay premium rates for short-term placements, such as supply teachers, bank or agency nurses. Therefore costs are incurred not only as a result of recruitment, but by plugging the gaps and putting a finger in the dyke. If we estimate those costs just for the health service, we come up with a figure that easily exceeds £100 million. We could radically improve the situation by redirecting the money that is currently spent on short-term solutions; rather than spend excessive sums treating the symptoms, we should deal with the causes of the problem and put the money into decent salaries for public sector employees. That is the solution, but how quickly will the Government reach it?
The vacancy rate in Kingston hospital in my constituency is more than the average for England. but it probably slightly less than the London average; nevertheless, turnover is high. Management tried their best to deal with the problem, but ended up going to Manila in the Philippines, where they recruited nearly 100 nurses to work in the hospital on two-year contracts. We welcome those Philippine nurses; they are exceedingly talented and have undergone a rigorous recruitment programme. However, it is ludicrous that we went to a relatively poor country on the other side of the world to recruit huge numbers of staff to work in Kingston hospital—I cannot believe that that makes economic or social sense. Two-year contracts mean that the turnover problem will be dealt with for a short time, but the overall long-term sustainable capacity of the London health service is not enhanced by having to resort to such measures.
In my constituency, I meet former nurses who had worked in the health service for many years and for whose training the taxpayer paid. They left the NHS because in the private sector, in retail and in office jobs, they receive higher salaries and enjoy more flexible working conditions, which can help them to meet family commitments, for example. The NHS competes in that market, and I do not believe that recruiting on the other side of the world can provide a solution. We should

213WH
encourage those whom the taxpayer trained to return to the health service and work in their local hospitals. In my example, it would not be a case of poaching nurses from West Chelmsford; we must encourage people to work in public services provided to the communities in which they live.
Dr. Vincent Cable: My hon. Friend eloquently describes a problem that many suburban hospitals have in common. West Middlesex university hospital faces an almost identical situation. Does he agree that the problem is, in part, caused by a chronic shortage of nurses' accommodation? Perhaps the Government could provide on-site facilities. A related problem is the difference between inner and outer London weighting, which does not reflect the current realities of the labour and housing markets.
Mr. Davey: I thank my hon. Friend for his intervention, partly because he has anticipated two of my points. Clearly, we think alike.
Reserved housing for nurses, police and teachers is a potential solution, but only a partial one; people in those professions do not want to receive their salary only or mainly in the form of housing because of the inflexibility of such an arrangement. However, such provision could be useful, especially for new entrants. Cuts in funding for public services have meant that much of the accommodation that was once used has been sold to supply a short-term solution to a funding gap elsewhere in public services in health and education. Many local education authorities used to have houses for teachers, and my hon. Friend the Member for Carshalton and Wallington mentioned that a head teacher in his constituency considered bringing back such provision.
The Government should examine reserved housing as a solution and consider reforming outer London weighting. The chief executive of Kingston hospital told me about the problem that that has caused in his hospital. When Queen Mary's university hospital in Roehampton closed, many of its staff moved to Kingston hospital to allow it to take on those patients who had formerly gone to Queen Mary's. However, the London weighting received by staff at Queen Mary's was higher than that received by staff at Kingston hospital, just down the road. A difficult agreement had to be reached to enable staff to work side by side with different London weightings, and the situation will have to be sorted out later. As my hon. Friend the Member for Twickenham (Dr. Cable) implied, the differences between inner and outer London weighting do not reflect financial realities. It can be more expensive to live in Surbiton or in Kingston than it is to live in parts of Roehampton and Putney. The old system no longer works.
In many respects, I do not blame the current Government for the difficulties. They inherited a huge political problem. As my hon. Friend the Member for Carshalton and Wallington said, the Conservative Government's abolition in 1982 of the London weighting index that the Labour Government had introduced in 1974 was one of the longer-term causes of the problem. We have also heard about the
214WH
Conservatives' abolition of the police housing scheme in 1994, which contributed to the increasing scale of the problem.
Mr. Nick St. Aubyn: To what extent does the hon. Gentleman acknowledge that more money being given to public sector employees in London increases the problems of retaining people in the public service in the area outside London, to which my hon. Friend the Member for West Chelmsford (Mr. Burns) referred?
Mr. Davey: I thought that I had dealt with that matter earlier, when the hon. Member for West Chelmsford intervened. My point is that we need information, not only about London, but about other parts of the country: information on shortages, retention, recruitment and turnover in the public sector is limited, which is absurd given the avalanche of requests from the Government for huge amounts of information on services, outputs, waiting lists, absenteeism, qualification league tables and examination results from schools, local education authorities, police authorities and NHS trusts. The point is that the information that will help us to plan services more effectively is not requested. Public services depend on their employees: the health service, the police service and the education service are only as good as the people who work for them. If we really care about the quality of services in London and the surrounding counties, we must demand high-quality information on inflows, outflows and quality of staff.
If the Government sent questionnaires to the chief superintendent of Kingston police, Alan Given, to the chief executive of Kingston hospital, John Langan, and to the director of education in the royal borough of Kingston, John Braithwaite, they would provide the requested information because they know how important it is. They want the Government to acknowledge a major problem facing our public services. Armed with high-quality information, Government policy would be so much better informed. In addition, points made by Conservative Members about the difficulty of making fine judgments between London and areas outside London, and of reforming outer and inner London weightings, could be informed by data, not by anecdote and prejudice. That must be the way forward. If the Minister takes note of only one point from my speech, it should be that work force planning in public services must be better informed by gathering the relevant statistics.
My final point relates, of course, to my constituency. People who work in public services in London should be congratulated on the fantastic job that they do for our constituents. The quality of life in London is far higher because of their hard and dedicated work. We should take note of the work of temporary staff from Australia, New Zealand and South Africa in our schools and hospitals and thank them for it.
Mr. Burns: They have not got a vote here.
Mr. Davey: The hon. Gentleman misses the point. The nurses from the Philippines who work in Kingston hospital do not have a vote, but I still want to put on record my thanks to them.
Mr. Burns: I was trying to help the hon. Gentleman. He already has the press release for his local papers

215WH
congratulating those workers in his constituency who have a vote; I was warning him that, having congratulated them, he need not go on for too long about the Australians and others who do not have a vote.
Mr. Davey: The hon. Gentleman is clearly ground down by cynicism. Some of us are value the quality of public services, not only for those who work in them, but for those who require their services. The people being served by the Philippine nurses are grateful for the work that they do. At the end of day, the issue is as much about the people who need the services as it is about those who provide them: constituents who need hospital services and who need the police to answer their 999 calls quickly, and parents who want their children to have the best start in life and the best teachers are asking us to improve public services. They also want us to ensure that those who provide those services are properly recompensed and can afford to live and work in our communities.
I hope that the Minister will take note of the points made by my hon. Friend the Member for Carshalton and Wallington and me, and that he will treat the issue with the seriousness and urgency that it demands.
10.15 am
Mr. Nick St. Aubyn: I congratulate the hon. Member for Carshalton and Wallington (Mr. Brake) on instigating the debate. It is an important subject and, as he will have learned from my hon. Friend the Member for West Chelmsford (Mr. Burns), it has ramifications well beyond London. As a Surrey Member of Parliament representing Guildford, which is similar to my hon. Friend's constituency, I have much sympathy with his argument.
London weighting for public sector workers is part of the wider issue of the range of formulae that the Government use to allocate funding. However, paying public sector workers is not just about funding, but about how much flexibility the system allows for decisions to be taken locally. For example, within the same central funding constraints, one police service might decide to employ fewer police officers, but to pay them more, than another. Those formulae include London weighting, the area cost adjustment—described by Sir John Banham, when he was a member of the Audit Commission, as 42 pages of regression equations—and the market forces factor in the health service, which drives much of the funding for the nurses and other health services workers mentioned this morning.
When I was a councillor in London, there was something called the equalisation fund; it was absorbed into the new way of funding local authorities after the introduction of the new local taxation system and the withdrawal of the local councils' ability directly to collect business rates. The longest-running star of the scene was the Barnett formula, which throws up discrepancies affecting everyone who lives south of the Scottish border. The Financial Secretary has had his ear bent on many occasions by representatives of those living in the north-east of England, who feel most strongly about the way in which the Barnett formula affects them.
216WH
Whether we live in London, Surrey, Essex or north-east England, we can hold up our hands and say, "Excuse me, but such-and-such a formula is unfair to our region." Of course, there is a circularity about the application of these formulae, because the more people who are employed in the public sector, the more the weightings for living costs are increased for their area, and the more that feeds through into higher local demands and costs. If public service workers in London have a large pay rise, there is a knock-on effect on the cost of housing; it is unfair to treat one substantial group of workers more beneficially than another; they all compete for the same limited housing stock.
It is important to consider flexibility as well as funding. I heard with interest that there is a 6 per cent. vacancy rate for nurses at the hospital in Carshalton; it might interest the hon. Member for Carshalton and Wallington to learn that, in Guildford, there is a vacancy rate for nurses of up to 30 per cent. and staff turnover of nearly as much in a single year. That is because people living in towns such as Guildford face the same cost pressures as those in central and outer London, but have none of the allowances. Someone who has the opportunity of catching a train to Waterloo every 15 minutes can come into London and obtain the allowance by working in a hospital—perhaps even one on the way to central London, in Carshalton, Richmond or other outer London areas. That is a way of obtaining extra allowance while living in Surrey.
Mr. Edward Davey: How much of the allowance would be taken up in the travel costs?
Mr. St. Aubyn: There are indeed travel costs and many employees might be tempted to use a small car and share the transport with someone else working at the same place. That would add to the traffic burden on the roads into London, so the hon. Gentleman is right to raise that issue.
However, let us address the real world. Already, 15 per cent. or more—one in seven—of my constituents commute into London, and a similar number commute every day from other parts of the south-east into my constituency, so there is a massive crossover of commuters. The cost of commuting does not stop people moving to where the opportunities and the jobs are the greatest. If, because of a massive increase in the weighting allowance, opportunities and jobs are concentrated in London, there will be a detrimental effect on services in towns such as Guildford, which already face deep problems.
I am grateful to my hon. Friend the Member for West Chelmsford for mentioning the police force. Surrey Members of Parliament met the county police authority only a week ago. At that meeting, the allowance given to police officers in London was raised as a potential problem. If it is increased to £6,000 a year, we could face increased pressure on retention of officers in the Surrey force, as in the Essex and other forces around London. If we reflect on the reason why the Home Secretary is considering additional funding for police officers in London, we see that it is not all about money: it is also about morale. One of the reasons why the Metropolitan

217WH
police is pushing so hard for an additional financial incentive is that morale has taken a major blow since the publication of the Macpherson report.
Mr. Davey: Before the hon. Gentleman launches into an analysis based on morale, is he aware that newly recruited police men and women living in Kingston and Surbiton have to rely on housing benefit and family credit to supplement their salaries? That is why they need a housing allowance, which was abolished by the Conservative Government.
Mr. St. Aubyn: I am grateful to the hon. Gentleman for demonstrating that, when the housing allowance was abolished, police officers had access to other forms of support. The rug was not completely pulled from under their feet.
Mr. Burns: I was slightly confused by the comments of the hon. Member for Kingston and Surbiton (Mr. Davey). A police constable's starting salary is £16,000, so even if family credit regime were still in existence, someone earning that amount would not qualify for it.
Mr. St. Aubyn: I am grateful to my hon. Friend for making that point. A police officer in the London area faces the same housing cost pressures as an officer living in the area that I represent. The difference is that the London officer already has a £3,000 salary differential over officers based in the home counties.
To expand my argument, I draw hon. Members' attention to the way in which the private sector deals with these matters. I was interested to discover that Eagle Star, which has offices in London, Chelmsford and Guildford, not only pays a London allowance of £3,200 a year, but pays an allowance in Chelmsford, Guildford, Reading and Slough of £1,100 a year—not as much as a London allowance, but a significant sum none the less. That may reflect the fact that we have the same commuter factors and that living costs are high. Many police officers who work in Surrey live across the border in Sussex, because they find that they cannot afford to live in the area where they work.
The morale of the Surrey police force, which I know well, is high. It has the best success rate in the country on fighting crime—officers there are part of a winning team. That counts for something when someone is deciding where to develop a career. We have a young police force, but, as they get older and their financial responsibilities and commitments grow, there is a strong temptation for police officers in Surrey to say, "I now need extra money, so I will make the move to the Met, or to a part of the country where living costs are lower." Our young police force is dynamic, effective and successful, but there is a hidden cost in the lack of experience that we could suffer if the additional money being given to the Metropolitan police—as is now being contemplated—results in a further influx of police officers into the Met from areas such as Surrey. We could be left facing a serious shortage of officers and, more importantly, a shortage of officers who are experienced in tackling crime in our area.
The subject of nurses from the Philippines was raised and I was glad when Kingston hospital took that initiative. We learned from that experience: bringing in
218WH
nurses from the Philippines helped us to solve the much greater crisis at the Royal Surrey hospital in my constituency. We can vouch for the quality of training that those nurses were given and the contribution that they have made to our local health service in tackling the enormous increase in waiting lists in the past two to three years.
London weighting is part of the wider issue of the way in which we measure costs from one area to another. The critical factor in the health service is the market forces index. When the Government came to power they inherited two key indices: the index of need and the index of market forces, both of which were applied to about three quarters of the cost of each health authority. It was recognised that the other quarter of health authorities' costs was either not subject to, or not measurable in terms of either social need or market forces. Without any research, the Health Secretary at the time, the right hon. Member for Holborn and St. Pancras (Mr. Dobson), decided to increase the weighting of the health needs index to 100 per cent. of cost, while doing nothing about the market forces index. That meant that more prosperous areas of the country, such as the one that I represent were discriminated against and suffered a genuine cut in funding of 2 or 3 per cent.
In some areas, people are, on the whole, healthy and wealthy. However, the NHS is there to serve all the community. The old, the poor and the very sick, who do not have access to private health care or other means, are the ones now being made to suffer as we struggle with the longest waiting list in the country. Yesterday, I had to apologise for coming late to a Committee meeting attended by the Secretary of State for Education and Employment. I had just received a telephone call from the chairman of my health authority outlining the latest cuts in health provision that are having to be forced through because of the budget cuts imposed after election of the Labour Government. I am sorry to say that the Secretary of State laughed when I told him that—he thought that it was a fantastic joke, because he believes that people living in Chelmsford and Guildford and parts of London are so well off that they have ready access to alternative health provision, so they need not worry. He forgot about those who cannot afford those alternatives, just as he forgot about the nurses whom we cannot afford to pay a proper going rate for doing their job so well.
I agree with the hon. Member for Carshalton and Wallington that we urgently need research on and a radical review of all the formulae. The London weighting, and also the area cost adjustment and the market forces index, need to be considered clearly and dispassionately. It is unfortunate that the Government have proposed a review of health service funding that is deliberately weighted towards areas of high social need at the expense of areas such as the one that I represent. I hold no grudge against places such as Gateshead, where there are health problems. However, without being justified by any research, there has been an increase in funding in Gateshead of 30 per cent. relative to Guildford over the past few years. That makes one question whether the formulae, including the London weighting formula, are being applied fairly and equitably.

219WH
For a heart test that in our area used to be taken within three months of being needed, there is now a waiting period of up to a year. Not long ago, I heard about a young man of 29 dying of a heart attack because of that wait. One realises that the human cost of applying the formulae inequitably is incalculable. That heart test would have cost £80. The young man was an extremely successful employee in a major company: he had his future ahead of him and was much loved by everyone who worked with him. He was a loss to his community as well as to his family.
I have wandered a little way from the subject of debate, but I have tried to show that one cannot stop at saying, "£100 million here, £100 million there and we'll crack the problem of staff recruitment in London." We know from experiences in our constituencies that that will only open up problems in the areas surrounding London. We need services in which morale is high and people want to work. There must be flexibility so that decisions within funding packages can be made locally about whether money should go on more numbers, or on higher pay for fewer numbers with more experience and expertise.
Our debate is not only about money. In our education system, it is instructive that the unit cost per pupil in the past five years has gone down by 2 per cent. The output—the performance of our children achieving at least five passes at GCSE—has gone up by 3 per cent. The productive use of resources is as important as their allocation. I congratulate the hon. Member for Carshalton and Wallington on securing the debate because it is unfortunate that, under the Government, the allocation and application have suffered in areas such as the one that I represent. He told us that he has problems in his constituency as well. There is a tremendous burden on the Financial Secretary to tell us how he will ensure fairer allocation of resources, and how he will give the greater flexibility on the ground that is desperately needed.
10.33 am
The Financial Secretary to the Treasury (Mr. Stephen Timms): I, too, congratulate the hon. Member for Carshalton and Wallington (Mr. Brake) on securing this interesting debate, in which important issues have been raised. As the hon. Member for West Chelmsford (Mr. Burns) said, my experience in an east London constituency has made me familiar with some of those issues.
I begin by setting the debate in the wider economic context. After the election, our first economic aim was to achieve a new platform of stability after the decades of boom and bust that we had endured. In our commitment to stability and prudence over the past three years, we have had a single purpose: to build a Britain that is decent as well as modern. Our primary economic priority of building a sound platform of stability and steady growth has been achieved to a remarkable extent. For the third year running, inflation is in line with our target; it is at historically low levels, and is also low compared with rates in other European countries. The economy will grow steadily by between 2¾ and 3¼per cent. this year, and it will continue to follow
220WH
that trend. Long-term interest rates, once 2 per cent. or more above rates in Germany, are now the same as those in Germany. That shows that people have confidence in a low-inflation future for Britain, thus providing a platform from which we can all plan for the long term with greater confidence.
Mr. St. Aubyn: I do not want to destroy the Financial Secretary's confidence in that glowing report on the economy, but what does he have to say about the skills gap, or about the fact that vacancies are at their highest for more than 10 years, while in the three years of his Government being in office, the number of people taking courses in FE colleges has dropped cumulatively by more than 500,000?
Mr. Timms: The hon. Gentleman draws attention to a remarkable feature of the economy: more than 920,000 more people have a job than at the time of the last election—the highest number in our historys—and the unemployment rate is at its lowest for 20 years. At the same time, there are 1 million vacancies on offer across the UK, many of them in London; we are in a remarkable situation in which many more opportunities are available for people. All of that contributes to the optimism that all of us can share about the future. The stability that we have achieved is the precondition for high employment, higher living standards and strong public services. By building on the platform of stability that we have achieved by meeting national economic ambitions, we can realise the security and opportunity for all that we want. That is also the context in which we can achieve our ambitions for the services provided by public employees, on whom the debate has focused.
I remind hon. Members of the ambitions for Britain in the coming decade that my right hon. Friend the Chancellor set out last November. There is the ambition of prosperity, so that in place of our historic under-performance against other countries, we have a faster rise in productivity than our competitors, closing the productivity gap that has opened up. There is our full employment ambition, in contrast to years of high unemployment. We want employment opportunity for all, with a higher percentage of people in work, on a durable basis, than ever before. There is our education ambition, so that instead of lagging behind other countries and suffering huge disparities in our educational attainments, we ensure educational opportunity for all with the aim that, for the first time, at least half of our school leavers go into higher education and achieve greater skills, to respond to the point made by the hon. Member for Guildford (Mr. St. Aubyn). There is our anti-poverty ambition, so that, in contrast to the rise in inequality and poverty in recent decades, we ensure that every child has the best start in life as we halve child poverty in the next 10 years.
Alongside those ambitions are our ambitions for the services provided by public employees. Instead of inadequate public services that fail to guarantee opportunity or security, we are now investing for the future in strong public services that are there when people need them. We need to secure long-term answers to the long-term challenges that we face—an approach that was set out clearly in the Budget, when my right hon. Friend the Chancellor announced the largest ever sustained increase in NHS funding, and in the intensive

221WH
review of the NHS led by my right hon. Friend the Prime Minister. That approach is at the heart of this year's spending review as we match new investment in public services with further modernisation.
As part of our commitment to public services, we believe in a firm and fair approach to public sector pay that takes account especially of the need to retain, recruit and motivate staff. Those are the issues on which most hon. Members have concentrated today. Overall pay, like all other costs, must be contained within the framework of spending plans in the comprehensive spending review, supporting the service delivery targets set out in the public service agreements. Across the public sector, the delivery of high-quality services is the key priority. Public sector pay must continue to be set in a prudent, disciplined manner that is clearly focused on recruitment and service delivery objectives. Specific considerations, including recruitment and retention in London, must be taken into account as necessary.
I emphasise that this is not merely a question of pay. The initiatives in the "Modernising Government" White Paper recognise the importance of having the right structures. Pay systems must be flexible and provide the right rewards and incentives for those working in the public service. The initiatives being taken in the national health service and in teaching are on the right path: such reforms provide more flexible pay systems, which help to deliver high-quality public services with appropriate rewards.
We welcome pay reform that addresses the circumstances and requirements of individual groups and helps to deliver output targets. That benefits those who provide public services, and, therefore, those who use them. Such a targeted approach is right. In comparison, the hon. Members for Carshalton and Wallington and for Kingston and Surbiton (Mr. Davey) implieds—without making their view explicit—that the answer was simply to raise the pay of everybody who works in public service in London. However, it is better to recognise where there are difficulties and where change is needed, and to respond accordingly.
Mr. Burns: The Financial Secretary is, by implication, criticising the hon. Member for Carshalton and Wallington, whose remarks he paraphrases as implying that the only solution is to pay more in London. However, will the Financial Secretary not accept that that is his right hon. Friend the Home Secretary's sole solution to the problems of recruitment and retention in the Metropolitan police?
Mr. Timms: There are different issues facing different parts of the public service. My suggestion, with which the hon. Gentleman would probably agree, is that different solutions are appropriate to different circumstances in each of the public services. I shall speak in a moment about the issues facing the police.
Mr. Brake: I agree that different solutions are needed for different cases. However, the key issue that I raised in most of my remarks—I did not call for big increases in London allowances—is that no information is available on which the Financial Secretary can draw up different solutions for different scenarios.
Mr. Timms: It is not for me to draw up the solutions; it is a matter for those who are responsible for providing
222WH
the health service, employing teachers and employing the police in London. It is important that such decisions are taken in the right place, by those who deal with problems of recruitment and retention where they arise. It would be wrong to impose a pan-London solution, irrespective of the particular circumstances in each case.
I was interested by the point that the hon. Member for Carshalton and Wallington made about biomedical science, although it is not a matter for which I am responsible. He seemed to suggest that a problem in a particular part of the health service in Llandudno must apply in London as well. I thought that that illustrated well the need to focus where on those difficulties are being experienced in the health service, rather than say that a problem affects everyone in London when, in fact, it is much more tightly defined.
Mr. Edward Davey: The Financial Secretary says that he does not have responsibility for these matters because it is up to other people to make employment decisions. Will he confirm that he and the Treasury have responsibility for statistics? Will he confirm that it is within either his remit, or that of his ministerial colleagues, to ask for the collection of the statistics needed to analyse the problem that we face in London with recruitment, retention and high turnover in the public sector? He could ask for those statistics to be collected.
Mr. Timms: The hon. Gentleman is right: the Office for National Statistics is indeed responsible to the Treasury. However, those matters need to be and can be dealt with much more effectively locally, service by service. He should not pin his hopes on some huge central data collection exercise to tackle the issues involved; rather, the problems should be dealt with in a more devolved way. I am sure that, on reflection, he would agree.
Mr. Davey: Will the Financial Secretary give way?
Mr. Timms: Not again—I should like to make a little more progress first.
Within the overall public spending allocations, responsibility for pay, including the payment of London weighting, rightly rests with the wide range of different public-sector employers. They include not only Government Departments but local authorities, which are independently elected, autonomous, and largely independent of central Government; we do not intervene in their day-to-day affairs or in negotiations on their employees' pay and conditions. The detail of terms and conditions is, rightly, a matter for local authorities to determine. Local authorities are also responsible for funding the pay agreements of teachers, the fire service and the police, although the agreement for teachers is determined by the school teachers pay review body, and arrangements covering firefighters and police are determined by formulae over which the authorities have no control.
The Government expect local authorities to take a responsible line on the pay bills that they control. We want a firm and fair approach to public and private sector pay alike. In the public sector, that means pay settlements that take account of the need to retain,

223WH
recruit and motivate staff within the framework provided by the spending plans of the comprehensive spending review.
Mr. St. Aubyn: Is it not true that many public services' statutory responsibilities are so specific and so clearly defined and so much of their revenue comes from Government grant that they have little flexibility about the number of employees, and, therefore, over how much they can pay?
Mr. Timms: The hon. Gentleman asks several questions. A good deal of flexibility is available to local authorities over how many staff they employ. It is for them to make the difficult choices that face local councils in deciding how to tackle local problems. It is important that such decisions should continue to be made by those responsible for front-line services.
The NHS employs more than 100,000 staff in Greater London, and the cost of London allowances is approaching £250 million a year. The pay review body for nurses and associated groups in the NHS has recommended large increases in London allowances in the past two years—13.5 per cent. in 1999, because no national increase had been made since 1995, and 3.4 per cent. from April. The Government have accepted those recommendations. A qualified nurse working in central London will receive an allowance of £3,030 a year. Unions representing most non-review-body groups have agreed to an imaginative three-year pay deal that includes increases in London weighting allowances of 13 ½per cent. for 1999 and 3¼per cent. for 2000. Other public sector employers are similarly responsible for their own pay determination agreements. For example, London weighting allowance was consolidated into the salaries of London Underground employees in 1992, and the cost of living in London is one of the factors taken into account in annual pay settlements.
Some key public sector groups, such as doctors, nurses and school teachers, have an independent pay review body that make recommendations on their pay. The Government consider the recommendations of those pay review bodies. We have, I am glad to say, succeeded in moving away from the sequence of staged pay settlements that characterised the behaviour of the previous Administration. We have accepted the main pay recommendations for the past two years exactly as proposed by the pay review bodies. Public sector employers need to work within the resources available to them under public spending plans. Both public and private sectors must continue to be responsible about pay for the sake of our economic stability, which we need to secure for the longer term, if we are to build on our success. Existing spending allocations were agreed in the 1998 spending review; the review for 2000 is under way and will allocate resources to deliver the Government's objectives for public services over the next three years.
The cost of living and working in London is greater than in other parts of the country and systems of London weighting have developed in response. In practice, some organisations have specific London weighting allowances that reflect the distinction between inner and outer London; some have allowances
224WH
intended to meet particular recruitment and retention requirements; and some have consolidated their weighting into basic rates of pay or pitched their rates of pay so that basic salaries reflect the situation. All those arrangements are intended to reflect the additional costs to both public and private sectors and to help the recruitment and retention of the staff needed to deliver services in London.
In the civil service, for example, weighting allowances were largely translated into recruitment and retention allowances some years ago. Since then, responsibility for pay and grading has been delegated from the centre to Departments, and many Departments and agencies have consolidated them into base pay. That has allowed a more flexible arrangement, so that it is possible to concentrate extra help on problem areas rather than having a blanket provision, which was a feature of past arrangements. Within available resources, public sector employers need to tailor their pay arrangements, including those for London, to meet their own circumstances and their particular recruitment and retention needs.
Mr. Burns: Will the Minister give way?
Mr. Timms: I need to make headway, so I shall not give way now.
In the health service, regional offices are being asked to set out regional action proposals to reduce vacancies and turnover in all trusts, to expand the nursing work force across the region, and to target the worst performing trusts and improve their performance. We have allocated £4 million to consortiums for return-to-practice initiatives to follow up the recent successful nurse recruitment campaign that aimed to bring back into the health service the qualified nurses referred to by the hon. Member for Kingston and Surbiton. By last September, there were more than 5,000 more qualified nurses working in the health service than there had been a year earlier, so the initiative has been successful. London and the south-east have particular problems that account for one half of the three-month vacancies across the country. A small team that focuses on recruitment and retention will work across those two regions and link with the central recruitment and retention unit at the Department of Health. That will assist hospitals in the constituencies of those hon. Members from London and the south-east who have spoken in the debate.
In recognition of the Prime Minister's saying that teachers are the change makers in modern society, the latest report from the school teachers review body accepted that there are particular problems in London, but noted that recruitment and retention difficulties vary considerably between London boroughs, schools—I can personally confirm that from what happens in my constituency—and subjects. The review body is committed to finding out more about the problems in London, to gather some of the data for which hon. Members have been asking, and to establish why funding for London does not more often find its way into discretionary recruitment and retention payments. It will give details on the outcome of its findings in its next report. On 30 March, my right hon. Friend the Secretary of State for Education and Employment announced a training salary for post graduate trainee

225WH
teachers of £6,000 a year, which will take effect from 1 September. It is hoped that it will attract more people into teacher training and a teaching career.
In response to the hon. Member for Carshalton and Wallington, I must say that retention in the police is not a major problem. According to data from the Confederation of British Industry, in 1998–99, the rate of turnover in the Metropolitan police was about 7 per cent. compared with 19.3 per cent. for the whole economy, but less for the public sector. However, there have been recruitment difficulties, which are being dealt with through the police negotiating board whose negotiations are under way. As was mentioned, there has been a referral to the police arbitration panel to take forward those negotiations. One of the particular problems facing people in London is, as the hon. Gentleman said, the high cost of housing.
Mr. Burns: Will the Financial Secretary deal with the London weighting allowance and say what impact it will have on police in the home counties?
Mr. Timms: As I said, discussions are under way with the police negotiating board, which covers salaries in the Metropolitan police and those outside London. I have no doubt that such issues will be a factor in the discussions.
The hon. Member for Carshalton and Wallington asked me to say more about the proposals of my right hon. Friend the Deputy Prime Minister. The housing Green Paper entitled "Quality and Choice: A decent home for all" proposes a new starter home initiative designed to help key workers and others on low incomes to buy their own homes in areas of high house prices and high demand. It is a consultative document: we have not
226WH
defined which key workers should be helped, or the income thresholds of those who should benefit from it. I suspect that they are likely to vary from one locality to another. We are consulting on all such matters at present and asking for views on the help that should be offered, such as whether we should offer interest-free loans, cash grants or help with shared ownership, and which key workers should be the target of the initiative.
We shall be looking for innovative proposals that build on the range of existing low-cost, home ownership schemes. It is our intention that detailed proposals for the initiative, including the amount of funding available for it, will be announced later this year, in the light of responses to the consultation and decisions under the Government's spending review for the next three years. Proposals will be invited from registered social landlords and others. Hon. Members might be interested to know that my right hon. Friend the Secretary of State for Health recently announced the appointment of a national nurse housing co-ordinator, to act on our intention to have more affordable homes for nurses throughout the country.
The Government are offering in the public sector something for something. We value public services and the people who provide them. We want our public services to thrive and we need to demonstrate the value that we place on them, inside and outside London, through the pay and conditions that we provide. Equally, we need those in public services to work with us to bring about the changes that will modernise the services, restore public confidence in them and equipsthem for the challenges of the future. In that way, we can provide confidence for the future for the users of those services in London and elsewhere, and for those who work in them, too.

Special Educational Needs
11 am
Mr. Desmond Swayne: I have been assisted in my understanding of special educational needs and the issues surrounding them by the existence in my constituency of several centres for excellence. I should like to pick out for special attention Ashley junior school and its headmaster, Mr. Colin Williams, who is supported by his thoroughly professional staff. It is a very successful primary school, with a fully integrated special needs unit catering for pupils with simple learning difficulties through to those with autism.
The school's strength lies in the fully integrated nature of its special needs unit, which is managed by close contact with parents and with various professionals. The school's aim is to ensure that pupils with special needs are able to enter mainstream classes by the time that they enter secondary education. Although it is not always possible to achieve that aim, the school's success rate is high.
It is important that resourced, attached units such as the one at Ashley enable children with a variety of needs to enjoy their education within a mainstream setting, among other pupils who will act as good role models. Parents believe that their children's attendance at a mainstream school will help to meet their own aspirations of ensuring that their children are assimilated into society and can make a contribution to it.
I do not want to enter into the argument about the various merits of special schools against those of mainstream schools. My view is that there must be choice, because a mainstream school cannot always be the answer. However, I have neither expertise nor great knowledge in the sphere—unlike my hon. Friend the Member for Tewkesbury (Mr. Robertson). I am sure that, if he is fortunate enough to catch the eye of the occupant of the Chair, he will share some of that knowledge with us.
Ashley junior school's growing reputation has brought with it some penalties. Although a recent report on the school by the Office for Standards in Education was full of superlatives and recognised it as a centre for excellence, a consequence has been that Ashley has become a magnet for referrals from outside agencies, particularly local paediatric consultants. Therefore, a growing proportion of children at Ashley have special educational needs, and the school has had to work harder to maintain its position in local and national league tables. Ashley must still cope with the pressures of meeting what must be, at least in some cases, unrealistic or non-achievable targets. Nevertheless, Ashley continues to insist that, regardless of any short-term effects on statistics and league tables, increasing children's self-esteem will reap long-term benefits.
If the Minister is interested in seeing a school that has such an excellent reputation for special needs teaching, she could visit Ashley, where I am sure she would be most welcome and learn much.
My main purpose in initiating this debate, however, is to draw attention to problems in acquiring statements of special educational need. I know that there are always two sides to a story. For many parents, the granting of
228WH
a statement brings comfort and makes them feel more at ease. They believe that such a label seems to make their child's condition more socially acceptable. There is also a belief that a statement will ensure that the school provides a level of support that was not previously provided.
My view is that a statement should make no difference. In an ideal world, a statement would make no difference. At many schools, such as Ashley junior school, a statement does not make a difference. If a school provides support on a needs basis, rather than a resources-driven basis, it should not matter whether a child is statemented. If more schools were provided with sufficient resources and the freedom to deploy those resources according to their priorities—as they were under the grant-maintained regime; I assure the Minister that this is the only party political point that I shall make in the debate—the need for statements would be much reduced.
We do not, however, live in an ideal world, and not all schools are like Ashley. Schools have resource constraints, and different schools may have different priorities. Nevertheless, there is increasing demand among parents for statements. I believe, however, that that demand is capped by an artificial restriction.
The 1979 Warnock report, which formed the basis of the Education Act 1981, took the view that 20 per cent. of pupils have some special educational need, whereas, at any one time, no more than 2 per cent. of pupils should be statemented. My perception is that, despite the passage of time and hugely changed circumstances, those guidelines remain effectively in place. In the past 20 years, however, we have discovered a whole series of new conditions, such as attention deficit and hyperactive disorder.
To digress from my theme for a moment, I am concerned about the number of pupils who are being diagnosed with ADHD and prescribed Ritalin, which is being dispensed at school. The headmaster at Ashley junior school told me that he is concerned that he has 13 pupils to whom he dispenses daily doses of Ritalin, whereas he believes that, in 50 per cent. of those cases, Ritalin make little difference to the pupils' behaviour at school. He suggests that we should be looking for other explanations for children's behaviour, which is often well under control while at school.
As I said, a series of other conditions has recently been diagnosed, although such conditions were not prevalent in the late 1970s and early 1980s. Other than ADHD, they include organisational dyspraxia, motor dyspraxia, the autistic continuum and a variety of other disorders. I do not know the reason for the increased diagnoses, but suspect that we are only now noticing conditions that were always present, and not that something else has suddenly changed to cause them. Nevertheless, we should review the guidelines and criteria established by the Warnock committee.
I sought to initiate this debate because I perceive that there will be huge frustration if we maintain the resistance to statementing when there is an increased demand for it among parents. I am sure that I am not the only hon. Member who, at constituency advice sessions, faces parents at the end of their tether, filled with absolute frustration, because they feel that they are entirely on their own. They seem almost to be trying to

229WH
wage war against the local education authority in an attempt to obtain a statement for their child. I have also had parents who were in tears, after succeeding in achieving a statement for their child, as they recalled the frustration of months and years in which they seemed to be banging their heads against a brick wall.
Parents who are resourceful and articulate, of course, win through. I am concerned about those who are less resourceful or articulate—many of them lone parents—because they often do not stay the course and do not achieve a statement. That is a serious problem.
I am fortunate in having in my constituency Mrs. Irene Sharman, an adviser who runs a telephone support line for the Independent Panel for Special Education Advice. IPSEA is the largest parent advice and advocacy organisation in the voluntary sector. Mrs. Sharman recently put me in touch with its director, Mr. John Wright. IPSEA does a tremendous job in supporting those parents who are able to access its services and gain support from them, but the statement achieved at the end of the frustrating process is often not worth the paper that it is written on.
In the Education Act 1981, a statement was envisaged as an enforceable contract under which a local education authority was bound to make provision to meet the child's needs. That aim has been frustrated over two decades by local authorities refusing to specify how much special help a child should receive. I have seen a number of examples, including the following shocking extract from a statement:
This child requires provision suitable for a child with general learning difficulties.
What does that mean? How is it enforceable? How can parents be sure that their child is getting the support that he or she needs at school? I am told that such vagueness is not uncommon.
I am not the only one who says that. In 1992, the Audit Commission published a report entitled "Getting in on the Act: Provision for Pupils with Special Educational Needs. The National Picture". It said:
Since most statements for pupils in ordinary schools are vague, they cannot protect a specific level of provision. The notion that statements protect resources is therefore a fallacy. The 1981 Education Act envisaged that a statement would be a guarantee that extra help would be provided consistently and for as long as required. In fact, there are numerous examples of LEAs changing provision. One LEA, facing a budget crisis, reduced the extra teaching hours by 50 per cent. for all pupils with statements issued because of learning difficulties. LEAs which ran their own teams of peripatetic teachers frequently changed the levels of support offered to pupils. Rarely was there any discussion of this with parents—but even if there had been, the parents could hardly have claimed that the provision specified was not being made since it was not usually made clear in the first place.…
There is an incentive for LEAs not to specify what is to be provided because they thereby avoid a long-term financial commitment.
In response to that damning report, the Government issued a code of practice in 1993. It required that the statement should normally be quantified, specifying the number of lessons or hours of assistance per week that the child was to have. That was subsequently confirmed by a decision in the High Court. Notwithstanding that, I continue to receive a host of complaints about the vagueness of statements.
230WH
IPSEA has drawn to my attention the excuses that local education authorities give for failing to be specific in their statements, as they are required to be by the code of practice. For your amusement, Mr. Deputy Speaker, I shall regale you with a few. One says:
The school timetable won't let us be precise on the Statement.
Another says:
In our county there is a policy not to quantify provision on a Statement—this is done instead in the school's Statement Implementation Plan.
A further excuse runs:
We like to keep it vague so that if we are able to give a little extra we are not prevented from doing so by the Statement.
How extraordinary!
The intention of the 1981 Act was to guarantee provision so that special needs would be given the resources that the statement called for. The 1992 Audit Commission report showed that the law had failed to deliver that. The 1993 code of practice has similarly failed to deliver. Parliament is still failing to deliver the guarantee promised two decades ago to some of our most vulnerable children. It would be out of order for me to call for legislation in an Adjournment debate, but I should like the Minister to answer two specific questions. First, does she still support the principle enunciated in the 1981 Act that there should be a legal guarantee that a child will receive the special education that his or her needs call for? Secondly, if she is still committed to that principle, what will she do to ensure that we start to deliver it in practice?
11.17 am
Mr. David Drew: I am pleased to be able to take part in this important debate. I have to disappear for a few minutes at 12 o'clock. I apologise to the hon. Member for New Forest, West (Mr. Swayne) and to my hon. Friend the Minister for that, but I shall be back to hear the concluding speeches.
I am pleased to see the hon. Member for Tewkesbury (Mr. Robertson) here. I am sure that he will dwell on the issues as they affect Gloucestershire, and I make no apology for doing likewise. A long-overdue review of special educational needs provision is going on in Gloucestershire. It has concentrated on the moderate learning difficulty schools, but it will have an impact on severe learning difficulty provision and schools that cater for educational and behavioural difficulties.
The debate in Gloucestershire has become quite heated, to put it mildly. It has not always been handled as well as it might have been, but it is easy to speak from a distance and cast aspersions. I may disagree with some of what the hon. Member for Tewkesbury says. I agree that the review is needed and with the general direction in which it is going. I have always believed that to argue in extremis in favour of exclusion is as wrong as to argue that inclusion is neither possible nor reasonable.
Bownham Park special school is in my constituency. I have worked with the Special Schools Protection League, under the chairmanship of Mr. Graham Barton. It does not argue against inclusion in principle, but it is unhappy about some aspects, which I shall concentrate on.
The hon. Member for New Forest, West identified the essence of the problem. The fact that parents often have great difficulty with the statementing process and there

231WH
is often a battle to get children statemented—or at least to have their special needs identified—flavours the way in which they regard their children's education. That often means that it is difficult to include the children later. In an ideal world, all children would be in mainstream education, but that will never be feasible or realistic. We must understand the background and try to overcome some of the difficulties.
Gloucestershire's review is ongoing and some proposals have been made. I am a great believer in the need for incremental change, but to carry out that change we must provide facilities to allow children to integrate for some of the time, but have support when necessary. The difficulty is that in carrying that through, some mainstream schools will have to provide some special provision—I do not like the idea of special unitsߞwhere children can go when it is not appropriate for them to be in the mainstream.
There is a supposed problem of stigma for the schools that provide those facilities. More particularly, the parents of children in moderate learning difficulty schools essentially distrust the system because of the battles that they have had in the process of getting their children identified as needing either statementing or additional help. They believe that if their children go into the mainstream, support will be diluted—notwithstanding the fact that many children in the mainstream who are already identified as needing special help are not getting it, for all sorts of reasons. It is a question of resources—we cannot hide from that—but it is also a question of early identification and support.
I understand and support what the county is doing—even if I do not necessarily go along with all the findings and conclusions—because we have to take people along with us. Choice is something of a myth, but people need assurance that what is being provided for their children is right and as good as it can be.
We must understand that the debate on inclusion is approachable from the other side in the sense that, in our changing society, it is right to try to include people in whatever way we can. That must mean that we look at the balance of provision and whether it is right. That is why Gloucestershire has had difficulties. I know many other counties have been through this in the past, but Gloucestershire is something of a special case as we have had a high percentage of children in special schools. That may have been right historically—and it may be right now—but we must consider how best to move the picture forward.
The hon. Member for New Forest, West looked at some of the dilemmas that we face. In Gloucestershire, this has become a political issue, although not a party-political issue. Understandably, people will fight for their school and for their provision, and I have had some moving letters about this matter. However, we must argue the case, if it is right, and take people with us. I believe that that is possible. People at Bownham Park school understand and support the logic of integration, but not on all occasions and not at the cost of the educational provision for their children.
What we do must be right for the individual child. That is a wonderfully idealistic concept, but if my understanding of the 1981 Act is right, that should be
232WH
happening now. For too long the battle lines have been drawn in terms of authorities seemingly trying not to provide the necessary education and, if they do, providing too little, too late. We must overcome that.
This is not a finance-led exercise, and too often we are taken along that road. We must also recognise that many children in the mainstream need additional support. Special schools will remain, although they may not stay on their existing sites. If integration is possible, we must identify how it can be achieved in practice.
I wholeheartedly believe that we need to engage in the debate. It is not easy, and I shall always argue for the provision of special needs education for all children who require it. I would be interested to hear what the hon. Member for Tewkesbury has to say in terms of taking the matter forward. Special educational needs is rightly a subject for debate, and I am grateful for this opportunity to debate it here this morning.
11.25 am
Mr. Laurence Robertson: I congratulate my hon. Friend the Member for New Forest, West (Mr. Swayne) on securing this debate. It is not easy to get these one-and-a-half hour debates, and I am sure that he has been persistent. There is a good reason for his persistence, and he eloquently went through the problems.
I do not know whether I ought to declare an interest, but I declare that my wife is a county councillor in Gloucestershire. She sits on the education committee and, for a year, she was the Conservative group's spokesman on that committee. One of the biggest items that she dealt with was the changes to the provision of special educational needs.
I am pleased to follow the hon. Member for Stroud (Mr. Drew). He said that I was not his hon. Friend but, away from the Chamber—and, quite often, in it—we work closely together for Gloucestershire. This may not help the hon. Gentleman's career, but he comes from an independent-minded position on many issues; I mean that as a compliment. I may not agree entirely with his comments, but I recognise that our opinions come from different, but genuine, standpoints.
On the question of money, I will make some accusations regarding the process in Gloucestershire, one of which relates to the speech of my hon. Friend the Member for New Forest, West. He talked about statementing, of which there is a great shortage in Gloucestershire. We could query why that is; I suggest that it suits some people in the county to have a lack of statementing facilities. When there are a great many statemented children, that means that one must question whether special needs provision should be retained or expanded. If there are no statements, it is easy to pretend that there is no need for special educational needs provision.
The hon. Member for Stroud, who has been at the meetings with me, knows that Gloucestershire has had a funding problem in education generally, and we have done what we can to try to improve matters. However, I must refer to a comment, which was probably not intended, by the county's director of education when we were discussing the general problem of education funding. When it was pointed out that the county had quite a good provision for special educational needs and

233WH
that money could be saved there, the director of education said that he was "doing his damnedest" to save money in that respect. That is a disgrace; it is supposed to be not a question of saving money, but of providing the right kind of education for children.
I recognise that many children with special needs are already integrated in schools across the country—certainly across Gloucestershire. If we can include children in mainstream schools, we should. That is an obvious statement with which most people would agree.
My hon. Friend the Member for New Forest, West and the hon. Member for Stroud recognised that there are many children who simply cannot be included in mainstream schools and who need the special care, education, treatment and facilities that only special schools can provide.
If we are agreed on that, what is the problem? Some authorities, including Gloucestershire, have taken the Green Paper as a green light for the wholesale closure of special schools. That is beginning to happen. The Minister will no doubt say that that was not the intention, and I would accept that, but that has certainly been the effect.
I have taken the matter as high as I can, to the Secretary of State and to the Prime Minister, who recently wrote to me to say that his concern was that parents should have a choice. That is a good, Conservative principle, but there will be no choice for any parent if the schools are closed.
I support the principle of inclusion, but I recognise that it is not always possible. A nephew and godson of mine has special needs, and he has been tried in both kinds of school. He is extremely bright, but he has one or two problems that caused disruption in the mainstream school. That was not fair on him or, equally importantly, on the other children. Because of his difficulties, the special needs school tended to provide a far better education for him.
It is important to recognise people's feelings on the issue. I have spoken to many parents in Gloucestershire and to heads and teachers at mainstream schools, as well as a great many pupils, and they are all in favour of retaining the special schools.
Alderman Knight school in my constituency provides education, care, treatment and facilities of the highest quality. If the Minister came to that school and saw the work that was being done there and the feeling that the pupils have, or if she saw the letters that I and my wife, as a then education spokesman, received from the pupils, or the petitions calling for us to do our utmost to save the school, I am sure that she would be persuaded that it is important to keep it open. Nobody who has seen that school's work would allow it to close.
It is not entirely down to the Minister whether such schools close, because responsibility has been handed down to regional or county level. One could argue that that is the right thing to do, in that people in the area should know what provision is needed and which schools are doing a good job, but it concerns me that the Department for Education and Employment seems to be washing its hands of the issue. If the special school is under threat, will I still be allowed to hold an Adjournment debate on the issue, or will I be told that it is not the Minister's responsibility?
234WH
Given that so many people who are involved in education do not want the wholesale closure of special schools to go ahead, who are we to engineer that closure? Who are we to say that inclusion has to be the right way? It may be the right way for many children, but for many others it is not.
I congratulate my hon. Friend the Member for New Forest, West again on what he said about statementing, although I have confined my remarks to another issue, which concerns me and a great many other people in Gloucestershire. Somebody who came to see me yesterday, who is heavily involved in Alderman Knight school, asked why we should work to help the school if it is to be closed. It is not under immediate threat of closure, but, given Gloucestershire education authority's policy, neither I nor the parents have any doubt that it is under threat.
I end by making a plea for the very special pupils who attend special schools.
11.35 am
Dr. Evan Harris: I, too, pay tribute to the hon. Member for New Forest, West (Mr. Swayne), who so eloquently introduced this subject—when we saw it on the Order Paper, we realised that it was a big subject—and who made an effective point about the vagueness of statements. We all recognise that problem. What he said about how authorities seem to want to keep their statements vague to give them more flexibility has many resonances in my local authority, although I question whether that is a matter of intentions or of the resources available.
I think that we all appreciated the contributions of the hon. Members for Stroud (Mr. Drew) and for Tewkesbury (Mr. Robertson), who identified some issues in Gloucestershire that have received national attention in the media. They brought out well the difficulties that local authorities face in dealing with integration.
It is helpful to analyse the pressures on local authorities by considering both the demand and the supply side and recognising that many factors create pressures that, sadly, are transmitted to parents and children and lead to inadequacy of provision, delay in identifying the need for provision, vagueness over what is to be provided and, sometimes, cuts. When cuts are needed, it is sometimes seen as a soft option to cut special needs provision.
Much of what the hon. Member for New Forest, West said about the demand side is true. He listed some of the reasons why there may be an increasing—and legitimate—demand for special educational needs provision and, as a subset of that, for statements. One is that more difficulty and disability in communication, behaviour and learning are recognised these days by educational psychologists, paediatricians and other experts. We would expect that to be the case in this, as in any, field of medicine and education.
It may be the case that, at the margins, advances in neo-natal care have led to a greater number of severely disabled children—of course, I make no judgment on that—and to a wider range of disabilities that, quite rightly, have to be catered for. That has certainly been observed in terms of health care provision and there will of course be a spillover to education. Physically or

235WH
mentally disabled children have a right to education, and that can add an enormous amount to their and their families' quality of life.
There is probably more information available now—in the information age—to parents of children with needs, alerting them to the fact that there are services out there. Many patient organisations and organisations of the recipients of education do invaluable work in identifying best practice and alerting parents and teachers to what can be done. The National Autistic Society is but one. In the age of the internet, we would expect more parents to have a great deal of information about the best practice that is out there. There is also information about new practice, which will be portrayed as good by those who are promoting it, although there may be no evidence to back up the claims.
More can be done in schools, as the professionals become more expert and experienced. Both the legislative and the good practice approaches that have been taken over the past few decades to try to ensure that children with special needs get the attention that they need can be built on. Potentially, in certain areas, there may have been a shift from health service provision for some children with severe difficulties to the education service, and that raises the issue of whether that shift has been matched by a transfer of funds. Both sectors, of course, try to retain as much funding as possible, as demands increase.
Demands may increase for other reasons and the hon. Member for New Forest, West mentioned the increased diagnosis of conditions. It is unclear whether that is caused by new conditions emerging, new recognition of conditions or the labelling of conditions that were previously recognised but did not have a diagnostic label that enabled people to campaign more clearly on the issues. Attention deficit hyperactivity disorder is one example, and many of us will have had representations from people concerned about the recognition of that spectrum of problems and whether the drug treatment is appropriate.
On the supply side, it is inevitable that funding questions will arise. Even in the best-resourced education service, and even with a Government with the best will towards education, one would expect resource pressures, whether in terms of grants to local education authority or of the level of standard spending assessment. The two are not necessarily linked. Simply calling a school grant maintained does not suddenly magic up extra resources—they are taken from somewhere else in the system. The hon. Gentleman said that that was a party political point, but my response would be that it misses the point on funding issues.
Clear underfunding still exists in education, and the Government have recognised that in giving a big increase in funding this year. Many of us would note that the 8 per cent. real-terms increase in funding has come three years into this Parliament, and we should therefore ask what people receiving the service went through in that time, as well as under previous Governments.
There is a question—no more than that—about the danger of distorting priorities through target setting. I have not investigated the issue in detail, but I ask the
236WH
Minister to recognise that the problem may exist and to investigate it. If more targets are set in an area other than special needs, or the Government or Ofsted decide that targets set in special needs must be more stringently adhered to, there is a danger that local politicians will put resources into ensuring that they meet the targets that they must meet. By default, resources would then be taken from areas with fewer targets or with targets that appear to have lesser political importance. That may be an issue for the media, because it seems that, if something is not capable of being measured by a league table, they are not interested in it. In asking the Minister that general question, I do not defend the use of targets as the answer. There may be merit in having fewer targets and allowing priorities to be set locally and letting teachers get on with their jobs within a Government-set framework.
A question arises from the Gloucestershire debate on integration and whether that creates pressures on funding. We want parents and children to have a choice, but it must be a funded choice. We must recognise that if a certain number of special schools have a certain number of pupils and slowly but surely those pupils are integrated into the mainstream without the closure of any special schools, the per capita cost of providing that special schooling increases. Overheads cannot be reduced as quickly as the number of pupils in the system. While the Government may have provided additional help for special needs, the question is whether that has been sufficient to cope with the additional cost in the special schools sector of providing the same service for a smaller number of pupils. It is also questionable whether full funding has been provided for the sort of support that statemented and non-statemented children and their parents wish for in the mainstream sector. Such support is not a cheap option.
Another area in which resource pressures may have been created by policy is the continued delegation of funding to schools. I do not oppose such delegation and, indeed, the early pilots of delegated budgets took place in Liberal Democrat-controlled authorities, for example—at the time—Cambridgeshire. It has been pointed out by schools receiving delegated budgets and by local education authorities that one loses economies of scale when some services are not provided centrally because of the following of the mantra of delegation. That has certainly happened in the case of school meals in my authority, and the Government have also recognised the problem in the provision of music education. We must also question the continuing drive to measure the efficiency and competence of local education authorities by the amount that they keep centrally, even if that is for effective and efficient provision for special educational needs.
Mr. Drew: Does the hon. Gentleman agree that there is a problem that, if we integrate more children, special schools will become smaller, which means that they will face a deteriorating budgetary situation? That is the double whammy facing Gloucestershire's special schools.
Dr. Harris: I am grateful to the hon. Gentleman for agreeing with my point. Without some closures, the cost per capita of educating children in special schools will increase because overheads cannot be reduced as

237WH
quickly as school numbers are falling. If the number of children educated in special schools falls by 10 per cent., the logical answer is to close 10 per cent. of the schools to achieve the overhead savings, but that can be difficult for political reasons. It can also be difficult for practical reasons, if a school specialises in specific provision, whether for a disability group or a mode of delivery of education. That may make it counter-productive to seek to rationalise the buildings.
That issue must be recognised by those responsible for resource allocation, or the responsibility for taking difficult decisions that are unpopular should be taken by those who have control of the budget. As we know, 80 per cent. of control of LEA budgets rests with the Chancellor and the Secretary of State for the Environment, Transport and the Regions and only around 20 per cent. rests with the democratically elected members of local authorities and their discretion to raise the council tax, where that is permitted under capping rules. Blame—if that is the right word—and responsibility should rest with those who set the budgets.
I have several specific suggestions on the issue of special needs, based on my experience of what Oxfordshire has done in the short time that I have been a Member of Parliament for the area. Parents feel genuine concern that targets in the form of league tables for attainment may make schools, perhaps irrationally, resist the inclusion of children with special educational needs, especially in large numbers, because of the effect that that may have—even marginally—on attainment levels. It is important for the Under-Secretary of State for Education and Employment, the hon. Member for Redditch (Jacqui Smith), to put on the record her position on that issue, if she has the opportunity to do so. My LEA is on record as saying that such discrimination in admission is unacceptable, especially for that reason, and I hope that the Minister can assure us that it is also unnecessary. The market that is being created by the publication of league tables in their current form—I recognise the changes the Government have made to reflect added value better—can be a disincentive to integration.
A second suggestion is that the Government should develop specialist mainstream schools dealing with certain disabilities. They may be doing that in certain areas, but in Abingdon in my constituency I recently visited the Larkmead school, the county specialist for the integration of deaf children and of children with hearing difficulties. It has an excellent reputation, and provides a supportive yet challenging culture for its children. It does not rely merely on sign language, but does a lot of other work with pupils.
The Minister must also accept that the additional cost of transport for special needs children has implications for funding. Large distances may be involved when children have to travel to specialist mainstream or special schools. In Oxfordshire, I am told that transport for SEN children costs £3.6 million year, compared to a total of £5.8 million for transport for mainstream children. The Minister will not want to get into a discussion about standard spending assessments, but there is a feeling that the cost of transport, especially in rural areas, is not covered adequately in SSA calculations. That problem may worsen as specialist mainstream schools become more common.
238WH
There is an argument for regional planning of special needs provision. That would ensure that each county or local education authority did not regard its area boundary as the limit of its responsibilities and of the requirement to share good practice. Provision must be shared between LEAs in a region, and they must work closely together. Clearly, it is easy for the Liberal Democrat party to call for that, given our attachment to a democratically elected tier of local government at regional level, but existing regional structures should also consider that suggestion.
Mr. Tim Boswell: I am listening with interest to the hon. Gentleman's thoroughly constructive speech. Although I do not necessarily accept his regional agenda, will he join me in asking the Minister to say a little more about the regional co-ordinating committees for special educational needs provision? They have been established, but we have heard very little about them to date.
Dr. Harris: I look forward to the Minister's response to a joint quasi-delegation on that point.
The use of new technology provides an opportunity to integrate the delivery of education to some children with special educational needs. It allows them to integrate even better than they do in mainstream schools, as children with physical disabilities are at least as adept as others at using joysticks and computers. Do the Government have any plans to fund or encourage new initiatives in that area?
I end by thanking the hon. Member for New Forest, West for introducing the debate, which has given us an opportunity to hear his concerns about statementing, and to discuss the wider issues. The hon. Gentleman noted that statements are seen to be an end in themselves, rather than a means to provision. Parents tend to focus on statements because of the way in which the legislation and codes of practice are put together. The situation will improve when we concentrate more on the provision and less on the statement.
11.54 am
Mr. Tim Boswell: I echo the congratulations extended to my hon. Friend the Member for New Forest, West (Mr. Swayne) on his good fortune in securing the debate, and on the way in which he introduced it. He tackled an important subject with the appropriate blend of passion and sensitivity.
As we consider these issues, we should all adopt the phrase "sensitivity matters" as our motto. I have no quarrel at all with what was said in the distinctive contributions from my hon. Friend the Member for Tewkesbury (Mr. Robertson) and from the hon. Members for Stroud (Mr. Drew) and for Oxford, West and Abingdon (Dr. Harris). The first two speakers explained and made more widely known some of the difficulties in their local education authorities, and the third contributor added to the mix some constructive points arising out of his experience of what is happening in his area.
I have no intention of spoiling the tone of the debate, and I am sure that the Minister has no such intention either. All hon. Members have different points to add to what I hope will remain a broad consensus on this

239WH
matter. We are all aware, from our work as constituency Members of Parliament, of the immense effort expended and concern expressed by parents of children with special educational needs. Equally, we are aware of the frustration and hassle that they experience when they try to get from their local education authority the appropriate provision for the distinctive—and often unique—needs of individual children.
The debate has revealed a phenomenon that is evident in the wider spectrum of social policy. Better scientific knowledge, improved information among citizens and rising expectations blend together to make it difficult to provide appropriate resources for special needs education, and to resolve conflicts with respect to that provision. Parents have huge concerns about SEN provision, which Members of Parliament must loyally try to represent to the providing authorities. However, at the same time, we must accept the difficulties that LEAs face in balancing the allocation of resources between mainstream education and SEN provision. In that connection, the hon. Member for Oxford, West and Abingdon made some highly revealing comments about transport costs.
Moreover, overall SEN provision will vary between LEAs. Some authorities may make better provision for blind children than for children with hearing difficulties, for example, while others may do more for children with specialist conditions than for those with more familiar categories of disability. It is extremely difficult to treat all cases fairly and in the best possible way. We must also bear in mind the fact that special school provision will not always fit a changing pattern of presenting disabilities or needs, or the various transport and geographical requirements of a well scattered county authority.
As I have said in previous debates on disability issues in this Chamber, the right approach is not to play party political football with what has or has not been done in the past. Instead, we must accept that all parties want to achieve continuous improvement when it comes to disability matters, and a gradual raising of standards, expectation and provision.
As my hon. Friend the Member for Tewkesbury said, the Conservative Government made some contribution in the early 1990s, when they established the code on SEN, and the tribunal. I was a Minister at the time, and played a small legislative role in that process. However, I am happy to accept that the Government now want to move on to other matters, and I hope that we will spend some time today on those.
The new phase was ushered in by the Green Paper and the Government's welcome commitment to involving education in the disability rights agenda, which extends to all education in maintained schools, and to further and higher education. The Government have also promised that they will introduce a Bill on disability in education, and I hope that the Minister will say when that is expected to appear. It is an open secret—Ministers have admitted as much—that the Bill was agreed to at the very last minute and that it is being drafted.
That Bill is complex to draft, and it is another open secret that the Government are having some difficulty with their legislative timetable. Will the Bill appear this
240WH
Session? If not, should not the Government make a clean breast of the matter and concentrate on getting a largely agreed Bill ready in good time for the next Session? Given the sensitivity of these issues, it is better to legislate properly than to legislate in haste. That should not, however, be seen as a blank cheque for sitting on such a measure indefinitely. There is a balance to be struck, and I should be grateful for the Minister's comments.
From the general tenor of the debate so far, I wish to identify two areas of particular sensitivity. The first, to which nearly everyone has referred, is the inclusion agenda. The Government's programme of action tells us quite eloquently:
Inclusion is a process, not a fixed state. The term can be used to mean many things, including the placement of pupils with SEN in mainstream schools, the participation of all pupils in the curriculum and social life of mainstream schools, the participation of all pupils in learning which leads to the highest possible level of achievement and the participation of young people in the full range of social experiences and opportunities once they have left school.
Try as I might, I find it impossible to disagree with the spirit behind any of those sentiments. However, difficulties may arise in their delivery.
Philippa Russell, known to some of us as the director for the Council for Disabled Children, has said that increasing inclusion will be challenging—a word which the Minister will know is occasionally used by officials to indicate a task that will require a great deal of work in Whitehall, rows with the Treasury and difficulties with the lawyers; however, that does not mean that we should not attempt to increase inclusion.
Another point, which was made well in the speech of my hon. Friend the Member for Tewkesbury and implicit in the contribution of my hon. Friend the Member for New Forest, West, is that inclusion policies cannot be implemented on the cheap. If inclusion is to be appropriate, it may cost more in resources than continuing special schools. The test ought to be whether it is appropriate.
That brings us back to some important concerns. There is concern at the suggestion by some local educational authorities that they see little future need for special schools. They would like to impose an element of compulsion on inclusion. Some parents—not many—are over-protective of their children and expect too little from them. They do not realise the opportunities that may be available in mainstream education. The Government have, on the whole, been encouraging about the principle, and local education authorities that are worried about resources need to be imbued with an element of pragmatism and to recognise that special provision is needed for children who might be lost or vulnerable in mainstream schools, and/or have a clear need for specialist support.
In certain cases, with a bit of ingenuity and lateral thinking, we may be able to break out from the simple concept of one or the other. We may be able to provide an element of inclusion alongside extra support or special provision, as is often done in mainstream schools, or by including children from special schools in some activities. I hope that local authorities and schools will be flexible, and that the Government will disseminate good practice.

241WH
I should value the Minister's comments on the interaction between the special educational needs regime with which we are broadly familiar, and which is based, at least in concept, on the educational appraisal of the individual child, and the new agenda that will take a civil rights-based approach to disability rights. We all acknowledge that disabled pupils have a right to appropriate education. The converse is that their schools have a duty to make reasonable adjustments to accommodate them. Some adjustments, which require capital investment, are quite do-able, and others require special arrangements in the classroom. The difficulty with joining the two concepts arises where a statement, particularly one on which it is difficult to put a specific value, does not fit in with the legal concept of a right or a disability right. The Government have made it easier for themselves by indicating that they intend to deliver the disability right in education for pupils through the tribunal. That is with the difficult exception of further and higher education where, as I understand it, the courts will be involved in adjudication, as they might be where other issues of disability rights are involved.
There are also interesting and important resource implications where local education authorities may look to the Government to meet contingent commitments. I need hardly mention the huge cost to the national health service of liability claims—it exceeds £600 million a year. We have only just started on the disability rights agenda and it could be very expensive if matters are not handled well. I tabled a parliamentary question to register my concern that the original approach would not even evaluate the impact costs of these moves on further and higher education.
As with inclusion, we cannot offer disability rights on the cheap. There will be further resource implications, of a capital and current nature. The Government must face those and work out, with the local authorities, how to deal with them.
My final points concern the awkward interface between SEN provision and the wider social issues that are relevant to any inclusion agenda. We really need to improve the transitional provision from school to further education and past that, wherever possible, into work experience and work. It is generally conceded that the current practice is not ideal because local authorities do not always do what they are obliged to do under previous legislation. The Government need to ensure that the existing law is properly implemented as well as taking forward into law any improvements, such as those in the Learning and Skills Bill. In no sense is that a cop-out. We need to ensure that local authorities are doing what they are obliged to do and that any new duties are properly carried out. A lot of value is added if people can be properly assessed and passed from one stage of their provision to another as part of a proper plan.
We need to consider families and family units as a proper framework, as part of our wider approach to inclusion. There needs to be proper consultation with all relevant agencies and with the family as a whole, given the interaction and relationships between family members. For example, one child may be in mainstream education and have a sibling who is in specialist education. We need to be more sensitive to such issues.
242WH
A Member of Parliament is often the holistic bit of the jigsaw. Constituents who come to our surgeries may have three or four needs. The Member of Parliament sometimes functions as the sole agency, drawing those needs together and referring to the various pieces of the jigsaw. Families, pupils and parents need an approach that is centred on meeting their needs.
In conclusion, local authorities may sometimes view local children with special needs in terms of problems, resource centres and costs, but there are also huge opportunities. These are very special children and they deserve, as I think they will receive, our firm, warm-hearted and generous support.
12.9 pm
The Parliamentary Under-Secretary of State for Education and Employment (Jacqui Smith): I, too, congratulate the hon. Member for New Forest, West (Mr. Swayne) on securing a debate on a topic which all hon. Members agree is most important. I join him in paying tribute to the good work that is obviously going on at Ashley junior school in his constituency. Since taking up my post, I have been fortunate enough to visit many schools where excellent work is being done on such matters, and I hope that the hon. Gentleman will pass on my congratulations to schools in his constituency.
Education of children with special educational needs was one of the first issues that the Government tackled after the general election in 1997. Within months, we published the Green Paper "Excellence for all Children: Meeting Special Educational Needs". We followed that up with an action programme, through which we have continued to work hard to establish a system to enable children with special educational needs to receive the education they need and deserve. That forms part of our overall drive to improve standards for all children. I hope that I shall be able both to respond to the points made by hon. Members and to highlight how, in practice, we are delivering what we said we would.
The hon. Member for New Forest, West asked about the specificity of statements. There is no absolute requirement that the educational provision to be made for a child should be specified in hours per week. However, in most cases, it will be necessary to set out the hours of help needed in order to comply with the requirements of section 324 of the Education Act 1996 and with the Education (Special Educational Needs) Regulations 1994.
The code of practice to which hon. Members referred indicates that provision should normally be specific, detailed and quantified; for example, for the hours of ancillary or specialist teaching support. Although some flexibility should be retained in order to meet the child's changing needs, it will be necessary, in many cases, to specify the hours of ancillary or specialist teaching support required for a child with a statement.
If an authority does not specify the hours when making a statement, the child's parents have the right of appeal to the SEN tribunal. The Secretary of State is able to consider taking action against an authority which maintains a blanket policy of not specifying such provision in a child's statement.
Concerns were expressed about statementing and the code of practice. The Department is currently engaged in revising the SEN code of practice, in close

243WH
consultation with a specially convened sub-group of our national advisory group on special educational needs. As we explained in the action plan, the revised code focuses on guidance for SEN school-based provision in each phase of education, with an emphasis on the roles and responsibilities of all teachers in relation to children and young people with special educational needs.
Alongside the new code, we plan to publish a good practice guide that will help schools, LEAs and other agencies to improve the ways in which they meet the needs of children and young people. We shall also publish guidance on thresholds for the identification of pupils with special educational needs and on the range of provision that would be appropriate to meet those needs.
I share the concerns expressed by hon. Members that the code should not be seen as a rush to statement, if parents and schools are worried about what support will be offered to their children. I shall refer later to other measures that we are taking to support those children and their schools and families.
The hon. Member for Tewkesbury (Mr. Robertson) and my hon. Friend the Member for Stroud (Mr. Drew) rightly raised their concern about the review of special educational needs provision currently under way in Gloucestershire. The hon. Member for Tewkesbury and I have been in communication on the issue, and I understand his anxiety about a particular school in his constituency. However, changes will continue to be made to school provision, both special and mainstream, in accordance with local needs and circumstances. That has always been true and was reflected in the remarks of both hon. Members. All hon. Members who have experienced changes in school provision in their constituencies are aware that such changes will always be difficult; they always raise considerable local concern which needs to be addressed.
LEAs cannot, of course, summarily close a special school; they must publish statutory proposals and, before doing so, must ensure that they have consulted all interested parties. Under the new arrangements, they have to refer those plans to the school's organisation committee, whose members are drawn from local groups with an understanding about the decisions to be taken. They can include members of the LEA, governors of local schools—at least one of whom should be a special school governor—the Church of England, the Roman Catholic Church, the Further Education Funding Council and other groups deemed relevant in the LEA area. If that committee is unable to reach a unanimous decision, it will pass the case to an independent adjudicator for determination. Notwithstanding the difficult decisions that will be made in Gloucestershire, I hope that hon. Members feel that the process at least allows their concerns to be reflected.
The Government's position was spelt out in our Green Paper. We are firmly committed to promoting inclusion by choice. That is a cornerstone of our strategy for raising standards of achievement and for meeting the educational needs of all children. We are determined to maintain progress on that matter, so that more parents feel confident that their child's needs can and will be met in a mainstream school.
244WH
My hon. Friend the Member for Stroud made the important point that the inclusion of children with special needs in mainstream schools would be beneficial not only for them, but—socially and educationally—for the other children in the school. That was proved by the hon. Member for New Forest, West when he highlighted the good work in a school in his constituency.
Our approach has been practical. The objective must be to safeguard the interests of all children. When parents want a mainstream setting for their children, our policy is to try to provide one. However, it is equally important to respect the right of parents to specialist provision, if that is what they want. We have underlined the point that specialist provision continues to play a vital role.
Inclusion is not an agenda for the closure of all special schools; it creates a challenge for the education system—often to find new roles for special schools and for specialist provision. In particular, we want such schools to become outward-looking centres of excellence and to work with their mainstream colleagues to help to support pupils who would benefit from a mainstream place. We are acting to support such collaboration between schools.
The hon. Member for Daventry (Mr. Boswell) is right to point out that we must not only outline our objectives but ensure that we can deliver improvements for children with special educational needs. The importance that we attach to promoting inclusion is emphasised by a range of initiatives designed to help schools to develop their practice so as to become more inclusive. The initiatives offer practical solutions to enable schools to meet the challenge of providing for the needs of a more diverse range of pupils. They will also ensure that we maintain high-quality provision for all children with special educational needs and the other children who are learning alongside them.
The first of the practical approaches relates, as hon. Members have suggested, to funding. I strongly agree with the sentiment that the move to inclusion and to improving provision for special educational needs is not about saving money. That is why the extra £219 million in funding to schools that was announced in the March Budget will give schools the flexibility to use it to support all children and children with special educational needs. In particular, the money provides an extra £15,000 to each of the 62 non-maintained special schools.
We also are allocating £15 million this year from the SEN standards fund to support 100 innovative local inclusion and emotional and behavioural difficulty projects. That is nearly double the money that was available last year. Overall, the SEN standards fund has been raised from £35 million last year to £55 million this year, and the money is being used to support training, parent partnerships, pilot speech and language therapy projects and to help schools to prepare to become more inclusive.
Since 1997, 3,300 schools have benefited from the schools access initiative and the capital support available to make schools and the curriculum accessible to all pupils. That money has been increased to £30 million this year as part of a £100 million package over three years. The Department is funding the distribution of the index for inclusion to all schools and local

245WH
authorities. That is a practical review tool to enable schools to examine what they need to do to become more inclusive, to increase participation and to raise standards not just for pupils with special educational needs but, as I stressed, for all pupils in school.
A special mainstream links working group is producing an interactive CD-ROM package aimed at teachers, showing how we can, as I suggested earlier, develop in a practical way the links between the specialist provision that remains and the mainstream sector. The package will be launched later this year at a series of seminars.
There is nearly £1 million to support the network of 11 SEN regional co-ordination projects that were mentioned by the hon. Member for Daventry. Since this April, they have covered the whole of England and they bring together all the local partners—health, social services, education, employment and the voluntary and private sectors—and they help to promote inclusion.
The projects aim to redress through collaborative planning and working the variations in access to, and the quality of, provision for pupils with special needs. They go some way to dealing with the concerns expressed by the hon. Member for Oxford, West and Abingdon (Dr. Harris) about the need to ensure that we do not allow different authorities and sources of funding to isolate themselves so that they do not work together in the way that they should to provide the best of the whole package to children with such needs. I am more than happy to send the hon. Member for Daventry details about the work that the regional co-ordination projects currently undertake.
Rightly, we heard about the importance of involving and helping parents and about the frustrations that they sometimes feel. The importance of an effective partnership with parents was one of the key themes in the SEN programme for action. All local education authorities have been expected to provide parent partnership services from 1999. LEAs do not necessarily have to provide the services themselves: they can, and in many cases do, arrange for the services to be delivered by the voluntary sector and by organisations such as those highlighted by the hon. Member for New Forest, West. I strongly believe that it is important that LEAs look for good supportive provision in the voluntary sector that will work with them to support parents.
The aim of parent partnership services is to ensure that parents of children with special educational needs have access to information, advice and guidance on their children's needs so that they can make appropriate and informed decisions, in what, as has been pointed out, can be a stressful, difficult and emotional time. In 1999–2000, the Department supported expenditure of £6 million through the SEN standards fund to develop and expand such services. This year, we have doubled that to £12 million.
246WH
In relation to the concerns expressed about statements and the code of practice, the parent partnership services will be expected to ensure that parents of any children identified as having special educational needs—not just those with statements—should have access to an independent parental supporter. That goes some way to meeting the concern expressed that parents think that their child must have a statement before they receive the advice and support that they want.
Mr. Boswell: I sense that the Minister is beginning to draw her remarks to a conclusion. Before she does, will she tell us what has befallen the promised legislation?
Jacqui Smith: The hon. Gentleman will be pleased to learn that I was coming to that point.
The Department also funds the national parent partnership network that is operated by the Council for Disabled Children. It plays an important part in encouraging positive partnerships by providing information on existing services, distributing newsletters, arranging meetings, sharing good practice and exchanging information. The draft revised SEN code of practice to which I referred will include a new chapter on effective partnership working with parents. We intend to legislate on that subject as part of the planned SEN disability Bill that is designed to ensure that LEAs provide parent partnerships services and to replace the current arrangements for named persons that operate only in relation to children with statements.
In reply to the hon. Gentleman's question about the Bill, regrettably, it is not for me to decide the timetable for legislation. However, he will be aware that we have carried out consultation on our proposals in the Bill, and he raised important questions about how we intend to take forward the disability measures in it. Following the results of the consultation, we are committed not only to implementing the Bill but to implementing it in a way that delivers the changes that we all want. I think that hon. Members will agree that we should reflect the views expressed in trying to ensure that the Bill works. We are committed to the changes, but, as I said, I am not responsible for the parliamentary timetable.
I hope that hon. Members will accept from what I have said that we recognise that parents, teachers and children need support and reassurance on these issues. We are providing the funding, the renewed structure to the system, the support for teachers, the support for schools and the examples of good practice that will be necessary to ensure—as all hon. Members have emphasised—that we provide the best possible opportunities for all our children, and particularly for the special children whom we have considered today.
12.29 pm
Sitting suspended.

Consumer Protection (Uno plc and World of Leather)
12.30 pm
On resuming—
Mr. Bill Tynan: I am grateful to have secured time for this important debate and to have the opportunity to speak on behalf of many colleagues who, like me, have been inundated with pleas for help and requests for assistance from many angry and confused constituents. Numbers affected in my constituency are relatively small, but the overall effect on individuals is considerable. The administrators have confirmed that approximately 21,000 people have been affected throughout the United Kingdom. With so many people involved, justification for this debate is self-evident.
As I go through events, I hope that the Minister for Trade, my right hon. Friend the Member for Sheffield, Central (Mr. Caborn), will agree that there is a case for a thorough investigation of the relevant issues which, if mismanagement is established, may lead to the introduction of legislation to protect consumers who find themselves in similar circumstances. Two of the furniture stores traded in Lanarkshire, and, like me, my colleagues in neighbouring constituencies, my hon. Friends the Members for Clydesdale (Mr. Hood) and for Motherwell and Wishaw (Mr. Roy), have constituents who ordered and paid for furniture in part or in full. Those people now find themselves with little chance of receiving either their furniture or a refund of their hard-earned cash, leaving them with substantially reduced bank balances. The vast majority have been told that they will not receive a penny of compensation as they have little or no protection under current consumer laws.
However, the problem is not confined to Lanarkshire. As hon. Members can confirm, approximately 21,000 consumers throughout Scotland, England and Wales are affected by the closures of Uno plc and World of Leather plc. World of Leather was acquired by Uno in April 1997, and, between them, the two companies traded in 58 stores throughout the UK, 19 under the name of Uno and 39 under the name of World of Leather. In November, both companies issued a profit warning and announced a £6.06 million loss for the previous 26 weeks in, I understand, the London Gazette, a well-read journal in my constituency.
It is safe to say that the customers who continued to shop at both stores were totally unaware of the companies' perilous financial position. Had they known, I believe that they would never have parted with their money. Unsuspecting customers continued to order furniture between November and 14 March, the date on which the decision was made to close all Uno and World of Leather stores. In fact, they were encouraged to pay in full to qualify for substantial discounts or early deliveries. On the advice of a colleague, I visited a Uno store, but, fortunately, did not place an order. I was totally unaware of the company's financial difficulties, and I sincerely hope that my colleague was, too.
It has come to light that both companies sold off all their freehold properties prior to the appointment of the administrator in an attempt to address their liquidity
248WH
problems. It is possible that about £11 million was raised, but I have no idea what it was used for, where it went or, indeed, how long it was between the sell-off and the appointment of the administrator. I am sure that the Minister could use his good offices to inquire into that.
During that period, I believe that purchasers for the companies were being actively sought. It is thought that detailed negotiations began with interested parties in December 1999: one set of negotiations involved the companies' main supplier and the other a proposed management buy-out. Unfortunately, negotiations broke down in early March and subsequent efforts to find another buyer were unsuccessful.
I do not know why the negotiations failed. It appears that the directors considered their options carefully and discussed the way forward with their professional advisers. On 8 March 2000, a separate bank account, known as the trust account, was established for consumers' cash and cheque deposits. However, cash and cheque deposits paid prior to that date were paid into the companies' overdrawn bank account and were not held in trust for the benefit of customers. If, at the time of the announced profit warning, the companies had set up a trust account, consumers would have been protected. Unfortunately, however, for the 21,000 customers, that is not the case.
Following the closure of all the stores on 14 March 2000, on 15 March, the High Court appointed Simon Allport, Alan Lewis and Richard Dixon Fleming of Arthur Andersen as joint administrators to the companies, and they became responsible for the management of the companies' affairs. I should like to place on record my thanks to Simon Allport, who has been extremely helpful. At my request, yesterday, with his colleagues, he attended a meeting in the House of Commons to brief Members. Those who attended agreed that the meeting was informative and worth while.
The administrators concluded that formal trading of the business was not viable for several reasons. The two companies owed a total of £3.2 million in rental payments on 24 March 2000, and salary payments of approximately £600,000 were due on 31 March 2000. Many customer deposits had been taken and there were related outstanding orders. Finally, substantial losses were being incurred by Uno.
Despite those and other difficulties, the sale of World of Leather as a going concern took place on 24 March. Thirty-two of its stores were transferred to the purchaser, a consortium of private individuals who, for whatever reason, decided to trade as New World of Leather. I think that that choice of name was unfortunate, as customers who were left high and dry by the closure of Uno and World of Leather could not understand why stock once owned and displayed by those companies was now being sold in the same stores under the name of New World of Leather. That was confusing for the many customers who ordered and paid for purchases from stock that is now back on sale. They cannot come to terms with losing their money and furniture while the stores are back in business and even employ the same employees as before. That is quite unacceptable.
As I said, the two companies had approximately 21,000 customer orders outstanding on the date of administration. Following representation on behalf of

249WH
my constituents, the administrator told me that he was attempting to establish the position of individual customers' orders by reviewing the companies' records and identifying individual orders. He said that considerable work was involved, as the particulars of every outstanding order had to be analysed and the furniture held at the companies' storage locations had to be sorted, counted and allocated. It was necessary to ensure that all furniture stored in all sites could be identified and relocated to central storage units.
There was also a need to sort, count and trace from source documents all furniture that appeared to have been appropriated by individual customers, thus identifying all customer stock. All competing title claims to furniture, including customer stock, had to be resolved, which involved negotiation and resolution of legal issues with suppliers who had not been paid for furniture manufactured by them. I understand that that may end up in test court cases. Finally, negotiations with customer finance providers and credit card companies had to take place to permit the release of furniture.
After that exercise, approximately 2,400 items of customer stock were identified—compared with a possible total of 21,000 outstanding customer orders—and stored in distribution depots throughout the country, one of which was in Baillieston in Glasgow. My hon. Friend the Member for Clydesdale and I gained access to that depot, checked our constituents' order numbers and identified their furniture. To his credit, the administrator had authorised the release of any furniture with a customer's name, address and order number, and three of my constituents were fortunate enough to obtain orders held in that depot.
The current position is that customers are likely to fall into three broad categories. Some are likely to receive their furniture because their order has been identified as customer stock. Others are likely to receive their order as the result of the administrator reaching an agreement with a third party on completing their order. Finally, some customers are unlikely to receive their order or have their money refunded, resulting in a claim against the companies for the amount paid. Unfortunately, however, those customers would be classed as unsecured creditors and are unlikely to receive any substantial return. Alternatively, depending on circumstances, they may have a claim against the credit card or finance company under the Consumer Credit Act 1974.
Is it any wonder that customers are extremely angry and are asking how companies can get away with what they believe is tantamount to fraud? They do not accept that there is nothing to be done in such circumstances and have asked that the Government take whatever action is necessary to prevent innocent people being ripped off in such a way in future. My constituents find it totally unacceptable and immoral that, on the same site where World of Leather and Uno previously traded, a new company trading under the name of New World of Leather is selling stock previously owned by World of Leather and Uno as bankrupt stock.
To return to the profit warning, it is clear that the announcement was known to those who knew where to look for such information. Was it just a coincidence that a private company of investors set up an organisation in November? I am sure that the Minister could explore that and confirm whether it is true. I am not suggesting
250WH
any impropriety, but the Department of Trade and Industry must undertake a thorough investigation into the events surrounding the closure. There are many questions to be asked and answered.
According to a customer notice issued by the consumer and trading standards advice service in Hamilton to my hon. Friend the Member for Motherwell and Wishaw and myself, the new company, MM&S, confirmed that the organisation acquired the display stock of Uno plc from the administrators on 24 March. The administrators have confirmed that part of the assets of World of Leather were sold to an independent consortium of private investors trading under such a title. The administrators further confirmed that no customer stock was sold as part of the sale agreement.
MM&S said in the customer notice that it had taken on some of the staff previously employed by the two companies, and went on to reassure customers who had lost their hard-earned savings that it had no connection with the previous owners. MM&S, now trading as New World of Leather, said that it would like further to reassure all customers that the staff were totally unaware of the financial state of Uno plc and World of Leather, whose collapse came as a complete and very nasty surprise, and resulted in significant loss of earnings for each and every one of them.
On that basis, the profit warning in November was unknown not only to consumers but to staff. Indeed, one of the employees—a manager—confirmed that. It is therefore essential that we revise how profit warnings are given, where they are published and how we maximise consumer awareness of the financial difficulties that companies may face.
This Government have a proud record of introducing legislation to ensure that consumers are protected—for example, the recent Utilities Bill. I do not accept that we should or can continue to allow consumers who buy goods in good faith to use their hard-earned savings only to find themselves in a similar situation to my constituents: simply being informed "It's just your bad luck" and given sympathy. They need and desire protection against sharp practices. That must be delivered by creating a fund or bond to compensate consumers in such circumstances. It is unacceptable simply to advise consumers that the Office of Fair Trading suggests avoiding paying in full for goods before receipt of them or, if paying a deposit in excess of £100, to consider using a credit card. Many of the consumers in my constituency do not have credit cards.
Since I was elected, I have constantly heard complaints from the Opposition about the amount of regulation that the Government are introducing. I make no apology in this instance for seeking more protection for my constituents and the 21,000 customers who feel that they have been ripped off. I seek a commitment from the Minister to investigate thoroughly all the issues and to introduce additional regulation if required in order to ensure proper consumer protection. On that basis, I ask the Minister to consider three changes to legislation.
First, a scheme similar to the bond scheme that operates for travel agents, which compensates consumers when a travel agent goes out of business, should be introduced. Secondly, a profit-warning notice

251WH
should be given maximum coverage, especially in local publications. Thirdly, the DTI should agree to an extensive investigation of the facts and act on its findings. If the Minister examines events leading up to the closure of those companies, I believe that he will reach the same conclusion as my constituents and I and many hon. Members.
12.44 pm
Mr. Keith Darvill: I congratulate my hon. Friend the Member for Hamilton, South (Mr. Tynan) on securing this debate. I should like to emphasise concerns across the country. Although he represents a Scottish constituency, while I represent an east London constituency, many of my constituents have raised similar problems. Some of them have lost—or are looking like they will lose—more than £3,000 in deposits. Others may have to rely on chance to receive their suites of furniture on the retention of titled clauses.
I emphasise the need for stronger consumer protection in this area, similar to that in the travel industry, where consumers pay such large deposits. We need a thorough investigation into the matter because the companies to which my hon. Friend referred clearly encountered financial difficulties some time ago, and because consumers were clearly unaware of that and unable to protect themselves.
12.45 pm
The Minister for Trade (Mr. Richard Caborn): First, I apologise to you, Mr. Jones, and to the House for being half a minute late. I was trying to get some information from the stock exchange, which I was not able to get but will pass on when I eventually do so. If I do not complete my speech, I will write to my hon. Friend the Member for Hamilton, South (Mr. Tynan), probably depositing that letter in the Library. Some 21,000 people have been affected by the matter and it is therefore important that we provide as much information as possible, although some of it will be an interim response.
I congratulate my hon. Friend the Member for Hamilton, South on securing this debate. I am very sorry to learn of the difficulties faced by customers who may lose money that they have paid for furniture ordered from the 58 furniture stores throughout the country. I assure him that some of my constituents have been hit, too; there are complaints in my postbag just as there have been in his. Many of those affected can ill afford to lose the sums that they paid, which in some cases was in excess of £2,000.
Before addressing the issues, let me confirm the facts as we know them. Administration orders were made against Uno plc and its wholly owned subsidiary, World of Leather plc, on 15 March 2000 on the petition of their directors. As my hon. Friend the Member for Hamilton, South said, three partners in Arthur Andersen were appointed as administrators. The objective of the administration was to secure the survival of the companies as an on-going concern or, if that was not possible, to sell the assets at an enhanced value.
As my hon. Friend knows, achieving the former objective was not possible, so the assets, comprising premises, showroom stock and the order book for
252WH
potentially profitable contracts, were sold to New World of Leather. The administrators have a duty to sell assets at the best value. I understand that the assets were sold to the New World of Leather Ltd. partnership, which was formed after the date of the administration's appointment. A separate company, New World of Leather Ltd., which is part of the group, was formed in November 1999 under the name MM&S (2599) Ltd. It is quite possible that that company was acquired off the shelf from company formation agents.
The potentially profitable orders to which I referred represented a small proportion of the total. Generally, they are orders on which only a small deposit was paid, and most were placed with World of Leather, not Uno. None of the directors of Uno or World of Leather is a director of the new company.
I understand that the administrators will be calling a meeting of creditors in mid-June to vote on the administrators' proposals on the companies' affairs. Generally speaking, an administrator is not permitted to distribute funds among creditors. That will occur by placing the companies in liquidation in due course.
Officials have obtained information from the administrators about the prospects of customers obtaining goods that they have ordered and paid for in whole or in part. As I said, about 21,000 customers are in that position. Broadly speaking, customers fall into one of three categories. First, there are customers whose furniture has been manufactured and delivered to Uno or World of Leather. Secondly, there are customers, mainly of World of Leather, who have paid a small deposit and consequently whose orders may still be fulfilled profitably. New World of Leather has acquired such orders. Thirdly, there are customers who fall into neither of those categories. They are unsecured creditors.
The position is complicated by the fact that most suppliers to Uno and World of Leather sold goods to them under terms whereby they retain the title of the goods until they are paid for in full and by the fact that some of the furniture appropriated to customer orders is in commercial warehouses, which may exercise liens on goods stored with them for unpaid costs. That means that it is unsafe to make definitive statements about any customer order until all the relevant circumstances have been investigated.
When companies are placed in liquidation, the order of distribution of assets will be determined by insolvency law. The Crown has certain preferential rights, but only for taxes that the company will have collected and should have paid, such as PAYE and VAT, and then only to certain limits. Employees also enjoy preferential rights for sums due to them, but, again, they are limited. I shall return to preferential rights later.
A question that I am sure is running through the minds of customers and hon. Members is what action might be taken if misconduct by Uno's directors is discovered. Although the Insolvency Service has no power under the Insolvency Act 1986 to investigate the affairs of a company in administration or any regulatory role in relation to one, the administrators have a duty under the Company Directors Disqualification Act 1986 to report to the Secretary of State if they form the view that the conduct of any of Uno's directors makes them unfit to be involved in the management of a company. I

253WH
am sure that, in preparing their report, the administrators will be at pains to establish the causes of the failure of both companies.
Mr. Jimmy HoodI am listening carefully to my right hon. Friend's response and, if he does not mind my saying so, the legal rhetoric. Let us be clear that, from our constituents' point of view, and ours, we are talking about corporate robbery, and I want him to tell us what will be done about it. There may be an inquiry further down the line, but we and the 21,000 creditors who have been robbed by the company want some answers. Where are the directors now and what are they doing? What influence did they have? If they are not still directors of the company, are members of their family or their friends involved in it? We would like him to tell us that there will be an inquiry.
Mr. Barry Jones (in the Chair): Order. Interventions must be brief.
Mr. Caborn: Thank you, Mr. Jones. I hope to cover some of those matters. If I had had notice of those questions, I might have been able to answer them, but I cannot at the moment.
I cannot anticipate whether the administrators will make such a report, but, if they do, the Secretary of State has the power to apply to the court for a disqualification order against the director concerned if he believes that it would be in the public interest to do so. That partly answers my hon. Friend's questions. The court may take into account the extent of a director's responsibility for any failure by the company to supply goods or services that have been paid for in whole or in part—in other words, deposits and pre-payments.
On 4 November 1999, more than four months before the administrators were appointed, Uno made a trading statement warning that results for the year to April 2000 were
likely to fall materially short
of market expectations. I understand that publicity given to such a statement is covered by chapter 9.2 of the listing rules: a listed company is required to notify the company announcements officer of the London stock exchange, which makes the information publicly available. In addition, it must notify shareholders, either by sending them a copy of the statement or by placing a copy in the national newspapers.
My Department also has investigatory powers under the Companies Act 1985. They are exercised if there is good reason to do so, but they are not used to duplicate investigation efforts elsewhere. We considered Uno plc for investigation, but took the view that administrators were already in place and were alert to their duty to report misconduct, so we do not plan to investigate at present. That stance will be reviewed if circumstances change.
An administrator has powers under insolvency law to apply to the court to reverse any payments made by the company that amount to preferences to certain creditors or transactions that are undervalued. The wrongful trading provision in the Insolvency Act 1986—which enables a court, on application, to make a director personally liable if he permits a company to continue trading while insolvent—applies only to a company in
254WH
liquidation, as does the provision whereby a director may be made liable to contribute to a company's assets if fraudulent trading is proved to the court's satisfaction.
Hon. Members will want me to address the question of whether, if nothing can be done to help the customers of World of Leather, the law could be changed to avoid a repetition of the position in which customers of World of Leather find themselves. The Government's view is that any attempt to protect consumers by removing existing preferential rights or, indeed, extending preferential rights to consumers in an insolvency case would not achieve adequate protection of customer deposits and pre-payments because it would not overcome the fundamental problem that, in many insolvencies, there are simply insufficient assets to go round, even for preferential creditors.
Mr. Desmond Browne: On possible changes to the law, what is my right hon. Friend's response to the not unreasonable suggestion of my hon. Friend the Member for Hamilton, South (Mr. Tynan) that, in the particular circumstances of the credit retail business, information about the insolvency or the trading circumstances of a business should be advertised in publications that circulate in the area where that business trades so that potential customers might know what the stock exchange and the limited number of readers of the London Gazette know?
Mr. Caborn: That is a very valid point. I was late arriving at the House today because I was trying to find out exactly what had gone on with the stock exchange. It could be argued that rights are given to shareholders, but not to customers, which needs to be investigated. I was trying to find out for hon. Members whether the public had been informed and, if so, exactly how. I cannot answer that question now, but, as soon as I receive that information from the stock exchange, I will write to my hon. Friend the Member for Kilmarnock and Loudoun (Mr. Browne) and put it on the public record. We might have to look at such matters when we discuss the consumer affairs White Paper.
Changing such rights would constitute an attempt to close the stable door after the horse has bolted. If protection were to be afforded to advance payments by consumers, it would have to operate when the payment was made. There are good policy reasons for not extending the ranks of preferential creditors. To do so would lead to demands from other categories of creditor who could advance an equally strong claim. For example, subcontractors could argue that moneys due to them by main contractors should be granted preferential status. To accede to any such requests would open the floodgates and lead to a general extension of preferential rights. That would be contrary to policy under the Insolvency Act 1986, which is to reduce preferential claims as far as possible. Time is running out, but I assure hon. Members that I will put in writing the information that I would have given them had I been able to do so.
It has been suggested that the Government should provide some means of compensation for consumers when firms fail. For example, there could be a statutory requirement on retailers to protect consumers' deposits and pre-payments generally by placing them in a

255WH
bond—which was referred to by my hon. Friend the Member for Hamilton, South—or a trust account until the contract is fulfilled, or we could make retailers take out insurance. However, while that might well be effective, it would all have to be enforced, and that would be costly. Inevitably, the additional costs on business would be passed on to consumers generally in the form of higher prices. All consumers would pay, but relatively few would benefit. A small business might find it increasingly difficult to trade, especially because of the loss to its cash flow. On balance, therefore, that approach would not be a viable solution to the problem.

Illegal Immigrants
12.59 pm
Mr. Charles Wardle:I am grateful for the opportunity to draw attention to what appear to be serious irregularities on the part of the immigration service in the way in which the renewal of the contract for the escort of persons to be removed from the United Kingdom under the Immigration Act 1971 was conducted. I shall also refer to allegations of unacceptably late payments by the IS of money requested in invoices, involving delays of up to four years. I shall cite evidence of administrative chaos, and the failure of the IS to keep records of removals.
These matters were drawn to my attention by Mr. Barry Southon, who lives at Broadoak, Brede, in my constituency. He is the proprietor of Airline Security Consultants Ltd. ASC has worked for the IS for some 18 years. In this debate, I shall rely on what Mr. Southon has told me and shown me, which I take to be entirely sound.
At the outset, I should declare a past interest. I served as an Immigration Minister in the Home Office during the previous Parliament. I did not meet Mr. Southon in that capacity, however; I first encountered him when he came to one of my constituency advice surgeries in February this year.
I have the highest regard for the hard work and dedication shown by men and women in the IS, who must frequently operate in trying conditions. If, on some occasions in the past, I have expressed reservations about the management calibre of some senior officials in the immigration and nationality directorate, as it now is, that does not detract from my esteem for the achievements of rank-and-file members of the IS. However, none of that prevents me from putting the spotlight on what appears to show carelessness and malpractice on the part of a very few officials during the tender for the new escort contract.
I hope that, following this debate, the points that I raise will be investigated more closely, not only by the Minister—to whom I have already written—but by the National Audit Office. I asked the Comptroller and Auditor General for a copy of the Public Services Contract Regulations 1993 in connection with the debate, and I intend in due course to draw to his attention what I have said today.
Mr. Southon tells me that, since he began working under contract to the IS in 1982, he has been personally involved in the escorted removal of more than 4,000 people from the UK. I am not aware of any significant criticism by the IS of the way in which ASC has operated during that period; indeed, I have been told that, in 18 years, only nine complaints have been made about ASC, all of which proved on further investigation to be without foundation. In contrast, I have seen copies of many commendations of ASC, from the Under-Secretary of State for the Home Department, the hon. Member for North Warwickshire (Mr. O'Brien), directors, an inspector, training teams, chief immigration officers and immigration officers. All have praised the company. Some of the most recent letters of commendation have expressed downright surprise that such an experienced team should be dropped at the very time when the British public looks to the IS to increase its effectiveness in removing immigration offenders.

257WH
Over the years since 1982, ASC has developed a highly efficient service in which security and medical escorts have been made available at just two hours' notice, together with a secure vehicle with airside access when required. Until 1994, it was the sole provider of escorted removals to the IS, but, following a written question tabled in 1994 by the Minister of State, Home Office, the hon. Member for Hornsey and Wood Green (Mrs. Roche), who will reply to the debate—she was then an Opposition Member, and I was the Minister—a second escort company, Loss Prevention International, was taken on at the instigation of a procurement official, Mr. Paul Quibell. From then on, ASC handled about 80 per cent. of the work and LPI about 20 per cent.
In 1996, ASC—presumably along with LPIߞparticipated in a tender for renewal of the escort service contract, but, for some unexplained reason, that tender competition was never completed. It was eventually abandoned three years later, in July 1999. At that juncture, ASC was asked to re-tender, which it did, by submitting an 83-page document by the due date of 9 November last year. The result of the new tender was to be announced on 20 December, although, in fact, no such announcement was made on that date.
Only one of the companies that tendered in November was called in for a clarification meeting with the IS. That was the eventual winner, LPI, whose representatives met Mr. Hassett and other officials in Croydon on 13 December when, it is alleged, they were told that they had been successful. That was a week before the designated date for the announcement of the winner.
On 20 January, a month after the date on which the result of the tender process should have been announced, Mr. Hassett spoke to Mr. Southon on the telephone and confirmed that the contract had indeed been awarded to LPI. Mr. Hassett said that another bidder, Reliance, had been placed second, ahead of ASC. A meeting was arranged for 26 January, at which Mr. Quibell gave his reasons why ASC's tender offer had not succeeded. He said that ASC had, in particular, fallen short on standards of quality and training.
At the meeting, Mr. Quibell denied that LPI had been told on 13 December that it had won the contract, but, in his letter of 21 February to Mr. Southon's solicitor, he appears to have changed his position. In that letter, Mr. Quibell admitted that
we had already…selected LPI as the contractor we proposed to appoint prior to calling the company in for…further discussion…LPI attended a meeting with us on 13 December to clarify a number of points…in order to allow us to proceed
to award the contract.
In that letter, Mr. Quibell said that the successful tender offer by LPI and the second-placed tenderer, Reliance, had set out a much more extensive package of training and a more comprehensive management structure. He said that the quality of systems and procedures offered by both those companies were supported by current accreditation to ISO 9002. What he did not say was that LPI's and Reliance's ISO 9002 accreditation was for activities other than deportations. The only company working for full accreditation for deportation is ASC, and the only reason for a delay in ASC's accreditation for that task is that the Home Office has refused to give the accreditation body permission to
258WH
observe a removal by ASC. That was confirmed when I saw a fax from National Quality Assurance Ltd.'s regional office in London saying precisely that.
Mr. Quibell's allegation that ASC fell short of its competitors' training standards is, to say the least, strange. On 26 January, Messrs Quibell and Hassett claimed that ASC had afforded only a six-day training course, with no monitoring of staff or acceptance testing. They could not have read ASC's tender document very carefully. That document makes it clear on page 9 that the initial six days of induction training will be followed by operational training, to be conducted by experienced staff and recognised outside instructors. Pages 12 and 13 outline no fewer than 28 aspects of the on-going training sessions, and make it clear that great emphasis will be placed on training on the job. ASC should know how to train better than anyone else, as it is the only company with a sustained track record in the business.
Pages 41 and 43 of ASC's tender document show what training is to follow the induction course. Pages 23 and 45 describe performance monitoring, and the on-going assessment of escorts; pages 32, 49 and 50 explain how staffing levels will be adjusted to cope with the expected increase in the volume of work. Mr. Quibell and his colleagues were entirely wrong to suggest that the ASC tender document had nothing to say on that point.
Equally wrong was the assertion by the IS that ASC had failed to ensure that escorts would identify themselves properly. Pages 36 and 50 make clear precisely how escorts are to do that. Equally inaccurate was the IS's suggestion that ASC had ignored questions of quality and the issue of Investors in People. ASC's quality policy and the commitment to Investors in People is set out on page 5 of the tender document; similarly, page 11 sets out in detail ASC's security plan, and page 61, together with the letter at appendix 5, confirms that ASC has the ability to increase its insurance cover.
For all those reasons, the objections to ASC wheeled out by the IS simply do not stack up. Even if we assume for the sake of argument that LPI and Reliance had demonstrated a greater thoroughness than ASC in their plans, it is not good enough for the IS to claim that ASC did not have a detailed plan in its tender document when it certainly had precisely that.
As I have said, I wrote to the Minister earlier this month. I imagine that she has by now been able to compare the three tender documents from LPI, Reliance and ASC in the unamended form in which they were presented on or before 9 November last year. I hope that she will agree that it would be appropriate now for the NAO to examine those three documents, too. As I have said, it is something that I shall ask the CAG to do.
If the discrepancy between IS officials' criticism of ASC's tender document and the reality of what that document contains is not serious enough, there are other warning signals from the tender, about which the Chamber should be aware. The first concerns Reliance, which was placed second in the tender process. In 1995, the IS raided the offices of Reliance and found that no fewer than 15 of its employees were illegal immigrants. The Minister will, I hope, be able to explain why, under those circumstances, Reliance was placed second.

259WH
As for LPI, IS officials will no doubt have alerted the Minister to the controversy in which that company became embroiled over stowaways on a Nigerian-flagged vessel in Lagos harbour some years ago. Equally, I feel confident that she will have been informed of the occasion a few years ago when LPI used four escorts for a removal to Sierra Leone. The immigration offender being removed was put under sedation by LPI and was delivered unconscious at Freetown. None of LPI's four escorts on that case was medically qualified. All four were detained in Freetown for a week for questioning.
I have no doubt that the Home Office will have on its files the latest accounts for LPI and will be aware that, as recently as the 1997 financial year, it appeared to be insolvent. When the Minister replies, I hope that she will be able to assure the Chamber that she has examined its latest accounts and can confirm a substantial increase in capital since the end of that financial year.
ASC is not insolvent. I am assured that it has never traded while insolvent, although no thanks for that are due to the Home Office, which has an appalling record of delays in payments and non-payments of invoices due to ASC.
In the past, ASC regularly had monthly meetings in Croydon. Almost every time, the issue at the top of the agenda was slow payment. Some of the invoices have been outstanding for four years before payment has been made. The delays have had nothing to do with queries on the content of those invoices. At one time, the debt owed by the Home Office to ASC was about £250,000.
In 1997, ASC was not paid anything for four months because of a Paymaster General dispute in Liverpool, yet, at the same time, it paid more than £90,000 in VAT on invoices for which it had not received a penny from the Home Office. Repeated requests to the IS did not result in payment.
ASC claims, for example, that, if it had been able to charge interest on late payment from the Home Office prior to November 1988 in the manner subsequently required by legislation, it would have been able to claim an extra £400,000. That is the extent of the inefficiency and muddle over finances into which the Home Office appears to have got itself over a period of years. I hope that that has been remedied.
There has been an equally unsatisfactory muddle over records that the IS is supposed to have maintained concerning the removal of immigration offenders. Mr. Southon has assured me that, whenever Members tabled questions about the number of people removed, the IS had to seek urgent answers from ASC because there were no in-house records of its own on which it could rely.
I turn to a particularly disturbing facet of the run-up to the tender offer. I am told that an LPI director, whose name I can provide to both the Minister and, if I am asked to do so, the NAO, regularly entertained IS staff at Harmondsworth. I have been given the names of the IS staff who were entertained and offered other inducements. I am assured that ASC is willing to provide an affidavit to support that allegation.
260WH
The IS officials who were entertained told ASC that they were looked after by LPI and asked whether ASC was willing to do the same. Specifically, they asked whether ASC would "weigh in too." Mr. Southon tells me that he refused point blank, but after he did so the work placed with ASC from Harmondsworth declined noticeably. I am unwilling—I am sure that the Minister will agree with this—to name in the Chamber officials who are the subject of those allegations, but I shall provide their names to the Minister and to the NAO if required to do so.
I have been alerted to reports that a former senior enforcement official at the IS has joined the board of LPI, since when that company appears to have gained favour, despite its modest track record and past inadequate capitalisation. I worked with that individual when I was at the Home Office and had no complaints about him. Nevertheless, it is said on the Home Office grapevine and among reputable home affairs press correspondents that, following that person's retirement, he secured for himself an unusual assignment in Russia, where, it is said, he produced a highly original guidance manual for clients about ways in which they might obtain entry into the UK with the minimum difficulty.
Two experienced journalists have related that story to me over the past year, but I did not feel that there was sufficient hard evidence from what I was told to raise the matter with Ministers then. In view of that official's involvement with LPI now, and LPI's success in the tender offer in the face of an apparent shut-out of so much of the ASC tender document, all those things now must surely merit closer investigation.
I have been informed that, on 2 March, at a meeting in Dover, the director of the immigration and nationality directorate, Ms Collins, was asked why the contract had been awarded to LPI instead of ASC. I understand that she seemed unaware that LPI had obtained the contract. That was more than two and a half months after LPI had been told of its success and a month and a half after ASC had been informed that it had lost out. I remind the Chamber of my past criticism of management performance among senior officials at the Home Office. That seems to be yet another clear example of an abysmal lack of communications.
I point out a frustrating catch-22 situation in which ASC has been placed following its failure to secure the contract. Mr. Quibell has told Mr. Southon that, where a carrier—for example, an airline or ferry company—brings an illegal immigrant into the UK, that carrier is now responsible for the removal of that immigration offender. Historically, the IS has arranged for the deportation and then invoiced the carrier for the costs. Mr. Quibell has said to Mr. Southon that, as from April this year, under new legislation, carriers have had to contract directly with escort companies for the removal of those offenders.
Mr. Quibell went on to say that, although the main IS contract had been awarded to LPI, he hoped that ASC would still carry out carriers liability removals under the new arrangements. To be able to provide that service to the carriers, ASC needs sponsorship from the IS to obtain airside passes, but Mr. Quibell has said that IS sponsorship of such airside clearance can no longer be made available. Thus, with that catch-22 situation, ASC finds that insult has been added to injury.

261WH
Under all those circumstances, I hope that the Minister will review as a matter of urgency the conduct of the tender procedure. I am sure that she will appreciate how important it is that ASC and the wider public receive an explanation of why there appear to be so many anomalies between what IS officials said on 26 January, what Mr. Quibell wrote in his letter of 21 February and the reality of the content of the ASC tender document.
1.18 pm
The Minister of State, Home Office (Mrs. Barbara Roche): I am grateful to the hon. Member for Bexhill and Battle (Mr. Wardle) for providing me with an opportunity to set the record straight about the award of the overseas escorting contract. I remember when I was in opposition asking a number of questions and taking an interest in that area of work. We now find ourselves in different roles on the subject.
It may be helpful if I say why it is necessary for us to escort some people overseas and why it was necessary to retender the contract. The immigration service and the immigration and nationality directorate remove about 39,000 people per year from the United Kingdom. Most people who are directed to leave accept that they must do so, but a small minority—around 600—must be escorted to ensure that they reach their destination. The majority of those escorts are for security reasons.
For more than six years, the overseas escort service has been provided by two suppliers: Airline Security Consultants and Loss Prevention International. ASC has provided the service for considerably longer than LPI, as the hon. Gentleman said. Owing to the new regulations specified in the Immigration and Asylum Act 1999, it will be necessary for escorting staff to be certified as fit and proper persons to conduct escorts under the arrangements set out in the Act. Existing contracts did not provide a satisfactory platform to achieve that; nor was it possible to demonstrate that the Home Office was getting best value for money or proper continuity of service by using those arrangements.
Consequently, and following an investigation and recommendation by the National Audit Office, it was decided to hold a competition last year for the provision of an overseas escorting service by one contractor. That was done on the basis of what the NAO had to say. Both ASC and LPI, which had previously been providing escort services, were aware that that would happen, and they participated in the competition.
The hon. Gentleman has made some allegations about LPI. I understand from the brief advice that I have taken that, at this stage, we have no knowledge of these accusations. However, I shall investigate his allegations and write to him.
The competition was run in accordance with the Public Services Contract Regulations 1993, using the restricted procedure. The contract was initially advertised in the Official Journal of the European Communities and also in Government Opportunities. As a result of the advertisement, eight companies were invited to submit tenders, although two of these subsequently withdrew from the competition. Of the six remaining tenders, LPI's was judged to be the best, in that it offered the most economically advantage
262WH
proposal with both the best technical solution and best overall value for money to the taxpayer.
The hon. Gentleman mentioned the sequence of events. Although it was hoped to announce the results of the tender on 20 December 1999, there were a number of practical issues to be resolved before the contract could be signed. These included confirmation that the insurance meeting our full requirements was in place. All matters were resolved and a decision was finally taken and notified to tenderers in writing on 17 January 2000. The contract was finally signed on 8 March. As the hon. Gentleman knows from his past experience and from his present position in the House, such decisions are taken by officials and Ministers are informed. I wish to make it clear that I had no part in the decision-making process.
The hon. Gentleman has suggested that the competition for the contract was not handled properly. I shall carefully examine his remarks when they appear in Hansard tomorrow. I can say only that, from the information that is before me, the procedures were fully complied with under the Public Services Contract Regulations 1993. The competition also had independent oversight from the Home Office procurement unit and the Treasury Solicitor, and both are completely satisfied with the process. That is important because those bodies are in place to make checks and balances. The hon. Gentleman will know that all our procurement procedures are subject to audit.
The hon. Gentleman has mentioned, as has ASC, that the company does not believe that the tender documents were properly scrutinised. There was the example of staff training. I am advised that the training proposals submitted by ASC with the tender were inadequate. It was only at a subsequent meeting on 26 January 2000 that ASC suggested that the training proposals were only indicative and represented one week of a programme of several weeks. It was alleged by ASC that the tender had not been read properly, but it was unable to show in its documentation any details about the further expansion of the one-week example into a full programme.
Mr. Wardle: I am acutely aware that I have taken more than my share of time, but may I say that I fully understand that the Minister was not involved in the procedure? I hope that she will find time to study the contracts, because that is what I shall be asking the Comptroller and Auditor General to do as well. I have no idea whether he will do that, but it would be a great help if the hon. Lady were to examine them.
Mrs. Roche:I shall examine what the hon. Gentleman has said when his remarks appear in the record.
The evaluation process cannot be expected to take account of things which might or might not be intended. It can take account only of the contents of the documentation.
The hon. Gentleman has raised extremely serious matters, and I want to deal with them in the time that is available to me. He implies that there has been some misconduct in the relationship between IND officials and ASC and LPI. Similar implications were contained in a letter from ASC's solicitors dated 7 March, in which

263WH
it is alleged that two members of staff had been socialising with LPI directors. I take such allegations extremely seriously. The two members of staff concerned deny the implications absolutely.
We asked the solicitors to provide specific details so that the matter could be investigated. To date, more than two months later, they have not done so, and I take great exception to that. If the hon. Gentleman is able to provide specific examples, I will ensure that there is an investigation. As I have said, these are serious allegations.
Mention has been made of a retired director of the immigration service. Again, serious allegations were made by the hon. Gentleman. I am informed that the retired director's appointment had no direct bearing on the decision to award LPI the contract. He did not attend any of the meetings with LPI and made no contact with officials responsible for the procurement process. As I have said, it was run under the 1993 regulations.
The hon. Gentleman made other allegations, which I heard for the first time. He repeated gossip. These are serious matters to raise on what is effectively the Floor of the House. As he is entitled to do, he raised them with the protection of privilege. I will consider the allegations. If he has any evidence to show, I will ensure that a proper investigation is conducted.
The hon. Gentleman mentioned late payment and the relevant legislation. I am responsible for it because I campaigned for its introduction when in opposition. It was one of the measures that I took through the House when I had the privilege to be a Department of Trade and Industry Minister. The hon. Gentleman will recall that I was critical of late payment by government, and made it a feature of what I was doing in opposition. I have in mind particularly the record of the previous Government, of whom the hon. Gentleman was a member. I am assured that payment practices, which were not good in the past, have improved dramatically. That is important.
It is important also for us to place arrangements for escorting people away from the United Kingdom on a better contractual basis. That is what we have sought to do. The hon. Gentleman mentioned the knowledge of senior management in terms of the contract. It was known at senior levels of management that the contract had been placed. The hon. Gentleman suggested that, in regard to accreditation, ASC was placed in not as good a position as the other companies. That is certainly not the case. On the basis of the information that I have seen, I can reassure the hon. Gentleman and the House on that point.
Given what I have seen so far and what has been presented to me—it was seen by the relevant bodies, including the Treasury—everything was done to meet the bona fides of the process. I shall carefully examine the record to ascertain what was said. I shall write to the hon. Gentleman as soon as possible. However, it is incumbent on him and on those who have provided him with information to provide that information, rather than merely making allegations—
Mr. Barry Jones (in the Chair): Order. Time is up

Shipbuilding
1.30 pm
Mr. Mohammad Sarwar:I am grateful for the opportunity to debate the future of British shipbuilding. Events in recent weeks have given the debate great relevance, particularly for workers at the Govan shipyard in my constituency.
United Kingdom shipbuilding has a proud past and a rich heritage. Britain's empire and wealth were based on our shipyards employing huge work forces. The Clyde yards in particular were pioneers of innovation and shipbuilders of quality. The first iron ships for the British Navy were built in Govan. At one stage, one sixth of the world's shipping was launched from Clydeside berths.
However, the present day has seen an industry in decline for a number of years. It is now readying itself to meet the challenges of the new millennium. Up to 30,000 people are directly employed in shipbuilding, repair and conversion, and an estimated 50,000 are employed by subcontractors, suppliers and support industries. United Kingdom yards now compete strongly for orders, with up to 30 vessels being built annually. Our capacity allows us to build almost as much again.
Shipbuilding and ship repair work generates £2.6 billion per annum in Britain. In facing new challenges head on, our industry is gaining a reputation for repair and conversion work. Conversion is increasingly seen as a genuine alternative to new building. Europe has about 40 per cent. of the world market, with the UK among the top three converters in Europe.
Our industry knows that it can shape its own future. Market conditions can be influenced, and Britain's shipbuilders are seeking new opportunities for work in an intense marketplace. They are changing practices and influencing policies that help the industry to improve its competitiveness in the world market.
I praise the work of the Minister's predecessor, my hon. Friend the Member for Leeds, West (Mr. Battle), in instigating the shipbuilding forum. Only a Labour Government would have established the shipbuilding forum and the Scottish shipbuilding forum within months of taking office, bringing the Government, the unions and the industry together to make real progress in British shipbuilding. It has provided real support to the industry, and encouraged practical recommendations that benefit shipbuilding in the United Kingdom. It has also facilitated broad co-operation between shipbuilders, the Shipbuilders and Shiprepairers Association, the British Marine Equipment Association and the Chamber of Shipping.
The Minister will recognise the value of continued co-operation in the forum in allowing the industry to flourish in the future. The nature of competition faced by British shipbuilders will shape the future for our shipyards. I urge the Minister to remain responsive to the concerns of Britain's shipbuilders about our direct competition in Europe. While I recognise that significant work has been done by the European Commission to remove barriers to fair competition across the European Union, it is important for our own industry to remain vigilant and to work closely with the Government when there is perceived unfairness through hidden subsidies on the continent.

265WH
I welcome the increased co-operation at British level, through the SSA, to promote the industry as being at the cutting edge of technology and innovation. Shipbuilding is a high-tech industry that combines the most advanced technologies in production and operation. Our shipyards have a key role in a knowledge-driven economy. They have a proud heritage of achievement, but they will have a future only if they work together across the board to increase productivity and to remain the most advanced shipbuilders in the world.
Operating aid granted under the shipbuilding regulations will be essential for the industry across Europe in the current global market. The second report of the European Commission to the Council of Ministers on the situation in world shipbuilding has proved that Korean yards continue selling new ships at prices that do not cover their cost. Those predatory practices undermine the market.
Last year, South Korea succeeded in replacing Japan as the world leader for incoming orders. The agreed minutes in April of discussions between the European Commission and South Korea offer a real opportunity for fair competition, and address problems in tariff practices and financial transparency. That followed hard negotiations and an ultimatum requiring South Korea to bring its shipbuilding prices into line or face action before the World Trade Organisation. The agreed minutes are clearly a step towards solving the problem, but the solution requires a level playing field in the market. Market conditions will not change dramatically overnight, but it will soon become apparent whether the South Korean Government intend to introduce fair competition or are simply trying to win time for their yards.
I hope that the Minister will outline the Government's position on British shipbuilders co-operating with European competitors in the preparation of a case to bring before the WTO, so as to safeguard against the eventuality of no change in Korea. A watchful eye must be kept on Korean ship prices and the pervasive influence of Government-controlled banks on Korean shipbuilding. We must all hope for fair competition to prevail. There may be the prospect of a multilateral agreement through the Organisation for Economic Co-operation and Development being initiated—an agreement that even the United States may no longer be restrained from ratifying.
My right hon. Friend the Secretary of State for Trade and Industry and my hon. Friend the Minister for Competitiveness have made it clear that they will work with the shipbuilding industry to help it to improve its competitiveness and to win orders. The Government have demonstrated a strong belief that the shipbuilding industry has a future as a modern and dynamic part of the manufacturing sector. There has been improved financial support for shipbuilding, with changes made to the home shipbuilding credit guarantees scheme. I appreciate the successful efforts of the Minister in that regard.
The shipbuilding intervention fund has been extended to previously excluded yards such as Ailsa Troon on the Ayrshire coast. Conversion contracts previously excluded from support have also seen support extended, as the British industry develops a reputation in Europe for conversions. The Government positively encourage
266WH
increased productivity. Companies are no longer punished by reduced financial support if they reduce their costs. That is a great benefit to well-run shipbuilders across the UK.
New investment has been encouraged, particularly in research and development, which is the clearest way of investing in the industry's future. The shipbuilding intervention fund now allows a 9 per cent. profit element. By no longer basing the grant on break-even basis, we have been able successfully to secure new orders for our shipyards.
Cammell Laird recently won the largest cruise liner conversion ever, worth £57 million. The north-east yard will also build the first vessel on the Tyne in six years. Harland and Wolff worked closely with Government Departments and agencies under great pressure to secure for the work force a conditional contract for four sophisticated RoPax ferries worth £300 million.
In addition to the threat over Harland and Wolff being lifted, Appledore in Devon earlier this month lifted notices on 300 workers following an order. That is good news for British shipbuilding.
The Minister has been attentive to the concerns of the industry over the ending of intervention fund money this year. While the fund did not always help to make our yards competitive, it continues to offer useful short-term assistance for our shipbuilders. Shipyards across the UK now have the common goal of improving productivity to increase competitiveness.
Defence orders are vital to UK shipbuilding, as can be seen at places such as Scotstoun, which is the biggest shipbuilder in Scotland, working solely on naval vessels. It must be stressed that maintaining shipbuilding capacity is also vital to our modern defence strategy, as was shown most recently in the Government's response to the crisis in Sierra Leone. The Amphibious Ready Group was dispatched, including the helicopter carrier HMS Ocean, which was constructed in Govan. HMS Ocean is an excellent example of Clyde-built quality and Govan's commercial build methods.
The yard operates as Britain's biggest merchant shipbuilder and has great flexibility—flexibility which is needed for the modern operations of the Ministry of Defence and which will be of paramount importance in determining future orders for British yards. Last month, the MOD issued invitations to tender for two landing ships logistics. Swan Hunter, Harland and Wolff, Cammell Laird in Birkenhead, Appledore and BAE Systems in Govan are all in the running, with orders expected later this year. Govan's sister yard Scotstoun is involved in designing the new type 45 destroyer. The first class will be assembled and launched on the Clyde at Yarrow. Thousands of jobs will be safeguarded by that decision, which is part of a multi-billion pound shipbuilding programme.
The type 45 destroyer future services combatant and the future aircraft carrier programmes will together create orders with British yards for more than 30 major warships. That is more than was ordered in the whole period since 1979. The MOD's procurement programme signifies a huge investment in the future of British shipbuilding. It gives the industry a long-term stable platform for the next two decades, to invest, modernise and become more competitive in the world market.

267WH
Orders should be made not only on the best commercial grounds but in the best interests of our shipbuilding industry. Defence contracts must be rolled out in a manner that ensures a viable, competitive future for UK yards. The Government must fulfil their commitment to work with the industry and the unions to build a world-class industry. I welcome plans by Ministers to hold discussions with Britain's main shipyards and the unions, and consider how we can best meet the challenges and take advantage of the opportunities provided by the MOD programme. It offers us an historic opportunity. Britain's shipbuilders cannot afford to miss this chance.
The Minister has always stressed that competitiveness in shipbuilding needs and demands a strong supplier base. A wider look at the industry is essential for decisions that protect and enhance our shipbuilding capability. That is a lesson that has been taken on board in my constituency. The west of Scotland defence and aerospace network has looked at the wider economy based around the Govan shipyard. At present about 1,200 people are employed directly by BAE Systems at Govan, with more than 2,000 employed at Scotstoun. Almost 5,000 are employed in and around Glasgow by suppliers and subcontractors to the Govan yard. That is a huge number of jobs reliant on shipbuilding in Govan, and it is not exclusive to Glasgow or even Scotland.
Up to 200 jobs in the north-east of England could go if the MOD order for roll on/roll off ferries is not awarded to Govan as part of the Sealion bid. The northeast defence diversification project, a networking organisation for the defence industry, predicts that 76 small firms in the region which would supply specialist parts and skills to the Govan yard could lose valuable orders. Although my focus is understandably on the Glasgow, Govan constituency, the placing of the contract elsewhere would have a major long-term impact on Scotland and the north-east for many years to come, as more than two thirds of the work would be carried out by sub-contractors. The order could provide employment to hundreds of workers in the north-east, not only during the building of the ferries but over the entire 25 years service of the ships.
Let there be no doubt: the Prime Minister and many other Ministers have assured me on numerous occasions that no decision has been made on this order. I anticipate my hon. Friend the Minister for Competitiveness doing so again this afternoon. There is everything to play for as the Government scrutinise the bids. My own position is also clear. The necessary skills and experience are in my constituency. Govan is ready to build the ships immediately. As the local Member of Parliament, I am grateful to the many colleagues who have constituents employed at Govan for the total support that they have shown in lobbying for this order and for future work. The message is clear in Scotland—we are fighting for Govan.
Our argument has moved on from attempting to secure this order to working effectively as a team to secure the long-term future of shipbuilding on the Clyde. Workers at the yard, through shop stewards led by yard convener Jamie Webster, the trade unions, Members of this House and of the Scottish Parliament are all united in support of Govan shipyard. When my
268WH
right hon. Friend the Secretary of State for Scotland, brokered the deal that saved Govan last year and saw Kvaerner sell the yard to BAE Systems, it was cause for real celebration in my constituency and across Scotland. The shipyard is the major employer at the heart of Govan, but it is a great symbol of pride across Scotland.
People appreciate that Govan has a justifiable reputation for Clyde-built quality—building ships to last, on budget and on time. Scottish MPs have mounted a positive campaign and made a persuasive argument on the strong merits of the Govan yard. Across Scotland, we have taken our campaign to the streets and asked our constituents to sign a petition in support of Govan. Thousands of people continue to express their full support for Govan. They believe that Clyde shipbuilding has not only a proud history but great potential for the future and they know how vital this order is for Govan. Work would be guaranteed for at least three years. Up to 200 additional workers would be needed. Apprentices could be taken on for the first time in three years. That is vital in an industry that desperately needs young recruits able to learn skills for the future.
Our argument has to be persuasive, as work ends at the Govan yard in a matter of months. Closure would rip the heart out of a community and be an economic and political disaster for Scotland and Britain. Earlier this year, BAE Systems announced plans for substantial future investment in Govan and Scotstoun as a centre of excellence. The two yards worked closely as one in partnership with the sister yard at Barrow. Govan needs the work offered by the ro-ro order to bridge the gap until key projects such as the type 45 destroyers come to fruition.
The future can be bright if political will and industrial competitiveness continue to work for the common goal. The dedicated and skilled work force at Govan and their families have suffered greatly through the uncertainty of the past year and a half. I have shared their rollercoaster ride and realise how unbearable the stress can be. They know that the future of shipbuilding depends on flexibility and technology. They deserve the chance to continue proving themselves. This is a vital time for shipbuilding in the UK. Nowhere is that more true than at the Govan shipyard. The Labour Government have worked hard for an end to boom and bust in British shipbuilding. I know that the Minister will continue his good work with colleagues in active and creative support of the industry. I also urge the Government to meet the challenges of securing the future for Govan.
1.47 pm
The Minister for Competitiveness (Mr. Alan Johnson):I congratulate my hon. Friend the Member for Glasgow, Govan (Mr. Sarwar) on securing this debate. He has been a persistent and effective advocate for the British shipbuilding industry and has articulated the concerns of his constituents on many occasions in the House. It is indicative of the importance of the subject to the area and the nation of Scotland that we have my hon. Friends the Members for Glasgow, Pollok (Mr. Davidson), for Hamilton, South (Mr. Tynan), for Clydesdale (Mr. Hood), for Midlothian (Mr. Clarke), for Kilmarnock and Loudoun (Mr. Browne)—I apologise for my pronunciation—and for Eastwood (Mr. Murphy) present at the debate this afternoon.

269WH
The Government are well aware of the importance of the shipbuilding industry, both to the British economy and to the economy of the constituency of my hon. Friend the Member for Govan, where the largest merchant yard in Great Britain—BAE Systems, Govan—is located. Govan accounts for more than one fifth of all employees in British merchant shipyards.
I am also acutely aware that all British shipyards face difficult challenges. There is fierce international competition. It has been assessed that global overcapacity of about 30 per cent. exists, which, despite increased demand, has led to a significant fall in real prices in the last 10 years. The Government know that British yards are finding it very difficult to win new orders against international competitors. We have been discussing the matter with industry and unions and we share their concerns about the current problems.
Before I deal with those problems, however, I stress that it should be recognised that the industry has not been without its successes. As my hon. Friend the Member for Govan mentioned, last year, Cammell Laird won the £60 million contract for conversion of the Costa Classica cruise vessel, which is the biggest ever cruise conversion. Conversion is more labour-intensive, and therefore creates more jobs, than new build.
I assure hon. Members—as my hon. Friend the Minister of State, Scotland Office did in the recent debate on the future of shipbuilding on the River Clyde—that the Government remain committed to working closely with the industry to help it to face the challenges and to achieve the improvements necessary to win the contracts that are needed.
Despite the current difficulties, I firmly believe that the British shipbuilding and ship repair industry has a future as a modern and dynamic manufacturing sector in today's knowledge-driven economy. There is nothing old-fashioned about shipbuilding. Today's industry is high-tech and requires a strong skills base. In today's industry, modern computer skills are as important as some of the more traditional shipbuilding skills. Modern shipbuilding also calls for a high level of project management and marketing skills.
The key challenges facing the industry—my hon. Friend the Member for Govan articulated them in his speech—are to improve competitive performance and to tackle Korean unfair pricing: and Korean pricing most definitely is unfair.
We are working closely with the industry in both those spheres. We are helping the industry to achieve improved competitiveness through both the national shipbuilding forum and the Scottish shipbuilding forum, which—as my hon. Friend said—were formed in 1998 to facilitate that process. It is worth remembering that, in the whole history of this maritime nation, never before had the industry, the unions and Government sat round the same table, as they have in the forum, created a couple of years ago by my predecessor, now the Minister of State, Foreign and Commonwealth Office, my hon. Friend the Member for Leeds, West (Mr. Battle). The forum is currently implementing all 40 recommendations made by the industry, including enhanced Government financial support for the industry.
Much progress has been made. We have enhanced the shipbuilding intervention fund and the home shipbuilding credit guarantee scheme. In fact, if I had
270WH
not been called to today's debate—I make no complaint about that; this debate is obviously the priority and where I need to be today—I would have visited Appledore, to announce more than £1 million of SIF funding to build a fisheries protection vessel for the Irish navy, plus a further half a million pounds regional selective assistance towards a three-year, £6.5 million dry dock expansion project—which will increase throughput, create at least 230 new jobs and safeguard 82 existing jobs.
Mr. John Burnett:I am truly delighted to hear that news, for which I am very grateful to the Minister. It is greatly important to my constituency. However, may I draw his attention to one of the central thrusts of the comments of the hon. Member for Glasgow, Govan (Mr. Sarwar)? Will the Minister assure the Chamber that all Departments will examine very carefully overseas tenders—particularly overseas tenders—for illegal subsidies?
Mr. Johnson:I am pleased to see the hon. Gentleman in the Chamber, and I thank him for those comments. Much of my speech, which I have limited time to deliver, will deal with the very issue of unfair subsidies.
The Government have supported a number of competitiveness projects that the industry has developed in the forum. We are currently considering proposals by the Shipbuilders and Shiprepairers Association for a programme that will deliver increased competitiveness within the shipbuilding and ship repair industry through productivity improvements and site-specific master classes, which are based on our earlier, highly successful master class programme for the automotive sector. We are also considering the industry's proposals for improving marketing, the main elements of which are the production of an industrywide marketing strategy by a marketing specialist and the creation of a database of shipowners, to help identify potential customers.
We continue to offer the industry significant financial support. As my hon. Friend the Member for Govan said, we pay the shipbuilding intervention fund maximum rate for new ships. We have also brought our financial support schemes into line with our European competitors' practice, in direct response to recommendations made by the shipbuilding forum.
We remain vigilant in seeking to ensure that our European Union competitors do not receive unfair subsidies. When there is hard evidence of such practices, we will take the matter up with the European Commission. However, as we have often said to the industry, there must be firm, not merely anecdotal evidence of such abuse. It is fair to say that no evidence has been produced to suggest that other member states are bending the rules.
We share entirely the industry's concern about unfair trade practices by Korean and other low-cost Asian shipbuilders, as we believe that that is where the major problem lies. We are continuing to make vigorous efforts to address those concerns. At the November 1999 Industry Council, the Council agreed bilateral trade actions to combat Korean unfair trade practices.
Much progress has been made. The Commission has engaged Korea in bilateral talks, which have resulted in an agreement that addresses the EU industry's concerns.

271WH
That is a significant advance in our approach to tackling Korean unfair trading practices. The priority now is to pursue Korea under the agreed minutes, as the agreement is called, as vigorously as possible.
The agreed minutes have extracted Korean commitments on financing yards on a commercial basis only, transparency in accounting rules for shipyards, and pursuit of commercially viable ship prices. The agreement has also secured a key consultation mechanism to take up specific cases of unfair competition. At the 18 May Industry Council—just last Thursday—we achieved a very strong outcome on Korea. The Council directed the Commission to press Korea to implement fully the agreed minutes and called for rapid bilateral consultations with Korea on specific cases of unfair competition. The UK took the lead in advocating that tough approach.
If Korea does not respond effectively, the European Union still holds the possible World Trade Organisation anti-subsidy case in reserve. The Government and the Commission are continuing to work closely with the industry in the preparation of a WTO action, should that be necessary. However, we all hope that the problems caused by Korean unfair competition can be resolved through the agreed minutes. That is the desirable way forward, and we are working hard to make the deal that we have struck with Korea work.
In the longer term, we continue to press for the only viable solution to the anti-competitive practices that my hon. Friend the Member for Govan described: to establish effective international trade disciplines, as embodied in the Organisation for Economic Co-operation and Development shipbuilding agreement. We have taken a leading role in advocating that approach both in the European Union and in the OECD. The problem is that we have been frustrated in
272WH
our efforts by the failure of the United States—which has a special relationship with South Korea—to ratify the 1994 OECD shipbuilding agreement. Nevertheless, we shall continue to pursue our objectives.
My hon. Friend urged us to remain vigilant to unfair subsidies in Europe. As I said, if we receive any hard evidence of such subsidies, the matter will be pursued vehemently. Although it is true that the shipbuilding intervention fund will be abolished at the end of this year, the United Kingdom industry last year gave its complete support to abolition; moreover, the fund will be abolished across Europe. In all the years for which the SIF has been available, it has done very little to help us in world competition. Therefore, although there has been a change of heart in some quarters about SIF abolition, the UK industry agreed to it unanimously. Nevertheless, as my hon. Friend said, we must remain vigilant on the issue of unfair subsidy.
The fundamental need is for the industry to improve its competitiveness. Operating aid has not delivered the improvements in competitiveness that the industry needs. We do not believe that continuation of operating aid is the right approach to dealing with Korean unfair competition.
I am convinced that the British shipbuilding industry does have a future. We shall continue to work closely with the industry to help it meet the tough challenges of the market, boost its competitiveness, improve its success and win new orders. In the summer, my right hon. Friend the Secretary of State for Trade and Industry will convene a high-level meeting of shipyards and unions for that purpose. The Secretaries of State for other Departments with an interest in shipbuilding, including the Scottish Executive, will be invited to attend.
Question put and agreed to.
Adjourned accordingly at Two o'clock.