Westminster Hall Sitting of 28 November 2001

Preamble
[SIR MICHAEL LORD in the Chair]

Poverty (Rural Scotland)
Motion made, and Question proposed, That the sitting be now adjourned.—[Mr. McNulty.]
9.30 am
Mr. Peter Duncan: I welcome the opportunity to place before the House the subject of the growing divide between urban and rural Scotland. I also welcome the time afforded to me to outline the issues that must be addressed before significant social problems overrun Scotland's rural communities.
The past four years, since 1997, have seen a welcome development towards attempting to address the causes and symptoms of poverty in all its forms, although I suspect that I shall differ with the Minister on the success or otherwise of the Government's strategy.
It is often said that society is only as good as the manner in which it treats its most impoverished, and I welcome the fact that poverty has been placed higher on the political agenda. However, in my constituency—and in many others, I suspect—the feeling is developing that although poverty in general may be increasing in importance in political debate, another form of disadvantage is routinely not given the priority that it deserves. It cannot be permitted that some who struggle to make their way in life are deemed deserving of multi-agency help, while others remain perceived as less deserving of attention, even though their suffering and isolation may be just as traumatic and difficult to overcome.
The kind of poverty that I routinely encounter in Galloway and Upper Nithsdale is no less deserving than that in city centres and other urban conurbations throughout the United Kingdom, which so often hits the headlines. The poverty that I encounter may be more difficult to tackle, but that is no reason to forgive a Government who ignore the problem just because its solution may require more imagination and result in less direct political advantage.
I draw the House's attention to three main aspects of poverty as it affects rural Scotland. First, financial poverty exists in remote communities in as serious a form as in any city centre. Secondly, we are routinely blighted by poverty of opportunity caused by declining local infrastructure, which places rural communities at a severe disadvantage. Thirdly, there is a worrying trend towards poverty of ambition for all that rural Scotland could be.
I need not brief the Minister of State on the social geography of my constituency, because he is a neighbouring Member, but some statistics may help to put my comments into perspective. Galloway and Upper Nithsdale is one of the most rural constituencies in the United Kingdom. It represents two thirds of the land area, but less than half the population, of the Dumfries and Galloway region, which has 147,000
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residents and is spread over 2,500 sq miles, and is the third largest region in Scotland. The population density is only 60 people per square mile, compared with the Scottish average of 168, which the Minister will appreciate is already well below the UK average.
Apart from Stranraer, which has 10,800 residents, Galloway has no settlements of more than 5,000 people. That is not an extreme example. Many other Scottish constituencies that are similarly disparate are represented by hon. Members present today.
The Minister of State, Scotland Office (Mr. George Foulkes): And Ministers.
Mr. Duncan: Yes, and Ministers, too.
Those striking population figures directly affect people's ability to access services and agencies' ability to deliver them. Employment opportunities in parts of rural Scotland are few and far between and are, on average, very poorly paid. Employees in Dumfries and Galloway have the lowest average earnings of people in any local authority area in Scotland. The region is heavily dependent on agriculture and tourism, both of which are seasonal and low paid, and were in decline even before foot and mouth disease devastated the area. In Galloway and Upper Nithsdale, the unemployment rate is 4.7 per cent., which is above that of Dumfriesshire and the national average.
As a crucial part of my argument, I must scotch once and for all the myth that the rural regions of Scotland are populated by well-off farmers and contented pensioners. The devastating decline in farming incomes of the past few years has greatly affected constituencies such as mine. Farm businesses remain very small and are often managed or run by more than one generation of the same family. As one attends the auction marts that have, blissfully, restarted following the devastation of foot and mouth, the most notable aspect is the average age of the participants. Generally, they are not slick, executive agribusiness men, as the most vociferous pressure groups would have one believe. In the main, the participants are of advanced years and attend markets every year because, principally, they cannot afford to retire. Even the meagre incomes to which they aspired three or four years ago have evaporated with the collapse of many of their markets. The average hill sheep farm derived an income of less than £350 for the entire year 2000–01. That figure belies the image of farming prosperity. The national minimum wage is irrelevant to the self-employed farmer on such average incomes.
Jim Sheridan: The hon. Gentleman says that the Government do not give rural poverty the priority that it deserves. In a past life, I campaigned to save the agricultural wages boards, which the Conservative Government considered abolishing. Does the hon. Gentleman accept that that campaign to save workers' wages in rural areas was correct? I am offended by his comment that the national minimum wage is irrelevant to farmers.
Mr. Duncan: With respect, the hon. Gentleman misunderstood my comments. I said that the national minimum wage is irrelevant to self-employed farmers who were on an average income of £350 during 2000–01. That occurred before the foot and mouth outbreak.

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The Government could have done more to avert the decline of Scotland's agriculture businesses. In recent years, many businesses' problems have derived from exchange rate movements that have made United Kingdom exports less competitive, which led to a massive drop in prices achieved at auction. However, on too many occasions, the Government systematically refused to claim the agrimonetary compensation to which farmers were entitled. Ever-heightening bureaucracy and red tape have led to escalating costs, reduced incomes and increased poverty.
Sir Robert Smith: I agree with the hon. Gentleman about the problems of the high pound and the Government's failure to obtain more agrimonetary compensation. Does he recognise that the Government are failing to look to the future? The adoption of a single currency in the rest of the European Union means that the replacement of agrimonetary compensation with a different scheme has not been thought out or negotiated. It is crucial that the poorly paid farmers in both of our constituencies receive a fair price for their exported products and a proper exchange rate for support payments from the European Union.
Mr. Duncan: Yes, I absolutely agree. I simply observe that that is why agrimonetary compensation was introduced, and the lack of claims is of no credit to the Government.
Agencies that are geared towards central belt disadvantage find it difficult to tackle such financial poverty. However, employment opportunities are few and far between in an area where high fuel costs have made profitable business creation a declining art form. As a result, many local residents have never been employed. Even on the dole, however, the substantial disadvantages of rural life become all too clear. To give one example of many, benefit claimants in Upper Nithsdale where, as the Minister knows, the mining industry closed substantially in the 1950s and 1960s and where many families have been without work since, face a round trip of more than 60 miles to the benefits office in Dumfries. As a result, the take-up of some benefits is horrendously low.
Those attending mandatory jobseeker's allowance interviews may spend a full day travelling to attend a half-hour interview. Nationally, the number of 16 to 19-year-olds who are not in work, training or education—currently 14 per cent.—is worse than when the Labour Government came to power. In some parts of rural Scotland, that proportion is even greater.
Hon. Members must remember that the rate of local unemployment to which I referred earlier is in an area where mothers face the impracticality of returning to work, as child care provision is sparse. Many of those who in urban Scotland would be registered unemployed are unable actively to seek work because of their child-care commitments and are therefore hidden within the unemployment statistics of 4.7 per cent. in my constituency.
The Government have good intentions towards the reduction of poverty, but they must undergo a change in attitude away from their perpetual bias towards the
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resolution of urban social problems. Only yesterday, in his autumn statement, the Chancellor of the Exchequer announced a new initiative aimed at kick-starting investments in "deprived areas" and the abolition of stamp duty on business and property transactions of up to £150,000 in such areas. That is a fine initiative, capable of delivering real economic improvement.
On further investigation, however, I found that, of the 135 council wards in Scotland that are classified by the Government as deprived, only two are in Dumfries and Galloway. Hon. Members will not be surprised to learn that 58 are in Glasgow alone. The allocation of financial relief is based on the Government's deprivation indices. They militate deliberately against rural deprivation in favour of classic and appalling—I do not doubt that it is appalling—urban poverty. Until that bias is dealt with, social problems in the countryside will continue.
By anyone's standards, the problems to which I have referred are symptoms of severe financial poverty. What is even moire worrying than that financial struggle is the poverty of opportunity that is a feature of rural Scotland. Opportunity has fallen away as small communities have suffered. As average incomes have collapsed so, too, have the communities who depended on them. The key institutions in each small village used to be the corner shop, the post office, the local garage and the primary school. On those entities were built the bones of a sustainable community.
Given the extent to which such sustainable communities are vital to the avoidance of poverty, one would have thought that this and the previous Government would have done all in their power to avert the cycle of decline that has set in. Regrettably, to a significant degree, the Government have been part of the problem, not part of the solution. With whatever little income was left, farming communities have endeavoured to support local service industries. Low-paid local employees have endeavoured, wherever possible, to support their local businesses, yet the same local businesses have had to face escalating costs combined with declining turnover.
For many communities, the other source of significant income was tourism, whereby at least for four or five months of the year, additional income was derived from visitors. Yet, once again, such micro businesses have seen trade collapse, first through the increasing drift towards Scottish tourism, such as Edinburgh and Glasgow city breaks, which I am convinced remains the main marketing objective of our tourist industry north of the border. They then faced the devastating outbreak of foot and mouth disease, which has blighted Scotland's rural economy this year—we must not pretend otherwise.
The major causalities of foot and mouth disease have been the thousands of hotels, bed-and-breakfast accommodations, corner shops and local garages. They have faced the collapse of their turnover with no direct compensation from the Government, who so mishandled the crisis. The Chancellor of the Exchequer announced yesterday that the cost to the UK taxpayer of foot and mouth disease was £2.7 billion. The most enduring legacy of this period has been the loss of many businesses in Dumfries and Galloway, to say nothing of the spin-off effect throughout Scotland.

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The plight of our sub-post office network—another type of micro business—deserves attention. The Minister will recall that we have crossed swords on that issue before. For the foreseeable future, the post office will, remain the key access gateway—the Government like the word "gateway"—to the many other opportunities and benefits that our society seeks to provide. Yet, as has been so widely documented and empirically shown by an increasing rate of closure, the Government's proposal for change is stimulating what can be described only as an implosion in rural communities. The proposed changes to the benefits system scheduled for 2003 are resulting in unprecedented numbers of sub-post offices either closing, or contemplating closure, leaving isolated communities further removed from the mainstream of our society.
The community garage, too, has suffered ever-increasing regulation. Its competitive disadvantage has been heightened by the Government's perpetuation of the fuel price escalator, which has ceased to be a tax on pollution and become a significant disincentive to living in rural Scotland. Not only do rural fuel stations have to contend with prices at an historic high, with tourist traffic declining; they also have to face the continuing burden placed on them by European legislation on fuel vapour emissions.
The picture is one of the fabric of existing rural communities being systematically dismantled by a combination of events within and outwith the Government's control. Were it not for the poverty of ambition in building countryside communities for the future, that would not be so worrying. We face a continuing decline and an ageing of the population in rural Scotland. That demographic time bomb will continue to tick for as long as the problem is ignored.
Government at all levels shows a worrying acceptance—somewhat fatalistically—that decline is inevitable. A classic example can be found in the proposal, currently before Dumfries and Galloway council, to close 42 primary schools. That proposal is perpetrated partly on the basis of cost, but also on the basis that population is declining and school rolls are falling. Nothing guarantees falling school rolls more than the closing of schools.
Central Government need to initiate a debate that focuses on the potential of our countryside, rather than simply on managing its decline. For example, the Government have a long way to go to make teleworking a real possibility, wherever in Scotland a person lives. We must appreciate that the young families of the future will not return to rural Scotland if the small village schools that they crave have been closed for some years.
The Government's policy has more than a passing resemblance to the mistakes made under Mr. Beeching. If we are to avert long-term increases in poverty, our rural areas must seize the opportunity provided by the telecommunications explosion. I have high hopes for the future of regions such as mine, which could offer a combination of high-quality telecom networks combined with the basic attractive requirements of rural life. Unfortunately, yet again, rural Scotland seems to be in the main excluded from the telecommunications revolution that could be the key to its revival.
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The picture of rural poverty is, I hope, becoming clear. I should like the Minister to respond to the debate with imagination and a constructive understanding of the problem that is developing. My contention is not that rural Scotland is experiencing only financial poverty—as I have said, rural incomes have declined hugely in recent years, in many cases to a level that makes the national minimum wage seem attractive—but that there is a new, emerging poverty: poverty of opportunity. Residents of Newton Stewart, Sanquhar, Blairgowrie or Wick are to a large and increasing extent significantly excluded from the opportunities that are developing for the vast majority of their fellow UK citizens. The Government's initiatives to encourage people to take public transport to work are laudable and to be encouraged, but they are of little comfort to people whose community is 10 miles from the nearest bus service or 40 miles from the nearest railway station. The Government's proposals to provide child care to encourage mothers to return to work are to be applauded, but they are of little consequence when local child care is non-existent.
I fear for the poverty of ambition for our countryside that is proving such an unhelpful contribution to my and other attempts to reverse our declining population. Rural Scotland has much to contribute to the UK. It is more than a playground for the discerning few who seek it out year after year; it is still a living, working area with huge social problems that the Government must tackle. I trust that they will do so over the remainder of their term, and I hope that the Minister will signal that change of heart in his reply.
9.52 am
Mr. David Stewart: I congratulate the hon. Member for Galloway and Upper Nithsdale (Mr. Duncan) on initiating this important debate. He has a keen interest in rural areas. I know his constituency well, having worked and served there for five years. In my youth, I was a councillor in the old Nithsdale district, and I have fond memories of working there.
I am delighted to make a brief contribution, as I have been interested in poverty in rural areas for a couple of decades, having spent more than 20 years in social work in rural areas with the poor, the unemployed and the dispossessed. As hon. Members will know, my constituency is the largest Labour seat in the UK. It covers more than 3,000 sq miles and includes the islands of Rhum, Muck, Eigg and Canna, as well as the isolated splendour of Knoydart, of which many hon. Members will be aware, the grandeur of Ben Nevis and the breathtaking beauty of Loch Ness. If that is not a good tourist advertisement, I do not know what is.
As someone who was born and brought up in the highlands, I know first hand some of the problems of rural areas, such as sparsity of population, distance from markets, cost of and access to services, isolation, poor transport and low pay, to mention a few well-understood factors that contribute to rural disadvantage. It would, however, be slightly over-simplistic to portray rural and urban dwellers as two separate, distinct tribes, like something from central casting for "The Lord of the Rings". We need a strong, successful economy geared to Scotland's long-term interests. That would be good news for Scots, no matter where they live.

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It is ironic that Scottish Conservatives talk about rural poverty and cry crocodile tears. I am reminded of the last Tory Government's economic record: 3 million people unemployed; interest rates at 15 per cent.; a national debt that doubled; record evictions, and record repossessions in rural areas as well. Some 3,500 post offices were also closed under the Tory Administration. If Conservatives Members care so much about the poor, the low-paid and the unemployed in rural areas, why did they fight tooth and nail to stop the national minimum wage being passed? That was one of this Government's finest achievements.
I remember being up all night, along with other hon. Members, just to go through the Lobbies and make sure that we had a national minimum wage, which is a tremendous life jacket for the poorly paid and the exploited. The national minimum wage has what British economists would call a virtuous circle. What does that mean? The extra spend created by the national minimum wage is spent in small towns and villages, in local shops and post offices and on local goods. The multiplier effect therefore helps the local economy.
Why did the Tories fight to the last ditch to oppose the new deal—a hand up rather than a hand out for the unemployed? The Tories would have denied that help to the 1,200 young and long-term unemployed people in my constituency who have joined the new deal since the 1997 general election.
What will the Government do about fighting poverty in rural Scotland? First, it is important to stress the importance of getting the big picture right before focusing on anything else. What is the big picture? High and stable growth and employment are needed, along with low and stable inflation and interest rates. What is the next step? It is not a question of one size fits all; we need a basket of solutions to deal with rural poverty. For example, in relation to the minimum wage, we must ensure that work pays. We must develop the new deal, focusing on the young, the long-term unemployed and the over-50s. Let us not forget those who are disabled. Statistics in the UK show that more than 1 million people with some form of disability would want to work, and that, with enough support, some 400,000 could be in the job market.
Mr. Dominic Grieve: I want to pick up on something that the hon. Gentleman said about the minimum wage. I understand his view that the minimum wage was designed to stimulate the economy in local areas. However, he will agree that, even with the minimum wage, the situation in rural areas is worsening. The minimum wage has not therefore had an impact on that. I dare say that the reason for that is the crisis in agriculture. Does the hon. Gentleman agree with that? Does he therefore also agree that the minimum wage on its own will not be the panacea that he seemed to suggest that it was?
Mr. Stewart: I thank the hon. Gentleman for that intervention. It is important to stress that we need a basket of solutions. The minimum wage on its own is not a solution to all our problems. Evidence from the United States and from other industrial countries with a
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minimum wage suggests that, when it is set at the right rate, it is an important anti-poverty structure because it makes work attractive for many people who would not otherwise be in employment. I know people who work in the hotel trade in my constituency, whose wages were doubled when the minimum wage was introduced. Clearly, we must get the balance right, because employers also create wealth in rural areas. I therefore do not agree with the hon. Gentleman, as it is important to have a national minimum wage.
Let us not forget some of the other measures that have been introduced. The working families tax credit is vital because it makes the jump from no work and benefits, to work and no benefits. It is important to tackle the poverty trap, which is evident in rural Scotland.
The Government have made new proposals. The employment tax credit will help half a million people in the UK who have no children, and is worth up to £35 a week. That is an important anti-poverty strategy. As the Chancellor made clear, we want to ensure that a further 1 million children are taken out of poverty, and our longer-term aim is to eradicate child poverty within a generation.
The British social attitudes survey reported that 71 per cent. of those surveyed were in favour of topping up the incomes of the low-paid through tax credits, so we need to continue looking at that. The minimum income guarantee has been a great help to pensioners in rural areas and is now linked with earnings, which is important.
Annabelle Ewing: I was interested to hear the hon. Gentleman's list of Government proposals, which he says will make a difference to the plight of people suffering in rural Scotland. Do the Government propose to reduce fuel duty? Scotland has the highest fuel duty in the industrialised world, and that has a devastating impact on the whole of Scotland.
Mr. Stewart: I had intended to discuss transport later, but I shall make a couple of points now. The Government reduced the escalator—[Interruption.] The hon. Lady asked a question, and I am happy to answer it.
The Government are promoting environmentally friendly fuels, such as liquid petroleum gas, which, as a result of my personal experience, I have been very keen on in rural areas. Its cost has been preserved, so that rises in its price are lower than the inflation rate. The Government have developed a rural transport policy, the funding of which will lead to the opening up of transport links throughout rural Scotland. It is important to address the long term, and I shall develop that point later.
Sir Robert Smith: I have been running take-up campaigns in my constituency to help people to access the minimum income guarantee. Is not one of the challenges in rural areas to ensure that people claim such benefits—complex forms often have to be completed—by providing them with information and support?
Mr. Stewart: The hon. Gentleman makes a valid point. During my previous life in social work, I was very

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keen on maximising the take up of benefits. The Government are introducing low-cost helplines that provide a one-stop shop for retired people: they can call a central number to find out what benefits they are entitled to. It is important that we maximise take up; one of the advantages of the £200 winter payment is that, because it is a universal benefit, the take up has been high. A crucial challenge for the Government is to ensure not only that we offer good benefits, but that the take up of them is maximised. New technology provides the answer to many of the problems that face us, especially in rural Scotland.
Sir Robert Smith: Many people who apply for such benefits are refused at the first hurdle, so that they have to appeal. Does the hon. Gentleman recognise, from the evidence of his own casework, that the process of appeal is much enhanced if someone is present to assist? The collapse of funding for independent advice centres has major implications for the availability of access to such advice in rural areas. Therefore, it is crucial to link up with the Department for Work and Pensions, as a reserve power, so that some of its resources are used to ensure that people make the best use of the system that is designed to help them.
Mr. Stewart: With regard to appeals, all of the evidence suggests that representation increases the chances of winning. We must take account of the excellent work that is done in Scotland by independent advice agencies and citizens advice bureaux—I declare an interest, as I used to be a CAB volunteer—which, although they struggle for funding, do a fine job and can help maximise take up. I am enthusiastic about the work that they carry out in rural Scotland.
Let me return to my basket of solutions. I mentioned the minimum income guarantee, but we should not forget middle-income pensioners—people who have some savings and occupational pensions. The pensioner credit will help many such pensioners in rural Scotland. Finally, I wish to flag up the importance of the integrated tax credits that the Government will introduce, as joined-up thinking is important in the fight against rural poverty.
The hon. Member for Galloway and Upper Nithsdale said that economists sometimes talk about the poverty of opportunity, and the hon. Member for Perth (Annabelle Ewing) asked about that with regard to transport in rural areas. I welcome the work that the Scottish Executive have done. The rural transport fund is now worth £18 million over three years, and 350 new or enhanced services have been introduced, particularly bus routes, and—as I am aware from my constituency—ferry links, which are crucial.
Let me offer an example from my constituency. Money from the rural transport fund has enabled the Grantown community car scheme to be set up. It works simply: elderly, unemployed and low-paid people are provided with links to shops, and to hospitals to visit relatives. It is a good example of what can be achieved in areas without a bus service; crucial links are established so that normal community life can continue.
Rural poverty in Scotland is being tackled by social inclusion partnerships. I offer another example from my area. The Highlands and Islands social inclusion
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partnership aims to equip vulnerable youths with the skills that they need to make the transition to adulthood. It targets young people in fragile rural communities, such as the Highlands, Orkney and the Western Isles.
The Scottish Executive's report on poverty suggests:
"Many of the root causes of poverty and social exclusion are the same wherever people live, urban and rural settings alike."
There is strong evidence, however, that development of information and communication technology can overcome social exclusion and poverty in rural areas. It is clear that barriers to work, such as lack of child-care facilities, remain a big issue throughout rural Scotland. Access to services such as rural post offices is vital, which is why I welcome the Government's formal requirement that the Post Office maintain the rural network and prevent avoidable closures until 2006.
By far the most important factor, however, is rigorous economic management during global slow-down, combined with strong Government redistribution to those in poverty. As Bharti Patel, director of the Low Pay Unit, said:
"There has been a welcome focus on raising the incomes of the poorest people. The benefit system has become far more generous than under the Tories."
In their first term, Labour were the most redistributive Government since the 1960s. As a result of changes to the tax and benefit system, the incomes of the poorest 10 per cent. of the population rose by 13 per cent., and the incomes of the next poorest groups rose by 10 per cent.
There can be few higher goals for this Government than fighting poverty across Scotland. Scots in rural and urban areas need a Labour Government not just for economic competence but for social justice.
10.6 am
Pete Wishart: I, too, congratulate the hon. Member for Galloway and Upper Nithsdale (Mr. Duncan) on securing this important debate. My constituency is similar in size and geography to his, although I would of course contend that mine is much more scenically attractive.
I know at first-hand the suffering caused by what can only be described as a rural recession, or even a depression The outlook for the rural economy in Scotland has never been so bleak. There is real pain out there, and there seems little prospect of any significant improvement. Every sector of the rural economy and every countryside activity is experiencing real difficulty. Farming, tourism, food production and even rural manufacturing are struggling in an environment that is clearly deteriorating.
My constituency is dominated by the large rural industries of farming, food production and tourism, but unfortunately we have a Government who seem almost blind to the suffering in rural communities. So far, they have been unable to respond to rural communities' clear appeals for help. Perhaps uniquely in the economic cycle, the first port of call for the impending economic slow-down or recession will be our rural communities. When the chill wind of recession blows, it is usually heavy industry and urban concerns that catch the first cold. This time, it is our rural economies and countryside that will catch that cold—if they are not already suffering from pneumonia.

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Rural activities such as farming, food production and tourism are already suffering because they have been weakened by high fuel costs, foot and mouth disease, the BSE disaster and an unfavourable exchange rate. Those industries are now highly susceptible to changing economic circumstances that cannot be offset by the hard work, endeavour and forward planning of employees. Those who work in such industries have to confront pressures that are completely outwith their control. Our rural communities have faced blow after blow, and many are on their knees.
In her evidence to the Scottish Affairs Committee, the Scottish Executive's then Communities Minister admitted that one in four people in poverty lived in rural areas. According to a report published by the Scottish Executive in May 2000, earnings in rural areas tend to be below the Scottish average. The Government also concede that farming incomes have reduced by some 90 per cent. since the mid-1990s. A 200 hectare farm that earned £80,000 a year five years ago must now survive on an income of £8,000. That is a spectacular loss of income. One would think that, on being presented with figures such as those, the Government would develop many strategies and approaches to offset the problem, but all that we get is complete inactivity.
We must not talk about the crisis in rural Scotland solely in terms of farming and agriculture, because there is much else that goes on in those communities. Highland Perthshire and the Angus glens are in my constituency and they almost entirely depend on tourism for economic viability.
Tourism has had an awful year—more than that, it has had an awful five years. It is worth some £0.25 billion to the Scottish economy and, at its height, it employs about 8 per cent. of the Scottish workforce. This year, however, the Scottish Tourism Forum estimated that in March £10 million was being lost every week in tourism. While that may be a problem for the whole of Scotland—I have no doubt that urban settings suffered because of foot and mouth—its impact on rural communities is disproportionate. In my constituency, hoteliers are considering moving out and people who run bed-and-breakfast accommodation have had only a handful of bookings this year. The potential offered by tourism in Scotland is enormous—especially in North Tayside, where there are so many scenic attractions—if only the Scottish Executive could see that. We must get people there and start to treat tourism as an important industry that is crucial to the well-being of the Scottish economy.
We must not overlook the contribution of manufacturing to our rural economy. It is doubly important because there is evidence of a prevalence of low-skilled, low-paid employment in rural areas, as well as a large number of seasonal and part-time jobs. Manufacturing provides a career for young people and is a means of keeping them in our rural communities, but it is hurting. During the past few weeks, some 30 manufacturing jobs have been lost in my constituency. If that happened in an inner-city area, it would concern few apart from those families involved and would impact little on the local economy. However, to lose 30 jobs in a rural setting—a town of between 5,000 and 8,000—is an almost unsustainable crisis.
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I have spoken to managing directors who have had to announce job losses, and I have discovered the increased costs of manufacturing in rural areas. Distances from markets create high fuel and logistical costs. Small manufacturers are under boardroom pressure to relocate to the central belt in out-of-town modern facilities, close to the motorway network. There is also a lack of support from the enterprise network, which seems to be more interested in assisting inner-city initiatives. People talk about social exclusion and deprivation in cities; what about the evidence of real poverty, social exclusion and deprivation in the countryside?
The closure of factories, with the loss of associated jobs, means that young people are becoming unemployed. Their prospects of finding work in another industry in a rural setting are practically nil, given the situation that confronts them. I maintain that unemployment in rural Scotland is a worse prospect than unemployment in an inner city. Benefit take-up is also a problem due to the lack of provision and information on how to claim benefits. Rural people are proud, especially farmers of a particular generation, for whom claiming benefits has a stigma attached. A self-reliant culture in our rural communities and the countryside inhibits people from coming forward to claim the benefits to which they are entitled. Thus in addition to visible poverty, a strata of people live in hidden poverty. Unemployment is the most crucial element of that, which is why job creation is so vital.
Small businesses and other rural industries must be created and supported, and barriers to employment, such as the red tape involved in creating a business, must be addressed and overcome. We must hold on to our young people because they are the life blood to rural communities. Educated and skilled workers must be retained.
I agree with much of what the hon. Member for Galloway and Upper Nithsdale said about failed Labour policies in the countryside, but we must go back further to pinpoint when the crisis began. I suggest to the hon. Gentleman that the BSE crisis, and the appalling way in which the Conservative Government handled it, was the first blow. The countryside never fully recovered, and it made subsequent blows all the more difficult to sustain. I remind the hon. Gentleman that it was the Conservatives who introduced the fuel price escalator, which has had a great impact on rural communities. Perhaps, it is the biggest burden that the countryside has had to endure.
Car dependency is, perhaps, the best example of how rural poverty is substantially different from urban poverty. When assessing poverty in urban areas, car ownership is considered indicative of a better standard of living, but in rural areas, a car is more likely to be seen as a necessary financial burden that gets a person from A to B. That burden is further exacerbated by high fuel costs in Scotland and the fact that fuel is even more expensive in rural areas.
Our rural areas are going through a period of profound change. For the first time in a generation, we have the opportunity to map out a new type of future for the countryside. Unfortunately, that opportunity has been presented to a Government with little interest in rural affairs. If we do not get it right, there will be a second wave of clearances in rural Scotland. Many

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talented young people are already leaving owing to the lack of opportunities. For many people, Scotland is our hills and glens. Let us ensure that the strategies are put in place to retain our talented young people and effectively to tackle poverty in rural communities.
10.15 am
Mr. Archy Kirkwood: I am happy to take part in this important debate and I congratulate the hon. Member for Galloway and Upper Nithsdale (Mr. Duncan) on securing it.
I listened with interest to the contributions of the hon. Members for Inverness, East, Nairn and Lochaber (Mr. Stewart) and for North Tayside (Pete Wishart). We all have a common interest in trying to look forward when dealing with the issues that face our constituents and our country. It is not instructive to look back or to try to allocate blame for what went wrong and for which Government were responsible. It is better to focus on the problems that face us in the future.
Depopulation is a problem that is unique to rural areas—it does not affect urban and city populations. The hon. Member for North Tayside mentioned the highland clearances. That is rather extreme language. However, depopulation is a spectre that will continue to haunt our communities unless the right long-term planning policies are put in place through central Government working with other agencies. I have reservations about the extent to which central Government can solve such problems in a top-down way, and they are always, understandably, tempted to put their name on initiatives and new policies. Many issues are better dealt with if they are devolved and decentralised to local government, the voluntary sector and corporate entities—some companies are now shouldering their social responsibilities, which is welcome.
The massive changes simultaneously experienced by the agriculture, forestry and fishing industries have created difficulties, and it is hard to be optimistic about what will happen in any of those three sectors. I suspect that we will end up with much larger farm units—agribusinesses instead of family farms—that the fishing communities around our coasts will face increasing resource conflict in terms of stocks and the catching capacity of the fleet, and that the forestry industry will remain in a state of flux owing to the high level of the pound and competition from other parts of the world where production costs are lower.
The future of our rural communities must be considered against that background. Unless policies are put in place to deal with it, employment will continue to suffer attrition. In my constituency, particular problems are faced by men who have worked on farm units for generations as tenants dealing in livestock. The combination of BSE, foot and mouth disease and a series of other problems is putting them under a degree of pressure that I have not seen in the past 20 years. Central Government must deal with that, but I am not sure that the Scotland Office is in the front line of policy making. If I were the Minister, I would spend a lot more time trying to get the Department for Environment, Food and Rural Affairs to understand that the agriculture industry in Scotland cannot be left to market forces in the way that parts of it can in some areas of the
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United Kingdom. Scotland Office Ministers have much work to do with the Minister for Environment and Rural Development in Edinburgh to try to give some hope and security to the farming, forestry and fishing sectors.
Depopulation and the future of the farming industry are integral issues when planning to deal with poverty in rural areas. I was interested to hear, and agree with, the remarks of the hon. Member for North Tayside on manufacturing industry. We might not have large-scale manufacturing sectors in our rural constituencies, but pockets of small-scale manufacturing industry need to be nurtured and supported. Most operate in niche markets. In my constituency, the textile industry has passed through a difficult phase in the past few years, exacerbated by such things as the banana war. That industry has a contribution to make, and needs help from central Government in securing trading conditions.
I agree with the hon. Member for Inverness, East, Nairn and Lochaber that we need to keep the big picture in mind. The big picture of economic stability is integrally important, but with skill, innovation and creativity, central Government can help industries such as the textile industry to flourish. I am pleased to see Ministers making good use of Dover house for trade promotions in a way that plays to the industry's strengths. I hope to see more useful initiatives of that kind.
On the wider issues of poverty and social security, I do not subscribe to the view that there are differences between urban and rural populations, and I would not encourage people to create such differences. The issues are generally the same. Looking at the incidence of incapacity benefit take-up on the west coast, and the epidemiology of heart and lung, and other, diseases prevalent in that area, it would be a dereliction of duty if central Government failed to concentrate on such problems. However, it is not an either/or situation. Getting a basic framework within which people can operate is the way forward, and whether one agrees with the policy or not, it is irrefutable that, since 1997, the Government have at last had a policy: welfare to work.
I support that welfare policy. Work for those who can and security for those who cannot is a catchphrase, but it encapsulates a changing culture that I warmly welcome. However, I am becoming concerned about implementation problems, which apply in rural areas as well as everywhere else and revolve around the means testing now being used and the complex interrelation of some benefits.
That leads on to the points made by hon. Members earlier about take-up and eligibility. People can test their eligibility and do a better-off calculation to find out whether they will do better in low-paid work. Although the Government's strategy is heading in the right direction, difficult problems will emerge if we do not take account of the fact that we have moved away from a social contributory system where people, through national insurance contributions, pooled risk, paying in during periods of employment when they had an income and drawing out when they did not. Call me old fashioned, but that concerns me. The classic Beveridge system set: up after the second world war has been abandoned by default.

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New plans coming from the Treasury, such as those for tax credits, are making matters more complicated. From 2003, we shall have the employment tax credit, the pensioner credit and the integrated child credit. By that time, the national insurance contributory principle will have been all but abandoned. That has happened by default, and we should have a discussion on the long-term consequences of that change for welfare and social security in rural and other parts of the country.
Another recent, significant change is the increase in the disparity of wealth, which is as much a feature of rural as of urban life. People face much wider scales of wealth disparity, and the Labour Government are encouraging it, which surprises me. Central Government, the Prime Minister and the Chancellor seem to have no concern at the increasing disparity. Those who are rich are becoming very much richer and those at the bottom of the pile are becoming disproportionately and relatively poorer. I am not saying that people are starving. The indicators of poverty are relative, not absolute, and we must be careful not to get matters out of proportion. However, I fear that if we are not careful we shall end up with great disparity of wealth, which is more obvious in a rural than an urban context. We should be careful about that because it will make matters significantly worse.
Since I was elected in 1983, I have become increasingly convinced that there is no evidence base on which to make informed policy decisions about the incidence of poverty in rural areas. I make no complaint about that—it is not a party political point. The statisticians are challenged because statistical samples are often difficult to obtain in a disparate population. I believe that the Secretary of State, with whom I have had one or two informal as well as official conversations, understands the problem. In my constituency, the unemployment claimant count is useless as a measure of anything. Unemployed people go away: they do not hang around in Hawick or Galashiels for six months; they go to Edinburgh or Newcastle. That is not necessarily so in inner cities because the population is more stable in urban areas, but in rural areas there is a predilection and an incentive for people to leave. The statistics and indicators used to calculate local government spend are not secure or robust. If I had one wish this morning it would be that we were all better provided with robust data on which we could plan for the future.
I was pleased that the Scottish Executive's rural poverty and inclusion working group, which has been working on some of these issues for the past year, produced a report in September 2001. One of the key messages in that report is that the evidence base is insufficient and that a particular problem in rural areas is that people tend to move away and remove evidence of the problem. The group identified that as a difficulty and I hope that the Government will put some resources into investigating the problem. We would all be better off if we had more robust data.
During the 18 years that I have represented Roxburgh and Berwickshire, the nature of the working economy has changed substantially. When I was elected in 1983, there was male domination in the proportion of those employed. Work was full time, highly paid and highly
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skilled in industries such as textiles and electronics. We have now moved to more casual employment with more women in the workplace, which is good, often in part-time and casual work. I was startled when I first came across two-earner households that are still living in poverty, but that is a regular occurrence now. In 1983, households with two people bringing in wages were relatively well provided for. It is true that average earnings in rural areas are much lower than in other parts of the country. I am not too bothered about that by itself, but I am bothered about the fact that, following the decimation in the manufacturing and agriculture sectors, the new type of jobs that people are finding is part-time, casual work in the service sector. Although they are bringing two wages into the household, they are still struggling and falling in and out of poverty.
I welcome the fact that the Government have recognised that problem by introducing the working families tax credit, which will be a significant help. The minimum wage has also been a significant help, because it has put a wage floor under some of those casual and part-time jobs.
The adage is, "Work for those who can", but just because people are in work, it does not mean that they are well off. Even in two-earner households, people are classified by any meaningful relative measure as falling in and out of poverty. Benefit levels are not designed or high enough to support families over periods of time, particularly those with children and loan families with children. It is possible to live a serious life with proper inclusion for weeks or months—perhaps it is not easy, but it is possible—but the benefit system does not adequately cope with big household items having to be replaced. Some families are in real distress as a result.
Families now drop in and out of poverty. It is not just the number of families that are in poverty that is worrying, but the way in which they fall in and out of poverty and the length of time that they are below the level that it is sensible to live on.
The issue of debt in my constituency is frightening. I do not know whether it is just a rural problem. I suspect that it may be even worse in our cities. The extent to which people are now using catalogues, money lenders and loan sharks to get by from week to week is frightening. It is now a culture. Again, there has been a substantial change since I was elected in 1983. People are being encouraged to go into debt. People are knocking on their doors and saying, "How about a loan to pay the loan, to pay the loan?"
Those people need proper access to advice. Central Government should look at how to encourage agencies such as the citizens advice bureaux to help in that regard. Excellent work is done by welfare rights officers in local government in my constituency, and I am sure in others too. Such help is essential to protect people from the clutches of loan sharks.
As a result of what I have said about debt, the social fund, which seeks to help people as a fund of last resort, needs to be substantially reformed. We need to put more money into it, because it can throw a lifeline to people who are in desperate circumstances. It does not work properly at the moment.
The Government need to sort out housing benefit in this term, which they have not done to date. I am worried about the increased charges for water, council

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tax and other housing costs in the coming weeks and months. The whole issue of child care needs to be properly addressed, so that people can take jobs in rural areas.
I do not want to prolong my speech, because I know that hon. Members want to get to the Scottish Grand Committee and the Minister wants time to respond to the important points that have been made in this debate. The rural economy needs specialist treatment, but central Government cannot produce all the solutions themselves. I hope that the Scotland Office will look carefully at what local government, the voluntary sector and some industries and companies can do to produce local variations of projects and initiatives that come from the bottom up, rather than the top down. If we do that, it will make a difference in all our constituencies. If we do not do it, the spectre of depopulation will not go away. If the Government are not careful, they will look back in five years and rue the day they left our hills and valleys with no one working in them. That would be in no one's interests.
10.35 am
Mr. Dominic Grieve: My hon. Friend the Member for Galloway and Upper Nithsdale (Mr. Duncan) is to be congratulated on having brought the subject up for debate this morning. It has been educational. I represent what the literature with which I am bombarded describes as a rural constituency. That seems to indicate that there are more green areas than built-up areas. However, it is a million miles removed in description and economic profile from the sort of constituency that my hon. Friend represents. When discussing rural areas, particularly rural areas in Scotland, it is easy to use generalisations that bear little relation to reality or to their diversity.
I was interested to hear the contributions this morning. The majority of hon. Members have described areas that by national standards are now something of a rarity. The indicators produced by various councils for environmental conservation describe them as quiet areas. They should be attractive to people to move into precisely because some of the environmental aspects are so desirable.
I know a little about the constituency of my hon. Friend the Member for Galloway and Upper Nithsdale because I have walked over parts of it, and I remember having crashed my car on the night of new year's day some years ago—[Interruption.] I was not the driver. I first-footed a family at a farm called Palgowan 18 hours after new year, which is a reflection of how isolated the farm is. It is noteworthy that it had diversified by trying to attract visitors in the summer. I shall return to that in a moment.
I was struck by the comments of the hon. Member for Roxburgh and Berwickshire (Mr. Kirkwood). My family used to farm in that area but was forced off the land in the 1930s by the agricultural depression. There is a cyclical pattern to some of the problems affecting rural areas. The hon. Gentleman made a point about rural depopulation, but in many rural areas the principal concern, if we listen to south-east Members, is the fear of rural over-population and the disappearance of the attractiveness of the areas that they represent.
From experience and observation, fundamentally, the areas described by hon. Members are underpinned by agriculture. Although there may be arguments about
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diversification, its contribution to the local economy in percentage terms will not be a major one. It has always seemed to me that the agricultural sector in those areas underpins not just the economy but the whole way of life. That is what makes those communities tick. The agricultural crisis that has hit this country, particularly areas that depend on stock raising, is the fundamental issue that must be dealt with.
The hon. Member for Inverness, East, Nairn and Lochaber (Mr. Stewart) gave a long list of initiatives that the Government are taking to alleviate poverty. I do not disagree with the initiatives, and they may have an impact. However, I hope that he will forgive me—I do not mean this pejoratively—for saying that they are, by necessity, palliatives that attempt to ease the problem. They do not deal with the underlying difficulties.
In the areas of which hon. Members have spoken, the economic base has been either seriously eroded or is in danger of collapse. The structure of society has collapsed without agriculture because of communication problems, which are considerable in Galloway, and high fuel costs that act as a disincentive and make it difficult for business to relocate to such areas.
I agree that there is no difference between rural and urban poverty. Poverty exists in parts of my constituency despite its wealth and proximity to urban areas. However, rural poverty is out of sight and out of mind. I have always been struck by the fact that it is easy to overlook the frequently dire conditions in which people live, their lack of access to services and isolation from each other because of the general attractiveness of their environment. There has been fragmentation of the social networks that used to underpin rural areas, which may not have enjoyed the wealth of an urban area but gave a greater quality of life and, therefore, made the area pleasant and attractive, which drew people to it.
My hon. Friend the Member for Galloway and Upper Nithsdale told me that despite the isolation of such areas, charges other than fuel duty may be very high. I gather that band D council tax in his constituency is £978 per annum. That compares unfavourably with some London boroughs. Therefore, these places have their social structure assaulted by economic problems and general difficulties of overburdening council tax, bureaucracy and general taxation.
The fuel escalator—and its past manifestations—tipped the balance in rural areas. I received enormous representation on the matter when I was a spokesman on Scottish matters. I accept that the fuel escalator was introduced by a Conservative Government and justified by environmental benefits. However, there is always a point when someone should have the common sense to observe that a scheme has gone wrong or too far. The Government failed to observe the extent to which the fuel escalator moved from being a disincentive for urban dwellers to use their motor car, to being a powerful factor that forced rural areas into considerable recession. I am glad that the policy has been reversed, but much damage has been done over the past four years.

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A point was made about sub-post offices. I am not clear where future strategy lies in view of the contribution that they make to maintain rural communities. If rural areas such as those of my hon. Friend the Member for Galloway and Upper Nithsdale are to recover, the key will be to solve the agricultural problems. Without agriculture, such areas are deserts with nothing but small pockets of population. We must provide a general economic climate and framework that makes it worth while for people to diversify into local businesses that are essential for the return of rural prosperity.
One has to compare only my hon. Friend's area with parts of rural Cambridgeshire to see the contrast. In Cambridgeshire, there is a mix of agriculture and dynamic local businesses that operate out of small, village trading estates. Communication, ease of transport and the desirability of the environment make it worth while for people to settle and invest there. Ultimately, only investment, not Government, will solve the problem. That is a real challenge.
I do not wish to be overcritical of the Government, in view of the problems that they face. We must consider those matters, rather than—or perhaps in tandem with—making palliative efforts to alleviate poverty immediately. I wait to hear the Minister's response. I thank my hon. Friend the Member for Galloway and Upper Nithsdale for introducing the debate. I am now far better informed than I was when it began.
10.45 am
The Minister of State, Scotland Office (Mr. George Foulkes): I have represented a rural constituency of 800sq miles—not quite as big as Inverness, East, Nairn and Lochaber—for almost 23 years. That is a little longer than the period for which the hon. Member for Roxburgh and Berwickshire (Mr. Kirkwood) has represented his constituency. My constituency has had significant problems with poverty.
I, too, congratulate the hon. Member for Galloway and Upper Nithsdale (Mr. Duncan) on securing the debate. After all, rural Scotland is important to all of us. Rural Scotland covers 89 per cent. of the Scottish land mass, and includes 29 per cent. of the population. The hon. Member for North Tayside (Pete Wishart) said that one in four people in Scotland is in poverty. Given that some 29 per cent. of the population live in rural areas, that is perhaps not much of a surprise. Rural Scotland provides 27 per cent. of total employment in Scotland.
We recognise that the area has distinctive needs. The hon. Members for Galloway and Upper Nithsdale and for North Tayside have painted a picture that distorts the reality, and what the Government are trying to do and have done to tackle the problems in the past five years. I sometimes think that Scottish National party Members are more concerned with the welfare of the SNP than with what is best for Scotland.
My hon. Friend the Member for Glasgow, Shettleston (Mr. Marshall) —a more urban constituency could not be found—was Chair of the Select Committee on Scottish Affairs when it produced its report on poverty, which acknowledged that there were problems
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with employment, farming, transport and benefit take-up. The report also said that Scotland had many natural assets, including the wonderful environment. Some hon. Members have claimed that theirs is the most beautiful constituency in Scotland. I beg to differ; hon. Members should come to see mine. We must maximise such assets, and not talk Scotland down or minimise the opportunities that we have.
The Scottish Executive, as the hon. Member for Roxburgh and Berwickshire mentioned, produced a report on rural poverty and inclusion, which was honest about the problems with access to services, transport and visibility in rural areas. People in rural areas notice those who are poor much more than those in urban areas do. There is a culture of self-reliance in rural areas. We recognise those problems. We are not complacent about them, and we are tackling them.
The hon. Member for Beaconsfield (Mr. Grieve), of all people, had a bare-faced cheek to raise the question of unemployment. He should think back to 1986, when unemployment in Scotland was at 331,000. I do not know whether that was when he crashed in Galloway, but if it was, I can understand why. Unemployment was at 12.9 per cent. It is now less than a third of that figure, and we are taking measures to bring it down further.
In the constituency of the hon. Member for Galloway and Upper Nithsdale, unemployment, at 4.9 per cent., is a little greater than the national average, but we have helped. Some 961 people have benefited from the new deal, and 512 of them—people who would not be in work if it had not been for Government measures—have received jobs. Unemployment among 25 to 49-year-olds in Dumfries and Galloway has fallen by 14 per cent. in the past year.
Mr. Peter Duncan: It is worth restating the excellent point made by the hon. Member for Roxburgh and Berwickshire (Mr. Kirkwood). He said that many of the unemployed never appear in unemployment statistics, because if a person does not have a job in Ballantrae, never mind Traigh Mhor, he or she moves. That is the problem.
Mr. Foulkes: The unemployment level is low throughout Scotland and throughout the United Kingdom, so such people have found jobs, even if they have gone to Edinburgh to get those jobs. It is not the end of the world to move to Edinburgh to find employment. In his balanced speech, the hon. Member for Roxburgh and Berwickshire acknowledged what the Scotland Office is doing for cashmere, and we could now add Harris tweed to that. We also provided much help during the banana wars, but I shall explain more about that on another occasion.
It is not only unemployment that is the problem. People who are in employment must be paid properly. The national minimum wage, which is so derided by Conservative Members, has made a huge difference to poverty in Scotland, as my hon. Friend the Member for Inverness, East, Nairn and Lochaber (Mr. Stewart) said. More than 135,000 people have benefited from it. It is particularly helpful in rural areas where there has been a tradition of low pay, and to women, as my hon. Friend the Member for Ayr (Sandra Osborne) knows.
My hon. Friend the Member for Inverness, East, Nairn and Lochaber outlined the actions of the rural transport fund. It has assisted 33 filling stations in the

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highlands, the importance of which has been recognised. During the next three years, the Executive are to spend an extra £60 million on transport in the highlands and islands. That includes £13 million for Caledonian MacBrayne, £21 million for Highlands and Islands Airport Ltd., almost £20 million for piers and harbours and £1.5 million for lifeline air services. That is evidence not of neglect, but of understanding the problems and tackling them. I am sorry that my friend, Sarah Boyack, is no longer the Scottish Minister with responsibility for transport. She did a great deal for rural areas in the highlands and islands. When I was with her in Orkney, she was one of the most popular Ministers I have ever known.
The hon. Member for Galloway and Upper Nithsdale and I have crossed swords on the Floor of the House about post offices. The hon. Member for Beaconsfield had the cheek to raise the matter of post offices but, as my hon. Friend the Member for Inverness, East, Nairn and Lochaber said, 3,500 closed when the Tories were in power. We have placed a formal requirement on the Post Office to maintain the rural network and to stop avoidable closures. That will apply until 2006 in the first instance. We have invested £480 million to modernise the network and the spending review for 2000 included further provision for ring-fenced funding of £270 million.
I have taken a particular interest in the constituency of the hon. Member for Galloway and Upper Nithsdale, as well as my own. I told him that no post offices had closed in my constituency. Two have closed recently at Kipford and Dunragged in his constituency: one person who was the manager became ill, while the other person gave it up. The job in Dun ragged has been advertised and interest has been expressed in it. I hope that the post office will reopen.
The Government have a fund to help rural post offices to reopen. I take an interest in such matters as a Minister as well as a Member of Parliament. Others can take a personal interest in their constituencies and find people to take over post offices. Rural post offices provide good job opportunities. I advise the hon. Gentleman and others to take up the issue. It will help them to get re-elected, too, which is not unimportant.
It is worth tackling issues such as transport and the future of the post office network, but we must recognise the need to tackle poverty suffered by individuals. Supporting businesses and supporting individuals go hand in hand. The Scottish Executive have established 48 social inclusion partnerships, including those in Argyll and Bute, the east Ayrshire coalfields, the highlands and islands, Moray and the Scottish Borders. Lots of money is coming in to help rural areas. I was pleased to find out yesterday that nearly £8 million in health compensation has gone to ex-miners and widows in my constituency, although it is not as much as has gone to yours, Mr. Illsley.
Another significant issue for rural areas is the take-up of benefits and tax credits. My hon. Friend the Member for Inverness, East, Nairn and Lochaber referred to help lines and take-up lines. We are encouraging people to use them, so that they can access information and ask for forms to be sent to them. We are improving the position with new information and communications technology. Ukonline will make it possible to claim benefits through the computer as well to register births
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and to apply for passports. Such new technology will be especially important to rural areas. Thirty-three per cent. of rural households have access to the internet at home and the Government are committed to having all public services delivered electronically by 2005 where that is feasible. That will be of great value to rural areas. Even people my age can understand how to use modern technology. By modernising the Government's funds, a number of pilot schemes—including six in rural Scotland—have been supported. We recognise the problems. We are not ignoring them or being complacent. We are tackling them.
I went to Dumfries and saw the work being done by all the agencies to tackle foot and mouth disease. The co-operation was fantastic. I was really impressed and congratulated everyone involved. We have tackled foot and mouth and are providing many resources for the constituency of the hon. Member for Galloway and Upper Nithsdale and the neighbouring constituency of Dumfries. We gave £13.5 million in hardship relief and £7 million for interim support of the worst affected areas. On 2 August, we gave £10 million for long-term recovery, particularly of agriculture and tourism.
We did not start foot and mouth disease. Listening to some Conservative Members, one would think that we caused it. We tackled it a great deal better than the Conservative Government tackled bovine spongiform encephalopathy. I agree with the hon. Member for North Tayside that we are still suffering the legacy of BSE.
Mr. Grieve: The Minister is so satisfied with the way in which the Government have handled the foot and mouth outbreak, but why have they refused to have a public inquiry into its handling, resorting instead to a series of inquiries where the evidence will not be heard in public?
Mr. Foulkes: We have had not one inquiry, but three, because we are concerned about the matter. We are working to ensure that the farmers' products are exported. The hon. Member for Beaconsfield spoke of the importance of farming. It is vital for farmers to be in operation, but they need markets to sell their goods. I am pleased that, after much work, we have successfully negotiated our way back into the European market. The whole of Scotland can now export pig meat, sheep meat and beef, subject to the requirements, which I am aware are stringent, of the date-based export scheme. There is hope for the future.
I find this type of debate strange. Where were the hon. Members for Galloway and Upper Nithsdale and for Beaconsfield between 1979 and 1997? Were they asleep? Have they woken suddenly, to discover those problems? Do they not remember the huge increase in rural unemployment— the biggest cause of poverty—that we suffered under 18 years of the Tories? In my constituency and that of Galloway and Upper Nithsdale, 5,000 people were thrown on to the scrap heap because of pits closed by Thatcher and her cronies. Also 3,500 post offices were closed.
I say to the hon. Member for Beaconsfield, a home affairs spokesman who is allegedly interested in crime, that crime doubled under the Tories. Conviction rates fell. Now we are tackling the common agricultural

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policy. The Conservatives made no effort to tackle that. When they were in office, this country spent less on rural development than any other European Union country, except for Spain and Greece. They managed the BSE crisis hopelessly. They created a decline in the number of affordable rural homes for local people. Public transport in Scotland was underfunded, and deregulation devastated bus services. That is still causing havoc in my constituency, and no doubt in Galloway and Upper Nithsdale, too. The Conservatives voted against us, rejecting a national minimum wage. People should be careful.
It seems unlikely, especially to me and you, Mr. Illsley, that there will ever be a Tory Government again. There is, however, an outside chance, and if that were to happen, rural Scotland would again suffer badly. I have not spoken about fuel, but the present Government are taking measures to provide cheaper fuel and cheaper motoring in rural areas. They support public transport.
If the Tories were to be re-elected, they would, instead of dealing with such issues, slash extra funding for rural schools, cut funding for rural police, and axe school transport for rural areas. There would be increased rural unemployment and poverty. Food safety would be put at risk and farmers would be affected. That is why the people of Scotland, including people in the rural areas of Scotland, will continue to return Labour Members of Parliament.

Construction Industry (Self-Employment)
11 am
Mr. Michael Clapham: I shall first declare an interest, as I am a member of the Union of Construction, Allied Trades and Technicians. I want to make four points. First, I want to explain what false self-employment is, and look at its extent in the construction industry. Secondly, I want to look at the reasons why the system has become institutionalised in construction. Thirdly, I want to look briefly at the cost of self-employment to the industry and society. Finally, I want to suggest a way in which the problem could be remedied.
False self-employment describes work situations in which workers are classified as self-employed primarily in order to reduce their tax liabilities. That is the Organisation for Economic Co-operation and Development definition. False self-employment is endemic throughout the UK construction industry. It has cost UK taxpayers tens of billions of pounds during the past 30 years, and has been a major contributory factor in many of the construction industry's problems. The rise in atypical work patterns such as self-employment is often attributed to new patterns or new methods of work. However, the experience of the UK construction industry shows that false self-employment was encouraged by employers and then became institutionalised by changes introduced by various Governments.
The current situation is unique—a system is in operation in construction in which self-employed workers have their tax deducted at source. There has always been a great deal of legitimate self-employment on building sites. My argument is not against genuine self-employment. There will always be a place for genuine self-employed businesses in the construction industry. However, evidence clearly shows that the level of self-employment in the UK construction industry is out of step with that in comparable countries. That statistic comes from work over the past few years by an academic called Mark Harvey.
In Europe, self-employment in construction ranges between 6 and 10 per cent. In the USA, it ranges between 17 and 19 per cent. In Korea, a developing country with almost total deregulation of its labour markets, the self-employed constitute only 7 per cent. of those employed. In the UK, by comparison, self-employment in construction reached a peak of 45 per cent. around 1995. For manual workers alone, the figure rose to nearly two thirds of the total labour force in construction. Even today, self-employed manual workers make up half of the labour force. That is despite the tightening of the tax system by the Inland Revenue in 1997.
The boom in false self-employment started in the 1960s with the growth in tax evasion. To counteract the growing influence of trade unions following a series of disputes in London, employers encouraged a shift out of the standard form of employment. It is estimated that the total number of self-employed workers in the industry grew during that period from about 200,000 to 400,000.
In 1970, the Government introduced legislation to try to cut tax evasion in construction by creating two categories of self-employed. The first category was the

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independent self-employed business for those who could demonstrate a business case. The second was the dependent self-employed who had tax deducted at source by the contractor or subcontractor for whom they worked. Despite the tax legislation that was introduced from 1970, tax fraud and tax avoidance remained rife within the industry. However, under the Conservative Government in the 1980s, false self-employment became the dominant form of labour organisation on most sites. As part of the liberalisation of labour markets, that Government accepted that workers were self-employed for national insurance purposes if they could produce a self-employed tax-exemption certificate 714 or a subcontract certificate 60. That important change meant that self-employment became a matter of self-declaration. Over the next 15 years, the switch from direct employment to self-employment grew alarmingly.
The policy continued until it became unsustainable in the mid-1990s. The United Kingdom economy was in deep recession and a number of employers were nervous about potential liabilities for backdated tax and national insurance payments. Therefore, the Inland Revenue reinstated the self-employment test. Contractors were given until 1997 to classify their work force correctly. That resulted in between 180,000 and 250,000 construction workers switching from self-employment to direct or payroll employment.
In 1999, the tax system was further tightened with new tests for tax-exemption certificates and the introduction of a card system for businesses and the self-employed. Since the introduction of that system, around 1,063,700 cards have been issued.
Such changes unwittingly reinforced the existing system and did little to tackle the underlying problem of false self-employment. Consequently, the swing to direct labour has come to a halt. A recent survey by the Government-sponsored Construction Industry Training Board suggested that there has been a reversal back toward self-employment.
It is not easy to estimate the current level of false self-employment. Union regional officers, industry leaders, main agency organisations and several companies gave evidence to a union investigation of the widespread use of false self-employment. The managing contractor of the channel tunnel rail link. Bectel, accepted that at least 25 per cent. of the labour force on the project was employed on a self-employed card with tax deducted at source. A later survey by regional officers of UCATT at 88 sites that were managed by the largest contractors in Great Britain found that 55 sites had over 50 per cent. of workers self-employed, and that 33 sites had 80 per cent. self-employed. That provides evidence of the continuing dominance of self-employed labour on building sites.
In an effort to bottom the size of the problem, the union undertook a further survey of false employment, which resulted in a more detailed analysis. A 1999 survey of 10 major contractors by Mark Harvey showed that 85 per cent. of the total work force was self-employed. Following detailed interviews with subcontractors, operatives and an examination of documentary evidence, the survey concluded that at least 80 per cent. of the self-employed were falsely self-employed in accordance with the definition that I gave. From that survey, it can reasonably be assumed that the vast majority of the self-employed in construction are
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falsely self-employed. Based on the current average level of self-employment in the industry, the union estimates that there are between 300,000 and 400,000 falsely self-employed workers in construction, and that they are costing the UK taxpayer at least £2 billion per year.
The incentives that are built into the present tax system are a crucial factor in sustaining the current level of false self-employment. For example, the deductions for a self-employed worker are as follows: an 18 per cent. deduction at source for tax; a 7 per cent. national insurance contribution, based on profits; and a class 2 national insurance deduction of just £2 per week. That compares with an employee or payroll worker's deduction of 22 per cent. for income tax, and a 10 per cent. national insurance contribution. That illustrates the difference between the two classes of workers. The ability to use the tax system in that way allows workers who are self-employed for tax purposes to boost their average level of earnings, making self-employment an attractive option for building operatives, even during a recession.
Contractors have been the main beneficiaries of the scheme. They have used falsely self-employed workers, rather than payroll labour, to avoid paying an 11.9 per cent. employees' national insurance contribution, as well as other costs such as training, welfare and safety. Instead, those costs and responsibilities are dumped directly on to the falsely self-employed, and they fall indirectly on to the rest of society, as construction workers who leave the industry due to illness or injury become reliant on state benefits.
The long-term impact of false self-employment on the construction industry is clearly visible on every building site. Construction has one of the worst safety records of any industry. For example, in 2000, there were 105 fatalities, and it is estimated that, over the past 10 years, almost 1,000 workers have been killed on construction sites. Despite those shocking statistics, it is estimated that only one in 20 construction accidents involving the self-employed is recorded. Responsibility for the health and safety of workers has been shifted by the contractors and subcontractors on to those in the most vulnerable positions.
With regard to the training of construction workers, damage has been done because of the industry's reliance on falsely self-employed labour. The major contractors reduced apprenticeships and training opportunities during the 1980s. After the recession of the early-1990s, the industry lost a generation of building workers. Over the past five years, the industry has picked up, but there is currently a huge skills shortage in all of the main trades. That has made efforts by the industry to improve training and safety standards more difficult than they would otherwise have been.
I have tried to show that the problem of self-employment in the British construction industry is as deeply ingrained as ever—I have mentioned that there are between 300,000 and 400,000 falsely self-employed workers in the industry. The recent changes in the construction industry tax scheme have reinforced a flawed system.
The shortcomings in current arrangements have been graphically highlighted by the transposition of the working time directive into UK law. For the first time, hundreds of thousands of building workers became

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entitled to paid holidays. Building operatives who were self-employed for tax purposes were classified as "workers" under the working time directive, which helped to show the false nature of the construction industry tax system. Many operatives have won their cases in tribunals following action by the union.
The current confusion in the UK's construction industry could be resolved by the abolition of the special self-employed category that allows tax to be deducted at source. When the Minister replies, I hope that she will indicate that she is prepared to review the situation. Abolition of that category would have to be accompanied by rigid enforcement of compliance rules to ensure that those who were classified as self-employed were involved with genuine businesses. That would tackle the immediate problem, but in the long term there would need to be further work across Departments to deal with the confusion that surrounds employment status in the UK.
Employment status classification has become confused because of its reliance on case law. Case law judgments are based not on broad principles, but the facts of each case. A discriminating factor established by one case does not erase discriminating factors established in previous cases. The result is that test cases used in case law conflict with each other, and no test or set of factors is decisive in establishing employment status. The confusion has been worsened by the addition of the concept of the worker, which has extended employment protection to people who could be described as dependent self-employed.
A further element of confusion in the UK legal system relates to the differences between legal and taxation status. Employment law is generally concerned with employment protection and the safeguards afforded by that, whereas taxation law is primarily concerned with the relationship between the taxpayer and the state. The same person can take several different status classifications depending on which legislation or regulation is being applied. That confusion has been compounded in the construction industry by the development of a unique tax system that allows self-employed operatives to have their tax deducted at source by a contractor or subcontractor. In my view, that institutionalises mass self-employment, a great deal of which is bogus or false.
The Government are planning a review to assess the impact of employment status on statutory employment rights, and perhaps the Minister can enlighten us on that. Presumably that has come about because of the introduction of the National Minimum Wage Act 1998 and the Employment Relations Act 1999, which defined the status of the worker.
The problem of false self-employment must be tackled by harmonising employment status classification across employment law, common law and taxation classification. That would separate genuine and false self-employed businesses. It would be an extensive exercise, and it would require work across the Department of Trade and Industry and the Treasury. If tackled in that way, the self-employment test would become a display of economic independence.
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By clarifying the issue of self-employment, the way would be clear to define employment contracts that have a dependent relationship with an employer, contractor or subcontractor. Harmonisation of employment status classification should be accompanied by an extension of employment and social resources rights for workers whose current employment status falls into a grey area. Again, many in the construction industry are in that situation.
False self-employment has undermined the British construction industry for the past 30 years. Rather than tackling the problem, the Government have unwittingly institutionalised mass self-employment by creating a tax system that is unique to the construction industry. Major employers rely on that system to supply building site labour, and as is clear to anyone who studies the industry's history of the past 10 years, the consequences for the work force and the industry have been disastrous.
False self-employment has led to fragmentation of the industry, a skills shortage and an appalling level of accidents. The industry would support change, and I hope that the Minister will say that she is prepared to review the tax system as it applies to the construction industry.
11.21 am
Mr. Stephen Hepburn: I congratulate my hon. Friend the Member for Barnsley, West and Penistone (Mr. Clapham) on securing this debate on the construction industry in general, bogus self-employment in particular and related issues, such as health and safety and low pay. I should declare an interest, in that I, too, have been a member of the Union of Construction Allied Trades and Technicians for many years.
Past debates have concentrated on employers and how to improve, and engender greater wealth in, the industry. There has been little discussion of how the industry affects its workers and, in that sense, today's debate is unique. For that reason, I emphasise my congratulations to my hon. Friend.
Construction is an important industry, and it is only right that workers receive some of the benefits that they generate through the profits that they make for their companies. It is also a particularly wealthy industry, with a turnover of £65 billion a year. The industry employs some 7 per cent. of the national work force; almost 1.5 million people. It is also playing a vital role in delivering the Government's modernisation agenda by improving the quality of housing and other buildings such as schools, universities and colleges. The Government were elected on the promise to modernise society—a promise that included modernising the buildings and fabric of society—and I see no reason why we should neglect the workers in that regard. We should modernise the terms and conditions of those in the construction industry in particular.
As we know, despite its importance, the construction industry has one of the worst health and safety records of any industry, and in large part that can be attributed to bogus self-employment. Every year, there are many thousands of serious accidents and many deaths. In the past decade alone, there were almost 1,000 deaths in the construction industry. Last year, the death rate was the

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highest in more than a decade. Some 106 people were killed simply doing an honest day's work, leaving behind their families and loved ones. Surely we should be doing something about that.
Those figures, however, do not take into account industrial diseases. We could mention asbestos disease, which kills some 4,000 people a year, many of whom are building workers. One of my lingering memories as a branch official in Jarrow is of trying to get compensation for a man with asbestosis, who had worked for many years on his building site, before he died so that he could rest in peace knowing that his family were taken care of. He had worked all his life in a hard industry and contracted the disease, and nothing could be done except to make sure that his family did not suffer.
The construction industry has a tarnished reputation, in part due to cowboy builders, who are rife throughout an industry that also has many good builders. Unfortunately, the image that people get is the old one of "Auf Wiedersehen, Pet" from the television. If anyone in the street were asked for their image of the construction industry, they would describe long hours, dirty and dangerous conditions and outdoor, hard, physical work. I have some knowledge of that, because I was branch president of the Jarrow branch for more than 12 years. Changes need to be made, not least to the terms of self-employment, if we are to get improvements in working conditions and in efficiency for employers in the industry.
That is not to decry the Government. They can take a lead in bringing about such changes, and have delivered on that to a certain extent. They brought about the Egan report, under the Deputy Prime Minister. It was a good report on the construction industry, but we need to go further and give that report power. The Government are the powerhouse behind the construction industry. More than half the value of the industry and capital works in the country is generated by the Government. They pay the piper, so they can call the tune. I do not see why the Government cannot enact changes to the industry to benefit the workers.
One such change would be a law on corporate manslaughter, which is critical. That is not the subject of debate today, but it is very relevant to the construction industry because of deaths on building sites. Self-employment must also be looked at. Private builders encourage it, and bogus self-employment accounts for more than 300,000 workers in the industry at present. That practice not only deprives workers of the conditions and pay that they need, but deprives the Chancellor of the Exchequer of more than £1.5 billion in receipts. I believe, and many construction workers agree, that that would be better put to improving hospitals and schools.
By encouraging that self-employment, the industry encourages an environment of low skills, low wages, low productivity and poor health and safety. A typical example, in the north, has come to light following the transfer of Beazer Homes to Persimmon Homes, making the largest house-builder group in the country. Those homes are traditionally built by direct labour, and Persimmon Homes encourages self-employment. Since the takeover, UCATT has been involved in a protracted tribunal case to protect the rights of those directly employed, under the TUPE regulations.
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UCATT believes that Persimmon Homes intends to move the labour force from pay-as-you-earn to self-employment and subcontract labour. Persimmon Homes' intentions are highlighted by a checklist sent out by the company in the north-west to comply with the current regulations governing self-employment. It has 16 points of advice, and I will mention the main ones: employees must not be given holiday pay or sick pay; they must rectify defective work at their own cost; no minimum amount of work is to be guaranteed. The list goes on. Many workers have no choice. They either sign away their rights and become self-employed or they do not work at all. In the current environment, obviously, people will choose work because they need to provide for their families.
The checklist has been drafted to ensure that the contract employs the cheapest, and not the most efficient, form of labour. That denies workers their employment rights. It is a scandal and a disgrace. Is it right that a private employer should deprive workers of their basic rights of employment and trade union representation? Such rights are discouraged by self-employment. Is it right that a private business that makes millions and millions pounds of profit should deprive the Exchequer of money that is robbed from the taxpayers?
Other issues surround bogus self-employment in the construction industry. We need to ensure that the industry offers young people careers that are worth taking up. They should be careers of dignity and not the bogus self-employment offered by cowboy builders. That ideal was espoused by the Egan report, but it has sadly been lost since. None the less, the report is valid to this day. We need to encourage younger people to enter the industry and we shall not do that by encouraging self-employment. Ten years ago, more than a third of the work force were under 30. Now we find that less than a quarter are under 30.
Although I appreciate and support the aims of Government legislation for trade union reform, I remain firmly of the view that certain industries need to have compulsory trade unions if we are to tackle the problems that we face today. The mining industry, in which my hon. Friend was involved for many years, is one such industry and, given its health and safety record, so is the construction industry. That is a radical approach—perhaps too radical for the Government—but it should be considered.
At the very least, the Economic Secretary should address the issue of contract compliance. Surely, as a minimum standard, we should expect contract compliance to be part of all Government procurements. Sadly, however, that does not happen at present. How on earth will the Government be able to give a lead to the argument that working conditions should be correct if we do not maintain minimum standards in our own contracts? We have that power through the strength of procurement—more than half the capital projects in this country are Government led—and through our ability to impose contract compliance. We should use that power because, if we do not, the private sector will not. What sort of example will that set the private sector? If the Government do not maintain such standards, why on earth should the private sector?

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I congratulate my hon. Friend once again on instigating the debate at such a crucial time for the industry. As far as the Government are concerned, capital expenditure will double in the next few years and it is crucial that reforms are implemented so that we have a modern construction industry that is geared not only to improving the profits of employers—I have no problem with that—but to ensuring that the workers receive the rightful fruits of the industry in which they work. As well as receiving their rightful fruits, they should be able to work safely and to return home safe and sound to their families at the end of the day. Surely, that is the very minimum. We look to the Government to provide the lead and the direction.
11.33 am
Mr. Ian Davidson: I congratulate my hon. Friend the Member for Barnsley, West and Penistone (Mr. Clapham) on securing this debate. It is an important issue that has been neglected for far too long. I also congratulate UCATT and the Institute of Employment Rights on producing the report, "Undermining Construction", which has provided many of the case studies that support the arguments that we are advancing. If the Economic Secretary does not have a copy of the report, I am perfectly prepared to ensure that she receives one that has been autographed by the author and everyone else who attended the press launch. The launch went down extremely well and everyone who was present now expects her to take account of the evidence and to do something about it.
I do not have a direct interest in the building industry or in UCATT, but I want the Government to be able to spend the capital moneys that they have allocated to construction project on schemes in my area. I recognise that skills shortages are likely to cripple part of that programme and to result in an escalation of costs. That means that the Government will not receive value for money on many of their projects.
One of the reasons for that problem is the scams and the fraud that make up the construction industry's taxation system. It has already been said that the estimated tax loss to the Government resulting from fraudulent self-employment is £1.5 billion to £2 billion. I find it difficult to understand why the Government are prepared to turn a blind eye to that.
Like my hon. Friends, I am aware that there is a clear correlation between the high rate of self-employment and the rate of accidents and injuries in the construction industry. It is clear from the statistics that have already been outlined that one in two accidents in the employed category are reported, but that only one in 20 are reported by the self-employed. They face deadlines and are under pressure that reputable firms often do not place on their employed staff. Those deadlines and that pressure clearly result in an explosion of accidents and deaths in the industry. It has about the worst safety record in the United Kingdom.
I am sure that the Economic Secretary will explore that issue. However, when she does, she could ask her staff to examine why the rate of fatalities in the construction industry in Scotland is approximately twice that in England and Wales. The rate for major
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accidents in Scotland is one and a quarter times that in England and Wales, and that means that certain issues must be explored. The rate for minor accidents in Scotland is one and half times that in England and Wales. The different rates are partly the result of climate but another factor is the way in which employers behave under the self-employment structure.
The increasing lack of trained staff in the construction industry flows directly from the existing tax arrangements. Employers have no direct interest in training for the future when a high proportion of their staff are self-employed and are likely—indeed, encouraged—to move on. There is a regular pattern according to which good employers are forced to cut costs, to economise and to move towards the practice of the worst; otherwise they will carry overheads that cannot be sustained in a competitive environment. Allowing some firms to get away with malpractice, as the Government are doing, has knock-on effects on everyone else in the industry.
We are creating enormous difficulties for ourselves in the future not only in terms of the shortage of trained staff that is already evident throughout the industry, but in terms of the lack of pension provision made by many of the self-employed and employers. In years to come, a substantial proportion of the work force will have built up no occupational pension whatever and they will end up falling back on the state for support and succour. As I understand it. that is not the intention of the Government's general policy, but it is another reason why they should examine the issue closely.
As my colleagues have said, employers encourage as high a proportion as possible of their staff to become self-employed for reasons of profit. By cutting overheads, they are able to drive out direct labour organisations and many of the better and more socially responsible firms. They are also able to save on training costs and other elements of expenditure. I find it impossible to understand why the Government, by their inactivity, are prepared to condone that. I can only presume it is a hangover from the days when the major players in the construction industry had substantial political clout with previous Conservative Governments. However, I cannot understand why a Labour Government—even a new Labour Government—continue to allow employers to get away literally and not just figuratively with fraud and murder.
I want the Economic Secretary to clarify the Government's view of some of the allegations made in the "Undermining Construction" report about the Inland Revenue's lackadaisical approach to the problem. From what is alleged in the report, it appears that the Inland Revenue has been co-conspirator with the industry in tax and national insurance fraud. I want her to clarify why she is prepared to allow that to go on. It is clear from the report what has been happening and we are entitled to receive a response. It seems to me, as a simple outsider to the industry, that the Government appear almost to be in the industry's pocket. I cannot understand why that is the case.
As I said before, the Government's inactivity condones malpractice, which results in fraud, death and injury on building sites, and leads to a skills shortage. I recognise that the Economic Secretary is an impeccably new Labour Minister, but I understand that she is not the worst—[Interruption.] I am being contradicted:

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perhaps she is among the worst. Although I am not as close to new Labour as some of my colleagues, I do not think that it condones tax fraud, insurance scams, a higher rate of construction accidents or the removal of pressures to train within the industry.
I am sure, as are my colleagues, that the Economic Secretary will have the answers and will send us away happy in the knowledge that for the first time she will take serious action to deal with the problems in the construction industry, which will be resolved quickly at her behest.
11.41 am
Dr. Vincent Cable: I, too, congratulate the hon. Member for Barnsley, West and Penistone (Mr. Clapham) on securing the debate and on receiving such able support from the hon. Members for Jarrow (Mr. Hepburn) and for Glasgow, Pollok (Mr. Davidson). I see the problem as being specialised, especially the tax arrangements, and do not claim to be an expert. My attendance has as much to do with being educated as with pontificating on the answers, and I learned much from listening to the hon. Member for Barnsley, West and Penistone.
I have tried to get a perspective on the dimensions of the problem. The construction industry employs about 2 million people. That is a mid-winter estimate, so the figure is probably larger in the summer. Official figures suggest that almost a third are self-employed, and the hon. Gentleman estimates that half of those are falsely self-employed. That gives us an idea of the magnitude of the industry.
My difficulty in talking in general about the construction industry is that it is not only very large—it makes up more than 5 per cent. of the British economy—but very complicated. It varies a great deal. On the one hand are the big multinational companies—the Balfour Beattys of this world—that are involved in dam and road projects all over the world and exposed to international standards; on the other are the majority of companies that are employed for house extensions or to do jobbing work for local council repairs and so on. Trying to encompass all those businesses within the circle of the construction industry is inherently difficult. The industry also covers specialised and proudly guarded craft traditions in, for example, plumbing and electrical work, which have different professional groups and different standards of training. They all form part of the big pot called the construction industry.
Although hon. Members focused on the tax issues, it was interesting to hear them put it in the context of the wider problem. A couple of years ago the Department of the Environment, Transport and the Regions set up a cowboy builders working party to address some of the problems that have been described, and it is recognised that the tax problem is part of a bigger picture. A substantial number of operators in the industry are not just evading taxes, neglecting their work force and ignoring training and safety, but giving consumers a bad deal. In our private lives we have all experienced the guys who knock on the front door and, for example, try to persuade us that our drives need asphalting, or the people who embark on a house extension and mysteriously disappear halfway through. The problem is rampant throughout the industry, so there is a consumer protection issue as well as a worker protection issue to consider, both of which are valid.
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I am not entirely sure that the same companies are responsible for all the failings, but the industry clearly has poor standards at the bottom of it. We need to consider how to address those standards properly. The hon. Gentleman has suggested doing that through the tax regime. I am not enough of an expert on the details of taxation to know whether that is the right way to proceed, and I wonder whether it is feasible. The first problem is how easy it is in practice to separate self-employment and employment in tax terms. The Inland Revenue cannot operate on a discretionary basis; it needs rules. There has to be, therefore, a test of control. I think the hon. Gentleman used the word "dependency".
Mr. Clapham: There are two categories of self-employed: the independent and the dependent. The independent self-employed tend to be employed by a contractor or subcontractor. The unique feature about the industry is that tax is deducted at source from the so-called dependent self-employed. The tests that have recently been implemented—the SC4 for the dependents—also involve cards, of which 1,063,000 have been issued. The problem is rife throughout the industry and it comes back to the tax system and bogus self-employment.
Dr. Cable: I understand that we are discussing a unique situation and that tax tests have been devised to deal with the construction industry. I am trying to understand how in practice we determine the people who are falsely registered. To do that, we need to get at their motives and consider whether they are trying to evade the system or are genuinely self-employed.
The Treasury is still struggling with an analogous problem that arose a couple of years ago with IR35, which relates to other industries such as computer software. It appears that there is genuine doubt about whether people are engaged in self-employment to fiddle the tax system or because the nature of the employment is such that they have opted to be self-employed. I do not know whether the Treasury is confident that it can make a distinction with confidence.
On the tax side, we have to consider how easy it is to enforce tax arrangements even if we can make the distinction. The enforcement of value added tax was tightened in the construction industry a couple of years ago. Construction companies explained to me that they were having to chase around the country to collect pieces of paper in person to demonstrate that they were not falsifying VAT. It got to the stage at which the industry was not able to function properly. We have to work out how to disentangle companies' motives and how easy it is to enforce the arrangements without being too counterproductive. I have an open mind and I am sure that if the hon. Gentleman's concerns can be met, his suggestion to use the tax regime would be the best way to proceed.
The hon. Member for Jarrow suggested compulsory unionisation as part of the picture, but perhaps there is another solution. As I said, I am not an expert on the construction industry, but I know that Australia has a different approach, which operates rather like the old system of guilds. To operate legally within the construction industry a company or individual has to be the equivalent of an acknowledged member of the

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Federation of Master Builders. In order to be legally registered, some tests have to be passed. Employers or self-employed people who do building work have to demonstrate that they have the right qualifications and right training commitment to their employees. They also have to demonstrate that they are observing basic safety standards and obligations to the consumers, to whom they give an indemnity that they will not simply walk off the site. Part of the package is to ensure that they are properly attributed for tax purposes.
The Australian system is tough. It is illegal to operate as a builder unless someone is part of the federation. That may be too extreme for the UK situation, but from what the hon. Gentleman said there may be a half-way house whereby a test such as that in Australia must be satisfied by anybody who is bidding for public sector contracts, which I believe account for about 40 per cent. of all new work and only slightly less of all repair work. Companies that bid for public sector work should satisfy that Australian test. I have discussed the matter with people in the industry. The good companies are as embarrassed by bad practice as is everyone else and would like to encourage such an approach.
There is an analogy with the medical profession. It has been recommended that the building industry should operate like the British Medical Association, which gets its own house in order and sets its own standards, but has legal backing. Perhaps the medical profession is not quite as reputable as it was, but it may be a model worth considering as an alternative way of dealing with the problem.
My final query is to the Treasury Minister, who I am delighted to see here. I had thought that this was an issue for the Department of Trade and Industry, and I had not appreciated the balance between the tax and the non-tax concerns. It would be useful to know whether the Treasury is working with Departments in examining this industry in a holistic way. This is not just an issue of tax evasion. There is a bigger picture in terms of standards of labour practice and consumer protection. How will those elements be integrated?
11.51 am
Mr. Christopher Chope: I join everyone in congratulating the hon. Member for Barnsley, West and Penistone (Mr. Clapham) on introducing the debate. He and his two Labour party colleagues have poured scorn on much of the Government's policy on the construction industry, and I am sure that the Minister will try her best to respond.
Mr. Clapham: Neither I nor my colleagues have poured scorn on the Government's policy. We have drawn attention to a problem that this Government began to tackle in 1997. The real problem was caused in the 18 years of the Conservative Government, who allowed a total liberalisation of the labour market in construction.
Mr. Chope: I have given the hon. Gentleman the opportunity to get back on track with his Whips and to turn his attack on the Conservative Government. But he must face the reality, which he and some of his
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colleagues mentioned, that the most important issue in construction is that of health and safety. The increase in the number of fatalities in the construction industry over the past year, to its highest level for 10 years, is appalling. It is remiss of him and his colleagues to blame that increase in fatalities on self-employment. During those 10 years, the number of self-employed people in construction has declined. One could argue—although I do not do so today—that the decline in self-employment in construction has led to the enormous increase in fatalities.
The construction industry is six times more dangerous than any other industry. To have 105 fatalities in one year—an average of two per week—is unacceptable. I had expected the hon. Gentleman, knowing that a Treasury Minister was to respond to the debate, to refer to the useful report provided to most hon. Members by Prospect, the professional engineering union. The report draws attention to the way in which the Health and Safety Executive has got its priorities wrong by reducing the number of inspectors dealing with construction and increasing the number dealing with railway safety. The real problem with deaths and injuries is in the construction industry, not the railway industry. I hope that when the Minister responds she will comment on that useful report from Prospect.
The debate is also coloured by the hon. Gentleman's membership of UCATT. The hon. Member for Jarrow (Mr. Hepburn) is not just a member of UCATT, but an active participant in its conferences, paid for and all the rest. UCATT is a major sponsor of the Labour party. I have been in politics for the best part of the 30 years to which the hon. Gentleman referred, and I did not recognise the picture that he painted of the blameless, responsible, enthusiastic worker in the construction industry, which was heavily unionised under UCATT and unable to deliver good-quality services to the purchasing public, whether in the public or private sector. I recall, as I am sure does the hon. Gentleman, the construction of the three towers in Marsham street. Was not the work on that site stopped for three or five years, blacked by UCATT? That trade union ruined our building industry by allowing restrictive practices and totally unacceptable labour practices to prevail.
When I was a member of Wandsworth council, there was a major housing development at Kambala carried out by the direct works organisation under a Labour council. That housing estate was delayed for a long time, the costs escalated, and it was all about UCATT defending its employees' jobs irrespective of the wider public interest. Today we have heard comments about the interests of UCATT, which wishes to retain high union membership, rather than the interests of the wider building industry, which is such an important part of our national economy.
Mr. Clapham: The hon. Gentleman has been generous in giving way. During the 1960s, when the towers were being built, UCATT was trying to ensure protection for the people who worked there.
The hon. Gentleman says that he does not believe that self-employment was the cause of so many accidents in the industry. On a building site with 500 workers, that can mean 500 separate contracts. Co-ordinating those contracts and bringing the people together in a

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harmonious setting that is conducive to the job being completed is nearly impossible. It leads to unaccountability, and that is what causes accidents.
Mr. Chope: I am interested that the hon. Gentleman has not taken the opportunity to endorse the comments in the Prospect report that, in its view, one reason why the construction industry fatality rate has increased so much is the misdirection of resources by the Health and Safety Executive—arguably because the Treasury has starved it of funds. The report makes no reference to the fact that self-employment may be the cause of the appalling safety record in the industry.
The hon. Gentleman wants the self-employed to be the scapegoats for everything that has gone wrong in the construction industry. Let us consider, however, the benefits that come from self-employed people and the flexibility that they bring. The rules were tightened so that all self-employed people who work in construction have their pay deducted at source. That is different from most self-employed businesses. When the Labour Government came to office, they identified a reasonable level for deduction at source as 23 per cent. That was obviously far too high, and we welcome the much more realistic deduction level of 18 per cent. The hon. Gentleman seems to think that even that is far too high. If all the resources of a person or firm have to be expended in tax rather than invested in training, tools and equipment, it is counter-productive.
I hope that the Minister will respond to a practical point that has come to my notice. A constituent of mine came to see me last weekend. He has been made redundant three times in successive years in the telecommunications industry and has decided to become a plumber. He is paying for his own training to be a plumber, and travelling to Eastleigh technical college. He has been told that he is not allowed to set the cost of that training against the income that he received in this tax year before he was made redundant as an employee of Marconi. He has been told that only after he has qualified as a plumber will he be able to set the cost of his training against income earned from that trade.
My constituent is doing things the responsible way—trying to train as a plumber before offering his services in the marketplace. There are far too many cowboy operators who train on the job, in so far as they ever train, and as a result cause mayhem for many people who employ small builders in the belief that they will get a good job done, only to find that they do not. There is something structurally wrong with our tax system if somebody such as my constituent, who wishes to retrain as a plumber, finds that he must bear the costs of doing so without any tax relief. I hope that the Minister will be able to respond to that point.
The Government have been engaged in an exercise of "initiative-itis". There have been many initiatives but not much delivery. After the Government took office, we had the Egan report, the combating cowboy builders report and the cowboy builders working group, which reported in 1999. There was then a gap of almost two years, during which people wondered what would happen about the problems of cowboy builders. On 5 July, the Government launched the quality mark scheme, which has been piloted. The idea is that it places
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the names of builders and tradesmen who reach the required standard on a register, which can be assessed free of charge via a low-cost telephone number. Of course, builders are charged a registration fee.
Interestingly, the Financial Times, commenting on the launch of the scheme, said:
"The government's long-delayed scheme to put cowboy builders out of business will be launched in Birmingham today with only a fraction of the number of reputable builders originally envisaged signed up.
About 60 builders are understood to have been approved for the quality mark scheme in Birmingham—with a further 40-plus in Somerset—which will be unveiled next week."
The Government put enormous emphasis on that scheme and—apparently—had originally intended that several hundred builders would be on the approved list by the launch. However, the Financial Times goes on to say:
"The cost of joining, the red tape involved and the fact that most builders had enough work without bothering to take part have meant that the government has had to resort to a string of measures to make it more attractive."
That is another initiative that did not succeed.
There have been any number of initiatives on and conferences to discuss safety in the construction industry. Most recently, a programme was launched earlier this year that set a target of reducing injuries and deaths in the industry by 10 per cent. per annum over four years. I hope that the Minister will be able to tell us today what progress is being made on meeting that target, or whether it is just another target set by the Government and then abandoned as soon as it is obvious that the policies behind it will never enable it to be delivered and, indeed, may be counterproductive.
This is a useful debate. I pay tribute to all those who work in the construction industry, which is one of our most important industries. There are a heck of a lot of unsung heroes in the industry, and too rarely does it receive a proper airing in debates in the House. I congratulate the hon. Member for Barnsley, West and Penistone on enabling us to do so today. It is a big mistake to try to tar all those millions of people who work in the construction industry with the brush of the relatively few who may still be able to abuse the tax and benefits system to the detriment of wider society. That is a small minority compared with the large mass of construction workers who deserve a lot better from the Government than they have been getting.
12.5 pm
The Economic Secretary to the Treasury (Ruth Kelly): I am delighted to speak while you are in the Chair, Mr. Winterton, and I congratulate my hon. Friend the Member for Barnsley, West and Penistone (Mr. Clapham) on securing this important debate. He raises some significant and important issues, and I very much welcome the opportunity to discuss them.
Hon. Members of all parties have raised issues to do with health and safety, the importance of protecting construction workers, training standards in the industry, and matters that are clearly of great significance to many workers throughout the country. I shall come to some of those issues, but I shall concentrate mainly on those relating to self-employment status and Inland Revenue treatment of

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employees and employers in the tax system. I congratulate UCATT on raising such issues. It is important that we highlight them, consider them and take them seriously.
The construction sector is clearly a major contributor to the British economy. Nearly 1.5 million people work in it at any time. It encompasses work ranging from painting and decorating to underwater tunnelling and from simple kitchen refits to Government private finance initiatives. Construction work is carried out by one-man bands, family firms, partnerships, small to medium enterprises, household-name companies and multinational consortiums. Workers in the industry can be full time, part time, occasional, permanent, casual, single or multi-skilled, gang members or individual craftsmen.
Despite that massive diversity, all workers in the industry, along with those everywhere, need to pay the right tax and national insurance contributions and have access to rights and benefits appropriate to their personal circumstances. That last point is very important.
I was pleased to hear my hon. Friend say that it is important that a place be kept for genuine self-employment, and that he recognises that there can indeed be such self-employment in the construction industry. The point about access to rights and benefits and tax and national insurance contributions that are appropriate to someone's personal circumstances is important, and it goes to the heart of today's debate, which is essentially about employment status—whether someone is employed or self-employed, the consequences that flow from the decision on employment status and the role of the Government in determining and regulating such status.
Employment status is quite a simple concept, but it is important in several different contexts. It affects the tax and national insurance contributions that people must pay, the benefits that they are entitled to claim and, of course, their entitlement to rights such as statutory sick pay, statutory maternity pay, holiday pay and so on.
As things stand in the UK, the question of whether a person is employed or self-employed is normally entirely one of fact. It depends on the terms and conditions on which they are engaged and on the way in which they carry out their work. The facts then have to be compared with various factors identified by the courts in order to decide a person's employment status. No single factor is conclusive. The list of relevant factors is not exhaustive. Therefore, the courts have said that, to reach a decision about employment status, all relevant circumstances need to be taken into account. A qualitative decision must then be made based on the accumulation of detail.
Some issues considered when determining employment status include whether one works under the control of one's employer, the degree of risk associated with the employee and employer, whether one is part and parcel of the organisation, whether one must provide one's own equipment or whether the employer does so, and so forth. A huge range of factors is taken into account when determining status.
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That so-called case law approach to deciding employment status is by no means unique to the United Kingdom. The United States, Canada, Australia, New Zealand, South Africa and Ireland, for example, follow similar approaches, and our approach is recognised as workable and effective by various authorities.
Mr. Clapham: My hon. Friend says that case law is used to establish employment status and that countries other than the UK also use that approach. Does she agree that, such is the confusion, the Treasury must work with the Department of Trade and Industry on ways to create greater harmony? The tests to which she has referred are often contradictory; they overlap each other. A worker can have a great deal of control over his situation if he is integrated, as a doctor is within the NHS, but there are many examples of contradictions in common law. Does she agree that there is a need to examine those matters?
Ruth Kelly: I agree that many complex factors have to be taken into account in each case, but that is one of the reasons why it is difficult to produce general guidelines, and there is a strong argument that doing so might create an additional layer of confusion.
A research paper published in the Netherlands in 1999 reviewed a range of international approaches to deciding employment status. One of its conclusions was that the UK was top of the table of countries considered in terms of the clarity and consistency surrounding the making of decisions. The UK was ahead of four countries—the Netherlands, Germany, France and Italy—which define employment status in legislation instead of using a case law approach. Although we are always ready to consider the examples of other countries, such as those raised by the hon. Member for Twickenham (Dr. Cable), we remain convinced that the case law approach is probably the best way in which to provide clarity.
Earlier this year, Judith Freedman, professor of taxation law at Oxford university, published a detailed review of employment status on behalf of the well-respected Institute for Fiscal Studies. She concluded that the case law approach that we currently use provides
"flexibility to meet changing conditions".
She acknowledged that
"a simple, objective test would be too rigid and arbitrary and open to manipulation".
In 1999, the DTI sponsored a report that found that most people know what their employment status is. The report surveyed 4,000 people, concentrating on those who work in non-standard ways, such as temps, casuals and agency workers. It found that even among such non-standard workers, most of those surveyed could tell without difficulty—and without taking professional advice—whether they were employees or self-employed. According to the report, less than 2 per cent. of those working in non-standard ways defined their employment status wrongly.
That is not much use to those individuals who are on the borderline between employment and self-employment and who are sold misleading advice by advisers with their eye on profit rather than on providing good-quality customer service, or who do not

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have the freedom to decide whether to be taken on as an employee or to act as a self-employed person, as sometimes happens in the construction industry. I recognise that the problems are real, and we are here today to discuss how such problems are reflected in the construction industry in particular.
The Government accept that there is an element of false self-employment in the construction industry. I shall examine those issues and the Government will keep them under close review. Dr. Mark Harvey's report has been mentioned extensively today. It gives a passionate account of issues in which there is clearly a strong interest, which has been expressed in this debate. It contains a lot of facts and figures as well as serious allegations about the approach taken by Inland Revenue and the Government. I will comment on the report today, albeit not in detail. We will take it seriously and examine it in detail. We will keep an open mind.
Mr. Davidson: I welcome the fact that the Minister is going to examine the report, keep an open mind, consider it and so on, but is she actually going to respond to the points it makes item by item, allegation by allegation, or will it simply be dismissed and swept aside?
Ruth Kelly: I certainly intend to respond to some of the allegations made in the report. The Government accept that it raises real issues that we have a responsibility to examine—although it should be said that the industry itself also has a responsibility to tackle those issues. When we debated similar issues in an Adjournment debate last year, we were assured that the industry would do more to help itself. Dr. Harvey's report makes a helpful contribution to those discussions, but at grassroots level contractors must recognise and act on their own responsibility, rather than pass the buck to the Government to take all the action needed.
A key issue is the roles and responsibilities of all those involved in making decisions on employment status. As I have explained, employment status is decided on the facts. It is for workers and those for whom they work to agree between themselves the terms and conditions under which the work is to be done. It is not for the Government to decide those matters or to interfere in essentially commercial decisions that are entirely the business of the parties involved.
If the agreed terms and conditions amount to employment, the employer will automatically have certain responsibilities to his employee. Those include operating a pay-as-you-earn system to collect the right amount of tax at the right time, deducting and accounting for class 1 NICs, and providing employment rights and benefits. If the agreed terms and conditions amount to self-employment, the worker assumes responsibility for his own tax and NICs through the self-assessment system. Generally, such workers have to provide their own financial cushion to cover holiday periods or periods of ill-health, and perhaps to pay into a stakeholder pension.
The role of Government is to ensure that all parties meet their respective legal responsibilities, so Government Departments have to provide help,
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support and advice on whatever aspects of those responsibilities are causing problems. In addition, Departments need to play a policing role to ensure that people do not avoid their various legal responsibilities. The Inland Revenue is one Department that has a particular role to play in employment status. I take this opportunity to put on record what the Inland Revenue has been doing in that respect in the construction industry for the past few years, and what it is doing now. However, as I said at the outset, it is not only for tax and national insurance purposes that employment status is important; other Departments have a role to play.
It has been claimed in Dr. Harvey's report that the Inland Revenue has not been doing enough to police so-called false self-employment in the construction industry. Worse, it has been alleged that the Inland Revenue has somehow
"sanctioned large-scale false self-employment"
by
"making an agreement with major construction firms to enable them to falsely register directly employed workers as self-employed".
I do not believe that that is correct. For many years, the Inland Revenue has provided extensive customer service support for the construction industry dealing specifically with issues of employment status, backed up by targeted compliance reviews to address evasion and avoidance.
Since the mid-1990s the Inland Revenue has, for example, published a range of articles and leaflets to explain how employment status is decided and how the case law tests apply to construction workers in particular. It has published an internal employment status manual that explains how its inspectors are expected to carry out employment status work. It has operated a dedicated construction industry employment status helpline. It has specified a date by which all contractors must have reviewed the employment status of their workers and put those who should properly be employees on to the payroll. It has targeted specialist status inspector resources to visit contractors and check that PAYE and class 1 NICs are being deducted and accounted for where necessary.
In addition, appropriate changes have been made to legislation. One of the first things that we did, by means of the Finance Act 1997, was amend the agency tax rules. Agencies that supply the construction industry with workers have to operate the PAYE system for workers who meet the conditions set down in legislation. The Inland Revenue's best estimates show that up to 250,000 construction workers have moved from self-employment to employment as a consequence of these various measures.
That is not the end of the story. More recently, the Contributions Agency merged with the Inland Revenue, so there are now more inspectors undertaking employment status work. The inspectors are fully supported by additional employer compliance staff. There are now 60 status teams throughout the country that advise on, monitor and enforce compliance with the employment status rules. These local teams are supported by the large business office employer compliance team, which reviews the very biggest employers according to a rolling programme. There are also the various special compliance offices that are responsible for prosecutions.

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The special compliance offices are likely to play a particularly significant role in pulling the rug from under any composite companies in the construction industry, or anywhere else, that might be used as a front for false self-employment. To do so, they will use the service company legislation—IR35—that we introduced specifically to ensure that those who should properly be employees pay tax and national insurance contributions on the right basis. That demonstrates that both the Government and the Inland Revenue have been putting a lot of time and resource into this important area over a number of years. It shows also that there has been no decision to ease off on employment status work. Targeting and proactive monitoring of employment status has not ceased, and there are no plans to change that.
So far, I have not mentioned the construction industry scheme—in some senses, for good reason. The scheme should not have anything to do with whether someone is appropriately defined as self-employed or employed. It is simply a scheme for collecting an amount of money on account of the tax and national insurance contributions that will ultimately be due from a construction industry worker who is already self-employed.
For the avoidance of doubt, I stress that the CIS does not confer any particular employment status. The CIS4 card, in particular, is not a certificate of self-employment. None of the literature, forms or documentation that the Inland Revenue produces says anything different. Contractors and others who are misusing the scheme lay themselves open to penalties for so doing. The Inland Revenue has dedicated teams with responsibility for ensuring compliance with the CIS, and they are separate from the dedicated employment status teams.
My hon. Friend the Member for Barnsley, West and Penistone said that perhaps the CIS adds to the confusion over status by putting workers into another category. Some people have suggested that if there were not a CIS, perhaps there would not be mass false self-employment in the construction industry. I reiterate the arguments that were advanced when the scheme was introduced. It was designed to avoid tax evasion and to ensure that construction workers do not slip into the black economy but instead pay their tax and national insurance contributions. In the past, there was mass evasion. Without the scheme, there might be a huge loss to the Exchequer. It is suggested that we are currently faced with such a loss.
The scheme does not create a separate category of so-called dependent self-employed, as Dr. Harvey suggests. Nor does it mean that self-employment is a matter of self-declaration. Employment status is purely a question of fact that is determined by case law. If a dispute arises over status, the matter can be taken to an industrial tribunal.
There is no evidence that scrapping the scheme would help overcome the real issues that have been raised during the debate. I accept that they are real issues for construction industry workers. I am not aware that
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anyone in the industry is calling for the abolition of the CIS. Of course, along with the industry we continue to keep the matter under review
Mr. Chope: Before the Minister resumes her place, I hope that she will address the real issues of safety. She has described the large army of inspectors from the Inland Revenue that deals with the issue of self-employment. Does the hon. Lady think that the Government have the right order of priorities when there is only one construction inspector for three London boroughs, and there are only 19 such inspectors for London as a whole? Does not she think that it would be better to put more resources into inspecting construction safety?
Ruth Kelly: The hon. Gentleman, who speaks for the Opposition, raises the real issue of health and safety in the construction industry, and the Government are determined to deal with it.
Health and safety legislation does not apply only to employees; it has a much broader application. The Health and Safety at Work, etc. Act 1974 places a duty on employers to conduct their undertakings in a way that does not expose people to health and safety risks, as far as that is possible. Construction companies that are using both employees and self-employed workers have a duty to ensure the health and safety of all their workers.
I will raise with Ministers in other Departments issues about the number of compliance officers and ensuring compliance in the construction industry. We remain committed to ensuring that there are the highest standards of safety within the industry. Consideration of the definitions of self-employment and employment is not the best way to proceed on that front.
Where does that leave us? What are we doing? What has happened since the publication of the Egan report? It was a key piece of work and we do not want to lose sight of its important conclusions. Another report, "Rethinking Construction", came out in July 1998. It concluded that capital costs and construction time could be reduced by about 10 per cent. a year, that performance could be improved by 20 per cent. a year and that productivity and turnover could be increased by 10 per cent. a year. If those things are to be achieved, the Government will have to support and encourage good management in the industry, innovative approaches to projects and performance measures.
There have been various initiatives since publication of the report, but it would be unrealistic to expect to see substantive improvements in less than five years. The report is too substantial and the implications are too significant to allow that to happen. We will clearly keep matters under review. Some of the issues raised during the debate were also debated during consideration of the Employment Bill, which received its Second Reading last night. The Bill will extend individual employment rights to more workers.
We have undertaken a review of the CIS and are considering options. We are not expected to change our fundamental approach. We are considering ways of reducing administrative costs of compliance with the scheme. We are also considering ways in which it can be extendable to e-business, for example.

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We have launched a review of employment status, and we expect a report in the early part of next year. The review will very much be focused on employment rights. It could have significant implications for many of the topics that we have been discussing.
The Inland Revenue has issued a leaflet, "Help your Business in the Construction Industry". It contains contributions from the Inland Revenue, Customs and Excise, the Benefits Agency, the Immigration Advisory Service, the Employment Service, the Health and Safety Executive and Companies House.
Mr. Davidson: Does my hon. Friend recognise that a new leaflet from the Inland Revenue, while no doubt a wonderful thing, will not necessarily go as far as we would wish in resolving matters? Her speech has not been all bad, but my pager, which doubles as a complacency meter, has recorded a fairly high reading. Are she and her advisers prepared to meet those concerned in the industry in the near future to discuss matters in perhaps a more informal atmosphere?
Ruth Kelly: I know that my hon. Friend has asked me to send everyone away happy, but I cannot pledge to do that today. I hope that I have shown the seriousness of the Government's commitment to tackling the issues. We keep these important topics under constant review. I will pass on my hon. Friend's representations to Ministers who deal directly with these issues. I am sure that they will be delighted to contact him.

Kent Ambulance Service
12.30 pm
Hugh Robertson: I thank the Minister of State, Department of Health, the right hon. Member for Barrow and Furness (Mr. Hutton), for attending the debate. I am grateful for the fact that he will respond to my points, especially as the subject is not directly part of his brief. I also extend my thanks to his team of civil servants who, I know from contact with the Kent ambulance service at the weekend, have done a lot of preparatory work for the debate.
I have two reasons for wishing to secure this debate. The first, I confess, is entirely personal. I was born, educated and brought up in Kent; my parents, my fiancée and my in-laws all live in the county and, of course, I represent a constituency that is slap-bang in the middle of the county.
Secondly, and more important, there is genuine concern that the views of consultees, Members of Parliament, health service bodies, the ambulance service itself and my constituents—across the political spectrum, they all oppose the change—have not been properly represented by the regional office. I assure the Minister that I have had a continual involvement in the issue; it is not something that I just dreamed up this morning. I attended consultation meetings in August, made representations to the review, wrote to the Under-Secretary, the hon. Member for Salford (Ms Blears), and drafted an early-day motion on the subject a few weeks ago. I hope that this Adjournment debate marks the culmination of that effort.
Today I intend to talk briefly about the consultation process, discuss the aspects of the review that we welcome and support, highlight a few problems with it, and finish with some concluding remarks. The review process has taken more than three years, which is far too long. Critically, the reconfiguration was proposed by the south-east regional office in early 2000. "Modernising the NHS: Shifting the Balance of Power in the South East", the latest review, rendered that process obsolete.
Another problem is that the time the review has taken has had a serious effect on the Kent ambulance service, which is currently unable to recruit substantively to director positions, including that of chief executive; it has no human resources director in post at the moment. Despite the lengthy review process, there is no hard evidence that the proposed merger will have any financial or patient benefits. I am told that mergers audited elsewhere have not, in fact, secured those desirable benefits. As I have already said, there is no support anywhere in Kent from any of the key consultees for the merger. Finally, there is a worry that the disruption caused by the merger could put at risk many of the improvements in response time across Kent and Sussex. As a result, I am sure we all agree that patients and staff could suffer.
It is fair to say, however, that the review identified a number of benefits that we all support. The idea of a common ambulance vehicle procurement service is to be welcomed, as is the idea of a common communications system. The training and development of practitioners in emergency care—PEC—and the development of patient transport services are all welcome initiatives. I am pleased that there has been regional input in

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control and communications, clinical governance, human resources, procurement and fleet management. We whole-heartedly support all those things. Indeed, I should like to record my thanks for the Government's support for additional funding for the introduction of satellite navigation. Kent was one of the first ambulance services to install that navigation and it has already had considerable benefits.
However, there is a feeling that benefits could be achieved without the proposed merger. There are several reasons why we oppose the merger. First, and most important, ambulance services must operate to the same boundaries as strategic health authorities. "Modernising the NHS: Shifting the Balance of Power in the South East" said that there should be one strategic health authority for Kent. Everybody in Kent supports that sensible move. Strategic health authorities will have new responsibilities, including managing strategy and performance for NHS organisations within their boundaries. The review envisages that the NHS plan, the reform of emergency care and the review of ambulance services can be achieved only by co-operation between organisations. It follows that it is vital for patients, services and efficiency that the ambulance service operates to the same boundary as the new strategic health authority.
The Ambulance Service Association, responding to a request from the Minister for advice, said:
"Ambulance services should be aligned to one, or more, strategic health authorities—usually 1, sometimes 2 or more but never part of a strategic health authority".
If the merger of the Kent and Sussex ambulance services goes ahead, the new service will end up servicing one and a half parts of the new strategic health authorities; that is the key objection to the merger. However, subsidiary factors also impact on the merger, including the fact that the structure of the NHS in Kent and throughout the country is changing rapidly. In my constituency, new strategic health authorities are in formation and a review of hospitals will undoubtedly result in the downgrading of the Kent and Canterbury hospital, whichever option is embraced; primary care trusts are being formed and there are changes to community health councils.
I feel strongly that few parts of the NHS are as vital as the ambulance service. It is much better to allow time for changes to bed in before we set about altering the structure of that vital service. The county of Kent is large enough to support its own ambulance service. The Ambulance Service Association, responding to a request from the Minister for advice on the reconfiguration of services, said:
"The minimum population served by Ambulance Services will be around 1.5 million."
Kent has a population of 1.6 million, so it is large enough to support its own service.
Kent has particular needs because of its geographical position. It has an infrastructure like no other, comprising channel ports, the channel tunnel rail link, roll on/roll off ferries, the power station at Dungeness, and myriad motorways, including the M2, the M25, the M20 and the M26. The high-speed rail link is being installed and the county bears the brunt of all the traffic
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that comes across from the continent. With all that going on, there is a huge capacity for disaster for Kent, and many people in the county do not wish their ambulance service to be taken away.
Kent is a popular retirement county for elderly people. As the Minister will know, there are Government guidelines to build more houses. Its population will become more than 1.6 million, not less, which highlights the need to retain the ambulance service inside the county. There is also a political point: if the ambulance service is taken away, as local people see it, and merged with the Sussex service, many people in my constituency will feel badly neglected. As a result of the private finance initiative, they are already faced with the closure of the accident and emergency department at the Kent and Canterbury hospital, and are considering a series of options that will necessarily downgrade it. If, on top of that, they have to bear the loss of their county ambulance service, there will be a highly undesirable political impact.
I also oppose the merger because of costs. In a presentation this summer, the Kent ambulance service identified two types of cost: the initial investment and the transitional costs. They involved £1.6 million in pay equalisation, which I accept will probably happen, whatever the outcome of the review; £2.6 million of non-recurrent costs to cover, for example, staff redundancies, additional travel and relocation, IT upgrades and new signs; and a further £200,000 of recurrent costs every year. Whereas I welcome the £1.6 million to be spent on pay equalisation—it is quite wrong to discriminate against people just because they work in an ambulance service in Kent—the £2.6 million and the recurrent £200,000 could be better spent on investing in the services, not on relocation and reorganisation.
The final argument is what I call the 11 September argument. Following the disaster on 11 September, I am sure we all agree that it is important to maintain coterminosity with other emergency services in the county. The police and the fire service are already Kent-based, and the new strategic health authority will ensure that the health authority is also based in the county. When I spent a week during the summer looking at NHS facilities in my constituency, I was alarmed to discover that there is no common communications system between the ambulances and the police and fire services.
That cannot be good for emergency planning. The emergency services must be able to communicate with each other, and it is particularly important that they all work to the same boundaries. For the good of future disaster and civil emergency planning, I urge the Minister to leave the ambulance service operating to the same boundaries as other emergency services.
In conclusion, there are parts of the review which all of us welcome. However, a merger with Sussex is not necessary to bring about those benefits. There are major concerns in Kent, particularly about the lack of common boundaries with the strategic health authority should the proposals be implemented. That is the killer point.
There are also concerns about the amount of change going on in the NHS and the impact on people who work in the service; the unusually large size of Kent as a county—I believe that it is large enough to support its

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own ambulance service; Kent's geographical position and requirements, and its infrastructure; the perceived loss of NHS facilities following the closure of the accident and emergency department at the Kent and Canterbury hospital; the cost arguments—the £2.6 million and £200,000 recurring, which could be better spent on investment in existing services; and finally the need, after 11 September, to ensure that all our emergency services—the new strategic health authority, fire, police, ambulance and, in due course, I hope, the Territorial Army—operate to the same boundaries.
The proposed merger with Sussex has no support whatever in Kent. I take the opportunity this morning to urge the Minister to allow Kent, regardless of what happens elsewhere, to keep its own county-based ambulance service.
12.43 pm
The Minister of State, Department of Health (Mr. John Hutton): I begin by expressing my gratitude to the hon. Member for Faversham and Mid-Kent (Hugh Robertson) for his kind words about my officials, who will have greatly appreciated his comments. It is not always transparently the case, but we are ready to help and I am grateful to the hon. Gentleman for acknowledging that.
I congratulate the hon. Gentleman on the way in which he raised the issues, and on the cogency and fluency of the arguments that he presented. He has done a signal job on behalf of his constituents. Outside this place and in the press—although that may not be the case today—Adjournment debates are often dismissed as unimportant and irrelevant; they are seen almost as a sideshow. I fundamentally disagree with that as they provide a forum for hon. Members to do what we are essentially here to do—to raise issues of concern and to confront Ministers when that is appropriate.
As the hon. Gentleman made clear, the provision of ambulance services in Kent is a critical issue which, as he rightly said, has been the subject of widespread debate across the county in recent months. I know that the hon. Gentleman himself has commented on the current proposals for change.
I am sure that the hon. Gentleman will understand that it is important that I do not prejudge or give the impression that I am prejudging the outcome of the consultation. Ministers will clearly need to approach the issues afresh and with an open mind, as they may need to make final decisions on the proposals. For that reason, I hope that the hon. Gentleman will forgive me if I do not engage in detailed debate with him about some of the specific points that he raised. I also hope that he will appreciate that I cannot make an announcement today on the way forward for ambulance service reconfiguration in the south-east.
I shall certainly reflect on the hon. Gentleman's concerns about the lack of common communications between the three emergency services. I do not have an immediate answer to that at my fingertips, but I shall write to him about his concerns, which I share and which need to be addressed.
I begin by referring to some of the arguments behind the proposals in the recent consultation, as it is important to put on record the background to the review. As the hon. Gentleman knows, in 1999 Sir
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William Wells, the then regional chairman in the south-east region, asked the ambulance trusts to review their structures to ascertain whether their number and size were appropriate to enable them to deliver best care for the 8.5 million people whom they serve.
The current seven ambulance services in the region worked together to create a joint vision of what they saw as their role in the future. The vision developed by the leaders of ambulance services in the south-east set out a number of important objectives that ambulance services in the region should achieve in the future. They should deliver the best care, according to individual patient's needs; give consistent, high-quality care based on evidence and best practice; make full use of new technologies to respond to patients' needs more quickly and effectively; ensure that staff are well trained and motivated, and have the skills that they need; and finally, collaborate across organisations to increase support for staff, improve the infrastructure and make best use of the resources available for patient care.
The public consultation on the proposals to reshape ambulance services in the region began, as the hon. Gentleman said, on 3 May 2001. Public meetings have been held within each of the existing ambulance trust boundaries. The hon. Gentleman will be aware that the consultation document put forward a preferred option of merging the seven existing ambulance trusts into three: Kent and Sussex, Hampshire and Surrey, and a new Four Counties trust covering Berkshire, Buckinghamshire, Northamptonshire and Oxfordshire. The consultation document set out how ambulance services must continue to develop if they are to make the maximum contribution to a modern NHS.
I am sure that the hon. Gentleman would agree that those proposals should be set against a background of strong local identities in the south-east, which he described, As the consultation document states:
"People in the region require local, flexible and responsive ambulance services. These can only be provided by maintaining strong local identities and ensuring a close working relationship with other partners…including patients and carers".
As the hon. Gentleman knows, the statutory period for consultation was extended by one month to take account of the moratorium on consultation exercises during the recent general election, and ended on 7 September.
I acknowledge that many strong and varied views were expressed during the consultation process. I take this opportunity to express my thanks to all hon. Members, the public and community health councils who submitted their views to the regional office during the consultation period. I can reassure the hon. Gentleman that all the views received are being taken carefully into consideration. I shall return to that. However, we must all recognise there is no single national blueprint for the configuration of ambulance services that will suit all localities, not least in the south-east.
Hugh Robertson: I appreciate that the Minister cannot prejudge the outcome of the review, but is it at least possible that the ambulance services which want to merge can do so, while those that do not can remain outside the review and retain a county-based service?
Mr. Hutton: That is a decision that Ministers may have to make. Trust reconfigurations and mergers are subject to ministerial approval. The hon. Gentleman invites me to pull Kent out of the reconfiguration proposals. Clearly, I cannot do that today, but it was a good try, none the less.
As the hon. Gentleman knows, the regional office is currently considering the responses that have been received which, I understand, will shortly be presented to Ministers. I reassure him that Ministers' decisions will be fully informed by the views that have emerged in the consultation exercise and that no recommendation will be agreed by Ministers unless we are wholly satisfied that it will provide the effective, high-quality service that the people of the south-east deserve and that we aim to provide to them.
In future, as the hon. Gentleman knows, Ministers will be advised about such proposed service reconfigurations by the independent reconfiguration panel, which will be chaired by Dr. Peter Barrett. The panel will start its work early in the new year. Its remit will be to assess proposals against clear criteria such as quality of care, community health needs, accessibility, patient safety and clinical and service quality. I hope that that will ensure that the outcome of these major health service reorganisations will be transparent and accountable and that those who are directly affected by the changes are fully engaged in the consultation process. As I am sure he knows, until such time as final recommendations on the reconfiguration of ambulance services in the south-east have been provided by the regional office and Ministers are asked to make a decision, I need to remain impartial about any final outcome.
In setting out his arguments for retaining a local ambulance service for the people of Kent, the hon. Gentleman rightly referred to the work of the Kent ambulance service. I am grateful to him for doing so. As he will know, the Kent Ambulance NHS trust was established in 1994. As he said, it serves a population of more than 1.5 million in both urban and rural areas and has more than 800 staff. It has 154 vehicles and last year handled about 97,000 emergency calls and 30,000 urgent calls. Dealing with those levels of demand is no easy task. I am sure that the hon. Gentleman will join me in taking this opportunity to thank everyone working in the Kent ambulance service for the tremendous work that they do day in, day out.
The Government's priority is to save more lives by providing faster, more responsive emergency ambulance services. Clinical evidence has proved beyond any doubt whatever that early defibrillation and resuscitation services can save more lives. That is why the Government set challenging response targets for all ambulance services as soon as we came into office in 1997. Since then, we have seen a range of improvements, to which the hon. Gentleman graciously referred. They include more staff and vehicles, faster activation, better matching of resources to demand, dynamic cover, as opposed to station-based cover—an important element in helping us to meet access and response times—effective relief levels and rotas, and flexible 999 responses.
We also recognised that ambulance service response times had to improve significantly. That is why we are committed to the target of responding to 75 per cent. of
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immediately life-threatening calls within eight minutes. That target is also a milestone in the national service framework for coronary heart disease. We have estimated that, if all services were to achieve the target, the lives of 1,800 more people suffering from heart attacks would be saved every year. I would be the first to admit that the target that we have set is challenging. As I said, however, response times save lives, and we are already beginning to see the benefits of service improvement.
Nowhere do we see that more clearly than in Kent, where the performance of ambulance services has improved dramatically during the past year. From a starting point of being able to respond to only 38 per cent. of life-threatening calls within the critical eight-minute period, they are fast approaching the national target of 75 per cent. I hope that they will be able to meet that target when the figures are confirmed later next year. That is a huge achievement and I should like to pay tribute to the staff at Kent Ambulance NHS trust for their hard work, especially during the unexpectedly high demand in the summer months. They are doing a fantastic job in difficult circumstances for the people of Kent.
Kent ambulance service currently has 24 rapid response staff and has established community responder schemes on the Isle of Sheppey and at the Bluewater shopping complex. In the coming months, the trust will look for further opportunities to extend those important new services. As well as developing new schemes around the country and in Kent, we have provided significant investment in all ambulance services. In March last year, we invested £21 million nationally to help ambulance trusts make progress towards achieving the 75 per cent. target by investing in extra vehicles and extra front-line staff. Kent ambulance service received £841,000 on a recurrent basis, which has enabled them to recruit an additional 30 front-line staff.
The Under-Secretary, my hon. Friend the Member for Salford (Ms Blears), also announced further investment of almost £3.5 million earlier this year. That funding enabled state-of-the-art satellite tracking and navigation systems to be fitted to all 3,000 emergency ambulance vehicles throughout the country, giving them accurate information on the location of callers. As the hon. Gentleman said, Kent ambulance services were the first in line for that funding and received more than £140,000 to assist them in making that investment.
Ensuring that we have a modern ambulance service that is integrated with other NHS and social care services is a fundamental objective in what we are trying to achieve. The investments that we have made will, hope, ensure that the service can respond to patients' needs more effectively and quickly, with well-trained and motivated staff providing consistently higher quality care. The supporting infrastructure will make maximum use of new technologies, delivering best value in order to help concentrate resources on patient care and to enable best practice to spread to all health communities more quickly. To support the integration of the ambulance service with other NHS and social care services, we announced additional investment of £50 million last month to implement the "Reforming Emergency Care" report.

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As I have explained, I am, sadly, unable to respond now to some of the specific concerns the hon. Gentleman has raised and nor can I speculate on the outcome of the consultation exercise, although I hope that decisions can be made in the very near future. However, before I finish, I want to assure him once again that the arguments he has carefully set out will be given the most serious consideration, which they obviously deserve.
Mr. Nicholas Winterton (in the Chair): We are grateful to the Minister for his reply All interested parties for the next debate are present, so we can begin early. The debate has been initiated by the hon. Member for North Warwickshire (Mr. O'Brien), but before I call him I should like to point out that he has had the courtesy to ask me and the Minister whether other colleagues who have interests in the subject of the debate can participate in it. My only comment is that I am very happy to call them, but I want the Minister to have adequate time to respond.

University Hospitals (Midlands)
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Mr. Mike O'Brien: Thank you, Mr. Deputy Speaker. Can I confirm the time when the debate will finish?
Mr. Nicholas Winterton (in the Chair): The hon. Gentleman has gained a little time. This debate will not finish until 1.30.
Mr. O'Brien: Thank you, Mr. Deputy Speaker. I am very pleased to have that time, as a number of hon. Members wish to speak in this debate, which is important for us. I would like my hon. Friends the Members for Coventry, North-West (Mr. Robinson), for Coventry, South (Mr. Cunningham), for Rugby and Kenilworth (Andy King), for Tamworth (Mr. Jenkins) and for Nuneaton (Mr. Olner) to be able to speak. I understand also that there may be an intervention at some point. I am grateful to the Speaker for granting this debate and to you, Mr. Winterton, for presiding over it. My hon. Friend the Member for Warwick and Leamington (Mr. Plaskitt) is currently attending a sitting of the Select Committee on the Treasury, but has indicated his support for the points that we want to make.
The Government are determined to improve the delivery of health services. As local Members of Parliament, my hon. Friends and I fear that NHS delivery in our area will not improve without substantial changes in the management of the main tertiary and district hospital, the Walsgrave. The running of the hospital has been condemned in a series of reports and statements in recent months. The Commission for Health Improvement—CHI—reported on the Walsgrave in September. It was the worst report ever published by the CHI on any hospital. In October, the NHS league tables designated the Walsgrave as a failing hospital with no stars. A majority of consultants have signed a petition calling for urgent changes in the way in which the hospital is run. Last week, it was reported as having the worst record in the country on heart operations. Members of Parliament have, therefore, taken the unprecedented step of seeking this debate so that we can express publicly our serious concern that the hospital management is a mess and to ask for the resignation of the chief executive, Mr. David Loughton.
I understand that Gary Reay, the chairman of the trust, resigned this morning. It might be said that no man hath greater love than that he should lay down his part-time job for his friend's full-time one. However, Mr. Reay has missed the point—he is not the problem. The problem at Walsgrave has not been caused by the chairman or the board so much as by the dominant influence of a particular individual in the hospital: the chief executive. Apparently, Mr. Reay has also claimed this morning that the only reason why MPs have sought to criticise the chief executive is the proposed site of the new private finance initiative hospital outside the town centre. The truth is that I supported Mr. David Loughton on the PFI hospital and on the new site, but there is a lack of confidence that he can deliver that hospital or improve health care sufficiently in our area.

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The CHI report said of the management of the Walsgrave that
"senior staff felt isolated, disempowered and undervalued."
The report goes on to state:
"We were deeply concerned by the number of consultant medical staff who reported feeling bullied, intimidated, threatened and oppressed by senior managers when raising concerns about clinical care or conditions."
The CHI found an absence of any strategic leadership on patient care and service issues across the hospital. In particular, it found capacity planning for elective and emergency admissions, development of care pathways and accident and emergency services in disarray. On clinical governance, it found no evidence of any monitoring or review of the organisation as a whole.
There have been a number of other reports, but each time a bad one came out, Mr. David Loughton made reassuring noises, pleading that the report was wrong and that, anyway, he was putting it all right. One report might be in error; two might raise serious questions; but a series of reports says that it is time for a change and that Mr. David Loughton should now go.
There are a lot of excellent staff at the Walsgrave hospital who are doing a great job looking after patients, but they are handicapped by Mr. Loughton's increasingly desperate struggle to hold on to his own job. The hospital needs a new start. There is no confidence in Mr. Loughton: he has presided over the hospital for—what is it?—a decade and had the chance to turn it round but, by his own admission, took his eye off the ball. He now suggests that there is an action plan in place to turn round the hospital as a result of the NHS designating it a failed hospital, and that he should be given a chance to turn it round. It seems to me that if he could not turn it round in a decade, he is unlikely to be able to do so in the next few months.
I say all this not with anger but with sadness. I supported David Loughton on the private finance initiative, but I can no longer support him as manager of the hospital because the problems there seem to be fundamental. A new person is needed to restore confidence and lead the hospital out of its present problems. He has been a dominant personal influence at the hospital, and until that influence is changed we will not get the delivery of quality hospital services that we require.
A lot of good work is done at the hospital, and there are a lot of good staff, as I have said. Many patients will no doubt report that they have been very well treated there, and that will be true because the staff work hard. However, the way in which the hospital has been run has always caused problems and, in those circumstances, we need to restore confidence. We therefore need to have changes at the top.
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Mr. Geoffrey Robinson: I congratulate my hon. Friend the Member for North Warwickshire (Mr. O'Brien) on securing this debate. It is an important debate for those who live in Coventry and in the other constituencies whose MPs strongly associate themselves with what has been said today, because the health of the area is at stake.
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As my hon. Friend said, the debate is directly and inescapably about the chief executive, Mr. David Loughton. None of us takes it lightly on ourselves to criticise—let alone call for the resignation of—a chief executive by name, bearing in mind the privileges that we have. Those privileges must be respected all the more because they are unique in what they enable us to do and say in the House. For that reason, I would like to say that in no way does the siting of the new PFI hospital—much though we disagreed on it—have anything to do with the lack of confidence that we now have in the chief executive. It was already evident when we were debating that matter, when we disagreed with Mr. Loughton, that it was impossible to reason with the man, and that he was arrogant and dismissive.
That was a couple of years ago and, far from getting better, things have got worse. We saw that in the case where Mr. Loughton attempted to abuse correspondence between my hon. Friend the Member for Coventry, South (Mr. Cunningham) and one of his constituents, a distinguished consultant surgeon at the hospital. Mr. Loughton tried to use a letter as a reason for suspending, confirming the suspension of, and obtaining the dismissal of that fine, distinguished surgeon. Mr. Loughton would not listen to reason. He went to the high court, then to a higher court still. Each time his arguments were demolished, and each time he had to run away in shame, all at a cost to the long-suffering taxpayers of Coventry of £250,000.
Straight after that came the CHI report, casting disgrace on the management of the hospital. The very thought that one could leave the person who had been in charge for 10 years and brought the hospital to that state of affairs in charge for another three months to turn it round defies any logical analysis. After that, we had the report on coronary bypass surgery. There may be arguments on both sides there, but it is interesting that the hospital should have come bottom of the league in that field—a field that the chief executive had boasted was the jewel in the crown of Walsgrave hospital.
In the light of Mr. Loughton's behaviour in referring in open meetings at the hospital to some of his staff as the five on his hit list whom he is determined to get rid of, naming them, and referring to them using dismissive and abusive language, it is scarcely surprising that the very people that he needs—that any manager would need—to turn round the hospital after 10 years of his mismanagement have passed a vote of no confidence in him. Sixty-six per cent. have said that they have no confidence in him. How could anyone turn round a hospital with 66 per cent. of the staff against him? The hospital has no personnel director, and it cannot recruit a medical director—no one will take on the job—or new consultant surgeons. There is not a grade A consultant in the building, and it would need one to become a teaching hospital.
The whole of the management is dysfunctional. Therefore, any details of a change in the chairmanship of the hospital that the Minister might give us today will be an irrelevance, and cannot be used as a sop to deflect us from the primary objective of obtaining a new chief executive.
If we do not succeed with the Minister today, we shall take the matter to our right hon. Friend the Secretary of State and to the chief executive of the NHS. We shall not let up. If we have to, we shall—in the best of traditions—

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call another public meeting in Coventry, at which it will be absolutely clear where the chief executive stands, not in terms of our estimation or our sense of confidence, but in the estimation of the people he is meant to serve. I hope that it will not come to that. I hope that the Minister, the Department and the executive of the NHS will see that this situation can be resolved only by taking the simple step of replacing the chief executive.
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Mr. Jim Cunningham: My two hon. Friends have covered a lot of what I had to say, so I do not want to cover that ground again. One or two points, however, need emphasising. The staff at Walsgrave hospital do a wonderful job. I was there on Saturday and saw that for myself, and our remarks should in no way be misconstrued as an attack on any of the staff.
This is all about the style of management at the hospital and, in certain instances, the lack of public consultation. For example, the only information that we get on the PFI proposals is what we happen to read in the newspapers. There has been no attempt to bring elected Members in from time to time—we know that these people are busy—to explain to us exactly what is going on. One of the prerequisites for support is to involve not only elected Members but other organisations that might have an interest in the project. That involvement has been sadly absent.
In relation to the chairman's resignation, we never had a quarrel with him. In fact, at times, we had reasonable conversations with him. It became self-evident, however, that he and the trust were unable to control, and therefore to direct, the chief executive. Therein lay the problem. I am also aware that there have been press statements to the effect that we are against the chief executive because we lost the argument over the siting of the new hospital. When that decision was finally made, I accepted that the new hospital would be at Walsgrave, and I have never said anything publicly to suggest anything different. That particular red herring must be disposed of right away.
My hon. Friends and I were willing to assist where we could in developing the new hospital. We were prepared to meet Ministers and to go all the way down the road, because whatever we think about sites and the PFI, the most important thing is that the people of Coventry deserve a new hospital. They have been waiting far too long.
My hon. Friends, and my hon. Friend the Member for North Warwickshire (Mr. O'Brien) in particular, have said that the chief executive had 10 or 12 years in which to turn round the hospital. We appreciate that there were difficulties over the years with lack of resources, but that cannot excuse a lack of good management. As my hon. Friend the Member for Coventry, North-West (Mr. Robinson) said, there were problems between the chief executive, who had a job to do, and the surgeons.
I know that there is friction when talented people are being managed. In fact, everyone here knows that friction is inevitable, and we always recognised that the chief executive had a difficult management task and that he was attempting to secure a new hospital, but the fact that he spent most of the time drafting proposals for a
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PFI project and so neglected the hospital and the patients—we all know that waiting lists can result from that—speaks volumes. So, too, does the fact that he could not take a large number of people with him.
According to press reports, the chief executive has the support of most staff. He may well have it, but let me emphasise that what support he has is qualified, as it is being said that staff will give him three months to implement the Commission for Health Improvement report. Then, they may take a different attitude to whether it can be implemented. Like my hon. Friends, I have serious doubts about whether the CHI report can be implemented.
A number of colleagues want to speak, so I end by saying that, in the interests of the people of Coventry and the long-term interests of the staff and the new hospital, the chief executive should think about resigning as soon as possible.
Several hon. Members rose—
Mr. Nicholas Winterton (in the Chair): Order. Before I call the next speaker, I must point out that four hon. Members want to contribute. The Minister wants 10 minutes to reply, so there are eight minutes for those four hon. Members. If they are disciplined, they will all get in.
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Andy King: My hon. Friend the Member for Coventry, North-West (Mr. Robinson) said that, if the worst comes to the worst, we shall hold a public meeting on the issue. I can tell hon. Members and the Minister that there is no building in Rugby big enough to hold the people who would turn out to have Mr. David Loughton removed.
I do not like personalising such issues and I never have, but after almost five years of constant trouble for the residents of Rugby, I have a number of examples to refer to, some to do with basic care and cleanliness, and others of a serious nature which have cost the lives of Rugby people. There is no confidence whatever in Mr. Loughton's leadership of the trust.
The people of Rugby love their local hospital, but they have believed that it has no future ever since Mr. Loughton took over. We have had an uphill struggle. People had to come here with the chief executive and the chairman—who, I am glad to say, fell on his sword—to meet the Minister and secure a commitment on the long-term future of my hospital in Rugby.
We have no confidence whatever in Mr. Loughton's leadership. I shall give a few brief examples. A seriously ill patient who went into Walsgrave wrote to me to say:
"Floor filthy, appeared mopped with a dirty mop and polish applied sealing in dirt, walls had splashes of what appeared to be vomit or excrement, curtains around the beds stained—corridors actually cleaner than the wards".
It is unacceptable that Mr. Loughton allowed the hospital to deteriorate into such a state.
I have other examples of people going into hospital only to end up in a very distressed state. A retired clergyman from my area had to pay for an MRI scan because he was so seriously ill. His biopsies were then lost and the process had to start all over again.

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I say to the Minister, please do not try to defend the indefensible. The people of Rugby have asked me to come here to demand that either Mr. Loughton takes the honourable way out and resigns immediately or the Minister removes him.
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Mr. Brian Jenkins: I congratulate my hon. Friend the Member for North Warwickshire (Mr. O'Brien) on securing this timely debate, although people may wonder why Tamworth should be involved with a Warwickshire hospital and why the debate is so timely.
I picked up today's edition of The Mirror, which carries a story about a Mr. Ron Cooksey of Tamworth. With regard to the death rate from bypass operations, a letter went out to explain to people, especially Mr. Cooksey, that they should not worry about the reports they have read because they are mere suggestions, but that is a denial of the truth. The letter says:
"I would like to reassure you that the results in Coventry for non-emergency patients such as yourself are as good as they are anywhere in the country. In fact, over 98 per cent. of patients on our waiting list for coronary heart bypass surgery return home alive and well to enjoy a better quality of life."
That is a bit late for Mr. Cooksey. He died 11 months ago.
Mr. Cooksey was put on the priority list in September 2000, but taken off it in October. He died in November. Can Members imagine the distress caused to the family when that letter was received at home? Sending it shows a basic incompetence that I would not tolerate at any level, particularly in the health service. For Mr. Cooksey, the letter was too little, too late. Surely that is not the standard of service that we expect to be delivered in a modern health service.
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Mr. Bill Olner: I, too, thank my hon. Friend the Member for North Warwickshire (Mr. O'Brien) for securing this debate and for giving us some of his time so that we can chip in.
In my constituency of Nuneaton, the Walsgrave hospital is of paramount importance. It is the big hospital to which most people in my area go when they have serious problems. Indeed, a great deal of work goes on between the George Eliot in Nuneaton and the Walsgrave. You, Mr. Winterton, represented north Warwickshire on the county council, so you know those hospitals very well.
I want the Minister to reflect on the letter sent to my right hon. Friend the Secretary of State for Health referring to the Commission for Health Improvement and the fact that the serious problems outlined today are not new. They have existed for seven years, but have not been addressed. Members of Parliament representing their constituents are not the only ones saying that this man should resign. The letter to my right hon. Friend carries three pages of signatures, and consultants and surgeons are saying that, following the CHI report, this man should go.
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I hope that the Minister takes heed not only of the letter, but of the arguments we have made today.
Mr. Nicholas Winterton (in the Chair): We are grateful to the hon. Gentleman.
1.18 Pm
Mrs. Caroline Spelman: I thank the hon. Member for (Mr. O'Brien) for sharing his time with us. I am here to show cross-party support, as this is not a party matter. The constituency of Meriden is also served by Walsgrave hospital, and I wonder how many more of our constituents will have to come to our surgeries with a litany of complaint.
I wrote to the Secretary of State, who replied that steps could not be taken because the current management should be given time to implement its action plan. I put it to the Minister that if the hospital were a school zero-rated by the Office for Standards in Education, it would be on emergency measures and an acting head would be brought in. If I were running a business and 99 of my 159 senior managers signed a letter stating a vote of no confidence in me, I would be left with no alternative. Why should a hospital, especially one where lives are at stake, be any different?
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The Minister of State, Department of Health (Mr. John Hutton): I echo the congratulations conveyed by many Members to my hon. Friend the Member for North Warwickshire (Mr. O'Brien) on securing what I think has been, on all counts, an exceptional debate. I have never before witnessed an Adjournment debate in which seven Members wished to participate. There is clearly a strong groundswell of opinion in Warwickshire and Coventry.
I am, of course, aware of the concerns about the standard of services provided by the trust to which my hon. Friends have drawn attention. I realise how strongly they—and the hon. Member for Meriden (Mrs. Spelman) —feel about the need to ensure that good health services are available to their constituents. Those concerns are fully shared by Ministers.
My hon. Friend the Member for North Warwickshire was right to begin by mentioning positive developments in the trust There are such developments: the new renal dialysis unit at St Cross hospital, in the constituency of my hon. Friend the Member for Rugby and Kenilworth (Andy King); the new £1.2 million mobile MRI scanner to serve south Warwickshire general hospitals, the George Eliot hospital and University Hospitals Coventry and Warwickshire NHS trusts. We have been able to invest £6 million in the development of better facilities for linear accelerators.
Coventry and Warwickshire NHS trust has taken a lead as the English national pilot site for colorectal cancer screening, screening people aged 50 to 69 for colorectal cancer to confirm the effectiveness of early detection. It has also recently been accredited as a university teaching hospital. I am grateful to my hon. Friend the Member for North Warwickshire for doing what we should all do—express appreciation for the hard work and commitment of all the hospital's staff and also for their dedication to the well-being of the patients whom they serve.

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I am also grateful to my hon. Friend for noting the progress of the new £290 million hospital in Coventry. I agree with my hon. Friend the Member for Coventry, South (Mr. Cunningham) that it is long overdue, but the investment is now being made. The hospital provides a huge opportunity for improvement in the standard of care and treatment available to the constituents of all who are present today. I know that my hon. Friend the Member for North Warwickshire has been a strong advocate of the reforms, and I am grateful to him for that as well.
I shall of course focus my remarks on the concerns raised by my hon. Friends and the hon. Member for Meriden about areas of poor performance. They are substantial concerns, which we take very seriously.
The Commission for Health Improvement's rolling programme of clinical governance reviews began in 2000. The University Hospitals Coventry and Warwickshire NHS trust review began in February this year. During that review, the commission examined the clinical governance structure in the trust, taking account of the views of patients, staff and local partner organisations in health and social care, and user representatives.
As my hon. Friend the Member for North Warwickshire will know, the commission published its findings in September. Its report stated that it had
"found an absence of any strategic leadership on patient care and service issues across the three existing sites. In particular, capacity planning for both elective and emergency admissions and development of care pathways and A and E services are in disarray."
Those are exceptionally serious criticisms.
The trust board accepted all the report's findings and, as my hon. Friends will know, has produced a comprehensive two-year plan to address the issues. In the critical period of the first three months, the aim is to end the practice of placing five beds in four-bed bays, rebuild effective working relationships between clinicians and managers—which have been called into question by many who have spoken today—identify the reasons for higher than the national average mortality rates among non-emergency admissions, review the organisation of care between A and E departments to ensure the safe and effective care of patients, and refocus clinical and managerial leadership on the delivery of high-quality services to patients until the opening of the new hospital in 2005. Progress will be measured monthly by the regional office and there will be a joint formal assessment with the Commission for Health Improvement at the end of January 2002.
My hon. Friend mentioned the zero star rating given to the trust in the NHS performance ratings for acute NHS trusts, which were published on 25 September. As he will know, 11 other trusts in England were given the same rating. This is the first time we have assessed performance on issues that parents care about, such as waiting times, hospital cleanliness and the standard of clinical quality, as assessed by the Commission for Health Improvement.
All who spoke raised serious concerns about the trust management's ability to achieve the required improvements. My hon. Friend will appreciate that the positions of the chief executive and other senior managers are, in the first instance, for the trust board to
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address and resolve. I do not think that it would be appropriate for me to comment publicly in this debate on whether the chief executive should continue in his post. I hope that my hon. Friend agrees, however, that it would be neither fair nor responsible to local patients, other hospital staff or my hon. Friend's constituents to let poor performance continue without positive and firm action.
I assure my hon. Friends that when the management of a trust has been instructed to embark immediately on plans to improve performance within an agreed time scale and those plans fail to materialise, appropriate action will follow. That may involve a change in the senior management of the hospital concerned, including the chief executive. I have mentioned the trust's action plan to achieve the required improvements, which I think is the right way to deal with my hon. Friends' concerns.
Several Members expressed anxiety about the trust's performance with regard to heart mortality rates, identified as the highest nationally in the recent Dr. Foster publication. It is important to bear it in mind that the trust is a major acute and tertiary referral centre. I understand that, once adjusted to take account of issues such as age and clinical urgency, its figures are not significantly different from those in the rest of the United Kingdom.
Mrs. Spelman: Will the Minister give way?
Mr. Hutton: With the greatest respect, I will not. I have only a few minutes left, and I want to try to deal with all the points that have been raised.
I am told that the hospital has dealt with a higher proportion of surgical cases relating to patients over 75 than hospitals anywhere else in the country, has performed a higher proportion of emergency operations than the average, and has handled more complex cases than a number of other centres. I understand that the trust responded proactively to the publication, trying to reassure patients by, for instance, establishing a patients helpline and sending letters to individual cardiac surgery patients and health care professionals.
The case raised by my hon. Friend the Member for Rugby and Kenilworth is obviously deplorable, as is that raised by my hon. Friend the Member for Tamworth (Mr. Jenkins). I understand that the trust has apologised unreservedly to the family involved, but clearly this should never have happened.
I appreciate the concerns raised by my hon. Friends, especially that expressed by my hon. Friend the Member for Coventry, North-West (Mr. Robinson) about the difficulty of recruiting extra staff to the hospital. He said that it was proving impossible to recruit a medical director. I understand that one has now been appointed, and will start on Monday.
Mr. Geoffrey Robinson: The problem is that we are unable to recruit precisely because the chief executive remains in his place. As long as he is there, we shall not regain the confidence that is so vital to the three-month plan. We are now halfway through the plan. Following a vote by consultants, it has emerged that an

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unprecedented 66 per cent. are opposed to the chief executive. There is only one way in which to resolve the difficulty.
Mr. Hutton: I accept my hon. Friend's point but, although his concerns are obviously serious, it has been possible to appoint a medical director.
Mrs. Spelman rose—
Mr. Hutton: As I gave way to my hon. Friend the Member for Coventry, North-West, I shall be fair to the hon. Lady and allow her to intervene briefly.
Mrs. Spelman: That is kind of the Minister.
The figures in the Dr. Foster study have been adjusted. Having checked, I found that they had been adjusted in respect of both age and inter-hospital transfers.
Mr. Hutton: I am sure that the hon. Lady is right. I simply gave the information I have received. I shall make further and better inquiries when I return to my office.
I recognise that the concerns expressed today are very important. Patient safety must be paramount in the national health service at all times and in all places: that is why we have raised the profile of clinical governance in the modern NHS. The concerns need to be addressed quickly by the trust—but there are positive developments as well, and I am grateful to my hon. Friend the Member for North Warwickshire for mentioning them. The task of senior management and the trust board is now to ensure that sustained performance improvements are made as quickly as possible. We will not hesitate to take whatever action is necessary to ensure that that happens.
Mr. Nicholas Winterton (in the Chair): I congratulate all who spoke in the debate on their co-operation. It must be unique for eight Members, including the Minister, to deal with such an important issue in half an hour.

Affordable Housing (South Gloucestershire)
1.29 pm
Mr. Steve Webb: I am very grateful for the opportunity to raise an issue that is brought home to me every week in my constituency surgery. In 1997, when I was first elected to Parliament, people very rarely came to see me or wrote to me about housing—the issue did not appear on the radar screen. The contrast between 1997 and this year could not be more acute. Almost every week, one or more families come to see me because their housing is inadequate; it may be too small, unsuitable for raising children or in the wrong area. One of the advantages of Adjournment debates is the opportunity they provide to express to the Government various concerns about the way in which policies, many of which were introduced by previous Governments, are being manifested and to seek a Minister's assurance on those concerns, so that I have more to tell my constituents than, "I'll write to the council for you, but the chances are that nothing much is going to happen."
The human stories of those who come to see me include that of a woman whom I shall not name who will spend this Christmas in bed-and-breakfast accommodation with her child. She came to see me some months ago, and I have done what I can to try to find housing for her, but the last letter that I received from the council said that there was little chance of getting her out of that accommodation before Christmas. I would not want my children and myself to spend Christmas in a bed-and-breakfast hostel, and I am sure that the Minister would not want anyone to have to do so unless it were absolutely necessary. None the less, that is the situation that we have reached in south Gloucestershire.
Another lady who came to see me is the mother of young children and a victim of domestic violence. She is very much the victim in the situation and has not herself created her own housing need. She left her husband, and is living with her children in a first-floor maisonette. If she needs to put out the washing on the ground floor, she has to take all her children with her because they cannot be left alone upstairs as the balcony is not secure. Although she is seven months pregnant, she has to carry a pram and other items upstairs.
Those are very human tales illustrating the unsuitability of social rent housing and, in the case of those folk, of council housing. I seek assurances in this debate that the Government's planned responses—I know that they are taking action—will match the scale of the problem. The number of social rent units in the United Kingdom has decreased in each of the past 10 years. Under Governments of both larger parties, the number of units has decreased from 4.5 million in 1991, to fewer than 4.3 million last year. There have been different policies and initiatives each year, but the number of units has continued to decline.
A couple of weeks ago, in an Adjournment debate on housing in this very hall., the Minister mentioned a target of 100,000 more units of affordable housing by 2004. That is a welcome target, but it compares with an estimate from the Environment, Food and Rural Affairs Committee that 60,000 to 100,000 units are needed not in the next three years but in every year. The estimate shows the scale of the problem facing us.

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Although, this year, the Government have put more money into the Housing Corporation in an effort to ensure that more affordable housing units are built, fewer units have been built this year than in the last one. The reason for the continued decline is partly that units need to be built in areas where there are shortages of affordable housing, such as in the south, which is more expensive; and partly that, quite rightly, Government policy is that houses should increasingly be built on brownfield rather than greenfield sites, which again makes them more expensive. Therefore, although the money for housing construction has increased, the number of houses built has continued to decrease. I am not saying that it is an easy problem to solve, or that nothing is being done, but simply that the action being taken does not match the problem.
Although I am concerned in this debate primarily with affordable social rent housing, I recognise the issue of affordable owner-occupied housing. I am also aware of Government initiatives to make it easier for key workers to buy a starter home. My main concern today, however, is not the shortage of teachers and nurses in south Gloucestershire. I am talking about families who are in many respects just like mine; I could be in the same situation. There are just not enough houses to meet the needs of those families.
For South Gloucestershire council, there is a problem of both housing supply and housing demand. On the supply side, the council is obliged to honour council tenants' right to buy, and each year it sells on average about 180 council houses. In a typical year, however, south Gloucestershire's housing associations build not 180 units but only 80. Year after year, therefore, the number of social rent units in the area decreases by 100.
In 1998, the council commissioned an independent study that stated that simply to maintain current numbers on the priority housing waiting list, half of all new houses would have to be affordable. It is an extraordinary figure. The same study said that it is not feasible to believe that more than 30 per cent. of new houses will be affordable. Those figures alone show that the problem is likely to grow worse, but as I shall explain in a moment, only a tiny fraction of the new houses are affordable.
A big problem therefore exists on the supply side with right-to-buy sales not being matched by housing association new build. However, there is also a big problem on the demand side. Three years ago, in 1998–99, 400 households were accepted as homeless in south Gloucestershire. Last year, that figure had increased by almost one half, to 575 households. The figure covers only households who have been accepted as homeless; it does not include the long list of people whose houses are unsuitable or too small.
The pressure is growing because new legislation that my colleagues and I supported has given new groups entitlement to housing. It is quite right and proper that that should have happened, but it will add to the pressures on the local authority. The cost of owner-occupation in an area like south Gloucestershire also creates pressure on the demand for affordable rented housing. As they grow up, many young people cannot afford a first home, and so they end up living with their parents. As they grow older, they form relationships and partnerships and have children. Eventually, not merely the grown-up children but their partners and their own
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children are living in the family home. Eventually the strain begins to show, something gives and they cannot continue living there. As there are so few affordable owner-occupied homes, people in those households end up on the housing needs list. Therefore, although I am focusing primarily on rented housing, the problems of owner-occupied housing clearly have a knock-on effect on rented housing.
The average house price in south Gloucestershire is £101,000, which is four times the average salary. Those of us who have ever applied for a mortgage will know what that means. Moreover, the people who I am talking about are not earning the average salary; they are starting out in the job market and simply cannot get on the housing ladder. Consequently, we have decreasing housing supply but increasing demand for it.
How can we meet that demand? There are two principal elements to any Government response, the first of which is to use the planning process to ensure that a decent proportion of new build houses are affordable. That response would be fine in principle if it worked, but there are real practical problems. Paragraph 5.11 of the Government's December 2000 housing policy statement—on the rules allowing local authorities to use the planning process to offer affordable housing—states:
"Although some respondents expressed concerns about the effectiveness of this process, we believe that the current policy already gives local authorities sufficient powers to deliver affordable housing through the planning system."
Although the policy contains a promise of good practice guidance and other relevant provisions, it maintains the principle that the necessary powers already exist. The problem is that if a local authority faced with a big new housing development told the developers that they had to provide lots of affordable homes, the authority cannot also say, "We would also like a primary school, a community centre, a library and highway improvements." The authority has to choose which requirement to impose. One of the problems for South Gloucestershire is that there is so much new housing and so little new infrastructure that the authority, for the sake of the new residents, sometimes has to say that the section 106 condition imposed on the development should relate to community facilities such as schools, thereby watering down the affordable housing requirement or requiring the affordable housing to be built somewhere else.
I have new figures from the authority which, I must admit, shocked me. Each year, between 1,100 and 1,600 new houses are built in the South Gloucestershire council area. The number of those that are affordable because of planning process requirements is not 1,500—which is the average figure—but 70. The planning process is therefore securing only 70 of 1,500 homes as affordable. That is barely 5 per cent, whereas, as I said, the housing needs survey said that 50 per cent. of new homes would have to be affordable simply to keep the waiting list at current levels and that 30 per cent. is the feasible figure. The Minister may say that the council has to choose its priorities between affordable housing or schools and community facilities, but she will understand the pressure on a rapidly growing area with lots of new housing. We need infrastructure as well as affordable housing, and I hope that she will respond on the specific point.

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My first inquiry is whether the planning system can be made more effective in securing affordable homes and I would be grateful for the Minister's reflections on that point. My second inquiry is whether the local government finance system could be used more effectively to support affordable housing. When I was a candidate in 1997, we had a book of standard answers, and I suspect that my answer on this issue was similar to the Minister's. If the question was what we would do about housing and homelessness, the answer was always to say that we would free up the council house receipts.
The Government did introduce a capital receipts initiative, which I naively assumed meant that houses would be built. However, when I tabled a question a few years later to ask how many new council—or socially rented—houses had been built because of the capital receipts initiative, the answer was only a handful. The initiative was not about building new council houses, but an authority that is selling 200 council houses a year should be able to do more with the millions of pounds in receipts to house the people who have not been able to buy a home and who are in real housing need.
Local government finance is a complex subject, but it is difficult to explain to people that they have no housing because the council is selling off all its council houses and the housing associations are not building new ones. Their reasonable response is to ask what happens to the money. I have to tell them that nothing can be done with some of it and some of it allows the council to borrow to renovate, but that it is not used to provide the quantity of new houses that are needed. I ask the Minister to consider whether the local government finance arrangements could be made to help the situation.
Given that I have a Minister from the Department for Transport, Local Government and the Regions in front of me, I cannot resist mentioning that as South Gloucestershire has the worst funding settlement for education and one of the worst for social services, and therefore has to spend above its standard spending assessment to keep those services going, the money for housing is even more restricted. That is a tangential point, but prioritising education and social services means that there is even less money to provide decent housing. Local government finance is part of the jigsaw.
The Housing Corporation, and the funding it receives, are also part of the story. The Minister will probably tell me that extra money has been put in. I do not doubt that, and I am grateful for it, but even if the Government's goal is reached, it is only 100,000 new homes. My concern is that my surgeries a week, a month, a year and three years hence will show that the imbalance between supply and demand has not been rectified. It is possible that the same people will come back and tell me that they came to see me a year ago but still have not got a proper home for their children to live in.
My constituency is not one of the most deprived in the country, but that does not mean that it does not have families in real need, especially those in bed and breakfast but also those living in places that are just not right to bring up children. After my constituency surgeries, I go home and say to my wife that if I could achieve one thing it would be to raise £1 million and
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spend it on building new, affordable houses, so that some of the good people I meet could have somewhere decent to bring up their children. That is what I expect for my children and it is something that my constituents should also be able to expect. I am grateful for what the Government have done so far, but my concern is that it will not tackle the problem on the scale that it exists.
1.44 pm
The Parliamentary Under-Secretary of State for Transport, Local Government and the Regions (Ms Sally Keeble): I congratulate the hon. Member for Northavon (Mr. Webb) on securing this debate and on his speech. I know that the provision of affordable housing is an issue close to his heart and I have answered several written questions from him on the subject. We have all had similar cases in our advice surgeries, and we all share his experience of the problems.
I agree that it is not acceptable for families to be in bed-and-breakfast accommodation at any time, but I can appreciate that it would be even worse at Christmas. As he probably knows, the Government have set up a bed and breakfast unit, which will try to reduce dependence on bed and breakfast, especially for families with children, for whom the use of such accommodation is inappropriate.
The hon. Gentleman also mentioned the victims of domestic violence. The homelessness legislation and associated priority needs order that is being considered should make them a higher priority and ensure that they are not returned to the place from which they have fled. I hope that legislation will ensure that greater attention is paid to the needs of the victims of domestic violence. That agenda will also be addressed by the supporting people programme.
The hon. Gentleman mentioned a constituent who is seven months pregnant and living in an upstairs property. That raises several issues, including overcrowding, which can often force people into inappropriate accommodation, and it goes to the heart of the issue—the supply of good-quality, affordable family housing.
Ensuring the provision of more decent, affordable homes lies at the heart of the Government's policy and we have taken action to achieve it. We have set ourselves a target of providing 100,000 new affordable homes by the end of 2004. To help us to meet that target we have significantly increased funding for new affordable housing. Over the past five years, the Housing Corporation has directed some £5.3 million of funding to South Gloucestershire, resulting—as the hon. Gentleman said—in the provision of 270 affordable homes, but we intend to do better. Investment through the Housing Corporation will rise to more than £1.2 billion by 2003–4, almost double current levels.
We have increased the resources available to local authorities, primarily to maintain and improve their own stock, but they will also be able to work with housing associations to increase supply. Total capital allocations for local authority housing are being increased from £1.2 billion last year to £2.5 billion by 2003–4. This year, our capital allocation to South Gloucestershire was some £5.85 million and an announcement about next year's allocation will be made next month.

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Much of the hon. Gentleman's constituency is rural and we have put policies in place to ensure that the particular needs of rural areas are addressed. We have doubled the size of the Housing Corporation's programme to deliver affordable housing in rural communities from 800 in 2000–01 to 1,600 homes a year by 2003–04. The corporation has put in place a new rural policy that shows how it will build a rural dimension into all its policies and their delivery. One example of that is the fact that the corporation takes account of the higher costs of development in rural areas when drawing up its scheme cost criteria.
The hon. Gentleman is aware of the starter homes initiative, so I shall not dwell on the issue. However, I should point out that Knightstone and Sovereign housing associations, which operate in his area, have been allocated £1.7 million under that initiative to provide starter homes for about 80 key workers in south Gloucestershire and Bristol. I am sure that he will accept that the infrastructure of schools is no use without the teachers to work in them.
The hon. Gentleman mentioned his concern about allocations policies, especially in relation to domestic violence victims. The provisions of the current homelessness legislation will make it possible for local housing authorities to allocate housing to persons of a particular description. That will give explicit authorisation to the operation of local lettings policies, subject to the scheme as a whole giving reasonable preference to the named categories—those in priority need. I hope that that reassures the hon. Gentleman, who was concerned about making sure that the needs of local people were properly respected in the allocations policies, and about ensuring that the real pressure of need among homeless people was met.
The hon. Member for Northavon spoke at some length about the role of the planning system. I shall deal with that matter in detail, as some connected issues have been quite contentious. If there is to be an increase in the supply of affordable housing in the hon. Gentleman's area, some of those tensions must be resolved.
To increase the supply of affordable housing and to develop more mixed and sustainable communities, we are encouraging local authorities to make best use of provisions in the planning system to secure more affordable homes as part of mixed developments. Some authorities use the existing national planning policy framework extremely effectively to secure the provision of affordable housing. Over the past two years, permissions for as many as 30,000 affordable homes were negotiated, but many local authorities could do better.
I turn now specifically to south Gloucestershire. The authority's local plan aims to ensure provision of an average of 107 affordable homes per year between 1996 and 2011. The council has a target of negotiating for 30 per cent. of all dwellings built to be affordable.
The hon. Member for Northavon mentioned an overall figure that was, to put it politely, not very good, but a more detailed analysis makes it look quite a bit worse. Since 1996, the authority has achieved an average of only 57 affordable homes per year through the planning system. In each consecutive year, the proportion of affordable homes provided has ranged
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from zero per cent. to 6.3 per cent. of all homes built. Clearly, those percentages are well below the local authority's own target figure.
The Government published PPG3 in March 2001. It strengthened the hand of local authorities in seeking to secure affordable housing through the planning system. Regional planning guidance for the south-west, published this September, encourages local authorities, social housing providers and other agencies to work together to assess the need for affordable housing, and to deliver it.
Government have provided the tools, and it is now for the local authority and its partners to ensure that they use them as effectively as possible to secure the affordable housing that the community needs.
Mr. Webb: Is not there a local angle to this matter? If an authority has 500 new houses built, for example, it will not also need a new school or a whole new infrastructure, so it can demand affordable houses as the quid pro quo for the development. However, 5,000 new houses are being built in several areas, where entire new infrastructures will be needed. Those local authorities cannot simply demand that affordable houses should make up 30 per cent. of the development because no new infrastructure is needed. Does not the Minister agree that the number of new houses involved—whether a small number are being built, or whole estates—makes a difference?
Ms Keeble: Perhaps I can help by giving the hon. Gentleman examples of local authorities that have done interesting things and where the trade-off between schools and houses, for instance, has not taken place.
My right hon. Friend the Secretary of State announced recently that he intended to look at a range of options for providing more affordable housing through the planning system. That will include considering whether planning obligations on new commercial developments should require some affordable housing in the vicinity of the development.
I said earlier that some local authorities had made extremely good use of the planning system and had negotiated good arrangements with local developers, housing associations and other bodies to secure a good supply of affordable housing. To prove that I am not politically partial in any way, I direct the attention of the hon. Member for Northavon to Taunton Deane council, which is near his area, and to Hackney. Those councils have been exciting and innovative and have succeeded remarkably well in producing good-quality, affordable and sustainable housing.
Local planning authorities must also look at whether existing provision for housing will help to deliver affordable homes and more sustainable communities. The PPG3 document points to the need to review unimplemented planning permissions which, for example, do not take sufficient account of the need for higher-quality development that makes more efficient use of land. Our comments on the south Gloucestershire local plan pointed to a lack of evidence that the council had done that. More could be done by the council to encourage development of a type and density that will produce homes that are more affordable.
The hon. Member for Northavon also asked about financial arrangements, and referred to the answers that he was able to give constituents in his advice surgeries.

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He is braver than I if he is willing to explain the intricacies of local government finance to constituents coming to his surgeries, but I assure him that the issue will be raised in the local government White Paper to be published shortly. In addition, the Government have recognised the need to get extra investment into housing in particular. That is why some of the options now open to local authorities, such as stock transfer, arm's-length management and the provisions in the forthcoming White Paper, will make it possible for them to lever in more financing. I hope that the hon. Gentleman will explain to his constituents that more money will be made available—although he might not trouble them with all the intricacies of the mechanisms involved.
I turn now to the matter of providing enough homes for the whole community. A key aspect of meeting the need for affordable housing is to make sure that the planning system will deliver sufficient homes for the whole community, in the right places and at the right time.
In the former county of Avon, which includes south Gloucestershire, more than 70 per cent. of household growth arises from the existing population. Local people will therefore be hit hardest if the planning system fails to provide sufficient homes for them. They will be unable to obtain housing that meets their needs and, as the hon. Member for Northavon has suggested has already happened, the price of existing houses will increase.
Moreover, there will be more instances of enforced sharing and of people living in inadequate accommodation. People in such circumstances might be covered by the term "the hidden homeless". There are therefore real incentives for local authorities to ensure that they achieve their targets for the provision of affordable housing for people in their areas.
The hon. Member for Northavon will no doubt recall that my right hon. Friend the Deputy Prime Minister, when he was Secretary of State at my Department, directed South Gloucestershire and the other authorities in the former Avon area to increase the housing provision in their joint structure plan. One reason for that direction was that the plan's provision was
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insufficient to meet the housing requirements of the whole community, including those in need of affordable and special-needs housing.
I shall not develop the point further, but I am sure that the hon. Member for Northavon will understand that the planning system cannot play its full part in helping to deliver affordable housing if local planning authorities do not provide enough new homes for the whole community.
The hon. Member for Northavon mentioned the role of the private sector, and we should not ignore the role of the private rented sector in helping to take the strain of providing more housing. The Government are committed to continuing to pursue our strategy of encouraging investment in this sector and of improving standards of quality and management. I hope that legislation will be introduced to cover those matters soon.
I began by saying that this Government share the concerns of the hon. Member for Northavon about the need to ensure a sufficient supply of decent, affordable housing. I do not pretend that we have all the solutions, but I am confident that the measures that we have put in place will make a real difference in helping people to find homes, and in dealing with some of the real human problems that the hon. Gentleman identified—such as those faced by victims of domestic violence, by women who are trapped in unsuitable accommodation, and by people living in bed-and-breakfast accommodation with their children. The latter encounter special difficulties at Christmas.
However, the Government cannot deliver change alone. We need to work in effective and imaginative partnerships with local authorities. Where we have been able to do that, the process has worked extremely well.
The hon. Member for Northavon should go and see the high-quality housing being produced now, partly as a result of the guidance in publications such as "Better Places to Live". The Department is working to promote good standards and to ensure that the right numbers of housing units are developed. That housing is not confined to big council estates, as used to be the case, but is now taking the form of individual units that people want to live in. The Government aim to give people decent and affordable homes in sustainable communities.
Question put and agreed to.
Adjourned accordingly at one minute to Two o'clock.