Westminster Hall Sitting of 18 July 2001

Preamble
[SYLVIA HEAL in the Chair]

Credit Unions
Motion made, and Question proposed, That the sitting be now adjourned.—[Dan Norris.]
9.30 am
Mr. Gareth R. Thomas: I am delighted to introduce the debate on credit unions today and will begin by declaring my membership of the Rainbow Saver credit union.
There has been much focus since the general election on the modernisation of services used by our constituents and the possible role of the private sector in that process. I have long thought that the third sector of the economy—the mutual and co-operative sector—could have a key role in improving those services, on which our constituents rely. Developing the credit union movement throughout the country offers just such a solution. At some time, all our constituents will need a loan and a facility to save. Developing the credit union movement—thus helping to continue the process of reforming the financial services industry—is one way to help support that key service.
I sought today's debate for four reasons. First, I wanted to impress on the House the need to establish a central services organisation to help drive the expansion of the credit union sector. Secondly, it will highlight the case for further deregulation of the rules governing credit unions. Thirdly, I will highlight our disappointment at the lack of effort so far by regional development agencies to expand credit union coverage in their regions. Finally, I believe that the Housing Corporation and key housing associations could be much more proactive in helping to extend access to a credit union.
Credit unions throughout the world have an open and voluntary membership. They are run on the basis of one member, one vote. They cannot discriminate within the terms of their common bond, and they help to create a sense of belonging and responsibility in the communities or the workplaces that they serve. They seek to provide high-quality, affordable, ethical financial services. They distribute any surplus that they create to their members. They provide continuing financial education for their members and support co-operation among co-operatives. The key attraction of credit unions is their affordability. They also encourage self and mutual responsibility—it is impossible to borrow without saving.
The Minister's predecessor attended a conference on financial exclusion before the general election, at which the Consumer Credit Trade Association outlined the cost of a loan from a home credit company. It gave the example of a £400 loan, repayable over 24 weeks. It indicated that a person borrowing that sum would have to pay £160 in interest. In comparison, a credit union is allowed by law a maximum annual percentage rate of only 12.68 per cent., so the loan of £400, again repayable
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over 24 weeks, would incur interest of just £11.62—resulting in a considerable saving when compared with a loan by the home credit company route.
We can consider the impact, too, on a particular community. For example, 500 people, each with a £1,000 loan from a home credit company, would spend £775,000 on credit over a 31-week period. The same loan over a 26-week period with a credit union would cost those 500 people £515,725, resulting in a considerable saving for their community. A local authority making a capital investment of £250,000 to establish a credit union would, within six months, have helped to keep more than £259,000 in its community, and in the pockets of those 500 people. That financial investment by the local authority could make a real improvement to the financial position of local people.
It is arguable that credit unions are, internationally, the most successful co-operative structure on offer. There are more than 37,000 credit unions in more than 85 countries, with more than 100 million members. There are 680 credit unions in England, Scotland and Wales, with almost 300,000 members and assets of almost £200 million. I am told that the growth rate of credit union membership is 10 to 15 per cent. a year. That may sound impressive, but that membership is drawn from a relatively low base. In London, for example, there are only 44 credit unions, with 25,000 members and just £20 million in assets.
Workplace credit unions have been the most successful type in the United Kingdom to date. Nicred, which serves the employees of News International, is one such example. It has 1,000 members and assets of £1.3 million. The London Taxi Drivers Association is perhaps the most famous credit union in London. It has existed for 22 years and is one of the oldest credit unions in Britain, with more than 2,100 members and £3 million in assets. It has been proved to offer an excellent service to taxi drivers, helping them to obtain loans to undertake repairs to keep their taxis on the road. Taxi drivers can also use loans to pay for insurance.
Credit unions that serve the boroughs of Newham and Lewisham are being explored. Three existing credit unions in Lewisham would have to merge, and anyone who works or lives in that borough could join and benefit from the service provided by a single credit union.
The new work-live model for credit union development has perhaps been best demonstrated by the Southwark credit union. That credit union, which is also long established, began life serving the employees of Southwark council. It expanded two years ago to provide services to the 250,000 people who live in the Southwark borough.
Another example of that model for credit union development can be found in the neighbouring borough of Tower Hamlets. A brand new community credit union serves the 250,000 people who live or work in the borough, and the staff of the Financial Services Authority, which is based in Canary wharf, could join it. The Tower Hamlets credit union has produced bilingual publicity and information material to address the language difficulties that the substantial number of Bengali speakers in the borough face. It has also ensured that volunteers who speak Bengali help to provide the services that the credit union offers. That is an example

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of a credit union that has provided—because of its size, local responsiveness and position in the community—a specific solution to address the needs of its community.
Credit unions provide access to affordable credit. They promote a regular savings culture that embraces even small deposits and they actively work to improve the financial literacy of their members through educational programmes. Credit unions are based around their members' financial needs. Some members will need a savings facility and others will need to borrow. Credit unions help to match members' savings needs to other members' credit needs. As credit unions offer local community-based financial services that are owned and controlled by the people who directly benefit from them, they provide a service that meets their members' needs, not the requirements of private shareholders or external stakeholders.
Since the publication of a research report in 1999 by Liverpool John Moores university, credit unions have sought to strengthen and modernise themselves. They have merged, opened high street premises, employed more staff and actively sought to improve their image.
Credit unions now provide a professional service. They have formed partnerships with other organisations, such as local housing associations, trade unions or local authorities. Leeds City credit union has 8,000 members, who are mainly public sector employees, and it provides services to more than 1 million people who live or work in Leeds. Telford and Wrekin council offers a similar service.
The Social Enterprise London project, now in its third and final year, is funded by the single regeneration budget, and has sought to equip credit unions in London with the professional tools and marketing material that they need in order to expand. We need more local authority initiatives, such as those in Tower Hamlets and Southwark, to make credit union membership available to everyone who lives or works in London.
Other examples of strategic programmes specific to particular areas and designed to strengthen credit unions include the work done by the National Assembly for Wales to extend credit union coverage to all the people of Wales. The Scottish Executive are developing a Scottish credit union partnership to deliver a strategic plan for credit union development in Scotland, and to that end launched a document called "Unlocking the Potential" in March.
Well financed strategic initiatives in London, Scotland and Wales demonstrate what a sustainable credit union can achieve if it has sufficient capital. Credit unions should receive capital from direct funding. Recent developments in Lewisham, Tower Hamlets and Telford have shown that it costs about £300,000 to capitalise a credit union—to provide staff, premises, information technology and operational systems—so that it can provide financial services to the community that it serves.
Once a credit union is properly established, it requires no further financial support from outside sources. Members of the Scottish Parliament have demonstrated both political and actual support for credit unions; all MSPs can now join Capital Credit Union, which has
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7,000 members and assets worth £5 million. It pays a 4 per cent. dividend on savings. Members of the National Assembly for Wales and the Assembly's staff are also seeking to join or establish a credit union. Members of Parliament might wish to enjoy the benefits conferred on Scottish and Welsh colleagues—and on American congressmen and senators, who also have a credit union. The leading credit union trade association has approached the House authorities; perhaps the Minister will shed light on how that initiative is progressing.
Credit unions provide a powerful model for the delivery of core financial services. In the United Kingdom, however, it is still difficult to gain access to a credit union. There has been a series of problems, some of which remain to be addressed. When our party came to power in 1997, a series of regulatory issues needed attention in order to make credit unions more attractive. We needed to develop a central finance facility and, crucially, the Government needed the will to expand the credit union sector.
The Government have taken many positive steps since they came to power. From 1 July 2002, the Financial Services Authority will regulate credit unions as well as the other financial services industry players—the banks and building societies. Credit unions will have access to the same compensation scheme as those organisations, so that money deposited in a credit union will be as safe as that in a bank or building society.
The credit unions are concerned about the nature of the FSA's regime, because future regulations must be affordable and proportionate, and should provide safety for credit union members, while enabling growth and an increased range of services. To date, the credit union movement has had a positive response to the FSA's attitude. I hope that the FSA continues to work in partnership with the credit union movement to implement the regulations governing credit unions.
A central services organisation is needed to help to drive the expansion of the credit union sector. A visible demonstration of the Government's political will to establish such a body would be welcome. The taskforce on credit unions recommended a central services organisation. That taskforce was established by my right hon. Friend the Secretary of State for Scotland during her time as Economic Secretary to the Treasury. The Government accepted that recommendation, and it has been highlighted consistently in Government policy.
Today, I hope that we shall discover the time scale for the establishment of such an organisation, its financing, and an outline of its possible work programme. A central services organisation could be the Government's way to provide national strategic support for the credit union movement, which would result in a larger and stronger credit union sector. That could provide credit unions with a central finance facility, which would enable them to pool their liquidity to get a better return than they do currently. Moreover, such an organisation could make arrangements with the banks to ensure a lender of last resort for the credit union. It could focus on helping credit unions to combat financial exclusion through a challenge fund, so that they could contribute to financial inclusion. It could also support credit union development, for training and for business planning.

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The Treasury taskforce's idea of a central services organisation did not just emerge out of thin air. In the international credit union movement, there are several similar bodies. Canadian Central is the Canadian equivalent of a central services organisation. Its priorities for the next 12 months include: developing the capability of credit unions to deal with e-commerce; launching a national branding and awareness campaign for credit unions; developing the liquidity efficiency of the Canadian credit union movement; and looking for further efficiencies in the handling of payments and clearing. A similar body in Australia provides business services to credit unions, including information technology support, financial management and planning. New Zealand has a central banking fund for the credit union sector. Even in South Africa, where the credit union movement is smaller than in Britain, a central finance facility has been established; its main objective is to put money back into credit unions.
Throughout the world, the credit union sector benefits from central services organisations. Such an organisation, providing expertise and resources for credit unions to rely on, would clearly be an enormous benefit. I hope that my hon. Friend will outline whether the Government intend to deregulate credit unions further.
Three particular changes would be welcome. First, the ability to declare a dividend more often than just annually and to offer variable dividend rates on different savings accounts would be beneficial. That would enable credit unions to attract more savers and thus meet other members' credit needs, and it would specifically help credit unions to meet the new liquidity requirements set by the Financial Services Authority.
The second key change would be to allow borrowing from external sources, such as housing associations or local authorities. Borrowing from sources such as other banks and credit unions is currently allowed, but additional flexibility would benefit the credit union sector and enable it to raise the capital that it needs. The regulators require new credit unions to raise that capital, as has been demonstrated by the practicalities of getting large projects such as the Lewisham and Tower Hamlets credit unions off the ground. Both have required approximately £300,000.
The final welcome change would be the ability of credit unions to charge for additional services—to pay bills to utility companies, for example. I understand that the consultation period for deregulatory change usually takes a year. That one-year period usually includes the time for a consultation document to be issued, and a three-month consultation period to allow responses, which have to be collated and assessed. Only then can a deregulation order be drafted and come into force.
The Financial Services Authority is due to increase its responsibilities to credit unions in July 2002. It would make particular sense, therefore, to allow the deregulation of the rules that apply to credit unions in those three areas in line with that time scale. I hope that my hon. Friend will outline her view on that, and say whether the Government will move in that direction. I also hope that she will be able to give a clearer steer to regional development authorities, so that they work in partnership with housing associations, the newly established central services organisation and local authorities to increase access to credit unions.
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I was surprised that no mention was made of credit unions in the economic strategy that was published by the London Development Agency. There was, it is true, mention of the need to develop the wider social economy in London. Mention was also made of the excellent Social Enterprise London, to which I referred earlier, which has been doing work with credit unions. Given the need to expand access to available financial services in many London communities, the absence of a specific commitment to develop the credit union is disappointing.
The London Development Agency and other regional development agencies could provide a clear strategic lead to develop credit unions in their regions. London boroughs or other local authorities could then take up that lead. Such a strategy could include encouraging the boroughs, other partners and local employers to become involved in establishing and developing credit unions at a rate of knots. The London Development Agency could have a role in ensuring that any funds or assistance for credit unions are applied in an appropriately sustainable way. In London, for example, who could better lead approaches to the more traditional financial services community—the banks, the insurance companies, the pension funds and the building societies—to find and secure resources to help establish credit unions?
Mr. David Drew: I apologise for missing the start of my hon. Friend's remarks. I was at the opening service.
Does he also agree that there is a role for the universal bank in relation to the postal network? In rural areas there is no better way for people to have access to savings facilities. Could the Government explore that angle in opening up the real possibilities for credit unions?
Mr. Thomas: My hon. Friend makes an excellent point. The universal bank, once established, could help credit unions to provide further services or access to their members.
There is a need for the Housing Corporation and local housing associations to be more active in helping credit unions to develop. Richard Newcombe, writing for the Housing Corporation in March 2001, emphasised that direct attempts by housing associations to set up credit unions had generally been unsuccessful and that, given the need for a more professional and more heavily resourced set-up, housing associations were unlikely to be the key appropriate agency. Why cannot housing associations, in partnership with a central services organisation or with regional development agencies, be part of a coherent strategy to develop credit union coverage in their area that their tenants can afford and that is properly thought through?
The credit union movement offers excellent services around the country. Those who are lucky enough to have access to a credit union in this country are generally offered an excellent service. People are enthusiastic about the services that credit unions can provide. The tragedy in this country at the moment is that too few people have access to a credit union. The Government have made a series of positive steps towards developing credit union coverage, but I hope that my hon. Friend

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the Minister will give that development a further sharp push so that, by the end of our second or third term, there will be far greater coverage of credit unions throughout Britain.
9.54 am
Mr. Paul Truswell: I congratulate my hon. Friend the Member for Harrow, West (Mr. Thomas). He is establishing quite a reputation as an assiduous advocate for the credit union movement. I declare an interest as a founder member of what is now Leeds City Credit Union Ltd.
I became involved with credit unions as a Leeds city councillor in the mid-1980s, when I was asked to chair a working group to consider how the city council could promote the development of credit unions in the city. We made two recommendations: first, that we should provide financial and other support to council employees to enable them to set up their own credit union; and, secondly, that we should appoint a credit union development worker to support the establishment of credit unions, particularly in deprived parts of Leeds.
We were fortunate to have an extremely supportive leader, whom we now know and love as my hon. Friend the Member for Leeds, East (Mr. Mudie), and we pursued both initiatives. As my hon. Friend the Member for Harrow, West said, the first initiative has been a huge success, but the second—the development of credit unions in small deprived communities—has had a more chequered history. I shall return to that.
The great advantage of credit unions is in respect of people in deprived areas who have difficulty accessing credit and who all too often, especially in cities such as Leeds, fall victim to loan sharks. The credit union for Leeds city council employees was registered in August 1987 and it grew slowly but steadily for about four years. Since 1991, its membership has been sustained and currently stands at 9,000 adult members and 600 junior members. The latter group is the result of an extension of the union's common bond.
Leeds City credit union is the largest in England and Wales and the third largest in the United Kingdom behind two Scottish credit unions—I do not know whether the affinity of Yorkshire and Scottish people with their purses, wallets and sporrans has anything to do with that development or whether it is pure coincidence.
The common bond of the Leeds City credit union was changed in 1996 to reflect the fact that compulsory competitive tendering and the removal of further education colleges from city council control had changed the nature of the people who had worked for the city council. That is one aspect of the way in which that credit union has developed organically and responded to changes in the needs of its members and potential members. As I said, membership was extended in 1996 to include families and junior members, which helped to boost the union's size. To reflect the changes in its role, its name was changed to the Leeds City Credit Union Ltd.
More recently, the credit union was granted a further extension to its common bond to include anyone living and working in the city of Leeds. That crucial
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development gives the union a target audience of about 800,000 people and makes it, I think, the largest common bond in the country by far. With the assistance of core grant funding from the city council, the union employs a development manager to take forward citywide expansion of credit unions.
In December 1999, the union assumed responsibility for the support of other credit unions in Leeds. The new support officer conducted an extensive review of how smaller community and church-based credit unions were faring in the city. Unfortunately, it was found that some unions had great difficulties. They had the usual difficulties of finding a sufficient number of people to form the board to carry out the nuts-and-bolts mechanics of running the union. The unions also had difficulty generating a sufficient number of members to provide the assets that are essential if they are to provide the services that my hon. Friend so graphically described. It was also obvious that, although Leeds was a successful pioneer in developing credit unions, far too many people there still lacked access to the services that such a union can provide.
Five existing credit unions merged with the Leeds City credit union, but it was not a takeover or financial aggrandisement. The situation was more like that of an adoptive parent providing support and succour to orphans of a storm. It reflects what has happened in many other parts of the world. My hon. Friend demonstrated clearly how credit unions have caught on and developed over decades in other countries. There is absolutely no reason why that cannot happen in this country, particularly if the Government support the credit union movement.
I have tried to paint a picture of the experience in Leeds. It is fair to say that Leeds has been an effective trailblazer in promoting credit union development. As such, the lessons that have been learned there and the views of the people who are involved in running the credit union in Leeds are worthy of serious consideration. I do not intend to go into great detail; my hon. Friend the Member for Harrow, West made the case coherently and cogently, and it does not need repetition. However, as someone who has been involved with the credit union movement for many years, I associate myself with everything that he said in support of the measures that are needed, particularly on the part of the Government, to ensure that credit unions develop more effectively.
I have had discussions with people who are involved more closely and in more detail than I am with the Leeds credit union to ascertain what they regard as the major priorities that will enable the movement, not only in Leeds but generally, to progress further, reach out to more people and become even more relevant to potential members. As such, my hon. Friend's comments came as no surprise: first on the list is the establishment of a central services organisation as recommended in the Goodwin report. In particular, a central finance facility must be established to allow credit unions to pool their resources. I join my hon. Friend in pressing the Minister for an indication as to how speedily she anticipates that process taking place.
Along with everyone associated with credit unions in Leeds, I accept that organisations, particularly financial organisations, must walk before they can run. To some extent, Leeds is an exception—it is already up and

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running. However, established credit unions such as the one in Leeds should be allowed to broaden the scope of their activities to make them even more attractive and relevant to existing and potential members. They could be given the ability to offer tax-free savings accounts—the son or daughter, one might say, of individual savings accounts. They could be given opportunities in the development of the new baby bond accounts, as they are colloquially called. Credit unions could be allowed to offer fixed-term deposit savings accounts to help them generate more share capital, and approved credit unions—perhaps this is a very ambitious suggestion—could be given permission to conduct mortgage business.
As my hon. Friend said, the Government could do a great deal towards generating enthusiasm for, and spreading the word about, credit unions and, where necessary, directly or indirectly providing some of the essential pump priming that is necessary to get them up and running. The experience of Leeds is worthy of wider promulgation. Organisations such as the Association of British Credit Unions do a fantastic job, but the more organisations that recognise the work of credit unions and encourage their growth by exhortation or, perhaps, with pump-priming cash, the better things will be.
The intervention of my hon. Friend the Member for Stroud (Mr. Drew) touched briefly on the part that credit unions can play in the development of the universal bank, which I endorse from my knowledge of the Leeds experience. Broadening out the evangelical approach—I hesitate to call it that—there may be ways of instigating discussions and learning about credit unions in schools; that would be a helpful development.
I hope that my hon. Friend the Minister will take all of those ideas on board but, in particular, will, pursue with some urgency the issue of a Central Services Organisation. The Leeds experience clearly demonstrates that credit unions work, but support from the Government and other agencies is needed to make them work even better and to extend their services to more of our fellow citizens.
10.4 am
Mr. Andrew Love: I too congratulate my hon. Friend the Member for Harrow, West (Mr. Thomas) on securing the debate. We all recognise his expertise and commitment to the credit union movement. Like him, I should declare my membership of a credit union and the fact that I benefit from a small loan at a low interest rate.
Credit unions are unique community-based financial services organisations that are owned and controlled by their members. Perhaps most importantly, they foster both self-help and thrift. They share a community and collective responsibility in the form of a common bond that brings people together for their mutual benefit. There are two common misconceptions about the credit union movement. First, we must understand that their function is primarily to promote thrift and savings. People often talk about the attractions of low interest rates, certainly for those who suffer from being financially excluded from the marketplace. However, people must save before they may take out a loan. Secondly, credit unions are prudential financial institutions, not a social service or an anti-poverty strategy.
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Credit unions did not originate in this country. They came primarily with immigrants from Ireland and the Caribbean, and it was some time before there was a legal framework, which eventually emerged with the Credit Unions Act 1979. Since then, we have seen steady, if modest, growth, which has been disappointing. However, growth has increased since the 1997 election, and I was pleased to see that there has been a 30 per cent. increase in membership since then, which shows some progress at least. The penetration of the movement is still insignificant compared with that in some other countries. In Ireland, more than 40 per cent. of the population are members of credit unions, while the figure for Canada is 15 per cent. Sadly, Britain does not compare to them in any way, with credit union membership totalling only 1 per cent. of the population.
There are many reasons for those figures, not least the contribution of other mutual financial services organisations, which have traditionally attracted the savings of the people who would most benefit from credit union membership. Certain factors are important in the context of the growth of credit unions and their attempt to address financial and social exclusion. The first reason is the fragmentation of the leadership of the credit union movement. Since its inception, there have been disagreements about its role, ethos, objectives and even its values. Many believe that small is beautiful and that growth in itself is almost a bad word, while others would like the movement to expand and develop.
We have ended up with a disparate movement, with some large and expanding credit unions that offer a wide range of services and other smaller community credit unions that seem to take pride in not expanding or being able to offer so much. That has bedevilled the movement's ability to act in unison and, perhaps more importantly, to speak with one voice. I therefore strongly support the recommendations of the National Consumer Council, the Treasury taskforce and the financial services organisations that there should be one national representative body. The movement needs to consider that carefully if it is to respond to the need to develop and expand the movement.
The restricted legal framework in which credit unions are currently set has already been mentioned. There have been two recent deregulations measures: the first was in 1996 and the second will be implemented mainly through the Financial Services and Markets Act 2000. Nevertheless, we still have the most restrictive regime in the world for credit unions. If they are to grow we must be able to provide a broader range of savings, lending and financial services to compete with the high street organisations. Of course, even if we have those changes they may not lead to any spectacular growth along the lines of what has happened in other countries, but they would boost both the membership and, perhaps more importantly, the asset base of the credit union movement. I certainly endorse the deregulation measures that have been carried out, in particular those increasing the flexibility of the common bond. That is an area where further deregulation could assist growth.
I should like briefly to comment on a couple of areas that are critically important if credit unions are to grow and develop and play a part in addressing social and financial exclusions—which the Government are seeking to do. First, both previous speakers mentioned the need for a central services organisation, which will

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be the main body that could sort out some of the shortcomings of the credit union movement. There is a need for more professional provision of services. All reports on the movement have commented on the need for premises, qualified staff, management skills and new technology, or back office services, as they are commonly known. Everyone needs to work together. Growth is extremely difficult to achieve. A centrally-based organisation to foster that growth, along with the member organisations and the development agencies, would go a long way to sustain and perhaps increase the recent growth.
Small and community-based credit unions face considerable difficulties in this respect. That was commented upon by both the taskforce and the recent report by John Moores university. Many credit unions are far too small in membership. They lack the dynamism to grow. They have reached a plateau and are not really going anywhere. We need to intervene to assist them to develop the services that their communities need. I am greatly attracted to the idea of a challenge fund set up for CSO to help it tackle some of the problems of community credit unions.
The CSO is an ambitious business plan and it is on an ambitious time scale. If that is to be implemented, as I think would be the Government's wish, it needs the Government's support and assistance. I hope that the Minister will tell us what measures she intends to take to get the CSO up and running.
The second issue is further deregulation. As I have already mentioned, the current framework is perhaps the most restrictive in the world. I support the Treasury's decision to bring credit unions within the regulatory regime under the supervision of the Financial Services Authority. That is the right way forward; it provides a compensation scheme for depositors and an ombudsman scheme for those who may feel they have been hard done by in their dealings with a credit union. I hope that will increase consumer confidence and promote greater trust in credit unions. We must ensure that the regulatory regime is robust, as that will offer an opportunity further to deregulate the legislative regime in which the credit unions operate.
Credit unions are worried about being supervised by the Financial Services Authority because of concerns about affordability and about having a regime that is proportionate to the risks that are faced by their membership. However, I am pleased that the FSA is responding to both those concerns, so matters can proceed. If the problems in relation to regulation have been solved, it should give credit unions the opportunity to develop the wider range of affordable and accessible services that are necessary if credit unions are to grow and respond to the issue of financial exclusion. Further deregulation measures are being considered, which I very much welcome, because it will help to stimulate future growth.
With FSA regulation kicking in in July 2002, it would be appropriate and sensible, if there are to be further deregulation measures, to consult on the issue and for implementation to take place at the same time so that when the credit union movement is taken under the wing
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of the FSA, it is also encouraged to develop a wider range of services. That would produce a positive response to the movement.
Credit unions are not the only solution to financial or social exclusion but they are the only self-help, cooperatively owned and run financial organisations that promote thrift and savings. Credit unions present a unique opportunity to end financial exclusion and provide affordable and appropriate financial services, but they need Government support and help to achieve that aim.
I look forward to the Minister's response to what I have said this morning.
10.18 am
Mr. Adrian Bailey: I join my hon. Friends in congratulating my hon. Friend the Member for Harrow, West (Mr. Thomas) on securing the debate, and endorse many of the arguments that have been advanced in support of my hon. Friend.
I want to pick up one or two points made by my hon. Friend the Member for Edmonton (Mr. Love) about the nature of a credit union. He said that it was not a financial social service but rather a financial institution designed to encourage thrift and savings. The perception that credit unions are a social service has been extremely damaging to the movement's development.
Before becoming a Member of Parliament, I was a member of the Sandwell Credit Union Development Agency, an organisation introduced in the borough of Sandwell with the specific objective of promoting the development of individual credit unions. It may be a reflection on the success—or lack of it—of that body that I have never been a member of a credit union. The lack of success of credit unions in this area highlights the need for our debate and explains why we are asking the Treasury for changes.
Sandwell is a traditional black country inner-city area with relatively low incomes, low car ownership—only 50 per cent.—and relatively low membership of any financial institutions. The Government's attempts to promote social and financial inclusion should be targeted to make savings and thrift part of a wider culture of regeneration.
The financial deficit has been aggravated in recent years by the closure of bank and post office branches, which is a big issue in urban as well as rural areas. Combined with low car ownership, it makes it difficult for some people to gain ready access to financial services.
I mentioned earlier that credit unions are not a financial social service. However, as my hon. Friend the Member for Harrow, West said, they are able to take in savings from people not targeted by the major financial institutions and can offer loans at a much cheaper rate. They are by definition appropriate for people on low incomes in urban areas, so they have a potentially important role to play in such areas.
The Government are anxious to promote the culture of financial management among lower income people. On the surface, credit unions would seem an ideal vehicle to promote such a culture, so why are only 300,000 people in this country members of a credit

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union? In the United States 25 per cent., in Ireland 50 per cent. and in some Caribbean countries 70 per cent. of the population are members.
David Taylor: My hon. Friend makes a valuable point and I apologise to him for not being present at the start of the debate. Ireland has been very successful. Our credit union in North-West Leicestershire—I declare an interest as a member of the Money Tree credit union—has been twinned with Ballinasloe credit union in southern Ireland. Picking up the threads of its ideas and suggestions has led to a new lease of life and a new period of expansion for our credit union. Perhaps that arrangement could be replicated in other areas.
Mr. Bailey: My hon. Friend makes a valuable suggestion, which should help us to develop credit union policy further. It has sometimes been difficult for other areas to develop the kind of policies that have proved appropriate for North-West Leicestershire.
I was commenting on the small number of people who are members of credit unions in this country. Given the enormous potential for development, it is obvious that that lack of growth is the result of cultural, financial and other obstacles. I hope that the Government will tell us how they will break down those obstacles.
As other hon. Members have done, I give credit for the progress that has been made. Changes in regulation enabling the relaxation of the common bond have undoubtedly been a major step in that progress. Prior to that, work-based credit unions in this country had most members—people with a secure income—and facilities to carry out the necessary financial functions; community-based credit unions had relatively few members. Extending the common bond has made it much easier to have larger, geographically based credit unions that can incorporate a far wider section of the community and far wider income bands. That is a positive development.
However, there are three obstacles. First, there is a lack of trained and confident personnel who are capable of understanding the credit union movement, promoting it and carrying out its day-to-day administration. During my years as a member of the Sandwell Credit Union Development Agency, we made strenuous efforts to find volunteers in local communities who would be prepared to put in the time to undergo training. We found some.
The poor public perception of credit unions and the lack of confidence in certain low-income and traditionally deprived communities are undoubtedly major obstacles. Tying credit unions into the regulatory framework of the Financial Services Authority and having a central services organisation that is highly professional in its approach to training could play an important role in removing one of the main cultural and institutional obstacles to their development.
Another obstacle is the status of credit unions as a social service geared only at poor people. The irony is that if one is on a low income, saving is much more difficult and one is less likely to choose as a safe haven for hard-won savings an institution that appears to be just a social service and does not have the safety and regulatory framework of an established financial
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institution. Credit unions have therefore been missing some of the people who might benefit most from them. That obstacle could be removed by incorporating credit unions into the regulatory framework and by having a training and promotional body for them.
Mr. Drew: Does my hon. Friend accept that one of the biggest difficulties with training is the amount of time that credit union staff—who are volunteers—are expected to give up? Anything that can be done to support people during their training period is important. Could my hon. Friend comment on that?
Mr. Bailey: My hon. Friend makes an important point. As my hon. Friend the Member for Edmonton said, some £300,000 of investment in the financial infrastructure is needed to get a credit union going. My own experience substantiates that. One must have appropriate premises and staff to generate the image of professionalism necessary to encourage people to invest their savings.
That brings me to my final point, which is the difficulty that credit unions have with a lack of premises and inadequate security. The somewhat romantic notion promoted by some of the credit union evangelists is of people starting a credit union in someone's front room, with volunteers totting up the money, banking it and so on. In my experience, that approach is a great deterrent to those who want to invest their money. Potential investors want to see proper offices, proper security and properly trained staff, and the Government or other financial institutions need to invest in the system to guarantee that they are available.
For those reasons, I support the move for a central services organisation. The credit union movement needs to be tied into the existing financial structure so that those who might benefit from its services have confidence in it. It offers a distinctive additional means of providing financial services to people who otherwise would not have access to them.
David Taylor: I am interested to hear my hon. Friend's argument. I accept that the minimum number of people required in a credit union to justify a shop-front approach of the sort that he recommends and to ensure its viability is quite high. Will he comment on the possibilities opened up by the era of the internet, although I acknowledge that a good number of those who may benefit from credit unions may not have ready access to the internet?
Mr. Bailey: My hon. Friend raises a valuable point. Promoting the internet should be part of the package of training, promotion and investment that the Government and allied financial institutions need to introduce, although it would not be accorded the highest priority in inner-city areas such as mine. However, there must be considerable potential in that direction in the long term.
The institution of credit unions potentially conforms to a number of Government objectives: first, it deals with financial exclusion; secondly, it promotes thrift and good financial planning—certainly, the proposed baby bonds would be well within that sort of financial framework; and, thirdly, it has a potential for

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community and urban regeneration. By working together to save and invest in the locality, local communities have the potential for expanding community activity, which benefits the area socially and financially.
10.33 am
Mr. David Drew: I shall keep my remarks deliberately short, so that the Opposition Front-Bench Member and my hon. Friend the Economic Secretary have the chance to make a good summing up. I shall concentrate on one perspective.
Like other hon. Members, I declare an interest: I am a founder member of the Stroud credit union. I want to speak about the difficulties of running a credit union in a rural area. Although I agree with everything that has been said by my hon. Friends, they represent more urban parts of the country. It is good to see my hon. Friend the Member for North-West Leicestershire (David Taylor) here; however, mine is a slightly different perspective.
The key problem in rural areas is access. Important though it is to talk about bulking up numbers and about increasing the financial base of credit unions and the services that they provide, in rural areas the key issue as regards the common bond is maintaining the local strength of credit unions by making them as accessible as possible while keeping the financial position as sound as possible. That is why I want to reiterate a point that I made in an intervention on my hon. Friend the Member for Harrow, West (Mr. Thomas), who did an excellent job of explaining the value of credit unions. There is a synergy with the opening up of the universal bank in the postal system. As part of the negotiations on that, we could—I am looking directly at the Minister—ask the postal network to consider making available sub-post offices, particularly in rural Britain but also, as my hon. Friend the Member for West Bromwich, West (Mr. Bailey) said, in urban Britain. If we make sub-post offices places where people can access savings and if we open up the network—as I am sure we will—so that we keep sub-post offices open and make them useful for people, the need to be able to access savings from them will be all too obvious.
David Taylor: Does my hon. Friend support my request to the Minister carefully to consider what is happening in Leicestershire? The pilot scheme for post offices—the linking in of the network in the county's numerous post offices—could be twinned with the potential for expansion of, and access to, credit unions. That is true in particular of rural areas and not least of the monetary union in the town of Coalville.
Mr. Drew: I thank my hon. Friend, because he has taken my words from me. He gives an excellent example. Given all the initiatives in the postal network in Leicestershire, we could, with a push, have a win-win situation. The Government are the only people who can provide a real push.
I ask the Minister, not necessarily in direct response to today's debate and to my pleadings, but certainly over the course of developments, to understand, along
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with her colleagues in the Department of Trade and Industry, which will obviously be the lead Ministry, that the issue could open up. So many advantages can be gained by giving people access through the universal bank to the savings network that I do not need to keep going on about it. However, unless someone provides the drive and a reason to act, we shall not take that opportunity and we shall all rue the day when we failed to do so.
10.38 am
Mr. Howard Flight: May I add my congratulations to those already given to the hon. Member for Harrow, West (Mr. Thomas) on securing this debate on an important subject? I also note the valuable contributions made by the hon. Members for Pudsey (Mr. Truswell), for Edmonton (Mr. Love), for West Bromwich, West (Mr. Bailey) and for Stroud (Mr. Drew).
The objective of the debate has been to push the Government to get a move on with establishing a central services organisation, which was proposed four years ago. I cannot resist noting that I have lived through three Economic Secretaries to the Treasury waxing lyrical about how credit unions would solve the problem of social exclusion, but little has happened. Something has been made of the legislative changes, which are necessary and arguably just as important as a central services organisation. Those changes would make credit unions much more useable and viable financial services providers than they are at present.
The objectives of a central services body are perfectly sensible. The pooling of liquidity management is important if credit unions are to be competitive and professionally run. There is a need to train people in an area where there are many potential problems. The provision of automated teller machine cards for the payment of bills will be important. The legislative changes would involve arrangements to pay interest—called dividends in credit unions—in a regular way, analogous with other bodies, and to permit credit unions to borrow from other bodies so that they could constitute capital by subordinated loan. A number of those changes will be necessary when the new regulatory regimes begin this time next year. I understand that some credit unions cannot start operating until those changes have happened.
That all seems very sensible, and I congratulate the Association of British Credit Unions and Shaun Spiers, its chief executive, on the vision and leadership that they have provided. The Conservative party supports mutuals, as it supports diversification and a wide choice of financial services providers. Over the years, many of us have supported friendly societies and mutual building societies. However, so far, credit unions are immaterial in a wider UK context. With assets of only £180 million, they are tiny—as has been observed, only 0.4 per cent. of the population belong to them, compared with 25 per cent. in the United States and 50 per cent. in Ireland. The main reason is not just that credit unions are a fairly recent import from Ireland and the Caribbean, but that we already have building societies and friendly societies. Let us not forget our other mutuals when we wax keen on this new form.
Credit unions that have succeeded materially, both here and overseas, are those that are tied in with employment, particularly those provided by large

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employers—British Airways is the main example, although Leeds, Birmingham and the taxi drivers' credit unions are employment-oriented. They are a low-cost and convenient benefit for an employer to offer to staff. If the credit union movement takes off in this country, as I think it will, that will be the main area in which it will succeed.
However, the movement is not the solution to the lack of financial services in deprived areas. It will become—as it has substantially in the United States—predominantly a middle-class movement. There is nothing wrong with that, or with the fact that it can help in deprived areas, as it plans to do in Leeds and Tower Hamlets, but it is much more important, as has been said, to keep post offices open. Friendly societies have an important role and banks could, too, if they would return to areas from which they have withdrawn. Worthy though the cause of credit unions is, it is mistaken to think that they provide a solution in deprived areas.
That brings me to the central services organisation. I assume that the Government have dragged their feet because it is difficult to justify providing taxpayers' money for one type of mutual and not for others. Why should friendly societies or even the many worthy remaining building societies not have similar funding? To the extent that taxpayers' money is to be made available, it should, if at all possible in the long-term, be on a self-liquidating basis—potentially by loan to be repaid by the movement, rather than by the provision of a grant.
In conclusion, the aims are excellent; the Conservative party supports mutuals and I am pleased to see some oomph behind the credit union movement.
David Taylor: If the Conservative party is as supportive of mutuals as the hon. Gentleman says, why did it stand by and let them be targeted by corporate raiders and others, the result of which is that the mutual sector has been enfeebled during the past 10 to 15 years?
Mr. Flight: We are not debating building societies. As the hon. Gentleman knows, a protection against that problem was built into the original proposals, but it proved not to work on two scores. When building societies and mutuals were liberalised, the intent was to create a fair and level playing field. However, members' ballots came to be important and building society management noted them when it need not have done. Also, methods were used to get round paying out to people who had not been members for long, some of which have been changed. The Conservative party intended to create a fair and level playing field, while offering choice. What developed was not caused by the then Government.
The regulatory changes to credit unions have mainly been sensible, and the FSA has responded to concerns that they would be over-tight on liquidity requirements. I do not see how the arrangements for money laundering and credit unions can be any different from those for any other financial intermediary. That presents a problem in deprived areas, which are essentially cash economies. I do not know how that circle will be squared. There will be a major issue about whether credit unions can be helped by larger parentages, such as Tower Hamlets, to achieve success in providing services in deprived areas.
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Credit unions will grow enormously, but people should not be blind to the fact that most of their success is likely to be related to employment, as in the United States. They will probably provide services to the great rump of people in the middle of society, and will not be the key solution to increasing financial services in deprived areas.
10.47 am
The Economic Secretary to the Treasury (Ruth Kelly): I am grateful to my hon. Friend the Member for Harrow, West (Mr. Thomas) for securing the debate. He and other hon. Members aired issues of real importance to the credit union movement, to the people who benefit and to others who could benefit from the services that credit unions offer. He is an extremely active champion of credit unions and their work, and I hope to work closely with him and other interested hon. Members on the issues in future.
Credit unions have an important role to play in the campaign to reduce financial exclusion. They make a real difference to the people and the communities that they serve, not only by providing financial services to which communities would often otherwise have limited access, but through their ethos of self-help and thrift, which plays a valuable role in educating people about managing their finances, bringing greater independence and security.
I assure hon. Members that the Government share their support for credit unions, and their hopes for a large and flourishing credit union movement in our country. The Government have already been involved in several initiatives to help credit unions grow to realise their full potential in the United Kingdom, and we shall continue to support their further development.
There are more than 700 credit unions in Britain, with around 300,000 members and assets of about £200 million. As several hon. Members have pointed out, the development of credit unions in the UK is much smaller than in other countries. Fewer than 1 per cent. of the population are members of them, compared with around 20 per cent. in Australia, 30 per cent. in the United States and 45 per cent. in Ireland. The small size of the membership of the credit union movement in this country has arisen for several reasons. It is partly because it is relatively new here. Nevertheless, it is important and clearly has the potential to grow.
With that growth in mind, the Treasury set up the credit unions taskforce in July 1998, bringing together stakeholders from the credit union movement, along with those from the wider financial services community. The taskforce was asked to explore ways in which the banks and building societies could work more closely with credit unions to increase their effectiveness. It also looked at ways of expanding the range of services on offer from credit unions, and expanding the credit union movement as a whole.
The taskforce recommended the establishment of a central services organisation, or CSO, which in addition to offering the facilities to manage resources, would create a central pool of expertise on which credit unions could draw. The taskforce also felt that such an organisation would be a straightforward way for the banks and building societies to play their part in helping develop credit unions as complementary institutions in the financial services sector. I shall say more about that later in my speech.

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The Government's approach to neighbourhood renewal and social inclusion acknowledges the central importance of improving access to financial services. The social exclusion unit was set up by the Prime Minister to develop integrated and sustainable approaches to the network of problems faced by people in our most deprived neighbourhoods. The SEU established 18 policy action teams—PATs—bringing experts together with people living and working in deprived areas, to take forward an intensive programme of policy development. One of those action teams, sponsored by the Treasury, focused on issues relating to financial exclusion.
That team reported towards the end of 1999, making 44 recommendations under five headings: credit unions, banking, insurance, regulation and education. The team's recommendations reflect the complexity of the issues that make up financial exclusion, and it suggested a number of joined-up solutions. It called on central and local government, the banking and insurance industry and many other organisations to work together to deliver greater financial inclusion.
In January 2001, the SEU published a report that audited progress against the recommendations, and I am pleased to say that we are making significant progress on all the report's key recommendations, including those covering credit unions. For example, the Local Government Association has issued a good practice guide to all local authorities concentrating on the development of sustainable credit unions. It is now up to local authorities to act on the guidance, but the Department for Transport, Local Government and the Regions is continuing to lend support in what is, of course, an on-going process.
The Treasury's role is to help create the right conditions for credit unions to expand. Earlier this year, we introduced two changes to give credit unions greater freedom. We increased the maximum loan repayment periods that credit unions may offer borrowing members, and we increased the amount that junior members may save with a credit union, bringing it into line with the amount that adults may save.
We shall also be introducing a further package of three deregulatory changes, when the relevant sections of the Financial Services and Markets Act 2000 are brought into effect on 1 July 2002. The forthcoming changes will abolish the maximum limit on the number of members a credit union may have, and abolish the statutory distinction between the large credit unions that are able to take advantage of the additional powers conferred by a section 11C certificate, and other credit unions. They will also abolish the requirement on credit unions to dispose of repossessed collateral as soon as possible.
We also plan to consult on a range of further measures aimed at relaxing some of the restrictions on credit unions' operational powers. This exercise will include a number of proposals that have been put forward by the sector, many of which remove or reduce legislative constraints, and which will also include some of the proposals that my hon. Friend the Member for Harrow, West made today.
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I know that these measures are eagerly awaited in the movement, and I am keen that we make progress with the assembly of a package of measures for public consultation as soon as possible. I am also aware that it would he helpful to introduce those deregulatory changes that consultees consider desirable at the same time as the Financial Services Authority commences its regulation of credit unions, next year. A great deal of work still needs to be done before we can release the consultation document, but I hope that we shall be in a position to start the consultation process before the end of the summer.
The movement is known for its diversity, so I hope that when the time comes as many credit unions as possible—large and small, community, associational and employee based—will respond, to enable us to take account of all the different perspectives and needs before we come to take decisions about how to proceed.
The Treasury has also used the Financial Services and Markets Act to bring credit unions under the rule-making powers of the Financial Services Authority. In future, credit union members will be given similar protection to that afforded to depositors with banks and building societies.
The Government received strong support from across the movement in November 1999 when we decided to transfer the regulation of credit unions to the FSA. Since then, the FSA has been working to develop a regulatory structure that is proportionate to the nature and scale of the risks that credit unions face. As several hon. Members have pointed out, the response has been overwhelmingly positive, despite some concerns about whether the degree of regulation would be proportionate to the credit union sector. The FSA has been paying close attention, and responding positively, to such concerns.
All hon. Members mentioned the need for a central services organisation. The taskforce and the policy action team both pointed out how establishing such an organisation would be to the advantage of the credit union movement in this country. That has always been a project for the movement to take forward, and the taskforce felt that the banks and building societies could usefully support it. However, the Treasury has maintained regular contact with the Association of British Credit Unions, which is finalising its business proposals in consultation with other key stakeholders.
Under the latest plans, a CSO would offer all credit unions—regardless of the representative body to which they might be affiliated—a finance facility that should be able to achieve better rates of return on deposits, assistance with liquidity management and help with training and development. It would, however, remain a matter for each credit union to decide whether to use any or all of the facilities on offer, which means that the take-up, or otherwise, of those services would rely exclusively on their overall desirability and cost.
My hon. Friend the Member for Harrow, West, among others, questioned me about the timing and financing of a CSO. I hope that the organisation will be set up soon, but, as I said, it is primarily a matter for the movement to take forward.
Mr. Flight: Have the Government worked out how the proposal will be financed? Many hon. Members are aware of discussions taking place with banks and, not unreasonably, many banks have taken the view that it is not fair, when they are being leant on to finance the universal bank, to be asked to finance a future competitor as well. The crucial issue seems to be where the money will come from.
Ruth Kelly: My view is that the crucial issue at present is how the movement will take the matter forward and finalise its plans. After that, it will be possible to examine funding arrangements. However, I think that banks and building societies have a duty to support any organisation that is set up.
Mr. Love: Will my hon. Friend undertake today to bring the parties together, to try to find an effective and quick way of setting up a central services organisation?
Ruth Kelly: I certainly will undertake to try to facilitate those discussions. I am interested in any proposals from hon. Members that might advance the process. I would also seriously consider representations about the future work programme of the CSO. I hope that, once it is established, credit unions throughout the movement will want to support it and take advantage of the services that it offers. I believe that a CSO would provide an important foundation for a stronger credit union movement in the future, and I fully intend to keep in touch with developments.
My hon. Friend the Member for Harrow, West mentioned the role that regional development agencies, the Housing Corporation and housing associations could play in developing the credit union movement. That is primarily a matter for my colleagues at the Department for Transport, Local Government and the Regions. However, I understand the significance of the points that my hon. Friend raised, and I shall consider the matter in the hope that progress can be made.
My hon. Friend the Member for Pudsey (Mr. Truswell) and other hon. Members considered the role that credit unions can play in their localities. Clearly, they have an important role in the development of local community life, as well as in encouraging the virtues of thrift. There is clearly much scope for the future expansion of credit unions, not only in size and membership but with respect to their products. However, quite a lot of flexibility exists in them already, and I believe that some credit unions already offer facilities such as mortgages. When the relevant powers are finally transferred to the FSA in July 2002, large credit unions will be able to offer mortgages or loans over a period of up to 15 years. I am sure that some will want to take advantage of those facilities.
Credit unions make a significant contribution to tackling financial exclusion. I am keen for them to bring the benefits of their unique approach to many more of those who lack access to mainstream financial services.
The Government support credit unions, and on the Government's behalf I should like to thank all the dedicated people who run them, many of whom are volunteers. They do valuable work for their members and for all the people of this country, which is why we have, and will continue to encourage, a strong and flourishing credit union movement.

Upland Farming
11 am
Mr. Peter Atkinson: Thank you, Mr. Winterton, for chairing this morning's proceedings. I am pleased to have the opportunity to initiate a debate on an issue that is of critical importance to my Northumberland constituency, to that of the right hon. Member for Berwick-upon-Tweed (Mr. Beith)—I am pleased to see him here today—and to those of all Members who represent upland areas of the north. Naturally, there will be considerable discussion of the foot and mouth epidemic, which is still very real, particularly in Yorkshire, where there is a regular stream of new cases. Today, however, I want to focus on the legacy of foot and mouth and the crisis facing upland hill farmers in the north.
Some of the legacy of foot and mouth is glaringly obvious to anybody who journeys in Cumbria or in Northumberland: empty fields, generations of breeding wiped out, and ruined lives. My right hon. Friend the Member for Skipton and Ripon (Mr. Curry), who I am pleased to see in his place, will have witnessed that at first hand. His constituency continues to suffer the live effects of foot and mouth. In mine, there has not been a case for several months, although a couple of weeks ago a renowned flock of sheep was slaughtered as a precautionary measure.
What is not obvious to the public is the impending welfare crisis looming in the upland areas, as our farmers ponder the fate of hundreds of thousands—perhaps millions—of unsaleable sheep. Nor is the further fall in farm incomes obvious. Before the foot and mouth epidemic, farming incomes, particularly those of hill farmers, were historically low. Some estimated their annual incomes just before the epidemic at about £4,000, although others would describe that as extremely optimistic. Since the outbreak, incomes have fallen even further, and I shall say a few words about the recent effect on prices.
A third important aspect that is also not particularly visible is that, in respect of dealing with the aftermath of the crisis and the future of farming, we are suffering from a lack of political leadership. I do not mean to be aggressively critical of the Minister. Decisions on the future of farming are extremely complex and detailed, but the Government must establish their promised foot and mouth inquiry. They should also set up the policy commission that I believe was promised in the Labour party manifesto, so that the future of farming can be examined. We are just two days away from the recess, but that commission has yet to be established.
The matter is urgent, given the problem of unsaleable sheep and the fact that we are about six weeks away from the deadline for decisions. Traditionally, in six weeks' time the sale of light lambs from the high hills begins. In my own constituency, the Hexham and Northern marts will sell tens of thousands of light lambs—Herdwicks, Swaledales and Blackfaces—during August and September. Normally, they are exported to Mediterranean countries. Southern France, Italy and Spain in particular delight in these small, tasty lambs, which the UK market has rejected. We import most Mediterranean food and eat it with great enthusiasm, but the traditional light lamb of the hills of

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Northumberland, the Lake district and Yorkshire, which number about 2 million, are rejected by the market. Given that we cannot export a single lamb, the crisis in those areas will be considerable.
It is interesting to recall that before the foot and mouth disease epidemic, we exported 30 per cent. of our lamb crop. At best estimate, the epidemic has taken out 3 million lambs or 15 per cent., which leaves about 3 million lambs that cannot be exported and will have to be absorbed into the UK market. That has caused the price to fall and it will fall further. A 20 kg Suffolk-cross lamb currently fetches around £27, which is about £12 less than last year, and the main sales have not yet started. It costs around £30 to put a lamb into the market, so hard-hit farmers will lose around £3 per lamb.
A solution to the problem of light lambs might be to extend the welfare slaughter scheme to them, but if the meat is sold in supermarkets, it will displace meat from normal fat lambs that would have been sold instead. A more palatable alternative might be a slaughter scheme and long-term store. However, at some stage the meat will have to come out of cold store and enter the market. There would also be a huge logistical problem because slaughtering 2 million sheep is a huge task and abattoirs in the north-east would be unable to cope.
Mr. A. J. Beith: The hon. Gentleman will be aware of a further problem if animals are sent to abattoirs on the other side of the border in Scotland because, despite earlier help from the Scottish Executive, there is a ban on the movement of animals across the border for slaughter—even clean animals from clean areas.
Mr. Atkinson: I am aware of that and the Minister may be able to explain the mystery. We were told originally that animals from Northumberland could go for slaughter in Scotland but, as the right hon. Gentleman said, that is not happening. There has been a breakdown in communication between the Scottish Department with responsibility for agriculture and our own Department.
Apart from light lambs and surplus fat lambs, a third problem to add to the general misery concerns breeding ewe lambs, of which the north of England is a major producer. They are traditionally sold for breeding to farmers in the south, Yorkshire and the west country, but they cannot be sent there because of movement restrictions. Farmers in the south do not want to buy stock from infected areas and prefer to buy from non-infected areas for the sake of safety. One cannot blame them, but there will be a considerable surplus of breeding ewe lambs on the market. Farmers in Cumbria, Northumberland and Yorkshire who have been hit by foot and mouth disease and had their flocks slaughtered may buy some and opportunist farmers with spare grazing may also buy them, but there will be a considerable surplus.
The right hon. Member for Berwick-upon-Tweed referred to the problem of moving stock to Scotland for slaughter, but an additional problem for Northumberland in particular is that many of our beef
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cattle are sold to Scotland as store cattle and that trade has been stopped, so there will be a problem at the back end of this year as those calves come to market.
The Minister could help by sorting out the confusion concerning the movement of fat lambs which cannot be sent to market because of movement restrictions. The Secretary of State for Environment, Food and Rural Affairs announced in the House recently that the movement restrictions were being lifted. That was welcomed as good news because it meant that we could sell fat lambs from the north to the large abattoirs in the midlands and the south. A problem has arisen since then because the Department insists that the transporter carrying the livestock makes the journey from farm or collection centre to abattoir non-stop, but the drivers' hours regulation specifies that they cannot drive for more than four hours—it may be four and a half hours—without a break. That effectively means that a livestock transporter can go no further than it could drive in four hours; for the sake of argument, that would be about 160 miles. The big abattoirs in the midlands are therefore out of reach for our fat lambs. Farmers in Northumberland have to sell their lambs to local abattoirs, which are accustomed to cope with 3,000 or 4,000 lambs and are largely in the butchery and industrial trade. At this time of year, however, the Hexham mart alone would be selling about 8,000 or 10,000 lambs. Clearly, that is a problem.
I mentioned a political vacuum at the top and that needs to be addressed urgently. As we know, the system of funding hill farmers has changed from the hill farm compensatory allowance to what is called the hill farming allowance, but it is still unclear how it will affect farmers in upland areas, particularly in respect of their income. It may place onerous and unreasonable inspection and environmental burdens on farmers who have already suffered a huge drop in income.
We need a proper announcement about the foot and mouth inquiry, and the policy commission to be set up so that it can begin to take evidence and consider how farming might develop in future. I did not hear the Secretary of State speak yesterday, but I have seen a press cutting or two. It seems to me that she said nothing that indicated to farmers Government thinking on the future of farming. The German Agriculture Minister made some suggestions about less intensive and more organic production. I do not agree with those suggestions at all. I would sooner side with Lord Haskins, whose recent report presented a slightly different vision of farming: the need to improve efficiency, cut costs and become more competitive. I believe that that is the inevitable future of farming.
We do not want mixed messages. We need to know the Government's thinking on how farming will develop. The Government must announce as quickly as possible whether they intend to introduce a buy-up scheme—a buy-up to slaughter scheme or a buy-up for storage scheme. Farmers need to be reassured that there is a Government out there who care about them. They have lost their Ministry of Agriculture and they want to know if the new Department will encourage and take care of them.
Finally, Northumberland, Yorkshire, Cumbria and the other upland areas have a wonderful tradition of livestock breeding. It is always said that arable farmers are trained, but livestock farmers are born. Handling

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and rearing livestock to a high quality is a skill that has been passed from generation to generation in farming families in upland areas. Farmers with that skill have a future; they have a knowledge and understanding of the breed. The United Kingdom, among other European countries, has grass, so it is capable of being a major and efficient producer of meat. We must know, with certainty, what the future is, and that is what the Government must urgently address.
11.13 am
Mr. A. J. Beith: I am glad that the hon. Member for Hexham (Mr. Atkinson) introduced this debate. He is right to point out that there is a crisis in northern upland farming. The boundary between my constituency and his passes through the Cheviot hills—one of the most drastically affected upland areas—and the problems that he described are ones that I, too, have experienced. It might be hard to find our constituency boundary in that vast and largely empty territory if it were not for the small number of people who maintain the hills in the form that tourists want to see. They husband and shepherd sheep flocks primarily, and hill cattle to a more limited extent, not to mention wild goats, for which a warden has recently been appointed. It is a remarkable area, but it could face a drastic loss of the qualities that visitors appreciate if upland farming is not rescued from crisis.
The crisis began some time ago. The dangers to upland farming have continued over a long period. They were, of course, exacerbated by the BSE crisis, so the foot and mouth outbreak hit an industry that was already in a very poor state. The difference between the current crisis and the foot and mouth outbreak in the 1960s is that this time it hit an industry in much worse condition.
We have had many debates and questions about the details of what the Government are doing and what they should be doing, so we do not want to go over that ground today. However, foot and mouth is a negative influence on the state of upland farming and there is continued anxiety about what will happen. Farmers report that vets are warning them of the possibility of a further outbreak due to the identification through blood testing of sheep that are carrying the disease. There is therefore a great deal of anxiety about whether it will break out again. The most drastic effects are the loss of lamb exports and the complete disruption of the trade.
As people look ahead, there is a feeling that many who have had sheep slaughtered, particularly those whose sheep either had foot and mouth or went into welfare slaughter, will not go back into the industry. Hill farmers traditionally provided lowland sheep farmers with breeding stock. The hill farmers are looking at people that they know in the lowlands and observing that they are unlikely to go back into large-scale sheep farming. There will therefore be no market for the breeding stock from the hills, and that is a major worry for hill farmers.
Hill sheep are of course an organic product in all but name. They are not registered as an organic product but the way in which they are produced—grazing naturally on our hills—makes them, in the sense that most people would understand it, an organic product, the future of which is seriously threatened.
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We need to look at what is happening in the lowlands. Prices are down from 175p to 125p a kilo on lowland Suffolk lambs. I was talking to a farmer who was selling horned Blackface sheep for carcass export at 270p a kilo before the foot and mouth outbreak; after the outbreak the price is 150p a kilo because there is no export market. No business can stand that level of reduction in prices, and certainly not the frail hill farming industry. Hill farmers cannot continue taking less than the cost of production, which they are doing now and have sometimes had to do in the past. However, in the past the good times have evened out the bad times. Now there is a run of bad prices and no prospect of the situation improving.
Most hill farmers say that they would like to get their returns on livestock in the marketplace. In principle, they are looking not for a subsidised market but for a genuine one. However, they do not have a genuine market because there is an export ban. The Government must recognise that we are in an artificial situation and any intervention that they undertake is not part of a policy of market distortion. They must try to preserve the industry so that it can get back into a position where it can compete in a genuine market, which we do not have at the moment.
Some aids that are meant to help hill farmers are not helping at the moment. The sheep annual premium—the headage payment—is calculated on the price in Europe. The price in Europe is high at the moment because our hill farmers cannot get their lambs there. Their premium is down due to the combined effects of the high European price and the exchange rate. At a time when the system should be helping hill farmers, it is giving them the lowest possible annual premium. The number of ewes has decreased by 25 per cent. in about a decade. Let us consider what has happened to them since the foot and mouth outbreak: 20 per cent. have been culled and 30 per cent. used to be exported, leaving 10 per cent. of ewes from that reduced flock on the market.
We need to know what short-term measures the Government are prepared to take to try to stabilise the market and what the long-term prospects, which are especially important to hill farmers, are. Do the answers lie in environmentally focused support? That is the message that farmers have been getting for some time and we are all party to giving it to them. Given the way in which the economics of farming is going, my party believes that there must be environmentally focused support to avoid the loss of farming from the hills. That must be the way forward, but that has not yet been proved in the eyes of hill farmers because there are an awful lot of gaps and missing figures in the equation. If the answer for the future of upland farming lies in a substantial environmental contribution from the nation, there are still problems. First, livestock are central to conservation. We cannot pay farmers to mow the Cheviots and clip the grass on the Ministry of Defence ranges that cover large parts of my constituency and that of the hon. Member for Hexham. Yet the grass hillsides form the scene that the tourists expect—it is they that make the Cheviots so distinct.
Livestock, therefore, cannot be written out of the equation. There must be some way of running a viable livestock business in the hills, even at the lower levels of intensity that we now have. To make a proper contribution to preserving the traditional upland

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environment—as the national park authorities believe that we should—there must be a livestock presence, which cannot be allowed to collapse.
On an environmental basis, help must aid smaller as well as larger farmers. I was talking to a farmer who was investigating the countryside stewardship scheme. In order to participate, he would have to get rid of three quarters of his livestock to receive £2,000 income. However, he is looking ahead at ways of keeping the farm going for his son, so that there will be a future generation hill farmer there to look after the hills. Obviously, the scheme will not work for him. It will work for a large farmer, with a big acreage, who can get tens of thousands of pounds from stewardship schemes. That is probably a sensible bargain from the nation's point of view, but it will not work for the smaller hill farmer. That must be carefully examined.
A background to the situation is the attrition of services in remote areas, which makes it increasingly difficult for people to live and work there. This week, the county council told us that it plans to charge £300 to every pupil over 16 to travel to school. What does that say to a farmer living in the hills, or even more, to a farm worker such as a shepherd living in a remote position on a modest income with a family of youngsters going to school? There are many other examples of how the attrition of services is making it very difficult to keep farmers or shepherds in the hills.
Many discussions take place on the assumption that we are talking only about farmers. Believe it or not, there are still people employed in agriculture who draw a wage and do not have assets that could contribute to their retirement. Their income is limited, but their future is absolutely vital to the hills. The whole cultural life of the Cheviots has been built round shepherds, who have included great musicians, even poets and all sorts of people of tremendous talent who have lived and worked in the hills.
The Government play a large role in the area and are vital to the equation because they, in the form of the Ministry of Defence, are the biggest landowner in much of my constituency. In many respects, they have been a conserving farming landlord. Much of the area concerned is also national park. Within the area, there is short-term despair and long-term pessimism. I hope that the Minister can dispel that despair and change that pessimism by practical proposals to make farmers realise that it is worth hanging on in there, and that there is a future for hill farming. At the moment, they do not feel that there is one.
11.23 am
Mr. David Curry (Skipton and Ripon): I do not normally tune into "Farming Today", because it is at quarter to 6, which I find somewhat premature. However, when one has hayfever and catarrh, one often ends up listening to programmes when one did not intend to. I caught the back end of Lord Whitty on that programme, following which it was commented that he would make a statement in the House of Lords today that would be repeated in the Commons. I thought that
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that was an interesting inversion of constitutional practice, and I look forward to any enlightenment that the Minister can give about it.
The Minister for Rural Affairs (Alun Michael): Lord Whitty is responding today to a starred Question on the subject in the Lords. I think that he was asked what his response to it was going to be and that he indicated that he would make his response clear.
Mr. Curry: So we are going to hear something about the matter. I do not know what form that will be in—it does not sound as though it will be a statement.
Alun Michael: It will not be a statement.
Mr. Curry: I am glad that we have got that sorted out. I beg your pardon for the diversion, Mr. Winterton.
I am grateful to my hon. Friend the Member for Hexham (Mr. Atkinson) because, in giving the broad picture, he has precisely set the scene for the particular cases that I wish to raise. By way of background, since the general election was called, in my constituency and the immediate neighbouring constituencies, mainly in the Ribble valley in Lancashire, we are approaching 100 outbreaks of foot and mouth disease, 400 farms culled as contiguous premises and 300.000 animals slaughtered.
I want to focus on a particular category of farmers: those who are not afflicted by foot and mouth disease, but are unable to carry on their business because they are in areas that are under heavy restrictions. I have enormous sympathy with farmers who have been culled out as either infected premises or contiguous premises. Although they receive payments for that compulsory slaughter programme, I would not wish to minimise the sheer trauma that such culling brings to a family, especially when they have built up a herd over a long period. We know about the problems to business that have come increasingly to the fore in relation to the lack of cash caused by the decrease in tourist numbers. However, the plight of farmers who are still trying to make a livelihood is too often overlooked. I therefore want to do something that I rarely do, and highlight two individual cases that illustrate the problems of those farmers, who are all in the uplands and less-favoured areas. Almost all the infected areas in my constituency are upland areas.
I start with the case of Gary and Gill Schofield, a young couple from Heber farm in Buckden, which is right at the top end of Wharfedale in the high hills. Mr. Schofield is only 33. He has been a tenant farmer for seven years and has a small family and a big overdraft, with loans on top of that. He raises 150 beef animals and has 900 ewes, which normally yield a crop of about 1,200 lambs. Because he is in environmental schemes, which are specifically aimed at reducing levels of fertility by restricting the use of fertiliser, there is not enough fertility on the land to keep the lambs over winter. He could, at a pinch, keep his breeding sheep, but nothing more, because he does not have enough lowland ground and snow covers the tops in winter. So his only substantial income comes from selling his lambs down the hill—and one cannot sell lambs at the moment.

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What would be Mr. Schofield's normal pattern of business if foot and mouth had not happened? In September or October he would sell his breeding lambs down to the lowland and sell his draught sheep—ewes that have done three or four years' service breeding in the uplands—down the hill to do another three or four years in the lowland in the milder conditions, because they can no longer take the more severe upland conditions, but can still have a productive life in the kinder conditions in the south. He would also take down his male lambs—wethers—while the half-horned lambs would go to export. The mule wethers—crossbreeds—would be sold as store lambs or fattened on the lowland, perhaps until after Christmas.
What is the situation now? He has to keep his breeding lambs and draught lambs on the farm because he cannot sell them off it. He has to buy in expensive food to keep them going. They occupy the land that is needed for his normal breeding flock, which is therefore over-grazed. The land is under pressure and the stock is under pressure, so a welfare problem is looming. He wants to keep his breeding sheep—that is the heart of his enterprise—but he cannot keep his male lambs and his mules. He also has store cattle, which he is keeping on and fattening rather than selling them in July at 10 months old, which is what he would normally be doing now. That means that he needs bought-in feed, which sucks in capital, and the store cattle occupy the cattle sheds needed for his over-wintered cattle.
Mr. Schofield faces an impossible situation. He is left in complete uncertainty, with no information about what will happen, and he has had no income since February. This young couple are not dog-and-stick farmers; they are really trying to make a go of things in difficult circumstances, putting their whole life into it. His business is under pressure, his stock is under pressure and his land is under pressure. At some point there must be an intervention to relieve that pressure and make sure that he receives some income.
Another young couple, Matthew and Tracy Harrison, live at Stories House farm in Elslack, which is up the Aire valley from Skipton and close to the heart of the foot and mouth outbreak. It is in the Ribble valley, which is the epicentre of the epidemic. Tracy Harrison wrote to me. I did not solicit the letter; it just happened to come in the post when I was applying for the debate. She said that while she can appreciate the problems faced by farmers when their livestock has been culled, an income could be generated. The cleansing operation itself is remunerated and there is a payment for the stock. She wrote:
"I am bitter, and for this I do not apologise. We run a herd of suckler cows and a flock of 80 sheep. We have been placed in a D band twice, for having feed delivered so that our sheep don't starve and our lambs have a chance. Both have been lifted after the 1 month period expired. After the expiry of the last one we were able to find a buyer in Huddersfield to take last years bulls (12 in total), but the licence took 11 days to come through, even though we faxed the applications to try and speed things up. Sadly in the same post came the notice that we were in the Settle Special Area and that all licences had been retracted. Thoughts of easing the overcrowding were fading. Not to mention the money that is our income. We don't milk and therefore have no regular cheque to keep us ticking.
We are now in a D band that has no end. 20 lambs were able to be taken to the slaughterhouse".
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Tracy Harrison then described the circuitous route that she was advised to take to the slaughterhouse and said that it took a two-hour discussion to prevent her from having to comply with those instructions. She continued:
"The last licence for taking 25 lambs was applied for on Friday June 22. Dates from the last infected premises were counted and a date for Thursday 28 June was arranged with the slaughterhouse and the vet who was to inspect them. Wednesday 27 June brought a call from the vets who stated the licence had not been faxed and could we chase it up…The second call was disastrous because the dates quoted back at me were different from the ones stated…The licence would not be issued.
Tracy Harrison said that the goalposts had been moved. She goes on:
"Legislation now prevents us from moving anything to slaughter. We need this income. A vet comes every two days from DEFRA to inspect all our stock and a local vet would come and inspect our lambs prior to the movement to the slaughterhouse. What else can be done to safeguard the consumer? This legislation is ridiculous and uncalled for, unless bankruptcy is the aim of the Government.
My husband and I are both under 40, with 3 children under 10 and in no rush to retire. Our standard of living was not superb in the good old days of 2000, but at least we could look forward to making things better. It's not working though, and we need help."
As I said, I do not usually quote individual cases, but these two young modern farmers are desperate to make a go of things in the dales. They may have the farming industry in their genes, but they also learnt about it through a formal education. They are receptive to modern schemes and environmental programmes. They do not believe that agriculture will continue unchanged. It may be regarded as a time-honoured tradition, but activities change with the time. The Harrisons are in a terrible situation, because they cannot farm. Farmers who have been culled out suffer such trauma, but provided that they receive their cheques, they can begin to think about how they will take forward their businesses. Although the delays in receiving cheques are the subject of a different debate, those farmers can contemplate the development of their enterprise.
We must bear in mind, however, farmers who are caught in infected areas and who have already suffered years of economic recession. As my hon. Friend the Member for Hexham said, they have seen the mechanisms change by which hill allowances are paid. As the right hon. Member for Berwick-upon-Tweed (Mr. Beith) said, the sheep premium is at an all-time low because it is based on the European price. Those farmers have nothing. They are stuck. An enormous welfare problem is building up with regard to the stock, as is an environmental problem because the welfare schemes will be shot to pieces. There is no choice other than for them to be shot to pieces. The only way to assist is to let some of the steam out of the pressure cooker. If that does not happen, the farmers will not be able to continue. The land will suffer, a welfare problem will result, and not merely the ecology but the business environment of such a precious area as the dales will go down with it. I hope that the Minister understands the problem. There must be an intervention to take the pressure off those farmers, or they will not be around this time next year.
11.34 am
Mr. Colin Breed: I and my party heartily welcome the Government's intention to introduce genuine medium-term and long-term strategies and a commission on food and farming, which should specify precisely the future for agriculture in general and hill farming in particular. This morning's debate is about the short term and urgent matters.
Slightly disappointingly, we still do not know who will lead the commission or its intended timetable. A fundamental question is in the minds of an awful lot of hill farmers today: is there a future in hill farming? They are wondering whether to do whatever is necessary now and jump all the hurdles and whether, having tackled all the logistical and other problems that have been so eloquently described this morning, their upland farming ultimately has a future. That is one of the biggest questions that must be answered as quickly as possible, even though we must take evidence. One problem is that the future will relate more to environmental stewardship than to agriculture, and that will not suit everyone. It is not how many see their future in farming, but it is fundamental to what happens to people who operate on the ground.
We are talking about the short term and urgent matters. In the short-term category, it has been clear for some time that hill farm incomes have been getting lower and are too low. Of necessity, people, including those in hill farms, question the likelihood of those incomes being driven up through farming activity. Prices are still weak and seem unlikely in the short term to improve, and it is almost impossible for many farmers even to sell and therefore receive any income at all.
Hill farming allowances are being considered. That has changed the way in which support is received and created considerable alarm and despondency in the hill farming community. Unsurprisingly, therefore, many are wondering whether now is the time to give up. That will have huge implications for many different Government policies. Perhaps the Government could help in a planned and managed way by reconsidering the potential of a retirement scheme. I know that the Government have considered the matter several times and have decided that such a scheme would not be appropriate, even though common agricultural policy funding could be used for it. I urge the Government to reconsider opportunities for a relatively small-scale retirement scheme that could put some structure into how farmers organise their futures. A retirement scheme should be part of the overall broad strategy to help hill farming.
The export of so-called light lambs is such an urgent problem that we are dealing with weeks, not even months. When I heard hon. Members speak about welfare, it struck me that there is a welfare problem not only with animals but with farmers and their families. We need to consider that and what farmers want from the Government. Obviously, they know that there are huge problems in the aftermath of foot and mouth disease and so on, but we need a clearly thought-out policy to deal with the immediate situation.
It would be nice to use all the available evidence and set a policy in the context of a medium and long-term strategy. However, we do not have time to consider all the ramifications of subsidy mechanisms, problems with
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compensation, the logistical aspects of any welfare disposal scheme and the implications for the market. If we promote greater use of lamb and sheep meat, that might have a knock-on effect on other sectors and result in lower sales of beef and pork. It could take months to bring all those issues together into a comprehensively thought-out plan and strategy, but we may have a monumental problem in a few weeks' time.
The Government must come up with urgent short-term measures to deal with the real problems that have been described this morning. The word that everyone wants to see in Government policy and decision making is "flexibility". Inflexibility has been a feature of the implementation of decisions in the aftermath of foot and mouth in my part of the world and in the north. Having jumped over a number of hurdles, farmers have been obstructed by the way in which regulations have been implemented.
Unless there is real flexibility and management on the ground to deal with the circumstances of the dozens of individuals who have been affected, we shall have a huge problem in a few weeks' time. It will be interesting to hear Lord Whitty's answer to the relevant starred question this afternoon.
This debate is taking place only two days before Parliament rises for the summer recess, and many people will be looking to the Government to make a reasonable announcement about how they intend to tackle a problem that is likely to come to a head while Parliament is in recess. I hope that the Minister will provide at least some comfort by saying that the Government have not only considered the issues, but have clear plans for solving that problem.
11.43 am
Mr. James Paice: I declare an interest that is properly recorded in the Register of Members' Interests, although it is not directly related to upland farming.
I congratulate my hon. Friend the Member for Hexham (Mr. Atkinson) on initiating the debate, which comes just two weeks after a similar debate that was secured by my right hon. Friend the Member for Skipton and Ripon (Mr. Curry). Two members of the Liberal party, the right hon. Member for Berwick-upon-Tweed (Mr. Beith) and the hon. Member for South-East Cornwall (Mr. Breed) have made the same points that were made then and rightly so.
During the previous debate, which I think was the Minister's first appearance in this Chamber in his new incarnation, he rightly said that this forum provides the opportunity for a less partisan approach and a greater exploration of the issues. I agree with him entirely. I hope that he will accept that it behoves him to respond as fully as he can to the various points that have been raised and to the questions that have been asked. He has a considerable amount of time available and I certainly do not intend to encroach too much on it. He will have ample opportunity to reply to the debate.
I should like briefly to refer to the previous debate in this Chamber. The point was made, which the Minister fully accepted, that in the absence of proper information the rumour mill runs riot. All sorts of stories do the rounds in the farming world and in the farming press, for that matter. They may or may not have any

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foundation, but they are bound to occur when there is no proper information. I cited the case of a flock of sheep slaughtered in Wiltshire the week before the debate. The Minister said that he would come back to me when he had received more information. I do not know whether he can do so yet. Nobody knew whether there had been an outbreak or why a flock was being slaughtered in an area that had been free of the disease for some weeks.
As my right hon. and hon. Friends have pointed out, the disease continues. Although all the epidemiologists told us that it would have a long tail, there is no sign yet of that tail shortening. It seems to run somewhere between three to five outbreaks daily, with no lessening. We are now in July, although one might not think so today, and we have had quite a lot of much warmer weather and sunshine. We were told that such weather would help to overcome the disease because the virus would be less viable and more quickly destroyed. There is a great deal of worry about what is really happening.
The other issue that was touched on in the previous debate is serological testing, which we believe is being carried out on quite a large scale. I hope that the Minister can tell us a bit more about that testing and its structure. It is obviously not just to establish where there may have been undetected infection: is it concentrating on certain areas or types of sheep or farming?
Mr. Curry: If farmers on the periphery of infected zones or within them are to be able to restock farms that have been culled out, large-scale serological testing is vital so that farmers who are being restocked have the assurance that they are not importing the problem.
Mr. Paice: My right hon. Friend is entirely right. I referred in the debate two weeks ago to the conflict that arises when some farmers opt to restock with sentinel animals and others opt to be clear for four months. If a sentinel animal goes down with the disease it can destroy a neighbouring farm's opportunity. That is a serious issue and I hope that the Minister will address it.
My hon. Friend the Member for Hexham rightly highlighted the impending problems of the sheep and hill cattle industry, which I referred to a fortnight ago. It was widely referred to in the debate on the Floor of the House last Thursday and again today. By reciting the problems of Mr. and Mrs. Schofield and Mr. and Mrs. Harrison, my right hon. Friend the Member for Skipton and Ripon illustrated the problems in a way that simply talking about national figures of 5 million sheep cannot do. He graphically demonstrated how serious the problems are for those who desperately need to get rid of some of their stock this autumn, partly to generate cash flow and partly because they do not have the physical resources to keep them as they have neither buildings nor feed.
Some farmers sell ewe lambs down the hill, as my right hon. Friend said, for others to keep on as breeding ewes in my part of the world. It is essential that those new lambs are kept alive whenever possible, because the consequential cost to the sheep industry would otherwise be disastrous. The problem is that, even if the farmers find some tack or agistment—whatever the word may be in a particular area to describe overwintering on someone else's land—in an affected area and are allowed to move their stock, they do not have the money to pay for that.
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Almost all right hon. and hon. Members have referred to light lambs that are just beginning to come on stream and the absence of a market for them. I hope that the Government will not allow the controversy over live exports to blur the issue. The question of whether lambs are sent alive or in carcass form is secondary to finding a solution to the problem. I am not suggesting that we re-open exports any quicker than would be wise, but we must work out what is to happen to those light lambs. As my hon. Friend the Member for Hexham rightly said, even if we could persuade supermarkets and shops to take them, they would only replace other lambs, or red meats as the hon. Member for South-East Cornwall said.
I make no apology for returning to questions that I asked the Minister in the House last week, and I hope that he will now give us answers, because the industry wants to hear them. It is being constructive about possible ways forward and, having seen its correspondence with the Minister's colleagues and officials, I know that these points have all been put in writing during the past weeks. Will the Government allow any live sales to take place outside the infected areas? Sales could take place in East Anglia, where there is traditionally one big sale per year—not of upland sheep, although I appreciate that upland sheep would not often come into it.
What does the Minister think about the Scottish highlands, which is another provisionally free area? Huge sales of sheep traditionally take place at Lairg and other places in August and September. Will the Government allow those markets to take place? We must consider also the licensing system. My understanding is that the licensing system for the transport of animals allows movement only for breeding or slaughter. Will the Government amend the regulations to allow movement for further growing and fattening, assuming that other criteria are met? There is also the issue of a welfare scheme for light lambs, as my hon. Friend mentioned.
I asked last week about corridors through infected areas, which would allow sheep to move from one provisionally free area to another. I cite all the sheep in the north of Scotland, to which I have just referred. Many of those sheep could come to central and eastern England as either store lambs for fattening or ewe lambs for breeding stock. The Government have already accepted that we can transport livestock from an infected area to an abattoir in a free area for slaughter. My hon. Friend the Member for Hexham described the problems with drivers' hours on that, but the principle is conceded. The Government should designate one or two road corridors through south Scotland and northern England, so that we can move the sheep in northern Scotland to areas where they are required. That would be of some help.
Those ideas have all been put to the Minister previously, but before I give him ample time to reply, I should speak about other issues relating to the foot and mouth crisis and the uplands. I am beginning to pick up information about the clean-up process that is being undertaken on farms that are being slaughtered out. People who have gone through that awful experience have told me that the process is becoming more inconsistent. At the outset, farm tools and machinery had to be individually disinfected; cobbled floors and

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flagstones had to be lifted and cleaned and farms were not passed if the flooring of livestock areas was impaired. When high-pressure washers are used regularly, they wear holes in the concrete. The Ministry of Agriculture, Fisheries and Food did not allow potholes to remain and in most cases reached an agreement with the farmer that the Department would pay for the manpower and the farmer would purchase the concrete—a perfectly reasonable compromise. Now, however, farms that previously would not have been passed are being passed although the stated cleaning requirements have only been partially met.
Alun Michael: I am grateful to the hon. Gentleman for giving way. As he has raised some anxieties, I extend to him my invitation to hon. Members in previous debates to provide me with information—the why, when and wherefore—about anything that appears to be inconsistent or wrong. I am sure that the hon. Gentleman will acknowledge that rural myths circulate in the same way as urban myths. A story is put about, but no one can put a finger on its origins. I assure the hon. Gentleman that I shall investigate anything that needs investigation and try to ensure that inconsistencies are dealt with. However, if we do not get the information directly, and have only a general account of a suspicion of a developing problem, it is difficult to take the necessary action.
Mr. Paice: The Minister makes a reasonable point. Subject only to the agreement of the people who provide me with information, I am happy to pass the details to the Minister. He referred to rural myths, which arise because of a lack of information, a point that I made earlier. The clean-up process needs to be tackled with consistency, according to what is acceptable.
The Minister will no doubt have seen a copy of last week's Farming News, which reports the problem of the payment of welfare cheques. I understand that 97 per cent. of farmers who put animals into the welfare disposal scheme do not receive the money within the 21-day target set by the Department for Environment, Food and Rural Affairs. Worse still, a quarter of applicants are waiting more than 50 days for their cheques. Although I do not have the details of individual cases, the matter is reported in the press and I hope that the Minister will look into it.
I hope that the right hon. Member for Berwick-upon-Tweed will forgive me for referring to a case in his constituency—he may also have received copies of the correspondence from Northumberland Estates about problems in the uplands concerning grouse shooting. I hope for a moment that we can put to one side people's different views about grouse shooting, which is a huge economic activity and thus vital to welfare and employment in the uplands.
Mr. Beith: Before the hon. Gentleman continues, I want to say that not only have I received the correspondence, but the Minister handed me a reply to my letter on the subject at the start of the debate. The Department yesterday issued a press release indicating that grouse shooting would be open under licence in
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what appears to be quite a liberal regime. The hon. Gentleman is welcome to ask the Minister to repeat what was stated in reply to the debate.
Mr. Paice: I am delighted that I gave way to the right hon. Gentleman, who gave first-hand answers and stopped me pursuing an issue that has already been resolved.
Mr. Peter Atkinson: I am grateful to my hon. Friend for giving way. The agent of Northumberland Estates has obviously been very busy. I have not yet had my reply from the Minister but I reinforce what my hon. Friend said. In my constituency and in the north Pennines, grouse shooting is a huge and significant industry. It attracts large numbers of extremely wealthy people who stay in local hotels, which employ people for the shooting season. The proposed restrictions would have devastated the economy.
Mr. Paice: I look forward to the Minister's confirmation of what has apparently appeared in at least one letter of reply. I have not yet written to the Minister on the matter, because the letter went to my hon. Friend the Member for South Suffolk (Mr. Yeo), who passed it to me for today's debate.
The next issue that I want to raise concerns the National Federation of Young Farmers Clubs. Hon. Members may wonder why I am digressing but, in fact, the foot and mouth crisis seriously affected that organisation. In many of the hills and upland areas it plays a vital role in bringing young people together and enabling them to share skills and knowledge. In his former career as a youth worker and subsequently, the Minister has taken a great interest in youth organisations; I am sure that he appreciates the importance of the young farmers' clubs. They have lost about £450,000 as a result of the foot and mouth restrictions, because meetings, events and activities could not take place. Mr. Peter Jackson, the president, has pursued the matter diligently. He was incorrectly informed by way of a letter to the noble Lord Carter from Baroness Hayman that the Countryside Agency would deal with the funding shortfall. However, the Countryside Agency has now clearly stated that the terms of reference laid down by Government under which it is allowed to operate do not allow it to consider the claim that has been put forward by the young farmers' movement.
I am a former member of that organisation and extremely proud of it. It has missed out on the help that the Government have made available, and I hope that the Minister will respond to its concern. I believe that either he or his right hon. Friend, the Secretary of State for Environment, Food and Rural Affairs met young farmers last week—one of the Department's Ministers certainly did.
I endorse the call of the hon. Member for South-East Cornwall for a retirement scheme. It could be introduced under the umbrella of the rural development programme and would be of benefit in some areas. However, we need a much clearer understanding of the future of agricultural policy. The Government are talking about a commission, which would be welcome, but we must avoid any regimented plan that smacks of a soviet approach. We must understand what the

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Government can do within the existing constraints of the CAP to provide for payments that are connected not to production but perhaps to environmental aims.
We must balance the demands on farmers in this country with the lack of such demands on farmers in other parts of the world. Our farmers cannot operate under the serious domestic constraints that have been imposed for valid reasons—whether to do with animal welfare, the environment or food safety—if they have to compete in the British marketplace with products from abroad that have been produced where such constraints do not apply. What matters more than anything else in our long-term vision for agriculture is how we address that issue, whether by import controls or by somehow guaranteeing a premium on prices in this country. That will be the most crucial issue affecting the viability of farming in the uplands and lowlands in the years to come.
12.4 pm
The Minister for Rural Affairs (Alun Michael): I congratulate the hon. Member for Hexham (Mr. Atkinson) on initiating the debate, which gives us an opportunity to consider again some of the serious and complex problems that were caused by foot and mouth disease. I will try to respond to all the issues that he raised, as well as those raised by other right hon. and hon. Members. I thought that he spoiled his speech at the tail end when he accused the Government of a lack of political leadership and wrongly alleged a political vacuum. He may have been referring to his own party as that comment certainly does not apply to the Government.
The hon. Gentleman should have the fairness to acknowledge that over the past five weeks we have established a new Department. Other changes in Government structures have taken a year to complete. My right hon. Friend the Prime Minister rightly said that speed is of the essence when setting up the right government structures to deal with rural affairs, the environment, food and farming in an integrated and grown-up way. It is hardly fair to suggest a lack of leadership and immediacy.
The new Department was established in parallel with other efforts to achieve a joined-up approach to food and farming, environmental issues and rural affairs. The hon. Gentleman criticised the speech of my right hon. Friend the Secretary of State for Environment, Food and Rural Affairs, but admitted that he had not read it. That speech was an early attempt to spell out the direction of policy.
We are setting up new structures and trying to look further ahead at a time when the Department's resources—not just in London, but throughout the regions—have been stretched to the utmost by foot and mouth disease and consequential issues. Some environmental issues have to be confronted immediately and my right hon. Friend the Minister for the Environment is displaying leadership in Bonn today, grappling with crucial long-term problems.
Simultaneously, we have invested massive time and effort with officials throughout the Department in tackling the immediate problems—direct and indirect—arising from foot and mouth disease. I chair the rural task force, which was established to respond to foot and
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mouth disease. It has been an instructive experience. It has proved to be a means of getting up to speed in dealing with problems across the range of stakeholders. The group has approached serious problems constructively. It met the National Farmers Union, as my ministerial colleagues do regularly, and yesterday I met several representatives of small businesses in various areas including the south-east, North Yorkshire and Cumbria.
We have all heard about the tragedy of farming families and similarly I heard harrowing accounts of how difficult it is to keep businesses going through the winter, to remain competitive and to survive into the new year. We have had to engage directly with those problems at the same time as ensuring that everyone understands the need for biosecurity to avoid the spread of foot and mouth disease. We have also tried to open up footpaths in the countryside where it is safe to do so. It is one heck of an agenda to confront in five weeks and we have tackled it with leadership and a sense of purpose. I allow the hon. Gentleman an opportunity to withdraw his criticism of my right hon. Friend the Secretary of State.
Mr. Peter Atkinson: I should like to make it clear that I was not accusing the Minister or his officials of idleness. I was able to visit the disease control centre at Kenton Bar, Newcastle and I was most impressed by the stupendous efforts made by the staff there and by the long hours that they were working.
The point that I was trying to make—in a friendly, unaggressive way—is that Ministers have caused the vacuum by, for example, not determining the policy commission. We have been waiting for some time for the policy commission to be set up; with two days to go, we still have not been given any names. The problem of upland livestock has also to be resolved. We have known about that problem, which has been raised in debate by my hon. Friends, for some time. We should have a decision by now on whether there is to be a scheme.
Alun Michael: It was worth giving way to the hon. Gentleman, first because of his acknowledgement of the hard work of the Department staff. We in the House sometimes overlook that when we visit the regions. I hope to visit several of our regional offices to see the problems directly and meet the people working there. I have been impressed by the degree of commitment that I have seen—people are coming back after having dealt with the disease, day and night, for perhaps six weeks, with their motivation intact. They say, "We must get on urgently with the farm visits and other recovery work."
Against that background of the intensity of work, I shall comment on the two points to which the hon. Gentleman has referred. There is a commitment to establish the policy commission on food and farming and for it to take a thorough look at the future. It is important to get it right. If we do not get the right people, the right structure and the right brief, the resulting inquiry may be interesting, but it will not carry us forward in the direction we want. We are determined to get it right. There will be an announcement as soon as we are sure that we have done so. The hon. Gentleman will acknowledge that a delay of a few weeks to get the right composition, structure and brief is a small price to pay.

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The comments that have been made about the need for an inquiry are simplistic. Ministers have stated clearly that their priority is to eradicate foot and mouth disease and to deal with the immediate problems. We are as seized as anyone of the need to ensure that all the lessons are learned and that the facts and issues are brought out into the open. It is always easier to say what should have been done in retrospect. Writing history in retrospect is easier than writing it as it is being lived. The facts should be brought out and the lessons learned.
We have also said that, without prejudice to the findings of any inquiry, immediate lessons can be learned from the epidemic, in regard to matters such as disease control policy for future outbreaks. The case needs to be considered for such changes as better animal identification, especially for sheep, improved movement records, controls on the movement of cattle and sheep similar to those that exist for pigs, stricter enforcement of controls on imported meat—DEFRA is coordinating a cross-Whitehall initiative to improve our record in that area—and better biosecurity by markets, dealers and farmers. A balance must be struck because wherever one imposes a restriction, in the interests of safety and avoiding problems, it causes problems for the industry, as several hon. Members have illustrated.
Mr. Paice: The Minister and his colleagues have resisted the phrase "public inquiry" that has been used by Opposition Members. I shall not go into that, but could he assure us that the inquiry will be in public even if it does not use the legal terminology of a public inquiry?
Alun Michael: It is not my place to take us in that direction. We want the inquiry to be open and effective. As the hon. Gentleman will know—because they have been trailed over many times—all sorts of issues are involved. A public inquiry has constraints. It has to be conducted in certain ways; it has time scales that may not please Opposition Members. The question of which discussions and hearings should be held in public requires consideration—I understand the distinction that a public hearing need not necessarily be a formal public inquiry; I have dealt with a number of decisions on establishing inquiries. One has to make it possible for all evidence to be given in as open a way as possible. I assure the hon. Gentleman that we want to have the right inquiry. I live in hope that when the nature of it is announced we shall have his enthusiastic support.
Mr. Curry: I hope that the Minister will tell us what he means by eradication before an inquiry, whatever its nature, because that could well rumble on for a long time. He mentioned drawing on the analogy of pigs in looking at movement restrictions for cattle and sheep. The proposed 20-day rule is based on what has been established for pigs. Can the Minister give us any insight into how the responses to that proposition are being analysed? When does he expect to reach a conclusion? Is he thinking of considering a different scheme from that originally set out, as it has evoked an enormous response? That is crucial to the future of the live option, for example.
Alun Michael: I understand the concern that the right hon. Gentleman expresses. The trouble with all such matters is that everyone wants an immediate decision. That is understandable—to someone trying to run a business and waiting for an issue to be dealt with, a delay of even a day or two can seem enormous.
The Government are reviewing the proposals on standstill movements in the light of responses to the consultation exercise, which my colleague Lord Whitty is examining. Our aim is to move from considering just the current foot and mouth disease outbreak to looking at future disease control—including the issues of biosecurity, animal identification and licensing. We intend to allow fuller veterinary and economic assessments to be carried out. In the meantime, the current movement licensing controls will continue. I am not in a position to go into further detail, but I shall be happy to write to the right hon. Gentleman.
This is the fifth debate to which I have responded in two weeks. That illustrates the seriousness of the problem and the sense of urgency that hon. Members have in raising matters on behalf of their constituents. However, since the previous debate, we have not discovered a magic wand that will suddenly resolve the problems and straighten out a complex set of issues. We have heard today about a mixture of short-term problems, medium-term—and in some cases, short-term—recovery issues, and many matters requiring a longer-term perspective and consideration of major changes in the way in which we do things. Some hon. Members, in making the case for their constituents, have included all three of those in one sentence. I shall do my best to respond, but I might jumble them a little, because they are interrelated, which goes to illustrate the complexity of the subject with which we are dealing.
The hon. Member for South-East Cambridgeshire raised, and the right hon. Member for Berwick-upon-Tweed (Mr. Beith) responded to, almost on my behalf, the problem that the estates office at Alnwick castle has identified—I am sorry if I do not pronounce that correctly, but we do things phonetically in Wales. I will try to learn.
In respect of grouse shooting, we examined the veterinary assessment of the risk of shooting parties in infected areas and took the decision, which was announced yesterday by way of news release, that grouse shooting should resume—under licence—in such areas. That means that grouse shooting will be able to go ahead in most parts of England from 12 August, through the licensing system. The veterinary assessment of the risk of shooting parties spreading foot and mouth disease resulted in a decision that the Foot and Mouth Disease Order 1983 should be amended to allow licensed grouse shooting—I stress the word "licensed"—in infected areas. No licence is required for grouse shooting, outside infected areas, but it is prohibited on premises subject to form A or form D restrictions. All shooting parties should, of course, observe basic disease control precautions, as walkers are required to do.
Licences for shooting in infected areas will not be issued for premises within 3 km of an infected premise. I am sure that that will be accepted as sensible. For the first 30 days following the preliminary cleansing and disinfection of an infected premise, shooting will not be permitted within 10 km of that premise. That is consistent with decisions that have been taken on other

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issues. The licences will be issued by divisional veterinary managers—DVMs—based at the regional animal health offices, once the Foot and Mouth Disease Order 1983 has been amended—something that we hope to accomplish very quickly. Licences will be subject to conditions, including a requirement that no member of the party should have handled livestock during the previous seven days. That will emphasise the important biosecurity precautions.
To be clear on the matter, licences will not restrict the numbers of the shooting party and there will be no change in the current provisions in the 1983 order that allow the occupier to shoot in infected areas with a party of up to three without licence. To avoid any doubt, separate measures will be brought out by the devolved administrations in Wales and Scotland. That is part of the important job of opening up the countryside, and I hope that Members are aware of the approach that the Government have adopted in relation to footpaths.
Mr. Beith: The Minister referred to form A and form D restricted areas. If shooting can take place without a licence in non-infected areas and with a licence in an infected area, what does that mean for those restricted areas? Does it mean that no licence can be obtained for an area covered by form A or form D restrictions?
Alun Michael: I believe that that is the case. The licensing system will be for those areas that are not covered by form A and form D restrictions. I am pretty sure that I have understood that correctly. I may return to the matter later, but if I do not I shall write to the right hon. Gentleman.
Where there is no need for footpaths to be closed in order to control the disease and ensure that there is adequate biosecurity, we want to see them open. It is important for people such as the individuals from Cumbria, North Yorkshire and Devon who came to see me yesterday that there is clarity about where the countryside is open, so that they can start to re-establish their businesses. Those businesses may be vulnerable during the coming winter unless they are able to reestablish them quickly.
Such organisations are subject to collateral damage in the same way as the young farmers referred to by the hon. Member for South-East Cambridgeshire. Other organisations such as the Youth Hostels Association, with which I have been associated in the past, have experienced a massive loss of income, which will affect not just their ability to keep their balance sheet in order but their ability to invest. We will certainly examine those issues. I have received a letter from the young farmers and have agreed to meet them to hear their concerns
Mr. Curry: Barely five minutes of the debate are left. Everyone is especially concerned about whether upland farmers can sell the autumn crop of lamb. Will the Minister please deal with that crucial issue and with livestock movements in the time that remains?
Alun Michael: As I said at the beginning of my speech, hon. Members have raised an enormous number of issues.
As regards arrangements for the autumn movements of livestock, I should explain in response to the right hon. Member for Berwick-upon-Tweed that an answer
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will be given to a starred question in the House of Lords today. My right hon. Friend the Secretary of State has arranged for hon. Members to be provided with the same information in a written answer. The Department has had intensive discussions with a wide range of industry interests and with the European Commission, with a view to putting in place by the end of July a strategy that would apply from 1 September. In the meantime, all possible action is being taken to eradicate foot and mouth disease as soon as possible. That will allow a return to normality throughout the country.
I was asked what eradication meant. Basically, we want to reduce the disease to a minimum in every part of the country and then to nil as soon as possible. That will be difficult, and is hard to predict exactly how long it will take. Ministers have always included in their warnings fears about the possibility of additional outbreaks—and rightly so, as I think people will agree following events in recent weeks.
Everyone involved is clear that controlling foot and mouth disease and safeguarding animal welfare must continue to be our primary concerns when considering autumn livestock movements. We are therefore proceeding on the basis of veterinary and scientific advice. Full details will be published as soon as possible, but the arrangements for the autumn will cover the following aspects: first, the possibility of holding livestock markets in counties that have been free of foot and mouth disease for three months or more and where testing has been completed—that touches on a point that several hon. Members raised: secondly, the possibility of some relaxation in the criteria covering livestock movements outside infected areas; and thirdly, the possibility of promoting the domestic consumption of lamb, in particular, and of negotiating with the European Commission for an early resumption of pigmeat and sheepmeat exports, while not disrupting the domestic food supply chain. We are formally raising with the Commission the possibility of private storage aid as an approach and have discussed with it both the possible adaptation of the livestock welfare disposal scheme to handle the disposal of surplus lambs and the possible use of quota suspension or buy-out.
I understand that hon. Members would like to hear the announcement towards which those proposals are a staging post. Quite honestly, if we could say more, we would be delighted to do so, because we are as keen as Opposition Members to be as clear as we can with farmers about the situation that is affecting them. Again, however, I am sure that it will be understood that the negotiations involve difficult decisions, and it would be wrong to rush through a decision before everything had been thought through.
The hon. Member for South-East Cambridgeshire referred in passing to a case in Wiltshire, which we discussed briefly in a previous debate. I understand that the sample has now been confirmed as negative. There has been some delay in getting that information. I do not have the full details, but I will write to the hon. Gentleman. However, it appears that the news is better than we had feared.
The right hon. Member for Skipton and Ripon (Mr. Curry) illustrated the problem that we are discussing by referring to an individual farming family, and he was right to do so. Statistics do not tell the story of how foot and mouth disease impacts on a farmer who

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loses all his stock or who sees the way in which he has conducted his business for many years being totally disrupted because of movement restrictions. As I said earlier, those involved in tourism who have laboriously built up small businesses over many years see their efforts being wiped out almost overnight. They fear that they will not get through the next winter and will not be able to develop their business again. We wish to engage with all those issues.
I have been unable to answer all the specific points raised this morning, so I shall write to those hon. Members involved.
Mrs. Irene Adams (in the Chair): Order.

Operation Lancet
12.30 pm
Dr. Ashok Kumar: I welcome the Minister to his new position in the Home Office.
My main reason for calling for the debate is that I represent a constituency where one of the country's longest running police disciplinary inquiries has been dragging on. I refer to the infamous Operation Lancet. Today's debate is my third on the subject in the past 18 months. That police investigation has involved one of the country's highest profile police officers. Detective Superintendent Ray Mallon has been blocked for nearly four years from doing what he does best—the effective policing of his community and providing a high-profile public service.
The Government were re-elected on a manifesto that promised improvement and reform in our public services. I congratulate the Home Secretary and his team on their appointments. I also congratulate them on the swiftness with which they made it clear that reform of the police service would be a key part of that wider Government commitment. Such an overall approach will be applauded throughout Britain, but nowhere more so than in the Cleveland police area, where residents have had to pick up the bill for a police force that has become tainted by greed and jealousy.
If the Minister wants to see an example of how a police force should not be run, I suggest that he visit Cleveland. I emphasise that I am not making an attack on the rank and file of our police force. They have battled on in the face of extreme adversity. No; the problem lies at the top, with Chief Constable Barry Shaw and his senior management team. The problem also rests with the police authority, which is seen by many on Teesside not as a watch dog for the public but as publicly funded body armour for the chief constable and his senior managers.
Operation Lancet was launched nearly four years ago by senior officers of the Cleveland police force, who chose to believe the word of convicted criminals above that of hard-working and respected detectives. It was a matter of extreme regret that, at that early stage, the chief constable did not follow the advice offered to him by the Police Superintendents Association of England and Wales to call in a senior officer to have a simple look and see, in order to assess the strength of the evidence. I am convinced that such a move would have confirmed within a matter of weeks what the public of Teesside already knew, which is that those rank and file officers, including Ray Mallon, were all honest, dedicated and hard-working people. Instead, in a decision driven by petty jealousy and self-interest, the senior officers, with the tacit approval of a neutered police authority and the increasingly discredited Police Complaints Authority, embarked on a witch hunt. It was a witch hunt to equal that of Salem.
So far, Operation Lancet and the associated inquiry that followed in its wake have bled local and national taxpayers of as much as £7 million. The operation has demoralised the ordinary hard-working rank and file police officers on Teesside, men and women who had previously set the standard for crime fighting in the United Kingdom. The officers suspended as a result of

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Lancet, and those officers who were questioned by Lancet investigators, have had to put up with an implied slur on their character.
Senior force managers and some members of the Cleveland police authority have been only too happy to peddle stories about severe corruption in the Cleveland force. It has been said that individual police officers traded hard drugs for confessions, beat up subjects and acted as a law unto themselves. Nearly four years on, we know that that was complete rubbish.
In Operation Lancet, 400 criminal allegations were levelled against 60 officers, 571 notices were served, 6,707 specific inquiries were made, 3,162 statements were taken, 2,444 separate officer reports were compiled and no fewer than 8,311 other documents were considered. After all that, each allegation having been considered in depth, the Crown Prosecution Service concluded that the evidence did not support any criminal charge. I ask the Minister to consider that. Would anyone now suggest that the spending of such a massive sum of public cash for no return was the best use of police resources?
The decision of the CPS should have been the end of the story, but it was not. The chief constable of Cleveland has instigated a new series of costly and long-running internal disciplinary hearings, which revisit all the Lancet evidence at great cost, I suspect, to manpower and resources. Public disquiet at the cost and length of Lancet led to the appointment of Sir John Hoddinott, the former chief constable of Hampshire and a respected man in the British police system, to bring order from chaos and to report on Lancet to the Home Secretary.
Meanwhile, Ray Mallon and some of his colleagues remain suspended. As well as having to run the gamut of the former Lancet machinery, Ray Mallon has been the victim of some peculiar and sinister practices. A highly respected civilian employee in the press section of the Cleveland police who could see what was happening was forced to resign in disgust at the orchestrated dirty tricks campaign directed at Ray Mallon from its senior ranks. The matter is now being investigated by another external police force, that of South Yorkshire. I hope that its report is near completion.
We also saw the selective leaking of a section of a highly confidential Treasury counsel report into Ray Mallon on the day after the CPS cleared him, the very day on which he was to hold a press conference to outline his views. On top of that, Mr. Mallon has discovered that operatives from a Government agency—he believes it to be MI5—have been following him. Will the Minister investigate the truth of that as a matter of urgency? If it is true, what justification can be given? Is a cleared detective superintendent a threat to our country's national security?
In the latest report on Cleveland police, Her Majesty's inspectorate of constabulary warned of the need to keep Lancet focused. It stated that the inquiry should not
"float downstream, gathering pieces of disciplinary flotsam".
Surely that has started to happen yet again. There are to be no prosecutions, and the disciplinary process takes place behind closed doors and far from any public scrutiny.
Legal advisers to the police authority have recently suggested that it instigate a series of court orders to gag the local press and hon. Members from commenting on
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any aspect of Lancet. As everyone will expect, that suggestion was treated with utter derision and contempt by the local press, which saw it as an attempt to gag free speech and comment and as part of the murky world of spin and cover-up that has come to characterise Lancet. Thankfully, for once the members of the Cleveland police authority found enough courage to tell the authors of that piece of censorship to take the suggestion back to the cesspit from which it originated. Indeed, an air of mutiny is now apparent in the police authority, as the realisation of the results of the past four years of cover-up and concealment dawns. Just a week ago, a member appointed by the Home Office resigned. Although he kept his own counsel about his resignation, I know from other quarters that it was due to his growing realisation that the authority was both unwilling and unable to hold the chief constable to account.
During the attempts at gagging orders and the first resignation over Lancet, the latest annual report of the Police Complaints Authority was published. That had a section on Lancet, which stated:
"This investigation was, perhaps, the most complex and difficult that we have ever supervised."
It continued:
"We are compiling a special report under section 79(2) of the 1996 Police Act. These reports are laid before Parliament and published".
The passage concluded:
"We may have to delay completing and publishing this report to avoid causing any prejudice to pending disciplinary proceedings."
The relevant section of the Police Act 1996 refers to matters that emerge as a result of Police Complaints Authority activities which, in the opinion of the authority
"should be drawn to the attention of Parliament by reason of their gravity or their exceptional circumstances".
I would argue that the fact that the PCA now considers the matters in question to be of such gravity that they need to be placed before the House should outweigh the timetable drawn up by the chief constable with respect to disciplinary matters. I am deeply fearful that the sheer bulk and weight of the evidence collated for Lancet, with deliberately long and drawn-out internal disciplinary hearings by the chief constable, will frustrate the will of Parliament—which is to hear the PCA's opinions on Lancet—and will prevent a proper debate on the issue.
I am aware of the reforms promised by the Home Secretary involving the framing of new legislation to open out, democratise and speed up police complaints and disciplinary procedures. I know that he is keen for a move away from the disturbing spectacle of the police investigating the police, with the Masonic and canteen-culture echoes that arise from that. I do not believe that the framing of such new measures can proceed without our taking into account the history of Lancet and without an explanation of the PCA's concerns about the handling of the issue. It would be like trying to write "Macbeth" without mentioning the character of Lady Macbeth.
I ask the Minister for some undertakings: that he will meet the chief constable and put pressure on him to speed up the Lancet disciplinary hearings and set a date for their end; that he will ask Sir John Hoddinott if he

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can give a date for his final report into matters affecting the Cleveland police as a result of the Lancet years; that he will ask the South Yorkshire police for a date for the completion of their investigation into the dirty tricks operation that has its roots in the Cleveland police; and that, on receiving the relevant assurances, he will liaise with the PCA, so that a full report on Lancet, under section 79(2) of the Police Act, can be laid before the House.
The Lancet years will help to inform a better way of dealing with police complaints and disciplinary matters. In that respect, the sense of outrage felt by the people of Teesside will have done the nation a favour. However, there must still be a reckoning and a result on Teesside. The result is needed to inform root-and-branch reform of the Cleveland police and the Cleveland police authority. The people of Cleveland want a full public inquiry into operation Lancet, so that those who cannot speak now can have their say, and so that falsehood and petty jealousies can be exposed and blame apportioned. It is essential that the mistakes of Operation Lancet should never be repeated. The taxpayer and good, honest police officers, such as Ray Mallon, must never again be treated with such contempt. I ask the Minister to give serious consideration to such a public inquiry. Those with nothing to fear would have nothing to hide.
12.45 pm
The Minister for Police, Courts and Drugs (Mr. John Denham): I congratulate my hon. Friend the Member for Middlesbrough, South and Cleveland, East (Dr. Kumar) on securing the debate, and I am grateful to him for raising issues relating to the investigation of alleged misconduct in the Cleveland police, which continue to attract interest and concern locally and nationally.
It is true that Operation Lancet has been one of the longest and most complex investigations in the history of the complaints system. The investigation, which began in late 1997 as a result of serious and disturbing allegations and counter-allegations against a number of officers, has now concluded, but disciplinary proceedings continue. Some 2,000 witness statements were taken and 44 files were generated, covering various criminal and disciplinary issues. More than 500 allegations against 61 officers were dealt with. Today, eight officers remain suspended.
Public confidence in the police service rests on its reputation for integrity. When allegations of corruption or misconduct are made and the service's reputation is brought into question, it is important that there be thorough scrutiny to establish the facts and determine what action is appropriate. Cleveland acted robustly by initiating an investigation into the allegations in this case.
I share the concern of many about the time taken to bring matters to a conclusion. The investigation suffered several serious delays, some of which were the result of a substantial number of counter-allegations by officers under investigation. Those counter-allegations were brought together under a separate investigation. The senior investigating officer for Lancet, Andrew Timpson, had to be replaced because of his personal
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situation and eventual departure from his post as chief constable of Warwickshire. He was replaced by Lloyd Clarke, the deputy chief constable of West Yorkshire.
My hon. Friend has taken a close interest in the progress of Lancet and its related inquiries into alleged corruption and misconduct in the Cleveland police. He has asked many questions in the House about the scope and cost of the inquiries, and secured two Adjournment debates—on 10 November 1999 and 13 June 2000—on the Cleveland police. Of course, at that time I was not the Minister with responsibility for such matters, but I have taken the opportunity to read those previous exchanges, as he would expect.
From an early stage, Operation Lancet was supervised by the PCA. Its role was to ensure that a thorough and impartial investigation was carried out. There has also been close consultation with the CPS throughout the investigation. The CPS completed its work on Lancet in February, and has not pressed any charges under Lancet. Of course, responsibility for the matter rests with the Director of Public Prosecutions.
To date, the total cost of Operation Lancet is about £3.25 million. However, my hon. Friend mentioned a figure of £7 million. Having read previous debates, I am aware of differing interpretations of the figures, but £3.25 million is the figure with which I have been provided. I shall perhaps endeavour to write to the hon. Gentleman to explain why our figures differ and resolve the matter once and for all. None the less, by anybody's measure even £3.25 million is a substantial sum. The cost of the operation raises questions about the conduct of such complex investigations. Of course, a major investigation such as this can place a significant burden on the budget of a small force such as Cleveland. It was in those exceptional circumstances that the then Home Secretary, now the Foreign Secretary, authorised a contribution of £1.9 million from Home Office funds towards the investigation's costs.
As I mentioned earlier, the position today is that eight officers remain suspended from duty. The suspensions may continue either until it is decided not to bring disciplinary charges, or until the case is resolved. That is a matter entirely for the chief constable of Cleveland.
My hon. Friend invited me to intervene in some way in the handling of the affair. However, if he were campaigning in the Chamber for an investigation into a scandal that he thought had occurred, he might be alarmed to think that a Minister was intervening to tell the chief constable how to conduct the investigation. Ministers can rightly say that, in such circumstances, it is for the chief constables of police forces to conduct what is, after all, an operational matter, in line with their responsibilities and accountability.
The chief constable and the PCA have responsibility for considering the disciplinary aspects of the inquiry and for determining whether any officer should face disciplinary proceedings. The review of disciplinary matters is continuing but, to date, seven officers face disciplinary charges. One detective superintendent will face 14 charges and his hearing is scheduled to be held in mid-October. The other six officers, who have heard of their charges since April, will have their hearings early in the new year. One chief superintendent and one superintendent have had disciplinary charges found against them.

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The Home Secretary, in addition to what I said earlier, has a role as the appellate authority in the disciplinary process. In the future, he may be called upon in that capacity to consider any disciplinary appeals from officers that arise from this inquiry. It would, therefore, be inappropriate for me to comment further on those matters.
My hon. Friend made several trenchant criticisms of the PCA and the current system of handling such affairs. It is true that the problems of the present system, in dealing with complex, long-running investigations, have given significant dissatisfaction within the police service. We are committed to introducing a new system, and we will have to be confident that it will be robust enough to deal with the most testing cases. If we are to build public confidence in the complaints system, there must be greater independence and openness in the way in which alleged police corruption and misconduct are investigated. We laid our plans for the system before the House in a framework document on 18 December 2000. The Government's fundamental objective is to promote public and police trust by providing an effective and efficient system for dealing with police misconduct. In the Queen's Speech, the Government announced their intention to introduce a Bill later this Session which included a provision to establish a new police complaints system.
Now that the Lancet investigation has concluded, we shall want to consider any lessons on how similar matters should be dealt with in the future. Calls have been made, reiterated again today by my hon. Friend, for an inquiry into the whole affair. We think that an independent review would help to identify the lessons to be learned from the conduct of Operation Lancet. We should then be able to take those into account in developing the details of the new complaints system.
The review will provide a detailed case study of the way in which allegations of corruption and other serious complaints against the police are investigated, by examining strategic operational decisions that were made and resources, including time management, that were utilised. My hon. Friend referred to that review as seeking to "bring order from chaos". It is important to make it clear, on the record, what the review will and will not cover. I need to be unequivocal. The review will not reconsider the conclusions of Lancet, which will continue to be the subject of on-going police disciplinary proceedings.
The terms of reference of the review were drawn up with that in mind. It may be helpful if I put them on record. They were drawn up on behalf of the Home Secretary to conduct a review of Operation Lancet and were as follows: to consider the functioning of the statutory constitutional arrangements for the investigation of corruption and other serious complaints against the police, including the roles of the PCA and the CPS; to consider Operation Lancet as a case study of how such an investigation is managed strategically and operationally and to consider the process by which decisions were taken during the investigation, and the extent of resources and time used; and to make recommendations for the future investigation of police complaints. The review will
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consider the issues arising from the conduct and management of the investigation and will not reconsider any of the matters of substance that were the subject of investigation. The review will not consider issues relating to the substance of allegations of misconduct about individuals or any such new allegations.
As my hon. Friend knows, Sir John Hoddinott, the former chief constable of Hampshire, has been asked to carry out the review. I am grateful to my hon. Friend for acknowledging the respect in which Sir John is held. That is helpful while we await the review.
We carefully considered the timing of the review. We listened to the police authority and the chief constable, who had expressed concerns about its timing and the risk of prejudice to on-going disciplinary proceedings. However, to learn the lessons in time for the new complaints system, the review had to start immediately. I am satisfied that the terms of reference will separate the disciplinary process from the review. Although I have not been able to give the dates for which my hon. Friend asked, I hope that I have reassured him that we will try to take Sir John Hoddinott's conclusions into account when drafting legislation later this year for the new complaints procedure.
I understand that some proposals were put to the police authority that suggested restrictions on the way in which some information would be made available. The position is that the police authority, like any other public body, considers many reports, including proposals offered by officials and advisers. However, on this occasion, the authority made it clear that it was not prepared to support any proposal relating to the consideration of court orders or media coverage of investigations. That has been emphasised in a statement issued by the chair of the authority, which underlined its commitment to the principle of open government. The authority cannot be criticised for having a paper tabled by its advisers. It has made its position on the proposal clear.
Finally, I should like to address the allegations made by my hon. Friend the Member for Middlesbrough, South and Cleveland, East about the involvement of the security services. He will be aware that the policy of successive Governments has been neither to confirm nor deny whether the security services have been involved in any specific operational matter. The investigatory powers tribunal, headed by Lord Justice Mummery, provides a robust redress mechanism for people who wish to complain about the activities, or alleged activities, of the security services.
Dr. Kumar: Before my right hon. Friend concludes, may I remind him of the PCA's report on Lancet? He has not commented on that and I hope that he has not overlooked it.
Mr. Denham: Given the time remaining, it would probably be better for me to write to my hon. Friend on that point.
I end by acknowledging my hon. Friend's continuing concern about the issue. We too want to find out what can be learned from Operation Lancet to ensure that we can incorporate those positive lessons in the new complaints system.

Rail Strikes (Southend)
12.59 pm
Sir Teddy Taylor: One of the joys of these Westminster Hall debates is that troublesome Back Benchers such as myself can sit on the Front Bench—a pleasure that I have not experienced for at least 21 years. The other piece of good news for the Minister is that I do not hold the Government to blame in any respect for the issue that I am about to raise.
The issue is nevertheless serious and significant, and I hope that the Minister and his Department will take an interest in it and promote a solution. The problem relates to the c2c rail service, which links Shoeburyness near Southend to Fenchurch street station. It is a commuter service that is used to transport about 25,000 people to London every day. Sadly, the service is a shambles this morning, with only about one third of the trains running, due to industrial action by the National Union of Rail, Maritime and Transport Workers, which is holding its third one-day strike. A warning has been given that another such strike will take place on 1 August.
It is terrible when those strikes happen. I have before me a form, which I was handed yesterday in Southend and which contains the amended timetable for the RMT strike. The Minister will see that about one third of trains are running, which means that people are going through misery. The strike is not of train drivers, who are members of ASLEF—the Associated Society of Locomotive Engineers and Firemen—but of guards, who are members of RMT. In most industrial disputes the onus is on both sides to solve the problem, but the circumstances of this case are unusual and their character could justify Government action.
Many local residents use the c2c service. I often use it, and my secretary uses it every day. After privatisation, it was originally called the LTS line. Before privatisation the line was unbelievably bad; its services were so spasmodic that it became known as the misery line. After privatisation there was a dramatic improvement in the service, which may have been due to the work of a wonderful manager called Ken Bird and to the new signalling that dealt with many of the problems, and commuters were delighted.
The new contract holders who ran the service were formerly known as the Prism company, which is now part of the National Express Group. Prism decided that that improvement was not enough and that the line should be made into a magnificent new railway that would be an example to the world. It decided to replace the old rolling stock with wonderful new trains called 357s, which were manufactured by a company based in Derby called the Bombardier group—like all companies nowadays it has a complex name. Both Bombardier and c2c assured us that the new trains would be a wonderful way of travelling, but when they arrived they constantly broke down. The difficulty related to computer software, but that reassured neither the public, whose services were disrupted, nor c2c, which had to bring out the old trains.
We have been trying to sort things out for about 12 months. I met a senior c2c executive for two hours in the Commons last night and he was optimistic—as the company has been for so long—that 46 of the 76 new
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trains would be operational soon. Of course, I hope that his confidence is justified but in the meantime the Railway Travellers' Association and the Rail Passengers' Committee have produced an angry report asking why, given that passengers travelled on the first of the wonderful new trains on 1 August 2000, those trains, of which only a handful are operational, are used only spasmodically on off-peak services. That has created many problems for the travelling public.
I have received many letters from constituents who heard that I was initiating this debate. One such letter, which summarises the problem, came by fax a few minutes before the start of the debate. It is not from one of my constituents, nor even from somebody who lives in Basildon—I see that the hon. Member for Basildon (Angela Smith) is here representing her constituents. The fax outlines the basic problem: the
"standard of service we now endure has declined significantly in the past 12 months on this line.
The many problems relating to the introduction of the new 'Electrostar' trains are well documented, and I will not repeat them in detail, but it has caused real problems with delays, short formation and over-crowding. It also means that the old slam-door stock continues to be used in a rapidly deteriorating state…Just last Friday I was in a train in which the toilet had overflowed and water was spilling through the carriage. That cannot be acceptable, nor can it be right.
I would also add that trains arc now frequently late arriving into London. Most mornings recently trains have been between 10 and 15 minutes late. In the past we would have received an apology and an explanation. Now we are simply greeted by silence. I wonder if' there is even an unofficial 'go-slow' in operation, as almost every day for the last two weeks we have been delayed, which is poor even by c2c's standards.
The late night service is also poor."
I could read out to the Minister seven such letters that I received this morning outlining the seriousness of the problem. The Government, either themselves or through their contact with Railtrack, may be able to help in relation to one aspect of this tragedy: lines used to test new trains. It may seem ridiculous, but in Britain we do not have a proper test rail on which new trains can be fully tested. The c2c company and the manufacturers have had to send one of their new trains abroad for testing—not to America, Germany or any of the places where one might expect superb test facilities, but to a country called Czechoslovakia. It is quite a task to transport a Southend train by lorry to that part of eastern Europe, and there may be a case for a test rail in the UK. As the Minister will be aware, the increasing emphasis on public transport means that we will probably have many new trains, and it would be a great idea if we could try them out.
What about today's crisis? As the company was endeavouring to bring in its exciting new trains—some of which were four-carriage, some eight-carriage and some 12-carriage—it decided that it should contact the unions about manning arrangements. After long discussions, the company and RMT came to an agreement that the four and eight-carriage trains would be driver-only with no guard but that, because it was accepted that 12-carriage trains were different, a guard would be provided for them alone. In exchange for that arrangement, which was of course helpful to the company, c2c agreed that there would be no redundancies of existing guards, all of whom would be offered guard duties on the 12-unit trains, or alternative

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jobs. Furthermore, a 4 per cent. pay rise was agreed in addition to the normal pay increases, and the company said that it would endeavour to give more attention to the presence of staff on trains to protect the travelling public from problems or dangers.
As the agreement with RMT had been signed and agreed, the company went ahead with a pretty massive investment programme on the facilities required for driver-only trains. When I asked people at my meeting last night how much the company had spent, they would not tell me but said that it was a lot. It includes cameras and special mirrors at stations that enable the driver to check that everyone has got on and off and that everything is okay for the train to start off again.
However, all of a sudden, after the agreement had been signed and all the investments had been made, RMT stated that things had changed—it had to have guards on all trains and would be initiating strikes to secure its position. In the subsequent strike ballot, fewer than 50 per cent. of RMT members voted in favour of action—nevertheless, that provided the required majority. Ballots are very complicated things, as we in the Conservative party know these days.
The situation is difficult to understand, because driver-only trains are not a unique discovery that is being tried out only in Southend. I have been phoning around, and such systems are operated on several lines—for example, WAGN and Thameslink—with no apparent problems. Moreover, the famous Cullen report did not in any way argue that driver-only trains created safety problems. In fairness, I have not read the report in detail, but that is what I have been told.
Where do we go from here? RMT has never been regarded as one of the troublemaking unions. I have always considered it to be one of the more sensible and responsible unions, although it probably shares my basic sin of being suspicious of change. I hope that the Minister can tell us whether the Government believe that the strike is lawful, bearing in mind that it is in breach of an agreement signed by the union.
I do not want to involve the Government in controversy, but legislation is involved and it would speed up a solution if, first, they could make an assessment and say whether the strike is lawful. Secondly, bearing in mind the hardship suffered by the travelling public and the impact on the use of rail transport, there might be some merit in the Minister seeking a meeting with both parties. Although that might set a precedent inasmuch as he might find that other people want him to become involved in trying to solve other problems, it could be worthwhile in this case. I cannot see what damage would be done because everyone would be on his side. The union is not a bad union consisting of a crowd of wild or difficult people; it is worried about something and that is creating a nightmare for the company.
Although c2c has problems with the travelling public, as all companies do, it seems to consist of reasonable people who have spent a fortune trying to improve the service. Things have gone wrong with the trains, but those people are not a bad crowd. I believe that the travelling public would appreciate the Minister's intervention because they are suffering greatly, not just from today's strike, but from hold-ups and cancellations caused when employees do not work
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overtime. The 7 o'clock train from Southend always seems to be delayed or cancelled, and the 7.30 train, which should be a fast service, becomes a slow one and stops at every station. The amended timetable for today states that
"no c2c peak services will call at Upminster or Barking on this day."
Many people want trains to stop at Upminster and Barking, but today they did not do so. The timetable continued:
"no c2c trains travelling from London will call at Limehouse or West Ham on this day."
West Ham connects with one of the new underground lines, so it is important.
Thirdly, would the Minister feel justified in asking the union to try to resolve the problems without having to inflict so much hardship on the travelling public? We must all try to do something. Let us hope that before long, the new trains will be working well and that relations between management and employees will be fully restored.
The vital issue is public transport. The Government want to encourage more people to use trains and to discourage them from using cars, as did the previous Government. I am told that even Mr. Ken Livingstone takes a similar view in London and would like everyone to travel by train. The number of people travelling on the c2c line has increased steadily and in the interests of the general public and the environment we want to encourage that. We do not want to return to the old misery line.
I have probably spoken for too long but I have two minutes left. As someone who uses the line, I know, as does the hon. Member for Basildon, that it used to be terrible. It then improved, but is now becoming bad again. Although the Government are not directly responsible, the Minister could help if he thought it appropriate. The dispute is not between nasty people who are looking for rows; it has arisen because everything seems to have gone wrong. If the Minister thought that something could be done, the travelling public and I would be very grateful.
1.14 pm
The Parliamentary Under-Secretary of State for Transport, Local Government and the Regions (Mr. David Jamieson): I congratulate the hon. Member for Rochford and Southend, East (Sir T. Taylor) on securing the debate. During my brief tenure in this job I have appeared often in this Chamber, and the hon. Gentleman is the most distinguished Member to whom I have had the pleasure of replying in a debate. He said that after 21 years he has reappeared, unofficially, on the Front Bench, and I am trying to weigh up whether the developments in the leadership campaign have advanced the possibility of his return to the Front Bench. I look forward, Mrs. Adams, to the day when I can call you Madam Deputy Speaker, but that may be reliant on developments in another part of the House. I, too, note the presence of my hon. Friend the Member for Basildon (Angela Smith) who has been a forceful representative of people in the area and has vigorously made points to me about the line, for which I am grateful.

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The Government greatly regret the problems that passengers have suffered on all lines in recent months and the further inconvenience currently being experienced by c2c passengers. I share the view of the hon. Member for Rochford and Southend, East that RMT is a good union, which is well represented. I shall refer to c2c's performance of its contract. It is unfortunate that passengers have been so inconvenienced.
It might be helpful if I briefly explain the background to the dispute. It relates mainly to RMT's concerns about the role of guards on trains and the introduction of more driver-only operation. The rule book lays down safety procedures to be employed in the movement of persons and rolling stock in and around the operational railway. A change to the rule book in October 1999 removed the requirement for guards to protect failed trains and requires them instead to look after passengers.
Railtrack and the train operating companies believe that the change improves rail safety. The Health and Safety Executive had no objection to the change on safety grounds and believes that it helps to clarify the respective roles of drivers and guards in emergencies. However, RMT is worried that that reduces guards' responsibility, adversely affects safety and will lead to more driver-only trains and to job losses for guards. Accordingly, RMT is seeking changes to the rule book to reflect its concerns. In addition, RMT wants train operators to give a commitment not to increase the existing number of driver-only trains.
RMT balloted the 22 operators of trains with guards and proposed industrial action. RMT members voted in favour of industrial action and 24-hour strike dates were set for Monday 25 June and Wednesday 4 July. However, before the first of those dates the dispute was settled with all train operators other than Midland Mainline and c2c. The position of Midland Mainline was subject to a court judgment, which subsequently ruled that the RMT ballot was unlawful. Leave to appeal was not granted so the strike action could not take place on Midland Mainline. RMT agreed before the first strike date that their requested changes to the rule book should first be considered by the relevant groups in Railway Safety, the appropriate body in such cases. It is important to note that, unlike previously, RMT is now represented with other stakeholders on those groups and is able to make a full contribution to the debate. It is for hon. Members to reflect on whether we would be in the present position if it had been involved earlier.
The sticking point relates to the commitment that no more driver-only services should be introduced. All operators, with the exception of c2c, were able to give the commitment sought by RMT as they had no plans to introduce additional driver-only services. However, c2c had always intended to employ driver-only operation on the new rolling stock now being introduced and believed that it had an agreement with RMT to that effect. That is the agreement to which the hon. Gentleman referred. However, RMT does not share that view and there is a difference of opinion between RMT and c2c on the validity of the agreement. The company therefore feels unable to give the commitment that the RMT is asking
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for on driver-only operation until the matter is resolved. The result is industrial action, culminating in a strike today and another planned for Wednesday 1 August.
Although I appreciate the hon. Gentleman's frustration and that of his constituents and others along the line with the apparent impasse, the validity or otherwise of any existing agreement between the RMT and c2c is a matter for the parties involved to resolve and not one on which I or anyone in my Department can rule. It is a contractual arrangement between the two parties, and we have no locus in the matter. Ultimately, it may be for the courts to resolve whether the agreement has any standing.
I am pleased to say that, as the hon. Gentleman points out, some services have run today. However, many services have not run, and there has been considerable inconvenience to people on the line. I note that to mitigate disruption and give passengers the most up-to-date information, emergency timetables were handed out in advance by c2c to passengers at stations and posted on the c2c website, and real-time information is available on passenger information screens at c2c stations. However, I realise that there have been difficult journeys for passengers travelling into the City on strike days. For example, trains are not generally stopping at Barking, Upminster or Ockendon, where alternative, underground links are available into the capital, as the hon. Gentleman said in relation to West Ham. I regret the inconvenience that that creates for passengers travelling from those stations and the increased pressure that results on already busy underground routes in other areas.
The roles of guards and drivers in particular circumstances on the railway are a matter for the safety authorities, the trade unions and the managements of the privatised rail companies. The hon. Gentleman may appreciate that, as the dispute does not involve contractual issues relating to the franchise, there is no direct locus for the Government or the Strategic Rail Authority to intervene.
The latest performance figures published by the SRA, which cover the six months from 15 October to 31 March, show that recently c2c has performed better than nearly all other operators, with 84 per cent. of services arriving on time. Only the Island line surpasses that level of performance. The speed restrictions imposed throughout the network post-Hatfield have not particularly affected c2c, but its performance remains 2 per cent. down compared with the previous year, partly due to difficulties with new rolling stock.
The spring 2001 national passenger survey revealed that 72 per cent. of c2c passengers are satisfied with the service overall, which is the same as the figure for the previous spring. However, only 38 per cent. of passengers believe that c2c offers value for money. That is an 8 per cent. increase on the previous spring, but it is still low. I am sure that the hon. Gentleman's constituents were pleased that the standard day return from London to Southend Central was reduced from £12 to £10.60 with the introduction of the May timetable. The seven-day ticket remains £58, the same as a year ago.
The hon. Gentleman referred to some rolling stock problems. I am sure that I need not remind hon. Members that Ministers have made it clear to rolling

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stock manufacturers that late delivery and poor reliability of new stock are unacceptable. Technical problems with c2c's new rolling stock caused widespread disruption and overcrowding, especially on peak services. Faulty electrics and software problems rendered the new trains unreliable and prone to breakdown.
The majority of units could not be introduced by their contractual date and as a result the SRA negotiated a package of passenger benefits with c2c to compensate passengers for the late introduction of the new stock. That included an increase in the order of new units from 44 to 46, and a commitment to procure a second tranche of 26 new four-car trains to be delivered and in service by 30 June 2002, replacing the remaining slam-door stock.
The hon. Gentleman asked about the testing of trains and about them being sent to the Czech Republic. I appreciate that he has feelings about things the other side of the channel. We are aware that the network generally and the train operators and manufacturers have limited capacity to allow the timely testing of new vehicles. The lack of a suitable high-test track makes vehicle testing time consuming and logistically difficult. The SRA is therefore looking at the feasibility of building a new test track in the United Kingdom. We are all mindful that that is important not just for train users, but for British jobs in train manufacturing.
Returning briefly to rolling stock delivery, c2c has a franchise commitment to introduce 45 of the 46 units into passenger service by 31 July 2001, and the remaining units by the end of September 2001 once winter testing has been completed. I am pleased to confirm that c2c is now in the final stages of its fleet acceptance and the introduction should be completed
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on time. The second tranche of class 357 units is in production now. The first units for testing are expected in the next few weeks. The company is confident that it will have the second tranche fully in passenger service by spring 2002. It is clear that there is a lot of work to be done and that will be achieved only if the rail industry works co-operatively to deliver real improvements for passengers right across the network.
The hon. Gentleman asked whether we could set up a meeting. Years ago he probably would have accused us of having beer and sandwiches, but sparkling water and canape"s may be more appropriate these days. The matters that have to be resolved concern the agreement that is said to exist between c2c and RMT. As it is so clear what the difference of opinion is about, it would be inappropriate for us to intervene at the moment, but that does not mean that we will not have considerable concern if the dispute continues, so we hope that it can be resolved soon. The Government must remain impartial, as we have no locus to intervene. Any further industrial action on the national railways would of course be regrettable, and I hope that both sides will make every effort to achieve a quick resolution, exploring all avenues for settling differences so as to avoid further industrial action and inconvenience to passengers.
I am grateful to the hon. Gentleman for raising the matter today; it is of considerable importance to his constituents and to all the people along that line. I thank him for the measured way in which he did so. It is a sign of our changing relationship here that these things are discussed calmly and sensibly, and I am pleased to have responded to him. If he feels that there are any matters that I have not considered in detail and if the dispute is on-going, I and my officials will be pleased to meet him to discuss the matter further.

New African Initiative
1.29 pm
Hugh Bayley: I welcome my hon. Friend the Member for Leeds, Central (Hilary Benn) to what I believe is his first full debate as a Minister. I was very pleased when he was appointed to his new job. The appointment will obviously be good for him, but I am sure that it will also be good for the United Kingdom and our international development policies.
According to the Order Paper, the debate is entitled "Millennium Africa Programme". When I sought the debate just 10 days ago, the initiative had that name, but when it was launched last week in Lusaka at the 37th summit of the Organisation of African Unity, it changed the name to the new African initiative. For the sake of clarity now and in years to come, I hope that Hansard will retitle the debate accordingly.
I shall try to explain why we should take an interest in Africa. Politics is a pragmatic business. Its first rule is to concentrate on what matters to the people whom we represent. The second rule is to concentrate on what we can do something about and change for the better. Africa matters to Britain and its people, including my constituents, for three reasons.
First, Africa has a presence in the UK, and there has been contact between this country and Africa for centuries. Many people of African origin have settled here. Indeed, this country has many people of African origin whose families have been settled here for centuries, and for many years people from this country have settled in Africa.
Much of our music, particularly popular music, has clear roots in Africa. We can trace it back through the black music of the United States and the music that came across the Atlantic in the middle passage. Many of our artists take inspiration from Africa. Picasso and Henry Moore used to draw African carvings and so developed their art.
At one level, there is a bit of Africa in all of us: human beings first evolved 3 million or 4 million years ago in Africa. However, humans first emigrated from Africa only 100,000 years ago, when they crossed into the middle east. The first humans came to Europe only 40,000 years ago. Human beings have therefore been in Europe for perhaps 1 per cent. of the time that we have been on earth—a tiny proportion of the time of human history.
Secondly, we need to take an interest in Africa for humanitarian reasons. Churches, charities such as Oxfam and Christian Aid and campaign groups such as Drop the Debt say that we politicians and representatives have a responsibility to help people in poorer parts of the world. They are right to say so, and we should respond.
As an Under-Secretary of State for Social Security for a time, I, among others, had some responsibility for the programme to tackle poverty in Britain. It is a terrible fact that when we came to power four years ago, one child in three born in the UK was born into a household living in poverty, which is defined as one living on less than half of average incomes. That is a serious issue, and our constituents are right to tell us that charity begins at home. We need to address issues of poverty in the UK and we do.
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However, charity does not begin and end at home, because we have responsibilities to other human beings throughout the world. The poverty faced by almost half the population of Africa, who live on less than US$1–60p or 70p—a day, is quite different from the poverty faced by people in Britain. As a result, many Africans do not have access to basic human needs and things that we take for granted, such as clean uninfected drinking water, an adequate diet, basic primary education and primary health care.
Thirdly, we need to take an interest in Africa for reasons of self-interest. Britain wants access to Africa's minerals and agricultural products. For example, chocolate could not be made in my constituency without the ingredients being imported from Africa.
The whole world faces enormous environmental problems such as global warming and problems caused by infectious diseases, such as HIV, but we should remember that 90 per cent. of the world's AIDS orphans live in Africa. Malaria, too, wreaks a terrible toll on Africa's productivity and may become a problem in Europe if global warming gathers pace. If malaria was eradicated, it is estimated that Africa's gross domestic product would increase by about 15 or 20 per cent. Problems such as the trade in illicit drugs and human trafficking have no respect for national frontiers. We cannot protect our interests in Europe if we ignore problems abroad.
It is in Africa's interest that it should seek solutions to those problems. African leaders must take the lead; it is their continent. But it is also clearly in our interest to work in partnership with them to look for solutions. I am especially glad that we have a Prime Minister who has risen to the challenge, who has taken a lead in the developed world in pressing for debt cancellation, and who, at the end of the present spending period, will have increased our aid budget by some 70 per cent. In 2004 it will be 70 per cent. higher in real terms than it was in 1997. The Prime Minister has made refocusing our aid on poverty reduction a primary aim.
The Prime Minister told the Millennium summit at the United Nations last September:
"We need a new partnership for Africa in which Africans lead but the rest of the world is committed; where all the problems are dealt with not separately but together in a coherent and unified plan."
Speaking in Edinburgh during the general election on 25 May, the Prime Minister pledged:
"If elected for a second term I will make Africa a major personal priority and a priority for a Labour Government."
For the first time in a generation we have a Prime Minister with a strong personal commitment to Africa, and at the same time a new generation of African leaders who are committed to thorough economic and political reform and to doing things differently, which is what is needed.
Since decolonisation, Western aid to Africa has created many development successes, but we must accept that in macro terms western aid policy on Africa has failed. So, indeed, have the economic and development policies pursued by African leaders: the average output per head in Africa is lower now than it was 30 years ago. To achieve the international development targets set by the Secretary of State for International Development, to which she persuaded

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other developed countries to subscribe—one of which was to halve the proportion of people in the world in extreme poverty by the year 2015—will require 7 per cent. annual growth between now and then. That is a difficult target to meet; even the best-performing economies in Africa—the modernising, forward-looking, reforming countries—are achieving only about 6 per cent. growth. We need to go further.
The Government have recognised the need for change. Since its creation, the Department for International Development has substantially changed the role and remit of British aid, with the focus on aid to the poorest. That change of focus was explained in detail in the two White Papers that the Department published in the last Parliament.
This debate is about the new African initiative, which was launched last week at the Organisation of African Unity summit in Lusaka. That initiative is important because it comes from Africa, is led by Africans and involves Africa finding solutions to its own problems. In a speech at the Guildhall in London in June, the South African President Thabo Mbeki said:
"We accept that the buck stops with us and cannot be passed to others. But we also know that without your sustained involvement with us, we will not succeed."
I cannot summarise in a few minutes everything that is in a 27-page document, but I can tell the House why I was impressed with what I read. The new initiative talks about what Africa will do to tackle Africa's problems. It talks about strengthening conflict prevention and macroeconomic stability. One reason why African growth is low is because job creation is poor and investors are concerned about the lack of economic stability and the potential for losing their investments. We now have African leaders who recognise that they must address the economic conditions if development is to succeed.
The initiative talks about instituting transparent legal and regulatory frameworks for financial markets. I have spoken to people who want to do business in Africa but find that they do not know where their company stands in law. It is important for them to know that otherwise they find it difficult to do business. As well as speaking about basic financial structures and addressing the financial problems, the initiative discusses the basic development task of extending education, training and health care. It considers gender equality and the problem of establishing law and order, which is extremely important in Africa.
I was impressed that the initiative does not begin and end with aid. Aid accounts for some 5 per cent. of the gross domestic product of sub-Saharan Africa, while economic endeavour accounts for the rest. If progress is to be made, it must be done through home-grown economic development, albeit with support from the aid of western countries. The new initiative calls for thoroughgoing economic and political reform in Africa, but also for reform in the west. It asks us to examine the trade barriers that we impose and the farm subsidies that make it impossible for African countries to export agricultural produce to us, and to examine the terms of debt relief. Aid is included in the document, but it is much lower down the list.
We should consider trade. Africa is home to 10 per cent. of the world's population, but accounts for only 2 per cent. of world trade. In 1997, export earnings in
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Africa rose by 2 per cent. only to fall in the following year by 16 per cent. Why did that happen? Out of the 48 sub-Saharan African countries, 39 are dependent on only two primary commodities, with agricultural produce and minerals accounting for 50 per cent. of exports. There is a pressing need for African countries to increase and diversify their exports, but their ability to do so depends on us. For every exporter, there must be an importer and, unless we change trade policy in Europe, Africa's opportunity to meet the development targets that we set will be severely compromised.
I was extremely pleased by the response on 4 July of the Secretary of State for International Development to my parliamentary question. She listed a wide range of activities within her Department to strengthen the capacity of developing countries to make sure that their interests are properly represented at international trade negotiations. Our Government must be level-headed about the new African initiative. There have been many bold African development initiatives in the past. The Lagos plan of action in 1980, like many others, was launched with a fanfare of publicity but did not achieve real results. The new African initiative will work only if it is led by reforming and modernising African leaders, and we should work with them to make a success of it.
The Prime Minister said in an article that he wrote jointly with Thabo Mbeki in The Guardian on 14 June:
"The British government has committed itself to this initiative and we will work to persuade others in the international community to join us."
The Prime Minister will raise the initiative at the G8 summit in Genoa this weekend and has invited Thabo Mbeki to attend the summit and speak from an African perspective about why the initiative is necessary.
The most interesting and attractive feature of the new initiative is that it is not just about aid. It is about trade, investment, financial liberalisation, democracy, transparency and conflict prevention. It is a crosscutting policy and, to do justice to it, we must formulate a cross-cutting response. Will the Minister ensure that his Department raises the trade issues with the Department of Trade and Industry? Will he raise African concerns about EU food subsidies with the Department for Environment, Food and Rural Affairs? Will he raise the ambitions in the African initiative for a global health fund with the Department of Health?
I know that there is already good interdepartmental working between the Department for International Development and other Departments on many issues. The Secretary of State for International Development chairs the committee for the Africa conflict prevention fund. I recognise that the machinery of Government is for the Prime Minister, but will my hon. Friend draw this debate to the attention of No. 10 so that the Prime Minister can consider how to co-ordinate in a crosscutting way all the UK Government Departments that need to examine their policies in relation to the Africa initiative to ensure that we as a Government pull in the same direction?
1.47 pm
The Parliamentary Under-Secretary of State for International Development (Hilary Benn): It is a great pleasure to respond to my hon. Friend the Member for

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City of York (Hugh Bayley). He raised a most important and topical subject, and I understand that his long interest and great expertise in development matters will now be at the service of the International Development Select Committee, whose membership we were able to agree on Monday. I particularly warmed to his reminder of the patterns of migration around the globe, in which Africa played an important part, because it encourages us to reflect on our interdependence and the fact that globalisation actually started a long time ago.
As my hon. Friend said, the challenges facing Africa are enormous. He referred to the 600 million people in sub-Saharan Africa who live on less than a dollar a day. Whereas during the past 30 years Asia has significantly reduced poverty, Africa has not. Its share of world trade is just 2 per cent., and 40 per cent. of Africa's savings leave the continent. Partly as a result of that, it is short of investment. It faces trade barriers, especially in agriculture. I assure my hon. Friend that we constantly raise the points that he made about trade, not least in arguing that the World Trade Organisation should take them on board in considering topics for a new round. Above all else, Africa urgently needs economic growth. My hon. Friend reminded us that to reach the international development targets Africa has to grow at 7 per cent. a year, but it is currently achieving just under half that, which is barely enough to maintain income per head.
To complete the list of challenges facing Africa—as if that list were not enough—there are many obstacles to economic growth and sustainable development, including poor governance, corruption, unfinished or unstarted reform, conflict, debt and HIV-AIDS, in regard to which, as my hon. Friend will be aware, the Government have announced that they will contribute $200 million to the global health fund, and in Brussels last week I argued that the EC should make a significant contribution. We may have further news at the Genoa summit. On its own, HIV-AIDS is a catastrophe for the continent and is a subject worthy of debate in its own right.
Rising to such a challenge is exactly what the new African initiative is all about. Its existence as an initiative represents recognition by the countries of Africa that they must do something for themselves to change the continent's future. The initiative brings together the Millennium Africa plan, the Global Compact and the Omega plan. Some joins are visible, but through the medium of last week's Organisation of African Unity summit the initiative now has "Made in Africa" clearly stamped on it. We want more exports stamped "Made in Africa", which will be a sign that economic progress is being made. That ownership, the fact that it comes from Africa, is the most important aspect of the initiative. I agree with my hon. Friend that without that sense of ownership the necessary change will be much harder to bring about.
Like my hon. Friend, the Government warmly welcome the principles on which the initiative is based—especially the commitment to democracy and human rights, which is an essential building block of stability. We welcome the explicit recognition of the importance of investment in economic growth and trade to bringing
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about the requisite change. We welcome the fact that the initiative sees both the potential for poverty reduction and the need for greater equality—an objective of which we must not lose sight. The last time that my hon. Friend and I were in this Chamber we were debating poverty in the United Kingdom—the first debate on that subject for about 20 years.
We welcome the recognition of mutual interdependence and the need for global governance, global rules and an international financial institutional framework to support countries in transition. We welcome the fact that the initiative embraces international development targets and poverty eradication as a long-term objective. We recognise that it does not shy away from recognising the scale of the problems facing Africa, particularly in political and economic governance. It is candid about the fact that action needs to begin at home and it has several constructive proposals for reforming the relationship with donors to create a more equal partnership. We would all readily sign up to those principles. The question, however, is how they will be delivered. As my hon. Friend put it: what shall we do to support the initiative? In the remaining time I shall deal with that issue.
One of the most profound changes in development policy took place under the leadership of the Secretary of State for International Development, and my hon. Friend kindly referred to her leadership role since 1997. I refer to the recognition that in the long term we do no favours to developing countries by running parallel structures and delivering services through our own direct aid effort and that of other donors unless we also encourage, support and enable developing countries to do it for themselves.
Africa probably provides the greatest regeneration challenge in the world. If the effort springs from within, there is a much greater chance of success. To answer my hon. Friend's question about the first contribution that we can make, it is in fact the one that we are already seeking to make—to focus on countries with large numbers of poor people and Governments committed to the principles of change set out so clearly in the initiative. That means supporting better governance, pro-poor economic growth. conflict prevention, better health and education, sustainable management of the environment and improved infrastructure, and creating a climate in which business can do good by doing good business in those countries.
If we want signs of progress—it is always important to remember progress because that gives us the heart to rise to the next challenge—we should consider Uganda, Tanzania and Mozambique, Mozambique is the fastest growing country in Africa. Where things are not working, the scale and nature of our intervention will need to be different, not least because so many countries in Africa are emerging from or still are in conflict. Stability is the essential building block of progress. Without stability, one cannot address the other issues.
Under the heavily indebted poor countries initiative, the total amount of debt relief already agreed for African countries is $25.5 billion. There is more to come for the remaining countries. provided that we can deal with the issue of conflict. In saying that Africa is a priority for the Government and the Prime Minister—in the light of the two speeches cited by my hon.

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Friend—we are putting our money where our words are. DIFD's bilateral programmes in Africa have almost doubled in size, from £297 million in 1997–98 to an estimated £594 million in 2000–01 and will grow further to some £687 million by 2003–04. That is, by any measure, a substantial commitment of resources. It is particularly important when one considers that overall international aid flows to Africa are declining. Another question that we need to ask as a result of the debate is what contribution other countries will make to that process, including how we can get more private investment into infrastructure improvement in the African continent.
That brings us neatly to the dialogue that is needed to increase the momentum created by the agreement of the initiative, starting at the G8 summit in Genoa in a few days' time. We need to be honest about the fact that there will be much hard talking. Some tensions are laid bare in the initiative between different countries in Africa. We need to be realistic about the scale and timing of donor support, and we need to consider carefully how the initiative can work with existing cooperation at national and international level to spread
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best practice. We are particularly interested to see how the institutional framework proposed by those who have signed up to the initiative will work in practice. One needs those mechanisms to make a difference and to turn the principles into reality. The challenges are enormous but not insurmountable. Africa has much to gain from that process through increased trade and investment, better infrastructure and communications and greater access to knowledge. To reap those benefits in the months and years ahead will require much political will and commitment.
I conclude by quoting the succinct conclusion of the document. It states:
"In proposing the partnership, Africa recognises that it holds the key to its own development. We affirm that the African Initiative offers an historical opportunity for the developed countries of the world to enter into a genuine partnership with Africa, based on mutual interest, shared commitments and binding agreements."
We agree with that. It is an opportunity that Africa, and we, cannot afford to miss.
Question put and agreed to.
Adjourned accordingly at two minutes to Two o'clock.