Westminster Hall Sitting of 5 February 2002

Preamble
[SIR MICHAEL LORD in the Chair]

Manufacturing Industry
Motion made, and Question proposed, That the sitting be now adjourned.—[Mr. Wilson.]
9.30 am
Paul Flynn: Three weeks ago, 235 people in my constituency were made redundant, although on 18 December last year they had been informed that the company's orders had increased and that it looked good for going into profit this year. The blow was savage and brutal, and people who worked on the night shift were told when they came off it that they would not be paid. One such worker expressed his views to me in a letter:
"The hammer blow was I would not be receiving the money owed to me by the company …That includes 3 months contractual notice, 3 months pay during the consultation period, salary for work done in January 2002, holiday pay, the return of money lost to 'short-time' working in 2001/02 (which was to be returned by the employee according to the agreements signed) and redundancy pay."
According to his calculations he was eligible for £12,000, which would have been a useful cushion against the loss of his job, but he will receive 10 per cent. of that. He is highly skilled and was devoted to a company at the pinnacle of high technology that ran one of the largest semi-conductor plants in Europe—a plant of the future. However, 235 jobs have gone this month, 179 went last year and the firm has gone into receivership.
On 4 December last year, Alcan announced the loss of 310 manufacturing jobs in its aluminium works, and by the end of the month a further 220 jobs had gone. We also debated the issues raised when 1,300 jobs went at Corus in February last year. That makes a total of 2,284 manufacturing job losses in one town. In the microcosm that is my constituency and that of my right hon. Friend the Member for Newport, East (Alan Howarth), there have been huge losses of manufacturing jobs, and that pattern has been repeated throughout the country.
Every statistic points to an accelerating slump in UK manufacturing. The job share of manufacturing has fallen from 18 per cent. in 1990 to 14 per cent. in 2001. Output has fallen from 23 per cent. to 19 per cent., and that has accelerated in the past year, which contained the worst year-on-year fall since the end of 1991. Job losses in manufacturing industry totalled 112,000 in 2001, and that process is occurring at the same time as another damaging trend.
In Scotland, Wales and the north of England we have relied on inward investment from other countries to replace those jobs. Many jobs in those areas consist of people working for firms that came into the country from elsewhere, but that flow has dried up. Those three areas are vulnerable to the downturn because
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they have all devoted a great deal of effort to luring firms that are involved in information technology and communications, which are now in recession across the world.
Why is that recession happening? It is complex and I would not suggest that there is a simple solution. One matter that comes up again and again, and which has great force, is our position outside the eurozone. We know that opinion in Denmark and Sweden has changed, and that they are likely to join. We see a future in which we could have the great dollarzone on one side, the eurozone on the other and the United Kingdom, with its small currency, isolated in the middle. Noticeably these days, very few Conservative MPs wear their £ badges. There is a good market for them—10 £ badges for a euro. That is a sign of the loss of conviction by those who oppose the eurozone.
Corus in Newport, and Alcan, have stressed time and again that, above all others, the problem that caused jobs to be lost in the UK was our position outside the eurozone and the lack of hope of entering it in the foreseeable future.
Mr. Philip Hammond: If the hon. Gentleman sees going into the euro as the solution for Corus, Alcan and other hard-pressed manufacturing industries, can he tell the Chamber at what rate it would benefit those industries for Britain to lock into the euro?
Paul Flynn: I will come to that, but a further point must be made about the rate and another solution.
The problem for Llanwern was that the strength of the pound and the weakness of the euro meant a £15 premium on every tonne of steel. That was enough to ensure that jobs were lost in Newport, not Holland, which had a far poorer productivity record. There is the danger of seeing again what happened to the party represented by the hon. Member for Runnymede and Weybridge (Mr. Hammond) when, in an unfortunate period in the 1980s, a huge chunk of our industry was lost because of a persistently overvalued exchange rate. We are now in a position in which that is continuously happening. We must find some way, even if it is not through the euro, to get an exchange rate that is acceptable and realistic. There may be different ways in which we can adjust our exchange rate accordingly, but it essential to move forward.
Jobs are being affected here. When companies have a choice and decisions are made internationally, they may find it irresistible, as we have seen in many cases, to lose jobs in Britain. We must consider measures to engineer a revaluation before more of our manufacturers migrate to eastern Europe, Ireland, Spain or Asia.
It came up last week, and last year, that it is easier to sack people here than in euroland. The information consultation on economic matters in the United Kingdom and Ireland is voluntary, whereas detailed requirements exist in almost all other European countries. The deal done between Alchemy and BMW last year would have been impossible elsewhere. Compared with our continental counterparts, employers in Britain are relatively free to decide and announce massive changes with no obligation to consult

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their employees—the key stakeholders. The Select Committee on Trade and Industry looked at that and concluded that:
"the suggestion that it is easier and cheaper to dispose of employees in the UK than elsewhere seems to us to have been shown to be factually correct.
The national and local trade unions representatives we met felt that the decision to close Dagenham, rather than Cologne, owed more to the absence of constraints on shedding labour than to nice calculations of returns on capital or the inherent characteristics of the two sites."
We know that BMW would not have been able to dispose of a German subsidiary in the way in which it did Rover. That is a key objection that causes great anger and a sense of injustice among the work force. I look forward to the Minister's response to that.
The picture is bleak and sad. I have read the splendidly upbeat and positive speech by the Secretary of State in which she rightly praised all the aspects of British manufacturing industry that are attractive and forward looking, but while it is right to accentuate those positive aspects, it is extremely dangerous to ignore the negative. The Secretary of State pointed out that many other countries have suffered losses in manufacturing industry, especially since 11 September. That is true, but if we look at the picture in similar European countries during the past 10 years, our situation is worse than it is in theirs. The United States Bureau of Labour Statistics carried out an examination and published a comparison of European manufacturing companies' output. With the possible exception of Germany, all the other countries examined had a lower loss of manufacturing jobs and capacity than we did. They included Belgium, Denmark, France, Italy, the Netherlands, Norway and Sweden.
There is the good news that the Secretary of State emphasised, and there is encouraging news even in the picture that I painted of Newport in that many of the people made redundant have found other jobs. However, I believe that the bad news of the slump in manufacturing industry is being masked by growth in other parts of the economy. It is a great credit to the Government that we have a strong economy, but the problem is that many jobs replacing those in manufacturing are in the candy floss economy—in call centres and dot.com companies that are here today, but gone tomorrow. We have seen them disappear rapidly. They are not as secure and permanent as manufacturing jobs.
A dangerous loss of critical mass is also taking place. Four years ago, Britain made more television sets than any other European country. Today, production of all small and medium-sized models has switched to lower-cost factories in eastern Europe. We still have a small, low-volume market of high-value televisions, but it is questionable whether that can continue. Electrical goods suffered the worst decline in output of all manufacturing sectors between 2000 and 2001. There is a danger that the telecommunications sector will shrink beyond the point of no return. We are all familiar with that phenomenon. Without the critical mass of suppliers and people contracting in, suddenly the service will implode and not have the necessary strength to continue.
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The general manager of Sony UK has said:
"What keeps us here is the quality of staff and research and development. These depend on the strength of the wider UK industry."
There will be trouble there if the wider UK industry is in trouble. Sir Ian Gibson, chair of the Department of Trade and Industry's automotive innovation and growth team, commented that, because of the loss of critical mass, the car industry may have gone beyond the point of no return already. He said:
"It's like a man walking by the edge of a cliff in a fog. We don't know how close we are."
Why is manufacturing important? Why should we worry about it at all? Is concern about its replacement by other industries a sentimental attachment to the past? Manufacturing has special value because of its permanent nature. It is a matter of sorrow to see a blast furnace lying on its back. It cannot rapidly be re-erected without massive new investment. It has gone and the jobs have gone, not for the present generation but for the children and grandchildren of those who work there. If a high-tech factory is closed down, within six months or so the equipment is obsolete. If an aluminium factory is closed down and carted off to somewhere else in Europe, it cannot be replaced. Such jobs have a permanence that others lack, and their loss is often carried out in a way that shows indifference to the damage that is caused.
Manufacturing workers have a special pride that comes from creating something tangible instead of moving papers around or talking to people on the telephone all day. That is good for their psyche and morale. There is an especially fulfilling reward to be gained by those who can create an object of value, usefulness or beauty. We lose that at our peril.
Mr. Hammond: The hon. Gentleman is making an eloquent plea in support of our heavy manufacturing industries, especially those in his constituency. What has been the impact of the climate change levy, which was introduced last year at a critical time for those industries?
Paul Flynn: For the steel industry, the original plan was that the industry would pay £120 million. That was negotiated down to £8 million— a huge reduction—on the evidence that Corus gave to the Trade and Industry Committee. The climate change levy is unfair in that it hits the manufacturing sector in Britain, but the retail sector in other parts of the continent. It does act as a burden on the industry, but Conservative Members tend to forget that there was a quid pro quo in that £1 billion was taken from the national insurance scheme as compensation—although that is unfair to the extent that it goes mostly to labour-intensive industries such as call centres and Marks and Spencer. It is not an enormous factor, but it rankles with manufacturing industry. However, we are all environmentalists now, and there is not much point in putting a burden on call centres and Marks and Spencer given that some of the most prodigious users of electricity are large manufacturing industries.
This country has marvellous examples of success in high-tech industries. It is good to know that the Government are to invest more in nanotechnology, the

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technology of the future that will amaze our children and grandchildren. It is an area in which we, along with two other countries, have enjoyed a world lead, and in which the Government have accelerated investment.
Over the years, our extraordinary record in science has been reflected in Nobel prizes, of which we have won 70 in chemistry, physics and other technologically significant fields. Japan has won seven; many far eastern countries have won none. However, as was mentioned by the Secretary of State last week, the innovative genius of the British people has never been translated into large-scale manufacturing jobs and prosperity.
I shall conclude, because many hon. Members want to speak. Manufacturing is undergoing an almost invisible slump that does not sufficiently engage the attention of the nation or the press. Some suggest optimistically that it may be a U-turn and that we will bump along the bottom and come out of it. Others say that it is a V-turn, and that we will come out of it more suddenly. I fear that it is an L-turn and that, having reached the bottom, we will continue until we fall off the end. That will be the consequence of accelerating decline and lack of critical mass. We could well be at the edge of the abyss, and the fog is gathering daily.
9.49 am
Adam Price: I congratulate the hon. Member for Newport, West (Paul Flynn) on securing the debate at such a critical time for manufacturing industry. This is the second Westminster Hall debate on manufacturing in which I have participated, which reflects a wide concern with the continuing problems of industry.
Unfortunately, in recent months and years a host of manufacturing companies have gone to the wall in Wales, including Corus, Panasonic, Sony and Valeo. I have a list that goes half way down a page, but time does not allow me to name them all. The Welsh economy has suffered such ill luck recently that it reads almost like a roll call of first world war battles. Incredible damage has been inflicted, especially in manufacturing. In a sense, the problems in Wales go much deeper and much further back than the recent manufacturing recession. As an economist, I find nothing surprising about the asymmetric shock that the Welsh economy has suffered over the past eight years. Over the past five years the decline has quickened as part of the wider recession.
It is welcome that there is at last some resonance from the Government in terms of their recognition that manufacturing has problems. I read the Secretary of State's speech at Merrill Lynch. It was a good speech, in which she railed against the myths about manufacturing. That begs the question of who is propagating those myths. Commentators such as Will Hutton have been called paranoid for talking about the vested institutional interests of the City of London and the Treasury view, which has been the spectre haunting British economic policy for more than 100 years.
The manufacturing summit gave a higher profile to the problems of manufacturing, but the Government need to go much further. We have a Minister for Industry and Energy and a Minister for E-Commerce and Competitiveness, and it is high time that we had a designated Minister for manufacturing to get to grips with the long-term decline of manufacturing industry.
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The hon. Member for Newport, West mentioned the problems in the early 1990s; there was also a massive haemorrhaging of jobs in the early 1980s. There is a 10-year cycle of huge, concentrated decline in manufacturing jobs. Like the manufacturing recession of 1979 to 1982, it was particularly severe in Wales and the regions of northern England, Scotland and Northern Ireland that are disproportionately dependent on manufacturing jobs.
The problems of manufacturing industry have a regional and spatial dimension. The Government need to grasp the tools of regional policy that are available. The main tool, regional selective assistance, goes back to the 1970s and an earlier age of regional policy. It is only discretionary assistance, which distinguishes it from the tools that were available throughout large periods of the 1960s and 1970s, especially the regional development grant, which was an automatic capital grant available to all firms in the designated regions. The regional employment premium invented by Nicky Kaldor was possibly one of the most successful examples of intervention in economic policy in the post-war period.
The Government are committed to the concept of evidence-based policy making—what works is what counts. I advise the Minister to look again at the evidence for the success of the more directive regional policy tools that were available in the 1960s and 1970s. Some of the firms that have not closed and remain in business were diverted to Wales in the 1960s, and some even go back to the 1940s. Those old-style regional policies were fairly successful. The emphasis in the Labour party's new regional policy is on bottom-up assistance and helping regions to help themselves. There is something to be said for that. We need a more judicious balance between bottom-up and top-down policies, especially with regard to the problems in the manufacturing industry.
We spend less on direct regional aid to firms in the United Kingdom than does almost any other European Union country. Spain is the only major exception, although many Spanish industrial regions spend more than we do. We spend less than one third of the EU average per capita on direct aid to firms. In the 1970s, we spent £2 billion a year at current prices on such aid. That figure is down to £400 million a year, which is a significant decline in regional aid. To be fair to the Government, most of that decline occurred under the previous Administration. The Government have kept the spending pretty much at the level that they inherited.
Now is the time to grasp the potential of reinvigorated regional selective assistance. We need to give the aid to more firms and to get nearer to the ceiling imposed by the EU. We should also make it more automatic, as there is a problem of uncertainty. Many consultants make a lot of money from helping firms with their RSA applications. The system should not work like that. There should be automatic trigger mechanisms. The Government should reconsider the issue of enterprise zones, especially in disadvantaged regions such as the heads of the valleys in Wales. They have taken a zonal approach in many of their policies, and should reconsider wide-ranging packages of tax incentives for local areas.
On the macro-economic aspect of the problems in manufacturing, the inept policies of the previous Administration in the early 1980s and 1990s led to the

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major recessions that caused massive damage to manufacturing in Wales and many other parts of the UK. The Government are concerned not to make those mistakes again. I understand their emphasis on low inflation and low interest rates, but I do not understand the lack of concern for a lower and more competitive exchange rate. Several economists, such as Peter Spencer of the Item Club and William Keegan in The Observer, made yet another plea for action on the exchange rate. Labour Governments came unstuck on that issue in 1945, 1964 and other years. Action on the exchange rate is critical for the manufacturing industry.
The exchange rate has boosted imports and held down exports, especially in many sectors that are important for the economy of south-east Wales where there has been a large concentration of job losses, and in sectors such as steel, cars and textiles in other parts of the UK. It has hurt other sectors such as farming, coal mining and other primary producers that had to match the low prices of imports, and has increased joblessness in areas with an employment rate that was already below the average. There has been a convergence in unemployment rates, but a divergence in employment rates. The employment rate among people of working age in Berkshire is about 85 per cent. In large parts of south Wales the rate is below 60 per cent. The Government's unwillingness actively to intervene to make the exchange rate more competitive is a major part of the problem.
Ian Lucas: Will the hon. Gentleman specify what action he would like the Government to take with regard to the exchange rate?
Adam Price: The technical jargon is "sterilised intervention". It is a widely used tool in which pounds are sold and euros are bought through Government bonds, and is a neutral way of intervening in revenue, as distinguished economists such as Charles Goodhart, who invented Goodhart's law, have said. The head of the UK's leading investment fund, Gerry Holtham, who was formerly director of the Institute for Public Policy Research, has also widely made the same plea. It is a respected position among economists. We need a Government response on the issue.
The Government have been lucky on the macroeconomic front, because of the state of the world economy. The international economic outlook has changed. The Government's mantra is that the best thing that they can do for manufacturing is to ensure macro-economic stability. However, if that stability disintegrates—there are many signs that that is happening—supply-side policies, which have been at the core of the Government's approach, will seem, however well intentioned, pretty irrelevant. As the hon. Member for Newport, West said, the problem with the damage to manufacturing capacity is that it is likely to persist. It is difficult to rebuild the capacity and the competence that have, in many cases, been built up over generations. Once they are lost, they are gone for ever. No Treasury Minister is present, but I stress to the Government that
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we need action on the exchange rate. It is the single most important thing that the Government can do to help ailing manufacturing regions.
Several hon. Members rose—
Mr. Bill O'Brien (in the Chair): Order. If all the hon. Members who wish to speak are to do so, I must ask for brevity.
10.1 am
Alan Howarth: I congratulate my hon. Friend the Member for Newport, West (Paul Flynn) on obtaining the debate and on speaking with characteristic deep feeling and knowledge about manufacturing, in particular the problems faced by manufacturing industry in Newport. We are proud in Newport of our manufacturing tradition but, as my hon. Friend described, it has suffered a series of recent blows. The question is how we can rebuild our manufacturing capacity in Newport, as elsewhere, in modern form.
Steel, which dominates the economy of my constituency and of the south-east Wales economic region, is these days a high-tech business involving the highest level of industrial skills. As my right hon. Friend the Secretary of State for Trade and Industry interestingly noted the other day, 70 per cent. of the steels used in cars today did not exist 10 years ago. The industry is at the forefront of new technology.
The main problems facing British manufacturing are global recession and, in many sectors, including steel, global overcapacity. That is why manufacturing output in Britain fell by 5.5 per cent. last year; it also fell by large amounts in many competitor industrial countries.
What should the Government do? What is their role in addressing the problem? I read with interest and admiration the speech made by my right hon. Friend the Secretary of State on 23 January. I believe that her analysis is correct.
The Secretary of State stressed that the Government's primary role is to ensure financial stability—a stable economic context within which manufacturers can take necessary decisions. The Government have done that admirably, against a background of increasingly difficult world economic conditions. We have the lowest long-term interest rates since the 1960s, an achievement based on sound management of the economy. Low inflation has meant that the Monetary Policy Committee of the Bank of England has been able to cut interest rates aggressively over the past year to mitigate the effects of impending recession. We have also enjoyed the benefits of the counter-cyclical expenditure increases that my right hon. Friends the Chancellor and the Chief Secretary to the Treasury have planned and announced and which not only give the promise of greatly improved public services but help us to weather the economic storm by enabling us to maintain levels of demand that would otherwise be lacking. It is crucial that we as a country do not throw away those two advantages—the freedom to operate both our interest rate policy and our fiscal policy on the basis of our judgment of economic conditions and what is best for Britain.
My hon. Friend the Member for Newport, West mentioned the enthusiasm of manufacturers Corus and Alcan—important to his constituency—for Britain

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entering the euro. Global capitalism always wants to be footloose and to ensure that no inconvenient barriers to manufacturing operate anywhere—but we should consider what is best for the UK. Knowingly to embark on devaluation, for which my hon. Friend called and which the hon. Member for East Carmarthen and Dinefwr (Adam Price) also found seductive, is a perilous course. The Secretary of State was right to say that one cannot devalue one's way to manufacturing success. It would be delicate, if not impossible, for the Treasury and the Bank to engage in "sterilised intervention" on any considerable scale. It might be possible to anticipate and go with the flow of major market movements, but it is impossible for us to turn the market around—and we could waste vast resources trying to achieve it, as discouraging precedents for that sort of effort suggest.
Mr. David Drew: The EU has one sector of massive intervention—agriculture. If we are looking for an example of getting things wrong, that is surely it.
Alan Howarth: I agree with my hon. Friend.
My right hon. and hon. Friends should be aware that devaluation has often ended in tears electorally. General elections following devaluations in 1951, 1970 and 1997 were lost by the Government of the day. I certainly hope that my right hon. Friends will reflect on that.
Paul Flynn: Has my hon. Friend forgotten that defending the pound was not an electoral success a short while ago?
Alan Howarth: I would love to debate history with my hon. Friend, but let me develop my theme first.
Devaluation is one matter, but entering a fixed exchange rate such as the economic and monetary union of the European Union is quite another. Let us recollect that sterling's membership of fixed exchange rate systems has not been a happy experience historically, whether under the gold standard, the Bretton Woods system—under which we did quite well for a period, but it ended in tears—or indeed the exchange rate mechanism catastrophe of more recent memory.
Adam Price: Will the hon. Gentleman give way?
Alan Howarth: If I may be allowed to continue, because I am mindful of Mr. O'Brien's admonitions.
Joining the euro will certainly not be a panacea. A "one size fits all" interest rate is difficult enough within the UK. The Monetary Policy Committee conducts its affairs admirably, but cannot establish a single interest rate that is appropriate for manufacturing in south-east Wales while at the same time restraining the excesses of the property boom and consumer spending in south-east England. We see the effects of that policy in the generation of inflationary conditions in Ireland and recessionary conditions in Germany. If we were to devalue in order to enter the euro, we would risk increasing inflation at the same time as we abandon our capacity—through a unilateral interest rate policy—to remedy it.
Under the Maastricht treaty, a limit of 3 per cent. of gross domestic product is set on public borrowing. That is dangerously compounded by the grotesque growth
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and stability pact, which fines countries that engage in counter-cyclical fiscal policy. Only last week, for the second year running, the Commission warned the British Government that, were we within the euro system, we would be obliged under the terms of the treaty and the pact to cut our public spending. The powers that be within the European Union fail to make the distinction between capital spending and current spending, which our Chancellor wisely and appropriately does make.
There will be enormous pressure to increase tax revenues going to the structural funds, which will be distributed extensively across an enlarged European Union in a fairly short time. It is clear that they will not be distributed to Newport. Under the present arrangements, Newport is not an objective 1 area. In my hon. Friend the Member for Newport, West's constituency and mine there are wards with great poverty and deprivation, but under the present dispensation we do not receive assistance to help attack those problems, and that will be far less likely within an enlarged Community.
The United Kingdom, while outside the single currency system, was last year the number one destination for inward investment in Europe. My advice to hon. Members is that we should retain these advantages, at least for the foreseeable future. We stand a better chance of sustaining financial stability outside the system.
The Government have an obligation to ensure a first-rate infrastructure in the United Kingdom so that our industrialists have the best opportunities in a competitive world. In Wales, that means we urgently need a positive decision on building the M4 relief road. That will be good for not only my part of Wales, south-east Wales, but for south Wales and south-west Wales.
I am grateful to my right hon. Friend the Secretary of State for taking advantage of what is permitted under the protocol between the Government and the Assembly in relation to issues of national strategic importance. I know that she has drawn this factor to the attention of Sue Essex, the Minister responsible in the Assembly. It matters a great deal that we have first-class infrastructure in Wales. Wales is poor in relation to the rest of the United Kingdom. Its infrastructure is in many ways inferior. There is a vicious circle; unless we get the investment we need we stand less chance of catching up with the performance of the rest of the United Kingdom, which otherwise we should be well placed to do.
I was disappointed that the Strategic Rail Authority produced no plans to do other than patch and mend the mainline railway system into Wales. We are talking of a system designed by I. K. Brunel, the great engineer. The Government have put the Great Western railway on the tentative list for future world heritage sites. That is fine, but it is not an industrial policy. We need not just patching and mending, but serious modernisation. Corus draws attention to problems of track access charges, which perhaps the Minister will be kind enough to look at. It mentions that port and shipping costs are high and discusses a curiosity relating to infrastructure: that the costs of maintaining it fall upon industry rather than on general taxation. It has to contribute £4 million out of the total £30 million cost of maintaining the lighthouse service. I thought that that was odd: perhaps the Minister will look at it.

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In broadband I am pleased to say that Newport is rather ahead of the game. I am glad that the Assembly recognises the importance of that factor.
The Government need to make sure that in a global knowledge economy our institutions of education, training and research are the best they can possibly be. I am pleased that there is a new emphasis on technical education in schools. That is yet another attempt to remedy the failure following the Butler Education Act 1944, which was intended to set up a tripartite system of grammar schools, secondary moderns and technical schools. The technical schools were never established. More than 50 years on, we need that strong technical stream of educational opportunity.
As a former Minister with responsibility for science, I can only congratulate the Government and say how pleased I am that they have enjoyed greater success than I did in securing greater investment in science and a greater emphasis on technology transfer. However, unless the Government attend to the need to improve PhD stipends and lecturers' salaries, we will be at risk of not having a first-rate academic system.
I am conscious of the time, so I shall be brief on the framework for competition that the Government should maintain. If President Bush decides, perhaps in March, to invoke section 201 to impose steel quotas, I hope that our Government will take extremely tough action. I hope that my hon. Friend the Minister will assure us that vigorous diplomacy is already taking place. If, unhappily, the US Administration impose quotas on steel imports, and steel is consequently dumped in Europe, I hope that the Government will act vigorously through the World Trade Organisation and will also seek to reform the glacial procedures in the European Union for taking anti-dumping measures.
It is for the Government to ensure that we have the right structures of governance and administration to give effective, practical support to manufacturing and other economic sectors. I am talking about structures in which decisions can be taken rapidly, based on effective consultation and expert advice, and executed to a brisk timetable that matches the needs of the economy and communities. We do not have that, as I shall illustrate with the experience of Newport in the year since the Corus redundancies were announced. Of course, the prospect of redundancies loomed for many months previously.
Since the announcement a year ago, Newport has lost another 1,400 jobs, and I believe that we have yet to see the worst effects on the supply chain of the ending of steel making in Llanwern. Admirable support has been given to the workers who lost their jobs there, but trying to develop a regional or sub-regional economic strategy and a regeneration strategy has been like wading through treacle. We have had endless debate, and a plethora of agencies, boards and taskforces have been set up, all of which do useful and dedicated work. There have been endless meetings, academic studies, consultancy reports and announcements, including a number that have promised money to be spent. However, there has been little so far that is precise and actionable.
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I am grateful for the First Minister's announcement that Newport is to have an urban regeneration company, with £10 million from the Assembly and another £10 million over three years from the Welsh Development Agency, particularly because elements in the WDA fought a bitter rearguard action against that policy. The simple decision has been announced, but we know nothing of the detail, and it is expected that another consultancy will advise on the structure and scope of the URC.
What do we need? We need a board, which I should like to see chaired by the leader of the local authority, because civic leaders should lead the process whereby their communities develop their own regeneration policies. The major players should be represented on that board: the council, the WDA, Education and Learning Wales, the academic and business sectors, environmental and voluntary organisations, and creative outsiders. They would all contribute to a strategy for Newport and contribute funding to what we might genuinely term a single regeneration budget.
I am told that to hope for such an outcome is pie in the sky, but I do not see why. The Government say that they want joined-up government and to restore powers to local government. We must be confident and decisive in putting that in place. My request may be too Utopian, but at least in the context of devolution and regional government, with all the multiple layers of government and the cat's cradle of accountabilities, let us design arrangements to ensure that decisions needed by businesses and communities are taken and can be carried through.
Several hon. Members rose—
Mr. Bill O'Brien (in the Chair): Order. I appealed for brevity. Three hon. Members have still to speak, and I want the winding-up speeches to start at 10.30 am. Therefore some Members who applied to speak may not be able to do so, which is sad.
10.19 am
Mr. James Gray: I shall speak briefly, to raise a matter of great concern that was brought to my notice this morning. I apologise to the hon. Member for Newport, West (Paul Flynn) for not being in the Chamber for the start of his remarks, but I was listening to a press conference about the matter that I want to raise.
In my maiden speech in 1997, I praised Dyson, the vacuum cleaner manufacturers in my constituency, as one of the fastest growing and best manufacturing companies in the United Kingdom, for which it won a variety of awards. James Dyson typifies the best in British enterprise; he invented and designed his high-technology vacuum cleaner and was a leader in his field. His factory employed about 2,000 people at its peak. Just before Christmas, James Dyson announced that he would lay off 180 people, and at the press conference this morning he said that he would not continue manufacturing in the United Kingdom, and will move his entire vacuum cleaner manufacturing process to Malaysia, where the job costs are lower and there is greater proximity to the suppliers he needs to manufacture his vacuum cleaners. He will lay off 1,000 people in my constituency this year.

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His announcement came hard on the heels of a similar announcement by Lucent Technologies, based in the town of Malmesbury in my constituency, which has a population of 4,000. The very successful, high-tech, American company announced just before Christmas that it is to close its manufacturing operation in the town, at a cost of 2,000 jobs. There is no manufacturing in Malmesbury now—a significant loss of jobs in a small Cotswold town.
The end of Lucent and Dyson is a severe crisis in my constituency. Dyson, especially, has been a beacon of excellence in UK manufacturing and the fact that even James Dyson is wrapping up his manufacturing operation in the United Kingdom shows precisely what is wrong with the nation's manufacturing sector. My constituents and those in Newport and elsewhere want the Government to do something that they have not done: focus on the manufacturing sector as opposed to the service sector. A country that cannot make things better and more cheaply than others and sell them overseas cannot prosper. This country is going in that direction and I call on the Government to focus on manufacturing industry.
10.22 am
Mr. Tony Lloyd: I congratulate the hon. Member for North Wiltshire (Mr. Gray) on his brief speech. I want to pick up one of his themes. It is a tragedy for his constituents, and for the country, when a company such as Dyson disappears. I was interested in the reasons that the hon. Gentleman gave for Dyson leaving. Obviously, labour costs are significant, but Britain can never compete globally with the low labour costs of countries in the far east. Equally, we cannot compete on the same basis with countries that are close to the supply chain. However, none of those issues is fundamental. In the past five years, manufacturing in the United Kingdom has grown by about 5 per cent. At first, that appears to be a healthy figure, but it is less healthy when compared with the United States, where manufacturing grew by 33 per cent., or with Germany, where it grew by about 20 per cent.
There are issues concerning the pound. I disagree profoundly with the analysis of my right hon. Friend the Member for Newport, East (Alan Howarth), who should consider the history of devaluation, especially the period when the pound was floating. The movement of the pound relative to other competitive currencies was extraordinary; it was valued upwards and downwards on an irregular basis, but the economic record of the time shows that the process of devaluation was good for manufacturing. What is less good is a sharp and precipitous devaluation. I join the calls to consider the competitive value of the pound, particularly in my constituency, where some two thirds of manufacturing companies are operating well below capacity. A significant issue that they raise is the value of the pound.
A rather different issue that should worry the hon. Member for North Wiltshire concerns the Dysons of this world. While Mr. Dyson has enjoyed enormous entrepreneurial success, he is not a good employer if he
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simply wipes out the livelihoods of thousands of his employees. I hope that hon. Members deplore the cavalier actions of that company.
Mr. Gray: I apologise to the House if I did not make it plain that James Dyson has made it clear that the matter is under consultation at this stage. There are 900 jobs under threat and he will go through the proper procedures, consulting the work force and seeking ways of fulfilling the conditions that the hon. Gentleman described. For the sake of brevity, I did not go into that, but I am confident that James Dyson and his managing director, Sir Richard Needham, will do all that they can to ensure that this is let down as gently as possible.
Mr. Lloyd: I hope that that is right, but there is a huge difference between being let down gently and not being let down at all.
One of the things that concerns people in the employment sector of manufacturing is that it is far easier to sack employees in this country and to waste their skills and talents than it is elsewhere. I received a letter about that recently from a trade union in the north-west. It wrote:
"Rolls-Royce, for example, has had a lot of government money in the form of launch aid and it would seem it is repaying that investment by looking elsewhere abroad to manufacture its products, which to our point of view, is not why the money was lent in the first place."
That union was right. We need to look at the ability of firms to disinvest in the United Kingdom. We lag behind other European countries in the aid that we give to the manufacturing sector. While I congratulate the Department of Trade and Industry for its new attention to manufacturing, it is vital that we invest in research and development. We should rectify the imbalance and push Britain to the top of the research and development league.
10.27 am
Mr. Frank Doran: I thank the hon. Members for North Wiltshire (Mr. Gray) and for Manchester, Central (Mr. Lloyd) for their brevity. I congratulate my hon. Friend the Member for Newport, West (Paul Flynn) on securing the debate. Clearly manufacturing industry is extremely important to us. I want to focus on a narrow point that relates to a company in my constituency called Richards plc. Aberdeen, as the Minister knows, is the energy capital of Europe. We are perceived to have a fairly rich economy. The manufacturing industry that we tend to talk about is the oil and gas industry.
Richards has existed in my constituency for over 300 years. It is a textile company operating in a difficult market. It suffers from all the problems that hon. Members have described this morning. It is an exporting company and it has problems with the rate of the pound. Over the past few years it has faced serious difficulties. There were management problems and the management has been replaced. There is the problem of competition and the problem that the whole UK textile industry faces. Its main competitors are based in Belgium and it is concerned that the Belgians can invest more and pay higher wages but can still undercut British companies in the price of their carpets. The company has sought to address that problem through Europe and has lobbied the Government persistently.

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For some years the company has been attempting to refocus. It owns plants in Aberdeen, Cumnock in Ayrshire—close to the Minister's constituency—and Wetherby in Yorkshire. It has worked closely with the Bank of Scotland, which has been totally supportive. The bank's attitude changed slightly after the events of 11 September because of their effect on the export markets and, as one of Richards' largest customers is the Hilton hotel chain in the United States, there were problems for the company's exports.
In all respects, the company seemed to be moving forward. However, it recently went to the bank to ask for a restructuring of its finances and found that the bank's attitude had changed significantly. It decided that it wanted to have another look at the company and instructed the accountants KPMG to produce a report. The company was consulted in that process, but the directors were extremely disappointed by the narrowness of the report. It focused just on protecting the assets of the bank, not on the company's wider strategy, a strategy with which I was familiar because I had been closely involved in some of its aspects during the past three or four years. When the bank received the KPMG report, it decided that it could not support the company any longer. A pistol was effectively put to the head of Richards' directors, and it went into receivership just last Monday.
A decision was then made to appoint KPMG as the receivers. I find that difficult to understand. As a lawyer, I am conscious of the rules on conflict of interest and have brushed against them myself in the past. That is the clearest example of it. It is one that faces many small manufacturing companies that go through difficult times, have a close relationship with their bank and are constantly on the edge. I am concerned about not only whether the individual case of Richards will resolve itself, but what the case shows, particularly as another bank has taken a different approach.
The Bank of Scotland shares its attitude with almost all other British banks, but there is an example that I urge the Government to examine. Four or five years ago the Royal Bank of Scotland decided to change its policy on such incidents and chose not to allow firms that were sent out as consultants to be appointed as receivers. Consultants were clearly told that receivership work was not on offer to them. Such a move puts accountancy firms in a difficult position. In the Richards case, the estimate of receivership fees was in excess of £1 million, which is quite a carrot for a company. I am not suggesting that anything illegal or dishonest has happened—I have no evidence to do so—but the perception is important.
The Royal Bank of Scotland found that its customers were reluctant to comply or co-operate with consultants in such situations. That led to delays in final decisions being taken and uncertainty being created in the work force, so it changed its practice. There have been positive benefits. Figures given by the Royal Bank of Scotland show that, despite having 35 per cent. of business customers in Scotland, it was responsible last year for only 18 per cent. of receiverships. That is a positive benefit, which the bank believes has enabled it to have a different relationship with its customers. There is no
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fear, no gun is put to the head of companies, and a more constructive and managed approach to businesses is achieved.
It is a small point compared with the other points made by hon. Members this morning, but it is no less important to the thousands of small businesses up and down the country, particularly in manufacturing, that are facing difficulties in the present economic climate. I urge the Government to examine that practice, which will be on their mind after Enron's collapse and details of its relationship with its accountants have emerged. There is ongoing discussion about whether auditors should be allowed to do consultancy work, and that falls into the same territory. There are clear conflicts of interest that are not good for the accountancy profession or, in particular, for manufacturing in this country.
10.34 am
Dr. Vincent Cable: I, too, congratulate the hon. Member for Newport, West (Paul Flynn) on introducing the debate. I have attended three of these debates over the past 18 months and have noticed a vivid contrast between the low-key way in which we debate the crisis in manufacturing and the reaction in Parliament and among the public to problems in agriculture. Clearly, that sector has problems that should be exposed but, lest we forget, it employs less than a 10th the number that manufacturing employs and contributes about a 10th of what manufacturing contributes to the national economy.
To put the matter in context, it was right for previous speakers to emphasise the problems of Wales, which are acute, particularly in the south. Manufacturing employment in Wales is slightly above the national average. However, we have not heard about the real manufacturing heartlands—the west midlands, followed by the east midlands, the north-east, the north-west and Yorkshire. The biggest contraction in manufacturing employment is taking place in those areas. [Interruption.] The hon. Member for Manchester, Central (Mr. Lloyd) made a valuable speech about his region.
In many ways, this is a long-term problem. Manufacturing has lost 2.5 million workers since 1979. There has been a staggering decline in manufacturing employment, from 30 per cent. of total employment in 1979 to about 15 per cent. now. Even within the western world, such decline is almost unprecedented. Some people glibly say that it does not matter much because the decline in employment is the result of higher productivity, and manufacturing still contributes to wealth creation, even if jobs are lost. Certainly, within the past couple of years, there have been striking increases in productivity of, I believe, 6 per cent. in 1999 and 4 per cent. in 2000.
However, we must not be complacent. Such an approach assumes that the workers affected find something more productive to do. I do not know whether the Department of Trade and Industry still does tracking studies, as it did in the 1970s, but I suspect that most of the people who have been displaced from manufacturing industries disappear from the labour force. Many are men in their 50s who do not register as unemployed but simply drop out of the labour statistics. Thus, in a meaningful sense, national productivity is not increasing.

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In addition to the long-term problem, there is a short-term crisis. This is where the Government's responsibilities kick in. Despite the fact that productivity has been growing, manufacturing output has grown by only about 1 per cent. a year since 1977. Growth is virtually stagnant, and all the signs are that the situation is becoming worse rather than better. Two key studies have been done during the past few months. One is the Confederation of British Industry study of industrial trends, and the other is by the Engineering Employers Federation. Both produced extremely negative and worrying predictions about what is likely to happen in manufacturing in the next year or so.
That leads us to consideration of policy and the Government's responsibilities. There are three fundamental causes of the current crisis in manufacturing. One of them is international and is, largely, beyond our control. There are worrying signs that the temporary recession in the United States, which has a serious problem of debt overhang, may become more permanent. The right hon. Member for Newport, East (Alan Howarth) made a helpful intervention about trade. There is a real danger that, if the international recession drags on, countries such as the United States may deal with it through beggar-my-neighbour policies. Other countries would retaliate, and industries such as steel would be dragged into a trade war. The Government have a responsibility in Europe to make clear our commitment to an open trading system and our willingness to fight for it.
The second cause is home-grown policy. The Government have pursued policies that have been helpful to industry; for example, interest rate stability and low inflation. However, in some ways, they have made the problem worse. The climate change levy has been mentioned. The Government should not be allowed to get away with the idea that it is part of the price that industry must pay for an environmentally friendly future. The point has been made many times that, if the Government really wish to deal with carbon dioxide emissions and climate change, there are methods of taxation that can be applied upstream, such as the carbon tax, which would avoid problems for manufacturing industries. Instead, they chose a cumbersome route that is particularly onerous for industry.
The third cause, which the hon. Members for Newport, West and for Newport, East touched on at length, is the role of the exchange rate, on which I am closer to Newport, West than Newport, East. Two distinct aspects of that issue have been blurred. First, the exchange rate has nothing to do with the pros and cons of entering the eurozone, but if we are to enter the euro, it must be at the right rate.
Last week, the Chancellor took a key step by commissioning Professor Wren-Lewis of Exeter university to determine the right exchange rate for our entry into the euro. The exchange rate has appreciated by 30 per cent. in real terms since 1995 in relation not only to the euro but to currencies such as that of Korea—a country against which we compete in manufacturing. More than any other single factor, that has created the current crisis. Companies had their margins squeezed; because their margins were squeezed they stopped investing; they are now laying off large numbers of workers. The exchange rate is critical to the current debate about manufacturing.
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Secondly, and this is a separate issue, exchange rate stability takes us to the heart of whether it is a good thing to enter the euro. In manufacturing one needs a stable environment. A variation in the exchange rate of 10 or 20 per cent. in a short period wipes out improvements that one may obtain by improving performance. The Government have a role in ensuring greater stability through the exchange rate. That is why a commitment to a zone of exchange rate stability should be a key part of their long-term strategy, which would mean entry into the eurozone.
10.41 am
Mr. Philip Hammond: The hon. Member for Newport, West (Paul Flynn) has been assiduous in trying to get debates on the Floor of the House on job losses in manufacturing industry. That is the subject of today's debate, and I shall try to focus on it.
The facts speak for themselves: between 1998 and the end of 2001 nearly 500,000 manufacturing jobs were lost. Manufacturing jobs as a percentage of the total work force have decreased from 15.8 to 13.8 per cent., in sharp contrast with previous years during which the percentage of manufacturing jobs was stable and the number of such jobs rose slightly.
The right hon. Member for Newport, East (Alan Howarth) mentioned that manufacturing output fell by 5.5 per cent. during the past year. Turnover in the engineering industries was down by more than 7 per cent. in the last three months of 2001 compared with the previous three months. More worryingly, order books in the engineering industries were 12 per cent. lower in the last quarter of last year than in the last quarter of the preceding year. We are therefore running record trade deficits.
Manufacturing output and employment have been hit before, but we are seeing the sharpest fall in output for a decade, and it differs from previous recessions in that the manufacturing sector is being disproportionately hit while other sectors of the economy continue to do relatively well. Hon. Members have sought to put their fingers on the causes of the problem, and of course currency exchange rates and our ability to operate in the international arena have something to do with it.
I do not intend to debate exchange rates, because we have already been round that course, but it is apparent to Opposition Members and other observers that the Government have their own agenda in relation to the euro and currency exchange rates. That agenda does not include what matters to manufacturing industry; it concerns the politics of the decision on the euro, and the Government's particular problems over that decision. That is deeply unhelpful to industry.
Currency factors are only part of the package, because industry examines its total costs and burdens. The hon. Member for Twickenham (Dr. Cable) mentioned productivity, and despite the Chancellor's exhortations the gap in productivity between the United Kingdom and the United States has stubbornly failed to close—indeed, it is widening. Labour productivity in manufacturing is driven by several complex issues, but with profits squeezed and investment in new machinery and training down, productivity improvements are unlikely to be strengthened.

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In the short term, the Government could help to offset the foreign exchange effects from which industry is suffering by fiscal policies, easing the burden of regulation and encouraging flexibility in labour markets. Unfortunately, in every case the Government have done precisely the opposite of what industry needs, despite their rhetoric. They have piled an extra £5 billion a year on business in taxes, many of which—the climate change levy in particular—are targeted at manufacturing. A report out yesterday suggests that there is worse to come if Britain is to meet its Kyoto targets.
The Government have piled on bureaucracy and red tape, transferring to businesses a large part of the burden of running our social welfare system. Last year alone, there were 4,642 new regulations, a 50 per cent. increase from 1997. The British Chambers of Commerce—not usually quoted as a friend of the Opposition—said recently that
"government has dramatically increased the regulatory burdens"
on business it added.
"Excessive red tape is stifling the very enterprise the Government is seeking to promote".
The list already in place includes the working time directive, stakeholder pensions, the data protection directive and IR35. In the pipeline are the waste and electrical appliances directive, the vibrating agents directive and the vehicle end of life directive. Together, they place a burden of at least £15 billion on industry, falling disproportionately on manufacturing businesses.
Just as our competitors are beginning to deregulate and recognise the need for greater flexibility in labour markets, Britain under a Labour Government is going in the opposite direction, reducing flexibility and making Britain's competitive position even worse. Government policy exacerbates rather than ameliorates the impact of the exchange rate on our manufacturing businesses. The response that we get from the Government is largely lip service. We have had manufacturing summits, the announcement of a new tsar for manufacturing and, perhaps most bizarrely of all, the announcement in the House of Commons in December 2000 of the ministerial group on manufacturing job losses. The Leader of the House told us that that would consider a range of manufacturing issues. Answers to written questions have established that the group, announced with such a fanfare, has never actually managed to meet, despite the shake-up of nearly half a million jobs in our manufacturing industries.
What manufacturing now needs is action: action on tax, on regulation and on skills and competitiveness. We need an immediate moratorium on the introduction of the new and costly environmental and employment regulations in the pipeline. We need a breathing space for manufacturing industry to regroup and recover so that profits, and therefore investment in plants and training, can resume in order to underpin the long-term health of our manufacturing economy.
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This Government were elected promising to halt and reverse the decline in Britain's manufacturing base. We have a Chancellor who said in the Labour manifesto in 1997:
"We will not impose burdensome regulations on business".
He has spent the last five years doing precisely that. We have a Prime Minister who said last November,
"Of course … manufacturing industry is going through difficult times … The issue is not about tax or regulation."
If he talks to some business men, he will find that the issue is about tax and regulation. This Government stand charged with breathtaking complacency and gross hypocrisy as they now act out in office the caricature that they painted of the previous Government's attitude to manufacturing industry.
Manufacturing industry is failing.
"This is not the failure of some other Government, some other Cabinet, or some other Prime Minister—today's failures are the failures of this Government, this Cabinet, and this Prime Minister." — [Official Report, 16 October 1991; Vol. 196, c. 340.]
Those are the words of the now Chancellor of the Exchequer in October 1991. I have the honesty to acknowledge that what he said then was true. I will be interested to see whether the Minister will have the decency to acknowledge that that is true today of this Government and this Prime Minister.
In 1993—at the bottom of the cycle of manufacturing job losses, just before the situation stabilised and jobs in manufacturing started to increase, as they did during the following four years—the Minister said of the Conservative Government:
"They have had 14 years of power, but still lack the guts to accept any of the responsibility for what has resulted".— [Official Report, 12 January 1993; Vol. 216, c. 851.]
I acknowledge that mistakes in monetary policy were made in the late 1980s and early 1990s. With the support of the then Labour Opposition, a wrong policy was chosen. The question is whether he, as a member of a Government apparently committed to pursuing the same mistaken route, has the guts to accept responsibility for the disaster that is decimating British manufacturing industry and struck the constituency of my hon. Friend the Member for North Wiltshire (Mr. Gray) only this morning.
In 1989, the Chancellor wrote that:
"it is through manufacturing that we will succeed or fail".
On that test, the Government have failed.
10.50 am
The Minister for Industry and Energy (Mr. Brian Wilson): I congratulate my hon. Friend the Member for Newport, West (Paul Flynn) on securing this debate. The Government believe that manufacturing matters and must play a central role in our future as a leading knowledge-driven economy. I shall be happy to discuss where responsibility lies and other issues to which the hon. Member for Runnymede and Weybridge (Mr. Hammond) referred.
We accept that we have an immediate priority to meet, which is in gross contrast to our predecessors. Where difficulties arise, we get in alongside industry, the community and trade unions to work for the best possible outcome. We want to try to prevent the loss of jobs and, if they are lost, to find new ones. That could

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not be in starker contrast to the hands-off approach of our predecessors. Each case that has been spoken of today has shown an approach that we have taken when job losses have occurred, or one that we will take if there is a prospect of maintaining jobs.
Mr. Gray: If the Minister is determined to do things, what does he intend to do about the loss of Dyson jobs in Malmesbury?
Mr. Wilson: The hon. Gentleman has delayed me, even with his short intervention, by coming to Dyson. I will deal with that in the course of my remarks; unlike past Tory Ministers, we do not necessarily stick to the script in front of us and can improvise in response to issues that arise during debate.
Manufacturing accounts for more than one fifth of our national income, and almost £150 billion of output each year. The sector employs about 4 million people directly, and millions more depend on manufacturing for their livelihood, including 2.5 million in the service sector. It is led by some of our most innovative businesses investing heavily in research and development. Manufacturing drives innovation in the rest of the economy, creates jobs and prosperity, and is responsible for productivity improvements across the whole economy through advances in technology, new goods and processes.
As hon. Members have said, it is tough for manufacturing and its workers right now. Output in manufacturing has gone down by 5.5 per cent. in the past 12 months, and 153,000 jobs have gone from the sector in that period. However, as my right hon. Friend the Member for Newport, East (Alan Howarth) said, the problems that manufacturing industry is experiencing are far from unique to Britain: last year, manufacturing output fell by 5 per cent. in Germany, 6 per cent. in the United States, and 14 per cent. in Japan. The simple message of those statistics is that no country can isolate itself from the downturn in the world economy. For instance, there has never been a recession in the United States that has not caused a contraction in Britain.
It is worth noting that in the past 20 years the proportion of people employed in manufacturing as a share of the total employed fell from 23 per cent. to 13 per cent. At the same time, in real terms value, the goods that they produced rose by a huge 36 per cent. A big element is that fewer are working in manufacturing to produce more goods of higher value. That is why we must keep producing new products and companies, and try to create a self-renewing process. Only in that way will we prosper in competition with low-cost producers. Our aim is to have many highly skilled, highly paid people working in manufacturing.
I want to deal briefly with specific issues that have been raised, and will be pleased to pursue further discussions on each and every point. The hon. Member for North Wiltshire (Mr. Gray) referred to the disappointing announcement by Dyson today. I want to make it clear that, according to the information that I have received in the few minutes since he spoke, the Department of Trade and Industry has had no contact with Dyson about that. No notice has been given of the announcement.
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Through the medium of this debate, I say to Mr. Dyson, and to Sir Richard Needham, a former Tory Minister at the Department of Trade and Industry, that it would have been useful if the Government had had an opportunity to work with the company in advance of the announcement to see what could be done. I would welcome such contact now that the announcement has been made. In his press release, Mr. Dyson states:
"If it goes ahead this will be a blow to all those who have put in so much effort."
I take comfort from the statement's conditional tense: there must be room for discussion, and I hope that there is more to Dyson's calculations than the obvious statement that labour is cheaper in Malaysia than in Malmesbury. There are other factors, such as loyalty, to be taken into account.
I hope that we can have meaningful discussions with Sir Richard Needham, with Mr. Dyson and with the hon. Member for North Wiltshire. We did not know of the announcement about this symbol of British industry and excellence until this morning; we should be able to discuss the matter to see what can be done to soften, or remove, the blow to the hon. Gentleman's constituents. I cannot do anything unilaterally: I can help only if the company says that it is interested in discussions and has not already decided to go to Malaysia.
I recently visited a plant in Indonesia that makes Royal Doulton pottery and pays its labour force $30 a month. I do not think that hon. Members, even on the right wing of the Tory party, would want their constituents to work for such a wage. If it is just a matter of wage rates, we lose, but there are many other factors in the Dyson case, and I hope that we can discuss them.
My hon. Friend the Member for Aberdeen, Central (Mr. Doran) raised several matters. I want the Bank of Scotland to tell me why it is appropriate for KPMG to occupy both roles in relation to Richards plc, but it is a matter—certainly in this instance—on which we cannot legislate. However, I note what my hon. Friend said and ask for a response from the Bank of Scotland.
My right hon. Friend the Member for Newport, East raised the matter of steel and the WTO. We are represented in these matters through the European Union, and if the United States acts in the way suggested, the EU will seek action through the WTO in response to such a threat. It is for individual member states and the EU to consider any compromise solution that the US may propose. Much thought has been exercised on the matter in the trade policy division of the Department of Trade and Industry.
I have dealt with individual cases, so I shall not say much more in general about manufacturing, except to state that the Government, particularly since the wave of manufacturing job losses, are not merely reacting to events. Our approach is to be proactive: we are working alongside companies, trying to improve our support and the flow of information available to pre-empt such developments.
There are many successes in manufacturing industries, and the worst thing would be to talk them down or to ignore them and thus to suggest that the entire British manufacturing sector is blighted. Most importantly of all for the future of modern manufacturing, we must continue to strengthen our

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science base and raise our game in turning new science and technology into businesses, products and jobs. The question whether there is more or less support for workers who face redundancy is tied into that, because when job losses are inevitable, we must help workers come to terms with them and move on to new employment with new skills and training. That reflects the dynamism that we need in our economy if we want a future for manufacturing. Where we recognise the inevitability of job losses and closures, we must always work with a view to placing something new and forward-looking in their place. That will continue to be our approach.

Tax System
11 am
Mr. Mark Hoban: I am delighted to be able to raise an issue that causes many people a great deal of concern. By way of introduction, I should admit that I am a chartered accountant. Many people may think that, as a result, the tax system is an open book to me, but it is not and therein lies the nub of the problem. The tax system has become sufficiently complicated that even people who are informed in financial matters find it difficult to understand.
There are several problems with a complex tax system. It allows the advisers—lawyers and accountants—the opportunity to examine the system of tax reliefs, breaks and allowances to minimise the tax bill for their clients, while those who cannot afford advisers feel a growing sense of suspicion and dissatisfaction as they cannot understand the linkage between the taxes announced by the Chancellor in the Budget and their tax bill. Another aspect of the raft of breaks, exemptions, credits and tapers, is that one man's tax break is another man's tax increase. Someone must pay for the tax breaks and the basic rate must increase to take that into account.
A complex tax system is inherently unstable for businesses, and I will give some examples later. The rate of change and the complexity of the tax system mean that it is hard for businesses to plan ahead and set up transactions in the knowledge that their tax treatment will remain unchanged for several years. The complexity of the tax system is also inherently unstable for the Treasury, because the linkages between taxes and the tax take become more complicated and it becomes harder to understand the effect of a downturn on tax revenues. A complex tax system is against the interests of both the taxpayers and the tax collectors, which is why I have raised this subject this morning and why I support simplification.
There are many examples of the complexity of the tax system. Capital gains tax was simplified in April 1998, but many issues arose from that alleged simplification. One example that has been put to me concerns the purchase of two parcels of shares, one before 5 April 1998 and one after. The treatment of the second parcel is relatively simple, especially when compared with that of the shares purchased before April 1998. If I wanted to sell the first parcel, I would have to work out the indexation of the base cost from the date of purchase to 5 April 1998 and I would be taxed on that. I would then have to assess the gain between 5 April 1998 and the date of sale and apply taper relief to that.
Unfortunately, the definition of some assets that are subject to capital gains tax has been changed in recent years. Some shares have been treated as non-business assets and then as business assets, and one must apportion the gain during that time. Those straightforward examples demonstrate why the capital gains tax calculations on relatively simple transactions, such as the sale of small packets of shares, are now beyond the ability of most taxpayers.
Complex taxes so have an impact on behaviour. In the Chancellor's first Budget in 1997, he moved away from a stamp duty regime of 1 per cent. on all transactions to a graduated tax: 1 per cent. up to

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£250,000, 1.5 per cent. between £250,000 and £500,000, and 2 per cent. thereafter. In the 2000 Budget, the rate remained unchanged at 1 per cent. on transactions between £60,000 and £250,000, but increased to 3 per cent. on transactions between £250,000 and £500,000 and 4 per cent. on those of more than £500,000.
In the 2001 Budget, the Chancellor recognised the impact on property transactions in deprived areas by waiving the stamp duty on them. That fell foul of European Commission regulations, so he had to reduce the limit to £150,000. There are now four different rates of tax on transactions in deprived areas: 0 per cent., 1 per cent., 3 per cent. and 4 per cent. We are starting to see price points arising at those thresholds in the property market. The cost of moving between one band and another is significant. If one buys a property at £249,999, one pays stamp duty of only £2,500. If the price increases to just over £250,000, one pays £7,500. It is therefore not surprising that when one talks to estate agents about buying a property, there is much nudging and winking about how much the owners are prepared to sell the curtains for to ensure that the transaction falls below £250,000 and that stamp duty of only 1 per cent. is paid. Although we are considering stamp duty on residential property, we should not forget that that duty is applicable to commercial transactions, whether on the purchase of property or of goodwill. Such high stamp duties impose an additional transaction cost on businesses, but cash costs are not relieved in tax calculations until the asset is sold.
Another interesting aspect of stamp duty is how it has increased the Government's exposure to significant downturns in the value of houses or the volume of transactions in the property market. In 1997, the Government raised £900 million from stamp duty on property sales. In the most recent year for which figures are available, that figure was £3.4 billion. Under their revenue-raising powers, the Government have introduced more instability into their calculation of predicted tax revenues.
We could go on for hours and I have received suggestions of many examples of complex taxes. The Financial Secretary said yesterday that between 1 January 2000 and 1 January 2002 the Inland Revenue employed more than 2,000 additional full-time-equivalent staff. Under this Government, the number of basic rates of tax has increased from 15 to 38. The number of pages in "Tolley's "—the bible for tax practitioners—has increased by 30 per cent. from 2,559 in 1997 to a whopping 3,414 last year, even after the size of the typeface was reduced to accommodate all the legislation. In its response to the Finance Bill in 2000, the Institute of Chartered Accountants said:
"The volume of tax law has doubled since the 1980's. I do not know how ordinary people have a hope of understanding their tax affairs. Even accountants are struggling."
John Whiting-vice—president of the Chartered Institute of Taxation—said in response to the 600 pages of that Finance Bill:
"The whole area of personal tax is ripe for simplification".
A book by Peter Warburton and the noble Lord Saatchi, entitled "Poor People! Stop Paying Tax!" demonstrated another example of the complexity of the tax system. They proposed that the Government in effect collected 53 per cent. of tax revenues but then gave
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back 14 per cent. of gross domestic product by way of the more than 250 complex allowances, reliefs, credits and tapers that form part of the tax system in this country. The volume of regulation affects not only tax advisers but also businesses. In July 2001, the Association of Chartered Certified Accountants carried out a survey of its members. Ninety-six per cent. of respondents thought that they spent more time on pay-as-you-earn and tax compliance than in April 1997. Ninety-eight per cent. of respondents cited PAYE as a reason, 92 per cent. quoted IR 35, 78 per cent. cited the working families tax credit and 61 per cent. referred to the burden of collecting student loans, which has been passed on from the Student Loans Company.
The cost of payroll compliance falls disproportionately on small businesses. A business with between one and five employees faces payroll costs of £288 per employee, whereas the cost is only £5 per head for a large business employing, say, more than 5,000 employees. If one looks at the impact of stamp duty on business and at the payroll burdens, it seems the complexity and cost are discouraging job creation—the reverse of the Chancellor's intention. The Government are guilty of increasing the complexity of the tax system to unparalleled heights. Simple transactions are impossible. It is impossible for taxpayers to calculate the tax effects without consulting a tax adviser.
The complexity of the tax system is being exploited by advisers. For example, with inheritance tax, at the moment someone who gives their house to their child has to vacate it if they are not to pay tax on that transaction. However, if they have good tax advisers, they can construct a scheme whereby they give the property to their children but occupy it on licence, thus circumventing the constraints of the inheritance tax regime. That benefit is available only to those who can afford to pay expensive tax advisers.
The Government are committed to introducing a community investment tax credit, which would bring a credit of 25 per cent. of the value of the investment against income tax. I can imagine advisers up and down the country looking at ways to exploit that new relief. To try to ensure that advisers cannot take advantage of the tax credit, the Inland Revenue will draft complicated schemes to prohibit abuse. As a side effect, the scheme will be difficult to administer for those setting up the community finance development institutions, and it will be difficult to ensure that the schemes in which they invest comply with the rules.
The battle between tax advisers and the Inland Revenue is like a long rally in a tennis match, where both players bounce the ball backwards and forwards—the ball being tax policy—and the confused spectators, the taxpayers, try to understand what is happening and when the rally will conclude. The erosion of the tax base is also a consequence of that raft of breaks and regulations forcing up the basic rate. A simpler tax system will provide less incentive to advisers to find ways round the legislation, because there will be less incentive for them to save tax as the basic rate will be that much lower, reducing compliance costs both for taxpayers and for those in the Revenue who try to chase down these complex schemes.
In a debate on the Budget resolution on 7 March 2001, my hon. Friend the Member for Mid-Bedfordshire (Mr. Sayeed) set out the impact of

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introducing a flat rate of 10 p for all incomes and abolishing personal allowances. He found that that would increase the revenue from income tax by £9.6 billion a year. We can therefore have a basic rate that is much lower if we lose the allowances and it will act as a disincentive to tax advisers to find ways around the legislation. In an answer to me yesterday, the Paymaster General demonstrated that if the taper relief on capital gains tax were abolished, the 10 per cent. rate would come down to 7.4 per cent., the 20 per cent. rate to 14.8 per cent. and the 40 per cent. rate to 29.6 per cent. There are opportunities to reduce the rate of tax by looking at some of the reliefs and allowances in the system.
Tax rates distort people's behaviour. I referred earlier to the community finance tax credit. An investor faced with two schemes with a similar pre-tax rate of return will obviously be swayed by the tax incentives put in front of him by the Chancellor when considering the post-tax return. Where one tries to direct behaviour, taxpayers may take sub-optimal investment decisions, which would not always be in the interests of the economy as a whole. One hears many more examples these days of tradesmen who wish their customers to buy materials themselves. That is done for the convenience of not the customer but the tradesman, who, by not having to invoice the customer for the materials and having a low turnover, can escape registration for value added tax. The complexity of the tax system and some of the incentives that are introduced into it distort behaviour.
The fourth consequence of a complex tax system is that the Chancellor can use it as a shield when raising taxes. The headline rates of income tax have not increased, yet the Chancellor has in successive Budgets abolished the married person's allowance and mortgage tax relief. The rates of national insurance for employees have not increased, but for three years from 1999 the upper earnings limit on national insurance contributions for employees increased by more than the rate of inflation.
The biggest example of a stealth tax and the disconnect between the tax and its impact on individuals was the abolition of tax credits on dividends paid to pension funds—a cost to pension funds of £5 billion per annum. Most lay people did not understand that that was a stealth tax increase. They are starting to pay the consequences of that change in tax treatment, as the cost of contributing to their pension funds increases or their benefits on retirement diminish. I wonder whether the decline in defined benefit schemes, which used to be a mainstay of pension provision in this country, resulted from the change in the tax treatment of dividends going into pension funds.
The complex tax system brings inherent instability for businesses. The frequent changes in the capital gains tax regime since its simplification in 1998 have caused a great deal of uncertainty among business men. They wonder whether to undertake transactions when their tax treatment is so uncertain and unclear. When the Chancellor proposed the reform of double tax relief, only the outcry from FTSE 100 companies forced him to change those policies. Sadly, where there has been no consultation with business or the tax profession, the
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constant series of fine-tuning exercises has led to an unstable regime for businesses. The final consequence is that we may lose the direct understanding of the impact on the economy of a downturn and the consequent impact on tax revenues. I spoke earlier about the gearing up of the tax take on property transactions; that is a clear example of a change in the property market leading to a significant change in the Government's tax revenues.
What are the remedies to the problem? In a debate in another place on a similar issue a couple of weeks ago, much emphasis was placed on the tax law rewrite project presided over by Lord Howe; the fruit of its labours can be seen in the Capital Allowances Act 2001. It takes existing legislation and codifies it so that tax practitioners can understand it. However, simply rewriting and revising tax legislation to make it more comprehensible is not enough to simplify the tax system. We need to ensure that the Government take policy decisions that will lead to a much simpler system.
My first proposal is for more widespread consultation on tax matters. All Chancellors like to pull rabbits out of hats on Budget day—that has been a tradition of Budgets since time immemorial. However, that desire may stand in the way of producing a stable and comprehensible tax system. Springing significant changes on business without consultation denies businesses the opportunity to influence legislation, with the resulting constant fine-tuning that we have seen on such matters as CGT. I suspect and hope that the tax system that emerges from the consultation on research and development that the Chancellor has announced will be much better and more stable than the regime for CGT. Consultation will promote far greater stability in the tax system.
My second proposal is to move to simpler Budgets. This Chancellor, perhaps more than any other, is a great believer in announcing a little on the day, which means that everyone comes away feeling that they have got something. However, when one looks at such initiatives more closely, they are of little real consequence to anyone. The example that sticks in my mind—it is so dreadful that the Minister might say that it is apocryphal—is the six free breakfasts a year for employees who cycle into work. Indeed, employers can claim tax relief for those breakfasts. That sounds so far-fetched that it is hardly credible, but it is one of the small initiatives announced by the Chancellor. We have said how much the volume of tax legislation has increased in recent years. Legislation for each of the small initiatives adds to that burden and prohibits proper parliamentary scrutiny of the Finance Bill. Better scrutiny will lead to reduced compliance costs and increased simplicity in the tax system; that simplicity will restore the clarity of the link between the state of the economy and the level of taxation.
My third proposed remedy is greater transparency in the tax system. I have already cited the benefits of sweeping away some of the 250 allowances, reliefs and tapers, which would bring about a much simpler and more transparent tax system that laymen could understand. It would help people link Budget announcements to their tax liability, which would be good for the integrity of the tax system and for taxpayers. However, it will put pressure on the Chancellor because a more transparent system will

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make it far harder for him to raise taxes by stealth. If people understand clearly the levers that make the tax system work, it is much harder to effect changes that are obvious only to tax advisers and specialists and hidden from laymen.
In conclusion, the tax system is complex and the Chancellor has contributed hugely to its complexity. A simpler system would reduce the dead weight of compliance costs on taxpayers and collectors and would have a much more neutral effect on people's behaviour. Above all, a simpler system would enable taxpayers to hold the Government to account on their tax decisions in the Budget.
11.24 am
Lynne Jones: I congratulate the hon. Member for Fareham (Mr. Hoban) on raising this important issue and I agree with his conclusion. A simplified system would also remove much of the fraud in the tax and benefits system at a stroke.
When I heard about the debate, I searched through my files to locate a copy of the Saatchi and Warburton document that the hon. Gentleman mentioned, but I did not anticipate having the opportunity to speak. Indeed, I dashed to Westminster Hall this morning because I thought that there would be far more interest in the debate among other hon. Members than there is. The level of interest is surprising. I thought that, as hon. Members had to complete their tax returns only recently, the issue would have been weighing on their minds more, but apparently not.
We owe thanks to Saatchi and Warburton for pointing out the complexity of the tax and benefits system. As I recall, it has provoked me to table at least one parliamentary question, a copy of which I also managed to find. The answer to that question was that, in the year 2000–01, 69 per cent. of employees earning less than a third of male median earnings paid tax. Sadly, that percentage had increased from 56 per cent. in 1997–98. It is ridiculous that people on such low earnings pay tax and are probably at the same time forced to claim means-tested benefits.
The document entitled "Poor People! Stop Paying Tax!" points out that the tax system collects a staggering 63 per cent. of GDP, and the citizen must then claim back 14 per cent. of GDP by navigating more than 250 allowances, reliefs, exemptions, credits, tapers, indexations, disregards and so on. In the process, we employ 80,000 civil servants to collect the taxes and 60,000 to pay the benefits, at huge administrative cost.
I agree with many of the proposals suggested by people who might be considered my political opponents, which is important, because some consensus on the tax and benefits system is desperately needed. In opposition, parties are fond of highlighting the existence and availability of stealth taxes, but in government, they enthusiastically use them. Perhaps instead those in opposition and those in government should think ahead to how we might behave when our roles are reversed and try to achieve a consensus.
Yesterday, we had a debate about pensions. Bills on tax credits and pensions credits are currently passing through Parliament. Both types of credit increase the complexity of the tax and benefits system, which is deeply worrying, because the extension of means-testing
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and complexity creates disincentives to work and save and incentives to commit fraud. Surely it is not beyond the wit of man for us to agree on at least some broad principles.
I am glad that Lord Howe is involved in the tax rewrite project, but I agree with the hon. Member for Fareham that that is not sufficient. The system needs a radical overhaul, and I endorse the proposals made in the "Poor People! Stop Paying Tax!" document. A very large hike in the personal allowance is desperately needed, so that people can earn far more before they start paying tax. A £10,000 tax threshold is being advocated, which would be a radical change.
I have not done the sums, but the general principle of a large rise in the threshold, coupled with a simplification of the different income tax rates, is sound and reform is long overdue. Unfortunately, the Government have introduced greater complexity into tax bands. The 10 per cent. and 20 per cent. tax rates were merely a gimmick; it would have been better to put those resources into raising thresholds. We need to consolidate the various tax rates. We should have one basic rate, perhaps around 20 or 25 per cent., an upper rate that is higher than the present 40 per cent., and something in the middle, which would claw back the benefits from middle income earners—the bonanza that they would otherwise receive from large increases in personal allowances.
The interplay of national insurance contributions is also relevant. The Chartered Institute of Taxation and other organisations believe that the kink in the system— whereby between £29,900 and £34,000 the marginal tax rate for each extra pound drops from 32 per cent. to 22 per cent. —could be reconciled by raising the upper earnings limit for national insurance in line with the threshold for the higher tax rate. From my political perspective, that would also mean an increase in the tax take from higher earnings. That is unlikely to achieve political consensus, but agreement across the political spectrum could be achieved on the general principles if only the Government were willing to sacrifice some of their sacred cows.
To achieve a more simplified system, we need to restore universal benefits and reduce means-testing. I commend the Chancellor for increasing child benefit, but wish that he had not introduced the additional complexity of the children's tax credit, which effectively takes us back to the position when child benefit was introduced. At that time, family allowances and personal tax allowances meant that higher taxpayers gained more than others for bringing up their children. I acknowledge that the new children's tax credit system is more redistributive, but it is complex. A simpler system might continue with universal child benefit and ensure that it adequately reflected the additional cost of bringing up children. The better-off, including MPs like myself who receive child benefit, would have the additional income recouped through a progressive tax system.
I make no apology for wholeheartedly supporting progressive taxation and for being against increasing taxes for poor people, who should be less reliant on means-tested benefits. Such benefits will always be with us, but should be for the exceptional cases rather than for average groups of people.

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When child benefit was first introduced, it effectively rolled up a tax allowance into a universal benefit—a process for which there is more scope in future for other tax allowances. If a large increase in the personal allowance is the first step, the next step is a flat-rate benefit, otherwise known as a citizen's income. Again, the idea initially came from the right. It may have been proposed earlier, but to my knowledge the first suggestion was from Christopher Monckton, a researcher in Downing street in the late 1980s or early 1990s, when the Tories were in control. The idea may have a longer history than that.
Such a policy would draw people from both ends of the spectrum. It would maximise personal freedom and incentives to save. Every time that it is raised, people say that its time has not yet come. I disagree; in Ireland, for example, there are interesting debates on the subject. However, it may be a second step. As a first step, I plead with the Government to consider the direction that they have chosen and the complexity and amount of means-testing. In the future, 65 per cent. of pensioners will be subject to some kind of means-testing, and I doubt that that will be conducive to the Government's aim of increasing private savings. Surely, we can broadly unite around such principles. If there were the will, such changes could be introduced.
11.36 am
Mr. Michael Jack: I congratulate my hon. Friend the Member for Fareham (Mr. Hoban) on securing the debate and on beginning what should be a much more widespread discussion. As the hon. Member for Birmingham, Selly Oak (Lynne Jones) said, it is restricted to a few aficionados at present.
As a former Treasury Minister, I share something in common with the Paymaster General. We have had to deal with the real complexities of the tax system in the form of the Finance Bill. If my hon. Friend the Member for Fareham thinks that everything that every Minister wants emerges in the Finance Bill, I can tell him that an enormous discard process restrains the well-meaning officials from the Inland Revenue who beaver away with a sometimes zealot-like commitment to ensure that money is raised in accordance with what they believe are the wishes of the Government of the day. Ministers must occasionally restrain their enthusiasm, however, and many non-starters in the budget process end up in the wastepaper bin.
My hon. Friend and the hon. Member for Birmingham, Selly Oak gave several cameo observations to illustrate where complexity abounds in the present tax system. If we are to discuss simplification, we must first define what we mean by a simplified tax system. The world is a complex place. If the Government of the day are to secure revenue through the major areas of tax—personal, business and international taxation—to pay the national bills, complex systems will be involved.
We must determine whether we wish to start removing bits of the tax architecture. My hon. Friend the Member for Fareham referred to problems with capital gains tax, for example. I agree with his comments about the Chancellor's fiddly approach to tax.
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However, we must consider the justification for and implications of removing parts of the tax structure. For example, the Conservative Government removed the tax provision on performance-related pay because we felt that it had had its day, it was being abused and, if the truth be told, such a change was a good way of raising revenue. There were good reasons for doing it, and the tax system was simplified by the removal of that legislation.
If we are to have an honest debate, we must start by asking what should stay and what should go, if that is our definition of a simplified tax system. If we do that, we must have a wider debate, which we have not had in this country. We have not discussed tax, as we are all frightened of it. The political parties shy away from discussing it. The Government try to shield themselves from the debate by saying that they will not raise the basic and higher rates of tax. A great shield is held up against anyone who says that Labour is a tax-raising party. The Government, like every other Government, have been forced into raising revenue, however, and many things go on behind the scenes that we define as stealth taxes.
At the end of the day, we are avoiding the debate about what it is legitimate to tax. Our tax system has grown out of building on history; it is not an accident of history. Before the present range of income taxes, many capital taxes were invented: stamp duty, inheritance tax and so on. The world has moved on, but we have not discussed whether it is sensible to tax people's inheritance or to use stamp duty. The current Chancellor has found that stamp duty is a nice littler earner and the dog that does not bite. By putting in a little complexity here and a tweak there, we get a few more billions out of the tax system. Politically, I see the attractiveness of that.
A second way to simplify the tax system is to be honest enough in the 21st century to stop and ask what we are taxing. Are these the right ways for the Government to derive their revenue? We should go back one stage further and debate how much tax it is sensible for a modern economy to contribute as a percentage of gross domestic product. We seldom start the debate about tax from the size of the cake and then ask how we raise it. Instead, Governments have built on the substructure of the tax system that they have inherited from the previous Government. Usually, we add to it, but occasionally we take pieces away. If we are going to talk about simplification, we need to have a fundamental discussion about the purpose and architecture of the tax system. Otherwise, we will end up fiddling.
The Finance Bill is a fiddler's charter. Along the conveyor belt of Budget starters come individual measures, which are perfectly justified and formed in their own way, to tell the Minister of the day what needs to be done. The Paymaster General will have experienced that in her early days, as I did. The Minister, however, never saw the big picture—what he or she was bolting in or taking out of the tax system—or the added complexity until the tax law rewrite exercise brought forth its first product, the Capital Allowances Act 2001. We suddenly had the book on capital allowances, which was remarkably clear, and we could read it for the first time from beginning to end. The story unfolded. The previous system grew like Topsy. No one could

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understand it, or see where a review of schedule A might be sensible to take into account modern property transactions. Now, we can.
The rewrite exercise opened an important window on the operation of the tax system. I am glad that the process was begun when I was Financial Secretary and I pay tribute to the present Paymaster General for taking on the exercise. I just wish that she would increase the resources that are available to it, especially with regard to the drafting of the parliamentary counsel, so that the process can be speeded up. As my hon. Friend the Member for Fareham pointed out, the exercise is starting to tease out where improvements could be made. Excellent officials in the Inland Revenue have identified some of them.
The exercise could be a way of refining current law, rather than changing it, especially with regard to schedule E and earned income, but it needs to go further. The Government should not be frightened of having the debate to which I referred.
My hon. Friend pointed out the need for greater consultation—an ocean of consultation takes place on the mechanics of the tax system. All sorts of representative bodies spend half their lives whizzing in and out of Somerset house talking to Revenue officials. The problem is that we have not had that discussion about the tax system. If the Paymaster General was feeling brave, why did she not set up a group of interested parties to examine simplification? I would have volunteered my services to help in that task, for what they are worth.
I have met with many representative bodies, including the Institute of Chartered Accountants in England and Wales, the chambers of commerce, the Confederation of British Industry and the Chartered Institute of Taxation. I have told them all that if they want to talk about simplified tax, they should produce some. So far, they have not produced one piece. They have returned to the need for better written tax law—tax law that is more easily understandable and has fewer bells, knobs and whistles on it. If a cleaning up of the tax system is what we mean, that is fine and we should agree with that as a definition.
My hon. Friend the Member for Fareham mentioned one or two examples where the Chancellor has indulged in additional complexity. My position on tapers in the capital gains tax regime is well known. I thought that the taper system was wrong because it made an artificial distinction between long and short-term capital movements. We lack any form of economic appraisal to determine who is right about that. Will the new proposals do what the Chancellor of the day says that they will do?
When Ministers receive tax proposals, they get a generalised statement of their likely impact, but we do not. One classic example, which I raised during the Finance Bill proceedings last year, concerns the reduction in VAT on children's car seats. The Red Book included a series of vaguely connected sentences in justification of the tax. It gave the impression that reducing the VAT on car seats would cut the numbers of children who are tragically killed on our roads by inducing people to buy better seats that provide better protection for children. However, a helpful official at the Department for Transport, Local Government and the
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Regions told me that 50 per cent. of children killed on the roads are pedestrians. Would it have been better to deploy the £5 million that the measure cost on improved publicity and raising safety awareness for children on the footpaths of our nation? Have we had any justification for the measure? Has it worked and has the change been passed on in lower prices?
The Paymaster General (Dawn Primarolo): The right hon. Gentleman knows about that matter as it was dealt with in the Standing Committee. The Government simultaneously increased the grant funding to the Department for Transport, Local Government and the Regions to deal with pedestrian accidents. He can check the record, but I am sure that he will remember that the figures were given to him at the time.
Mr. Jack: The hon. Lady shows sensitivity about the matter in rising to intervene. I will not rerun those debates, but the question was a good way of illustrating that we do not know whether adding yet another element to the tax system was effective. It is the same with capital gains tax. We have no economic analysis to tell us in capital terms whether tapered tax has had a better impact on industry than the previous system of CGT or having no taper at all. My hon. Friend the Member for Fareham mentioned stamp duty and we do not know its impact on property transactions. We do not know whether a cliff edge or a tapered version of stamp duty is the way forward. There are an awful lot of don't knows.
The complexity of our tax system is partly due to avoidance. The hon. Member for Birmingham, Selly Oak touched on that and painted a picture of a pure world in which people would read the words of tax legislation and follow them exactly. I am sure that the Paymaster General will know of many examples of when clever people have read the words. I remember some gentlemen from Close Brothers getting terribly upset when I told them that they could not have a £55,000 personal equity plan. They had read the PEP legislation, thought "What a whizzo idea", bought £6,000 worth of PEPs, parachuted into them the income from £49,000 of an interest-earning asset and set the return so that no capital gains could be levied. It was a wonderful return and a fantastic way of investing, but it blew a hole a mile wide in what the PEP legislation was all about and had to be stopped.
The banks and insurance companies then came up with a whizzo wheeze on life assurance policies, which put at risk £750 million of tax revenue. The famous Glaxo case on transfer pricing—a dimension of international taxation—put at risk a further £600 million of tax revenue. So, any decent Financial Secretary or Paymaster General who is seeking to safeguard the public purse will always have to block up such holes in the tax system.
During the lifetime of the present Government, the need for general avoidance legislation—an all-encompassing super sentence that would stop it all—has been debated but they have rightly drawn back from that. Avoidance is an intellectual battle between clever people who examine tax law and try to interpret it in certain ways. That is the problem. Tax is not scientific; it is a best endeavour to raise money. The ways in which people get round tax legislation illustrate why tax law is

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so complicated. If a truce could be declared on avoidance, a vast array of tax laws could be scrapped. That would help enormously, but is unlikely to happen.
Mr. Edward Davey: Will the right hon. Gentleman say a little more about why he is against general anti-avoidance provisions? The Ramsey test case helped considerably, but subsequent cases blew it apart and we ended up in the position that the right hon. Gentleman described. Could not the Government by statute return us at least to a Ramsey-type position and perhaps even better?
Mr. Jack: I said that tax is a set of words open to interpretation and the same would apply to general anti-avoidance provisions. Perhaps someone could provide a set of words to do the job effectively, but I have yet to see it and I remain to be convinced. I was illustrating how a vast amount of tax complexity is due to plugging avoidance holes.
The Chancellor has a tendency to fiddle with many little micro-measures. Research and development tax credits are a classic example. We have no idea what the effect will be. Until we can achieve some economic appraisal of these measures, the tax system will be an open door to fiddling, adding on small measures and providing a sense of well-being to whatever group has achieved something from the Budget. Greater complexity arises for questionable effects.
The hon. Member for Birmingham, Selly Oak referred to playing tunes with the tax system. When I was in the Treasury, I recall one of its officials saying, "Ministers, you can achieve the Conservative promise of a basic tax rate of 20 per cent." —no 10 per cent. from us, I hasten to add—"even though we are short of revenue". I thought that it was fantastic and wondered where they kept the Harry Potter magic wand. It meant moving allowances, changing national insurance measures, reforming rates here and there. I realised that it was possible to have umpteen variations on the theme and that the machine would continue to turn out money. What was the objective? That was the key point.
The hon. Lady also mentioned flat tax and advocated simple tax systems, with simple rates and allowances— great! Starting with a clean sheet, such a system might develop. I refer hon. Members back about seven years to parliamentary questions put by the then Member for Carshalton and Wallington, Nigel Forman, who wrote a good pamphlet on this subject. The answers showed the winners and losers under the arrangements that were current then.
The hon. Member for Birmingham, Selly Oak obviously has a keen knowledge of social security, but making changes means dealing with the winners and losers, which is difficult unless starting out with a brand new system. The Chancellor has gone too far. The hon. Lady was right that the 10p rate was unnecessary window dressing.
On the other hand, the PAYE autopilot, which works extraordinarily well, shields two thirds of taxpayers from much of the system's complexity. Those who have to fill in the self-assessment tax form wander into such
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complexity and, as my hon. Friend the Member for Fareham said, greater transparency should be considered.
Lynne Jones: I accept the problem of winners and losers, but that should not stop us from moving towards the system that I advocate. I agree that it will be a slow process, but we could have a consensus that that is what we should aim for and work towards it.
Mr. Jack: I draw my remarks to a conclusion by saying that I agree with the hon. Lady. However, tax is one of the great politically sensitive matters. It is almost like death—no one wants to talk about it. The Government of the day want to be able to say that they are not raising too much tax or that they are doing wonderful things with the bits of their handiwork that they admire, but they will not talk about the legitimacy of what they should tax and how they should do it.
If there were a public debate on the matter, we might find new ways to raise revenue that the public would think legitimate. If that could be done, some of the superstructure could be dismantled. For example, in France there is VAT on food and people return from visits there saying how cheap the cigarettes and the booze are. The French have a nice little source of revenue and food seems to be cheap too. We cannot talk about that, however, because both our major parties say, "We will not put VAT on fresh food, children's clothes, books and periodicals." That may be right, but we have not discussed it because it is a no-go area.
To deal with simplification, we must first define "simplify", consider the history of the tax system and its legitimacy and have a proper, public debate about the matter. If we were not frightened to talk about tax we might find a way to simplify a complex system in a complex world.
11.56 am
Mr. Edward Davey: I congratulate the hon. Member for Fareham (Mr. Hoban) on securing the debate and the right hon. Member for Fylde (Mr. Jack) and the hon. Member for Birmingham, Selly Oak (Lynne Jones) on their excellent contributions to it.
I recommend to hon. Members the report of the debate sponsored by the noble Lord Howe in the other place on 23 January. I welcome the fact that both Houses are debating what the right hon. Member for Fylde was right to call a key issue. Liberal Democrats believe that a simpler tax system would be of huge micro-economic significance to the personal and corporate sectors. I shall deal later with the costs of complexity, which have been discussed and which are much larger than has been acknowledged.
I declare an interest of sorts. The tax law review committee of the Institute for Fiscal Studies, of which I am a member, established a working party chaired by Sir Alan Budd on the institutional need for tax simplification. The committee will publish a report in due course. I hope that the Minister and her colleagues will respond positively to the ideas advanced by the group, which includes members of all parties and many external experts.

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The right hon. Member for Fylde talked about starting with a definition of a simpler tax system, which he seemed to define only in terms of the language. I want a wider definition. To build a simpler tax system, we must consider long-term tax policies, the reform of existing taxes, which have been discussed today, and the process of implementing those policies. We must bear in mind that some of the complexity arises from the way in which taxes are administered, not from the taxes themselves. We need to look at the bureaucracies and how they organise themselves. Often, their organisation leads to unnecessary complexity, such as the separation of Customs and Excise and the Inland Revenue, about which the Minister has trenchant views.
Political parties need to assess their tax measures in the light of simplification. We need to widen the long-term debate and to deal with some of the sacred cows that have wandered into the polity of Britain. It is a shame that in the beginning of the 21st century we cannot discuss measures that we debated vigorously in the 1970s and 1980s. It is a retrograde step. It is a symptom of spin politics that we should de-spin for the sake of the taxpayer.
I want to talk more about the processes. In his Hardman memorial lecture Lord Howe emphasised simplicity and stability. He talked about the need to reduce the volume and pace of change, which is important. We should look at ourselves in the House as we are responsible for that in many ways. An examination of the processes involves both looking at ways to stop the situation getting any worse and reviewing what has already happened.
Lord Howe and others have suggested that we should get rid of the annual Finance Bill. I agree. The right hon. Member for Fylde talked about the need to protect the revenue yield to the Treasury. That is right. Nevertheless, we have an annual Finance Bill only because income tax and corporation tax are not permanent taxes on the statute book. If we reformed the Provisional Collection of Taxes Act 1968 and made income tax permanent, we could think about tax policy in a longer term way. We could have a comprehensive tax review to go alongside the comprehensive spending review. We could look at tax policy over a period of three or four years rather than have this annual change, which is a dynamic in itself for more legislation and increased instability in the system.
Let us consider changing the Finance Bill regime. I am attracted by the idea of separating the Finance Bill into two parts—whatever remains of it after the reform of the 1968 Act. A change in excise duties requires a Budget resolution and a quick Finance Bill to put it in place. Perhaps every year, or preferably every two or three years, we could have a technical taxes Act to deal with some of the detailed changes in a more protracted way with greater consultation. Let us reform the Finance Bill system so that we do not make it any worse, and let us also look at the past and at some of the ideas floating around the various institutes and professions.
Let us look at building on the wonderful tax law rewrite project. I pay tribute to the hon. Member for Fareham and to the Paymaster General for their work and support for that project. It produces a whole set of reform proposals, which it cannot deal with because its remit is tightly drawn only to rewrite the existing law. What will happen to all those ideas? Although Lord
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Howe and many other people could probably claim paternity for the idea, I suggest that we need a tax commission similar to the Law Commission or, preferably, a Select Committee in the House of Lords, charged with looking at the existing tax system and proposing sensible reforms to the Government. It would be up to the Government of the day to decide whether to adopt them. It would be a body with the political clout and expertise to ensure that the legacy of complication was reduced.
On the costs of complexities, some people question whether that is a problem, although business men or tax consultants readily admit that it is. What is the real cost? The figures are not readily accessible. We have had various estimates over the years, primarily from Professor Sandford and his team at Bath university. I saw a figure suggesting that compliance costs—I believe that his definition of compliance costs in this case is both private and public sector costs—equated to 1.5 per cent. of GDP, so we are talking about £15 billion to comply with and administer the tax system.
Professor Sandford's latest work is entitled "Why Tax Systems Differ" and was published by Fiscal Publications in 2000. It has a chapter on administration and compliance costs, which goes into some academic detail about how one goes about working out those costs. The major conclusions are that we are only beginning to develop the methodology of working them out; that it is difficult to make international comparisons, for a number of reasons; that high public sector administration costs might not be a bad thing if they reduce private sector compliance costs; and, that compliance costs are higher than previously thought and we must start to take them seriously, which is the key point. Professor Sandford talks about much greater interest in the issue and many more studies being commissioned, and I give the Government credit for commissioning some of them.
I hope that the Paymaster General will elaborate more today than she and her officials have done in recent months in answers to my parliamentary questions. For example, I asked the Chancellor of the Exchequer whether he had received a final copy of the study by Professor Anne Hansford into the compliance costs to business of the UK tax system and when he would publish the study. The Paymaster General replied:
"Studies into compliance costs for Corporation Tax and VAT were commissioned as the first stage of a four year research programme into the compliance costs to businesses of the UK tax system." — [Official Report, 27 November 2001; Vol. 375, c. 870W.]
In other words, we did not receive a clear answer, which is not unusual.
The Government have commissioned a four-year research programme, but I hope that they will not wait until the end of that period before sharing some of the lessons with us. We want to help, which is an important reason for them to do so. The Paymaster General is looking at me over her glasses because she cannot believe that Opposition Members want to help the Government, but this is a shared project. It is not a project of the Government of the day; it is a project through which we as parliamentarians can improve the system.

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I urge the hon. Lady to say more about the studies that have been commissioned, to share her thoughts on how the Government are looking into the issue and the research that they are doing and, as the right hon. Member for Fylde said, to involve us, because that is terribly important. To tempt her into doing so, I shall end by praising the Government on one or two matters. There is no doubt that consultation on tax measures has improved under this Government. The pre-Budget report is a big step forward and, as the right hon. Gentleman said, they have been supporting the tax law rewrite project.
In answer to another debate in which the right hon. Gentleman and I talked about tax simplification, the Paymaster General said:
"I am sympathetic to their point." —[Official Report, 19 December 2000; Vol. 360, c. 323.]
Clearly, she is minded to support us and I hope that she will move from sympathy to activism by setting up the institutions, processes and policy review that will enable us, over five or 10 years, to tackle this major problem.
12.8 pm
Mr. Howard Flight: I add my congratulations to my hon. Friend the Member for Fareham (Mr. Hoban) on securing the debate, in which extremely valuable contributions have been made. I hope that this debate and the recent debate in the House of Lords will be the start of a much more open and focused public debate.
I should perhaps declare an interest, having established a Centre for Policy Studies committee under the chairmanship of Lord Young to consider the areas in which there may be scope for simplication and to make proposals. It is interesting that competing bodies are doing the same.
Unfortunately, the Government have made the tax system more complicated than it needs to be, particularly in proliferating personal tax rates, as is evidenced by the speedy increase in the length of "Tolley's" tax guide. I shall not name names, but I spoke to a Treasury Minister just this week who commented that they regretted having to employ an accountant to do their tax return because they did not have time to deal with the complicated forms. As more people are dragged into complexity, the risk of lack of compliance will increase, as will extreme annoyance.
I pay tribute to the Revenue staff. They do an amazing job in dealing with our tax system. For eight years in the 1980s I sat on a Treasury tax consultative committee. In those days, representatives of different parts of the country's economic life were sounded out in confidence about potential tax changes and their impact. It is a pity that the committee was eventually wound down in, I believe, the early 1990s.
It is important that Paymasters General remain in post for a reasonable period of time to gain intellectual mastery of the brief. I congratulate the Paymaster General on that, because I have observed in the past—not in the case of my right hon. Friend the Member for Fylde (Mr. Jack) —that if Tax Ministers move too frequently, the situation tends to worsen.
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Let me discuss some principles. My right hon. Friend raised the big question of legitimacy, but other obvious principles should be considered. One is as old as tax itself: the cost-efficiency of taxation. We should consider not just the costs to the Revenue of collecting taxes but the costs to businesses and people of paying taxes. Some areas of tax are extremely efficient and, manifestly, some are less efficient. That is one criteria.
I believe passionately in the principle of not distorting economic activity. There is a growing tendency for taxation to do that. It is crucial not to damage the gross national product and not to drive economic business activity abroad or allow it to go elsewhere when it might come to the UK. I remember fighting the cause of the investment management industry when I sat as its representative on the Treasury consultative committee. I pointed out that Dublin and Luxembourg were getting huge amounts of fund management business that London should have, that the business would be more honestly and better carried out in London, and that the central issue was whether tax should be stopped on interest paid by money and bond funds. For whatever reasons, the Revenue did not agree, and we lost huge amounts of income and employment because about £500 billion of business was done elsewhere.
I am cautious about using the tax system to encourage certain types of behaviour rather than simply to raise revenue efficiently. The most fashionable aspect of that at present is environmental taxation. One can see the logic, but I suspect that the results are often contrary to the intentions. It may drive some businesses to areas where there are less stringent environmental checks, and it can lead to nonsensical outcomes. For example, it is not surprising that many people ended up with wrong codes under the new car taxation arrangements. The requirement for employers who provide cars to report the carbon dioxide engine emission details to the Inland Revenue is strange. No doubt manufacturers of cars will eventually provide it, but it is not information that someone responsible for PAYE can easily find.
Mr. Edward Davey: Does the hon. Gentleman think that the Inland Revenue should instigate a completely new coding exercise or—as seems to be the intention—require individual taxpayers or advisers to contact the Inland Revenue?
Mr. Flight: In practice, it seems that a coding exercise may be necessary. As things are developing at present, there is the danger of a considerable shambles.
We all say that it is wonderful to take measures that are good for the environment, but I believe that they can lead to taxation that is economically damaging or misconceived. We should be wary of using the tax system for objectives other than solely raising tax. The taxation of cigarettes is complete madness— [Laughter.] Yes, I declare an interest. The revenues are far lower than they should be and it encourages smuggling on a wide scale. At least theoretically, the taxation of tobacco and alcohol should be on the supply and demand curve for maximising tax revenues. It is misconceived to think that people's behaviour can be changed purely by imposing taxation that is designed entirely for other areas.
I echo the points that were made about not changing the system of taxation more often than is necessary. The Government constantly revisit and tinker with elements

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that are of interest to them and leave unchanged areas that are not of interest, but where there may be scope for change.
It is crucial to keep the tax system for individuals sufficiently simple for them to understand. In a recent debate in the Committee that considered the Tax Credits Bill, I was shocked to hear the Financial Secretary say that we could have a system like a television set that was so complicated that no one would understand it, but that all people had to do was turn the switches on. Whether people are paying tax or receiving negative income tax, if they do not broadly understand the rules we invite chaos, if not semi-fraud. Clearly, complexity does create fraud.
There is a relationship between the number of Inland Revenue or tax officer staff and the amounts of tax paid and of taxpayers. Although the United States has a reasonably complicated tax system, the ratio of people working in the Internal Revenue Service to tax paid and taxpayers is much lower than it is here. The Paymaster General seems to be shaking her head. Perhaps we will have a chance to return to that.
Layer on layer of taxation is a problem that is most evident in relation to pensions taxation and company taxation. As my right hon. Friend the Member for Fylde said, the solution may be to take bits of the architecture out.
Anti-avoidance measures are unavoidable. The principle of having only general anti-avoidance provisions was tested in Canada, where it created the problem that commercial transactions had to be pre-cleared, which occupied large numbers of inland revenue staff and considerably delayed the process of commerce. The clear distinction between evasion and avoidance is essential to the honesty of our society. It is understandable that people will want to pay as little tax within the law as they can, but they must know whether or not they are crossing the boundaries of the law. A degree of rough justice between fairness and efficiency is required. In recent years we have bent over backwards to honour fairness where it is both tax-inefficient and not necessarily appreciated by citizens at large. My hon. Friend the Member for Fareham described what was wrong with tax complexity and the problems that it could cause to government and business.
The Saatchi and Warburton proposals appeal to me greatly in principle, for the same reasons that the hon. Member for Birmingham, Selly Oak (Lynne Jones) outlined. One of tasks of the committee in which I am involved is to consider the viability of those proposals. The overlap between the number of people who pay tax and the number who receive benefits is about 40 per cent. It is not as easy as simply raising the tax threshold and doing away with many benefits because one is dealing with overlapping but not concentric groups of people.
Lynne Jones: The proposed citizen's income would deal with that because people who receive income support would be paid.
Mr. Flight: I thank the hon. Lady and look forward to co-opting her on to the committee.
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The corporate area is not of great interest to citizens at large, but there is still scope for masses of simplification, and I commend the Institute of Directors' 11 quick wins, with which I shall not deal at length.
Dawn Primarolo: There are only 10 minutes of the Adjournment debate left. I know that the hon. Gentleman has many interesting things to say, but if I am to answer hon. Members' points, I implore him to be brief.
Mr. Flight: The last thing that I want to do is to deny the Paymaster General sufficient time to respond.
There is scope to deal with corporate taxation. On personal taxation, the major principle is that although it is okay to introduce complexity for those at the top end of the scale, if that creeps down to the majority, and especially to those at the bottom end of the scale, it becomes unworkable. That is where we are going, and it is largely unnecessary.
12.21 pm
The Paymaster General (Dawn Primarolo): First, I congratulate the hon. Member for Fareham (Mr. Hoban) on securing the debate. The convention is for short replies from Ministers in Westminster Hall debates and I hope that all hon. Members who took part will excuse the fact that I shall be unable to answer every question.
I shall assist the hon. Gentleman with some information that he quoted from parliamentary answers. If he returns to the question that he asked about capital gains, he will notice that the paragraph that gave him the answers of 7.4 per cent., 14.8 per cent. and 29.6 per cent. is preceded by a statement that those figures were calculated by "ignoring behavioural changes". The right hon. Member for Fylde (Mr. Jack), who experienced the tax law rewrite and is a former Financial Secretary to the Treasury, touched on that matter when he referred to simplification.
The hon. Member for Fareham quoted figures on the increase in Inland Revenue staff. Unfortunately, he did not mention that 8,400 staff were transferred directly from social security work in the Contributions Agency and that 3,700 were transferred in with tax credits. The increase in the number of staff in the Inland Revenue was around 245 in the period he discussed, which, given the vast increase in taxpayers due to the Government's economic reforms and success in getting people back to work, is not a large increase when compared with the increase in workload.
Mr. Hoban: I was careful in picking my numbers from the parliamentary answers because the disconnect clearly took place during the first part of the Administration as new functions were brought into the Inland Revenue. I was well aware of that issue, but time prevented me from pursuing the matter further with the Minister's colleagues.
Dawn Primarolo: I am happy to ensure that the hon. Gentleman gets that information on the record in a parliamentary answer if he would like it.

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The point of the debate has been to suggest that the United Kingdom is suffering, but I remind hon. Members that the UK has more direct foreign investment than a large number of other countries and that we are now fourth in the worldwide league table. Both the Organisation for Economic Co-operation and Development and the International Monetary Fund have pointed out that the United Kingdom is one of the most conducive environments in which to do business and continues to attract half of all new headquarters of multinationals. The UK and its economy are in a very buoyant position.
Simplification involves a number of propositions. We would all agree that simplification is correct and that we should try to achieve it, but it must be balanced with certainty, fairness and what we intend the tax system to do. As the right hon. Member for Fylde pointed out, to start from the proposition that whatever we do in the tax system no one will try to circumvent it and do something else, is simply to fail to face up to what is really happening. There must be intervention on the basis of fairness. I intend the tax system to be used as it is supposed to be and for relief to be given as it is meant to be. I will come back to anti-avoidance.
Another question involved in simplification is whether Members of Parliament believe that there is any role for the tax system to intervene on market failure. The hon. Member for Arundel and South Downs (Mr. Flight) says not, but that is not business's view, nor the view of many of his Front-Bench colleagues. It seems to me that people want complexity when they believe that it suits them. The capital allowances legislation is an example of that. People do not want complexity if it means that their taxes are higher.
What the Government must do, and have been doing, is to examine how to balance simplicity, fairness and equity and look at what it is acceptable for the tax system to do and not do. The Government have clearly laid out our objectives for the tax system. They are to
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ensure economic stability, raise productivity, increase employment opportunities and tackle child poverty in a fair tax system. Within our complex world and our complex economy, we try to take those principles forward.
Of course, fairness to one person can be uncertainty to another. The hon. Member for Fareham mentioned tax planners. I find it breathtaking if he is seriously suggesting that there will be a truce and that tax planners will say that they will never try to put bits of legislation together that were never intended to go together to minimise relief. Of course that is not the case. There is always that intellectual challenge, as the right hon. Member for Fylde pointed out.
The next question is how to defend ourselves against that possibility. How do we have simply written and easily understandable legislation? I wholeheartedly support the tax law rewrite project, and the capital allowances legislation, in particular, is fantastic. We have tried to get to such a truce and asked if we could have general anti-avoidance legislation, but business said, "No, that is no good". Can we have smaller, or mini, general anti-avoidance legislation? The problem with the anti-abuse legislation is that it is so large. Again, business says, "No." The hon. Member for Fareham says that we should consult more. We consult, and business says, "No."
I do not mind having the debate that right hon. and hon. Members have suggested this morning. It is important, however, not to enter that debate with rose-tinted glasses, believing that the tax system is neutral and that people do not try to manipulate it. The purpose of the tax system is to raise money fairly to invest in public services. I am happy to have had this short debate and I do not mind having it again and again because the more people who understand what goes on in the tax system—how people try to manipulate it and where the winners and losers are—the more they will understand that the process of simplification, fairness and certainty in investment is a difficult balance, which the Government are striking.

Health Inequalities (Huddersfield)
12.29 pm
Mr. Barry Sheerman: It is a great pleasure to introduce a debate on a topic close to my heart, and to have it presided over by you, Mr. Illsley, a fellow Yorkshire Member of Parliament. I want to make general points before coming to the specifics of Huddersfield. Huddersfield is a typical place when considering health inequalities because it is close to the national average—so, when we talk of the place, we talk about the United Kingdom.
When we celebrated the 50th birthday of the national health service, not long ago, it was a time for reflection. An interesting part of that reflection was that when the NHS was founded, there was a tremendous confidence in the fact that health inequalities would be tackled. Some who were euphoric believed and wrote that by and large the NHS would eventually disappear, as all ill health would be cleared up, problems of health inequalities would be solved and there would no longer be a need for a health system. We have learned a few lessons since then.
I want to point out the important fact that after some initial success in delivering health care to a broader audience, and in involving more people in high-quality health care, something significant happened. When we became the Government in 1997 and looked back over the previous 20 years, we found that, astonishingly, health inequalities had widened. For two generations, the gap had widened between the two extremes of those who had good health and were enjoying longer, healthier lives in social class 1, and those in social class 5. That is worrying for someone who represents an average constituency such as Huddersfield. So, why did it occur?
First, I will give some chilling figures. In the early 70s, the mortality rate among men of working age was almost twice as high for those in social class 5 as it was for those in social class 1. By the early 90s, it was almost three times as high. Those are unacceptable figures. Between 1970 and 1972, the mortality rate per 100,000 men aged between 20 and 64 was 500 in social class 1 and 897 in social class 5. By 1991–93, the number had fallen to 280 in social class 1, but was 806 in social class 5. That is not to suggest that there had not been a general improvement across the piece, but the gap was widening substantially.
Interestingly, Professor Richard Peters, who was responsible for a clinical trials study in Oxford, believes that smoking was a relevant explanation for up to 30 per cent. of that disparity—another chilling figure. We know that such disparity in Huddersfield and the average constituency such as yours, Mr. Illsley, or the Minister's, is centred around income. To paraphrase President Clinton, "It's income, stupid"—how much disposable income is necessary to promote a healthy life.
Income is not the only important issue because factors such as family, smoking, alcohol, drugs, poor diet and a lack of good exercise are also relevant. Those on lower incomes with lower education are prone to a range of diseases. I have spent my lifetime in Parliament campaigning for public health measures such as seatbelts, and I was interested to learn that social classes 4 and 5 are most likely to die in accidents.
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The answers lie in education, and poverty alleviation through the income tax system and other benefit systems to address poor incomes. Employment is important because there is a clear relationship between having a job, feeling good about oneself and having good health. One great thing that the Government have achieved during the past five years is a record level of employment. The disparity between social classes I and 5 becomes more worrying when one realises that the statistics leave out unemployed and disabled people. That is the nature of the statistics, but many that look pretty darn awful are in fact even worse because they only take into account people in work.
Given your constituency, Mr. Illsley, you know about accidents, the mining industry and the health of miners, and you know what that environment did to the health of both your constituents and mine. The chemical industry had a heavy presence in both the Minister's constituency of Pontefract and Castleford and mine, and it caused diseases, especially in the dyestuff industry in Huddersfield, which are a serious indictment of former industrial practices.
Wearing another hat, I am Chairman of the Select Committee on Education and Skills. On becoming Chairman, one of the first inquiries that we conducted concerned school meals, which are important for children from deprived backgrounds. For many years, especially under the previous Administration, there was a move away from a balanced and healthy school meal regime. The Committee visited schools where there was a broad choice from salads to what I call "proper food", but sadly many children were eating burgers, chips and other unhealthy stuff. Worryingly, a recent survey asked school children to identify a range of fruits and vegetables, but they did not know what they were. There are worrying trends in our diets.
In Huddersfield, we have just reached the stage at which we no longer see old men with bandy legs who had worked in textile mills and whose children must have suffered from rickets, because that generation has died out. There is, however, a new generation with symptoms of obesity, who we can predict will die early of coronary heart disease or other diseases because of their diet and lifestyle. Couch-potato syndrome is a problem because people are not getting enough exercise. There is too much watching sport on television and not enough participation in it.
What can we do about these matters in Huddersfield, and what can we do about them nationally? I have been involved with the launch of the new health forum and the new parliamentary group on health. Until now, we have been unable to identify the statistics on health that influence our constituencies because most data have been collected on a regional and sub-regional level, which is too broad and unfocused. The Dr. Foster organisation enables us to identify, in some focus and detail, health statistics in our own constituencies. The service is accessed by using a private pin number. You could use it, Mr. Illsley, to access the health statistics in your Barnsley constituency. It could be of great benefit to Members of Parliament, and I hope that they will use it. The House of Commons Library can provide marvellous statistics on employment—unemployment rates, length of employment, male, female and youth unemployment, the shift between manufacturing and service jobs, and so on—but health statistics remain vague.

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Many of our parliamentary colleagues are remiss in their approach to local health problems. In Huddersfield and elsewhere, the regime should be much more focused on making MPs pro-active leaders—knowing about community health issues and assuming a leadership role. To do that, they need the relevant statistics. Now that they are available, I hope that Members will use them.
For too many MPs, their only contact with the health sector comes from sitting in their advice surgeries hearing complaints about the health service. One always hears a lot about the people who complain—"You never did anything for me, Mr. Sheerman"—but not much about the contented people whom one has helped. Sometimes thex write a letter, but more often one meets them in the street and they say, "All those years ago, you helped me." Many people are happy with the good service that they receive from the NHS, but those cases do not come to prominence and the Leader of the Opposition does not drag them into Question Time.
MPs should be more pro-active. I do not want their relationship with the health service to be limited to involvement only when a ward or a cottage hospital is closing down and they rush in like the fire brigade attending a fire. MPs are always invited to and are good at attending ceremonies at which a Minister unveils a plaque for a new hospital extension, but the prescription for changing health understanding in this place is to make Members commit themselves to spending seven days—a whole week—in a hospital talking to patients, doctors, nurses and ancillary and care staff to find out what is really going on. Too many of us talk about health without any real focus.
In Huddersfield, the town centre has more deprived wards than less deprived wards. In other words, more people from the lower socioeconomic classes live in the centre. We are surrounded by higher-income and more affluent areas, especially in our valleys. Data from the Library shows a clear difference between the centre and the wealthier periphery. I am sure that the same applies in your constituency, Mr. Illsley.
I applaud the Government for taking two brilliant steps. First, they have introduced a 10-year national strategy for the health service. Secondly, they have set targets for tackling health inequalities over that period of time. Even better, statistics are emerging that show that since 1997 the gap between social class 1 and social class 5 has started to close, not to widen further. As with education, the resources that the Government are putting into health care seem to be paying off, although it is early days.
Primary care trusts are part of the answer. The Government's ambition for the not-too-distant future is for 75 per cent. of health spend to be in the hands of the primary care trusts. There has recently been consultation on whether there should be one or two primary care trusts in the Huddersfield area. Until now, one trust, Huddersfield Central, has covered most of the deprived wards in my Huddersfield constituency and the neighbouring one, Colne Valley, and another trust, South Huddersfield, has covered more affluent areas.
During the public consultation—surprise, surprise—there was an enormous furore of activity in the more affluent area, led by GPs, who lent on their patients,
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disgracefully in my view, to write to the Minister and sign letters and petitions. In more middle-class, professional residential areas, it is so easy to organise such things, but we saw less of that activity in the Huddersfield Central area.
After a long deliberation, Huddersfield health authority came down firmly in favour of one primary care trust for the area. Huddersfield is one community. It does not contain a more deprived community and a more affluent one, it is one community. I would have thought that, to tackle health care inequalities, one primary care trust would have been the answer.
The Minister might be going to tell me that there is a reason why the Government overturned the health authority's recommendation, ignored it and said that we will have two trusts—one for the affluent and one for the less affluent area. Those trusts go across constituency boundaries. Will she tell me the rationale for that decision? I think that people in this House know that I am a reasonable Member of Parliament and that I can accept a reasoned argument, but I have not heard the rationale and logic for that move. Pontefract or Barnsley, for example, do not have one primary care trust for the more deprived part and another for the more affluent, but the Government have decided that my town and my community should. If the Minister can give me a rationale, and assure me that the reason for the decision is that money will be poured into Huddersfield Central, and that it will be given an enormous amount of resources per head compared with South Huddersfield, which is more affluent and does not need so many resources, I shall be content and we can resume our normal good relations.
I hope that the debate has put in context why I, as a Member of Parliament, feel strongly about health inequalities. The Government have done some good things and are on the road to tackling inequalities, but I am part of the coalition that wants faster change. I want to know why, in the Huddersfield area, it is deemed right to have two primary care trusts, one for the more affluent area and one for the less affluent area.
12.48 pm
The Parliamentary Under-Secretary of State for Health (Yvette Cooper): I congratulate my hon. Friend the Member for Huddersfield (Mr. Sheerman) on securing the debate and on raising the important issue of health inequalities in his constituency. He made some general points and some specific ones about his area, particularly about the primary care trusts. I shall attempt to address those in turn.
I concur with my hon. Friend's points about the scars that health inequalities leave right across the country. It is fundamentally unfair that people on higher incomes on average live longer than those on lower incomes, and that people in some parts of the country live significantly longer than those in other areas purely on the basis of region and background. That is unfair, and we must address such inequalities in our broad programmes to tackle the causes of ill health and in more local structures and health service programmes.
The scale of health inequalities is stark. For example, a baby boy born in Calderdale and Kirklees health authority can expect to live three years less than a baby boy born in Barnet—at the end of the 20th century.

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The teenage pregnancy rate for girls under 18 in Calderdale and Kirklees is 60 per cent. higher than in Barnet, resulting in health and social inequalities being passed from one generation to the next. The infant mortality rate in the most deprived areas is 70 per cent. higher than in the most affluent areas and babies born to low-income families are more likely to have low birth weight, which is linked to health and education problems for many years. I share my hon. Friend's anxieties about those health inequalities and his welcome for the fact that the latest figures show that the life expectancy gap for men in the most affluent and most deprived social groups has, at last, begun to narrow. The latest figures are extremely welcome, but, as he said, we have a long way to go.
The provisional findings of the Centre for Health Economics in York suggest that the majority of people are shocked when they become aware of such health inequalities and believe that action should be taken to narrow the gap. The Government are right not just in investing to improve and reform our health service, but in investing to improve and narrow health inequalities.
Much of the work in this area stems from that of Sir Donald Acheson and his team who were commissioned soon after the 1997 election to carry out an independent inquiry into inequalities in health and the causes of those inequalities. It was the first time since the Black report some 20 years before that a major report was produced on health inequalities in this country. It examined the root causes of ill health, ranging from child poverty, unemployment and poor housing, and more immediate factors such as smoking and poor diet. As my hon. Friend said, smoking is indeed one of the greatest causes of health inequalities because the highest rates of smoking are among those on lowest incomes.
Since the 1997 general election, we have taken action to try to narrow those health inequalities. For example, the minimum wage and the working families tax credit have lifted 1 million children out of poverty. I am sure that my hon. Friend agrees that that measure alone will probably have more impact on his constituents in Huddersfield and mine in Pontefract and Castleford than almost any other measure to narrow health inequalities. Widening educational opportunities for children, initiatives such as the new deal programmes and many of the measures that he, as a member of the Select Committee on Education and Skills, has examined will also have an impact on health.
The sure start programme is one of the most important in helping to narrow health inequalities early in life by providing help and support for the under-fours and their families. Two fifth-wave sure start programmes have been approved for Huddersfield, both of which will have an impact on the population in Huddersfield Central primary care trust area. One programme is based in Deighton ward, which was identified in the neighbourhood renewal programme as among the 10 per cent. most deprived wards in England. It is being led by local trusts, with responsibility passing to Huddersfield Central primary care trust from April 2002. It is developing in parallel with other local programmes, including the Deighton Brackenhall initiative and the second sure start programme, which covers parts of the Crosland Moor and Paddock wards and is led by Kirklees social services.
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We are also targeting specific help at key risk factors—for example, nicotine-replacement therapy on prescription to help people to stop smoking, and the national school fruit scheme. I agree with my hon. Friend that the diet and nutrition of school children is particularly important, and I am a strong supporter of the national school fruit scheme, which will ensure that all infant school children are entitled to a free piece of fruit each day. That is probably the biggest programme to support children's nutrition since the introduction of free school milk after the war. The teenage pregnancy strategy is clearly also having an impact.
My hon. Friend expressed concern about PCTs and their configuration in Huddersfield. He also raised the issue with my hon. Friend the Minister of State, Department of Health, the Member for Redditch (Jacqui Smith), who took his views seriously and who has spent some considerable time weighing the arguments. My hon. Friend the Member for Huddersfield is right that the role of the PCTs is critical in tackling health inequalities, as they have so much money—they will have 75 per cent. of the budgets—and as they commission work that can have a huge impact on health inequalities. They also provide services that can help reduce those inequalities, such as smoking cessation, statins for heart disease and managing hypertension.
PCTs can have an impact on all those things, as well as in the untapped source of working more closely in partnerships. They work more closely in some areas, but not as far as they could in others. More partnership work is needed on sure start and teenage pregnancies, and more local partnership work is needed on housing. I understand my hon. Friend's concern that PCTs are established most effectively to address health inequalities. My hon. Friend the Minister of State and the Department of Health considered those issues when they made their decision.
PCTs need to be rooted in their local communities and be endorsed by them to have the greatest effect. My hon. Friend the Member for Huddersfield will be aware that the public responses to the consultation were overwhelmingly in favour of two PCTs for the area. I recognise his concerns, but we have made it clear that the PCTs and the health economy in Huddersfield need to work closely together across the patch. If the community is not ready to embrace a single PCT with enthusiasm, it is right to establish two PCTs, but with the clear direction that they work closely together and look forward to the future. That means joint appointments, such as the director of public health and the director of finance. The director of public health is the most important appointment, as issues of health inequality need close joint working. We expect the director of public health to lead that work in a PCT.
We also expect strategic health authorities to explore greater joint working throughout the health and social care sectors. I assure my hon. Friend that we have considered those issues and that the decision was not easy to take. Nevertheless, on balance, it was the right one to take at this stage. The two PCTs can make considerable progress in narrowing health inequalities by working together and in partnership with the local community, local authorities, voluntary organisations and community groups.

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As my hon. Friend made clear, we have set two national health inequalities targets and recently ran a major consultation throughout the country on how to meet those targets on life expectancy and infant mortality. A group of organisations in the Calderdale and Kirklees area responded jointly to that consultation. The group included the Calderdale primary care group, the North Kirklees PCG, the Central Huddersfield PCG, the South Huddersfield PCG, the Calderdale and Kirklees health authority and a range of community groups. Although they supported the consultation document and much of the work that is being done, they urged us to do more work to ensure that mainstream resources are devoted to action on inequality. I agree. They also said that two groups had been prioritised locally because of the changing demographics of older people and black and minority ethnic communities, to which they urged us to pay more attention. We will certainly take their remarks seriously.
I welcome the fact that such bodies worked together on the consultation on narrowing health inequalities. I urge them to continue to do so. We will consider their comments seriously and are working as part of a cross-cutting review involving all Departments on how best to address the narrowing of health inequalities. We have made considerable progress, but must recognise that fundamental injustices still scar our nation and that there is much more to do.

Role of Lord Birt
12.59 pm
Norman Baker: I am delighted to have secured this debate today; it is, in many ways, a journey into the unknown. I hope that by the end of it we will all know more about what Lord Birt does. The Minister has a blank canvas on which to paint, for we know precious little so far. I draw the Minister's attention to the title of the debate. I have deliberately chosen a narrow topic, so I hope that when he replies he will address himself to it. If he is tempted to range far and wide without actually hitting the target, I will look to you, Mr Illsley, for assistance and protection.
What do we know about Lord Birt's latest appointment? I can list that very quickly. According to the Prime Minister's answer to one of my questions, we know that he has been appointed to the forward strategy unit in No. 10 and that he works with the unit on "a range of projects", that he is unpaid but can claim expenses, and that he last travelled by train on 28 November. We also know that he is engaged in blue-skies thinking, whatever that is. Someone suggested that it may be gazing out of the window of the Cabinet Office. In any case, when one adds up that information, it is not very revealing.
What we know about Lord Birt himself, as opposed to his new role, hardly fills us with confidence that he is an appropriate person to occupy a key Government position. Let us take his time as Director General of the BBC. It was hardly a success. He took a unified organisation and split it into atomised pieces, each fighting the other. Morale plummeted while management costs soared. Broadcasting house became virtually empty of broadcasters; they were all shipped at vast expense to White City to make more room for the managers and accountants and the army of consultants that Lord Birt employed. Fortunately for the BBC, Greg Dyke has reversed much of the damage.
The profile of John Birt in The Observer in 1996 put it thus:
"Here is a man who has embarked on the total reconstruction, many would say destruction, of Britain's most visible and successful cultural institution. For years the BBC has been churning with turmoil, its staff confused, alienated and depressed by the authoritarian rule of a Director-General despised by most of them. At the same time the governors of the BBC, nominally Birt's superiors, have consistently been patronised, manipulated and sidelined by him."
The man who was chairman when Birt was Director General, Marmaduke Hussey, told The Guardian last August that if he had been given a new term as chairman, he would have sacked Birt. He said:
"I wouldn't have reappointed him if I'd had the chance, I would have got rid of him. He was dogmatic and difficult and slow to take decisions. He did have some fine qualities, but admitting that others on occasion might be right was not one of them."
Is that the sort of man we want creating transport policy?
We also know that Lord Birt was installed as Director General at the BBC without a formal interview or application process. Lord Birt appears rather good at securing jobs for which he is ill-equipped without having to bother applying for them. He joined the BBC as Director General in November 1992 and it was not until

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March that it transpired that he was not on the staff but was employed through an organisation called John Birt Productions Ltd. He then asked people to believe that he had been too busy to join the staff. Naturally, his little wheeze was financially very rewarding in tax terms—although it meant less money for the Exchequer, as tax avoidance always does. None of that stopped him from retiring from the BBC with a golden handshake reputed to total £784,000. Is that the sort of man we want creating transport policy?
Of course we need not look back to the BBC to examine John Birt's record. Prior to being given his transport blue-skies role, he was the Prime Minister's crime tsar. His brief, according to a parliamentary answer to me, was
"to take a long-term, strategic look at criminality and long-run social trends."
And if that was not clear, the Prime Minister helpfully added:
"Lord Birt brings a strategic outlook and an understanding of social trends".—[Official Report, 24 July 2000; Vol. 354, c. 443W.]
It was interesting to know what the Prime Minister thought he brought to the job, for it certainly was not a knowledge of crime.
What did Lord Birt manage to contribute? We do not know officially, of course. That, like everything else to do with Lord Birt, is kept from MPs and the public. However The Guardian managed to piece things together a little. An article entitled "Crime tsar Birt leaves to the sound of mockery" stated:
"Lord Birt…has been quietly pensioned off amid mounting criticism that he failed to deliver…'It's just been a deathly silence since he was appointed—he's made no impact at all,' said one Whitehall source… insiders say he was in effect limited to poring over the Offenders' Index—records of crime statistics for the past 50 years—in an attempt to discern trends."
The article went on to say that John Birt had not met the Association of Chief Police Officers, the National Association of Probation Officers, the National Association for the Care and Resettlement of Offenders or, it appears, any organisation with a knowledge of crime. One would have thought that he might have started on that tack if he had wanted to carry out some useful work in that role.
We are told that his work was "considered alongside" contributions from Departments for the report "Criminal Justice: The Way Ahead", although the Prime Minister has refused my request and those of others to place a copy of John Birt's work in the Library. Why is it not in the Library? Is he worried that it might look a little threadbare or amateurish? In any case, the consensus is that his work was distinctly underwhelming.
Is this the sort of man we want creating transport policy? Why has he been asked to look at transport? Well, it gives him something to do, as the Secretary of State for Transport, Local Government and the Regions neatly put it when giving evidence to the Transport Select Committee. He implied that Lord Birt was a harmless diversion, but I wonder whether he knew about Lord Birt's financial connections with Virgin, which has railways and air services as part of its empire. He should know that Lord Birt became chairman of Lynx New Media in 2000, as he disclosed in the Lords' register of interests. However, Lord Birt did not disclose
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that Lynx is in effect managed by Virgin Media Group. Was the Prime Minister informed of that connection when he asked Lord Birt to undertake transport policy?
Perhaps that explains why Lord Birt has an office with Lynx New Media on the fourth floor at 45, Old Bond street. That is where Downing street will refer callers on ringing up to find out how to contact him. It might also explain why a life-size cardboard cut-out of Richard Branson adorns the office. Of course, 45, Old Bond street is very exclusive. I have a photograph that the Minister might like to see if he has not seen it before. It shows John Birt's office, two doors from the Gucci shop, with a Rolls Royce parked opposite. I am reliably told that rents there average £80 per sq ft. Is the taxpayer paying for office space for Lord Birt there?
Is it appropriate for the Prime Minister's personal transport adviser to have a £100 million financial relationship with a leading supplier of transport in the UK? Is that the sort of man we want creating transport policy? I believe that the link with Virgin represents a clear conflict of interest for a person charged with developing transport policy. Unless the Prime Minister and Lord Birt himself can show categorically that no conflict exists—bearing in mind that no information whatever has been provided so far—Lord Birt should resign forthwith.
However, neither Lord Birt nor the Prime Minister seems to want to show anything. For a start, the Prime Minister refuses to give out anything but the barest information about Lord Birt and his role, little more than the fact that he has been appointed. I refer to some of the questions that I have asked so far but the Prime Minister has refused to answer. The Prime Minister will not tell us for how long Lord Birt has been appointed to the forward strategy unit. He will not tell us how many times he has met Lord Birt this year. He will not tell us whether Lord Birt has access to Cabinet papers. He will not tell us how many hours a week Lord Birt works. He will not tell us how much he has claimed in expenses. He will not tell us to which Ministers Lord Birt reports. He will not tell us which transport organisations, if any, Lord Birt has met since his appointment. He will not tell us what secretarial support is available to Lord Birt, although a helpful inside source tells me that between eight and 10 civil servants are working for him. Is that correct? He will not tell us what office space has been made available to Lord Birt. He will not tell us which projects Lord Birt has worked on or will be working on.
The Secretary of State for Transport, Local Government and the Regions will not tell us—no doubt under orders from No. 10—whether he was consulted prior to Lord Birt's appointment or what access Lord Birt has to civil servants in his Department. Was the Secretary of State consulted by the Prime Minister prior to Lord Birt's appointment?
I wonder whether the Prime Minister recalls the magic words he issued as Leader of the Opposition:
"Labour would change the whole style of government. Our bill of rights and freedom of information act would get rid of the culture of secrecy".
Those are hollow words when it comes to finding out about Lord Birt or much else in the internal mechanism of No. 10.

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This farrago of non-answers, which the Minister appears to think is consistent with democracy—he is laughing about it—treats Parliament with contempt. I have requested basic information that would in no way compromise the principle that advice available to Ministers is confidential. Some of the questions that were refused an answer had previously been answered by this Prime Minister and the previous Prime Minister, who in many ways was more open. I refer the Minister, and the Prime Minister, to the Speaker's statement of 28 November—
Mr. Eric Illsley (in the Chair): Order. I must remind the hon. Gentleman that "Erskine May" details particular conventions on comments about Members of Parliament. Lord Birt is technically a Member of the upper House, so I ask the hon. Gentleman to follow those conventions and ensure that his language is temperate.
Norman Baker: I shall try to do that, Mr. Illsley. I thought that my language was temperate, but I have listened to you carefully.
I refer to the Speaker's statement of 28 November, in which he said that
"when Ministers refuse to answer questions, they are expected to indicate in their reply why they have refused by reference to the Government's code."—[Official Report, 28 November 2001; Vol. 375, c. 971.]
In none of the cases that I mentioned was that done, and the reason is obvious. Nothing in the code could possibly justify the contemptuous non-answers that the Prime Minister has given to me and other Members. If there is, the Minister should tell us about it in his reply. I give the Minister notice that if he fails to provide answers to those outstanding queries today, I will lodge a formal complaint with the Public Administration Committee to take the matter further. I will also pursue the whole issue by other means.
This matter does not only concern questions. We now learn that Lord Birt has decided—or the Prime Minister has decided for him—that he is not prepared to give evidence to the Transport Committee, despite the formidable and vocal objections of the hon. Member for Crewe and Nantwich (Mrs. Dunwoody). I hope that the Prime Minister has also noted the points of order raised last Thursday in the Chamber by the right hon. Member for Bromley and Chislehurst (Mr. Forth) and my hon. Friend the Member for North Cornwall (Mr. Tyler).
What on earth has possessed the Prime Minister to appoint someone whose record is patchy to say the least, who is ill suited to the task in hand and, according to the press, widely derided by civil servants and the Secretary of State for Transport, Local Government and the Regions? Given his involvement with Richard Branson and Virgin, he also has a clear conflict of interests. If Lord Birt is the answer, the question must be a strange one.
What on earth has possessed the Prime Minister to deal with the matter in such a secretive and contemptuous way? Why will he not answer basic questions? Why should Lord Birt not be answerable to the Transport Committee? The immediate answer that I
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fear is that it is because he is a friend—or should I say a crony. Lord Birt was ennobled by the Prime Minister, he attended Cherie Blair's 40th birthday party, and at his 50th birthday celebration, the Prime Minister took part in a pantomime skit based on his life. The wider answer, I regret to say, is that the Prime Minister appears to believe that he can simply bypass normal rules and conventions if his friends are involved and he feels like it. It seems that the rules and conventions that work to hold the Government to account are optional if he so decides.
The Prime Minister came to power in 1997 with a Labour Government who had a huge majority on the back of public revulsion at the sleaze that had dominated the latter Tory years. He arrived committed to a new way of doing things—a new Bill of Rights and a Freedom of Information Act, ending the secrecy in government and the corruption, patronage and sleaze. Fundamentally, the Prime Minister is a decent man, but he is slipping into the seductive ways that make life easier today but store up trouble for tomorrow. His decision to withhold from Parliament almost all information about Lord Birt is a symptom of a wider malaise. He must remember, as should his Ministers, that freedom of information is ultimately a friend of good government and the governing party. Subterfuge, secrecy, contempt of Parliament, withholding information unnecessarily and thwarting Select Committees are dangerous roads to go down for both democracy and the Government.
Lord Birt is the wrong man for the job, and he should be relieved of his post forthwith. However, if the Prime Minister wants to keep him, he should provide answers to justify the employment. He must recognise that Members of this House have a right to ask questions and a justifiable expectation that they will be answered, whether they are inconvenient or not. That is how this place works. Members are entitled to ask questions and expect answers, not to be fobbed off. Let us have Lord Birt before the Transport Committee to answer basic points about his role—not about the advice that he has given, but about his terms and conditions of work. If Lord Birt is to win any respect in his present post, that is the only way forward. Without basic accountability, he will be able to limp on in his closed world, sheltered from the biting wind by the warm, enveloping cloak of the Prime Minister and all at No. 10, but the price that he will have to pay is derision.
The price that the Prime Minister will have to pay is greater. It will be to water the bitter seeds already planted—the seeds of distaste at the naked patronage of cronies, the seeds of anger that the Government's fine promises of openness and accountability have been betrayed, and most of all the seeds of disappointment that the new start in which so many people believed back in 1997 has finally spluttered to a halt and that the Prime Minister, in the public's eyes, is just like any other politician.
1.15 pm
The Parliamentary Secretary, Cabinet Office (Mr. Christopher Leslie): Convention dictates that I congratulate the hon. Member for Lewes (Norman Baker) on securing the debate, but so far it has not been characterised by his more usual generous and magnanimous approach. I was starting to feel worried:

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he is desperately trying to maintain his reputation by portraying himself as a man with the bit between his teeth. I felt that he was grasping at straws today and the level of intemperance said a great deal about his mindset and focus in the debate. I am truly disappointed and sorry about that.
I should like to deal with Lord Birt's role and directly answer the hon. Gentleman's questions. Lord Birt is appointed by the Prime Minister as an unpaid strategic adviser and has an overarching role on several projects supported by the forward strategy unit at No. 10. His role is to provide analysis and advice on a range of strategic issues, including long-term options for transport over future generations. Lord Birt's position is simply another in a long line of external unpaid appointments that have been made by Governments of all parties when they want the benefit of wider advice. His role is in parallel with the work and objectives of the forward strategy unit, and he provides private policy advice to the Prime Minister and his Cabinet colleagues.
It is important to set out what Lord Birt is not doing: he does not have an executive role; he does not execute or make policy decisions; he does not receive a salary from the taxpayer; he does not change the nature of decision making because Ministers and the Prime Minister are ultimately accountable. Ministers are in the hot seat, taking decisions and accepting full responsibility. Ministers are properly held to account and have to answer for the consequences of their decisions. Ministers have always sought private advice from a range of sources. They have always had private discussions about long-term trends and developments in policy across departmental barriers. The unpaid advisers in the forward strategy unit provide useful analysis in order to inform those discussions.
Advice comes to Government from several quarters—even, I suppose, from the Liberal Democrats. Policy is not made in a vacuum. Suggestions, recommendations, guidance and opinions are all taken to Ministers, who weigh up options and arguments, and take decisions themselves after careful consideration.
Their choices are defended when Ministers are held to account in Parliament. Ministers go before Select Committees, make statements and answer at Question Time in the Chamber—and, indeed, in Westminster Hall Adjournment debates. As the ministerial code of conduct makes plain:
"The Minister in charge of a Department is alone answerable to Parliament for the exercise of the powers on which the administration of that Department depends."
Nothing Lord Birt or the forward strategy unit does changes that.
It might help the hon. Gentleman if I explained the context and practice of appointing unpaid advisers. The ministerial code of conduct clearly sets out the provisions and parameters in the appointment of unpaid advisers. Such advisers are personal appointments by Ministers; there is no contractual relationship between adviser and Department; all normal codes of government apply; the Official Secrets Act and the business appointment rules—introduced, incidentally, by this Administration—cover unpaid advisers and special advisers. Those arrangements have worked well in the past, and we believe that they will continue to do so.
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There are virtues to having two unpaid advisers in government. Advisers volunteer their time and expertise because they want to contribute to improving public services and the country at large. They offer the benefits of their experience and knowledge to help Ministers to make better policy. No financial rewards are involved. Advisers simply wish to contribute to the common objective of delivering improvements to the work of the Government. They are public-spirited individuals, with no vested interests or axes to grind, or profit to gain. I wish that I could say the same about axes to grind in respect of the hon. Gentleman. We would all be much worse off if we resisted taking fresh perspectives and challenging concepts to the heart of government.
Ministers receive advice all the time from a huge range of sources, some of which is requested and some unprompted. There are many professionals and experts with ideas that may be worth listening to. It would be idiotic to have a closed mind and a blinkered approach when alternative strategies and options may provide the right solutions. It is right to be able to tap into advice from outside on an unpaid basis. That must be a feature of a mature democracy.
I want briefly to set in context the work of the forward strategy and the performance and innovation units. There is a long-standing tradition of strategic units at the centre of government. They hardly represent a radical new departure in No. 10 or a major constitutional change. In the Heath Administration in the 1970s—I cannot recall it precisely—the central policy review staff were known as the Think Tank, which was intended to look at issues in a detached, strategic manner, while Departments focused on delivering day-to-day policies. The Think Tank was headed by an outsider, Victor Rothschild. It lasted throughout the second Wilson Government, the Callaghan Government, and the Thatcher Administration, and then merged into the No. 10 policy unit.
Governments of all parties have from time to time felt the need for outside advice and a fresh perspective from new angles. In 1997, when the Labour Government took office, the policy unit was not sufficient to give proper capacity for strategic thinking. Therefore, we set up a performance and innovation unit to look afresh at different issues across normal departmental boundaries. The PIU undertakes its work in several ways, using outside advisers to bring in new skills and expertise. It conducts structured, intensive and focused projects and has a commitment to the use of hard evidence to ensure that policy decisions are built on firm foundations. Let us consider two examples of the PIU's work and outcomes. Its report on the recovery of the proceeds of crime led to the Proceeds of Crime Bill and the Prime Minister's review of adoption led to the Adoption and Children Bill.
The PIU has been increasingly recognised as a successful model, so the establishment of a forward strategy unit inside No. 10 gives a stronger strategic function capable of giving the Prime Minister and the Cabinet long-term, private and strategic advice. The forward strategy unit is a panel of senior individuals with a wide breadth of expertise working in small teams drawn from the civil service and outside.

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The hon. Gentleman mentioned appearances before a Select Committee. Ministers are accountable to Parliament, not officials, except for accounting officers. Ministers make and execute policy. It is the Executive who are held accountable. Ministers give evidence and submit written material to Select Committees all the time, and it is proper for them to express a preference on who should explain their policies. As an unpaid strategy adviser, Lord Birt has no executive role. The invitation to Lord Birt from the Transport Committee was to give evidence on the 10-year plan, which is the responsibility of the Department for Transport, Local Government and the Regions. Ministers therefore decided that Mr. Willy Rickett, a senior official from the DTLR who is working with the forward strategy unit on transport issues, would be better placed to give evidence, and he did so last week.
There are ample opportunities for Select Committees to make inquiries and cross-examine people. The Secretary of State for Transport, Local Government and the Regions has appeared twice, and the Minister for Transport and a Parliamentary Under-Secretary in the Department have also appeared before the Committee. There is no deficit in accountability, because the buck stops with Ministers.
The Government are strongly committed to a healthy system of scrutiny through the Select Committee process, and the Leader of House will soon bring forward proposals to further it—for example, making nominations more independent of Government, providing more resources to conduct investigations and broadening the scope and jurisdiction of Select Committees.
It is nonsense for the hon. Gentleman to refer to some grand, dark conspiracy theory at the heart of government. In many ways, I worry for the workings of his mind. There is bound to be lots of media excitement, especially in the BBC, about the issue. The desire to concoct such theories is a bit excessive.
Norman Baker: The Minister should not worry about my mind. It is perfectly all right, and I shall look after and treasure it in the years ahead.
Before he sits down, will he address the long list of questions that have not been answered by the Prime Minister and the others that I inserted later, including
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those on the relationship with Virgin and the costly offices at 45, Old Bond street? Does he agree that answering those questions would not in any way interfere with the advice given to Ministers but would be proper accountability in Parliament?
Mr. Leslie: If the hon. Gentleman had been listening to my comments, he would have heard me mention that the business appointment rules apply to unpaid advisers. He suggests that there is a conflict of interest, but that would not be allowed under the ministerial code or the business appointment rules.
As for the theory that there is a cost to the taxpayer for offices in Old Bond street, there is no cost to the public purse at all. As I said, whenever new units are created or appointments are made, there is bound to be some interest, but the role of Lord Birt and the forward strategy unit are hardly radical constitutional innovations. If the hon. Gentleman reviews previous discussions, he will discover that.
Ministers can accept or reject advice as they wish. The simple aim is to broaden the thinking in the Government and widen horizons in policy development. Surely there is nothing wrong with that. The Government are making genuine efforts to manage and improve public services. I hope that the hon. Gentleman will see all these matters in that light.
Running Government and public services—schools, hospitals, the police service and transport—is an immensely complicated and important task. The Government are trying as hard as they can to advance the quality and efficient management of those vital services. To do that, it is necessary to tap into the expertise of people who have a track record of running large and complex organisations and institutions. In the process of reforming and modernising our public services, getting the right solutions is, surely, vital. Thus, the ability for Ministers to listen to advice volunteered by those with useful experiences—for example, in managing major projects—should be welcomed, not discouraged. Reasonable Governments do not just dwell on the problems facing a nation; they face the challenge of devising practical solutions as well.
Mr. Eric Illsley (in the Chair): We come to the next debate, which is about the outcome of Government initiatives to combat the social exclusion of young people through work.

Social Exclusion
1.28 pm
Mrs. Helen Clark: Back in May 1997, the new Government pledged to get 250,000 young, unemployed people off benefit and into work. The target had been more than reached by September 2000, when more than 254,000 young people had been brought into work through the new deal programme. Young people, employers, private and public sector providers, environmental and voluntary organisations and the Government's Employment Service worked in partnership to achieve the objective—vital for a fair, inclusive society and economic growth—of cutting youth unemployment.
The achievements of the new deal were celebrated in November 2000 at a conference in London that was attended by Ministers and an invited audience of new deal participants, personal advisers—they are central to the delivery of the programme—employers, taskforce members and delivery organisations. Included in that invited audience as a representative of the new deal in Peterborough was Ken Shackleton of Shackleton Associates, who has long been involved in employment and training provision.
The day after the event, I was delighted to attend a ceremony in Peterborough where I presented personal advisers with awards for NVQs in guidance which they had successfully completed to develop their professional competence. Anyone who has met young people on the new deal scheme knows what a difference one-to-one skilled advice can make. "He was the father I never had", one young man said. Even those with helpful parents may find them unable to give adequate help and guidance in today's fast-changing employment market. The most recent edition of the newsletter for new deal partners, Partnership Practice, points out that new deal programmes have been helped by the economic recovery and that the new deal is not a "job's worth", job-creation programme. It is designed to help unemployed people compete more effectively for available jobs.
Peterborough used to have an unemployment rate higher than the national average, but in July 1997 it fell below that average for the first time in a decade. Much of the growth over the past five years—comprising approximately 6,600 jobs—has been in five sectors: distribution and catering, financial and business services, public services, construction, and transport and communications. According to a report by Peterborough city council, there is a projected increase of nearly 8,000 jobs by 2006.
We are fortunate that large Government and quasi-Government agencies provide employment in Peterborough. Appropriately in one of the four environment cities in the UK, some of them are working together to promote a cluster of environmental businesses, which are due to be launched officially next month by Department of Trade and Industry Minister, Lord Sainsbury. I believe that the city will rightly be regarded as a centre of excellence, bringing new opportunities to its residents and those who travel into it from the surrounding region to work.
However, against that rosy picture must be set the less well known fact: three wards in my constituency—Central, Dogsthorpe and Ravensthorpe—are among
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the 10 per cent. most deprived in England. That is according to the Government's overall index of multiple deprivation, which combines indices of income, employment, health deprivation and disability, educational skills and training, and geographical access to services. Indeed, Central ward is the most deprived ward in the eastern region.
I recently asked Ken Shackleton for an update on the programme. I am glad to say that it is mostly positive. All the targets for the most recent six-month period have been met, sometimes by an extensive margin, despite the fact that most of the new deal 18 to 25-year-old trainees face a range of barriers that make it hard for them to get a job. Those barriers can include basic literacy and numeracy needs, lack of job skills, poor personal skills, debt problems, drug problems and, increasingly in the Peterborough area, lack of English, to which I shall return.
Most trainees have experienced only casual or part-time work, usually unskilled, and come from homes with little history of work and where the benefit culture is deeply embedded. Training and support must therefore tackle lack of personal skills and poor literacy and numeracy before it can tackle job-related skills. The programme needs to re-motivate people, giving them the belief that there is another way than benefit, in which they can begin to take responsibility for their own future.
The initial gateway stage of new deal, where advisers build a relationship with individuals to help them develop an action plan suitable for them, is therefore vital. That stage, as the Minister knows, can include literacy and numeracy training, training needs analysis, job-search, debt, drug or substance counselling and a gateway-to-work course. As part of the gateway programme, the course lasts for two weeks, usually occurring between weeks four to seven. It uses new situations and experiences, often based on outdoor activities. It involves employers at all stages and includes a two-day work placement. Individuals then have a choice of route, with placements in the environmental taskforce, the voluntary sector, full-time education and training. Trainees who find the transition to work particularly hard are matched with a mentor, whom they meet weekly. There have been teething problems, but a major redesign is due in April, which should address all the shortcomings.
The environmental taskforce has already been redesigned to be more individually based, with individual placements. The voluntary sector option, which is a placement and training in the voluntary sector for up to 26 weeks, has always proved successful and popular. I regret that the full-time education and training option, for up to 52 weeks, is not as fancied, perhaps because the £15.38 supplement does not apply. I understand that the Government are addressing the issue through the Learning and Skills Development Agency, fostering better links between colleges and new deal providers.
However, the most significant change reported by providers in Peterborough is a significant increase in the need for basic skills, and English for speakers of other languages—ESOL. In the providers' opinion, that means that many trainees may need longer than the 26-week gateway period. Although providers have

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increased staffing to cope with that need, there is no extra funding for ESOL. Those questions need to be addressed.
Shackletons emphasises that the success of the new deal to date has depended on partnership working, and the working relationship between it and the Employment Service has become very effective. They work together at all levels and operationally have a joint development plan for the delivery of programmes. There are joint training sessions, workshops and regular operational meetings. Shackletons believes that all the right building blocks and funding are in place, and that the action being taken now is the best ever in its professional experience of more than 25 years.
Success demands that all the relevant partners continue to work together to keep abreast of the always-changing employment market, whether in terms of the type of jobs or skills available. Almost by definition, those first into employment will be the easiest to place, and as new employment sectors develop, so new skills and training will be necessary.
Two weeks ago, my right hon. Friends the Deputy Prime Minister and the Secretary of State for Work and Pensions were key speakers at a conference in London entitled "Building Partnerships for Social Inclusion: Next Steps for the National Anti-Poverty Strategy". The Deputy Prime Minister began by recalling the appalling rates of social exclusion that faced the Labour Government in 1997. There was mass unemployment, with one in five children living in a family in which no one worked. There was more adult illiteracy than anywhere else in Europe. Yes, there were higher incomes, but there was also a larger gap between rich and poor. We had the highest rate of teenage pregnancy in Europe and almost 2,000 rough sleepers every night.
As the Deputy Prime Minister pointed out, those factors too often operate together and feed a cycle of deprivation: the poorest communities have the highest unemployment, the least access to public transport, fewer GPs per head of population and the lowest achieving schools. As he said, that situation was a direct result of the wrong economic and social policies. Previous Tory Governments did not address or take responsibility for the causes and consequences of poverty; the trickle down from economic growth was supposed to be the answer. According to that theory, people who do not succeed have only themselves to blame. That is an eccentric and increasingly minority view.
For the Labour Government, combating poverty and social exclusion has been a priority from the start. A range of initiatives besides the new deal is designed to do so in a variety of ways. The new Connexions service provides a personal adviser for every young person—the focus of this debate. That means a single point of access to advice on careers, health, education, benefits and so on. Other programmes focus on younger age groups to give them a head start in life. That ambitious long-term strategy involves much creative thinking and cross-boundary working by people in government and out of government.
I should like to call attention to the contribution that voluntary sector organisations can make in targeting the groups most in need of help and in fine tuning
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Government programmes to have maximum impact in particular and individual circumstances. I shall focus in particular on the varied and extensive work of the Prince's Trust, which enables 14 to 30-year-olds to develop skills that help them to move forward with their lives. It offers a range of opportunities including training, personal development, business start-up support, mentoring and advice. It focuses on unemployed and under-skilled young people who are in or leaving the criminal justice system or care, who are disabled, parenting alone or facing discrimination. It operates in every constituency in the United Kingdom and has three country offices in Scotland, Wales and Northern Ireland, nine regional English offices and numerous local offices.
Since the trust was founded by His Royal Highness the Prince of Wales 25 years ago, it has provided funding and support to more than 400,000 young people, including more than 47,000 who have been helped to set up in business. More than 10,000 volunteers and 700 staff, including secondees, work to deliver programmes across the United Kingdom.
I am particularly impressed by the work of the trust with minority groups. As we know, belonging to certain minority groups can lead to higher levels of disadvantage. I am glad that Government financial support for the Prince's Trust is considerable. The Department for Work and Pensions provides substantial financial support for the business programme. However, the trust is keen to work with Government to develop and pilot new services for disadvantaged young people. The Government could make better use of the trust as a source of expertise and, where appropriate, for piloting new initiatives.
The Prince's Trust can do things that the Government cannot easily do. It is well placed to reach out to the most excluded who are often alienated by the so-called official channels. The trust is able to engage with people because it is not seen as part of the Government machine, and has a network of staff and outreach workers who remain close to the ground and to those young people who are hardest to reach. The trust targets specific groups that are more likely to be at risk of exclusion.
The trust also has the freedom to try out new, innovative ideas. It is an informal, enterprising organisation that conducts regular research with young people to initiate new ideas and programmes. That means that it can sometimes be quicker off the mark than Government, and offer speedy solutions to emerging issues or problems. If piloting programmes are successful, they can be taken up by Government. The core work of the Prince's Trust to start business and support personal development has been acknowledged as the inspiration for parts of our new deal, as well as for other things.
The trust pioneered study support centres that became part of Government policy. The new opportunities fund now has a target of 8,000 such centres across the country. More recently, the Excel network of clubs and schools reaches out to year 10 and year 11 pupils at risk of exclusion and aims to reintegrate them into the learning process by offering them an alternative way to learn. Excel is a good

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example of a way in which the Government could partner the trust in delivering supplementary education services.
I welcome and applaud the achievements to date of national and local government and their partners in the business and voluntary sectors in combating the causes and effects of social exclusion, and particularly in tackling the barriers to employment for our disadvantaged young people. I reinforce the message from both sides that future progress depends not only on our thriving economy, or on well designed programmes and funding for them, but on a readiness to recognise one another's strengths and contributions. As in so much innovative policy implementation and development, partnerships are key. Through effective working partnerships between all experts in the area, any initiative can be swiftly modified and adapted to suit local and changing conditions.
We have been good at partnership working in Peterborough; it is part of a proud tradition. I am sure that it will continue in the development of important programmes to assist young disadvantaged people who are such an important plank of economic and social policy. The benefits of our predicted economic growth will then be shared by them, and that includes the residents of Central, Ravensthorpe and Dogsthorpe wards in my constituency.
1.44 pm
The Parliamentary Under-Secretary of State for Work and Pensions (Maria Eagle): I congratulate my hon. Friend the Member for Peterborough (Mrs. Clark) on securing a debate on an important subject. Although, as she said, unemployment in her constituency is below the national average, she is right to have sought this debate and to have highlighted issues relating to a particular group of disadvantaged people in her constituency. Her remarks of course resonate far wider than Peterborough, but I understand her natural inclination to comment on the city and in particular the three wards to which she referred.
My hon. Friend hit the nail on the head when she said, towards the end of her remarks, that partnership is the key. We agree it is the key to further progress. Let me make it clear that this Government believe in promoting equality and giving everyone the opportunity to reach their full potential. That includes the people in Central ward and the other two wards to which she referred who are still disadvantaged and cannot play their full part in society by obtaining the jobs and opportunities that they want.
We believe in ensuring that people in my hon. Friend's constituency and elsewhere have the opportunity to reach their full potential. Not having a job is one of the main reasons for low income among people of working age. That has to be tackled. Paid work is the best form of welfare for individuals and families and the most secure means of lifting people out of poverty and dependence. We are determined to continue to bear down on the causes of unemployment and inequality in this, our second term in government.
We have also set out a clear strategy to provide work for those who can work and security for those who cannot. Our goal is clear: to create and sustain employment opportunities for all during the next decade
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in every part of the country. Of course, that includes Peterborough. Our strategy is based around three main priorities. The first is building a welfare state that is active, making work possible and making work pay, rather than just being a passive doler out of benefits. The second is to encourage lifelong learning to ensure that people have the skills and education that they need to play an active role in a modern labour market. It is no longer enough to be able to get one job, because people no longer remain in one job for most of their working lives. They have to be flexible and able to move around. Lifelong learning ensures that they can do that.
Our third priority is to support those most at risk from discrimination and disadvantage by promoting equality and diversity in our work force. Rather than just passively paying out benefits, our task is to deliver a system that works in partnership with individuals, employers and local voluntary organisations, to get people back into the labour market and able to compete for jobs.
Sustaining a strong economy underpins everything that we do, and my hon. Friend referred to that. There are problems and uncertainties in the world economy, but the UK is coping well, not least because we have given huge priority to sustaining a strong economy. The economy is growing, and although the labour market has weakened a little since last summer, activity continues at a high level. Employment is at a record level, with 28.2 million people in work—an increase of 1.3 million during the past four years. Unemployment is at its lowest level for 30 years. That is a real success story, and it has not just happened. This Government have made it happen.
With the support of the new deal, more than 600,000 people nationally have been helped into work. We must remember that the official Opposition and the Liberal Democrats opposed the new deal. We should not let them forget that. We now have the right policies in place to deal with change so that those who lose their jobs can return to work quickly, and those who have been out of work for some time or who are disadvantaged can have the chance to reconnect with the world of work.
The measures that we are taking not only help break down the barriers to work but ensure that, when people take up work, work pays. The working families tax credit is part of our first stage of the modernisation of the tax and benefits system to ensure that work pays and that we tackle child poverty. By August last year, the working families tax credit was helping nearly 1.3 million families. The national minimum wage has benefited around 1.3 million workers, of whom 70 per cent. are women. The combination of the national minimum wage and the working families tax credit guarantees that a family with one person in full-time work has a minimum income of £225 per week, or almost £12,000 a year. That is what we are doing to make work pay.
We recognise that more needs to be done, and we have made clear our commitment to increasing and improving the support available to families to make work pay and to tackle poverty further. The working families tax credit is a decisive step towards those goals. The introduction of new tax credits in 2003 is the next stage of reform because it will allow the Government to make further progress in delivering our objectives. The new credits will integrate child support into one

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payment, delivering a simpler, seamless system for all families, in and out of work, and it will extend the principle of in-work support to those without children.
My hon. Friend talked a lot about the new deal for young people, and it is something of which the Government are proud. In the 1980s and 1990s, generations of young people were abandoned to unemployment with little help; what a betrayal of our future that was. Since 1997, we have tackled the waste and damage that comes from youth unemployment. The new deal is giving young people the skills, confidence and motivation to help them find work and improve their prospects. It has already helped 345,000 young people into work nationally, including nearly 700 youngsters in Peterborough.
My hon. Friend made it clear that Peterborough has been doing well. Because we have built a strong economy and introduced measures such as the new deal, claimant unemployment in Peterborough currently stands at 2.2 per cent., which is 1 per cent. lower than the national average. The number of young people unemployed in that constituency has fallen by 35 per cent. to just 421. Of those, only 77 people have been unemployed for six months or more. We are doing well in Peterborough. Overall, unemployment has fallen by more than a third, and long-term youth unemployment has decreased by an average of nearly 60 per cent. The latest figures show that in Peterborough the numbers are becoming very small because there are only about 80 young people who have been unemployed for more than six months—although that is of course 80 too many. We are determined, even in areas like Peterborough that are doing well, to provide a personal service to all those who want to work, and we will join with partners to achieve that.
My hon. Friend referred to two voluntary organisations, Shackleton Associates and the Prince's Trust, that have experience of the local labour market and that are especially active in her constituency. We value partnerships between the Employment Service and such organisations because they can take innovative approaches and know what can be achieved locally. We want to work with them, and we do. For example, we have a valuable partnership with the Prince's Trust in delivering the new deal. It currently holds more than 200 contracts to provide for young people options either as lead contract holders or as sub-contractors. Lead contracts are in place in 136 of the 142 Employment Service new deal delivery units.
Under the new deal options, the Prince's Trust is, for example, involved in delivering a 12-week team challenge programme involving team-building activities, an outdoor residential week, work experience and team projects in the community, and a further 14-week individual challenge programme designed to provide opportunities for further skills development through work experience in voluntary or environmental work. My hon. Friend referred to people who are not job-ready, and that type of work builds confidence and self-esteem, which are essential prerequisites to success in the labour market. It can help people who are at a disadvantage and do not believe in themselves to realise that they have what it takes and should believe in themselves.
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More widely, the Prince's Trust business division is helping young disadvantaged people to set up in business by providing business advice, grants, loans and on-going mentoring support. By giving grants and loans, it offers an invaluable source of start-up capital to young people who cannot find finance from other institutions. More than 47,000 young people have received finance, mentoring and support from the Prince's Trust since 1983, creating more than 41,300 new businesses, and around 60 per cent. of trust-supported businesses are still trading in their third year. That is a fine record and a tribute to the energy and skills of the young people involved and to the professionalism and hard work of the trust.
My Department is match funding the programme. We contributed £5.8 million last year and in the current year our commitment is even greater at £7 million. We are committed to assisting with what works and to making the partnerships work properly at local level. Our agreement with the trust aims to help up to 35,000 disadvantaged young people into self-employment over seven years. We are also working with the trust to promote its programme more intensively to lone parents and disabled people wishing to enter self-employment. We realise that for many of them self-employment is a viable and attractive option, if only they can obtain the start they need.
We are determined to take our strategy forward during our second term of Labour government. We shall not rest on our laurels because we are determined that everyone who can work should have the opportunity to do so, not just those receiving jobseeker's allowance. The majority of lone parents say that they would like to work, with the right support, and the Disability Rights Commission quoted the labour force survey, which shows that 1 million people with disabilities are not in work but would like to be. We want to ensure that those aspirations become reality, and we must build on the new deal to do so. We must provide a personal service to help young people and those at a particular disadvantage to overcome the problems that they face in their communities.
Our new jobcentre plus service, which is operating in 56 pathfinder offices, will give all benefit claimants the opportunity to find out about the help and support available to help them to move into work with work-focused interviews, intensive help from personal advisers and follow-up assistance once they are in work. We are building on the success of the new deal, providing more help for those who need it most and more individually tailored support, and engaging further with employers to ensure that their needs are met.
We also aim to provide more help for those who face the greatest barriers in the labour market. That includes the labour market in places such as Peterborough that are generally doing well. We must ensure that disadvantaged people who are still unemployed are not forgotten because they happen to live in an area that is doing well, and that they can access the help that they need and make a success of their lives by getting into work.
We are aiming to provide more individually tailored support for young people—for example, through more flexible use of the new deal options and more use of subsidised employment, which is the most successful

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route back to work—and allowing them to enter the option on the day that they join the new deal instead of making them wait. We want to encourage even greater employer involvement in the programme, including the introduction of specific new deal provision for the information technology, retail, construction, security and hospitality sectors, and to test the provision of transitional jobs as a stepping stone for long-term unemployed people through the StepUP programme that we announced last November.
My hon. Friend referred to the Connexions service. We continue to roll out the service, which is of particular help to teenagers who are at risk of social exclusion or of being marginalised. It offers integrated advice, guidance and personal development opportunities to all 13 to 19-year-olds in the country and helps them to make a smooth transition to adult and working life. The service also helps young people to review their strengths and weaknesses, to boost their confidence, to recognise their potential and set their goals, and to receive advice on planning to achieve their educational and life goals. It also helps them to obtain impartial careers information and, when required, information and advice on health, lifestyle, housing, financial support and other personal issues, as well as information and access to personal development opportunities such as volunteering, community service activities, sports, arts
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and recreational activities. Fifteen of the planned 47 Connexions partnerships are up and running and the whole of England will be covered by 2003 with Government investment of £420 million for that year. We expect a further 19 partnerships to begin operations in April, including one in Cambridgeshire and Peterborough. It will be interesting to see how that proceeds in my hon. Friend's constituency.
Our objective is to ensure that everyone who can and wants to work has the opportunity to do so. Not enough was done in the past and too many people found themselves written off. We shall not put up with that in future. We are offering more support through jobcentre plus and the new deals, tax and benefit changes to make work pay, more help with work preparation and training. Our new approach, backed up by jobcentre plus, will provide a major contribution to tackling exclusion, combating poverty, and providing more opportunity and choice for all. That must be good for Peterborough and vital for the future of the country.
I hope that my hon. Friend will return in due course with an update on what happens in Peterborough, and will be able to say that no young people in her constituency are without jobs and hope.
Question put and agreed to.
Adjourned accordingly at Two o'clock.