Westminster Hall Sitting of 22 January 2002

Preamble
[SIR ALAN HASELHURST in the Chair]

Auld Report
Motion made, and Question proposed, That the sitting be now adjourned.—[Mr. Wills.]
9.30 am
Mr. David Kidney: It is my pleasure to lead a debate about the Auld report, "Review of the criminal courts of England and Wales", published in October 2001. The report is now the subject of consultation that will continue until the end of January. The report is substantial in every sense of the word, and it should be given serious consideration by all who are interested in the criminal justice system.
Sir Robin Auld is an experienced and senior Appeal Court judge. He benefited from the assistance of 12 consultants, and he found many commendable ways to consult during his investigation. He made the usual written requests for evidence and received more than 1,000 submissions from individuals and organisations; he consulted online, with a website that attracted yet more submissions; he held review seminars throughout the country, as well as a conference in Cambridge; and he visited Scotland, Northern Ireland, the United States of America and Canada. He fully reviewed previous inquiries and reviews, he consulted on the Government and Law Commission proposals that were being evolved at the time, and he commissioned as much research as was necessary to inform his final conclusions.
Lord Justice Auld's report is a significant piece of work. Its significance is heightened by the failure of two Government Bills on mode of trial, in debates on which opponents argued forcefully that the Government should await the outcome of the report before pressing on with their proposals. Ironically, although it was opponents who endowed the report with greater significance, it was the Government, not they, who would have benefited from waiting.
Sir Robin was asked to report within a year of December 1999. His report was published ten months later than that, so he was certainly able to give a considered view. Today's debate is timely because it comes just before the end of the consultation period, and it is right that we have the opportunity to respond to his recommendations and conclusions during that time. I had not anticipated that our debate would take place the day after the appearance of newspaper reports that the Government had changed their mind on one of the report's most important recommendations—on trial by jury in what are called either way cases—but the debate on those recommendations is better held in public.
I hope that the news reports are accurate. Although I have in the past argued and voted against both of the Government's previous proposals, I did not enjoy being a rebel. A journalist told me yesterday that I am "not one of the usual suspects" among Labour Back
180WH
Benchers, and I would be delighted if I could return to the mainstream. I assure the Minister that I do not bear a grudge.
Mr. John Burnett: Does the hon. Gentleman, like me, hope that in the debate the Government will give us an accurate idea of their policies?
Mr. Kidney: Answering that delivery with a straight bat, as the consultation period has not ended, I would be disappointed if the Government leapt in and announced that they had made up their mind before people had the opportunity to have their say. I expect them to wait until after 31 January to give their final opinion—although I welcome the news reports and hope they are accurate.
Today's debate will probably focus on the controversial issues of jury trial and the proposed third tier of criminal courts. None the less, much of the report is welcome and we should not lose sight of its many excellent recommendations which I hope the Government will accept and implement as soon as time permits.
In answer to his own criticism that the present system is complex and lacks overall direction and management, Lord Justice Auld proposes a single line of national management through a new national criminal justice board, which would implement decisions at local level through a series of local boards. He also recommends a criminal justice council to ensure that the system lives, breathes, consults, gives advice and provides accountability. Finally, he recommends that our criminal law should eventually be codified—a long-term project to which all political parties probably subscribe.
I agree with Lord Justice Auld's view that there are four essentials to the efficient and effective disposal of criminal cases: a strong and independent prosecution; efficient and properly paid defence lawyers; ready access on the part of defence lawyers to their clients in custody; and a communications system. I applaud that analysis, which I hope will form the basis of the Government's plans.
I am interested in Lord Justice Auld's proposals for graduated sentencing discounts, under which people will receive greater discounts on their sentences the earlier they admit their guilt. I also note with interest the proposal for judges to give advance notification of the likely sentence in the case of an early guilty plea. Both proposals would provide a great incentive for defendants and their teams to deal expeditiously with the case. Another welcome aspect of the report is its helpful review of the rules of evidence, trial procedures, improvements to court services and jury service. That part of the report includes perhaps the most controversial proposal: that we ensure ethnic minority representation on juries in cases in which the parties identify that a race issue may be involved. Finally, the report contains a welcome set of proposals on bail decisions, not the least of which is the recommendation that we use plain English to explain them.
I turn now to my opposition to changing the provisions for trial by jury in either way cases. Lord Justice Auld presents a full analysis of the arguments for and against making such changes and the reasons why people take one position or the other. By way of

181WH
shorthand, I shall say that I am in the camp that has a constitutional objection to making any changes. I am with Blackstone in regarding jury trial as a bulwark of our liberties, and I fear that allowing an over-mighty Government to dismantle one of those liberties will harm to our democratic society. I shall take a few minutes to explain why I disagree with Lord Justice Auld, who recommends a change.
Sir Robin Auld says that it is a matter of principle that the court, not the defendant, should decide the venue and manner of the trial. That sits strangely with his suggestion that the defendant could have the power to opt for trial by judge alone in the Crown court. Indeed, Auld goes further, recommending that defendants should be able to opt for trial by a district judge and two lay justices if the Government disagree with his other recommendations for changing trial by jury. His views on those matters are therefore inconsistent: he says that it would be a principle of the system he recommends that the defendant should have a choice, but adds that the court should make the decisions.
I have two further objections, which are not my own in the sense that Lord Justice Auld identified them. The first is that he cannot say where the public view lies on whether jury trial should be retained or changed. On page 187, he says:
"I have been unable to gauge from my Review what the public at large think about the issue."
The second of the two shortcomings that he identifies is a lack of current and comprehensive data bearing on the issue. He states on page 192 that much more research is required. Some of the practical difficulties recognised by Auld himself tend to undermine his conclusion.
My final objection arises from the recommendations on appeals. Lord Justice Auld recommends—on page 622—that there should be one system of appeal based on the current system applied to Court of Appeal hearings. What is serious about that is that having lost the right to elect a trial by jury, a defendant who is tried against his wishes in a magistrates court would also lose the right to appeal to the Crown court for his case to be reheard in front of a judge alone. That raises the stakes even higher in deciding whether to allow a defendant to retain the present right to elect a trial by jury in either way cases.
One recommendation with which I strongly agree is that the ability of a magistrates court to try a defendant against his or her wishes and then to commit to the Crown court for sentence should be abolished. When we last considered a mode of trial Bill, I moved an amendment to that effect on Report; I called it the Scottish amendment, because that is a rule of the Scottish system. The Government were not willing to accept it, but now that it has the backing of Lord Justice Auld, I hope that they will do so.
That reform could be implemented without changing the right to elect jury trial and would improve a position that the Government find intolerable. They allege that some defendants use the system to cause delay and extra expense. The requirement would oblige magistrates, if they accept responsibility for trying a case, also to accept responsibility for imposing the sentence. That, combined with Lord Justice Auld's proposed reforms for the efficient allocation of cases and ending committal hearings, would end the Government's objection.
182WH
The other issue that has become controversial is Lord Justice Auld's recommendation that there be a unified criminal court system, which everybody agrees with. However, he proposes inserting a third tier between the magistrates court, with which we are familiar, and the Crown court, called the district division. There, a district judge of the criminal court would sit with two lay justices and deal with certain cases of intermediate seriousness, however defined. That is an interesting suggestion.
When Lord Justice Auld consulted on that proposal via his website, many found it interesting and the response was benign. However, I understand that adverse opinion is beginning to form and opposition is growing. Magistrates in the Stafford area dislike the suggestion, giving two reasons for doing so: first, they could not spare the time for the longer cases that would go before the district judge; secondly, losing those cases to the district judge would mean that they were required to deal with less challenging and interesting cases, and so would no longer derive the satisfaction from their work—which most do voluntarily—that they now do.
Mr. Edward Garner: I thank the hon. Gentleman for giving way and I apologise for having been a few minutes late for the start of the debate. In his discussions with lay magistrates in Stafford about the hybrid court—professional judge or district judge with two lay justices—has the hon. Gentleman heard a concern that I have often heard expressed by the hon. and learned Member for Medway (Mr. Marshall-Andrews), that the district judge will deal with matters of law in the absence of the two magistrates, so that the tribunal is split in terms of knowledge? The district judge might be aware of previous convictions and of evidence that he has ruled inadmissible, of which the two lay magistrates are unaware because they do not take part in that decision.
Mr. Kidney: I confess that magistrates have drawn to my attention neither that problem, nor the other oft-quoted objection, that they would be overborne by the extra professionalism of the district judge and that they would not be able to have their say. As neither has featured in my discussions with magistrates, I cannot confirm the hon. and learned Gentleman's comment.
However, drawing on my 20 years' experience as a solicitor in the criminal courts, I have considerable sympathy with the idea of district judges having a more proactive role in relation to the magistracy. It would be a healthy experience if many more lay magistrates were exposed to the practices of the district judge in dealing with cases expeditiously but with no loss of quality in decision making. A good outcome of any reform would be a higher profile for district judges in the magistracy sector of the criminal court system.
I see that the Chamber has filled up quite well with hon. Members who, I hope, have strong points of view that they want to express. I am happy to conclude by commending the report, which is a fine one. I agree with it on many points.
Mr. Robert Marshall-Andrews: My hon. Friend is a great expert at playing devil's advocate with respect to the Auld report, and he has set out many of Auld's arguments. However, given that since 1996 any

183WH
abuse—or so-called abuse—of the process has been eradicated by plea before venue, and given that setting up a third tier would be immensely expensive and result in a system far slower and less efficient than the current one, what is the point of it? Can he summarise that?
Mr. Kidney: I accept the thrust of my hon. and learned Friend's intervention. I would be happy with a unified criminal court system that retained two tiers, in which the magistrates courts and Crown courts retained all their existing powers and defendants still had the right to elect trial by jury in either way cases. I accept my hon. and learned Friend's point that plea before venue has mostly eradicated the problem that the Government say they have identified. I accept, too, that complete eradication would be achieved by accepting the remainder of Lord Justice Auld's recommendations on discounts for early sentence, early allocation of cases and abolishing the committal procedure.
On jury trial and the district division, Lord Justice Auld identifies plenty of improvements that I support, short of the two changes I mentioned. In that, too, my views accord with those of my hon. and learned Friend. What I propose, short of making those two changes, can fulfil the Government's aim of a Modern, efficient and fair system of criminal justice, which would command even greater public confidence than at present. I look forward to hearing other hon. Members' views.
9.47 am
Mr. Colin Challen: I congratulate my hon. Friend the Member for Stafford (Mr. Kidney) on securing this debate, to which I shall make a brief contribution.
I am one of those who rushed to get my copy of the Auld report as soon as it was published. I searched for a crumb of comfort to support my efforts to reverse the decline in the local magistracy, which in my constituency has almost completed its course. Anyone visiting Morley five years ago could, with local people, representatives of the local weekly newspaper and others, have popped into the magistrates court in the town hall and seen local justice in action—but then it was decided that the courtroom had to close. On 1 January this year, the bench was moved to a new building in the centre of Leeds. The Morley bench was subsumed into the Leeds petty sessional area and, like other things that have been deemed too anachronistic to be efficient, was consigned to history.
I do not argue that by accountants' standards local magistrates courts are a cost-effective way of listing proceedings and arranging court timetables. I note with some satisfaction that the Auld report mentions the fact that Lord Beeching did not get the chance in the 1960s to take an axe to that part of our justice system, so—at least until recently—we have had something left to try to preserve. I am not one to preserve a thing for the sake of it, and I acknowledge that the Auld report raises issues that need to be considered by the Government in relation to the sensible and necessary reform of the administration of local justice.
In our local process, magistrates court closure was seen as a foregone conclusion, with the arguments stacked up in favour of a single course of action. The court system was an important aspect of local life for
184WH
our community—presumably, it still is in other parts of the country—and the consultation process should have been more genuine and open. The only people who seemed to be important in the process were those who were professionally engaged in it; users and the general public were not sufficiently consulted. There should be greater public involvement in such situations. If the process is perceived to be obscure and remote, fewer people will be encouraged to join the magistracy.
I am concerned about the dispersal of magistrates into a wider stream in which issues of community or locality cease to be important. Some 66 per cent. of the membership of the Leeds bench, which has 309 magistrates, live in the petty sessional area, whereas 90 per cent. of the membership of the now defunct Morley bench lived in that area. It should be borne in mind that magistrates can live up to 15 miles outside their commission area, never mind the petty sessional area. Although some people would not draw any conclusions from those figures, I would argue that locality was a major factor in recruitment. It is a question of finding people willing to serve their community.
The Lord Chancellor has said that he wants each bench broadly to reflect the community that it serves, and I agree. However, Leeds has a population of 750,000 and can be described as a community only in the broadest sense of the word. Cumbria, as detailed on page 83 of the Auld report, has a population of 500,000 and six magistrates courts, while North Yorkshire has a population of 742,000 and nine magistrates courts. Imagine the hue and cry if someone proposed the amalgamation of all those courts into just two centralised courts. People would say that the magistrates and those attending the courts would have too far to travel. That would also be my view.
Some might say that the Lord Chancellor's wish that benches should broadly reflect their communities cannot be fulfilled. I agree, but only because Leeds is treated as a single community for administrative purposes. That administrative consideration is of little or no importance. There are as many communities, not merely geographical ones, in Leeds as there are in any rural area. A one-size-fits-all approach for urban dwellers is not good enough.
I hope that a way ahead will emerge from this thoughtful review of the criminal courts. I want a Modern bench that reflects the need to administer justice fairly and efficiently and can meet Modern challenges. I do not deny the need for certain benches to develop specialties, and I strongly support the creation of drugs courts. However, there must be a solid link between benches, which deal with 90 per cent. of all cases going to court, and local communities. Local knowledge is important in drugs cases and antisocial behaviour orders: it is important not only for the families of victims, but for those of addicts, who, after sentences are meted out, are often called on to help in the process of rehabilitation.
There is, as I have said, a direct link between locality and the ability to recruit magistrates. I wonder to what extent making the administration of justice more remote will help recruitment. We seem to be making justice more professionalised and centralised, and I am not sure whether that is right. The basic principle of the lay magistracy—that we should be judged by our peers—is

185WH
at stake. In these changing circumstances, we need a clear understanding of precisely how to plan to enhance the recruitment of magistrates to ensure that no locality or community is under-represented.
9.54 am
Mr. Edward Garner: I am grateful to be called so early in the debate. Given the number of people in the Chamber this morning, I will be as brief as I possibly can.
I begin by congratulating the hon. Member for Stafford (Mr. Kidney) on securing the debate. I understand that the slot was originally reserved for a debate about relations with China. Many look forward to seeing the standards of justice that we in this country take for granted applied there. As a member of the Great Britain-China Centre, I will be able to talk with greater confidence about the system of justice in this country if some of the most controversial aspects of the Auld report are not implemented in law.
The hon. Gentleman mentioned the most publicly controversial aspect—the middle tier of the proposed system. The report suggests a criminal court with a professional district judge sitting with two lay magistrates to deal with the intermediate level of criminal offence. As I said in an intervention, even on the face of the proposals, there are difficulties inherent in setting up that intermediate system. I do not want to take up too much time on the subject now that I have flagged it up.
I salute the hon. and learned Member for Medway (Mr. Marshall-Andrews) for all that he has done to draw the Government's attention to the unsatisfactory nature of their proposals on the reform of the jury system. He did so in the last Parliament, in which there were two Bills that dealt with the jury system, and has done so on every other subsequent opportunity.
It is fair to point out that Lord Justice Auld's proposals go much further than the Government did in their two unsuccessful mode of trial Bills. As well as the deprivation of a right to jury trial, Sir Robin urges judges to consider factual questions for juries being answered publicly, and suggests that the judge be permitted to produce a final verdict based on the answers. It would therefore, he argues, be unnecessary to trouble the jury with the law. Such a procedure would allow the prosecution as well as the defence to appeal a verdict considered to be perverse.
I declare my interest as a practising member of the Bar, although I do not carry out any criminal work except as a Crown court recorder, when I take a rather more detached and neutral view of proceedings. Sir Robin's undeniably radical proposals might benefit some lawyers and produce unending litigation in the courts, but they are not good for justice or the appearance of justice. They would not permit or allow justice to be concluded speedily in any given case.
Many people want one thing from our criminal justice system, which is finality. Although at the moment, and I dare say in future, many defendants charged with criminal offences will be deeply annoyed that they have been convicted at the end of a trial, whether in front of a magistrate or a Crown court judge and jury, they none
186WH
the less enter into the court process with a degree of consent. If Sir Robin's proposals are taken up by the Government, many defendants, innocent or not, will not trust the system as they do now, and we will lose something important.
Any system invented by man is imperfect, and it would be foolish for any advocate to suggest that the existing criminal justice and jury system is beyond reform. I do not suggest that. Instead, I suggest that when the Government finally consider the consultation process and the content of the report, they think about the point of our system and what benefit will come to it and society as a whole if it is amended in the radical way proposed by Sir Robin Auld.
Opinions differ about the value of the report. Some people make fairly trenchant criticisms of it from start to finish. I do not belong to that camp: I think that Sir Robin and his fellow commission members have done a superb job. Whether they have in every respect come to the right conclusion—or, I should say, a conclusion with which I agree—is another matter, but I do not denigrate their work or the motives with which they approached a mammoth task.
However, I am sceptical about the Government. Since 1997, they have not demonstrated a hugely intelligent attitude towards the legal affairs side of public policy. The cruelly named Access to Justice Act 1999 showed the Government's cynical nature and their ability to misuse the English language in a way that would do credit to characters in Orwell's "Nineteen Eighty-four". The 1999 Act did not give access to justice: a more proper title would be the Denial of Access to Justice Act. It showed that in matters of public policy on legal affairs, the Government are economically illiterate, politically inept and intellectually confused. That series of epithets can be translated to their approach to the jury system.
The two failed Bills on mode of trial debated in the last Parliament were a political disaster. Their only good point is that they enable me to praise Lord Williams of Mostyn, a man with whom I often worked at the defamation Bar. He showed that if a bad case needs to be argued, a good advocate is needed to do it. When Lord Williams was Attorney-General in the last Parliament, he showed how to do one's best with terrible material. His speech in the main debate in Committee in the House of Lords showed his skills as a performer. Fortunately, however, the jury—the membership of the House of Lords—was not persuaded that the case stood up.
The Government sustained two bruisings in the last Parliament. A combination of skill, luck and sheer guts on the part of Labour Members resulted in the lowest Government majority for a Second Reading since 1997. While still a huge number, the majority of 75 was a tremendous result for the Opposition given that the Labour majority at that time was 166 or 167.
If the rumours reported in The Times yesterday are to be believed, there are signs that the Government's ineptitude is decreasing. Comments on Government proposals or initiatives do not seem to get into the newspapers nowadays unless the Government put them there, and I have no doubt that Mr. Alastair Campbell or one of his lesser satraps was busy over the weekend briefing the press about what the Government intend to

187WH
do this week. I hope that the Minister will be able to confirm that the rumours in The Times yesterday came from Government spin doctors and represent the nearest thing to the truth that the Government recognise.
Mr. Marshall-Andrews: Before the hon. and learned Gentleman leaves the interesting question of the relationship between Sir Robin Auld and the Government, he will recollect the main problem that the Government had with the mode of trial Bills 1 and 2. First, they introduced the all-important reputation clause into the first Bill, so that magistrates would be enjoined to take reputation into account in deciding whether someone had a jury trial. Subsequently, when for obvious reasons that measure was defeated, they shifted completely and decided that magistrates should not take reputation into account. That process receives a resounding raspberry from Sir Robin Auld in his report; he roundly criticises the Government's procedure. From his examination of the report, can the hon. and learned Gentleman say what Sir Robin Auld suggests is the best course between those two, or is the report completely silent?
Mr. Garner: The hon. and learned Gentleman demonstrates the third of my criticisms of the Government: that they are intellectually confused. No paragraph or page in the report answers his question. The Auld report is silent on that issue. That may be because Sir Robin was not hugely impressed with the Government's performance during the last two Bills. I do not want to ascribe to one of Her Majesty's Lord Justices of Appeal any political motivation or view and, as I said at the beginning of my remarks, I am confident that Sir Robin approached the matter wholly dispassionately.
However, I am concerned that it has taken many years, a great deal of parliamentary time, much anguish among those who care about our parliamentary system and—perhaps this is a small point—much public money to reach the conclusion that we suspect that the Government have reached on jury trial. I welcome any sinner that repenteth, and if the Minister tells us that the Government are rethinking the Auld report recommendations or their views about jury trial, I will be the first to congratulate them. However, they are in a mess of their own making.
I have dwelt, perhaps for too long, on the controversial element. Now, I shall draw out some practical issues that have worried me as a practising member of the Bar and a Crown court recorder. In view of time and the look of horror on your face, Mr. Deputy Speaker, I will confine myself to the issue of pre-trial preparation in criminal cases.
The plea and directions hearing procedure—commonly called the PDH—is one in which the parties to the criminal action—the Crown Prosecution Service and its representatives, and the defendant or defendants and their representatives—appear before a Crown court judge to describe, orally and on paper, issues that are likely to come up in a forthcoming trial. An indication of the plea and the issues to be tackled at trial may be given and witnesses are required. It is a hugely valuable but much misused process.
188WH
It is misused predominantly because those who appear in PDHs are woefully underpaid for their work. Were PDHs properly and directly controlled by the judge, and were their importance heightened so that failure to comply with directions could give rise to adverse consequences for the CPS or the defendant, the pre-trial preparation of even the most simple cases, and certainly of the most difficult ones, would be greatly improved. It does not take long for a court to gain a reputation of making it clear that sloppy preparation will not do and might lead to adverse consequences for the defaulting party; nor does it take long for the Crown Prosecution Service office to realise that if it appears before his honour Judge Such-and-Such without having got its tackle in order four, five or six weeks before the trial window, it will not have a trial, and the Government will be down on the CPS for failing to meet whatever target the Government have invented for that particular week.
I urge the Government, instead of wasting their time and my money and that of my fellow citizens on building middle court—echoes of the middle kingdom—buildings, to concentrate on the nitty-gritty of the part of the administration of justice system that is susceptible to change and in which change will produce beneficial results, not only for the Government and the Chancellor of the Exchequer, but for the wider citizenry. That will improve the willingness of witnesses and defendants to come to court, to do what the court asks, and to play their part in the criminal justice system.
If they stick to the simple things, the Government might have greater success. If they get stuck in grandiose schemes, they will merely make fools of themselves—or even greater fools of themselves than they have in the past few years.
10.10 am
Mr. Peter Lilley: I welcome this debate, which gives us an opportunity to recognise the immense contribution made by Lord Justice Auld, even if we do not sympathise with the line that he has taken. He has produced a major report that is clearly and powerfully argued.
The timing of the debate is fortuitous. New Labour fought the 1997 election in defence of the right to elect for jury trial, which the then shadow Home Secretary strongly opposed any attempts to remove. Having been elected, the Government reversed their position and decided to put two Bills through Parliament—both of which, happily, were defeated—to abolish the right to trial by jury. Labour's manifesto for the last general election contained a commitment to abolish the right to trial by jury. We now learn through the columns of The Times that the Government propose to abandon that position too. That shows an appalling lack of consistency, other than to betray whatever pledges they were elected on. I hope that the Minister will not try to seek safety in silence. If the Government's spin doctors can inform the press about their position, Ministers can inform the House of Commons.
I approach the debate with some apprehension, because I suspect that I am the only Member here who is not a lawyer and has no legal qualifications. My first mention of lawyers in the House when I was a new and junior Member was to quote Falstaff, who said,
"let's kill all the lawyers".

189WH
I wondered why there was a chill throughout the Chamber, then realised that on that occasion, too, I was the only non-lawyer speaking on a legal matter.
Mr. Burnett: The Minister is too self-effacing to make this admission, but I shall do so on his behalf. He is not a lawyer.
Mr. Lilley: In that case, I look to him for a healthy dose of common sense.
Although I am not a lawyer, I participated actively in our discussions of these matters in the last Conservative Cabinet. Those discussions must remain confidential, but suffice it to say that the outcome was, to my satisfaction, that we did not commit ourselves to the abolition of jury trial, although we consulted on the Narey report.
Mr. Garnier: I am sorry to interrupt my right hon. Friend, who has hardly started his remarks. We did not want to get rid of trial by jury, but neither, according to its manifesto, did the Labour party. Its manifesto said that it would
"remove the 'widely abused' right of defendants alone to dictate whether or not they should be tried in crown courts."
It made no mention of abolishing trial by jury. The problem that the Government face is that they have said one thing but want the world to believe another.
Mr. Lilley: I am afraid that Lord Justice Auld intensified that problem by equating the right to jury trial with the right of the defendant to elect for jury trial. He said that there was no right to jury trial until 1855, and that it was only when people had the opportunity to escape the panoply and problems of jury trial that that right could be said to exist. That is of course nonsense created by those who wish to pretend that it is a relatively new creation and has nothing to do with the traditional rights of the Englishman to be tried by jury for any serious felony.
I claim no great legal expertise, but I am conscious that, although the general public are unaware of most of our judicial principles, there are some that they value and in which they have great confidence. Above all, they would have confidence and trust in the system of jury trial in the event of their facing a serious charge. I was therefore very reluctant to contemplate any attempt by the previous Conservative Government to diminish the right of access to jury trial, and I was even more hostile to this Government's including such proposals in a Bill. I was also suspicious of the provenance of the arguments in favour of such proposals, which are redolent of bureaucratic and professional disdain for lay involvement in the judicial process.
It is natural for members of a profession to feel that their own expertise outweighs the contributions of lay people, but I fear that such feelings are in part responsible for proposals that the judicial establishment has outlined time and again in various reports, culminating in that by Lord Justice Auld. His report is underpinned not just by hostility to the right of defendants to elect for jury trial but by a deep mistrust of jury trial as such. My suspicion is that this marks not
190WH
the concluding stages of an argument that will be resolved, one way or another, by deciding whether defendants should have the right to choose jury trial, but the beginning of a process that will erode the use of juries altogether.
I am afraid that close reading of Lord Justice Auld's report has enhanced my suspicions. It is true that it contains valuable proposals on improving the way in which juries work and on increasing public participation in juries. Those of us who believe in juries should not pretend that they are perfect and incapable of improvement. Instead, we should endorse, support and adopt proposals to improve the working of jury trials, and advance our own. However, the report also contains proposals that would further erode the use of juries. Under them, many issues would be deemed too trivial for juries to consider, and would be considered instead by the new tier of district courts. Others, however, including fraud, are deemed too complex for juries. Lord Justice Auld proposes not only that fraud be removed from the purview of juries but that all cases of similar complexity be so removed in the long run. As my hon. and learned Friend said, juries would no longer have the last word on the question of guilt or innocence; instead, their conclusions would be subject to review by judges. Young people, too, would be removed from the purview of juries. Lord Justice Auld is eroding the involvement of juries in our judicial system in a number of ways, and undermining the very principle of such involvement. If, according to his logic, most cases are either too trivial or too complex for juries, what role is left for them?
The Government's case for abolishing the right to choose jury trial, which Lord Justice Auld endorses eloquently and emphatically, rests on a number of presumptions, including that the right of election is a powerful tool that is widely manipulated and abused by experienced criminals to escape their just deserts, and at great cost to the taxpayer in the form of expensive trials. Lord Justice Auld endorses the argument of Ministers that by removing that right they can simultaneously prevent such abuse, ensure that criminals get their just deserts and save large sums of taxpayers' money. Moreover, they assert, as has Lord Justice Auld, that it is wrong in principle for the defendant to choose the venue and that that decision should be made by the system.
Those points are blown apart by the evidence. Above all, it cannot simultaneously be true that experienced and hardened criminals are manipulating the system to get off lightly and that if we removed that right it would make great savings to the system, when it is revealed that those savings come largely from those people facing shorter prison sentences or none at all. The Government, Lord Justice Auld and those who defend the proposition cannot have it both ways. Nor can they have it both ways by saying that it is a matter of principle that decisions about venue and mode of trial be taken by the system on objective criteria, not by the defendant, and yet proposing, as Lord Justice Auld has done in a further effort to narrow the scope for juries, that the choice of mode of trial, in the case of the new trials for fraud and complex cases, be given to the defendant, to sweeten the pill. If it is wrong to allow defendants the right of choice in normal either way cases, why should they be given the right of choice where attempts are being made to prise jury trials further out of the system?

191WH
We must examine the report extremely cautiously and not allow it to weaken further the role of juries in our system. I asked a question about how many people had served on juries during the past 12 months, and the answer was 187,000. That is very considerable lay participation. Those people, by and large, take their role seriously and are, overwhelmingly, satisfied that, despite their loss of time and remuneration while serving, they have done something worth while and contributed to the justice and civic fabric of society. If we reduce such people's involvement in the judicial system, and the prospect of involving them, we lose a very valuable point of contact between the ordinary public and the judicial system.
I return to the positive aspects of the Auld report. Lord Justice Auld has proposed means of encouraging more people to participate in the jury system. Some three times as many as that 187,000 people had to be invited to serve on juries before a sufficient number who were willing to do so could be found. We must make serving on a jury easier and more of an obligation. Lord Justice Auld highlighted an inherent unfairness in the system, a comment endorsed by the hon. Member for Stafford (Mr. Kidney), which would be made far worse were the right to elect for jury trial removed. That is where the lower court, having heard a comparatively minor case because it deemed, it within its competence, and having convicted the defendant, subsequently passes him to the Crown court for a more serious sentence because it decides that the case was more serious than it initially led people to believe.
We must remove that manifest unfairness, which made the Government's previous proposal intolerable. Far better to leave defendants the right to elect for trial by jury, with the knowledge that if they opt for the lower court, they will be sentenced within its sentencing powers with no subsequent right for the lower court to refer to the Crown court. That is a proposal in Lord Justice Auld's report that I hope that Parliament and the Government will endorse and implement in due course.
10.23 am
Mr. John Burnett: I declare an interest straight away. I am a lawyer, although not a criminal lawyer.
I congratulate the hon. Member for Stafford (Mr. Kidney). He has a record of steadfast and principled opposition to the Government's previous attempts to abolish jury trial for either way cases. I pay tribute to him and to the hon. and learned Member for Medway (Mr. Marshall-Andrews), who is also here in the Chamber. It takes great courage, as I believe you know, Mr. Deputy Speaker, for a Government Back Bencher to oppose his Government's proposals.
Whichever way it goes, Sir Robin Auld recommends that a defendant should no longer have an elective right to trial by judge and jury in either way cases; that allocation should be the responsibility of the magistrates courts alone. There will be serious argument and, no doubt, lengthy appeals from magistrates' decisions in borderline cases, but it is important to state a few principles—principles to which the former Home Secretary and the former Attorney-General adhered before 1997.
192WH
In proposals to end the elective right to jury trial in either way cases, the public's confidence in our legal system is at stake. In this country, a person who is in serious difficulty with the law—an offence meriting up to two years' imprisonment is serious—knows that he automatically has the right to opt for trial by jury: his guilt or innocence will be determined by ordinary people. I stress that the public can and do identify with and relate to juries.
I know that time is tight, but I must emphasise that minorities, especially those from ethnic minorities, have little trust in our criminal law system, as the Lawrence inquiry report makes clear. Abolishing jury trial for either way cases will do nothing to build up the confidence of ethnic minorities in our system. It will further erode that confidence.
I shall deal as swiftly as possible with one or two points arising from the report. First, the Government must have some views on availability for jury service. Presumably there will be exclusions for lawyers and employees of lawyers, especially if there is a conflict of interests, and for the police and employees of the police, but do the Government expect there to be other exclusions? I suspect that there will be exclusions for members of the armed forces. Will there be exclusions for Members of Parliament? Perhaps it would be a good thing if we did jury service.
The Government must also have some ideas about their ambitions for the middle tier—the district judge, who used to be known as a stipendiary, sitting with two lay magistrates.
Mr. Kidney: I do not want to lose the hon. Gentleman's point, but I am interested in the Liberal Democrat view. All the classes that he mentioned, including politicians, are currently subject to disqualification. Sir Robin says that we should sweep all that away and decide each on a case-by-case basis, considerably widening the jury service base. What does the hon. Gentleman think about that?
Mr. Burnett: I would like as many people as possible to be eligible for jury service, but clearly, where there is a conflict of interest, it would not be practical for certain people to serve on juries.
To return to the point about the middle tier and the Government's ambitions in that respect, their view is presumably that the judge or district judge should decide questions of law on his or her own, with the lay magistrates and the district judge deciding questions of fact. Do the Government believe that it can be appropriate in any circumstances for a district judge to decide questions of guilt or to be a party in a triumvirate that decides questions of guilt or innocence if he is aware of, for example, the defendant's previous convictions? I am anxious to hear the Minister's response to that.
Lord Justice Auld proposes a system in which a district judge will sit with two lay magistrates. From which category of society will those lay magistrates in the middle tier come? I suggest to the Minister that they will be older, retired, eminently respectable individuals. They hardly comprise a representative group. The Government's programme of closures of rural magistrates courts has led to several retirements from the bench in my constituency: for example, a young

193WH
mother in a one-car family is unable to afford the daily four-hour travelling time from her house to Plymouth and back. Where will they find magistrates who are able to sit for three or four days at a time? That duty will fall on retired middle-class people—an admirable group of people, but not representative. An exclusive group will not encourage confidence in justice.
Mr. Marshall-Andrews: Are the hon. Gentleman's concerns addressed by the wording of Sir Robin Auld's report on that critical point? About magistrates, it states:
"There are many who, for one reason or another, are not restricted in their employment or other commitments who may well relish the opportunity to sit on longer and more substantial cases."
Does the hon. Gentleman have confidence in that assertion?
Mr. Burnett: As usual, the hon. and learned Gentleman hits the middle of the target. The quotation begs the question that I have raised. Drawing from a small pool of unrepresentative individuals is likely to do nothing to encourage confidence in the justice system.
Before the Government make their decisions on the Auld report, I hope that they will put certain information in the public domain. We want to see open and intelligible costings, especially in connection with the establishment of the middle tier. Will the Minister encourage his colleagues to avoid specious comparisons with the Scottish system? Will the Government provide detailed reasons why there would be time savings if a middle tier were established? May we also have an accurate record of the effect of the changes made in 1996 that allowed heavier sentences to be imposed when defendants plead guilty at a late stage?
I commend to the Government the study by Professor Vogeler on the matter of guilt decisions in Germany, where a system similar to the middle-tier system prevails. Interestingly, that report concludes that lay magistrates play little role in making guilt decisions, which are invariably made by the professional judge.
Finally, I ask hon. Members to consider the way in which they would elect for trial if they were charged with an either way offence. I know what I would do.
10.33 am
Mr. Humfrey Matins: I begin by congratulating the hon. Member for Stafford (Mr. Kidney) on securing today's debate and on the way in which he opened it. His speech was thoughtful and reflected the hard work that he has put into this subject over several years. We look forward to hearing further from him when these matters are debated in the House. I also pay tribute to the work done by the hon. and learned Member for Medway (Mr. Marshall-Andrews) in the last Parliament on a subject about which he feels passionately, as do many other hon. Members.
I declare an interest in these matters as a solicitor of many years standing, a recorder of the Crown court and a deputy district judge, formerly a stipendiary magistrate. I speak from experience. However, I am told
194WH
that I must be careful not to suggest any policies on behalf of my party, particularly any that might involve money. If I do so, Mr. Deputy Speaker, take no notice.
The Auld report is a huge undertaking of more than 650 pages. I congratulate Lord Justice Auld on his tremendous work. His report is full of the most thoughtful and interesting ideas and proposals, and although many of us disagree with some of the proposals, it is right that we all pay tribute to his work and that of the others associated with the report, which gives us all the opportunity to delve into the minutiae. Like all Governments, the present Government legislate too much on criminal justice matters. I hope that when they legislate on the major issues contained in the report, the House will be given ample time to discuss them.
Speaking not for myself alone but for my party, we were delighted yesterday to read press reports that the Government are likely to backtrack on jury trials. As my hon. and learned Friend the Member for Harborough (Mr. Gamier) said, the Conservative party is united in believing that jury trial is a shield against an over-mighty state. That is a matter of principle to us—and to me. We fought long and hard in the previous Parliament against the two Government Bills on mode of trial, both of which were poor. The best arguments came from those opposed to the Bills.
If the proposals suggested by Lord Justice Auld are introduced, we will have a problem because jury trial will be weakened and that will be a bad thing. If we have fewer jury trials and more professional judges, it will bring us more into line with the systems of our European partners, but it will result in the citizen gradually and subtly being removed from the judicial process. It is the place of the citizen in the judicial process for so many years that has created a sort of confidence in the system. Like the hon. and learned Member for Medway, I ask whether it is necessary to change the system. Why are the proposals likely to be taken up by the Government?
I do not think that the so-called tiers of courts and the removal of the right to jury trial are necessary. It is understood that jury trials are expensive. I heard a year or two ago that jury trials cost about £8,000 a day, but I do not measure fairness or justice by how much they cost. It is said that the right to jury trial is widely abused by defendants, but that is not my experience. Things have changed in the courts: the introduction of the plea before venue has altered things dramatically, and the Narey courts with early indicated pleas have helped. Early guilty pleas entered in magistrates courts work well.
Do I, when I sit in court, occasionally see what I regard as an abuse by a defendant? Yes, but not very often, and when I see it, I scratch my head and think, "Perhaps this is an abuse, but it is a small price to pay for the greater good, the jury system in which I believe our citizens have the greatest possible confidence." I do not believe in the theory that a trial before a jury is better, any more than I believe that a trial before lay magistrates or a district judge is better. That is not the question. The question is whether millions of our citizens instinctively feel that they would be happier with something that has been enshrined as a right for so many years—trial by their peers. If the answer is yes, as I believe it is, the arguments for change must be compelling before we interfere dramatically with a system that has worked so well.

195WH
The two Government Bills on mode of trial in the previous Parliament were deeply flawed. The question arose whether a person's reputation would be affected by a decision on whether they should have a jury trial. Another issue was whether the powers of punishment available to the magistrates court would be sufficient. The Government proposals were weak and were seen to be so by all those who helped to ensure that they did not reach the statute book.
The matters of the unified criminal court and the middle tier involving a district judge and two magistrates are difficult. I understand that Lord Justice Auld suggests that the district judge should be accompanied by two experienced magistrates. The hon. Member for Torridge and West Devon (Mr. Burnett) and the hon. and learned Member for Medway made a most interesting point—who would those magistrates be? Trials before that jurisdiction will not last an hour or two, as they do before a district judge sitting alone; they will last a day or two, or three. We all know that people who are available for two or three days at a time come from a limited sector of society.
I am concerned about the observation that the judge would be solely responsible for law, but an equal finder of fact. One can envisage all sorts of difficulties. If during the case the advocate for the defendant said that a point of law had arisen, the lay magistrates would retire. The point of law—which would of course be about the ability of the defendant's advocate to lead the defendant as a man or woman of good character—would be put. The district judge would make a ruling having heard about the defendant's background, and that ruling would stand. Back would come the lay magistrates. At the conclusion of the case the district judge would go out with the lay magistrates jointly to consider the verdict. Is that not rather odd—very artificial? The district judge would know things that the lay magistrates would not.
Mr. Marshall-Andrews: In those circumstances, what would happen if the lay magistrates said, "We think that there is a strong case, but we are not going to convict because this is a man of good character," when the chairman knew perfectly well that he was not? Would he say, "Well…up to a point?" [Laughter.]
Mr. Malins: The hon. and learned Gentleman is absolutely right. The district judge could not say, "Just between you and me, I heard something earlier that might make you take a different view." It is a difficult question.
I am worried to see that in cases before the district judge and two lay magistrates, the judge would be solely responsible for sentence. That would be unfortunate for the magistrates sitting with the district judge. The more I study the proposals, the more I think that, as well as damaging the jury system, they have the potential to damage the lay magistracy. I strongly support our lay magistrates: they do a wonderful job. I think that we have got the balance between lay magistrates, district judges and trial by jury about right. If, as I suspect they would, the report's proposals damaged the lay magistracy, that would be a sorry state of affairs. Lay magistrates have the huge advantages of being local and not being professional.
196WH
Having spoken about jury trial I shall conclude with a few observations about other contentious aspects of the Auld report. I do not wish to express any particular views about them today—I just want to draw attention to them, as they will be debated at some length later. I hope that the Minister will explain to us more about the position on juries. Also, I want him to take back to Government Departments the message that when the Auld report comes up for debate, many of the issues will on their own merit a day or two of debate.
The report refers to double jeopardy—an issue with which we are all familiar. The Select Committee on Home Affairs, whose report on double jeopardy and reform of the law I commend, spent weeks on it. Whether a further charge should be permitted for circumstances in which scientific evidence can clinch a case is a big question. The declaration of previous convictions is also worth a day and a half on its own. To what extent should we trail or permit to be trailed before different courts the previous convictions or behaviour of a defendant?
An aspect of the report that troubles many of us is the comment about perverse verdicts. Lord Justice Auld says that
"juries have no right to acquit defendants in defiance of the law or in disregard of the evidence".
That is an interesting proposition. In my view, the point of a jury is to produce a verdict that it believes to be right. It is well argued that if a jury comes back with a verdict that the judge does not like, that is the end of the matter and it is not open to the judge or the state to say, "I do not like this verdict. The evidence suggests that it should have been different." I take no position on the point, but I draw attention to it as a very contentious subject of future debate.
Finally, there is the question of ethnic minority representation on juries. The Government's proposals on jury trial might act against the interests of ethnic minorities in inner cities, especially those who for obvious reasons feel disadvantaged. We should examine with some care the proposition that when race is likely to be a relevant issue, a jury selection including up to three people from the ethnic minority group should be made. That is a matter of some difficulty.
To sum up, first, we must and will fight for the maintenance of trial by jury. Secondly, we must not make wholesale changes in our criminal justice system unless there is a compelling reason to do so. Finally, when the matters contained in the report come before the House, the Government must give time for them to be debated and argued properly.
10.48 am
The Parliamentary Secretary, Lord Chancellor's Department (Mr. Michael Wills): I would like to start, Mr. Cook—
Mr. Deputy Speaker (Mr. Frank Cook): Order. Perhaps it would be to the benefit of all hon. and right hon. Members to recall that the House in its wisdom, or otherwise, decided last Wednesday to reinstate the position of Deputy Speaker in Westminster Hall. That position is held by Nicholas Winterton, John McWilliam, Edward O'Hara and me. The title will be displayed in front of the Chair for those who cannot

197WH
remember it. For other members of the Chairman's panel, the term Chairman or the Chairman's name would be adequate.
Mr. Wills: I apologise, Mr. Deputy Speaker. That had slipped my attention. I will not fall into that error again.
I congratulate my hon. Friend the Member for Stafford (Mr. Kidney) on securing an important and timely debate. It is important to give a full airing to all the issues, and I welcome the opportunity to reply to the debate, to which I have listened with great interest. Reform of the criminal justice system is vitally important and inevitably provokes intense interest, and often controversy. We are listening carefully to all the responses to Lord Justice Auld's review, which was published in October. We have conducted consultations in Bradford, Cambridge, London, Exeter, Birmingham, Manchester and Cardiff, and we have heard some lively views—many of which have been repeated here.
Every speaker today has paid tribute Lord Justice Auld's work, which represents the most extensive review of the criminal court system for 30 years. It is some 700-plus pages long and contains more than 328 recommendations, many of which are radical and fundamental. It is an important contribution toward the Government's aim of establishing Modern, efficient criminal courts that suffer few delays, are in touch with the communities that they serve and respond to the needs of their users. I must put on record the Government's gratitude to Sir Robin for his extremely thorough and thoughtful work.
When the report was published, we made it clear that we would, before we made any decision, listen carefully to the views of public, the political parties and all those working in the criminal justice system, in order, as far as possible, to gain a consensus for enlightened and effective reform. As all hon. Members are aware, the consultation period ends on 31 January 2002. For that reason, if I may respond to the intervention from the hon. Member for Torridge and West Devon (Mr. Burnett), it would be wrong of the Government to reach or announce any decision before that date.
Mr. Burnett: Will the Minister tell me the genesis of yesterday's article on the front page of The Times, headed "Ministers' revolt saves trial by jury"? Where has that come from?
Mr. Wills: I will deal with yesterday's papers in a moment. First, I shall finish my point about the fact that we shall not respond in substance until the consultation has concluded and we have had a proper chance to consider all the views.
That process is taking place not only in Westminster Hall. We are receiving representations from members of the public and from people who are involved in the system throughout the country. We want to give proper consideration to every view, and we are not yet in a position to form an opinion. We also wish to consider Sir Robin's recommendations in the light of other reports on the criminal justice system such as "The Way Ahead", which we published last year, and the Halliday report.
198WH
While I cannot make substantive comments on Lord Justice Auld's review, it would be helpful if I set out the Government's underlying approach to the criminal justice system.
Mr. Lilley: Will the hon. Gentleman give way?
Mr. Wills: Yes, but if I give way to many more interventions, I shall not be able to respond in great detail.
Mr. Lilley: The Minister said that he would respond to the question about The Times. As I understand it, the Government have always said that their commitment to abolish the right to choose jury trial would not depend on the Auld report—they had already reached a final decision on that. If they have now changed their mind, the Minister should be aware that there is more joy in heaven over one sinner who repents than over 99 just men who need no repentance. Can we be sure, however, that the repentance is final—or will their reneging be further reneged?
Mr. Wills: I am always happy to give way, but the more Members intervene, the less time I shall have to respond to the concerns that have been raised. I shall come to that point, but it is worth first explaining our underlying approach.
We want a criminal justice system that is in touch with the communities that it serves, that is efficient, fast, fair and responsive to the needs of all who use it, that is co-operative in its relations with the criminal justice agencies and that uses Modern and effective management to reduce unnecessary delays and remove them from the system. Those aims will be paramount when we decide our response to the Auld report.
Several hon. Members mentioned the reports in yesterday's press, which still seem to be of intense concern. The Government cannot dictate what newspapers publish—[Laughter.] Astonishing though that may be, it is the case. Nor can we prevent papers from speculating about Government policy; that is how they sell themselves, and they will continue to speculate, no matter what the Government say or do. I must, therefore, disappoint the hon. and learned Member for Harborough (Mr. Garnier): he cannot take such reports as evidence that we are thinking again, because we are still thinking about the matter for the first time and shall not conclude that process until after 31 January.
Mr. Burnett: Will the Minister give way?
Mr. Wills: Yes, but I have only five minutes to respond to a lot of points.
Mr. Burnett: Does the Minister refute the article by Frances Gibb and believe that she had no grounds whatever for writing it?
Mr. Wills: With the greatest respect to the hon. Gentleman, I have clearly set out the Government's view on such newspaper stories. Our position is still being formulated and will be made clear at some point after 31 January, when consultation concludes.

199WH
In the four minutes that remain, I shall briefly respond to some of the issues that have been raised. Inevitably, much attention was focused on the recommendations for juries, and I shall have to confine my remarks to that issue. The overwhelming bulk of the discussion focused on the proposed abolition of the defendant's right to elect for jury trial in either way cases.
The hon. Member for Woking (Mr. Malins) mentioned some other recommendations, which have excited little interest in popular debate. The recommendation on so-called perverse verdicts, for example, has not surfaced at all in any of our roadshows. We have real doubts about the proposals on perverse verdicts, but we are keen to find a way forward. Difficult issues have been raised, and we are listening carefully to all the views that are being expressed.
The hon. Gentleman raised another important issue that has not been widely mentioned: the ethnic composition of juries. Again, we have concerns in principle about that, and particularly about the effect on random selection, which is a cornerstone of the jury system.
I turn briefly to concerns about Lord Justice Auld's views on the abolition of the defendant's right to elect for jury trial in either way cases, which clearly excite a great deal of comment. We are still considering the matter carefully. It is clear from our manifesto that we share Sir Robin's concerns, and we agree with the principles behind his recommendation. We are, however, aware of the sensitivities that surround the issue, and we are deeply and acutely aware of its importance to the public. We must consider our decision on Sir Robin's recommendation with particular care, and the views that have been expressed with great force today will contribute to our consideration.
Several hon. Members mentioned the unified criminal court, but we have not reached a decision and are currently seeking views. We are encouraging wide debate on the matter and, indeed, on all the other recommendations. Sir Robin's proposal for an intermediate tier to form part of the unified criminal court is thought provoking. We are considering it carefully and intend to continue to listen carefully to views on how to proceed.
I shall refer briefly to the future role of magistrates. It is worth stating again that we share the view expressed by almost all hon. Members who spoke of the central importance of the lay magistracy to our criminal justice system. Sir Robin endorsed that view in the report. We remain fully committed to maintaining lay magistracy and community justice as a cornerstone of our criminal justice system.
The debate has been extremely useful and vigorous—
Mr. Deputy Speaker (Mr. Frank Cook): Order. Time is up.

Coastal Flood Defence
11 am
Mr. Tim Boswell: I am delighted to have the opportunity to raise the important issue of coastal flood defence in this Chamber. A casual onlooker might be entitled to wonder why I, with one of the most inland constituencies in England, am doing so. My defence could be that Parliament should consider all matters of public interest and that our island is small enough for a problem in one area to translate into another area and be of common concern. To borrow and slightly modify the concept of John Donne, no man is an island unto himself, and what goes on in Waveney—I see the hon. Member for Waveney (Mr. Blizzard) arriving—or Boston is of as much concern to me as it is to the constituents of the hon. Gentleman and my hon. Friend the Member for Boston and Skegness (Mr. Simmonds).
In these days of hypersensitivity to matters of personal interest, I can say that I have no conceivable constituency interest to advance or declare on the subject and I must make time for those present with such interests to participate. However, there are three good reasons for my involvement with the topic. First, under the Conservative Administration, I was the Minister with responsibility for flood defence and coastal protection immediately prior to the current Minister. There are now not too many Tories in such a position. I am glad that the Minister is present and will respond to the debate. I have some reasonable idea of the general structure of the making and execution of policy on the subject. Although it is characteristic of neither the Minister nor, I hope, myself, we could trade insults about our comparative performances or the weaknesses of the planning structure. However, I want to secure for all hon. Members a constructive and forward-looking debate on an important topic.
My second reason is personal. Although I have lived in my constituency in Northamptonshire for 34 years, I was born and grew up in Essex. I never lived on the coastline, but I know it well and know some people who farm locally. My mother is now in her 90s and has a fund of ready stories. It may amuse hon. Members to know that she claims to be the undefeated ladies' golf champion of Mersea island. Today's subject affects that island very much. She won the championship in 1939 and the course was closed for the duration of hostilities. It has not reopened and has been largely subject to inundation, so she remains triumphant.
Be that as it may, I was in Essex as a boy for the disastrous floods of 1953, which caused great loss of life and may be said to have had an indelible effect on attitudes in the east of England. Even when the water subsided, the immediate tragedy began to heal and houses and lives were rebuilt, so far as they could be, there was a need for careful land restoration and the reconstruction of sea walls. In Essex alone, there are still 300 km of sea walls for coastal protection.
My third reason for bringing this matter to the attention of hon. Members is that, as farmers and constituency MPs in the midlands, our prime concern is inland flood defence. We were much exercised by the floods of Easter 1998, which involved some loss of life locally. However, it is impossible completely to divorce coastal management from the upland areas. Rivers such

201WH
as the Ouse and the Nene—we pronounce it "Nen" west of Northampton—rise in my constituency and flow to the North sea. Heavy rain in the midlands might easily lead to surcharged rivers, and if a change in the wind direction followed there could be a storm surge of 5 m or 6 m from the North sea up the coast. If those two pressures met, the water would have nowhere to go, which would inevitably lead to terrible damage in urban areas. That may be an extreme case scenario, but it is not inconceivable. That is why there is a common interest in getting our flood defences right.
All those factors have been known for the past half-century, since the 1953 floods, but they have been made worse by the combination of global warming and the tilting of England towards the south-east. That has led to constant changes in sea levels, which is another reason for my concentrating most of my remarks on the south-east. However, I am aware that there are important coastal defence and coast protection issues in other areas.
The Hadley centre for climate prediction, which is associated with the Met Office, forecasts that sea levels will rise by an average of 24 cm in the next 50 years, owing to the thermal expansion of the oceans and the melting glaciers. If the tilt effect is taken into account, the sea levels in Scotland will rise by about 16 cm, while those in southern England will rise by 31 cm. In imperial measurements, that is more than a foot. The figures are entirely consistent with existing data, which suggest that sea levels are rising between 4 mm and 7 mm a year. That constitutes a perceptible yearly increase and raises questions about the long-term viability of the Thames barrier as a flood defence. This is a serious issue, which brooks no ministerial complacency.
I share with colleagues my single favourite lobbying postcard, which reached me 10 years ago. I never entirely understood why I received one. It is the only lobbying postcard that I remember to this day. It was a colourful card with a picture on it, which came from Friends of the Earth. Its message was clear. Under the heading "Global Warming: Doncaster Races", it showed a horse passing the winning post—one needed a second or two to notice that it was a seahorse.
I turn from the general agreement about the pressure on coastal protection and defence to the action required by the Government and public authorities. Those matters are in one sense less complicated than they are with inland flood defence, because with inland areas the Minister must deal with the mish-mash of various responsibilities, the need to tune the various interests together, and the possibility that the disputed ownership by a district council of a particular culvert may nullify the benefit of a scheme. Those issues need attending to, but we cannot discuss them all this morning. On the coast, the main players are the Environment Agency, the local coastal protection authorities and the Department for Environment, Food and Rural Affairs itself. The Department is the facilitator and ultimately the grant-giver for schemes, although private local providers of protection and secondary sea walls, often to their own property, including agricultural property, are important.
202WH
Incidentally, I have one concern in all the statistics on which the Minister may like to reflect. As I was putting together briefing material for this debate, I found that it is still difficult to differentiate between internal flood defence and coastal protection. I have already explained why they cannot be treated as separate issues, but in terms of planning and the effort going into the two, perhaps more thought should be given to drawing out the statistics so that they are easier to use. I am aware that it is possible, inadvertently, to stray into adding the two together and confusing the result, but this morning we should concentrate on the sea, coastal defence and coastal protection.
Shoreline management plans were a positive development in our time in government and were designed primarily by coastal protection authorities under the aegis and encouragement of the Government. I hope that the revised plans will be published after the current sheaf of consultation exercises, and that they will be put in place as soon as practicable.
Before I deal with what the Government should do I will suggest two things that they should not regard as solutions to the problems. Action must depend on local conditions and, wherever possible, local consent. The Minister will know from his broad agricultural remit that he can get a great deal out of farmers with their consent. It is much more difficult to impose solutions on them without their consent. He may also know that I am wary of sweeping solutions in this context. Unusually perhaps for someone on the Conservative Benches, I approve of some remarks that he made in March last year. He said:
"We cannot completely surround the country with a wall of concrete. That is not only unrealistic, but undesirable. It would have consequences, given that our coastline is dynamic and erosion is part of a natural process."—[Official Report, Westminster Hall, 6 March 2001; Vol. 364, c. 61WH.]
So far, so good. Nothing that the Minister said then is wrong, but I am worried, when he speaks in those terms, that he may have setup an Aunt Sally. Who is in the list, defending every inch regardless of cost? When Ministers set up an Aunt Sally, it is often to knock it down.
That introduces two apparently seductive concepts. I acknowledge that both may have a role, but they do not amount to a comprehensive solution—the Minister is a prominent activist in the Royal Society for the Protection of Birds, while I am a modest member, but I have every respect for it. The first is managed retreat—letting the sea in. I can remember touring the first experiment on the Essex coast, which was interesting and, in certain respects, encouraging. It may have a role in particular cases, although, as I said, farmers are unlikely to agree with it wittingly and willingly in the absence of adequate compensation or inducement.
I am aware that the Minister has published consultations on this exercise. However, the experiment is limited to matters of local adjustment, as set out in his consultation paper. If I may use a slightly risky analogy, it is a little like straightening out the western front in 1914–18, removing the salients and producing a more defensible position, rather than retreating comprehensively to a completely different line of defence.
The second somewhat seductive concept is closely related to managed retreat: it is soft defences. I well remember seeing those on the Norfolk coast, where the

203WH
eroded beach was described, in a very attractive phrase, as being "nourished" by artificial offshore reefs. The beach was visibly regenerating and looked a lot better. That is a good thing, and I am not suggesting for a moment that it is not, but it is not the solution in every situation. I leave the Minister with the thought that he must acknowledge the need for what the Prime Minister once memorably described as hard choices. In this case, that must mean some hard sea defences as well.
On positive suggestions, I shall deal first with the regulatory and appraisal process. Farmers in the eastern counties are concerned that the present Minister's environmental enthusiasms might make things unreasonably difficult for the conduct of traditional activities and practices. There is a general problem for any farmer involved in environmentally sensitive land. I declare an interest in that an environmentally sensitive area impinges on my farm, for which I get a modest acknowledgment payment. It is one thing to have one ESA, but there can be a series of overlapping responsibilities and farmers' problems with them often rise not in arithmetic but geometric proportion to the number of requests and requirements involved. When I prepared for the debate, concerns were expressed to me about the fact that the Government are interpreting the European habitats directive as strictly site specific. It was inferred that proposals for even simple maintenance of existing sea walls at a landowner's own initiative and cost might not be permitted without exhaustive inquiry and regulatory investigation.
A wider concern—bringing in the Department's role—is whether provisions for cost-benefit analysis of schemes, which are currently subject to consultation, adequately score the value of agricultural land with reference to not only its current productivity once European subsidies are taken out—not all crops are subsidised—but its much higher capital value and its potential for diversification. In my general approach to such issues, I have some sympathy with the Dutch. They have extended their country and improved the protection of residents at huge capital expense and are unlikely to want to give the land back to the sea. As Mark Twain put it rather more succinctly across the Atlantic,
"land, they're not making it any more."
If it is being made, however great the costs, we must think long and hard about a general retreat from the land frontier.
My final point centres on the objectives of the coastal protection process. Whatever our different views on the value of agricultural land, there is an important human interface. I will always remember inspecting the crumbling Norfolk cliffs at Happisburgh and being made uncomfortably aware that any major sea incursion through the cliffs could surge straight through the broads. Once the sea got through the cliffs, there would be little to stop it.
The Association of British Insurers, which briefed me for the debate, said:
"We believe that Government investment in flood defence is vital if affordable flood insurance is to be available".
In other words, an individual's ability to protect themselves economically depends on there being a Government commitment, just as an individual's physical security also depends on that commitment.
204WH
The ABI goes on to recommend an increase
"in the Environment Agency's annual capital spend of at least £145 million per annum."
For the avoidance of doubt, I remind the Minister that that includes internal flood defence as well as coastal protection—an area in which we need to draw the figures out more distinctly. That line of figuring is consistent with DEFRA's published research, which shows that a range of incremental spending of between £84 million and £204 million per annum will be required to bring defences up to the Government's standard, which is a 100-year return frequency, or to put it another way one flood every 100 years, in densely populated urban areas and to make allowance for the climate change to which I referred.
I welcome the fact that after what was a sluggish start by the Government, Ministers are getting round to claiming, if not necessarily delivering, extra funding. One or two of my hon. Friends may have something to say about the split between coastal and inland areas in that respect. I have done battle with the Treasury in my time and I know, as the Minister does, that it is always easy to find a more pressing need and to put off this sort of thing in the hope that we will not have a problem in the next year.
I warn the Minister in all friendliness and seriousness that whether the issue is inland or coastal flooding, he must be prepared to contemplate and effect a serious and sustained capital programme. That would entail not a dramatic change from one year to another, but building on the shoreline management plans and the greatest priorities indicated by his studies. At the same time, I hope that he will remain sensitive to environmental concerns, as the idea of willy-nilly capital work without paying those any regard has long passed. He must also have regard to the worries of farmers, landowners and others who live in the areas at risk.
I conclude, as I began, by recording that when all is said and done almost any problem of flood defence or coastal protection comes back to individuals. They may live in directly affected areas, they may be at risk and some of them may be less mobile or less able to manage the situation than others. Many of our citizens live under the shadow of those risks and we cannot honestly tell them that we can remove all of them regardless of the cost or environmental impact; no one is asking for that. It is helpful to ventilate the issues and local problems and to hear the Minister respond to them. Even if the issue is not one that hits the headlines day to day, we are uncomfortably aware that one day it may do so dramatically. It behoves us all to do our best to ensure that, if and when such a day arises, we have got our defences in order.
Several hon. Members rose—
Mr. Deputy Speaker (Mr. Frank Cook): Order. I remind hon. Members that the common convention at these sittings is for the three Front-Bench speakers, and three are present today, to commence their winding-up speeches 30 minutes before the termination of the debate. I hope that hon. Members will bear that in mind and make their comments pertinent, clear and concise.
11.24 am
Mr. Bob Blizzard: I am grateful to the hon. Member for Daventry (Mr. Boswell) for securing the debate, especially given that his constituency is about as far from the sea as one can get.
My constituency is the most easterly in the country and Lowestoft is Britain's easternmost cardinal point. We are therefore as exposed as anywhere to the ferocity of the sea. Those of us in low-lying East Anglia look with more than a keen interest at predictions of the impact on our region of global warming and rising sea levels. Ironically, Kessingland, one of the lowest-lying stretches of the 20 miles or so of coastline in my constituency, is one of the very few areas where accretion is occurring. Some of the people of Kessingland say that it will eventually replace Lowestoft as the country's most easterly point. We shall have to wait and see about that. The two main areas of Waveney that are under attack from the sea both feature sandy cliffs. One is to the south of Lowestoft between Lowestoft and Kessingland and is largely open countryside. The other is to the north of Lowestoft at the village of Corton, which is the main subject of my speech.
In general national terms, one cannot disagree with the assertion that it is simply not possible to build a wall around the entire coast that would withstand the power of the sea. The cost would be phenomenal—unaffordably so—and no party could responsibly commit itself to such a project. Moreover, as the Royal Society for the Protection of Birds points out, it would be environmentally undesirable. Previously in this Chamber I have made the RSPB's case for the need to take steps to manage our coasts so as to ensure the continuation of sufficient wetland habitats, of which we have many in East Anglia. Today, however, I want to concentrate on people in communities by the coast and their homes and livelihoods. Although the macro arguments appear simple and support the national criteria against which plans for coast protection schemes are judged, when one looks at particular pieces of coast the situation becomes real in human terms and those national policies are truly put to the test.
The principle that operates is that the cost benefit—the value of what is saved—must exceed the cost of the works that are carried out. That is not a problem in relation to settlements of the size of Lowestoft, which always meets the criteria and is well protected so that people feel safe. In respect of large stretches of open countryside, I can understand why farmers say that they do not want to lose land to the sea. When I was leader of Waveney district council, a farmer came to the town hall with a bill for £1 million, claiming that we had let some of his fields slip into the sea. However, it is unrealistic to think that we can build walls to protect such areas.
The anxiety comes with villages on the coast the inhabitants of which tend to feel that they are particularly exposed. The village of Corton has a sea wall along its whole length, but in recent years some parts of it have suffered collapse and damage. Villagers' worries are manifested in overflowing meetings at the village hall, which I have attended. People have been told that the wall is collapsing partly because the level of the beach has become lower, but they cannot
206WH
understand why the groynes that were put there to help the sand to accumulate have been allowed to deteriorate over the past few decades.
Waveney district council has carried out two sets of work to contain the damage, on which, for two years running, it has spent two thirds of its annual £300,000 coast protection budget. Particular strain is often placed on small coastal district authorities in that respect, which is a problem that I hope my hon. Friend the Minister will discuss with his colleagues in the Department for Transport, Local Government and the Regions. Such situations are urgent and the coast protection element of the standard spending assessment is not very large.
With a population of some 1,100, Corton village is not small. Nor is it a scattered settlement. It is densely populated, within a tightly drawn village envelope. It has a school, a post office, a shop, two churches, two pubs, a social housing estate, social housing for the elderly and private estates of bungalows. On its doorstep is a new, £60 million Anglian Water waste water treatment centre that has almost been completed.
A shoreline management plan was drawn up in the mid-1990s. The policy for Corton was to hold the line, and we should remember that those who live there, or who have businesses there, mapped out their futures on the basis of that plan. To me, it is unthinkable that a managed retreat policy will be adopted and that the village of Corton will be abandoned to the sea. Indeed, I am sure that it will not. No politician from whatever political party, whether local or national, would accept leaving such an important and sizeable village undefended to the mercy of the sea. As a former leader of Waveney district council, I appreciate that such decisions are difficult. I had to take a very tough decision on a hamlet, consisting of four or five houses further along the Suffolk coast, in a heritage coast area of outstanding natural beauty. Reluctantly, we decided to leave the houses to the sea, and I believe that a couple have indeed gone over the cliff. In fact, my hon. Friend the Minister once visited them. For many years, a picture of him standing on the cliffs hung on the walls of the local Labour party offices.
Corton also has a tourist industry. The three holiday camps and caravan sites that are situated between the main street and the cliffs are not shacks or beach huts, but substantial, good-quality buildings, many of which are built of brick and have been winterised. Such all-year-round holiday camps are popular with older visitors, and represent a substantial investment. They are a major part of the local economy and support hundreds of jobs. Further up the coast, just beyond the boundary of my constituency, a similar camp recently hosted the world indoor bowls championship.
Concern has been expressed that the coastal strip on which the holiday camps are situated might not meet DEFRA criteria in respect of a proposed local authority scheme. I am happy to say, however, that Waveney district council is now confident that it does meet the criteria for a 20-year scheme that would protect not only the holiday accommodation but the two or three private houses situated among it, near the cliff. The scheme, costing some £2.8 million, has been developed in consultation with DEFRA, and will be submitted to my hon. Friend the Minister in March or April. I ask him to

207WH
be ready to consider that scheme, and I hope that he will look favourably on it and take a positive decision quickly, because the cloud of anxiety that has hung over the village of Corton for too long needs to be removed. I also ask that he remember that behind the holiday camp area lies the substantial village that I have described. It would be madness to allow the holiday camp to fall over the cliff over a period of two or three decades—what a spectacle that would present!—only for the cliff to recede to such a point that the village needed defending anyway. Given its size and importance, I cannot believe that Corton would fail to meet any criterion that was put in place.
Some concern has been expressed that a 20-year scheme is not long enough. In one sense, the proposed scheme is flexible, in that it involves boulders and additions can be made to it. Will my hon. Friend the Minister confirm that DEFRA does require local authorities to review such schemes every five years, and that they can be extended? Will he confirm that the matter will be considered again during, and towards the end of, the 20-year period, and that the holiday camp area of Corton will not automatically be abandoned after that time?
The proposed scheme is an appropriate level of spend to hold the line for a considerable period and will allow further assessments. We do not know what will be happening to the coast in 10 or 20 years, but if we can hold the line for that period, a calculation can be carried out in future.
In conclusion, I seek a favourable and quick response to the bid that will soon arrive in the Minister's Department so that work can begin this summer. I seek a recognition that villages of the size and importance of Corton with a holiday industry cannot simply be abandoned. People and businesses need all the confidence that they can reasonably be given. The Government must recognise that there are resource implications for local authorities, not only for their annual budgets but for individual schemes. For such an important policy, I hope that DEFRA is bidding, as the hon. Member for Daventry suggested that it should, for more resources in the comprehensive spending review.
We cannot predict the future configuration of our coasts. Where I live in Pakefield, south of Lowestoft, whole streets fell off the cliff in the 1950s. Today, the coastline and beach at Pakefield is another area of accretion. We cannot predict the future, but we must try to plan and gear ourselves up as much as possible to ensure that guidelines or criteria that exist at national level connect with the lives of ordinary people and the communities in which they live.
11.36 am
Mr. Mark Simmonds: I congratulate my hon. Friend the Member for Daventry (Mr. Boswell) on securing this important debate. Unlike him, I have every conceivable constituency interest in ensuring that the coastal flood defences and internal drainage boards work together and co-operate. Large areas of my constituency would be under the sea were it not for the excellent work of the myriad of agencies involved in coastal flood defence. I shall return to that theme. Much of the high-quality agricultural land was reclaimed during the past 400 or
208WH
500 years, and much of it by some extremely talented Dutch individuals. In the past, excellent work has also been done by my hon. Friend the Member for Louth and Horncastle (Sir Peter Tapsell).
Many people, particularly those living in coastal areas that are directly affected by the sea, have no idea of the severity of damage that can occur. As my hon. Friend the Member for Daventry suggested, the last time that a flood occurred on the east coast was in 1953. Several hundred people were killed in my constituency. It is important to realise that up to 10 km inland from the coast much of the land is at or below sea level. In an area such as east Lincolnshire, it is vital that we understand that river flood and sea flood defences are inextricably linked and that solutions to those problems need to be considered together.
Defences provide flood protection to an extensive area of low-lying coastal plane. It is both high-quality agricultural land and land for recreation and tourism. The hon. Member for Waveney (Mr. Blizzard) said that Corton in his constituency had a tourist industry. He should see Skegness. Along the coast of east Lincolnshire, between Skegness and Mablethorpe, there are about 26,000 mobile homes, the vast majority of which would be affected were the sea to breach the defences. That would have a severe impact on the local economy and employment.
I want to deal with four problems which, I am sure, exist around the United Kingdom, but which are exacerbated in areas such as Boston and Skegness. First, there is a disparity between the standard spending assessment and the internal drainage board levies. Historically, particularly taking into account the gross domestic product inflator within the standard spending assessment, those figures have approximately matched each other. For the first time, during this financial year, the money transferred from the local authority for the internal drainage board levy has been more than the SSA moneys from the Government. That does not fit comfortably with the consultation document released by the Minister, which emphasises the importance of local consultation and of flood defences.
The problem will worsen over time. The internal drainage boards have said that their levies may well have to increase by up to 10 per cent. in the next financial year. The local authority—I am using East Lindsey district council as an example—can deal with the disparity in one of two ways. It can cut other local services or increase the council tax. I should have thought that the responsibility lay with central Government, and was not something to be funded by local government.
Internal drainage boards are, to my mind, closely linked to coastal defences, and it is vital that they should retain local control. I realise that some time ago the idea of the Environment Agency taking over control of the boards was discussed. I should welcome a reassurance that that is completely off the agenda.
The second subject that I want to raise relates to shoreline management plans. They are five-year rolling management plans that take into account longer-term coastal erosion, integrating the implications of climate change and the need to establish confidence in the planning process, including environmental protection, tourism and biodiversity. I do not think that a long

209WH
enough view has been taken. I understand that Holland has a 1,000-year plan, in which it is made clear which parts of the coastline will have hard defences, which will have managed retreats and which will benefit from mudflats and salt marshes.
The Government need to consider embracing a much bigger strategic purpose, perhaps bringing together all the agencies that are currently involved under a broader remit. I learned quickly, in trying to marshal information for the debate, that no one agency has overall knowledge, even in one geographical area. The knowledge is split between district, county and town councils, environmental agencies, the internal drainage boards and a range of other institutions. That state of affairs needs to be examined, because it results in a fragmented, not holistic, approach.
The third matter that I want to mention is environment. My hon. Friend the Member for Daventry has alluded to some key issues. However, it is not always appropriate to build higher and higher defences against rising sea levels. Also, gradual land tilting is occurring. Some options, although not always appropriate, deserve sympathetic consideration. There are circumstances in which managed realignment of defences would have a significant environmental impact, creating important wildlife habitats such as salt marshes.
A good example can be found in my constituency at Frieston Shore, where a recent and continuing partnership between Boston borough council, Lincolnshire county council and the Royal Society for the Protection of Birds has secured objective 5b funding from Europe for a flood defence scheme, as match funding. That should be considered in the rest of the country. However, it must happen on a voluntary basis. Some valuable agricultural land abuts sea defences and, historically, many farmers have themselves provided those defences. There are now too many obstacles to stop them providing or improving sea defences.
The fourth and final matter that I want to raise is economic regeneration. There has been great concern, in my constituency and elsewhere, about the availability of long-term flood insurance. I understand from the Insurance Institute that it is prepared to provide insurance up to the end of December of this year. Nobody seems to know what will happen after that. That is directly related to the Government's commitment to providing sufficient funding and an adequate strategy for coastal flood defence. The Government need to ensure that insurers know the difference between coastal flood defence and river flood defence. There is a marked difference between development and building on river flood plains and on areas of land behind adequate coastal flood defences.
In an area such as Boston and Skegness—which has an ever-increasing population of people who retire from the midlands, and where local authorities and others have an ever-increasing ambition to diversify the economy away from its traditional agricultural base—there are great worries about achieving sufficient planning permissions for development to bring businesses in from outside. While the Environment Agency has played a constructive role, it has in the past
210WH
year or so hindered exciting developments that might bring economic growth and regeneration to a depressed agricultural area.
I have to inform the Minister that, in the view of the IDBs in my constituency, the drainage system is so efficient—because it has been there for so long and the individuals and systems are so expertly positioned—that it is difficult to envisage any circumstances in which flooding would occur as a result of precipitation alone. The danger in an area such as east Lincolnshire is from the sea.
In conclusion, too many bodies deal with both coastal flooding and internal drainage—it is a fragmented responsibility. That was highlighted by the Select Committee on Agriculture in 1998. Nothing seems to have been done about it. There is growing concern about offshore dredging and dredging for aggregates. Dredging alters wave patterns and creates faster and greater erosion than has been the case historically. A breach occurred in my constituency last year at a nature reserve called Gibraltar point, which is an unprotected area. I should like the Minister to take the thought away—I do not expect him to respond today, but hope that he will do so later. We need a national strategy and we should take a leaf out of the book of the authorities in Holland. We should have a longer-term view—perhaps a 1,000-year programme, or at least a 500-year one—across the United Kingdom. Uncertainty inhibits economic regeneration, so it would be helpful to have greater clarity about responsibility and about funding.
11.47 am
Tim Loughton: I pay tribute to my hon. Friend the Member for Daventry (Mr. Boswell) for his graphic demonstration of altruism in raising the issue. He has a landlocked constituency, unless things are getting very much worse and more of the Arctic circle is melting than we had believed. He also introduced the debate with his usual entertaining literary allusions.
Fortunately, my constituency does not have cliffs with houses crumbling into the sea, although it is on the coast of West Sussex. A great many of my constituents live along the shoreline. The Minister and I have debated flooding on many occasions, although we have previously concentrated on river and inland flooding, and today's debate is about coastal flooding. I have a plea to make. In the past year, there has been much debate in Parliament, and much media focus, on inland flooding and river flooding. For some of us, river flooding is not such a big problem—although we have a little of it—but coastal flooding is an ever-present threat. May I remind the Minister, therefore, that the danger of coastal flooding has not gone away, but has merely been overshadowed by what has happened with our rivers? The vast majority of resources were rightly targeted at the great devastation that occurred in many inland parts of Sussex, particularly at Chichester, Lewes and Uckfield. That was much reported in the media, but it did not help us.
Mr. Gregory Barker: My constituency is historically affected by both inland and coastal flooding. I am pleased to say that the Minister has taken a specific interest in Robertsbridge, which has

211WH
been among the worst affected inland areas in the south-east in recent years. I am cautiously optimistic that a long-term solution will emerge, but less optimistic about the coastal problem, particularly at Pevensey bay. I pay tribute to my county councillors, particularly Councillor Roger Thomas, who has been a doughty fighter for flood defences. The residents of Pevensey bay are concerned about the lack of an overall flood defence strategy, particularly because the Institution of Civil Engineers has pointed out that the flood defence programme is a second-class operation.
Tim Loughton: I think that I am grateful for my hon. Friend's intervention; Sussex Members constantly try to outdo each other about the severity of their flood problems. My hon. Friend's constituency lies further along the coast, but Shoreham beach in my constituency—a densely populated spit of land with many thousands of residents—is very low lying. The Shoreham and Lancing coastlines are all low lying but densely populated. We are not talking about pleasure beaches, holiday homes or caravan sites, but about the thousands of people whose homes are located within several yards of the sea, and they are exceedingly vulnerable. The Sussex coastline, from Brighton to Bognor Regis, is a built-up, urban strip, where the vast majority of people in south Sussex live.
The Minister knows that my constituency and the constituencies of many of my hon. Friends in that area are bordered to the north by the downs and to the south by the sea, where it is impossible to build. We are squeezed between those two natural features. If sea waters rose significantly, large parts of my constituency would be engulfed. We would require not what is called a managed retreat, but a retreat for many thousands of people.
I acknowledge that much has been done, particularly by the Environment Agency. For instance, some extra boulder protection has been put down along Shoreham and Lancing beaches over the past few years. However, that work is often delayed or subject to stoppage. Typically, if storms further up the coast at Selsey flooded a caravan park, the local authority would take emergency action, which would drain its flood defence coffers. Whenever that sort of thing happens, long-term defence work, which affects many more homes, is put on hold, and work that is desperately needed remains undone.
I echo the comments made by my hon. Friend the Member for Daventry on the grey area between flood defence and coastal protection, which causes a great deal of buck passing between the various agencies involved, including local water authorities, the district or county councils and the Environment Agency. Much of that is a legacy from when the Environment Agency took over from the National Rivers Authority. We have debated before with the Minister the problems caused by the fact that many responsibilities still lie with dozens of residual bodies. I am afraid that that anomaly is still being exploited by many authorities who do not want, simply because they do not have the resources, to pick up the tab for defence work or repairing damage.
A classic example is Shoreham harbour, which skirts Shoreham beach, which is, as I said, very low lying. At the end of one road, several people's gardens are literally falling into the harbour and have been doing so for some
212WH
years. It will not be long before they have no gardens left and the houses start to come under attack. The harbour authorities, the Environment Agency and the district council all say that that is not their responsibility, so who is responsible? Residents cannot get proper insurance cover for the damage, so they are stuck between a rock and a hard place—or, in this case, a rock and the very wet place that their homes are rapidly becoming. There should be greater guidance—we have discussed that before, but seem to have made no progress—in determining and defining who has responsibility for certain areas of our coastline, particularly in areas such as my constituency on the Sussex coast.
We need to ensure that local authorities receive a proper share of funding for flood defence work. Some years ago, Adur district council received less from central Government for its flood prevention work and coastal defence work than did Crawley borough council, which is some 20 miles north and well inland. In 1998, the Home Office cut the emergency planning grant to West Sussex county council by 31 per cent. The budget was already under enormous pressure because of the extra costs of social services caused by the ageing population of a county such as West Sussex, but the county council had to find more money to pay for flood protection and emergency flood work, and the extra costs incurred by the floods in Chichester and Selsey.
I wish to air a specific point about Worthing. I am advised by the chief executive of Worthing borough council that the council can obtain grant aid only for the prevention of erosion. Worthing has a long, exposed shingle beach, but cannot obtain grant aid for the provision of splash walls to prevent flooding from overtopping waves. Whether flooding occurs because something has been eroded or because there is low-lying land just beyond the beach with vulnerable houses does not really matter. Because of a funding anomaly, however, Worthing borough council cannot perform essential flood defence work on the promenade. That affects our tourist industry, which has suffered greatly anyway. Worthing's name comes from the Anglo-Saxon for seaweed, so the town has a long tradition of looking to the sea.
Pair trawling also has an impact on Worthing's coastline. The natural defences just off the shore have been smashed up—the boulders and the kelp beds have gone—by that very rough form of fishing. That leaves even lower our natural defence against water coming over on to houses just beyond the shore.
We have heard much about shoreline management plans. There should be much more action on those and results should be forthcoming. In July 2001, the Government issued planning policy guidance note 25, which deals with deterring the building of housing in areas at risk of flooding. It is absolutely right to attempt to do that, but our problem in West Sussex is that 46,000 houses are being imposed on us. We have the sea and the downs and very little land in between on which to build those houses. The land most vulnerable to those building proposals comprises the strategic gaps of which few are left and which are the only things that split up the vast coastal urban strip. Those areas are the most environmentally vulnerable to coastal flooding. It is nonsense that we are being forced to build houses and simultaneously being told that we cannot build them

213WH
where they are most likely to be built. That is a real problem in my constituency and in neighbouring ones in Sussex.
In conclusion, some progress has been made, largely through the efforts of the Environment Agency. I pay tribute to Peter Midgley MBE and the agency's Worthing office. They have done a lot to help in difficult circumstances. The Government get flood defence on the cheap. They expect local authorities to do much without properly funding them. Given that 5 million people and 2 million homes are vulnerable to flooding, the Government must take the issue much more seriously, particularly in areas where the coastline is densely populated. In my area, where there is precious little land for alternative development, a small rise in water level combined with the lack of sustained proper defence work will bring untold misery to many thousands of people who will be displaced. I ask the Minister to take that on board and to tackle the problem that I raised in regard to Worthing, which does not get the funding that it needs, because of an anomaly in the nature of its coastline.
12 noon
Mr. Paul Tyler: It is an unexpected pleasure to be able to participate in the debate. Although I am very interested in the subject, I had intended to be merely a passive observer because my hon. Friend the Member for South-East Cornwall (Mr. Breed) was due to participate. Unfortunately, he is involved in Committee proceedings.
I pay tribute to the hon. Member for Daventry (Mr. Boswell) for raising this subject, which is dear to my heart. I say that not least because I represent North Cornwall, which has the most famous and most attractive coastline in the United Kingdom. However, it regularly reminds us not only of the beauty of the sea but of its ferocity, and we heard again this weekend about a tragic loss of life in my constituency. An unexpected huge wave can cause devastation. At the time of this weekend's incident, I was a bit further down the Cornish coast and witnessed some of the biggest waves that I have ever seen—and I have spent most of my life living close to the sea in Devon and Cornwall. It is important for us to remind those who go to the coast only during the traditional summer holiday period that the sea is extremely frightening for those who live by it or have their living upon the waters.
In that context, I am reminded of the headline comment in the 1998 report of the then Select Committee on Agriculture, which stated:
"It is time to declare an end to the centuries-old war with the sea and to seek a peaceful accommodation with our former enemy."
The Minister will agree that that view is overly simple and that we must be more sophisticated. The sea is still an enemy in some parts of the country. As several hon. Members have said, the Dutch would never take such an open-ended approach; they would be much more resilient and more selective in their attitude.
The hon. Member for Daventry referred to fact that the south of England—I say England advisedly—is going down and that, in relative terms, the north of England is going up. My hon. Friend the Member for
214WH
St. Ives (Andrew George) advised me that Cornwall is the only part of the south that is going up, which may have something to do with our Celtic history. The problem, however, is that we are not going up as fast as the sea level is likely to rise, and relativity is important. All the contributions so far have been made by hon. Members representing constituencies on the eastern and southern coasts, but people in the south-west and many other parts of western Britain are just as concerned about the effects of global warming.
The hon. Member for Waveney (Mr. Blizzard) mentioned a village in his constituency that was threatened by the encroachment of the sea. In my youth, I went to see the south Devon village of Hallsands, which had succumbed to coastal erosion not long before and had mostly disappeared. One can still see some of the houses; indeed, in my childhood, one woman still lived at the top end of the village. Interestingly, the causes of coastal erosion in that case were not merely natural. In the 1930s, speculative developers who were building new docks in Devonport in preparation for rearmament got consent to extract a lot of gravel from the seabed immediately off the coast from Hallsands. It is interesting that the trigger for natural disasters is often man-made. That is why I welcome the new generation of thinking, which has moved us on dramatically.
In recent years we have recognised the connection between the hierarchy of decision making on international global warming—the hon. Member for Daventry mentioned that subject—and joined-up government at a national level. I pay tribute to the Minister, who has been at the forefront on the subject for many years. I say that in relative terms, although it may seem like many years to him. As hon. Members from both sides have said, joined-up government is critical. We have suffered too much from diffusion of responsibility and buck passing.
We also need local consent not only from farmers and landowners but from residents. My constituency contains communities where the residents do not feel that they have adequate influence on the decision-making process. That is partly because it is to some extent outwith normal local or central Government responsibility, with agencies and quangos involved, and there is difficulty in identifying precisely where decisions are taken. Anyone who thinks about the three levels of decision making will see the obvious links. It is frustrating for members of the general public to find that the links are not always as overt and effective as they would hope.
During the first Parliament after I came back to the House in 1992, I chaired the all-party coastal group, which has been sadly eroded although it has been connected with another maritime group. During that period when I worked with hon. Members from all parties, I was struck by the extent to which we had simply failed to pinpoint where the initiatives would be taken, where the priorities would be set and where the funding would go. There has been some improvement, to which the Minister will no doubt refer, but we have not reached a satisfactory conclusion. Some parts of the country need managed retreat in terms of coastal defence, and the administration of that rapidly needs managed advance if we are to gain the consent of the people most closely involved.

215WH
In 1998, my hon. Friend the Member for St. Ives was involved in discussions on the Flood Warnings (Vulnerable Properties) Bill. The debate revealed the inadequacy of risk assessment and its publication to communities and individuals. The subject requires careful consideration. I took seriously the point made by the hon. Member for Boston and Skegness (Mr. Simmonds) that insurance companies are often inadequately informed about the differences between threats from coastal erosion and flooding and from river flooding.
The Minister will take on board the point made by the hon. Member for Daventry about the close connection between inadequate management of flood plains for rivers and consequent frequent conjunction with high tides and bad weather. That is what often causes the most trouble in our coastal communities, and it means that we cannot pretend that the issues are separate.
I want to give the Minister the maximum time to respond, but I shall make one final point. Shoreline management plans have been the "in" concept of recent years, and we acknowledge them as a step forward. They have brought together many otherwise diffuse responsibilities, and have enabled people to see more clearly what is involved. However, they still lack a vital ingredient. The new approach or mindset has brought responsible bodies together to find solutions, but it has not yet gained the full-hearted consent of the people most involved. It is on that that we must concentrate in the next few years. We must ensure the mechanisms for gaining that consent through consultation, direct involvement and a proper role for elected representatives at all levels. If we do not achieve ownership of the plans by the people most affected, those plans may be a waste of paper and time.
12.9 pm
Mr. Jonathan Sayeed: I congratulate my hon. Friend the Member for Daventry (Mr. Boswell) on securing the debate and on the clarity of his comments. However, I am sure that he will understand if I ask him to pass on my congratulations, and those of the rest of the House, to his indefatigable 94-year-old mother. She has been the undefeated ladies champion of Mersea Island golf club for 43 years, which I am sure has nothing to do with its inundation by the sea.
My hon. Friends the Members for Boston and Skegness (Mr. Simmonds) and for East Worthing and Shoreham (Tim Loughton) mentioned two crucial points about the Government's action. First, they referred to the incoherent management of flood defences, and secondly to the lack of funding. Both my hon. Friends' constituencies—although I know one better than the other—are in considerable danger from flooding. As a member of Sussex Royal Naval Reserve, I once drove a minesweeper out of Shoreham, from whose bridge I could see over the tops of many houses, so it is clearly an area under serious threat of coastal flooding.
The threat of coastal flooding is likely to become more menacing in time. The recent planning policy guidance on development flood risk from the Department for Transport, Local Government and the Regions states that
"the current 1-in-100-year high-water level on the east coast may be expected to be exceeded every 20 years on average by 2050, assuming no change in storminess. There may also be secondary
216WH
impacts such as changes in wave heights due to increased water depths, as well as possible changes in the frequency, duration and severity of storm events."
Of course, it is not the Government's fault that the south-east of England is gradually sinking, and it is impossible for them, single-handedly, to halt the pernicious process of global warming. We must accept that a rise in sea levels, especially off the coast of south-east England, is tragically inevitable, at least in the short term. Even a new Labour Government cannot play Canute. However, it is reasonable to criticise the Government for failing to provide adequate resources to deal with the problem at hand. I shall focus my remarks on that lack of provision.
Operational responsibility for flood alleviation lies with local operating authorities, including the local authorities, the Environment Agency and the internal drainage boards. Local authorities are ultimately responsible for coastal defence under the Coast Protection Act 1949. When their jurisdiction covers a coastal area, the Act grants local authorities powers to take measures against coastal erosion and sea encroachment. Private or corporate owners of coastal land are also entitled to take protective measures against erosion and sea flooding, but are not eligible for Government grant in aid.
The United Kingdom coastline is managed under the shoreline management plan—or SMP. Plans are devised for each coastal region and take into account a variety of coastal management issues, including the adequacy of current flood defences. However, local authorities are ultimately dependent on grants from central Government. Hon. Members have made that point repeatedly today. Authorities are dependent on grants for resources to tackle coastal flooding, which have been woefully inadequate in recent years.
New Labour's complacency in that respect is made clear by consideration of the figures that were supplied by the Ministry of Agriculture, Fisheries and Food in July last year. Money allocated to local sea defence projects by MAFF stood at £46.8 million in 1997–98. The following year the figure dropped to £36.5 million. In 2000–01 a mere £25.7 million was earmarked for spending on coastal flood defences.
The Parliamentary Under-Secretary of State for Environment, Food and Rural Affairs (Mr. Elliot Morley): It might be helpful if I explain to the hon. Gentleman that the issue is a little more complex than that. It is not that money that has been allocated has dropped, but that some schemes approved by local authorities have slipped. The money has not been lost; in many cases it has been reallocated elsewhere in the flood and coastal budget. The hon. Gentleman should look at the situation a little more carefully instead of having a routine, political whinge.
Mr. Sayeed: The Minister will recognise that I have been endeavouring to obtain greater clarity from his Department, which has deliberately hidden many of the figures, but these we have managed to wheedle out. It is clear: whatever obfuscation the Department chooses to deploy, over three years central funding for sea defences dropped by almost 50 per cent. To say that some schemes may have been delayed would be using the same argument that the Deputy Prime Minister used in relation to many road projects.

217WH
We are interested in money that gets spent and things that get done. Although the floods of autumn 2000 were principally inland, they should nevertheless have served as a vivid reminder of the enormous financial implications of large-scale water damage. It is bizarre that, in the same year as United Kingdom insurers faced an unprecedented claim of around £1.3 billion for flood and associated storm damage, MAFF should have made cuts in coastal defence funding.
Lack of funding is not our only criticism. There is also a divide between the Government's rhetoric and the reality. The Labour party's 2001 election manifesto clearly stated:
"The dangers of coastal and inland flooding are now widely appreciated, and we are committed to investment in preventative solutions."
Quite how that admirable commitment squares with a £21.1 million reduction in grants for sea defences over three years is unclear.
In the aftermath of the catastrophic events of autumn 2000 the Association of British Insurers called for the Government to increase spending on all flood defence measures in England and Wales by at least £ 145 million. When increased Government funding finally arrived, it was too little and too late. The money allocated for flood warning and flood defence programmes by the Ministry was increased from £66 million in 2000–01 to £114 million in 2003–04—a £48 million increase—when insurers had asked for a minimum of £145 million, and much of that £48 million went on increased administration rather than on physical measures against flooding. The majority of that funding is provided by Government in the form of a DEFRA grant for approved capital and other works and by the Department for Transport, Local Government and the Regions via revenue support grant, which is used by local authorities to fund levies to the Environment Agency.
Mr. Blizzard: Will the hon. Gentleman give way?
Mr. Sayeed: I am sorry, but my time is very limited. I shall carry on.
All say that that is too little money and too late, and many complain that all that they can do is repair what they have rather than improve the protection.
In conclusion, what can be said for the Government? They are not responsible for the weather, for the tilting of the UK or for the long-term effects of global warming, but they have dragged their heels over coastal flood defence and continue to do so. Prospects for an adequate coastal flooding strategy in the near future look remote. On 31 October 2001, in an answer to the hon. Member for Gordon (Malcolm Bruce), the Minister expressed optimism that the current review for flood defences would provide long-term solutions and promised that a review would
"be published later this autumn."—[Official Report, 31 October 2001; Vol. 373, c. 735W.]
Three months on, with no sign of the promised report, the Government will perhaps forgive us if we do not share their apparently boundless optimism.
218WH
Despite increasing pressure on the UK coastline from erosion, rising sea levels and the gradual sinking of the south-eastern corner of England, sea defences remain hopelessly underfunded. The effect of that parsimony will be more misery, unnecessary cost, and more of the south of England lost at sea.
12.20 pm
The Parliamentary Under-Secretary of State for Environment, Food and Rural Affairs (Mr. Elliot Morley): I congratulate the hon. Member for Daventry (Mr. Boswell) on securing the debate. He put his case in a thoughtful and constructive way. As a former Minister with responsibility for flood and coastal defence, he is very knowledgeable on the subject. He made his arguments in a thoughtful and logical way when he was a Minister, commanding much respect. I shall return to the main thrust of his arguments in a moment. I hope to answer a few points that have been made during the 10 minutes that I have available.
I start with the comments made by the hon. Member for Mid-Bedfordshire (Mr. Sayeed). It is a little disappointing that his contribution was a purely political moan about how much more money we should be spending, and I am sure that he appreciates that that approach encourages cynicism among the public. I am not aware that his party has made commitments to large increases in public expenditure. If research is done, it can be discovered that the only cut in real terms in overall spending on flood and coastal defence happened under a Conservative Administration.
Under this Government, the overall spend on flood and coastal defence has increased consistently since 1997. From last year to 2003 there will be, in total, a 70 per cent. increase in expenditure from grants. Overall expenditure from all sources including levies, contributions from local authorities, internal drainage boards and the Environment Agency—the hon. Gentleman must take those into account, because DEFRA grants are not the only source of flood and coastal defence expenditure—will exceed £400 million this year. That is a record sum of money. We take the matter seriously.
There will always be an argument about what the appropriate figure should be. We have commissioned reports on appropriate spend and the need for long-term investment. That is an openness that has not existed before, although the hon. Member for Mid-Bedfordshire accused the Government of hiding figures. We have commissioned such reports so that people can see them, and to guide our future priorities. Projects such as engineered coastal defence schemes are a long-term business. Design, build, public consultation and getting plants on site can take between three and five years.
It is not unusual to have big variations in annual spend. In 1997, the Lincshore project, of which the hon. Member for Boston and Skegness (Mr. Simmonds) will be aware because it related to Skegness, involved very high capital spend on beach recharge, or nourishment, as the hon. Gentleman said. This year, the progress made on various coastal defence schemes is disappointing. Some £15.5 million was reallocated to the Environment Agency to provide, for example, £9 million for emergency repair costs following the

219WH
floods of winter 2000, £3 million for a range of database schemes to improve flood warning and £3 million for special funding—this will be of interest in Sussex—for such things as whole catchment river schemes. Where communities have technical difficulties with flood defences, we are funding studies of the whole catchment to help understand how it works and find ways of defending such communities in various catchment plans.
Mr. Barker: I accept a great deal of what the Minister is saying, although we can quibble over individual projects. Does he accept that it remains a worry for people up and down the country, especially my constituents in Pevensey bay, that, whatever the statistics, the Institution of Civil Engineers has said that the amount of investment needed across the board for sea defence must be doubled to be effective? Indeed, the Government have not responded to that report.
Mr. Morley: We have only just had the report, and the hon. Gentleman must give us a chance to respond to it, because we commissioned it from the Institution of Civil Engineers, and we therefore take it seriously. I am surprised to hear that the residents of Pevensey bay are concerned, because we have recently spent a large sum on a big scheme in that area to protect them. I know that the scheme is appreciated by the hon. Gentleman's constituents because I went down there for its opening and talked to them.
I understand the persuasive case that my hon. Friend the Member for Waveney (Mr. Blizzard) made for Corton. I shall consider sympathetically the bid from the local council, which knows the procedure to follow.
The hon. Member for Boston and Skegness made several reasonable and thoughtful points, although I unfortunately do not have time to respond to them in detail today.
I understand that the constituents of the hon. Member for East Worthing and Shoreham (Tim Loughton) will be concerned by the points that he raised, although I was puzzled by his remarks about grants not being available for shingle beaches. I must discuss that with him in greater detail because I suspect that that relates to an argument about what is an environmental improvement to a promenade and what is a flood defence scheme. The issue is more complex than he seems to think.
The hon. Member for North Cornwall (Mr. Tyler) made a point about taking a joined-up approach, which is something that we have been trying. We shall shortly produce the funding review report, which makes several interesting recommendations. It is an independent
220WH
report, not a Government position, and we shall put it out for consultation and respond to people's views on it. The suggestions that it contains on institutional changes and other ways of raising funds are interesting.
The responsibility for flood and coastal defence is shared between central Government and local government because the benefits of such schemes often apply locally. However, we also recognise the need for a strategic approach, which is why the bulk of funding comes from central Government. There are issues about the way in which the standard spending assessment works and the appropriate level of funding, and those matters are, of course, under constant review.
The hon. Member for Daventry made several serious points about managed retreats. I make no secret of my enthusiasm for them, but I should like to reassure him that the Government know that they are not appropriate in all circumstances. When we consider a managed retreat we examine the circumstances in which it would be of benefit. It is certainly better if one can conduct a managed retreat by persuasion, and in some of the schemes that I have recently seen, the agency has purchased the land. Such schemes involve deliberately allowing the land to flood, and if one does that, there is a case for purchasing it or entering into a management agreement.
There is a difference between a managed retreat and land that is flooded as part of a natural process, which is sometimes inevitable. Much of my constituency is below sea level, and it is close to the Holderness coast, which has been eroding for centuries, during which time many communities and villages have been lost. That is part of this country's natural process and the dynamic nature of our coastlines. We must recognise that if we interfere with our coastlines, there may be consequences for other parts of the coast and other communities.
I shall ensure that we think carefully about managed retreats, which we approach in the context of the shoreline management plans that I freely acknowledge were a good idea introduced by the previous Government. We have built on those plans, and we review them regularly, which addresses the point made by the hon. Member for Daventry that 20-year schemes can be periodically reviewed in the context of shoreline management plans.
Time does not allow me to continue to deal with the range of sensible questions that were asked, other than to say that the Dutch support managed retreat. We are in close touch with them and they share many of our attitudes to the problem. This is an important issue that demands a large commitment in terms of funds and requires us to consider sustainability and the balance between hard and soft defence.

Generic Drugs
12.30 pm
David Taylor: I am pleased to have secured this debate as it gives me an opportunity to explore the unforeseen effects of the pressure to drive higher still the proportion of national health service prescriptions for generic pharmaceuticals, and to make a submission to the Government review of the future supply and reimbursement of generic medicines for the NHS.
The Government have already, with some success, protected the supply chain that provides vital medicines to our pharmacists, general practitioners, hospitals and, ultimately, patients against some of the abuses that took place in the late 1990s. During that period, the need for the action that the Government subsequently took was apparent. Wholesalers regularly hoarded large amounts of a drug in demand and waited for that demand to meet critical mass before releasing their supplies into the market at the highest possible price. In 2000, the Government introduced an interim maximum pricing scheme for generics, which in its first year saved the NHS £330 million. That arrangement is not in place indefinitely and the options for the reimbursement and supply of generics are being reviewed. I shall return to that point later.
GPs have long been encouraged to prescribe generics whenever possible. In 2000, 71 per cent. of items were prescribed generically, but owing to the non-availability of generic versions of some drugs, only 52 per cent. were dispensed generically, representing 22 per cent. of overall cost. The upward trend continues. The figures for April to September 2001 reveal that almost 76 per cent. of items were prescribed generically against the 72 per cent. target. The dispensing rate of generics, although unknown, is unlikely to have increased a great deal.
Generics are less costly than branded medicines because their manufacturers do not need to undertake clinical trials. In the UK, the average net ingredient cost of a brand is £16.06 and that of a generic is £4.18. If there were no generics and the average cost of branded medicines remained the same, the NHS drugs bill would increase from £5.3 billion to £8.6 billion. According to the British Generic Manufacturers' Association, £1.2 billion spent by the NHS on generic drugs saves the taxpayer £3.3 billion.
The discussion paper, "Options for the Future Supply and Reimbursement of Generic Medicines for the NHS", said that the Government are looking to
"achieve a secure and consistent supply of both established and new generics and value for money in the prices the NHS pays for them".
The reimbursement price of branded medicines is the NHS list price set by the pharmaceutical price regulation scheme. For prescriptions written generically, it is governed by the drug tariff price. The calculation that is used to determine the drug tariff is the weighted average of the list prices of five major suppliers for the most commonly used medicines, which is published every month by the Department of Health. Two separate pricing mechanisms are necessary because generics, as multi-source products, operate in what is effectively a commodity market.
222WH
The payment that pharmacists receive comprises the list or drug tariff price of the item dispensed, minus an assumed level of discount, plus a container allowance and a professional fee. The fee, if any, that the patient pays for their NHS prescription is deducted from that payment. The difference between the actual cost of generic products purchased by pharmacies and the amount that they are reimbursed is determinable through the use of a scale of deductions derived from a discount inquiry.
The reimbursement system is rightly designed to achieve the cheapest purchasing price for the NHS, although its reliance on pharmacists in all sectors buying lower than the reimbursement price is being affected by recent announcements concerning the reduced dispensing fee that community pharmacists now receive.
The majority of medicines remain cheaper when written generically, but there is evidence that the 72 per cent. quota that all primary care organisations must meet as a key performance indicator is inhibiting their ability to achieve potentially substantial savings for the NHS by buying a branded medicine that is cheaper than its generic counterpart. Indeed, one PCO chairman said:
"Whilst greater levels of generic prescribing have historically improved value for the NHS, national and local levels have now risen to the point that further increases could either be unproductive or dis-functional."
Entertaining the prospect of purchasing cheaper, non-generic medicines should not jeopardise a PCO's status. The quota should remain, but where examples of substantial cost savings can be provided, there should perhaps be an exemption from inclusion in the overall quota. Obviously, there is the question of how one defines substantial cost savings, but given that the system of price checks and analysis is notoriously convoluted, involving individual community pharmacists, pharmacy chains and multinational generic suppliers, such an exemption is surely possible.
The justifiable fears generated by turbulence in the UK generics market in 1999 promoted the introduction of the maximum price scheme and a greater emphasis on a generic prescribing quota. Both factors now inhibit Government action and play into the hands of multinational interests, at the expense of the NHS, PCOs, prescribers and patients. The problems that the Government encounter in paying a fair price for the production, supply and provision of essential pharmaceuticals to the NHS and patients illustrates the legitimacy of the growing concern—particularly among younger people, who are increasingly reluctant to vote—that the rights and interests of corporations are being promoted at the expense of sovereign nations and their citizens. I agree with the view of my hon. Friend the Member for The Wrekin (Peter Bradley), whom I am pleased to see in the Chamber. In criticising the behaviour of certain drug companies in a Westminster Hall debate on generic drugs, he said:
"I am not arguing against the profit motive."—[Official Report, Westminster Hall, 17 May 2000; Vol. 350, c. 73WH.]
However, the primacy of the profit motive in shaping Government negotiations with the pharmaceutical industry does indeed have serious consequences for NHS patients and UK taxpayers.

223WH
To illustrate the way in which the Government's quota target can inadvertently aid the cartel of generic suppliers in driving prices to unacceptably high levels, I cite the experience of a particular east midlands pharmaceutical company, which encouraged me to initiate this debate. After consultation with a number of primary care trusts—including the former health authority for Leicestershire, which consistently overspent its drug budget in the last five years of its life—the company launched a branded version of an existing major generic that is used in treating depression, and which is 30 per cent. cheaper than the list price of other generics. It might seem counterintuitive, but generics firms that are resisting the product's entry into the market can be combated only by its being prescribed in a non-generic way. However, to do so would run against the NHS policy of incentivisation of generic prescription. Those two factors are preventing savings of up to £21 million a year on this product alone, and there are many other such products.
One of the motives in creating PCTs was the devolving of greater budgetary responsibility to a local level—something that we all support. The ability to access cost-effective new products such as the one that I have cited, without incurring the wrath of the auditors, is essential if we are to resist the monopolistic overtones of the handful of drug companies that already control the generics market. Of course, the overriding criteria for rational prescribing must always be drug effectiveness and suitability, but wherever possible flexibility in pharmaceutical spending is essential to achieving maximum possible savings for the NHS and the patient. Is not optimal use of the drugs budget more important than the generic rate?
It is well understood that the symptoms of an illness can indeed be exacerbated by a prescriptive flow of inconsistent characteristics. Patient unease at being prescribed unfamiliar treatments was consistently and cynically exploited by drug companies at the end of the previous decade. By exploiting poor communication between primary and secondary care—to an extent, such poor communication still exists—drug companies were able to wring millions of pounds out of the NHS, until the Government took welcome action and introduced a 72 per cent. generic prescribing target for PCOs. As expected, savings have been achieved but I have tried to show that that has had the possibly unforeseen side effect of restricting PCOs' ability to get the best drugs at the cheapest prices for GPs and their patients.
The major benefits of prescribing branded, rather than generic, drugs are that the prescriber knows the exact medication dispensed to the patient and that the patient will receive exactly the same medication wherever and whenever they have their prescription dispensed. That benefit would apply to low-cost post-patent proprietary brands, which are sometimes called ecogenerics. By paying regard to the needs of the NHS, GPs and patients, rather than focusing solely on shareholders, alert companies with knowledge of the pharmaceutical industry can reduce their excessive promotional budgets for the branded products that they sell, make them cheaper than generic alternatives and still make the decent profit that I and my hon. Friend the Member for The Wrekin endorse and recognise as necessary.
224WH
The rapacious pursuit of public funds that many drug companies have been guilty of in the past has been effectively reined in by the pharmaceutical price regulation scheme—the PPRS. That covers branded goods, the unregulated pricing of which has been a major burden on local health authority drug budgets.
Peter Bradley: I congratulate my hon. Friend on securing the debate. It is a shame that he and I seem to be the only two anoraks in the House of Commons who take this issue seriously. He referred to the PPRS but, saving the officials and possibly the Minister, probably only three people understand the PPRS: one is dead, one has been driven mad by it and third has forgotten everything that he ever knew. The investigation by the Office of Fair Trading into Napp Pharmaceuticals, which reported in spring after two years and was last week upheld by the Competitions Commission, found that the PPRS on its own is not sufficient—
Mr. Roger Gale: Order. The hon. Gentleman must come to the point. He should be making an intervention, not a speech.
Peter Bradley: I apologise, Mr. Gale. I will come to the point. The Competition Commission upheld the OFT's findings that the PPRS on its own is not sufficient to control the abuses that it identifies. Does my hon. Friend agree that it is time for the Government to review all negotiation mechanisms for the drugs industry to secure real and substantial savings for the NHS?
David Taylor: I certainly agree and I think that the arrangements are opaque, inflexible and call out for major reform. I am confident that the Minister will be able to initiate and oversee such reform.
Regulation of the sort that we have seen on proprietary drugs is just as essential in generics, where private companies are driving profits ever higher at the expense of public health and public funds. To maintain some semblance of parity between the public and private sector, the regulatory framework must remain fluid and resistant to the pressure that is inevitably brought to bear on any regulatory framework by the large corporations affected and the sponsored political emissaries who represent their interests in this place—they are not in the Chamber this morning—often at the cost of every NHS patient in their constituency.
The report by Oxford Economic Research Associates, "Enhancing competition in generic manufacturing", illustrates the priorities of recent arrivals in the UK that are licensed to supply a significant proportion of the UK's drug treatments. It states:
"The developments in ownership structure of UK manufacturers mirror wider trends, with large global manufacturers developing a presence in the main world markets. These players choose their markets of operation based on maximising return from their global portfolio, and are not constrained to one country of operation or supply, as traditional domestic suppliers were. They are often able to acquire licences in many countries using the same basic bio-equivalence research, and, in theory, can direct their generic output to those areas that generate the greatest return."
The type of activity flagged up by OXERA should be a cause for concern for everyone involved in primary and secondary care, whether as providers or recipients

225WH
How it fits in with competition laws domestically, Europewide and internationally is a moot point and one on which I believe that the Competition Commission will report in the near future. How will the Minister implement the findings of any inquiry that illustrate that checks on competition, which are created by the generic prescribing rate, specifically prevent PCOs from obtaining the best quality medicines at the cheapest prices in an attempt to avoid overspend in their drug budgets? In terms of manufacture, supply, prescription and provision of both generic and branded drugs, the existing structure penalises the community pharmacist, a term that embraces chains as well as individual operators. Following the recent 10 per cent. cut in the dispensing fee paid by the Department of Health, the community pharmacist is bearing the brunt of the Government's reluctance to force the major drug companies to offer branded as well as generic drugs at realistic, affordable prices.
The local dispenser, invariably, is a community pharmacist or, in rural areas, a GP licensed to dispense pharmaceutical treatments. Such people are therefore NHS agents, purchasing both generic and branded medicines to dispense against NHS prescriptions. For a chain like Boots or Lloyds, the 10 per cent. cut will be easier to bear; a distinction between such companies and the local pharmacist serving the local community may have to be made in legislation if best value is truly to be achieved on behalf of patients and taxpayers. Otherwise, we shall have the Orwellian situation in which some community pharmacists are more equal than others, especially as vertical integration accelerates.
Finally, I endorse the second approach suggested in last year's consultation paper and urge the introduction of central purchasing for generic drugs through competitive tendering, which seems to be a more transparent arrangement and one that could readily be operated by community pharmacists.
We need to obtain far greater acknowledgment from the pharmaceutical giants that, although they are operating in a market environment, they are bidding for public money and the right to supply life-enhancing pharmaceuticals to that public. It is a large market. The NHS costs £60 billion a year, 10 per cent. of which is taken up by the drugs budget. Of that £6 billion, 20 per cent., or £1.2 billion, is spent on generic drugs. My estimates suggest that a saving of up to 25 per cent. of that, some £300 million, could be made—that is nearly £1 million a day: a £20,000 saving during the time that it will take to have this debate. I am sure that the Minister will recognise the potential and will respond as rapidly as she can.
12.46 pm
The Parliamentary Under-Secretary of State for Health (Ms Hazel Blears): I congratulate my hon. Friend the Member for North-West Leicestershire (David Taylor) on having secured this debate and on having chosen the subject of generic medicines. It is an auspicious time to raise the subject because, as he said, we are examining the arrangements for the supply of, and reimbursement for, generic medicines in the NHS. Neither he nor my hon. Friend the Member for The
226WH
Wrekin (Peter Bradley) should be classed as anoraks, but as individuals who are extremely knowledgeable on the matter and who will make a constructive contribution to the on-going debate about the supply of generics.
The NHS spends about £5.5 billion on medicines in the community in England each year. As my hon. Friend the Member for North-West Leicestershire knows and has kindly acknowledged, the Government are making a record investment in the NHS. However, that unparalleled investment does not take away from the need to ensure that every penny is spent wisely and well, and that as much as possible goes directly to patient care. Medicines are a key component in the delivery of high-quality patient care, both in hospitals and in the community, and expenditure on medicines in the NHS rose by an average of 8.7 per cent. every year from 1995 to 2000. Similar, and in some cases greater, rates of increase are occurring in most other countries in Europe.
Much of the increased cost is because more prescriptions are being written, many of them for preventive medicines, which are helping to improve the health of people in this country—nevertheless, there is a huge increase. Another factor is the availability of medicines to treat diseases for which previously no therapy, or no effective therapy, existed. There has also been an immense change in the type of products that is dispensed to patients. More effective, and in many cases more expensive treatments are replacing older and cheaper medicines, so there is upward pressure on the finances throughout the system.
As my hon. Friend acknowledged, the arrangements for prescribing, procuring and dispensing medicines on the NHS and for the reimbursement of pharmacists are not straightforward. He referred to "a convoluted system"—it is, indeed, very complex, as I found out in my early dealings with the market. We need to take account of the interaction between manufacturers and suppliers in the private sector. There are also issues concerning product patents, the licensing of medicines for safety, quality and efficacy and the different characteristics and side effects of individual products which limit the extent to which patients may be moved from one product to another. We must always be conscious of possible contraindications.
Decisions about what to prescribe individual patients are made by doctors and sometimes nurses, who rightly want the best medicines for their patients. They have an obligation to follow prescribing guidelines where those exist, but it must also be right that they should prescribe what they consider to be the best medicine available to treat their patients. At the same time, pharmacists have an obligation under their terms of service to dispense, with reasonable promptness, all the medicines prescribed by doctors. The reimbursement arrangements for community pharmacists provide an incentive for them to obtain the best terms that they can from wholesalers and manufacturers.
The purchase and supply of medicines is not an ordinary market, and many of the considerations that apply in such a market must be modified to ensure that patient care is safeguarded. Encouraging generic prescribing plays an important role in controlling the money that is spent on medicines and ensures that patients receive the care that they need.

227WH
Branded, in-patent medicines are considerably more expensive than their generic equivalents. That is primarily to enable researched-based pharmaceutical companies to recover the substantial research and development costs that they incur in developing new and innovative medicines.
David Taylor: Does my hon. Friend accept that branded, post-patent generic medicines—if that is not too much of an oxymoron—can be cheaper than the generics produced by the cartel, whose development has been accelerated by the vertical integration of the drugs market?
Ms Blears: I am aware that the company in my hon. Friend's constituency provided him with some interesting information, which we shall examine closely. I shall come to the definition of cheaper later, although the operation of the market may result in generic products not being cheaper.
Branded products are significantly more expensive than generic products, which is why we are keen to encourage as much generic prescribing as we can. Overall, we estimate that prescribing and dispensing as branded products medicines that were available generically would cost the NHS an extra £600 million a year.
The Government have set targets for generic prescribing by GPs. By March this year, 72 per cent. of items should be prescribed generically, while no more than 295 practices should have generic prescribing rates of less than 40 per cent. I am pleased to say that both those targets have been met ahead of time. As my hon. Friend acknowledged, slightly more than 75 per cent. of items are now prescribed generically. Although they must still meet the target, GPs have a large degree of discretion because 25 per cent. of their prescribing need not meet the generic targets. That gives them some flexibility in their dispensing procedures to take advantage of situations in which drugs become available that would save the national health service even more money. We have not set a hard and fast, 100 per cent. target, and we recognise that there will be a need for flexibility in some circumstances.
My hon. Friend acknowledged that there had been a tremendous rise in the price of generic medicines in 1999–2000, and he welcomed the introduction of the scheme, which has managed to stabilise prices. We always said that it was a short-term measure, and now we want to introduce longer-term proposals to deal with the supply of generics. In July last year, we published "Options for the Future Supply and Reimbursement of Generic Medicines for the NHS". There have been many contributions to the discussion, and we are currently considering all the options and shall respond shortly.
Peter Bradley: Will my hon. Friend give us an idea of the weight of support for a central procurement agency to secure what one hopes would be real savings to the NHS?
Ms Blears: The two options set out were central procurement and a reference-based price scheme, but I am not in a position to say what the balance of the
228WH
submissions was. However, once we receive all the responses to the consultation, I am sure that the information will be made available. My hon. Friend will appreciate that simple numbers do not always indicate the weight of those responses; it is more complicated than that, and this is a most complex area with a great deal at stake. We shall therefore evaluate the submissions extremely carefully.
Representations similar to those made by my hon. Friend the Member for North-West Leicestershire have been received by PCTs and health authorities in the Trent region, and I understand that they have been the subject of detailed discussion and are still under consideration. I assure my hon. Friend that they will be properly considered and evaluated. Achieving savings for the NHS is in all our interests, not least those of patients.
The company considers that the branded product that it can offer would allow the NHS to achieve significant savings, and it is a matter worthy of investigation. The Government's policy on encouraging the use of generics has been successful in achieving savings for patients. Nothing in the present arrangements prevents a manufacturer or supplier from entering the market, provided that it has a licence from the Medicines Control Agency. Wholesalers and pharmacists are free to buy from whichever supplier offers the most advantageous terms. When a prescription is written generically, the pharmacist has the choice of dispensing either a generic or a branded product. Usually, however, they will be reimbursed only for the cost of the generic. The procedures would not preclude a lower-priced branded product entering the market.
David Taylor: That is okay, as far as it goes, but not all wholesalers stock the cheaper branded alternatives to the generics, which are sometimes made available to companies under covert and special arrangements.
Ms Blears: My understanding is that the best wholesalers would make the full range of products in the drug tariff available to the pharmacist. It is in their interests, when pharmacists request specific products, to ensure that they are available, because pharmacists will not want to use a wholesaler that does not provide the full range of medicines. If a wholesaler chooses not to stock a product, we can look into the matter. However, if a generic is prescribed, the pharmacist can choose to dispense either the generic or the branded product. That would allow the products mentioned by my hon. Friend to come to the market.
The discount clawback is a complex system of remunerating pharmacists, under which discount inquiries take place and a clawback is made of the estimated amount of discount that pharmacists have achieved through their buying policies from wholesalers and manufacturers. That discount clawback is worth about £600 million to the NHS. We need to be aware, when making changes to the system of purchase and remuneration, that we consider the system as a whole and do not take steps that could jeopardise the income that the NHS receives from the discount clawback.
It is important that the NHS has a secure and consistent supply of medicines. If exemptions were to be made for particular products, we might find ourselves

229WH
having placed all our faith in one supplier or manufacturer of a product. We know that that can cause difficulties for the NHS. It is in the interests of the service to have as wide a range of suppliers as possible, so that it can be assured of a consistent and regular supply. If we were to concentrate on only one supplier for a product, it would significantly increase the risk of shortage should that company run into difficulties and not be able to provide that secure and consistent supply.
I am grateful to my hon. Friends the Members for North-West Leicestershire and for The Wrekin for drawing attention to those important matters. We want to achieve the savings that can be achieved by the prescribing of generic medicines, but we also want, through whatever avenues are open to us, to increase the amount of money that we are able to spend on NHS patients. I reassure my hon. Friends that the submissions and points that they made will be taken into account in the current review of options with respect to the supply of generics in the national health service. They have made a constructive contribution to what is a complex area of manufacture, supply and reimbursement. I undertake to study closely the information that has been provided about specific products from my hon. Friend's constituency.

Standard Spending Assessment (South Gloucestershire)
1 pm
Mr. Steve Webb: Mr. Gale, I do not know whether you have ever seen the old news footage of industrial action in which a striking worker walks down the street at a demonstration with a placard saying, "Five per cent. of nothing is nothing; we want 10 per cent." I feel I am in a similar position. My argument with the Government is not that this year's settlement was particularly bad. Indeed, as I am sure the Minister will point out, it was markedly more than we might have expected under a previous Government, and even allowing for population growth it was probably broadly in line with the national average. However, my key contention is that the base for setting spending in the South Gloucestershire council area is far too low. I want to remark on the urgent need for reform of the system, and offer some thoughts about the shape that that reform might take.
I offer my sympathy to the Minister because I notice that there is a rash of Adjournment debates on the topic of the SSA for various authorities. I have read the transcript of his reply to my hon. Friend the Member for Somerton and Frome (Mr. Heath) and some of the issues raised in that debate are obviously relevant to South Gloucestershire.
The issue is not, or should not be, at local level, a party political one. Although it might mischievously be suggested that South Gloucestershire council is spendthrift, in the current financial year all three parties on the council set budgets with remarkably similar spending levels, and the one with the lowest level—the Liberal Democrat one—was adopted. All three were in the same ballpark, however, because whoever runs South Gloucestershire council must operate against what we perceive as an unfair system.
South Gloucestershire council has been underfunded from the beginning. In its first year, 1996–97, it pencilled in the use of £10 million of its inherited reserves to patch a hole in the budget. By cutting spending inherited from its predecessor authorities it avoided using the whole £10 million, but each year since then, £3 million or £4 million has been pencilled in to plug the hole in the budget. That is not a sustainable state of affairs.
To give hon. Members an idea of how low the standard spending assessment is for South Gloucestershire, I shall cite some figures that are familiar to the residents of that area. South Gloucestershire is 145th out of 150 authorities with respect to children's social services; 147th out of 150 with respect to care of elderly people at home; and 150th out of 150—bottom of the pile—for primary education. Clearly, in any system there are some at the top and some at the bottom. However, the discrepancies between authorities are impossible to justify. South Gloucestershire receives £300 per primary pupil less than the national average. I cannot believe that it costs £300 less to educate a child in South Gloucestershire than it does elsewhere. Even when a comparison is made with similar, unitary, authorities, the discrepancy is £260. That affects real pupils and real teachers in real classrooms.
The base level of funding is unfair, but why? First, as the Minister, who is knowledgeable about such matters, knows, we, like many authorities in the region, are

231WH
affected by the area cost adjustment, which gives us no credit for the pressures on our labour market. A pertinent example is that we find it impossible to recruit home care workers. Elderly people cannot leave hospital, because there are not enough care workers to look after them. It is the problem known as bed blocking. As the Minister will no doubt point out, money has been allocated in that general direction, but I cannot help feeling that if the system more readily recognised labour market pressures outside London and the south-east—and did so up front—we might never have had folk kept in hospital beds in the first place; we could have afforded care staff, enabling them to leave. We would not have needed a sticking plaster grant to deal with the problem. We could have pre-empted it. Whatever system the Government come up with, it is essential that they recognise that it is not only in London and the south-east that such labour market pressures exist.
A separate problem affects growing authorities such as South Gloucestershire—the use of acutely out-of-date information. The number of children in primary education is counted in the January before the following year's funding is calculated. A consequence of that is that each year South Gloucestershire educates the equivalent of a whole primary school's worth of pupils not for a below average amount, but for nothing at all. The county gets no money for the children that it is teaching. Until systems are introduced that use more up-to-date data, which ought to be possible by now, the authority, which is set to grow for decades to come, will lose out.
The problem affects not only young children but the whole population of the area. The assessment of that population, which feeds into the SSA calculation, is way out. The mid-year figure for 2000, which is used in the SSA formula for the coming year, assumes a population of some 247,000. However, we know from the health authority that, in April 2001, the population was already 3 or 4 per cent. higher than that and has grown since then. On the one hand the authority is not receiving money for people in its area and the other hand, the Government formula deducts money from the authority's grant for the council tax paid by those people as soon as they move in.
The day that someone moves into the area, the authority is assumed to be receiving council tax from them, which it does, and that is subtracted from the money that it receives from the Government. However, the authority does not receive the funds to cover the cost of educating those people's children or looking after the elderly among them or sorting out their dustbins for a year or maybe two. That is a double whammy. The second those people move into the area, we lose money on the council tax side of the equation. However, although the authority has to meet the costs of providing services for them straight away, they are not included in the figures on the revenue side until two years later. Growth is a real problem if the system does not catch up with change.
I have outlined some reasons why the base funding level is unfair. This year's settlement of 6.6 per cent. is clearly decent in the context of provision to other authorities. The figure is slightly above the national average, although when the population growth is taken into account, the increase is probably broadly in line
232WH
with the national average. As I said earlier, it is welcome in that it is substantially more than what we might have received under a previous Government.
Mr. Roger Berry: Does the hon. Gentleman acknowledge that the total grant to South Gloucestershire council, in cash terms, has increased by about 40 per cent. during the past four years, which is dramatically more than under previous Governments? Will he acknowledge that his concerns about the SSA for South Gloucestershire are shared by all political parties on the council and by all local Members of Parliament, including me?
Mr. Webb: I am grateful for the hon. Gentleman's support, of which I am well aware, for my argument that the SSA formula is unfair. I would say, however, that local political responses have been seasonally adjusted. When the Government announced the extent of their support in November, all three parties said that it was a scandal. When the council announced a council tax rise based on that unfair system, complaining about underfunding suddenly became a lonely business. Accusations were suddenly made that the council was not controlling its spending properly, and the Conservative opposition have been known to make mischief, having said only a few months earlier that the funding settlement was not adequate. I will deal with the hon. Gentleman's point about grants in a moment.
The settlement of 6.6 per cent. is not bad, but the fundamental point is that it is 6.6 per cent. of not enough. It is important to put on the record that built into that increase is the assumption that the council will increase council tax by roughly 5 per cent. Regular letters to the local press say, "We have to keep in line with inflation; why can't the council?" The first answer to that is that the Government assume that the council will not. They build into their allocation an assumption that council tax will be increased by double the rate of inflation before spending pressures have been considered.
As the hon. Member for Kingswood (Mr. Berry) said, separate grants go the local authority. The question is whether they change the system. Before we consider the grants, we should examine the spending pressures on the authority. Why was the SSA increase of £11 million or so not enough? One reason is that the authority has faced a near-doubling of people presenting themselves as homeless. The authority has a statutory duty to respond humanely to such people. It cannot turn them away or say, "Sorry, you are not in the budget."
That increase in homelessness is a nationwide problem, but it is particularly acute in South Gloucestershire. The homelessness tsar and his staff and departmental staff have been to South Gloucestershire to examine the council's response to homeless people and have recommended no changes. No fault has been found in the way in which the council responds to homelessness, but there has been a huge rise in the problem, for all sorts of reasons, which has put a further £500,000 on the budget for the year to come and meant that there were no underspends this year. Normally, interest income underspends bail the council out, but this year there have been additional pressures as a result of issues such as homelessness and falls in interest income from previous years.

233WH
The council has had to find money for other matters. Every three years or so, pensions schemes are reviewed for teachers and council staff. The council has a statutory duty to ensure that the funds are available, and has been told to put another £1 million into the budget to find that money. That sum, which is in addition to keeping services going, represents perhaps another 2 per cent. on the council tax. Another £900,000 has gone on what is known as single status, to level up the standards of manual and non-manual workers, whether women or men. Such matters are entirely laudable, and if a council did not act on them it would be taken to court, but the council tax payer has to pay for them.
A further £500,000 was required for the fire authority. Again, the council has no control over that, but simply has to levy the money. Another spending pressure is the £600,000 in matching funding when the Government take welcome action, not necessarily on core services but additional ones, and the council receives the money only if it finds money of its own. In a tight budget, that puts additional pressure on council tax.
In previous years, underspends have arisen, perhaps because of interest income helping to offset some spending and perhaps because of pressures that did not materialise. Now, pressure from homelessness and loss of interest income means that reserves have had to be run down by probably slightly more than £3 million in the budget. As a result, the reserves are almost gone and the burden falls on the hard-pressed council tax payer.
The hon. Member for Kingswood mentioned the grants that councils receive. They are mainly for schools and social services. The grants direct to schools are extremely welcome. However, given that the council has a policy for passporting all the money that it receives for schools directly to the schools themselves, the grants do not directly relieve the pressure on the council tax payer. The council does what it is told by passing the education money on to schools. It does not know what the schools will receive, so it cannot say that it will give less than any specific sum, and the Government would be unhappy if it did.
To an even greater extent, the grants for social services do not relieve the pressure on the council tax payer. Some £3 million is set aside for preserved rights cases, which involve people who used to be paid by the Department for Work and Pensions and are now the responsibility of the local authority. To match that £3 million grant, there is a £3 million or so liability. As my hon. Friend the Member for Somerton and Frome said a few weeks ago, that money has been dished out to councils in a way that reflects the SSA formula. That penalises us again. It would be wrong to say that councils have done well to receive millions of pounds and should reduce council tax when they have gained liabilities that more than exceed their grants in some cases. Likewise, £500,000 this year and £1 million next year for bed blocking is welcome, so far as it goes. At the same time, a grant to promote independence among elderly people has been cut by £500,000. One has to consider the whole.
The key point about the additional grants is that, welcome though they are, they do not pay for core services, except those to schools. They are for welcome
234WH
innovations, but often do not help the pressure on core services. When they require matching funding, they can make matters worse, and when they are allocated through the SSA formula, worse still. My director of social services cited the example of an initiative to help disabled children, for which the council received a grant total of £32,000. It had such a small SSA for children that, once the formula had been applied, the sum had almost gone on the employment of one person and overheads. The SSA formula is wrecking the system.
The key point for us in South Gloucestershire is that when the new system is introduced next year—I hope that the Minister will reassure us that it will be—we will not have to wait years and years for any significant gain from it. I may be wrong and we may gain nothing, but I hope that there is only one way to go, given that we start at the bottom of the league table. If there are gains for authorities such as South Gloucestershire, they must be brought in quickly. I understand that if there are gainers in a fixed pot, there will also be losers, and that some cushioning has to be provided for the losers. However, I hope that the Minister will assure us that councils that are not fairly funded will not have to wait years for that injustice to be dealt with. If a ceiling is put on gains, I hope that the ceiling will be on gains per head rather than on the total SSA—or whatever succeeds that assessment. That would at least reflect the fact that we need more money just to stand still. A ceiling that remains determined on the basis of total cash will be prejudiced against growth areas.
In the longer term, the entire council tax system needs sorting out. Pensioners in my constituency who are just above benefit levels are often those hardest hit by large council tax rises. They do not receive help through the benefit system and have to pay the full whack of any increase, although their incomes have not risen by much. In the long term, we need a local government system that is closely related to ability to pay, and council tax is not such a system. The priority is to deal with that unfair system and make reforms quickly, because the people of South Gloucestershire have waited long enough.
1.15 pm
The Parliamentary Under-Secretary of State for Transport, Local Government and the Regions (Dr. Alan Whitehead): I am grateful to the hon. Member for Northavon (Mr. Webb) for giving us the opportunity to debate the local government finance settlement for South Gloucestershire for the coming financial year. He referred to the debate initiated by the hon. Member for Somerton and Frome (Mr. Heath) in this Chamber recently, on funding and the standard spending assessment for Somerset. Several points raised in that debate are relevant today.
I welcome the statement of the hon. Member for Northavon that the purpose of today's debate is not to claim that this year's settlement was uniquely bad or robbed councils of all their funding. The deeper issue that we should consider is how the funding formula works and how it distributes money to local authorities in general. That was the substance of his contribution.
It is worth repeating some of what I said in the debate on Somerset's standard spending assessment. This year's settlement is a good one for local authorities

235WH
generally. It provides £3.3 billion more in general grant than in 2001–02, on a like-for-like basis. The 7.4 per cent. increase, taking into account all the grants that it represents, is more than three times the rate of inflation. However, I accept that the Government may truthfully say that the national settlement is good, while local authorities—and hon. Members discussing the settlement in the context of individual authorities—may say that it is not good, or that it does not do what they had hoped. That is not merely because the settlement varies greatly in different regions but because the funding formula continues to produce outcomes that individual local councils find perplexing. Hon. Members have often made that point in this Chamber.
South Gloucestershire council has benefited from the extra investment that we have made in local government. In the two years before 1998–99, which included the first year under this Government, South Gloucestershire received an average SSA increase of 3.6 per cent. each year. Since then, it has received an average increase of 5.7 per cent. Under our proposals for next year, it will receive a general grant increase of 6.8 per cent., or £8.16 million. This builds on the 4.5 per cent. that the authority received this year and compares favourably with the overall increase for authorities in England of 5 per cent., and for shire unitary authorities of 5.2 per cent.
On top of the increase in its general grant, South Gloucestershire will also benefit from the increases in ring-fenced grants, particularly in the areas of education and social services, on which I shall comment later.
It is not true that, in those settlement figures, the Government automatically assume that council tax will rise by the 5 per cent. or so that the hon. Gentleman mentioned. It is true that there were reports in the newspapers a little while ago of Treasury estimates that it was claimed were a built-in, council tax-assumed increase in the local government settlement. However, that relates to Treasury estimates of the council tax yield and is a composite calculation, which includes a possible increase in council tax, the continued improvement in the rates of council tax collection by local authorities and the additional properties that will be taxed through the council tax mechanism in the next year. That composite is not the same as an assumed increase. Indeed, because different local authorities have different circumstances, the Government have made no assumptions for an assumed increase in council tax across authorities before a grant is considered.
The hon. Gentleman emphasised the fact that, despite the good settlement for South Gloucestershire this year, there are substantial elements in the history of its funding and its nature as a unitary authority that cause him to believe that there are continuing problems in funding it. I am sure that the extra grant will have been welcomed by the local authority, but I appreciate that more fundamental concerns exist about the method of distributing grant between authorities, and I am aware of the general feeling among local authorities in the south-west that they do not receive a fair share of the grant overall, an issue highlighted in last week's Adjournment debate on Somerset.
I repeat the comments that I made in that debate. We recognise that the current system has its flaws. I have myself as a leader of a local authority fallen victim to a system in which the outcome of formula change reduced
236WH
the grant increase to my authority, despite there being apparently no change in its responsibilities. The SSA formula tends to penalise authorities that had relatively low expenditure in the early 1990s when it was introduced.
South Gloucestershire would no doubt have wanted the Government to make changes this year, but we did not want to impose a system on local government without agreement that it would be fairer or more transparent. It is true that where population figures lag behind actual growth that can cause problems with grants, but a decline in population can also cause a problem, because the continuation of services does not relate arithmetically to the reduction in grant following a reduction in population. One cannot reduce one 29th of a teacher per classroom to compensate financially for the reduction of one child per classroom following a reduction in the number of children. Whichever way one looks at it, the SSA formula has problems.
I join the hon. Gentleman in emphasising that not everyone can be a winner from the changes that may eventually be introduced. We must therefore look closely at all the issues and consequences for councils of any proposed changes so that, winners or losers, they relate clearly to the way in which that new formula will work for them.
We are committed to a fundamental reform of the SSA formula and we are working to create a local government finance system that distributes grants fairly and effectively and gives councils greater financial autonomy to help them better to meet the needs of their local communities. As far as possible, we shall work with local government and try to build a consensus on how those changes will work.
Mr. Webb: I am grateful for what the Minister has said so far, but I tried to express the frustration that local residents feel about the unfairness and the need for urgent change, and he mentioned the need to build consensus. Only today I received a copy of a letter from him to the hon. Member for Woodspring (Dr. Fox) who had suggested that he and I and the hon. Member for Stroud (Mr. Drew) went to see him as an all-party delegation. In his letter, the Minister said that he would not meet us. How can he get consensus if he refuses even to see us?
Dr. Whitehead: I received—indeed, the Department received—a large number of letters, as we have in previous years, from local authorities wishing to discuss particular issues relating to their settlements during the period of consultation after the announcement of the provisional grant. The Department took the view this year that it would be appropriate and right to meet a number of different local authority groups to discuss the nature of the settlement—not just the Local Government Association but the county network, the unitary authorities and the district councils—and those meetings have taken place.
However, having a large number of meetings over a short period of time was not felt to be very productive for the settlement. I recall writing a letter to the hon. Member for Woodspring emphasising that although written submissions would be welcome, it was not appropriate at that stage to hold a large number of

237WH
essentially similar meetings with particular local authorities. It was hoped that discussion on representations with groups of local authorities would be a more appropriate way to make concerns felt. The hon. Member for Northavon has, however, taken the opportunity of securing an Adjournment debate in this Chamber on his local authority.
The hon. Gentleman mentioned the vexatious issue of area cost adjustments. That factor in grant distribution reflects the higher cost of recruiting and retaining staff in the south-east, but there has always been controversy about how it is calculated, especially in areas that fall outside the boundary. Numerous research projects over the years have tried to find a better solution. We have conducted research openly, and local government has had every opportunity to scrutinise and debate the research projects, but unfortunately there has been no final agreement between authorities on the merits of the different options. We therefore decided not to rush into changing the area cost adjustment, but we are considering that as part of next year's review of grant distribution.
Some authorities complain about being just outside the boundary and argue, as the hon. Member for Northavon mentioned, that their pay pressures are comparable with those of the bordering authority. I have considerable sympathy with that argument and we have reviewed the issue carefully. Despite a considerable body of research commissioned in that area, local government remains divided. Finding the answer will not be easy, but we are committed to working with local government on it.
We shall update data, including the area cost adjustment, as normal for 2002–03. We have been working with local government to ensure that that is done in the best way possible and have taken on board some of its concerns, such as on new methods of
238WH
measuring road lengths used in SSA indicators. We have made concessions in terms of not implementing new methods of road length measurements this year. That has been put off until a future date.
We continue to discuss with local government how best to implement the formula, flawed though it is. I hope that, as a result of the discussions that we shall hold and the calculations that we shall make, we will have a simpler, fairer and more transparent system based on need and a notion of what local authorities see going into the calculations. That system should divide up the global grant total available for local government in such a way that local authorities can see that the overall grant cake has been divided up fairly, whether they have been winners or not.
In an earlier year, we introduced the floors and ceilings mechanism essentially set out in the Green Paper on local government finance as an option for the future. We felt that the continued substantial variations in grant between local authorities as a result of the way in which SSAs were working, produced, especially among district authorities, very wide variations, ranging from 0 to more than 10 per cent. Having a floors and ceilings mechanism was therefore important. The hon. Gentleman will know that, in the context of the floors and ceilings mechanism for unitary authorities, we have changed, again as a result of discussion with local authorities, the system whereby poor authorities pay for the very poor. Some £41 million has gone into the settlement to ensure that mid-range authorities do not pay to bring lower authorities up to the floor.
I assure the hon. Gentleman that I will take into consideration the points that he has raised today. The Government believe that we shall provide a good settlement for 2002–03, but there will be winners and losers. Nevertheless, next year's settlement will be good for South Gloucestershire. We are coming to the end of the six-week consultation period, and we shall listen carefully to all issues raised by local government during that process.

Occupational Pension Schemes
1.30 pm
Sandra Osborne: I am pleased to have the opportunity to open today's debate. I shall raise the plight of more than 1,000 workers who were employed by United Engineering Forgings. The matter affects not only my constituents but those of numerous other hon. Members because UEF workers were employed in six manufacturing locations in the United Kingdom. Within the time available, I shall endeavour to accept interventions from hon. Members who want to contribute to the debate.
I recognise that my right hon. Friend the Minister for Pensions may have difficulty commenting on much of the detail of the case, although I know that he has received correspondence and is aware of the situation. The position in which the members of the UEF occupational pension scheme have found themselves illustrates inherent weaknesses in the current rules that must be urgently addressed. I therefore hope that his response will inform the Chamber of the Government's intention further to strengthen pensions legislation to ensure that workers can never again be deprived of their rightful entitlement for which they have paid all their working lives.
I intend to show that this case has been caused by the irresponsible and cynical actions of UEF's major shareholder, Prudential Portfolio Management Ventures Ltd., which is part of the Prudential Group—ironically, a leader in pension provision. UEF was the former British Steel forging division that was purchased by PPMV in 1997. In January 1997, the chief executive of the company informed the group's trade union representatives of his five-year plan for the business, the aim of which was to launch the company on the stock market at the end of those five years.
The UEF company pension scheme originated in 1974 under the ownership of Guest, Keen and Nettlefolds. It was designed for GKN by the Prudential and was introduced as part of the 1974 annual wage award. It was a final salary scheme, in which the employer contributed 10 per cent. and employees contributed 5 per cent. of their pensionable earnings. The scheme was well run under GKN, and from 1986 by a new company, United Engineering Steels and Forgings. Actuarial reviews were held regularly and surpluses were the norm. When it was realised that there was a deficit, the employer fully funded the shortfall to the scheme, thus ensuring that benefits were maintained.
Until UEF bought the company in 1997, early retirement benefits were usually allowed only when the employer was satisfied that an employee's health was in such a poor state that they could no longer work. When UEF took over, it transferred the scheme as a mirror image, but a change was made to ensure that new members joining the scheme would not be offered the generous early retirement benefits that existed for its present members, which is ironic when one considers what happened later. In August 1997, when the transfer value was agreed, the scheme had 1,953 active members, and a board of seven trustees that was chaired by the company's financial director.
240WH
In September 1997, the first member of the pension scheme retired. However, the business was not going as well as the company had hoped, and it had started to make a loss. That fact is recognised by the employees, but it was the responsibility of the employer and the trustees to ensure that the pension scheme was funded properly. Some sites initiated voluntary redundancies in order to reduce their wages bill. The pension scheme, with its generous early retirement benefits allied to redundancy payments, certainly looked an attractive option to employees over the age of 55. Early retirement, however, required the company's consent. Former employees believe that the pension scheme was the carrot used by the company to ensure that many employees would volunteer for redundancy, with those of 55 years of age and over receiving their fully accrued pension. As I hope to show, scant regard was paid to the effect of this on the pension scheme and future pensioners.
To illustrate the effect of this redundancy policy on the pension scheme, an employee aged 55 years who had been a member of the pension scheme since 1974 would be entitled to a weekly pension of £100 per week plus a cash lump sum. If one assumes a life expectancy of 80 years, that person alone would cost the pension scheme £125,000 to £150,000.
In April 1998, the pension scheme had 47 pensioners and 27 deferred pensions. By September 1998, that had risen to 128 and 49 respectively. Some sites within UEF were employing new people, but they were temporary workers who were not allowed to join the scheme until they had been employed for a year. That did not help the situation, however, because fewer eligible members were paying into the pension scheme as more members were being taken out.
By April 1999, the pension scheme had 283 pensioners and 94 deferred pensions. The number of active members paying into the scheme had dropped to 1,712. In October 1999 the trustees, on the advice of Bacon and Woodrow, approached the board and asked it to increase its contributions, as the minimum funding requirement had dropped from the 120 per cent. funded in April 1998 to 100 per cent. in April 1999, and was still dropping. The advice was that the contributions required were now 19 per cent. The board refused to increase its contribution, and by March 2000 there were 373 pensioners and 139 deferred pensions, and the minimum funding requirement was down to 96 per cent. In April 2000, the board sold the Smith Clayton Aerospace division and the pension scheme then had 190 fewer paying active members.
In June 2000, the company decided to take action. Employees were asked to contribute another 2 per cent. on top of their existing 5 per cent. to help fund the scheme. The company would also pay 2 per cent., making a total contribution of 19 per cent., as previously requested by the trustees but refused by the board the previous year when the need was first highlighted. The employees were told that if they did not agree to pay the extra 2 per cent., the pension scheme would cease. Also a pensions roadshow was held at each site to explain to the employees why management was asking for the extra funding when the trust deed decreed that the employer should fund any shortfall, as previous employers had done.

241WH
The company went into administration on 12 June 2001 or shortly thereafter, and an independent trustee to the pension scheme was appointed by the court. He reported that the pension scheme was grossly underfunded and would have to be wound up immediately at a cost of £3 million, which would leave a shortfall of £12 million.
I am sure that my right hon. Friend the Minister and other hon. Members present will understand that the work force were devastated. They were always told what a good investment it was to pay into a company pension scheme and how it would provide them with a wage in their retirement.
John Robertson: I thank my hon. Friend for raising this subject. Does she agree that the Government must protect such occupational pensions? Many large companies have used and abused the early release schemes and the same could happen to them and their pension schemes as happened to the one mentioned by my hon. Friend.
Sandra Osborne: I thank my hon. Friend for that intervention. I hope to ask the Government later what action they intend to take.
Although such employees have taken the advice of Governments past and present and provided for their retirement by faithfully contributing for 20, 30 or even 40 years, so that they will not be a burden on the state, the expected pension from their fully accrued final salary scheme will not be there when they need it most—as they enter retirement and old age.
Miss Julie Kirkbride: I congratulate the hon. Lady on securing this debate; I, too, hope to secure such a debate. I am sad to say that her constituents' experience is mirrored by that of mine, but with one brutal difference. Mine appear to be losing not only their financial security in retirement but their jobs, and I hope that the Minister will say something about that.
Sandra Osborne: As the hon. Lady knows, receivership has had varied outcomes. I am pleased to say that a buyer has been found, but that will not diminish the serious impact on people's pension entitlement.
Such employees are now told that they must buy an annuity from whatever the reduced transfer value amounts to, but it will probably provide a pension far short of what they have paid for. Employees who are within one or two years of the normal retirement age must now live with the fact that, although they have no time to make up their pension deficit, younger employees who took advantage of the early retirement offers will reap 100 per cent. benefits for the rest of their lives.
I have permission to give the example—it is just one—of Mr. Willie Riggins, who has worked in what is known in Ayr as the Stampworks for 37 years, and has paid into the pension fund since 1976. In 1999, Willie received a quote for what he would be due—£29,500 in a lump sum and a pension of £137 a week—if he took early retirement. According to a recent quote for a
242WH
stakeholder pension, however, he would get a lump sum of £12,500 and a pension of £40 a week. Those sums are based on the average transfer value in 1997, and would be even less now.
My right hon. Friend the Minister has stated in letters to colleagues that if a scheme is funded to at least the minimum funding requirement, it should provide fair value for the accrued rights of non-pensioners in the event of insolvency. However, what if, through the neglect of people who should know better, it is not funded to MFR levels? Again, to ensure that the scheme's funds are used for the intended purpose, there are restrictions on the amount that can be invested from the pension fund into the employer's business. However, what if misuse is not direct and monetary? What if the pension fund is used to cut the company's wage bills, and the fund is overburdened without taking account of future requirements?
Dr. Richard Taylor: Does the hon. Lady agree that the methods of complaint available to pensioners and future pensioners are weak and inadequate? First, they must go to the independent trustee, and then to the office of the Occupational Pension Schemes Advisory Service, which by its own admission has no teeth. Only then can they go to the ombudsman. Several of my constituents are trying such methods, but they are cumbersome and apparently useless.
Sandra Osborne: I agree with the hon. Gentleman. I must curtail my comments because of time constraints, but I should point out that the Government have themselves recognised that MFR levels lull people into a false sense of security about their pensions.
It is clear that the responsible course of action on the part of trustees and the board would have been to put in enough money to ensure that the scheme was fully funded, and to take account of the company's financial problems by freezing those funds. That did not happen timeously, however. What can the Government do to impose sanctions on such irresponsible behaviour? While advising employees to increase their contributions because of the underfunding problem, PPMV was trying to offload its shares to the company and was totally uncommunicative with the work force, and others, in the process. For example, they refused to meet me and, to my knowledge, other Members of Parliament, to discuss the situation. Ironically, Prudential was keen to discuss it with me yesterday, but unfortunately it was a wee bit too late in the day.
I call on Prudential, even at this late stage, to sort things out. The shortfall is a drop in the ocean to it, but would make a huge difference to the lives of my constituents and of others. If it wants to retain its reputation, it should get round a table with the employees' representatives and live up to its responsibility for the whole sorry tale.
I am aware that the Government have been considering various aspects of occupational pension schemes and have recognised their importance. They have consulted on aspects that could lead to improvements, such as insurance and a central contribution fund, but have rejected them. I would like to hear about any proposals that will improve the

243WH
situation that the Government have accepted. Will the proposals prevent what my constituents and those of other hon. Members experienced?
1.46 pm
The Minister for Pensionsb (Mr. Ian McCartney): Good afternoon, Mr. Gale. I thank my hon. Friend the Member for Ayr (Sandra Osborne) for bringing this matter to the attention of the Chamber and for eloquently giving voice to the concerns of not only her constituents but those of a significant number of hon. Members across the House. They have directly suffered from the collapse of this company through the loss of pension entitlements and, in some instances, jobs, careers and the financial security in which they had been investing for future years.
I will attempt to answer as many of the questions as possible in the time available. I can offer a number of things to my hon. Friend the Member for Ayr and hon. Members who have not been able to attend today. I offer a further meeting to discuss the issue in more detail and consider improvements to the private pensions industry. A half-hour debate does not do justice to my hon. Friend's case or the general issues that the Government must address. If, by the end of the debate, I have not answered some questions, I will send a detailed letter to my hon. Friend that can be circulated to other hon. Members, who will then be fully aware of the response that would have been given had the debate lasted for an hour.
My hon. Friend said that she was extremely disappointed about the fate of the company. She greatly contained her anger. As a former trade union shop steward, I heard alarm bells and wondered whether we had heard this all before. A company has been bought out, or there has been a management buy-out, even though it has a good market record and order book, seems to have a product with added value in the marketplace, has substantial potential for development, and has a base in the UK economy and an order book for elsewhere. For a reason unknown to my hon. Friend and the work force, there is a venture capital company involved that may take a short-term, rather than long-term, view on the other company and its capacity to expand and improve its market share. I cannot comment on that, other than to say that we are in the ironic position that a venture capital company owned by a major insurance company is involved in the pensions industry. It is a further irony that Prudential was involved in the establishment of the original scheme.
The company has been led into taking short-term attitudes as a result of the pressure of investing in other pension funds. My hon. Friend the Member for Ayr is right to pursue a meeting with Prudential to ask it about the decision-making process behind the way in which, ultimately, that company has been unbundled as it has. Parts of it have been completely closed off, others have been sold to competitors and parts of its assets, including land, have been sold off by those put in charge during the winding-up process.
My hon. Friend asked a number of questions, and I will try to respond to some. My hon. Friend the Member for Aberdeen, Central (Mr. Doran) was not able to catch your eye, Mr. Gale, but I think that he had a point to make about the minimum funding requirement. The
244WH
Government consulted on the future of MFR and, in the light of the responses to that consultation, have decided that most recommendations must be implemented by primary legislation. We cannot undertake them simply by regulation.
We decided that if we were to develop our legislative proposals and introduce a Bill as soon as parliamentary time was available there should be further consultation. We have set up a consultation panel of representatives from the pensions industry and other interested parties including representatives of pensioners and trade unions. It will meet on a regular basis during the coming months to assist us in developing legislation.
Mr. Frank Doran: Following my right hon. Friend the Minister's invitation, I could not resist intervening. Does he accept that MFR, as presently constituted, is a double-edged sword? It is a protection for pensioners, but in my own constituency, just this weekend, my major non-oil private employer, Richards plc, was advised by its trustees to close down its pension fund simply because the fund was falling into deficit. The major reason that the trustees cited for that was the effect of MFR in the present economic climate. The anticipated returns were unachievable by a company in a hard-pressed manufacturing sector.
Mr. McCartney: I cannot comment directly as my hon. Friend invites me to. If he wants to write to me, I shall certainly comment, but let us remember why MFR is there. Whatever propositions come up later, certain principles are involved. One of those is, in all circumstances, the capacity to ensure that the employer makes good a deficit. The question is what is the most appropriate way of doing that, and we have decided that it is not the MFR regime as it currently stands. The review of MFR is not to get rid of, undermine or reduce an employer's obligation to make good funding requirements, but to find the most appropriate way of doing that on a consensual basis. If my hon. Friend writes to me, I shall send him more details about the review and what has come out of it.
The first meeting of the panel took place on 16 November, and agreed a work programme for activities with me. Hopefully, I will be able to report on that later in the year. Again, in a letter to my hon. Friend, I shall set out the work that has been done so far.
My hon. Friend the Member for Ayr asked about the discontinuance fund and rightly said that my predecessor consulted on it and found little or no support for the proposal. That was mainly because other defined benefit schemes made it clear that they did not want their members to help pay the deficit of members in other occupational funds. The Government are not in the business, and cannot be, of being a financial guarantor to every defined benefit scheme in the country. That is not feasible. Therefore, there is no consensus on well-run fund schemes being part of a fund to meet the needs and shortfalls of others.
Another issue raised was insurance to meet solvency concerns. Again, a consultation on that took place under my predecessor, and again there was no consensus on the system of safeguards for funders. It was thought feasible to have insurance on the terms that my hon. Friend talked about, but it was argued that the scheme would be even more complex than MFR. I am prepared

245WH
to examine insurance and will write to my hon. Friend about it. There is an issue there about finding ways and means for the scheme under difficult circumstances: because of the way in which the company has been wound up, it is outside the capacity of the members to use MFR or any other means. I am prepared to look at that matter again and give my hon. Friend a more detailed answer.
As to the question on employment that the hon. Member for Bromsgrove (Miss Kirkbride) asked, perhaps she could write to me with the details. The Department for Work and Pensions has a complete and professional Employment Service that works in local labour markets. I shall be more than happy to make the connection between the company and the Employment Service, if they have not already met, and to sit down with them to discuss the services that can be provided for those who will get redundancy notices. I will deal with the matter appropriately with my ministerial colleague at the Department responsible for employment services.
Despite what my hon. Friend the Member for Ayr said, I assure hon. Members that the vast majority of schemes have important safeguards that continue to protect members. A few weeks ago, I announced that I am carrying out a quinquennial review of the operation of the Occupational Pensions Regulatory Authority, and I shall report back on that later this year. I hope that by the end of the year we will have recommendations on the future of OPRA in relation to its effect on the regulatory regime, whether it should be more proactive, rather than reactive, whether it has enough resources to do the job and, five years after its establishment, what more we can do to make it more effective.
OPRA investigated this case. It has powers to impose financial penalties, to bring criminal prosecutions, to disqualify a scheme's trustees and to refer cases to the police or the special fraud office. However, it does not generally supervise the actions of trustees. Where there is wrongdoing, it has powers to act on behalf of those who made the complaint. OPRA first had inquiries about United Engineering's pension scheme in June 2001. The information that it obtained established that there was no breach of rules on which further action could be taken. Specifically, there was no evidence of theft or fraud having taken place. My hon. Friend is
246WH
concerned about whether the company acted appropriately in carrying out its fiduciary duties. That has been taken up with the Occupational Pensions Schemes Advisory Service and the ombudsman.
If the hon. Member for Wyre Forest (Dr. Taylor) will write to me with details, I will investigate the reasons for the delay. I cannot comment on why it is taking so long, but I will look into the matter on his behalf.
Mr. Dennis Skinner: I hope that when my right hon. Friend finally receives the report he will err on the side of more regulation, not less. This goes way back to 1988, when the Tories were in power talking about regulation being a bad thing that should be got rid of. They are still at it. We should be able to regulate those private firms to ensure that they carry out the wishes not only of my hon. Friend the Member for Ayr (Sandra Osborne), but of all the others involved. I urge my right hon. Friend, when he gets the report and takes action to introduce the Bill, to err on the side of more regulation, and let us hope that Conservative Members do not come to the House of Commons bawling about it.
Mr. McCartney: I thank my hon. Friend for that comment. However, it is a matter not of more regulation but of effective regulation. In my old position as a Minister at the Department of Trade and Industry, I was probably responsible for about 80 per cent. of Government regulation in the last Parliament, whether for the minimum wage or employment relations. I am not averse to using regulation, but it must be effective.
In the past we had layer upon layer of regulation going on for decades, mounting to the point where the books of case law are extremely thick, but there are still areas where it has been ineffective. That is the reason for the simplification review. We must strip out all the regulations that are doing nothing to support and develop pension schemes, to protect members' interests or to help and encourage companies to continue to fund them. We cannot force companies to have defined benefits schemes. It is therefore important that the regulatory regime should meet the balance of requirements in terms of the schemes that are established. I give my hon. Friend the Member for Ayr the absolute assurance that any regulations that are introduced will be effective.
It being Two o'clock, the motion for the Adjournment of the sitting lapsed, without Question put.