Westminster Hall Sitting of 9 July 2002

Preamble
[SIR ALAN HASELHURST in the Chair]

Refrigerators
Motion made, and Question proposed, That the sitting be now adjourned.—[Mr. Kemp.]
9.30 am
Angela Watkinson: I am grateful for the opportunity to debate the effects of the European Commission's regulation on the safe disposal of waste freezers and refrigerators. It has affected industrial and commercial appliances since October last year, but has also applied to domestic appliances since 1 January this year. Before I highlight the practical problems being experienced by local authorities in implementing the new duties, I will outline the background to the regulation.
The possibility of damage to the ozone layer from chlorofluorocarbons—that is the last time I will say that word in full—was predicted in 1974. In 1985, the Vienna convention for the protection of the ozone layer was framed to promote precautionary action. In 1997, an international agreement was reached to reduce progressively the use of CFCs and halos—the Montreal protocol to the Vienna convention. That has now been ratified by 156 countries, including all industrialised nations. Recent reports that the United Kingdom faces a growing pile of old refrigerators is perhaps the first obvious impact of the Montreal protocol. In 1999, the United Kingdom agreed to a European directive that would require all CFCs from refrigerators to be recycled from 1 January 2002.
In July 2001, it was brought to the attention of the United Kingdom Government that the directive would also cover insulating foam in the doors and walls of refrigerators. The Government have complained about the late timing of the information passed on by the European Union, but the 1 January deadline caught them unaware. The Minister stated that he did not believe there was a precedent for a delay in the implementation of the directive when the matter had already gone through Brussels. Unfortunately, the Government did not even ask for a delay in the implementation of such a worthy directive. A delay or phased implementation would have eased the many problems now being faced by waste collection and disposal authorities. Sites could have been identified for the recycling of refrigerators and other electrical goods.
The habit of refitting the kitchens of homes when they exchange hands means that many redundant refrigerators are still serviceable and in good condition. If they could be reused, the numbers requiring degassing and disposal, either by high temperature incineration or to landfill, would be reduced. In response to a parliamentary question, the Minister said that up to 3 million domestic refrigeration units are disposed of in the United Kingdom each year. A large number of them seem to be in my constituency.
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Old refrigerators must be treated in one of three ways. The whole refrigerator may be disposed of in an incinerator. That process is expensive, and means that the metal elements of the refrigerator cannot be recycled. It has also been suggested that they can be disposed of abroad. However, refrigerators are now classified as hazardous waste, and thus cannot be exported. Perhaps the right hon. Gentleman will be kind enough to clarify that point when he sums up. Moreover, transport costs are very high. The best available option is that proposed by the Government: that refrigerators be disposed of in purpose-built reclamation facilities in the United Kingdom. However, the Government do not seem to have made provision for that most sensible means of disposal. Although the Department for Environment, Food and Rural Affairs has allocated £6 million to help local authorities deal with the storage costs of the refrigerators that they cannot dispose of, none of that sum is payable until the next financial year.
Mr. Michael Jack: My hon. Friend has rightly alluded to the length of time that it took for the Government to wake up to such matters. Is she aware that the Minister received a letter dated 24 November 2000 from Dixons Group plc that alerted the Government to the ending of both the company's free take-back scheme and the export potential of those refrigerators, and to the consequences? The Government did not react to that timely warning.
Angela Watkinson: I am grateful to my right hon. Friend for his helpful intervention. I have received many letters from retailers about that very point. The potential exists for the retailer take-back method, which offers opportunities for refurbishment and resale, to take 20 per cent. of waste refrigerators from the waste stream. It is a great pity that that method is not available to the retail trade.
Mr. Jack: I am grateful to my hon. Friend for allowing me to intervene again. She may have noticed that, when I gave her that piece of information, the Minister intimated that he vigorously disagreed. In his reply to the letter that I mentioned, Lord Whitty says:
"A number of questions have arisen during the implementation of Article 11 and we are addressing these problems as a matter of urgency."
Is my hon. Friend aware that we learned that refrigerator mountains were beginning to build up in December 2001, yet that letter was written a year earlier? Does she consider that to be a demonstration of urgency of action by the Government?
Angela Watkinson: My right hon. Friend is right, of course. Another problem is that additional costs are piling up on local authorities, which have a duty to collect redundant refrigerators if retailers do not take them back.
The Minister for the Environment (Mr. Michael Meacher): I intend to respond vigorously to all those points when I catch your eye, Mr. Deputy Speaker.
Of course we received that letter in September 2000, but I vigorously indicated my dissent because we did not need to be warned by Dixons, as I made perfectly clear

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to the Environment, Food and Rural Affairs Committee. We were the first to raise the issue with the Commission in February 1999, about 20 months earlier. We took the initiative: we did not need any warning from retailers. The problem was that the Commission did not answer the perfectly proper question that we asked.
Angela Watkinson: Let me give an example. Essex county council has estimated that its costs are expected to be in the region of £1.68 million. So far, its predicted share of the £6 million sum is likely to be in the region of £50,000. The shortfall will have to be found from council tax, at a time when the difference between central Government grant and the spending requirements of local authorities is widening annually at an alarming rate. On the other hand, the East London waste authority, which services my constituency, has yet to learn how much funding it might be given. Havering council accepts and collects, via its bulky refuse collection service, only domestic refrigerators and freezers, which are temporarily stored at a local civic amenity site. Neither Havering nor any of the other ELWA constituent authorities accommodates commercial refrigerators and freezers. Between November and July—a period of only seven months—Havering had almost 5,000 refrigerators and freezers weighing 204 tonnes collected from its civic amenity site by ELWA collection vehicles, which required 153 vehicle movements.
A recent ELWA report highlighted the scope of the problem when it revealed the expectation that the authority would receive between 7,000 and 40,000 units. The speculative nature of the numbers involved illustrates one of the difficulties in planning that service. As the containers have to be stacked for onward shipment to Germany, closed-top containers must be used to meet health and safety and licensing requirements. A short-term contract was let, which allowed the disposal of approximately 5,500 units. However, the report pointed out that ELWA was receiving 574 units a week and that, by the end of June, more than 10,500 units would be stored at its refuse transfer station.
The report went on to identify options and associated costs for the disposal of refrigerators. The option chosen by the board of ELWA was the disposal of all units within the current financial year. That would have the advantage of clearing the RTS site as quickly as possible, and there would be no burden on future years' expenditure.
The total estimated cost for 2002–03, including storage and disposal, is between £750,000 and £1 million. Havering alone, one of ELWA 's four constituent authorities, has roughly 95,000 properties. It can expect between 9,500 and 19,000 units a year, depending on the life of a refrigerator; the figures are based on a lifespan of five to 10 years. The council has to offer a free collection service to deter fly tipping, and that is an additional burden on its budget.
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The guidance that outlines the legislative requirements for the collection and disposal of refrigerators is highly prescriptive. It imposes many new duties for which authorities are unprepared in both practical and financial terms. The standard that practitioners should achieve is an ozone-depleting substance loss of 15 to 25g per unit, which can be achieved by using a fully automated mechanical recovery plant with an integrated degassing unit. It is anticipated that losses in that range would certainly be acceptable from a Montreal protocol perspective.
The following requirements in the guidance involve techniques that prospective practitioners may not have anticipated: the removal of ozone-depleting substances prior to the storage of the appliance; extraction of both the oil and refrigerant in the same step; and, possibly, the pre-heating of appliances prior to degassing. Best practice would also involve degassing in a controlled environment where fugitive releases of ODS could be recovered. In the interim, the pragmatic decision has been taken that degassing can take place in the open air. Although degassing outside a controlled environment introduces an additional uncertainty regarding the overall ODS recovery efficiency from cradle to grave, it is currently considered acceptable, given the unquantified loss of ODS from handling and transport operations.
The standard licence is for the pre-destruction and storage of refrigeration equipment, including refrigerators. The conditions require the removal of foodstuffs and loose materials, cleaning, and the removal or securing of doors before the refrigerator is put into storage. That is defined as pre-treatment. The storage prior to pre-treatment, and the pre-treatment operation itself, must be undertaken on an impermeable surface. Once the pre-treatment has been done, the refrigerator can be removed to hard-standing for short-term storage of less than 12 months.
If refrigerators are stored for more than 12 months, the compressor must be drained of refrigerant and lubricating oil, and that draining operation must be done on an impermeable surface. The standard licence is to be used for the pre-destruction treatment and storage of waste refrigeration equipment only, and is not to be issued without modification in flood-risk areas.
The uncertainty about the long-term funding of that highly complex service makes it very difficult for disposal authorities to commit to long-term contracts. That is slowing down the process, and is resulting in a greater backlog than is necessary. The most immediate need is for a fast, non-bureaucratic reimbursement system, backed up by documentation, so that local authorities can forward plan with confidence. They need to be able to expand their local civic amenity sites where electrical goods can be brought for recycling, to provide proper storage facilities, and to form partnerships with refurbishing organisations such as Renew Trust.
Mr. Jonathan Sayeed: Is my hon. Friend aware that some time ago, in answer to a question of mine, the Minister said that the Government would fund any new duty imposed on a local authority? Is she aware of whether the Government have quantified how much they expect to pay local authorities, and

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whether they have offered funds to those local authorities to help them to prepare for what will undoubtedly be an environmental catastrophe?
Angela Watkinson: I am grateful to my hon. Friend for that intervention, because the main thrust of the debate is that local authorities are unprepared, both financially and in practical terms, to deal with those expensive new duties. The £6 million that has been promised will be spread thinly over local authorities across the country, and that will leave an enormous shortfall that local authorities will have to make up out of their council tax.
Mr. Jack: My hon. Friend mentioned the thinness of resource for local authorities to store refrigerators and the fact that the Minister estimates that the cost of disposing of the existing mound of refrigerators will be some £40 million. The trade suggests that it could be as high as £60 million to £70 million. It remains unclear who will pay for the disposal of those refrigerators, let alone what will happen in future.
Angela Watkinson: My right hon. Friend is right. Security of funding is necessary for all authorities that deal with the storage or disposal of fridges, to enable them to enter into long-term contracts. Until they can do that, there will be no lessening in impact of either the existing fridge mountain or the one gathering as fridges continue to flow into civic amenity sites throughout the country.
Renew Trust is typical of a refurbishment company that specialises in taking in redundant fridges for resale to housing associations and social services. I understand that legislation to reinstate retailer take-back is not expected before 2004. Interim measures to enable the service to be reinstated before then would greatly benefit that sector of the waste management industry. That would also prepare for the waste electrical and electronic equipment directive, which is wending its way through the European Parliament and will introduce new measures to reuse, recycle and recover all electrical and electronic equipment in order to reduce their disposal to landfill.
The lessons from the fridge disposal debacle need to be learned. The cost impact of the WEEE waste electrical and electronic equipment directive on both large and small businesses as well as waste collection and disposal authorities needs to be assessed. The last thing we want is a computer mountain that makes the fridge mountain look like a molehill.
9.47 am
Paddy Tipping: I am pleased to follow the hon. Member for Upminster (Angela Watkinson), who spoke properly and strongly about the problems affecting her area. It is a national problem. Between 2.5 million and 3 million fridges are discarded each year. According to the Minister, the cost of the episode is £40 million, although informed estimates from the private sector suggest that it could be much more—about £60 million to £70 million.
It is important to look at the landscape. Over the weekend, I visited Burntsump waste disposal site in north Nottinghamshire to see the piles of refrigerators. It will clearly take some time to resolve the problem.
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The episode has not reflected well on any of the parties involved. Following press speculation and the Select Committee report, it is important to draw lessons for the future. In introducing the new regulation, it is important in environmental terms to achieve more than we have so far.
The Select Committee report refers to the regulation being rushed through Parliament at a breakneck speed. It took three weeks for Parliament to consider that important matter. I appreciate that that is a matter not for the Minister but for the House and the appropriate Committee, but we need to look carefully at how we deal with the increasing amount of European Union legislation on the environment in particular.
Malcolm Bruce: The hon. Gentleman makes a good point. What emerged from consultation on fridges and end of life vehicles is that negotiations with the EU seem to be led by the Department of Trade and Industry. However, the Department with responsibility for implementation and enforcement is the Department for. Environment, Food and Rural Affairs, which was not party to the process, and was not fully informed about what was agreed. Is not that an obvious lacuna, and an example of a total lack of joined-up government?
Paddy Tipping: One of the things that emerges from this episode is that several Departments were involved, such as the DTI and the forerunner of DEFRA. When discussions took place at the management committee in Brussels, it was not always clear which official and Department was taking the lead in the negotiations. However, it is significant that when the British Government, and Governments across the EU, signed up to this regulation, they did not have a clue about what they were signing up to.
Malcolm Bruce: Does the hon. Gentleman agree that there was pressure to reach political agreement before the details of the ozone-depleting substance regulation and subsequent European environmental legislation were sorted out, and that, in retrospect, that has turned out to be the Achilles heel of this approach to environmental legislation?
Paddy Tipping: That is absolutely right. One of the lessons that we can learn from this regulation is that it is necessary to involve politicians at an early stage, when things appear to be going wrong. There was a protracted discussion between the Minister's Department and officials in Brussels—I know that the Minister will tell us about that—and I believe that there were faults on both sides. However, when the Minister became directly involved in July 2001, things began to happen. I make no complaint about the way that officials worked, but it is clear that things were going badly wrong. There had been a series of discussions to try to resolve the matter, but when the Minister became involved, progress began to be made. When difficulties of this kind arise, the Council of Ministers ought to be brought back into the discussion.
Mr. Sayeed: If I heard the hon. Gentleman correctly, he suggested that other EU countries were no more ready than the UK. Is he aware that, as of October 2000, four other EU member states were fully prepared to deal with this problem?
Paddy Tipping: There is a mixed response across the EU. Some countries, such as Germany and the Scandinavian nations, were well prepared. However, some EU countries have not made the progress that the British Government have made—and we have still got problems.
I return to my point. A political agreement was reached. A technical discussion then took place about the way that the regulation was going to be introduced. Problems arose, and at the end of the day—three years after the initial discussion of the regulation—we have environmental problems, because there was a lack of proper planning in this country, and across the EU.
Two lessons must be learned from that process, and talked about further. The right hon. Member for Fylde (Mr. Jack) talked about the private sector. Companies such as Comet had spotted that there was a problem, and it tried to tell the Department about it. It might not have been pitching at the right level in the Department, but it is clear that the private sector perceived that there was going to be a problem. That lead them to withdraw the take-back scheme. Their messages should have been picked up sooner. We must also have a better and more thorough discussion about the technical nature of the problems as such regulations are introduced.
Therefore, the process of introducing the regulations is difficult, and it should be improved. I take on board the point that it is important to get this right now, because there is a great amount of European legislation that will have an impact on this country. The landfill directive will change radically, and for the better, the way that waste is disposed of in the UK. The hon. Member for Upminster mentioned the end of life vehicle directive and the WEEE directive, both of which are sitting on the Minister's desk. They present major challenges for the Government. I would like to say—and I hope that the Minister will reassure me—that we are better prepared for the introduction of that legislation, but I am slightly ambivalent about that.
With regard to the end of life vehicle directive, a decision was taken only a few weeks ago that the last owner should pay for the disposal of the vehicle. That will lead to real difficulties. I know that steps and measures have been taken to try to mitigate them, but, potentially, the problem of abandoned cars and vehicles will become another real issue for the Government. It could be the end of the road for good quality waste disposal governed by DEFRA. Similarly, the WEEE directive affecting electrical equipment great deal of potential to cause problems.
The hon. Member for Upminster mentioned the costs to local authorities. On balance, the points that she made were pretty fair. Let us examine what has taken place so far: £6 million was made available to local authorities in 2001–02 for storage costs in the first three months of this calendar year. That money has been paid to local authorities via the standard spending assessment, through the distribution mechanism. However, when one asks local authorities, "How much money are you getting to store refrigerators?", they do not know, because it is drip fed throughout the year.
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I have tabled parliamentary questions asking the Minister to specify how much money has been paid to each local authority in 2001–02. I am concerned that, after pressing this matter for some time, we still do not have that breakdown in black and white. In the light of those comments, I am sure that the Minister will examine the matter and respond quickly.
The hon. Lady quite properly asked about the real costs for the current financial year. Three months into this financial year, no announcement has yet been made. We must have an announcement at an early date so that local authorities know where they stand. At the end of the day, if their costs are not reimbursed—and I doubt that they will be—they will knock on to the local council tax payer.
We need some indication from the Minister in the near future about the way forward, which, in a sense, should be to go back to what we had before. Companies such as Comet that provide new fridges should have a take-back scheme. When we refit our kitchens and buy new equipment, it makes obvious sense to have someone take the old equipment away. I would like to see a take-back scheme introduced quickly. I know that there have been discussions between the interested parties about that, and, in March, the Department issued a potential protocol for the way forward. My impression is that all the stakeholders are keen to take that forward.
Mr. Sayeed: Is the hon. Gentleman aware that, in last Sunday's "Captain Cash" column in the News of the World, the Minister said that he was ready to
"announce the return of the take-back service."
The Minister added—and I hope that this is an accurate quote:
"I hope that we get it in place within a few weeks, but certainly in the next couple of months".
In the discussions that he has had with retailers, will the Minister tell us where they will restore, refurbish or recycle the refrigerators?
Paddy Tipping: Retailers, including Comet, run schemes throughout the country. White goods are taken and refurbished. The scheme has the potential to offer refurbished goods to families with limited incomes, and alongside that is the opportunity to train people with employment problems due to such things as long-term employment or disability. We should focus on such a scheme because it is the way forward.
Unfortunately, I did not have the opportunity to read the "Captain Cash" column in the News of the World on Sunday. I look at only the front page of that paper to ensure that my name is not there; I never look at the inside pages. I shall peruse the "Captain Cash" column very diligently.
Mr. Simon Thomas: The Western Mail might not have reached Sherwood yet, but if the hon. Gentleman had read it today, he would have seen a picture of Europe's largest fridge dump of 35,000 refrigerators at Newport dock. The story in the paper is more encouraging because it mentions the opening of the United Kingdom's first fridge and freezer recycling facility. If we work with such facilities, and distribution companies, manufacturers and sellers of the products, the recycling circle will be finished. The key to success will be not only the useful additional recycling for less well off families that the hon. Gentleman mentioned, but the 35,000 fridges in Newport that will be processed there by a new facility.
Paddy Tipping: The hon. Gentleman has raised an important point that leads me to the final points that I wish to make.
The Government are consulting on a protocol on a way forward: the notion of fridge recycling credit. It would help all parties involved to be told by the Minister today whether that scheme will be introduced within three or four weeks, or whether it will take longer.
Angela Watkinson: Does the hon. Gentleman agree that the additional benefit of the retailer take-back scheme is the fact that as refrigerators are carefully collected, stored and transported, and kept upright, it is more possible to refurbish and resell them? Refrigerators that come via local authority collections are not stored and transported carefully, and I understand that only about 1 per cent. have the potential to he reused.
Paddy Tipping: The hon. Lady is absolutely right. The Minister has direct experience of that because the storage mountain for his region is close to his constituency. There has been controversy about the way in which refrigerators have been stored there. If fridges are stored properly and stacked correctly, there is a much better chance of recycling and reusing them.
I turn to the point that was raised by the hon. Member for Ceredigion (Mr. Thomas). There has been much investment in Wales, and there will be much investment throughout the country. The real lesson from the story is that the United Kingdom Government have a good record on environmental matters. We have an emerging environmental industry and emerging environmental technologies. With good leadership and forethought about legislation, that technology can be developed and investment can be made. We can not only enhance the environment, but build a new environmental technology industry that can be the envy of Europe.
10.3 am
Mr. Simon Thomas: I congratulate the hon. Member for Upminster (Angela Watkinson) on securing this important debate. It is as timely for people in Wales as for those in south-east England.
The background to the debate is that 2.5 million refrigerators a year are thrown out. What are the Government doing to minimise the way in which we
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treat those important white goods as disposable assets? We must be able to work harder with fridge manufacturers and retailers to see whether there could be more direct recycling at source, rather than having fridges go through the waste stream first and then returning as recycled material. We should consider that key point.
If a fridge still works, we should discourage people from throwing it out and encourage them to hang on to it for another year or so, rather than buy the latest cobalt blue or shiny gunmetal grey model. They should be content with their old white fridge, with alphabet magnets and poetry stuck all over it. It is sometimes environmentally more sound, because of the environmental costs of manufacturing, not to buy a new product but to continue with a slightly older one.
In our wasteful society, we have been throwing away 2.5 million fridges a year, which has a huge environmental cost. It was right and proper that the Governments of the European Union introduced legislation to try to deal with the chlorofluorocarbons found in fridges, because the link with the thinning of the ozone layer is proven. This Government had four years to prepare for that legislation but, regrettably, were not sufficiently prepared to facilitate recycling—or even incineration of fridges at designated sites, which is another option for some fridges. I am sure that we shall hear a reason for that before long.
As I said, we have been throwing away 2.5 million fridges a year, but when the legislation was introduced, we had the ability to dispose of only 8,000 a week, so we had only a 10th of the recycling capacity needed for discarded fridges. Any fridges discarded since January have either been stacked up by the local council on a farm, waste disposal site, at Newport docks or wherever, or sent to an approved facility abroad.
As I mentioned in my exchange with the hon. Member for Sherwood (Paddy Tipping), the good news, certainly from the perspective of people in Wales, is that Sims Metal has just opened the first fridge and freezer recycling plant to deal with the problem. Currently, it has 35,000 fridges, but that is expected to increase to 400,000. The plant can deal with commercial appliances from throughout the United Kingdom; it is not only for Wales. The plant is the fruit of a partnership between the private sector and the National Assembly for Wales, and Assembly money has been invested in it. An element of Government money is needed to kick-start a recycling facility to deal with CFCs from fridges.
The Government are spending £6 million to tackle the problem—that is mainly for storage costs, as we have heard—but I think that the Environment, Food and Rural Affairs Committee report estimated a cost of £40 million, which could increase to as much as £64 million. We in Wales have an interest in central Government's investing in local authorities. After all, we benefit from any increase in public spending in England through the Barnett formula and the block grant, so any investment in England to meet the demands of the hon. Member for Upminster would eventually be good for Wales—although not as good as it should be, because of the formula, but that is another debate.

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The other positive element was touched on by the hon. Member for Sherwood: the increasing numbers of local fridge recycling schemes. There are two in my constituency. CRAFT recycles all kinds of goods and delivers them to people on benefits, those who cannot afford new goods and those with a particular need. There is a direct relationship. Such goods are removed from one household, refurbished by unemployed people or those with learning disabilities, and then sent to another household. That virtuous circle benefits the community in Aberystwyth.
Another, ambitious project involves the Ceredigion Materials Conservation Association, which is trying to recycle just about everything in the county. I am pleased that it is in line for an award at the Royal Welsh show to acknowledge its success.
Mr. Sayeed: Is the hon. Gentleman aware that, although the recycling of fridges is extremely valuable to employment prospects and gives poorer people adequate forms of cooling food and so on, there are problems? Under the regulations, not just the directive, recycling must be conducted under controlled circumstances, and is therefore extremely expensive.
Mr. Thomas: I accept that point, but facilities to engage in such control will spread throughout the United Kingdom. If we are to create the right virtuous circle in the recycling of fridges, there should be—I expect it—at least one such facility in each local authority area.
The report apportioned "overwhelming responsibility" I think that those were the words—to the Government for the current fiasco. However, there is also confusion with the European Commission. Points were well made about future directives, and I would like some Select Committees—for example, the Environmental Audit Committee or the Environment, Food and Rural Affairs Committee—to have an increased role in scrutiny. There is a tendency for matters to be passed to European Scrutiny Committees, never to be seen again. Most Members do not involve themselves in the processes of European Scrutiny Committees or Standing Committees as perhaps they do in those of Select Committees. If they did, that might be a way forward.
In advance of the debate, I contacted all 22 unitary authorities in Wales, as I wanted to know the picture. Some 16 authorities responded, and I will tell hon. Members about some of their experiences. Interestingly, only one or two local authorities reported an increase in fly-tipping. However, they reported an increase in storage and related costs. Several authorities now charge between £5 and £10 to remove fridges. That is not a huge sum of money, but for someone who cannot afford it, that is a significant disincentive to having a fridge removed from a property, when previously a retailer may have exchanged it for a new one. Three local authorities now charge. That may be a disincentive, but they claim that there is no evidence for that. One local authority claimed that he charge was to stop hoax callers—people who call out the local authority for nonsense reasons, such as asking it to remove garden rubbish instead of the fridge.
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The crucial point is that the maximum charge of £10 is met by a fee of between £28 and £30, which local authorities have to pay other contractors to remove fridges. That is a huge funding gap, which I do not want the National Assembly for Wales to fill entirely, even though recycling is a devolved issue. It is down to the UK Government and the way in which they have treated the issue. They need to propose a financial settlement for all local authorities throughout the United Kingdom. The figures that I have to date suggest that the new plant in Newport is likely to charge approximately £17 to £18 to take away each fridge or freezer, which means that local authorities there will also be out of pocket.
I am told that fridges and freezers can be recycled in Europe at about £4 to £5 per unit, which worries me slightly. First, why is it much cheaper to recycle fridges in Europe than in this country? Secondly, I worry that there will be an export of fridges from this country to Europe for processing. That entails the hazard of exporting waste, although I have no doubt that there would be a way of doing it. I am concerned that one environmental "good" will be undermined by another environmental "bad". What will be the cost in fossil fuels of transporting all these fridges to be processed abroad? We will be trying to reduce the damage to the ozone layer while increasing greenhouse gas emissions. That is like shutting the vents on the greenhouse and turning up the paraffin heater. It makes no sense to deal with fridges in that way.
I hope that the Government will consider the matter carefully and ensure that it is economically and environmentally sound to deal with fridges in the United Kingdom. We should also minimise the transport of fridges, which is an environmental cost in itself. We are not going down this route in order to incur other environmental costs.
I shall conclude with one thought about how we should deal with the problem in the long term. There is a central provision in environmental and fiscal legislation hat the polluter pays. We will not solve the problems of waste and recycling of fridges until the cost of disposing of them is built into the cost of purchasing them. That should include the cost of removing and recycling the fridge, which would mean a slight increase in the purchasing price of about £10 or £15 per unit. That is not a huge amount to pay to create a cleaner, better and healthier environment. I hope that the Government will examine that solution for the medium term.
Mr. Deputy Speaker (Sir Nicholas Winterton): Before I call the next hon. Member, I should say that I want to call three further speakers. I shall start the winding-up speeches promptly at 10.30 am, because the Minister should have proper time to reply to the debate, which is important to the people of this country.
10.15 am
Ross Cranston: Thank you, Mr. Deputy Speaker. I shall be brief.
There are very important lessons to be learned, and I congratulate the hon. Member for Upminster (Angela Watkinson) on securing the debate and on the dispassionate way in which she spoke. Unfortunately, some of her right hon. and hon. Friends have used previous debates as an opportunity for argy-bargy and

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to attack my right hon. Friend the Minister. I support him, and it is universally acknowledged that he has been a splendid Minister for the Environment, who has commitment and energy.
The European Community breached three important principles of law making in passing the legislation. The first is the principle of clarity. The regulation was not clear, and a passage in the excellent report of the Environment, Food and Rural Affairs Committee identified 23 areas of ambiguity. That is unacceptable; laws must be clear. There may be universal agreement on a policy, but unless the law is expressed clearly, it will not be effective.
The second principle is that the implications of the law must be understood, but they were not. As my hon. Friend the Member for Sherwood (Paddy Tipping) said, with other regulations and directives coming through, it is important that the implications are fully understood. One implication of which the Government did not seem to know was that some 40 per cent. of domestic fridges in this country were refurbished and shipped to Africa.
The third principle is consultation. It is vital that those affected by laws are consulted, so that the implications can be understood. We can never have perfect foresight about a law's implications, but there are definite lessons to be learned as a result of this case.
I want to speak briefly about the restoration of the take-back scheme, which has already been mentioned by the hon. Member for Upminster and my hon. Friend the Member for Sherwood. The regulation stopped the scheme, under which retailers collected the old equipment when they delivered new fridges. That put a stop to important schemes such as that operated by the Renew Trust in conjunction with Comet. I pay tribute to both, especially Comet for supporting the scheme in a socially responsible way.
The Renew scheme had several advantages. First, meant that fridges would be in a good condition when they were collected. As the hon. Member for Upminster pointed out, some 20 per cent. could be refurbished when they were collected, rather than the 1 per cent. of those collected by local authorities. Secondly, disposal is more manageable. The company delivers the new fridge and takes back the old. Thirdly, Renew employs and trains the long-term unemployed and people with disabilities. I have a personal interest in that, as Renew was planning to open an outlet near my constituency—just over the border in West Bromwich—at which some 30 long-term unemployed people were to be employed and taught skills of renewing disposed fridges.
My question to my right hon. Friend the Minister is about the future of the take-back scheme. My hon Friend the Member for Sherwood mentioned the draft protocol, which was published earlier in the year and involves other stakeholders including local authorities, retailers and the Department for Environment, Food and Rural Affairs. My right hon. Friend mentioned that in a newspaper article earlier in the year. The draft protocol has been published. What progress has been made on restoring the take-back scheme?
Finally, we are not good Europeans if we sign up to any old law simply because we might agree with the policy. We must ensure that the law is clear, efficacious and practical.
10.20 am
Mr. Roger Williams: I congratulate the hon. Member for Upminster (Angela Watkinson) on securing the debate. I must say, when I was elected I was unprepared for the fact that so much of hon. Members' time was dedicated to talking about fridges—not even nice shiny new fridges, but dead fridges. Some of the exchanges at Question Time were a bit bizarre and surreal, reminding me of the dead parrot sketch so beloved of Monty Python fans. This is a dead parrot. This is a dead fridge. However, it is not just one dead fridge; we are talking about many thousands of dead fridges that are building up around the countryside.
While we have been debating the history of the problem, people in the rest of the country have been tackling the technology problems of disposing of and recycling fridges. In the few moments that I have, I will deal with a constituency issue. Mr. Cliff Matthews of Industrial Plastics Recycling of Knighton has proved himself to be able and innovative in the field. He has developed a new technique to deal with what are called dirty plastics, which are plastics that have been used for industrial and household processes. Many have said that they could not be easily recycled, but Mr. Matthews has shown that he is able to do that. He has produced recycled plastic in a quantity and quality appreciated by people looking for feed stocks in the plastic recycling field.
Mr. Matthews is critical of some of the technologies that are used in recycling fridges. He believes that the foam and the plastic in fridges are not separated prior to being fragmented and pulverised and before the degassing process takes place. As a result, after degassing the foam and plastics cannot be separated economically to be recycled. Mr. Matthews has developed a process that separates the plastics and foam at an early stage before the degassing and fragmenting take place. He can then recycle more of a fridge than is possible with current technologies. He goes so far as to claim that he can recycle up to 99.5 per cent. of the fridge. He is critical of some of the machinery that is being imported into the country for the process, because he does not believe that it can achieve an acceptable degree of recycling. He suggests that it might not even meet the requirements of the European directive on the amount of fridge material that can be recycled.
In doing such new and innovative work, Mr. Matthews has had no support from the Environment Agency for England and Wales. I have been working with him to see whether he can get a licence for his process. Far from being encouraged, he is being prohibited at almost every stage from doing his work. I have written to the Environment Agency on several occasions and have received replies. We have reached the stage where Mr. Matthews has been told that it will be at least three months before he has any chance of starting the work he wants to do.
Will the Minister ask the Environment Agency to give more encouragement to people who are doing such innovative work, often at their own cost and through investment of their own resources? The agency should also check whether the other recycling technologies meet European directives on the amount of material in fridges that is recycled.
10.24 am
Mr. Desmond Swayne: Only 16 months into the last Parliament my constituent Mr. Charles Curry, an engineer by training but for a long time the editor of the New Milton Advertiser and Lymington Times—
Mr. Sayeed: God's own newspaper.
Mr. Swayne: Indeed. Mr. Curry sent a facsimile advising me that the directive would cause precisely the events that have been described this morning. If the editor of a provincial newspaper could spot this coming so many years ago, how could Parliament and the Department be unable to spot the same problem? It is extraordinary.
What on earth was the rationale for signing up to article 16? The export of fridges is a perfectly proper way of recycling them: surely sending fridges to people in Africa who want and will use them is better than having them standing leaking CFCs in sites throughout the country. What is wrong with the export trade? What is wrong with the export of CFCs from the European Union, that it should be outlawed in principle?
As for foam insulation, was it reasonable for the directive to require the recycling of the foam? Even if it was reasonable, should we have signed up to it without the capacity to implement it? We have finished arguing about whether it applies to foam because we know that it applied from June last year, so why did we do nothing about it then?
How many planning consents is the Department aware of that have been granted for recycling facilities, and what capacity for recycling fridges is likely to result from them? What will be the allocation for each local authority for the current and the next financial year? I do not expect an answer this morning, but it would be useful for the information to be placed in the Library. What is the size of the current mountain, and what estimate has been made of the number of fridges illegally dumped? How many have been exported to Germany, and what are the cost implications of exporting our recycling? How much more expensive is it to export?
Last year I received another communication from Mr. Charles Curry, who warned me about the end of life directive for vehicles. I am particularly interested because I am a collector of the Dyanne variant of the Citroen Deux Chevaux—I have had five of them. It cost me £60 to get rid of my last one. If the cost of recycling is to be borne by the last owner, how much more will it cost to get rid of the next one? I do this by choice—it is my hobby but many people drive that sort of vehicle out of necessity, because they cannot afford a newer model. Moreover, the editor warned me that I would require a special licence for doing what I customarily do—strip one and use the parts on the other. Can that be true? Can anything so absurd be envisaged?
10.29 am
Mr. Bill Wiggin: As I listened to the debate it struck me that the road to hell is paved with good intentions, and never was there a truer example than the Government's handling of the refrigerator crisis. They had a good idea; they liked the headline, and
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they signed the directive. Then they played for time, lost, and had an environmental crisis on their hands. Since then, they have been looking for someone else to blame.
The hon. Member for Sherwood (Paddy Tipping) valiantly defended the Minister by saying that things got better when he intervened. Moments before, the Minister had leapt to his feet to tell us that he had known about the proposal since 1999. At this stage, blame for the crisis must stop with the Labour Government.
10.30 am
Malcolm Bruce: I congratulate the hon. Member for Upminster (Angela Watkinson) on giving us an opportunity to have this debate, which is overdue and necessary. There has been a mixture of contributions, some from hon. Members who have been up to here with fridges for a long time and some from those who have entered the debate more recently.
First, those who devised the regulation—I think that it was under the Austrian presidency—believed that the technology was already available and being used. The difficulty was that the view in the United Kingdom, which is always laggardly in these matters, was that the technology was impossible and impracticable. Therefore, we could sign the directive because we could argue that what was proposed could not be done, whereas those who drafted the directive knew that it could and would be done and were already doing it, or planning to do it. Peter Jones of Biffa summarised the matter well in his evidence to the Select Committee on Environment, Food and Rural Affairs. He said that
"the Government had lost sight of its own broad environmental strategy to reduce emissions, and rather than embracing the spirit of the Regulation it instead focused too closely on avoiding the burden of implementing its details".
I take issue with the hon. Member for Dudley, North (Ross Cranston) who said that the regulation was full of ambiguities. The regulation was clear—its intention was completely clear. The Government knew that, and spent an awful lot of time trying to avoid implementing it. I record an exchange between a researcher in the office of a Liberal Democrat MEP who covers the environment and an official from DEFRA. When the researcher read out the regulation, the official said, "Oh, shit!", which may be unparliamentary, Mr. Deputy Speaker, but that is what she said.
Ross Cranston: I refer the hon. Gentleman to the evidence to the Select Committee on page 102, paragraph 29, which states:
"The Commission's table of clarifications issued in February 2000 identified 23 areas of ambiguity, including three in Article 15 (now 16) where an agreed interpretation was needed."
Malcolm Bruce: There was a discussion about it, but the Government were relying on the words "where practicable". Everyone engaged in that discussion knew that it was practicable, which is why six countries fully implemented disposal of all their fridges under the existing technology. This month, there will be a mountain of 1 million unprocessed fridges in the UK. I understand—the Minister may correct me—that we have about 600,000 fridges-worth of installed capacity. It will take well over a year to get rid of the backlog before we can even begin to address the continuing problem of more old fridges coming up for recycling.

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The hon. Member for Brecon and Radnorshire (Mr. Williams) was right to say that we should be considering ways to encourage people to refurbish their fridges and hang on to them. The hon. Member for New Forest, West (Mr. Swayne) mentioned Africa. The argument was that Africa solved our problem because the vast majority of our old fridges were exported there. The problem is that when those fridges eventually died, Africa had no facilities to dispose of them. Sending our fridges to Africa did not help our objective of reducing emissions.
We must consider how we can get on top of the problem in respect of the regulation, because we have not done so yet. The cost to local authorities has been mentioned on several occasions. My office tried to analyse the financial implications of the problem. By dint of asking the industry the average cost of disposal and asking local authorities how many fridges on average they disposed of, we came up with a figure of between £60 million and £70 million a year. A spokesperson for DEFRA said that the Liberal Democrats were talking rubbish.
Mr. Swayne: As usual.
Malcolm Bruce: That was said as well. The reality, as has been demonstrated, is that the figure was approximately right.
The real worry, which the hon. Member for Sherwood rightly touched upon, is that local authorities, which are legally and practically responsible, are not being fully reimbursed for the cost of taking and storing fridges. The £6 million that they have received so far is considerably short of the total cost. In addition, they have to move fridges to an intermediate location. They then have to pay the cost of storage, and will have to transport the fridges to the place where they are eventually recycled. All that could have been avoided if we had acted early enough to get the capacity in place.
Biffa was more than willing to make an investment some time ago and in time to meet the requirement of the regulation, but it could not obtain clarification from DEFRA about whether the regulation would be applied. Mr. Jones said that the company would not spend £3 million investing in a plant if some fly-by-night character could come and steal the business away from it. It wants to be sure that the Government will back it up and enforce the regulation. There is clearly a difference of view about the timing, and about when the investment could have been in place.
The reference that has been made to the end of life vehicle directive is relevant. Here is a chance for us to get it right. There is enough lead time on that directive for us to think through what we are doing and solve the problem in advance. As I said earlier, the proposal that the last user should be responsible is honkers and totally unworkable. The hon. Member for New Forest, West may be a responsible chap who pays to have his taken away, but hundreds of thousands of cars are abandoned every year and 15 per cent. of them are set alight. It costs on average £400 million a year to deal with abandoned cars, and that figure could well double if we apply this regulation. It will be a much more expensive problem than the fridges problem if we do not tackle it head on and in good time.
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The lesson to be learned, and I quote the Secretary of State here, is to work with the flow of these European directives and regulations rather than resisting them. We are laggards in this country. I commend the Minister. I accept that he has a commitment to the environment and to implementing policies that will improve our environment and deal with recycling, and I suspect that he sometimes has frustrating experiences in Government when trying to get some of those policies implemented. On 2 May 2002 the Secretary of State said:
"sometimes we have been forced to accept judgements that we have under-implemented in the past. The lesson for the future is absolutely clear: we must engage from the first stages of such discussion, be more certain of what commitments actually mean, and play a full part in negotiation of new directives … It is simply no good attempting to object when the debate is all over bar the shouting."
She is absolutely right, but I am not convinced that the way in which we approach these things has changed.
Austria, Germany, the Netherlands and the Scandinavian countries are way ahead of us in recycling, in terms of both their cultural commitment to it and their practical engagement with it. These are the people who are shaping the regulations and the directives—rightly so, because handing the task of creating a directive to the worst performer would represent the lowest common denominator rather than the highest aspiration. In a sense we should accept that other countries are ahead of us, and take the opportunity to catch up. Obviously I do not know the exact details of his constituent, but the hon. Member for Brecon and Radnorshire put his finger on an interesting point. There are advantages in being late, as long as we are committed to implementing the proposals. That means that we may be able to invest in superior, more efficient and effective technology and thus demonstrate that, late as we are, we can make a realistic contribution to solving the problem.
My plea to the Government is to start doing what the Secretary of State suggests: think things through in good time, encourage people with clear directives so that they know how to invest, and ensure that the mechanisms that we have in place will deliver the desired outcome. The desired outcome is a lot less waste, a lot more recycling and a climate in which the UK can hold its head up high and say. "We are not the worst polluters in Europe; we are setting the best example." However, there is a long way to go.
10.39 am
Mr. Jonathan Sayeed: I congratulate my hon. Friend the Member for Upminster (Angela Watkinson) on securing the debate. Although the fridge fiasco was well catalogued by the British media and the Government have been criticised by pretty well everyone, it is fitting that the House should be presented with another opportunity to discuss how we came to such a sorry situation.
The Minister for the Environment insists that his Department was given the relevant information belatedly, but we have known for many years that no other part of a refrigerator presents such a serious threat to the ozone layer as the CFCs in the insulation foam. Because of that and because the aim of the EU regulations on fridge disposal is to safeguard the

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environment against ozone-depleting substances, a requirement to extract CFCs from insulation foam was inevitable. Other countries met with ease the practicalities of dealing with insulation foam; as early as October 2000, four other EU member states had the technology with which to remove that hazard. It is therefore deeply disappointing and environmentally damaging that the Government did not ensure that the UK was similarly equipped. Had they done so, we could now have a thriving fridge recycling industry.
Ross Cranston: Will the hon. Gentleman give way?
Mr. Sayeed: No, I am sorry; I have only limited time.
Even now, the UK has only one 10th of the recycling capacity needed to implement the regulation. The Minister has admitted to the Environment, Food and Rural Affairs Committee that a £20 million industry exporting refurbished fridges was destroyed under EU regulations. Up to 40 per cent. of the 2.5 million domestic fridges replaced every year used to be refurbished for that export market, or for poorer people in this country. The majority were exported, and most went to the poorest countries in the world which cannot afford new refrigerators in which to store essential drugs. However, the Government have now admitted that until Customs and Excise began to enforce the regulation to stop the export of refurbished fridges, the Government did not realise that the regulations would destroy that life-saving trade.
The Environment, Food and Rural Affairs Committee has confirmed what everyone has said all along: the current fridge fiasco has been caused by the Government's incompetence. The Government alone are to blame. The Committee said:
"the overwhelming responsibility for mishandling the implementation of the regulation lies with the Government."
Those are the words of a Select Committee a majority of whose members are from the Government party.
The result of the Government's ineptitude is that at least 1 million fridges are piling up across the UK with few facilities to combat the problem, which will get worse. Discarded fridges are rotting and leaking the greenhouse gases that the European directive aims to have safely recycled. The Minister proceeded with the regulation without appropriate preparation and has consequently created an environmental hazard that is far worse than the one that would have occurred if he had delayed or done nothing. The Select Committee has found that the fiasco will cost the UK about £40 million, which would not otherwise have been incurred. Local authorities say that it will cost them £65 million this year alone. If we add to that the extra cost to householders and the cost for next year, we will be facing an unnecessary bill of more than £100 million.
It is imperative that the Government accept the blame for this fiasco, and learn the necessary lessons from it. Implementation of other EU directives, such as the end of life vehicle directive and the WEEE directive, is imminent. The Government must ensure that we have the ability to deal with redundant products before these directives are implemented.
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When the Minister discussed matters with the Environment, Food and Rural Affairs Committee, he blamed EC officials for their tardiness in providing an authoritative ruling on whether foam was included in the regulations, but he withdrew an allegation that the European Commission was incompetent. When the Commissioner made it clear that it was the Minister who was in the wrong, the Minister blamed the waste industry for having claimed that it could provide facilities to meet the deadline for recycling foam. He neglected to say that his Department had not informed the industry of the rules under which it would have to operate. The only people who have avoided the Minister's—but not the public's—censure are the Minister and his officials in DEFRA. Even if the EU was tardy, it is an abysmal dereliction of duty not to have done what other countries did, which was to make contingency plans.
In the past, the Minister has made extravagant comments about himself. He has claimed that his performance as a Minister has resulted in the climate change programme, the Countryside and Rights of Way Act 2000, the home energy efficiency scheme, the energy efficiency commitment, and a commitment to end fuel poverty within 10 years. Most other people have a very different opinion from the Minister's about the Government's record on the environment. Carbon dioxide emissions have increased over the past two years. Labour Members have joined Conservative and Liberal Democrat Members to stop the Government scuppering the Home Energy Conservation Bill, and hurting the fuel poor.
I accused the Minister of being the environmental fig leaf for a Government who did not give a fig for the environment, and the Minister's self-congratulatory examples prove my case. Commenting on the Government's five-year record on the environment, the Minister's erstwhile friends in Friends of the Earth highlighted the importance of the environment in modern politics and the lack of political will on the part of the Government. It would be straining parliamentary language to quote what the Home Energy Conservation Partnership has said about the Minister.
DEFRA's lack of foresight has resulted in 13 million old tyres smouldering away and polluting the atmosphere, and mountains of old fridges with no means to recycle them. Unless the Minister learns from his mistakes, they will be joined by thousands of incinerated cars and millions of dumped televisions, all of which will blight what was once a green and pleasant land.
10.48 am
Mr. Meacher: There is certainly a major difference between the speech of the hon. Member for Upminster (Angela Watkinson), who presented a balanced, thoughtful and fair case about the problems in her constituency and in general, and the extraordinary rant that we have just heard from the hon. Member for Mid-Bedfordshire (Mr. Sayeed), who spoke from the Conservative Front Bench, which was the biggest farrago of nonsense that I have heard since he last spoke.

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The hon. Lady made the point that the Government reacted too late. However, as I have related the facts so many times, I am astonished that Conservative Members are so unwilling to take on board what actually happened, and prefer to resort to the kind of political slapstick that we have just had from the Opposition Front Bench. I will take the hon. Gentleman through what happened.
legislation was passed in December 1998 by the Austrian presidency, which was keen to reach agreement quickly. Although the legislation was not published until August 1998, it went through in December of that year because of strong political pressure to secure early agreement under the Austrian presidency. That is one thing that went wrong. The real point is that no one—not the presidency, the Commission, or any Department in any member state—questioned the idea that the regulation applied only to the coolant circuit of refrigerators. That is what everyone believed. Prior to December 1998, when the regulation was passed, no one, including those in the waste management industry in the UK and elsewhere, asked whether it also applied to insulation foam. The UK industry raised the subject with us two months later in February 1999, and we immediately raised it with the Commission.
As I have said on nine separate occasions in the past two and a quarter years, between February 1999 and June 2001, my officials raised the matter at every management committee meeting, which was the right place to do so. They also raised it at formal meetings of the Commission, held to decide any details left unresolved in the Council of Ministers and to settle how directives and regulations should be implemented. My officials did absolutely the right thing. I have heard the Select Committee's response that "overwhelming responsibility" for the issue lies with the Government—the words have been correctly quoted—but that is the biggest travesty of the reality that I have ever heard.
Malcolm Bruce: Will the Minister give way?
Mr. Meacher: I am unwilling to do so, because I have hardly any time. This will be the last intervention that I allow.
Malcolm Bruce: The information from the European Commission says that on 1 October 2000 it was made clear that foam should be removed. It was the British Government who questioned the practicality of doing so.
Mr. Meacher: That is simply not the case. The Commission's view before October 2000, and afterwards, was that of the UK industry—that foam removal was probably not required. There was a question about whether the "if practicable" part of article 16 applied. We continually asked for certainty on that matter, because the industry needed it. It was not until we insisted, out of the normal cycle of events, on having an extraordinary meeting in June 2001 that it was finally decided, after lengthy and anguished discussions, that it did apply. We then immediately put in place all the measures that we could in respect of local authorities, the waste management industry, and investors, in order to deal with the situation.
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I absolutely insist that the Government could not have done more. The only thing that my officials accept—I must say that I agree with them—is that I should have been brought into the matter earlier. I was not informed until July 2001, and in retrospect, I think that that was wrong, and my officials agree. As I have said publicly, I would have contacted the Commissioner. I would have raised the matter in Council meetings, and I believe that I could have got an earlier answer. However, on the basis of the facts that I have given, the fault lies absolutely and wholly with the Commission. There are lessons for us to learn. I do not want to get into an argument with the Commission, but I have given the facts, and I need those facts to be recognised.
The UK industry has now made the investment necessary to enable the safe disposal of fridges. I entirely absolve it of blame for the fact that seven months was too short a time for it to be able to do so before 1 January 2002. Four plants have been operating for several weeks. Another opened last week, and a further five are due to come on line this year, two of them in August. We therefore expect the fridge mountain to begin to reduce from October.
The hon. Member for Upminster asked, perfectly fairly, why we did not delay implementation of the directive. Of course we thought about that. It would have been desirable, but the directive does not have to be transposed into UK law; it is a regulation that has applied automatically to every member state from 1 January 2002. Once it had been passed—in fact, two or three years before that—it required the agreement of not only the Commission but all member states to delay its implementation. As has been said repeatedly, four member states already had the relevant technology and would not have agreed, so we could not get a postponement of the directive.
Exports have been ended—rightly, I think—because developing countries do not have disposal facilities. The object is to prevent leakage or gassing, which causes gas to enter the atmosphere and deplete the ozone layer.
I have said, and I repeat what others have said, that our best estimate of the initial annual UK cost is about £40 million. That cost will decrease as plants are commissioned—I have already said that there will be 10 by the end of the year—competition becomes established and more fridges that do not require treatment enter the waste stream.
I was asked about the retailer take-back scheme. I am keen for the scheme to resume operation. The decision to stop it was not required by the regulation, but it was a commercial decision taken partly because of the end of the export trade. The retailers said that they could not continue the scheme without adequate treatment facilities. The main barrier to the scheme is the increased cost associated with fridge disposal. I hope that we will soon be able to make a statement about funding, although any decision must be taken in the context of the spending review. Further to several meetings that I have held with the retailers, I believe that conditions required to put the retailer take-back system in place are fulfilled.
My hon. Friend the Member for Sherwood (Paddy Tipping) mentioned lessons, and there are two to be learned. I agree with hon. Members who have said that

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we should follow through all implementation details before passing a directive or regulation. Of course, that is right. It did not happen this time because prior to December 1998, nobody anticipated the full implications. We must learn that lesson and ensure that this situation does not happen again. The second lesson is that if there are outstanding details, the European Commission's management committee must reply promptly. I underline that several times.
It was correctly said that four member states had the technology in place at the outset. Eight member states now have plants to deal with fridges, and at least four or five have adequate capacity to handle all their waste fridges. Luxembourg hires a plant to deal with its fridges as necessary. The remaining six or seven member states are in a worse position than the UK. By the end of the year, or shortly after, we will be able to reprocess the vast majority of our fridges, and certainly 1.2 million per year by the end of next month. We have made substantial progress.
I turn to the waste electrical and electronic equipment directive—WEEE—and the end of life vehicles directive. Both directives must be transposed into UK law before they are applicable, which gives us time to implement them properly. That is the key point. We will not implement the directives until we are confident that facilities are in place. Fridges were covered by a regulation, which meant that it came into force in all member states automatically.
It is a key point that we will not have the uncertainty about each new directive that we had with fridges. The WEEE directive is subject to conciliation, and it is still going through Brussels. It will not come into force until 2004, which gives us sufficient time to deal with it. We are consulting local authorities and industry even before the directive has been finally approved.
We carried out one round of consultations in March 2001 on the hazardous waste directive, and a second round will be held later this year. Legislation is now in place implementing the landfill directive in England and Wales. There has been uncertainty about the waste acceptance criteria. Brussels has extensively delayed letting us know what the criteria will be, and they will not be finalised until a vote is taken on 23 July. We need the criteria in order to decide the different classes of landfill and what is hazardous, non-hazardous or inert. That information has still not been provided.
As the hon. Member for Gordon (Malcolm Bruce) said, the Department of Trade and Industry is leading the way on implementation of the end of life vehicles directive, but I assure him that there is the closest liaison about it. Even though both Departments are involved because of their different interests, we are working closely to ensure that the directive comes into force smoothly. The technology is already available and we do not foresee any problems.
Mr. Deputy Speaker: Order. We must now move on to the next debate.

European Union
11 am
Mr. Wayne David: I was a Member of the European Parliament for 10 years. I was elected in 1989, and one of the first things that I was told when I arrived in the Chamber was that as the European Union was a democratic entity, if it applied to join itself, it would not be admitted. Of course, what was meant by that was that in those days, although the EU was strong on the rhetoric of democracy, there was little there of any substance.
However, I saw a dramatic change take place during the 10 years that I was a Member of the European Parliament, which was brought about by fundamental treaty alterations. There was the Single European Act, which Mrs. Thatcher had the good sense to support, and the treaties of Maastricht and Amsterdam.
Because of those treaty changes, the European Parliament has significant democratic powers today. It has the power of scrutiny over other bodies such as the European Central Bank and the European Commission. It has significant budgetary powers, and can have significant influence over the EU budget for non-compulsory areas of expenditure. Most importantly, it has a range of different and significant legislative powers, chiefly the power of co-decision, which the Parliament uses in a responsible and coherent way.
The powers of the European Parliament were most clearly demonstrated in 1999, when it dismissed the Santer Commission en bloc. That single act had a profound influence on the people of Europe's perception of the European Parliament. It also markedly changed the power relationship between the European Commission and the Parliament. We should remember that the European Parliament is the only institution that is directly elected by the people of Europe. National Parliaments and the European Parliament should work together in partnership.
Mr. Richard Spring: Would the hon. Gentleman care to observe whether he thinks that the sense of connection between MEPs and the electorate has been enhanced or diminished by the change from first past the post to a list system of election?
Mr. David: My personal view is that the move to the unfortunate form of proportional representation that we now have was a retrograde step. I am convinced that first past the post is the most appropriate method of election in this country for all tiers of government—and that definitely applies to the European Parliament.
As well as the European Parliament, there is the European Commission. The Commission is the custodian of the European treaties. It has the sole power to initiate legislation. It represents the EU as a whole in trade negotiations, provides the administration of the EU and overrides sectional interests in the broader interests of the Community as a whole.
As well as having those significant powers, the Commission is the subject of constant criticism, not least by the tabloid press. How many times have we heard tales about square strawberries and straight bananas, attempts by the Commission to introduce

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fishermen's hairnets, and other nonsensical stories? When I was a Member of the European Parliament, the fishermen's hairnets story was running in the UK tabloid press, and I made inquiries of the Parliament and the Commission to see where that story had emanated from. No one had any idea. Almost in desperation, I visited a famous watering hole in Brussels called Kitty O'Shea's for half a Guinness, and lo and behold, I met the members of the British press corps joking among themselves. They had invented the story about fishermen's hairnets and sent it back to the UK, and to their amazement, it hit the front pages of the newspapers. That is a fair indication of how the irresponsible press in this country all too often misrepresents what happens in the European Union.
It is worth remembering that, although it is not faultless, the European Commission has only 17,000 civil servants—a bureaucracy far smaller than the many Government Departments in this country. The EU bureaucracy is also one of the most open that I have come across. It is often easier to gain access to Commission civil servants than it is to civil servants in this country.
The third element of the triumvirate of important institutions in the European Union is the Council of Ministers. It is there that power ultimately resides; it is there that most decisions affecting the development of the EU and the lives of European citizens are made, whether through unanimity or qualified majority voting.
Over the past couple of years there has been an increase in the influence of the Council of Ministers, particularly over the second and third pillars of the European treaties—the pillars of common foreign and security policy and the embryonic European defence and security policy, and justice and home affairs. People often ask whether the Council of Ministers is democratic. The European Council meets four times a year. It is made up of democratically elected Heads of Government, who are drawn from national states. The Council of Ministers, which makes many key decisions, is made up of national Government Ministers, elected by the people and accountable to national Parliaments. It is important to bear such matters in mind when considering democracy in the European Union.
Many unfair criticisms are made of the EU, and they are often extremely nationalistic in tone. Nevertheless, we have to accept that most people in the European Union regard its institutions as remote. Some regard them as irrelevant, and that is clearly shown by the low turnout for the European Parliament elections, not only in this country but in other EU countries. Those of us who believe in Europe and in democracy must accept that things have to change, and change radically. The status quo cannot be the way forward. I was pleased therefore that there was clear acceptance of that at the Laeken summit. A key extract from the declaration agreed by member states at Laeken is:
"The European Union derives its legitimacy from the democratic values it projects, the aims it pursues and the powers and instruments it possesses. However, the European project also derives its legitimacy from democratic, transparent and efficient institutions…The first question is thus how we can increase the democratic legitimacy and transparency of the present institutions, a question which is valid for the three institutions."
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I agree 100 per cent. with that declaration. Such a clear statement was a monumental step forward. Following that, a decision was made at Laeken to establish a convention to consider the future of Europe. The convention on the future of Europe has already begun its deliberations, and although it is early days, significant progress has been made. I hope that strong recommendations will be made to the next intergovernmental conference. The convention comprises Ministers from the member states, and representatives of the European Parliament, the European Commission and the United Kingdom Parliament. I am pleased that our representatives are already reporting back to this Parliament effectively, and I hope that that will continue.
We have a long way to go, but the situation is encouraging. I am pleased that the European Scrutiny Committee is already making a significant contribution to the debate on Europe's development, which must be held here and in the institutions of Europe. I warmly commend the European Scrutiny Committee's report to hon. Members, and I hope that they will take the trouble to read it. If it is implemented, it will have a profound effect for the better on our future work. I also hope that representations about debating the report fully on the Floor of the House will be taken up, and that there will be such a debate in the near future.
Angus Robertson: The European Scrutiny Committee published a report on the scrutiny of European business in the United Kingdom. One of its recommendations was that we should consider lifting the confidentiality of the relationship between the different Administrations in the UK. Does the hon. Gentleman agree that his colleague the Minister should listen to that suggestion and pursue It? After all, we are talking about transparency, democracy and accountability, which are relevant to the UK as well as to the European Union.
Mr. David: As I said, democracy and transparency are essential, given the relationship between the different elements of government that now exist in the United Kingdom. Our democracy is evolving internally, which means that democracy and transparency must always be scrutinised so that we have the best possible systems.
I will focus briefly on some of the changes that I would like to see over the next few months, and on how Europe might develop. This is not the time or the place to debate in detail the report of the European Scrutiny Committee, but my comments are complementary to the thrust of its arguments.
The European Union is an association of independent sovereign states that decide from time to time to pool their sovereignty in their mutual best interests. If hon. Members accept my definition of what the EU is in essence, it follows that the Council of Ministers has a pivotal role in the EU's development. I want far more coherent intergovernmental co-operation and better organisation of the Council's work. It is significant that there was a step forward in that respect at the summit in Seville. However, we have much further to go, and I hope that that issue will be carefully considered.
We must consider especially the ending of the six-month presidency of the European Council. We talk about the future enlargement of the EU and an increase

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in the number of member states from 15 to 25, so it is nonsense to have a rotating presidency and, as a consequence, a shifting agenda every six months. I would like the Council of Ministers to have a more permanent chair; I would even like consideration to be given to the idea of a president—but before anyone suggests that that should be Tony Blair, I must say that my right hon. Friend the Prime Minister is already doing a good job here. No Labour Members would like him to move from his effective role in this country.
We should consider more generally the need for better organisation of the work of the Council of Ministers. It needs an annual agenda, a work programme, and, above all, a clear sense of strategic direction. We need to know where the European Union as a whole is going, not only in a few months' time, but in the years ahead. The Council of Ministers should be responsible for providing that sense of purpose and direction.
There is also a need in certain areas for intergovernmental co-operation to be strengthened, particularly in terms of deepening the common foreign and security policy and the EDSP. The relationship between the European Commission and the Council should perhaps be redefined. Inevitably, we need to look objectively at whether qualified majority voting should be adhered to or extended. There is a case for that in some areas, but in others there is not. The issue must be examined carefully, in our national interest.
One vital reform to reinforce democracy would be for the Council to make its legislation in public. In a modern democracy, it is unacceptable for the Council of Ministers to meet behind closed doors to agree legislation that will affect the citizens of Europe, including those of our country.
Another area that needs careful examination is the role of the European Commission. I am one of the people who believe that the European Commission should be more accountable; although it should retain its right of initiative, political direction in the EU should come from the Council of Ministers. The European Commission should be less of a political body and more of a civil service, taking its lead from the elected representatives on the Council.
I shall not dwell on the subject of national Parliaments, other than to say that they have an essential role in the development of democracy in the EU, in scrutiny and, vitally, in defining whether the principle of subsidiarity is applied. Subsidiarity is essentially a political rather than a judicial term.
Angus Robertson: I am grateful that the hon. Gentleman has brought up the issue of subsidiarity, because it is relevant not only to member states but to sub-state legislatures. The transfer of information is another key area. The Government have stressed repeatedly that they do transfer information, but the hon. Gentleman will be aware of correspondence from the Department for Environment, Food and Rural Affairs and the Foreign Office confirming that agendas of Council of Ministers meetings have not been forwarded. He will also know that despite the Government's assurance to the European Scrutiny Committee that that practice will end, there has been a
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more recent example of information not being forwarded. How can subsidiarity be properly observed if Whitehall Departments do not forward information o the Welsh Assembly, the Scottish Parliament or the Northern Ireland Assembly?
Mr. David: I repeat that I genuinely believe that the Government are willing to ensure that there is participation and accountability. However, the mechanics to achieve that aim are not always in place—and that applies to Whitehall Departments. The relationship with the devolved institutions is a developing one, and it will take time to make sure that the mechanics are in place effectively. One of the most impressive aspects of the devolution settlement is the good relationship between central Government and both the Scottish Parliament and the National Assembly for Wales. We need to build on that good will to ensure that the settlement works as effectively as possible.
As I said, the European Parliament has considerable powers and, given the complexity of the legislative processes with which it is involved, we need to ensure that its involvement is as effective and efficient as possible. It also needs more openness. The co-decision process is complex but needs to be far more transparent. The emphasis should be on that, rather than on giving the European Parliament more powers for the sake of it. We should bear in mind the fact that turnout in the previous European Parliament elections was just 24 per cent. in this country. The emphasis must be on raising the credibility and acceptance of the European Parliament, rather than arguing for it to have still more powers.
My thesis is that although the European Union is not as undemocratic as many claim, there is room for significant improvement. I hope that the convention on the Future of Europe will make proposals about how Europe can be made more democratic that are acceptable to all member states and parties. Above all, as well as arguing for democracy, we must take that opportunity to define a new vision for the people of Europe.
Perhaps we politicians should speak less about comitology, proximity and subsidiarity, and more about issues to which people can relate more easily, such as jobs, peace and the environment. That is why a good starting point for the new treaty that I hope will result from the next intergovernmental conference would be to define clearly what European co-operation is all about. If we do that, we will have a good chance of one day making the EU popular among all the people of Europe.
11.21 am
Mr. John Randall: I congratulate the hon. Member for Caerphilly (Mr. David) on introducing the debate and on trying to unravel the complex and rather mysterious ways of the European system for people such as me, who are not great experts on the intricacies of that institution.
I am keen on enlargement of the European Union, because apart from anything else, most if not all the aspirant countries see it as a means of strengthening their own democracy. In recent times many of those countries suffered regimes that were far from

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democratic; even in today's world, those democracies could sometimes be regarded as fragile. Indeed, in my lifetime, existing members of the EU have had regimes that we would not regard as democratic. One thinks of Portugal under Salazar. Spain under Franco and Greece under the colonels. However, now it would be strange to think of those countries as not at the forefront of democracy. Not long ago some countries that hope to join the EU, such as Romania and Bulgaria, were perceived as among the most undemocratic countries not only in Europe but in the world. We must therefore make progress on enlargement and other issues.
There is, however, always a problem. If the processes are not correct, the smaller countries will feel that the large countries will overrule them. That is undoubtedly a difficult balance, as one of the Balkan countries has shown. One of the many complex reasons for the breakup of Yugoslavia was that some of the smaller republics in the federation felt that the larger two republics—Serbia and Croatia—were constantly overruling them. Again, I ask the Minister to say how the moves to admit Yugoslavia to the Council of Europe are progressing.
As the hon. Member for Caerphilly said, many British people wonder how the EU works. Some of its procedures seem so shrouded in mystery that people wonder what influence they have on it.
After an intervention by my hon. Friend the Member for West Suffolk (Mr. Spring), the hon. Member for Caerphilly spoke about elections to the European Parliament. I have never seen people so worked up about electoral arrangements: the current system of party lists seems so unfair. For the benefit of Labour Members, I should explain that one of their London MEPs wisely decided to join the Conservatives—surely there is a democratic deficit in that the individual was elected under a party list system and those who voted for a Labour MEP now have a Conservative one. They should be delighted because, like the gentleman concerned, they have realised the error of their ways. However, it is patently not very democratic when someone elected on a party list system crosses the Floor.
Mr. Michael Moore: I am intrigued by the hon. Gentleman's argument. My party has always supported the single transferable vote and we accept that the existing system has major weaknesses. However, what is the difference between what the hon. Gentleman describes and the first-past-the-post system, under which many people have crossed the floor to join different political parties?
Mr. Randall: I understand the hon. Gentleman's point, but first past the post applies to constituencies and single members. Rightly or wrongly, most people do not vote for the person, but the party. Those elected always claim that they were voted in as a person. However, the system that I am describing is overtly wrong because people vote for a party, and the system does not stand up when those elected change their party allegiance. I often wonder what would happen if a by-election were always necessary when members crossed the Floor; I doubt whether they would be so ready to do so. It is largely a matter for individual Members' consciences, but if people are elected under a party system there should he no doubt about what that should entail. That is just one example of why people regard the processes of the EU as undemocratic.
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The hon. Member for Caerphilly spoke about rolling six-month presidencies. I understand his point, but further questions arise about a directly elected president. No one wants failed politicians dumped into that position in order to get them out of the way. Who will do the direct electing—the whole population or a smaller constituency? How will that affect smaller countries, which might conclude that there will always be a French, German, Italian or British president? The system is so large and unwieldy that we must be careful about how we progress.
Mr. Win Griffiths: The hon. Gentleman raises an interesting counter-point. In a European Union of 25 or more countries, the presidency might come round to every country once every 12 years or so. As my hon. Friend the Member for Caerphilly said, we need to rethink the process and find a way, perhaps through regional blocs within the EU, to establish agreement on how to organise the presidency in future.
Mr. Randall: The hon. Gentleman makes a fair point. I am not advocating a particular system. I am not sure of the benefits of the current presidency system even with the existing number of member states. With an enlarged EU, it would become unwieldy.
I have always shied away from the complexities of the European Union and concentrated more parochially on matters that affect the United Kingdom and, more importantly, my constituents in Uxbridge. The EU's problem is that it seems distant from the everyday lives of my constituents, except when they are seemingly told that they cannot do this or must do that because of Europe. That is a spurious impression, which we in this House sometimes use as a let-out. However, if their Member of Parliament—admittedly not one of the world's greatest brains—cannot give an answer, it is difficult for the average person in Uxbridge to ascertain how decisions are made.
Time is short, and I do not want to labour the point, but if the EU is going to persuade the people of this country of the merits and benefits of membership, it must get its own house in order. For the EU to ask for reruns of referendums until it gets the right answer is more like what happens in Whips Offices than what happens in a democratic institution.
Mr. Deputy Speaker (Sir Nicholas Winterton):I call Mr. Win Griffiths.
Mr. Win Griffiths: I had not requested to speak, Mr. Deputy Speaker. I have to leave before the end of the debate, and it would not be fair on other Members.
Mr. Deputy Speaker: I have never been present at a debate of this importance in which no one has risen to speak.
Mr. Moore rose—
Mr. Deputy Speaker: Mr. Michael Moore will start the winding-up speeches for the Liberal Democrats.
11.31 am
Mr. Michael Moore: Thank you, Mr. Deputy Speaker. Like you, I think it is a shame that there are not more willing participants in the Chamber for such an important debate. It rather weakens the argument of this place that we want more scrutiny over European affairs if we cannot muster more than two contributions before the winding-up speeches. However, that does not detract from the importance of the issue. I congratulate the hon. Member for Caerphilly (Mr. David) on once again focusing our minds on an important aspect of European business. There is perhaps nothing more fundamental than the democratic nature of the institutions of the European Union.
The EU has been in existence for close to 50 years and has evolved considerably during that period. Its original aims and objectives focused on underpinning the security of nation states that had spent much of the previous few hundred years at war with one another. It also had the desire to develop and promote prosperity within the member countries, and at all times it has been a club for democrats. As the hon. Member for Uxbridge (Mr. Randall) said, within living memory the Governments of Spain, Portugal and Greece were not suitable for membership of the EU. There were dictators at the heart of Europe, but the carrot of EU membership was important in those countries' rapid progression towards democracy. Those democracies have undoubtedly developed and are now full partners in the Union.
We hope that we are poised on the verge of significant enlargement. Many countries that were once under the shadow of the USSR are poised to entrench their democracies in the EU. Of the current applicant countries, only Turkey fails to meet the political criteria set out by member states years ago at the Copenhagen summit, and cannot expect to join until that is resolved. Those countries are rightly focused on the democratic values and institutions that allow them to become part of the EU, but as the hon. Member for Caerphilly briefly outlined, there is an unhappy contrast between the democratic responsibilities of those who wish to be part of the club and the practices of the club itself. He mentioned that in 1989 the question was asked whether the EU would be admitted to its own club—and many could still argue that point today, but I hope that we can afford to be optimistic that the process of reform will develop a momentum to tackle many of the weaknesses.
The crisis of legitimacy, which is at the heart of the EU, rightly gives rise to much soul searching. We hear a lot about the democratic deficit, the failure of accountability and the need to reconnect the electorate with a plethora of unloved European institutions. Many of the failings of those institutions have been rehearsed this morning. There is a lack of clarity about the EU's purpose, with no clearly defined mission statement and a legislative footprint some 80,000 pages high, and rising. There is no clear focus on subsidiarity, which would ensure that decisions were taken at the most appropriate level in the EU.
As has oft been remarked, there is clearly a lack of openness in key institutions. Perhaps most damagingly, there is a lack of accountability, because of the inherent imbalance both among the EU's institutions and between the institutions and member states.
Angus Robertson: Does the hon. Gentleman not agree that one of our greatest challenges is to end the perception that the EU is based simply in Brussels, rather than also being close to home, with member state Governments and devolved Governments? Ending that perception might help to change the way in which the Government work in a European context. The EU is not only over there; it is over here, too.
Mr. Moore: I agree with the hon. Gentleman. There was an unasked question about how the Scottish Parliament and other devolved institutions should relate to that idea, and I agree with the hon. Member for Caerphilly that this is clearly an evolving process. No one would accept that those relationships are fully developed, but as devolution beds down, we need to learn what the right level for decision making is.
Angus Robertson: Does the hon. Gentleman not agree that as a minimum, we should hold to the rules clearly laid out in the concordats that govern the relationship between the UK Government and the Executives of Scotland, Wales and Northern Ireland? Devolution is an evolving process, but when the relationship between Governments is governed by rules, those rules should be held to, and they should be transparent.
Mr. Moore: I must make it clear that I do not share the hon. Gentleman's view of what the devolution process might evolve into in the end, and I have no wish to see Scotland independent from the rest of the United Kingdom. However, I agree that rules should be adhered to, and I pay tribute to his sometimes lonely one-man battle against everything in. Whitehall in which he feels that Scotland is not getting its share. I wish him luck in that.
Mr. Bill Tynan: Obviously it is essential that the Scottish Parliament should be deeply involved in Europe, and that Scotland should also be part of the UK. However, does the hon. Gentleman not agree that the real challenge, especially in view of the enlargement of the EU, is to connect with the people in more detail and ensure that they understand EL procedures? We do not want them to feel divorced from the decision making.
Mr. Moore: I am in danger of talking myself into a cul-de-sac in which I shall not be able to make the points that the hon. Gentleman has just made. I am grateful to him for refocusing our discussion. The hon. Member for Moray (Angus Robertson) may not agree, but because Scotland is still in the early years after devolution, we should see how its relationship with Europe develops and recognise that its future is best secured as part of the United Kingdom.
Angus Robertson: Will the hon. Gentleman give way?
Mr. Moore: I have given way to the hon. Gentleman twice already, and I want to make progress—
Mr. David Drew rose—
Mr. Moore: I shall take just one more intervention, and give way to the hon. Member for Stroud (Mr. Drew).
Mr. Drew: I apologise, Mr. Deputy Speaker, for not being present at the start of the debate; otherwise, I would certainly have tried to catch your eye.

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The hon. Gentleman spoke about the isolation of MEPs. My problem is more with what happens when they come over here. I am thinking of the farce of the current so-called foot and mouth investigation being carried out by MEPs. We should examine more fundamentally the relationship between MEPs and Members of this House, because of the way in which people can trample into one's constituency without any recognition of the damage done. All the wrong impressions can be created, so is it not time to examine the relationship more carefully?
Mr. Moore: I do not want to be dragged into the hon. Gentleman's private grief. He has clearly suffered from specific difficulties, on which I cannot comment. However, those problems can emerge as democracies evolve—in Scotland, for example, because of the Scottish Parliament. Some hon. Members are unhappy about the presence of Members of the Scottish Parliament on their territory. Frankly, we all have to learn to live with one another. It would surely be wrong to prevent MEPs elected in this country from visiting parts of it to investigate important issues on a European basis.
Before I generously gave way to several colleagues, I was arguing that over many years we have lost any clear focus on what European institutions are about. The lack of openness and accountability has led to increasingly poor awareness of what is going on among EU voters and growing hostility to much of what the EU quite properly seeks to achieve. A quick glance at the Eurobarometer polls will confirm that.
The EU has several handicaps to overcome. It is necessarily distant because it is "over there". I welcome the participation of its representatives in domestic British political life as well as in Strasbourg and Brussels. Much EU argument is also necessarily technical, but perhaps the biggest handicap is that the EU has had to evolve from tackling one set of problems from a particular era to tackling another set in today's considerably different political context. It is right to scrutinise the purpose of European institutions and to realign them to tackle today's problems more effectively.
We cannot afford to be apologists for the EU, but we can dare to be optimistic. As the EU prepares to admit up to 10 new member states, we know of widespread acceptance of the need for reform, and the convention on the future of Europe is addressing that right now.
Our party is reviewing its policy towards the EU to take account of the changing nature of the European body politic. We have consistently supported the need to reform European institutions and warned of the urgent need to tackle the alarming gap between those institutions and the electorate. First and foremost, we need a clear statement of what the EU is about. We therefore vigorously support the idea of a constitution for the EU, simplifying the many treaties currently in existence, and defining and limiting its powers. If citizens are to have a stake in the European Union, the charter of fundamental rights must be at the heart of the constitution. It is vital for the institutions to make subsidiarity a reality. Decisions should be local where possible, national where necessary, and European where appropriate.
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Not only should the principles be embedded in a constitution, but we should ensure that the European Parliament and national Parliaments have an ongoing role in putting them into practice. Much greater openness is required to achieve those aims. All institutions should, as a basic premise, conform to the principles of freedom of information. The Council of Ministers should meet in public when it discusses legislation. A full account of those proceedings and the decisions that have been taken should be published as a matter of course, and should be available for scrutiny in the European Parliament, and in this and other national Parliaments. We should not have the constant battle of having to table the right parliamentary questions to get information out of Ministers.
Greater accountability is also important. The leader of the country that holds the presidency should appear before the European Parliament before and after meetings of the Council. Many different views have been expressed about a rotating presidency. The Liberal Democrats are agnostic on the issue at present—we will watch how the debate develops. The annual "State of the Union" address given by the President of the European Commission should be accompanied by detailed proposals and justification for them under the constitution—particularly with regard to subsidiarity. Commissioners should be scrutinised about their proposals by the European Parliament, which should have the power to vet and veto each Commissioner, not simply the whole group en masse.
The most important aspect of the matter relates to Westminster—we too need to step up a gear. I pay tribute to the work of the Committees that scrutinise European Union activities in both Houses. However, we need to make Ministers' accountability a bigger deal. Perhaps the Minister will tell us when he expects to give evidence to the Committees on the work of the convention, and particularly on the Government's view of how Europe should look after 2004. He had an opportunity to set that out in a recent debate before the Laeken summit, and he has another opportunity to do so this morning. We are still short of specifics. As we approach the recess, and face the prospect of the convention making some key decisions before we return in the autumn, it is scandalous that we still do not have a clear picture of the specifics that the Government will propose and the position that they will seek to negotiate in the convention.
In this Parliament, we pride ourselves on being closer to those who elect us than the European Union institutions are to those who elect them. That may be one of our bigger conceits. If we are to ensure that it is true, we need to raise our collective game. We need to ensure that all substantial Government plans for the Council of Ministers are put to Committees before they are discussed in the Council of Ministers itself. Ministers should, as a matter of course, be required to attend key Committees after meetings of the Council, in order to be scrutinised on what they have been doing.
Europe is, unfortunately, largely unloved. That is partly the fault of those who represent its institutions to the outside world and partly a result of the actions of those who disagree with its very construct. That is politics. We should be ambitious for the European Union; it is a precious idea that needs fostering. However, those ambitions should relate not simply to

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extending the scope and power of the institutions, but to reforming what we have. We should make the European Union more capable of carrying out its existing functions and more in touch with the people on whose behalf it exists.
11.49 am
Mr. Richard Spring: I congratulate the hon. Member for Caerphilly (Mr. David) on securing this debate. He is a passionate enthusiast for enlargement, and I applaud him for that. I entirely share those sentiments. I also thank him for his insights based on his knowledge of the European Parliament and its workings, which are an important part of the architecture of the European Union.
A lively debate is taking place about democracy and the EU, much of it surrounding the convention on the future of Europe. We believe that reform of the EU's institutions should be based on three elements. First—this is now almost universally agreed—the EU suffers from an acute democratic deficit. The power wielded through its institutions must be made more accountable through greater transparency and greater responsiveness to people's wishes. Secondly, the principle of subsidiarity—at present theoretically embedded in the acquis communautaire but in reality ineffective—must become truly efficacious. That is a crucial point. The history of the EU has been one of working from the top down. That is no longer acceptable. The EU must now work from the bottom up.
Thirdly, it should be recognised that the member states are the fundamental constituent entities of the EU. Any reform that fails to understand that will not succeed; indeed, the first two principles fold into the third. The peoples of Europe naturally look to their national Parliaments to hold the exercise of power to account. They are also the main means for the expression of their wishes. That has become even more the case now that we have moved away from the first-past-the-post system for elections to the European Parliament. Change in Europe should flow upwards from the peoples of Europe; they should not be driven centrally. If we cleave to those three principles we can help to cure the alienation of the EU from the peoples of Europe, and reform an enlarged EU into something that delivers what its peoples want.
Angus Robertson: I know that the hon. Gentleman is well read, so I am certain that he will have read The Scotsman yesterday. On the issue of centralism and power exercised at the centre, was he as surprised as I was—I was delighted, although slightly confused—to read that
"Jack Straw has dropped his opposition to Scotland having more 'independent' influence in Europe"?
Is the hon. Gentleman surprised that we have not heard anything officially from the Government on this? Does he share my hope that the Minister, who was mentioned in the article, might be able to tell hon. Members what the Government's policies are?
Mr. Spring: I am sure that the Minister for Europe will have heard that, and he will be able to confirm or
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deny what was reported in that august newspaper. I am sure that the hon. Gentleman will agree that leaks and spinning, rather than directly telling Parliament what is going on, is one of the Government's most unattractive characteristics.
I am sorry to say that the Government have been disappointing in their failure to find constructive solutions to the challenges that the EU faces. They have had two big ideas for the reform of the EU's institutions. One has been shot down in flames, and the other has done a magnificent job of raising the hackles of the smaller member states. The Prime Minister's proposal to set up a second chamber of the European Parliament was greeted with silence and/or embarrassment by our EU partners. The House of Commons European Scrutiny Committee rejected the proposal and the subtitle of the report by the House of Lords European Union Committee—
"an Unreal Solution to Some Real Problems"—
spells out its unacceptability. I hope that the Government will stop promoting this impractical scheme and turn to something more constructive.
Mr. David: Does the hon. Gentleman not accept that by raising the issue of a second chamber of the European Parliament, the Government have ensured that the debate about the role of national Parliaments is centre stage?
Mr. Spring: The fact is that there is a void in the Government's practical thinking on the future architecture of the European Union. I do not accept that the Prime Minister raised the issue simply to underline the importance of national Parliaments, and I do not believe that our European partners saw it in that light either.
The plan for a president of the European Council was referred to as—I quote from the Financial Times:
"someone Europe's citizens would identify as the driving force of the European agenda".
His legitimacy would, apparently, be that he would be
"responsible to elected heads of government".
There are three main difficulties with that proposal. There is insufficient time to discuss the first, which is such a president's over-powerful and undefined role in foreign policy. The second is the matter of accountability, which was tellingly raised by my hon. Friend the Member for Uxbridge (Mr. Randall). How would that individual be appointed? To whom would he or she be answerable? How could he be sacked if member states were unhappy with his conduct? The proposed position would be influential, but at present its legitimacy would be tenuous. Those are all-important questions.
It is absolutely right that we should consider the role of the presidency in the light of the enlargement process, but it is important to ask how such a post would enhance democratic accountability in the European Union. We accept that that will be a major challenge. I hope that the Minister will answer those questions in some detail in due course. Thirdly, any proposal for reform of the European Union must take account of the different hopes, needs and fears of its larger and smaller members if it is to be workable.

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To be fair to the Minister, I welcome the reform of the workings of the Council introduced at Seville. Britain played its part in bringing them forward, but it is disappointing that the Government have not spent more of their time on practical, substantive reform measures
Mr. Drew: I am listening to the hon. Gentleman's arguments, but they would have more credibility if the previous Government, whom he supported, had not ceded economic power through the Single European Act. Would the hon. Gentleman care to wax lyrical on the dreadful mistake that his Government made in giving away economic powers? Now it looks as if we are giving away political powers too.
Mr. Spring: I hope that the Minister heard that comment. The creation of the single European market has been the crown jewel of what has happened in the European Union. An enormous trading area, which will be expanded in due course, and which has greatly benefited all Europe's citizens, has been created. I am disappointed by the hon. Gentleman's view, as I cannot think what the alternative would be. This is one instance in which the European Union as a trading bloc has particular clout in its discussions with other important trading countries and blocs. The sooner we remove the inhibitions to trade across the European Union and diminish the restrictions involved, the better. It was one of the most impressive things that the Conservative Government sought to introduce, given our commitment to the free enterprise system.
The European Scrutiny Committee's report must be commended; it is a model of intelligent analysis of the EU's failings and needs. It rightly identifies the disconnection between the EU and its peoples as a central problem. As it says, the Council's lack of openness is unacceptable, and a few television cameras will not mend that. If the Council, which should be the driving force in the European Union, cannot become accountable, the EU will never be properly answerable to its citizens. As the report says, parliamentary scrutiny needs to be fundamentally enhanced.
I was interested in some of the points made by the hon. Member for Tweeddale, Ettrick and Lauderdale(Mr. Moore) about how we could enhance scrutiny. Consideration of how that can most usefully be done crosses any party political divide.
Angus Robertson: As for cross-party unity on scrutiny, does the hon. Gentleman agree that scrutiny should also be exercised in relation to the scrutiny reserve in Parliament and the Assemblies of the United Kingdom that have a legislative role, so that where power is exercised by people elected to those Administrations, they can influence the European decision-making process more effectively?
Mr. Spring: Scrutiny in any Parliament, Assembly or council in the United Kingdom is vital to the democratic process. We are especially persuaded by the recommendation to replace civil service representation on COREPER with a senior Minister based mainly in Brussels, but answerable directly and regularly to the House of Commons. That would be a great advance in making the Council's processes accountable to national Parliaments. By taking that step, Britain could set an
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excellent example to other member states. I was delighted that the Council's report backed the creation of a subsidiarity watchdog. Conservatives have been pressing for such a body for some time. I am especially pleased that the Scottish First Minister backed the idea that I put to the European Committee of the Scottish Parliament when I gave evidence for its report on the governance of the EU. The hon. Member for Moray(Angus Robertson) will be aware of that. As the Scottish First Minister says:
"The new Subsidiarity Council would be able to stop the EU from interfering in areas better handled at a more local level. The new Europe should be more diverse, less centralised".
I hope ghat the Minister, too, will agree with our sensible proposal.
Importantly, the Committee's report proposed that such a body should be composed of elected politicians, not judges. No one disputes that the European Court of Justice cannot help but prefer action to be taken at a European level, as it is a European body. That is clear from its poor record of enforcing the principle of subsidiarity in its judgments. The only way of making subsidiarity real is through the enforcement of that principle by a body composed of politicians from national Parliaments.
No part of the European process creates more unease among Europe's citizens than the so-called ratchet effect. Europe appears to many to be on a journey with no clear end, and with ever more powers pushed towards the centre. That end must be defined, as we need a sense of finality. That worry is not confined to Britain. The German länder are concerned about their relationship to the federal Government, and about the intrusion of central European institutions.
Two actions must be taken if such intrusion is to be stopped. First, we need the clearest possible definition of competencies. I was pleased that the European Scrutiny Committee reached the same conclusion, that what is done should be the minimum possible. Secondly, it should be clear that we shall obtain a sense of finality only when the phrase "ever closer union" is deleted from the treaties. It sums up the perception in the EU that the Union is engaged in a one-way process towards greater centralisation, regardless of what citizens want. The report of the European Scrutiny Committee was clear about that. The removal of the phrase could help to guide the European Court of Justice towards a less centralising jurisprudence, and send a signal that there had been a reappraisal of what an enlarged EU is all about.
I shall add one last point. It is widely recognised that the Community method, particularly the role of the Commission, is not democratic. Unless there is reform we will never achieve the end that we desire: a democratic and accountable European Union. I understand that the smaller member states regard the Commission as necessary to ensure that the larger states do not dominate the EU, but we believe that the Commission's role must be transformed. It must work much more as the servant rather than the master of the European process.
A European Union of nation states, with national Parliaments at its heart, is not only desirable but achievable. Indeed, we believe that only a union based clearly on member states and recognised as such will

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satisfy today's need for democracy and reverse popular disconnection and disengagement from Europe's institutions. Archaic dirigiste structures and grand constitutional plans will not achieve that end. The Prime Minister, the Foreign Secretary and the Minister for Europe have frequently analysed correctly and persuasively the challenges facing the EU, but have totally failed to come up with specific, substantive and clear proposals to address those challenges. I hope that the Minister will take the opportunity, on behalf of the Government, to show the leadership and direction required to fill that void.
12.6 pm
The Minister for Europe (Peter Hain): I may surprise the hon. Member for West Suffolk (Mr. Spring) in the next few minutes. I agree with much of what he said. I am grateful to my hon. Friend the Member for Caerphilly (Mr. David) for initiating the debate. He brought to it the considerable expertise that he developed before coming to the House in his role as a senior member of the European Parliament and a respected leader of the Labour group. I am also grateful to the European Scrutiny Committee, of which my hon. Friend is a member, for its excellent report, to which we will soon reply formally.
The suggestion by the hon. Member for Tweeddale, Ettrick and Lauderdale (Mr. Moore) that we have not been open about our role in the convention could not be further from the truth. This afternoon I shall give evidence on the reform agenda in Europe, the Seville proposals and the work in the convention to the House of Lords Select Committee. Next week I shall give evidence to the European Scrutiny Committee of this House. Both those will be second appearances on that agenda.
Mr. Moore: I do not suggest that the Minister has not made himself available at the right moments; I said that we did not have a specific list of proposals that the House could scrutinise and debate. Have the Government plans for a White Paper on Europe, for example, setting out such proposals?
Peter Hain: We have no anxiety about openness but, as I am sure the hon. Gentleman understands. We are in the early stages of the convention. We are in the process of charting where the land lies and seeing which ideas will gain support. We are therefore reluctant to present at this stage a White Paper or blueprint to assemble coalitions of support—although that is what I seek. However, I understand the point that the hon. Gentleman makes, and we will keep the House continually informed.
The exercise of democratic control goes to the heart of people's concerns about Europe: the idea that its decision-making process is impenetrable and indistinct, and that there are no clear means by which they can influence those decisions, so Europe is something done to them, not by them. The right hon. Member for Kensington and Chelsea (Mr. Portillo) asserted in The Times last week that the EU was not democratic, and could never become so because it is impossible t o create pan-European institutions that people in nation states
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with such fundamentally differing value systems could respect. I do not accept that. The scale and diversity of the EU undoubtedly present particular challenges but it is as wrong to assert that Europe has no democratic legitimacy as it is to say that we cannot improve on what we have.
Mr. Randall: I feel a bit guilty for interrupting the Minister's flow, but on the subject of democratic deficiency, does he agree that the effective disfranchisement of the people of Gibraltar does not set a good example? Is he confident that they will be able to vote for a Member of the European Parliament by the time of the next European elections?
Peter Hain: Yes
The EU is a unique and ambitious construct, and has been remarkably successful. It has been a key factor in preserving peace in western Europe for the longest period in the continent's history. It is an engine for jobs, investment and economic growth through the single market. The EU is a force for better environmental protection, and against cross-border crime. Our security, prosperity and quality of life are enhanced enormously by common action on those and other matters.
The hon. Members for Uxbridge(Mr. Randall) and for Iweeddale, Ettrick and Lauderdale rightly referred to enlargement. Both made the important point that extending Europe's boundaries will extend the zone of democracy, stability, peace and respect for human rights. The hon. Member for Uxbridge made telling points about the fact that Portugal and Spain, as modern European democratic nations, are unrecognisable when we think of their history of fascism. The same will apply in due course to Bulgaria and Romania, about which he also made valid points.
The hon. Gentleman asked whether the Federal Republic of Yugoslavia would be admitted to the Council of Europe. The intention is that that will happen at the ministerial meeting in November. However, we and others seek further undertakings between now and then on co-operation with the international criminal tribunal for Yugoslavia in The Hague.
The structures that we have set up to deliver on Europe's ambitions are necessarily unique. For people who are used to the decision-making structures of nation states, that is unfamiliar and sometimes uncomfortable. There is, thank goodness, no single Government to elect or throw out, but that does not make the EU undemocratic. I am held to account by the House, as all Ministers in the EU are by their Parliaments. The Commission must regularly account for itself to the European Parliament and the Council of Ministers. As my hon. Friend the Member for Caerphilly reminded us, that consists of elected Ministers, representing elected Governments. The base of authority is democratic.
The EU's authority also comes from a framework of treaties that have been agreed unanimously by member states' elected Governments, and ratified by their elected Parliaments. The base of democracy is also established in that way. To the extent that the treaty provisions involve pooling of sovereignty, that has been freely

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accepted by elected representatives in Britain and throughout the EU. The same applies to the supranational institutions that we have established. Successive British Governments and Parliaments have signed up to those not because of a dogmatic commitment to greater European integration, but because each has believed that that was in our national interest.
Let us nail the nonsensical view that it is inherently undemocratic, and peculiar to the EU, to set up unelected institutions with their own powers. The right hon. Member for Kensington and Chelsea asserted that it was undemocratic of the European Central Bank to set the euro interest rate. However, we granted the Bank of England independence over the sterling interest rate. That has been hugely successful, and has widespread support in the United Kingdom. The principle of ceding control to independent bankers has been accepted; the question is whether they are British or European.
Whether at EU or national level, we need powerful independent bodies to implement policies decided by politicians. The Commission's determination to push through the single market programme has been a key factor in its success. Its rigorous approach to state aids has been crucial to the competitiveness of British companies abroad. The same applies to the European Court of Justice: we need a body that can enforce the obligations that member states enter into.
The basic framework and its institutions are not undemocratic, but the way in which power is exercised within that framework and by those institutions can be much better policed by democratic bodies—a point that has been made throughout the debate.
How can that happen? First, we can have a clearer treaty framework. People feel that the complexity and ambiguity of some of the treaty's provisions are ripe for exploitation. The hon. Member for Uxbridge said that he shied away from the complexities of the EU—a luxury that I do not have. I agree with my hon. Friend the Member for Caerphilly that we need to concentrate more on the practical benefits that membership of the EU brings to all our citizens in their daily lives—better job opportunities, greater prosperity, more security from the threats of crime, drug running, human trafficking and terrorism, and higher environmental standards. Air pollution knows no national boundaries. We should speak more about those practical daily life benefits rather than use the continuous Eurospeak that streams out of Brussels.
The convention on the future of Europe is currently considering how to use the treaty to state more clearly what the EU is for and where we want it to act. We also need to be aware of its limits by establishing more clearly what should be done at a European level, and what should be left to member states at national, regional or local level.
Secondly, we need to clarify through our institutional arrangements that elected national Governments accountable to their Parliaments are the principal source of the EU's legitimacy. That means focusing on the European Council and its sectoral Councils, on which elected Ministers sit. I agree with my hon. Friend the Member for Caerphilly and the hon. Member for West Suffolk in describing independent nation states as the bedrock of the EU. My hon. Friend in particular
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provided a good definition of EU members as "independent sovereign states who decide from time to time to pool their sovereignty".
Angus Robertson: While we are talking about independence and sovereignty within Europe, the Minister will be aware of yesterday's article in The Scotsman, which, under the headline "Straw backs Scotland's Euro role", stated:
"Jack Straw has dropped his opposition to Scotland having more 'independent' influence in Europe".
A source for the Scottish Executive is quoted as saying:
"Initially, the Foreign Office were hostile, but"
Jack McConnell
"has now started to win them over. He has got Peter Hain on side and Jack Straw also sees the benefits."
No further details are provided in this story, so will the Minister clarify what independent influence within Europe is envisaged? Will it be direct and automatic representation on the Council of Ministers? Will it allow Scotland to nominate a Commissioner, as independent countries within Europe can? Will it mean a near doubling of MEPs, which a country of 5 million within the EU would have? Will it be real independence within Europe, or is it all a second-rate spin effort by the Scottish Executive and the Westminster Government?
Peter Hain: It is neither independence nor second-rate spin; it is not first-rate spin either, for that matter. That is a straightforward answer to the hon. Gentleman's question.
We agreed last month at Seville that heads of Government in the European Council will set an overall strategic agenda and use their four meetings a year to deliver. We must make the sectoral Councils of Government Ministers beneath the European Council much more efficient. At Seville we took a step towards that by reducing the number of Council formations.
The next stage must be to find alternatives to the stop-start effect of the six-monthly rotation of the presidency. As my hon. Friend the Member for Bridgend (Mr. Griffiths) pointed out, the EU is likely to be 25 strong in a couple of years' time, so each nation is likely to secure the presidency only once every twelve and a half years—hardly much to be pleased about. The six-monthly rotation has worked against developing a strategic agenda and consistency of expertise, as well as a mature relationship with the Commission and Parliament.
We and others have suggested different national presidents for each Council, serving a longer period—perhaps two and a half years, which is half a Commission or European Parliament term—and working together as a team meeting regularly to implement the European Council's strategic agenda under a full-time president elected by heads of Government.
The hon. Member for West Suffolk asked me to spell out how that would enhance democracy. I am happy to do so. It would enhance democracy by creating a much more authoritative and accountable head of Europe who was democratically elected and answerable to elected Governments. That individual would be elected by the heads of Government, and would regularly

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report to them. I hope that the hon. Gentleman will look at this issue on its merits, rather than in a prejudiced fashion.
One of the problems with Europe is that there is no visible authority that people can identify and hold accountable, so the decisions made in Brussels are not adequately scrutinised. We think that having an elected president of the Council would solve that problem, because that person would be answerable and accountable to elected heads of Government.
The proposal would also answer another demand. I agree with the people who talk about the need for Europe to have a much more prominent global role—for it to be taken more seriously in global affairs, as a force for good. That is important. To achieve that, we must answer the famous Henry Kissinger question, "To whom do I pick up the phone in Europe?" It is not realistic to suggest that one can pick up the phone to a president who serves for six months—or to the President of the European Commission, as some people suggest should be the case—because that individual is not accountable to elected Governments and national Parliaments. We need someone to whom President Bush can pick up the phone when he wants to find out Europe's views. That would enable Europe to play a more authoritative role on the world stage. That person would also ensure that Europe's agenda was driven through the Council more effectively than at present, so that it delivered better for its citizens—a point that was made by my hon. Friend the Member for Caerphilly.
Angus Robertson rose—
Peter Hain: I will give way again shortly, as I am in a generous frame of mind, after I have addressed another issue.
The hon. Member for Uxbridge made an important point—to which the hon. Member for West Suffolk added—about the sensitivities of small countries. We are very alive to that. When the membership of Europe expands to 25 countries, 19 of them will be small countries. Those countries will be in a very powerful position, not least in determining who will be elected to the presidency of the European Council, if a decision with regard to that is eventually taken—by an intergovernmental conference, because that change would require a treaty change.
I have described the team presidency with different sectoral Councils underneath it. Five countries might share those Councils to form a team presidency, which would inevitably have a majority of small countries. It is conceivable that the president will be from a small country, and the arithmetic of the situation would lead to the majority forming the team presidency. Therefore, although the hon. Gentleman is expressing concerns that exist, they can be allayed by that proposal.
Angus Robertson: I am grateful to the Minister for being so generous about interventions. I am very sympathetic to the case that he is making for more consistency in the Council, but I have a question about how that might work effectively in practice when the different domestic political cycles of member states
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might make it impossible for somebody to have a full term in the convenership of the Council, or on one of the lower tiers of the Council of Ministers, because people would be elected as individuals rather than representatives of a member state. How would that work effectively?
Peter Hain: We envisage that the job of elected president of the Council would be permanent, and that the post would not occupied by a serving head of Government. Therefore, the president would not be subject to the rise and fall of any particular Administration in any particular country, although he or she would be accountable to elected Governments from time to time, as and when they were formed. With regard to the team presidency, the country concerned would still hold the presidency of, for example, two sectoral Councils.
Mr. Spring: Perhaps I misunderstood what the Minister was saying, but he said that the post would be permanent. He cannot be serious, can he?
Peter Hain: No, it would be for five years. I am sorry; I did not willingly mislead the hon. Gentleman. I thought that I had made myself clear.
Mr. Spring rose—
Peter Hain: I have to make some progress, although I am happy to be open. If I have the time, I will undoubtedly take more interventions.
The proposal has still to be worked through in greater detail, but the idea widely shared by other European Governments, both large and small, is that there should be an individual elected by heads of Governments for five years. That would coincide with the length of service of a Commission or a Parliament, so there would be some continuity.
We need more openness in the Council when it is legislating, and I strongly agree with criticisms in the European Scrutiny Committee's report that meeting in private is both objectionable in principle and makes it much more difficult for national Parliaments to hold Ministers to account. As the hon. Member for Tweeddale, Ettrick and Lauderdale said, we need more openness. The agreement in Seville to open Council meetings to the public for co-decision dossiers at the beginning and end of the process is a welcome first step.
I hope that we will, in due course, be able to persuade our partners to go further and open up all meetings in which the Council is legislating. We also need to strengthen the role of national Parliaments. Their principal role is, of course, to hold national Governments to account for the decisions that they take in the Council. I believe that the Scrutiny Committee does that well. We are studying the suggestions for improvement in the Scrutiny Committee's report, and will reply formally soon.
As my hon. Friend the Member for Caerphilly said, national Parliaments should have the collective role of focusing on subsidiarity. The principles of subsidiarity and proportionality are enshrined in the treaty. Europe should act only when it adds value to national action, and when it acts, it should do so as lightly as possible,

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leaving some flexibility in implementation to member states. However, we have no effective means of enforcing that. Subsidiarity is in principle judicially enforceable, but in practice it is primarily a political judgment about what adds value. I agree with the hon. Member for West Suffolk about that.
We need a political body to police subsidiarity, a body of representatives who will be credible, have a direct link to people, understand and respect national prerogatives, want to safeguard diversity in Europe, and have no vested interest in action at a European level. National parliamentarians fulfil those criteria. It would make a real contribution to democratic legitimacy if there was an ad hoc committee of national parliamentarians who examined the European Union's work programme and relevant proposals critically, and who had powers to make the Commission and Council think again when they were over-legislating. That would combat the sense that European institutions are arrogating ever more power to themselves.
Although the hon. Member for West Suffolk was rather sarcastic about the Prime Minister's original proposals, it was the Prime Minister who put the principle on the agenda, as my hon. Friend the Member for Caerphilly pointed out. However, I agree that elected politicians, not judges, should be the arbiters on subsidiarity.
The European Parliament also has an important role. To make Europe work, Member states take many decisions by majority vote. That makes it possible for national Ministers to be outvoted, and the powers of national parliamentarians in holding them to account can be limited as a consequence. That is one of several ways in which the European Parliament plays a key role as a further democratic check.
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However, there are problems. The electorate needs to understand what the European Parliament does. I agree with my hon. Friend that we need more openness in co-decision, for example, rather than letting the European Parliament have more powers for the sake of it, as he put it. However, I also agree with him that the European Parliament has an important role to play, one of which is summoning Commissioners and questioning them closely about the implementation of the work programme and the use of budgets. We need to find better ways of explaining to the public how that is done.
I do not agree that giving the European Parliament the right to elect the Commission's President would enhance the legitimacy of either institution. The proposals misunderstand the nature of the Commission as an honest and independent broker between different interests An election of that kind would place the President at the mercy of the largest political group in the Parliament. It is precisely the Commission's independence from day-to-day political interference that is its strength. Holding to account through regular and detailed scrutiny, yes; election, no.
The hon. Member for Tweeddale, Ettrick and Lauderdale raised interesting ideas about the European constitution. We are open to the idea of a European constitution, which would simplify the structure and establish clarity. There are serious problems associated with incorporating the charter into the treaties wholesale. It is a "motherhood and apple pie" charter, and we must be careful not to undermine our democratic decision-making procedures.
I would be happy to consider scrutiny prior to Councils. However, that would mean that we would have to meet on a Friday, and I do not think that hon. Members would want to do that—
Mr. Alan Hurst (in the Chair): Order. We now come to our next debate, which is on royal finances.

Royal Finances
12.30 pm
Norman Baker: I am grateful for the opportunity to have half an hour to discuss with the Minister royal finances and the Government's attitude toward them.
I recognise that the present arrangements are steeped in antiquity in many ways, and that some aspects have been unchanged for centuries. However, other aspects were adversely changed, from the point of view of the taxpayer, during the 20th century. The key argument that I shall deploy is that the arrangements are unsuitable for the 21st century, and I am keen to persuade the Government of that point of view. I recognise that there have been publications in recent days relating to royal finances. That is a step forward, and if the Government had any say in encouraging that, I congratulate them on taking that line.
The basis of my argument is that all citizens in this country should be treated equally on taxation—I include the Queen as a citizen, if I am allowed to do that. Royal finances should be transparent, as one would expect because public money is being spent. I make a distinction between matters that are properly private finances and those that are public finances. There should be proper control and auditing of the way in which public money is spent on royal finances, which is the case for every other area of public expenditure. There is no reason why royal finances should be different.
I shall address equal treatment. It is difficult to justify one individual, who happens to be the Head of State, having absurdly preferential terms of tax payment compared with other people in the country, particularly since the person who holds that office happens to be very rich. How can it be justified that the monarch s exempt legally from income tax, capital gains tax, inheritance tax and requirements to which everybody else in the country must conform? That position seems to be indefensible.
I accept that the 1993 memorandum of understanding under the Conservative Government represented a step forward and attempted to regularise the position. However, the memorandum outlined a situation in which the present Head of State—the principle does not extend into the future, except in so far as it relates to the Prince of Wales, who also agreed to the memorandum—agrees to pay voluntarily income tax and capital gains tax, but not inheritance tax. Of course, the Queen therefore received an estimated windfall of between £20 million and £25 million due to the sad death of her mother. That represents a great loss to the Chancellor, and as he is notoriously prudent in his attempts to control public finances, no doubt he did not welcome that big hole appearing in the Government's income stream.
The memorandum was presented as a step forward in 1993, and recognised matters by putting them on paper. However, George III paid income tax when it was first introduced in 1799—there was nothing exceptional about that. When income tax returned in 1842—it was abandoned for a period—Queen Victoria and Edward VII paid it. The requirement of the monarch to pay income tax was removed only during the reign of George V in the last century in exchange for paying the costs of
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visiting Heads of State. The idea that monarchs are exempt from income tax is not traditional, but a recent idea from the last century.
During George VI's reign in 1937–38, his requirement to pay income tax on his private income was removed. I tried to find out more about that after being directed to it by various august publications, but I understand that the relevant files on the agreement have been destroyed. I wonder whether the Minister can confirm that. It would be very unfortunate if those files have been destroyed.
The 20th century has been seen as a time when steps were taken to regularise royal finances by bringing them into line with the taxes and arrangements applicable to everyone else in the country. Actually, however, the arrangements are even more beneficial to the holder of the office of Head of State.
The 1993 memorandum of understanding says that the present occupant of the post will pay income and capital gains tax voluntarily. It is not clear, however, at what level that tax will be paid. It is not mentioned in the memorandum, the justification being that it is improper to discuss individual tax arrangements. I would be happy to accept that argument were normal taxation arrangements to apply to that individual as to all others. However, as the arrangements are unique, we have a right as taxpayers to know what they are.
I should be interested to know what the voluntary arrangements have meant in practice since 1993. Do income tax payments made by the present monarch correspond to those that would be required were she subject to mandatory taxation requirements, as everyone else in the country is? Or, for example, has she sought not to pay the 40 per cent. top rate? That needs clarification, because it is not clear from the memorandum of understanding.
From my understanding of the document, voluntary tax could be a very low taxation yield indeed. It could even voluntarily disappear altogether. There are historical precedents for taxes voluntarily being paid by members of the royal family and those contributions subsequently withering on the vine. Unless the Minister tells me otherwise, we have no guarantee that taxation is paid as it is by a normal citizen, and that that practice will continue.
Equal treatment is a matter of fairness and equity. It is—dare I say—in line with the Government's general philosophy towards the application of taxation. Therefore, I hope that the Minister will be sympathetic to those points. Historically, such arrangements are not ancient, as I have said. Many are the benefits that the Government of the day were persuaded of during the 20th century—Parliament had little say in the matter. Paragraph 31 of the 1993 memorandum of understanding states that arrangements can be changed at the will of the monarch—not the Government. I therefore wish to ask the Minister whether that clause has been invoked since the memorandum was introduced.
I have dealt with the first point—that of equal treatment for citizens. The second point of principle is one of transparency. Again, no doubt largely due to historical accident, there is not the transparency in royal finances that we would wish. Certainly, there is not the transparency that would apply in other areas of public

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finance. For example, the status of the Duchies of Cornwall and Lancaster is unclear. The Duchy of Cornwall is entitled to benefits that are allegedly given away to the monarch, even though the title is traditionally held by someone else. Even if a case could be made for unique taxation benefits for the monarch, is unclear why they should also be extended to the Duke of Cornwall.
The Duchy of Lancaster is regarded as a private income for the monarch, yet there is confusion about which elements of the privy purse are used for public and private purposes. That is unclear and needs to be made clear. It is also historically unclear why Duchy of Lancaster lands and assets were not transferred, as the Crown estates were, to Parliament in 1760, and why they subsequently retained that unique status.
The status of other assets held
"by the Queen in the right of the Crown",
such as the royal collection, is unclear, too. What is the Minister's understanding of the status of those assets" My understanding is that they are state, or public, assets that are owned by this country's citizens but happen to be held for the country by the monarch of the day. That would seem to be justified by the fact that they are not subject to the taxation treatment expected of private assets. In the unlikely event that this country becomes a republic at some distant point, would assets such as the royal collection pass to the state, or to the deposed monarch? It would help if the Minister would confirm that they are state assets, so that we are clear about the status of the royal collection and other such matters.
We also need a public inventory of assets held in that way, such as the royal collection, that are regarded not as the private property of the Queen or whoever happens to be Head of State at the time but as being held by the Queen or monarch for the public good. We need to make it clear what is public, and a public inventory of such assets would help.
It would also help if the Minister would make clear the position of gifts. My understanding is that gifts provided by the monarch or members of the royal family for visiting Heads of State are paid for out of public funds, although I am not sure whether from the privy purse or the civil list. Is that so? Do gifts received by the monarch in return from visiting Heads of State become public property, or are they regarded as the Queen's private assets? I am sure that the Minister would agree that it would be invidious if the state pays for gifts but the Queen keeps gifts that she receives, and I hope that she will tell me that that is not so.
Transparency requires public scrutiny of the accounts. I recognise that we are moving towards that but we are not there yet. It requires the National Audit Office and the Public Accounts Committee to be involved, just as they are in the case of other major pockets of Government expenditure. I see no reason why royal finances should not be subject to that rigour Knowing how keen the Chancellor is to have tight control of public finances—he does well in doing so, in many respects—I cannot believe that he is happy with such a loose arrangement that involves many millions of pounds.
On proper control of public money, it is appropriate to look at the civil list. I notice that £37 million has built up in balances—a huge amount. Indeed, it increased last
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year, from £35 million, as it is gaining interest and is not being spent or reclaimed by the Government. The reason for that goes back to 1990, when an absurd settlement was reached that allowed an inflationary increase of 7.5 per cent. a year. That was welcomed by the then Prime Minister, Margaret Thatcher, and the then Leader of the Opposition, Neil Kinnock. It was left to some of the Minister's Back-Bench colleagues to question whether a 7.5 per cent. inflation estimate was sensible. They turned out to be right to do so, because it was not, and a huge balance has built up over that period.
We need to be able not simply to freeze the civil list, as that allows balances to increase, but to find a mechanism to reclaim some of the money held there, return it to the Exchequer and use it for decent public purposes. I would welcome the Minister's comments on that.
The civil list should recognise the contribution of the Head of State, his or her spouse and the heir to the throne. It is inappropriate in the 21st century for it to be so exhaustive and to include so many minor royals. That arrangement may have been appropriate 200 years ago, but it is not appropriate today. It also reflects the fact that the present royal family, notwithstanding the spin from the palace that they cost us only 58p a year each—that does not, however, include all the tax breaks—is more expensive than other European monarchies.
This debate has been not about whether we should have a monarchy, but about equal treatment of everybody's finances, transparency and proper control of public money—matters that the Government hold dear. To those who think that the debate is about the monarchy, it could be argued that the changes that I advocate would do more to solidify the foundations of the royal family and the monarchy than do the present arrangements, which leave them open to justifiable criticism on financial grounds.
12.45 pm
The Paymaster General (Dawn Primarolo): I thank the hon. Member for Lewes (Norman Baker) for the clarity with which he advanced his arguments and sought information about the royal finances. I spoke to him briefly before the debate and will endeavour to answer his every question. However, if, in scrutinising the record afterwards, he finds that I have missed anything or run out of time, I will certainly write to him.
The hon. Gentleman talked about unique arrangements, the importance of transparency, and the auditing arrangements. He then asked specific questions about those arrangements. He asked why Her Majesty the Queen's circumstances have changed with regard to the agreement's being voluntary, whereas her predecessors may have paid. However, such payments have always been purely voluntary and, over the years, as the burden of taxation increased and the monarchy's financial position changed, successive sovereigns have had to take a view on how far that voluntary agreement went.
The hon. Gentleman has considered the memorandum of understanding carefully, which details the voluntary arrangements on income tax, capital gains tax and inheritance tax for the Queen and His Royal Highness the Prince of Wales. I draw the hon.

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Gentleman's attention to that issue in particular, because, as he rightly said, the debate is not about whether we should have a constitutional monarchy, but about public finances. It is important to draw clear lines between private moneys in the tax system and those assets that are held by the sovereign on behalf of the nation. However, paragraph 9, under the inheritance arrangement, states towards the end that the monarchy as an institution needs sufficient private resources to enable it to continue to perform its traditional role in national life and to have a degree of financial independence from the Government of the day. That principle must be balanced with the principles on which the hon. Gentleman concentrated: transparency and paying tax in the circumstances in which other citizens do.
The basis for the memorandum of understanding is the long-standing rule of statutory construction that statutes do not bind the Crown, including the Queen in her private capacity, unless they are expressly enabled to do so by necessary implications, and legal advice has confirmed that. The arrangements in the memorandum were discussed and agreed between the Government and Her Majesty. At the time the Government said that they welcomed the Queen's and the Prince of Wales's offer to pay tax voluntarily, and that the arrangements in the memorandum were a fair and proportionate way in which to take that into account. In law, the sovereign is not liable to pay unless required explicitly to do so by an Act of Parliament. Given that the sovereign is entitled to the revenues when there is no Duke of Cornwall, Crown exemption applies also to income received by the Prince of Wales from the Duchy of Cornwall.
Since 1993, Her Majesty the Queen and His Royal Highness the Prince of Wales have paid tax on voluntary arrangements agreed with the Government. That means that most sources of income, such as private investment income money, profit and losses from farming at, say, Sandringham, Balmoral and Windsor, or from opening to the public the houses and gardens at Sandringham and Balmoral, are dealt with in accordance with the usual tax rules. However, the memorandum of understanding includes special arrangements. The hon. Gentleman asked whether income tax is paid at the usual level, and the answer is yes. Capital gains is another example. It is not a negotiable lower rate.
Income tax is paid on all private sources of income. The memorandum of understanding includes provision for calculating the private taxable proportion of the Prince of Wales' income from the Duchy of Cornwall. Tax is also paid on the Queen's privy purse income, which includes income received from the Duchy of Lancaster to the extent that it is used for personal purposes. The hon. Gentleman asked a specific point about that and I shall write to him.
The memorandum of understanding provides for capital gains tax to be paid on gains from the disposal of private assets and on the private proportion of capital gains on the assets of the privy purse. Assets of the Duchies of Lancaster and Cornwall do not belong to the Queen or the Prince of Wales and are not theirs to dispose of. The duchies may sell assets from time to time, but the policy is to apply any proceeds to maintain their capital base for the future. Capital gains are not
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distributed and, under the terms of the memorandum, there is no capital gains tax in such circumstances. The position is not dissimilar to rollover relief that exists within the system.
As for inheritance tax, the memorandum of understanding recognises the need for assets to pass to successive sovereigns if the monarchy, as an institution, is to continue to play its part in the nation's affairs and to have some financial independence. It therefore provides for assets to pass from one sovereign to another without the payment of inheritance tax, but if the sovereign makes gifts or bequests to another person other than the new sovereign, the normal inheritance tax rules operate as they do for all members of the community. There are no special rules for other members of the royal family. They are fully liable to tax on the same basis as the rest of us.
The hon. Gentleman kindly drew attention to the fact that the civil list annual report has been published for the first time. It now joins the annual reports on grant in aid for the maintenance of occupied royal places and grant in aid for royal air and train travel. Such documents are available for scrutiny. The audit position was endorsed by Ministers as recently as 1998 after consultation with the then leader of Her Majesty's Opposition. That reflects the clear and long-standing bipartisan policy that accounts should not be laid before Parliament, or be subject to national audit scrutiny. However, the accounts are audited in accordance with the high standards of all auditing—and how the money is spent is also thoroughly explained.
The hon. Gentleman asked whether the memorandum had been varied in any way in recent years. It might amuse him to learn that minor changes have been made to take account of the introduction of the self-assessment system. Those are the only changes. That reinforces the point that—except in the unique circumstances of transfer from sovereign to sovereign the usual tax system operates.
The hon. Gentleman also asked about gifts received. He has not yet been given responses to a parliamentary question that he asked about that, and to a parliamentary question on a different matter, and I apologise to him for that. We have not yet received all of the information that he asked for, and we are checking what we have received, but his question will be answered. Gifts received in an official capacity belong to the nation; if Her Majesty receives a gift when she is performing her official role, that belongs to the nation. However, gifts received in a personal capacity are subject to the usual tax rules.
The hon. Gentleman asked about the art collection and, for instance, the use that is made of the revenue from entry fees into the palaces. I have forgotten the name of the charitable trust that was mentioned. I hope that the hon. Gentleman will forgive me for that, but I shall write to him about it. There are other relevant issues, such as the exact terms of the holding of the works of art on behalf of the nation, the obligation to maintain them, and the use of those monies to contribute to that.
The hon. Gentleman also asked about the surplus in the civil list. He may well have views about whether the agreement of 10 years ago should have been struck, but it was, and it must be honoured. A surplus has arisen,

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and I understand that it is being used to pay for maintenance of the palaces and public buildings I believe that the contribution is about £7.5 million, and that the rest is drawn down from the surplus. However, I shall double check all of that to ensure that he receives accurate information.
I come now to the matter of the civil list and annuities The Queen repays directly to the Treasury—and back into the Consolidated Fund—the annuities for all the members of the royal family, other than those paid to the Duke of Edinburgh in relation to his official duties Therefore, the hon. Gentleman can see that in all respects—with the exception of the exclusion of inheritance tax due to the unique circumstances of transfer from sovereign to sovereign—the usual rules of the tax system that would be applicable to the rest of us are followed. The provisions with regard to transfer from sovereign to sovereign are a recognition of the role of the monarchy, and they seek to maintain its independence from the Government of the day.
As time is short, I undertake to double check the accuracy of my answers to the hon. Gentleman's questions and, if there are any questions that I have not answered in this brief response, I shall ensure that he receives that information. I am grateful to him for the way that he has pursued this morning's debate, and the straightforward and supportive fashion in which he has genuinely sought information on an area that is of interest to all our citizens who have celebrated the great contribution that Her Majesty the Queen has made to our nation with her and her family in this jubilee year.

Bank Holiday Pay
1 pm
Mr. David Watts: I am delighted to have the opportunity to raise this important issue on behalf of my constituents and, I believe, thousands of low-paid workers throughout Britain. I have attempted to secure the debate for nine weeks, and I am grateful to the Speaker's Office for allowing me to take a slot that became available due to a cancellation late last week. I apologise because I am full of cold at the moment, so if I break into a coughing fit, please excuse me.
I do not wish to undermine the Labour Governments' great economic achievements since 1997. We have one of the most successful economies in the world, and it would be foolhardy to do so. I am sure that the Chancellor and the Government would not allow me to do that even if I wished. However, it is possible to have both a strong economy and a flexible work force while having good working conditions without exploitation. I hope to convince the Minister that the present balance is wrong and that further attention to legislation is required.
We need stronger employment rights and regulations to protect the most vulnerable members of our communities. The Government are justly proud of their economic performance. We have the lowest levels of unemployment for 30 years and historically low rates of interest and inflation, and we have experienced sustainable growth for five years. Most workers have enjoyed the benefits of our strong economy. They have received increased pay and longer holidays, and experienced better working conditions. Good indicators of the benefits derived from a strong economy include record car sales, more people taking foreign holidays, house prices and restaurant trade.
However, not all workers have enjoyed the same benefits from our strong economy. I accept immediately that the introduction of the minimum wage and the working families tax credit, in addition to four weeks' holiday entitlement for all employees, have gone a long way towards improving the conditions of some of the lowest paid workers in our country. However, such measures offer only basic employment rights. In my view, British workers are still the poor men of Europe and too many British workers are paid poverty wages. They work long hours in poor working conditions and they enjoy little employment protection.
About three months ago, a constituent contacted me about bank holidays. I ran a story in the local press, and I was amazed to be contacted by several of my constituents, who were mostly such employees as security staff, hairdressers and warehouse men. Nevertheless, several middle managers and management graduates raised issues that affected the way in which they worked and the conditions under which they worked.
We hear much about the need for flexibility, and although a modern nation must have a flexible work force, that should not be used as a guise to undermine basic trade union and employment protection. Examples of exploitation that I shall outline relate to bank holidays. I was amazed to learn from a constituent that we are not automatically entitled to bank holidays. Unlike the rest of Europe, we must negotiate them with our employers. I spoke to several of my colleagues in

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Parliament who were equally amazed by that. It is not well known that workers are not automatically entitled to bank holidays with pay, and my colleagues were shocked that that is the case in a modern Britain.
I was also amazed to find out that workers are often asked to take the four weeks' holiday to which they are now entitled at inappropriate times. I was told about an employer who forced his employees to take their time off in January and February. The argument was that the company had few orders during that period, and it was more convenient for the employer if employees took time off then. That meant that a married man with a family had no holiday entitlement in the summer, so while everyone else was going off on their summer holidays, that gentleman and his family were not able to do so, as he had no control over when he could take his holidays. There was no mutually agreed system; employees had to take holidays when the employer wanted them to.
Mr. David Laws: I congratulate the hon. Gentleman on raising this important issue. Is he aware that many of my constituents were obliged to work on the recent jubilee bank holiday, or else come in on the previous Saturday to make up for it? Does he agree that that is absurd in this day and age?
Mr. Watts: The hon. Gentleman makes an important point. I intended to come to that subject at some stage, but he has highlighted the problem.
I found that many people are asked to work unpaid hours. As I come from a trade union background, I did not think that that was acceptable, but several of my constituents tell me that their employers insist that they work extra hours without pay, and they do not even get time off in lieu. The Employment Bill has just come before Parliament, and one of the issues that I ask the Minister to address in it is enforcement. It may be illegal—I think that it probably is—to make people work unpaid hours and not give them time off in lieu, but many people, including middle managers and those in their first graduate jobs, are forced to work extra hours.
I am told that a 50-hour week is not unheard of for those in the retail business who have signed contracts to work 38 hours a week. Those who have come to see me tell me that if they were to try to enforce their employment rights, they would not last two minutes, and they would lack protection. Those people are not in trade unions. As a rule, they will accept overtime without pay.
The use of agency staff is a worry for many people throughout the country. Increasingly, it is the practice for many employers to replace those on permanent contracts with agency staff. Once again, the Employment Bill deals with that, but I should be interested to know what enforcement powers the Government will have.
Finally, I shall mention the way in which many employees are kept in the dark about consultation with their companies. Employees often find themselves made redundant willy-nilly. They do not have any warning, and are not allowed to consider the issues and negotiate
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with their employers to discuss solutions other than closure or job losses. I understand that that issue, too, is addressed in the Employment Bill. It is crucial that the Government act to protect groups of workers who are Vulnerable, and who have no trade union power or skills that would allow them to negotiate good pay and decent conditions of employment.
In addition to the issue of unpaid bank holidays, there is the fact that we are badly treated as far as such holidays are concerned. Germany has 10 to 14 bank holidays, France has 11, Belgium has 10, and Spain and Portugal have 14, but British workers are not automatically entitled to any bank holidays. The number of bank holidays and the protection given to employees as regards payment for them are issues that need to be addressed.
Employment protection needs a serious second look. I know that the Government have done a great deal and I do not want to desecrate the great work that they have done, but without good employment regulation, many of my constituents feel as though they are economic slaves, and that they have no power to influence the decisions of their employer. They believe that they are exploited and abused, and feel that they have little option but to accept the boss's offer, which is often made on a take it or leave it basis. Macho management is still alive and kicking in the United Kingdom. It is not unusual for many of my constituents to be bullied by their employers. People who come from an area of high unemployment are hardly likely to stand up to their bosses if they lose their jobs and cannot find another.
I know that people believe that regulation should not be extended. We often hear the argument that it is anti-competitive, that there are too many Government controls and too much bureaucracy, but such views should be ignored. Frankly, the people who make such claims would not accept the employment conditions faced by many of my constituents. Such people would not accept that they could not take bank holidays off, or poor pay and bad conditions. We should not take any notice of people who set double standards—they want Fetter rights for themselves and their families but not for other people.
It is clear that the present relationship between employer and employee is unbalanced. Without trade union membership or skills, it is difficult for people in my constituency to negotiate decent working conditions. I recommend that people join trade unions. It is interesting that, on average, trade union members get six more bank holidays than workers who are not in trade unions. Once again, there is a benefit in joining a trade union. However, the people that I am talking about are often not in trade unions. They work in small companies where they are easily abused and not given the right wages and conditions.
In many areas in the north-west with high levels of unemployment, there are still some very poor employers. In such cases, the Government should do what they can to protect the workers involved. The Government have made an excellent start with the Employment Bill, but much more must be done to bring about the level of employment protection enjoyed by our European partners. I ask the Government to build on what they have achieved so far. I note—as I have on three occasions now—the benefits that will derive from the new Employment Bill, but there is now a greater

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need to protect vulnerable workers. The Government have done a great deal on family-friendly policies, but it is not family friendly to be poorly paid, unable to take bank holidays or told to take holidays at inappropriate times.
On the subject of bank holidays, the hon. Member for Yeovil (Mr. Laws) mentioned the jubilee. Some months ago, I was contacted by a constituent whose employer had told him that he would not be paid if he took the jubilee bank holiday off. He described that as like being invited to a party but being told, "Bring your own beer and sandwiches." When the Government announced the jubilee bank holiday, most people thought that they would be able to take part in the celebrations. Sadly, that was not always the case. I hope that when such events take place in the future, people will be able to enjoy the benefits of good bank holidays, pay and conditions.
I hope that the Minister will take my comments on board and address some of the important issue's affecting many of my constituents.
1.13 pm
The Minister for Employment Relations, Industry and the Regions (Alan Johnson): It is a delight to serve under your chairmanship for the first time, Mr. Hurst. I congratulate my hon. Friend the Member for St. Helens. North (Mr. Watts)—who is with us courtesy of Nurofen—on raising the issue of bank holidays. He has consistently raised and championed this issue, and if the day ever comes when we do provide statutory pay for bank holidays, we should call it Watts payments day in recognition of his efforts.
The gist of the argument was put by my hon. Friend, but I approach it from a different perspective. We cannot isolate the issue of bank holidays from all the other protections being provided for workers in this country. He mentioned that, despite our good record, we were the poor relation in Europe. I do not agree with that description. It is true that every country in the European Union pays for some bank holidays, but not all. For example, France does not have statutory provision for payment for all its bank holidays, and if we look more widely at non-European Union G7 countries, we find the same picture.
The question in the United Kingdom is where we set the priorities. My hon. Friend, when making the argument that we are the poor relation in Europe—a notion that I hope to disabuse him of in my contribution—also mentioned that he is a trade unionist. Like me, he will recall that unlike every other European Union country, the trade union movement in this country opposed right up until the 1980s the implementation of minimum standards through the law It opposed a national minimum wage, concepts such as the working time directive and the right to paid holidays. Like me, he will remember that, when we wore our flares and tank tops, the argument in the UK trade union movement was that those matters should be settled through free collective bargaining, that there should be no state interference in them and that civil rights at work came with the union card.
I make those points because we must put this matter in context. It is true that when we came into power in 1997 there were more bank holidays in the rest of the
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European Union than in the UK, and that more of them were paid. However, we also had then no national minimum wage and no entitlement to paid holidays or a union recognition procedure. In many areas, there was no protection. It was then, as now, questionable whether bank holidays should be placed further up our list of priorities.
My hon. Friend mentioned the Employment Bill. I am delighted to announce that that is now the Employment Act as it received Royal Assent at 10.25 pm last night. That will affect some of the points that my hon. Friend raised about his constituents. The Employment Act will affect individuals who felt unable to raise those grievances in the workplace, because it insists that every workplace in the country, irrespective of how many people it employs, whether that is one or 1,000, must have a statutory grievance and discipline procedure as part of the protection available.
It is illegal for workers to receive no money for extra hours, not just in civil law but in criminal law because it breaches the national minimum wage. We have not only set a national minimum wage and uprated it this morning by statutory instrument, but set up a helpline whereby the Inland Revenue—which strikes fear into the hearts of everyone, not only employers, and has cruel arid unusual punishments—will pursue a case such as that described by my hon. Friend, without the employee having to approach the employer at all. Employees can ring the helpline and the rest is done for them. We have found that compliance with the national minimum wage has increased dramatically from its early days, April 1999.
As well as providing the protection for constituents that my hon. Friend mentioned, we are now ahead of most countries in Europe—in the top three—on paid maternity leave. We have uprated statutory maternity pay by 60 per cent., the largest increase since 1948.
Mr. Watts: My hon. Friend says that if someone is being asked to work longer hours than stated in their contract, they can take action by reporting that to the Inland Revenue. I want to be clear about something. If a contract says, as I understand that they often do, that someone is required to work 38 hours a week but will have to be flexible, does that element of flexibility include that person being asked to work long beyond the 38 hours? How would that be enforced? What kind of contractual arrangements deal with that, bearing in mind that we are often dealing with people who are unorganised, who are not in trade unions and who have little individual power?
Alan Johnson: I was referring to people being asked to work far no hourly rate, for nothing. Yes, there can be flexibility of hours, but there are no circumstances that I am aware of in which anyone can be asked to work those hours for no remuneration whatever.
I shall check on the other points that my hon. Friend made, and perhaps write to him about the protection on hours. We have, of course, an opt-out from the working time directive, and we are the only country in the European Union to do so, but the onus is on the individual; if they wish to work more than 48 hours, they can sign the opt-out. Protection does exist, and the introduction of the Employment Act 2002 means that

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we are well ahead of Europe on matters such as the right to be accompanied; any worker for any size of company in this country can be accompanied by a trade unionist, whether their union is recognised or not, at any discipline or grievance case. That is not mirrored elsewhere in Europe. We are well ahead of the game.
We are also introducing statutory paternity pay and paid adoption leave for the first time. Other measures include the extension of union learning representatives, and the right to paid time off and facilities. My hon. Friend said that we are the poor relation in Europe, but he should consider where we stand following five years of various pieces of employment legislation and now the Employment Act.
My hon. Friend said that people were not informed and consulted. I remember a particular case in his constituency that he came to see me about, which is now being addressed with the implementation of the information and consultation directive. In response to the idea that we are the poor relation in Europe, I say that over the next few years workers will have the right not only to a discipline and grievance procedure in their workplace, to a minimum wage, to paid holidays, to be accompanied, and to various other measures, but to request flexible working if they are the mother or father of a child up to six years old.
The workplace up to 2010—the measures will be introduced at various stages—will be very different. We will outlaw discrimination on grounds of age, sexual orientation, religion and disability.
Mr. Alan Hurst (in the Chair): Order. I am sure that the Minister is aware that he is covering a broad sweep. The subject under debate is bank holiday pay.
Alan Johnson: Absolutely, Mr. Hurst. I accept that it is a broad sweep, but I am replying to the allegation that we are the poor relation in Europe.
The first question is where we place our priorities. Secondly, we must consider the cost that businesses, particularly small businesses, would be asked to bear as a result of the measures. Many businesses complain about an incremental stacking up of costs. We have sought to introduce the measures in a way that takes businesses with us into the brave new world of minimum employment standards in the workplace.
Mr. Watts: My hon. Friend makes the point that some employers would object to the introduction of statutory paid bank holidays. I have been in contact with small employers who very much resent the fact that those whom they regard as poor employers are competing alongside them without providing decent conditions, pay or holiday entitlement. Does he agree that that can have an anti-competitive effect?
Alan Johnson: I do agree. I am not saying that the concerns expressed by my hon. Friend are not legitimate or pertinent. We estimate that about 17 per cent. of full-time and part-time workers are not paid for bank holidays, so 83 per cent. are paid. As my hon. Friend knows, the Bank Holidays Act 1871 has remained virtually unchanged. It was revoked and reintroduced in
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1971, but for 131 years of our history the situation has been has it is now: bank holidays, whether paid or not, are a contractual matter between employee and employer.
Mr. Laws: Does the Minister agree that now would be a good time to review people's entitlement to bank holidays? Does he not understand that many people find it surprising that a Labour Government could defend a situation in which the worst employers can exploit some of the most vulnerable employees in the labour market?
Alan Johnson: I hope to answer the point about this being a good time when I come to my feeble peroration.
Labour Governments under Ramsay MacDonald, Clement Attlee, Harold Wilson and Jim Callaghan did not address such issues in any way. They did not introduce a national minimum wage or a right to four weeks' paid holiday, whereas this Government have.
We have not as yet addressed the important points raised about bank holidays, which have a 131-year history. The cost of the Employment Act 2002, as Opposition Members pointed out during its passage, is considerable, and my hon. Friend talked about not just paying for bank holidays, but increasing their number. A TUC paper in August 2001 suggested that we increase the number of bank holidays by three. Taken together, hat would mean a cost to business of £6.5 billion a year.
I do not think that there would be any disagreement between us on the fact that many workers have to work on bank holidays, whether they are in the health service, in transport or, increasingly, in tourism, when we as consumers insist that there are facilities for us on bank holidays and where most of the costs fall on small businesses that are seeking to recover after foot and mouth disease.
We have to consider the question proportionately in terms of where the cost would fall and where it would stand in our priorities. We are probably a rather curmudgeonly and miserable nation in the days that we allow for celebrations, but in the rest of the EU the bank holidays exist for a reason. They were not just created because someone in France said, "We have two fewer bank holidays than in Germany—let's create a couple." Days such as Bastille day exist for historical reasons. The last time that happened was when a Labour Government introduced the May day bank holiday. There has to be a reason for the nation to celebrate; I do not think that one can manufacture a reason for a bank holiday, although we have done so, most recently for the Queen's golden jubilee, and we did so for the royal wedding in 1981, and there have been a couple of other occasions where there have been one-off bank holidays.
We estimate that it would cost £500 million if existing bank holidays were paid, given that we are talking only about 17 per cent. of the work force, but that is in the context of all the other changes that we are making. There is bound to be a cost for information and consultation, tackling age discrimination in the workplace, the worker versus employer argument that we are consulting on at the moment and all the other measures that we have in our exciting and rather full agenda during the next few years. Would we make this matter a priority in that debate?
Mr. Watts: Many of my constituents would say that many measures that we have introduced are aimed at

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people who are well organised, from the middle classes and who can afford to represent themselves. We are not addressing the basic, fundamental conditions of employment, such as bank holidays and time off. There is a view that our priorities are wrong, and we need to refocus on some of those issues.
Alan Johnson: I accept that, from the correspondence that I have received from my hon. Friend and others, this may be becoming a higher priority for workers and constituents. I think that he would accept that it was not the highest priority in 1997. We are still only five years into this brave new world.
We have a practical consideration. We have to consider those people who have to work on bank holidays and what they would be paid. Would it be a day in lieu? Would it be one of the things that I used to negotiate as a trade union leader: time and a half and a day off, or double time and a half? That creates practical problems. Generally, the most positive thing that I can say is that I would not rule out a review on the status and structure of bank holidays in the future. It is not an issue that is at the forefront of our employment legislative programme, but it is important, and one that we shall look at perhaps in our third or fourth term of government.

Contracted Care Workers
1.29 pm
Mr. David Rendel: I am delighted to have the opportunity to initiate the debate for two reasons. The first is to press the Government to introduce a long-delayed reform that they have been promising for some years but which has failed, inexplicably, to materialise. Secondly, I hope that the Minister will use his response to give some reassurance and to promise some recompense to one of my constituents, who faces severe personal financial strain because the reforms are not yet in place. Indeed, my constituent's clients face the prospect of losing the services that the business supplies and perhaps even of ending up as more of the hospital bed blockers whose numbers the Government rightly are determined to reduce.
Mr. Alan Hurst (in the Chair): Order. I remind hon. Members of the words of the Speaker as to dress in the Chamber. For that purpose, Westminster Hall should be treated in the same way as the Chamber.
Mr. Rendel: Let me start by describing my constituent's case and then I shall fit it into the wider picture of desperately needed Government reform, which has been so long delayed. My constituent, Mrs. Angela Reed, runs her own business providing infirm and disabled people with care, much of it of a medical nature, in their own homes. She trades in her own name as a sole proprietor and employs staff to assist her in the provision of services. Like others working in the field, she provides valued services, often on behalf of the local authority, to some of the most vulnerable people in our community and, because the services are provided in the home, they maximise the independence of the individuals concerned.
Given that the Minister is doubtless a proponent of joined-up government, this seems an ideal opportunity to remind him and his colleagues in the Department of Trade and Industry of the words of the Department of Health's 1998 White Paper "Modernising Social Services", which stated that
"when people need social services help, that help will be arranged in a way that lets them do as much as possible for themselves; and allows them wherever possible to live in their own homes."
The type of care provided by Mrs. Reed is VAT exempt if it is provided by or supervised by a medically qualified person such as a nurse or doctor. Since the beginning of the year, Mrs. Reed has employed medically qualified staff in a supervisory capacity. However, that was not the case earlier, so her services did not fall under the statutory VAT exemption, despite the fact that they were often recommended by medical practitioners who knew of her great and long experience in providing such services.
Accordingly, when it emerged that her turnover had exceeded the VAT registration threshold in early 2001, she was obliged to commence charging VAT to her clients, the elderly people who benefited from and were happy with her care services, which they desperately needed if they were to be able to remain in their own homes, but which many of them could afford only with difficulty. Many were unable or unwilling to pay the extra amount, and custom was lost as a result.

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Moreover, because it was not immediately apparent that she had exceeded the threshold, Mrs. Reed faces retrospective registration and VAT payments amounting to approximately £10,000. The situation has placed her and her business under considerable strain. Mrs. Reed's accountants—James and Cowper, a local firm—have been in correspondence with Customs and Excise in the hope of persuading it that the VAT exemption should apply in her circumstances. They have not been successful. I shall not argue today that that is an incorrect interpretation of the legal position, but there is a strong case for arguing that the situation conflicts with stated Government principles and policy.
I come to the general position to prove my point. If Mrs. Reed operated as an agency, not a proprietorial business, to provide the services of her staff, she would be in a much more favourable position in relation to VAT. Agencies are not regarded as supplying the full service of the staff whom they place, so VAT is due only on their placement commission. That is due to change. The Department of Trade and Industry proposes to change the status of workers placed by such agencies so that they will become full employees of the agency. The contractual relationship will therefore be with the bureau or agency that supplies them, not with the client who hires them. However, there has been a severe delay in implementation. Changes to the employment status of temporary workers supplied by employment bureaux were first announced more than three and a half years ago in September 1998. Eight months after that, on 31 May 1999, a consultation document entitled "Regulation of the Private Recruitment Industry" was published. In its business brief 13/99, dated 18 June 1999, Customs and Excise indicated that the regulations were expected to come into force at the beginning of 2000.
In an Adjournment debate on 29 October 1999, my hon. Friend the Member for Sutton and Cheam (Mr. Burstow) and others expressed the concern that the changes would increase the amount of VAT charged to people buying care in their homes, some of whom are often the most vulnerable members of our society, as hon. Members said. In another business brief 3/2000, dated 22 February 2000, Customs and Excise reported that there would be an extra-statutory concession for home care services. The brief makes it clear that the main reason for the concession was that Customs and Excise and the DTI recognised that the changes would
"place an increased VAT burden on some of the most vulnerable people in society".
The concession
"will be introduced to coincide with the introduction of the DTI changes in the Summer."
The summer of 2000 has come and gone, and two years and a general election later we are still waiting. The extra-statutory concession will be welcome when it is introduced. Business brief 3/2000 makes it clear that the concession will apply to non-agency care providers, such as my constituent. It will also apply to home care
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services, including personal care such as bathing, and help with practical tasks such as house cleaning where there is an obvious client need.
As the Paymaster General, in a written parliamentary answer on 29 January 2001 in response to a question from my hon. Friend the Member for Sutton and (Cheam) said:
"Customs will implement the Extra Statutory Concession to coincide with the changes in the Department of Trade and Industry regulations on the private recruitment industry. A side effect of these changes could have been an increase in the VAT paid for necessary home care provided by employment bureaux. The concession will mean that the VAT burden on those least able to look after themselves is not increased as a result of the DTI changes, and in many cases will actually go down."—[Official Report, 29 January 2001; Vol. 362, c. 39-40W.]
I welcome the Government's clear statement of intent, and their commitment to ensure that there is no inequity of treatment on VAT between agencies and proprietorial businesses providing similar services in competition with one another. However, will the Minister account for the extraordinary delay in implementing the proposals? Hon. Members will note that the Paymaster General's parliamentary answer is dated one year after the announcement of the extra-statutory concession. Why have those changes still not come into effect?
In another written parliamentary answer, dated 25 January 2001, my hon. Friend the Member for Sutton and Cheam asked the Secretary of State for Health
what discussions he has had with the Chancellor of the Exchequer and the Secretary of State for Trade and Industry on the implementation of the proposed extra-statutory concession on VAT and home care; and if he will make a statement.
The Minister of State at the Department of Health replied:
"The Department has been liaising closely with my right hon. Friend the Chancellor of the Exchequer and the Department of Trade and Industry on their proposals since 1997. The proposed Value Added Tax concession will mean that people receiving care in their own homes will not pay VAT on the wages element of that care. We will continue to make every effort to promote home care as a choice for individuals in need of support."—[official Report, 25 January 2001; Vol. 361, c. 689-90W.]
Therefore, this matter has been under discussion since 1997. The Government are committed to promoting home care as an option for the individuals concerned, but no action has been taken for five years.
One year further on and the Treasury was repeating the same mantra. The hon. Member for Runnymede and Weybridge (Mr. Hammond) asked the Chancellor of the Exchequer
"when he expects Customs and Excise to issue details of the proposed extra statutory concession in respect of VAT on supply of services agency workers for domiciliary care."
The Financial Secretary replied:
"Details of the proposed extra statutory concession on the VAT liability of home care will be available when the Secretary of State for Trade and Industry lays before Parliament revised regulations governing the conduct of the private recruitment industry."—[Official Report, 25 January 2002; Vol. 378, c. 1150W.]
So details will be announced when they are announced. That is very helpful.

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If the new regulations had been introduced in the summer of 2000, the timing initially announced by Customs and Excise, my constituent would not be in the position she is in now. This is not simply a case of a particular business reporting a grievance to the local Member of Parliament and calling for a change in the law. This is a case where the Government have been promising to change the law for several years, but have failed to fulfil that promise, to the great disadvantage of my constituent.
I hope that the Minister will today be able to announce when those changes will be introduced. Meanwhile the delay has had severe consequences for my constituent and her business. Her business provides important care services for many elderly people, in keeping with the principle of independent living, which is rightly at the heart of the Government's thinking on social care. Under those circumstances, can the Minister provide an assurance that the needs of care providers who have fallen foul of the existing VAT regulations will be taken into account when the expected reforms are finally announced?
Given that my constituent would never have got into her present financial difficulty had the Government brought in the relevant legislation according to their original timetable, it seems only fair that the retrospective VAT that my constituent is now being asked to pay is either waived or counterbalanced by a compensation payment to her of the same size paid on the grounds of the Government's maladministration of their own legislative programme. The local council and the local medical services value my constituent's work, and so, very much so, do her clients. The Government's policy, quite rightly, is to enable people to obtain the care they need to remain in their own homes. It is also the Government's policy therefore that VAT should not be charged on the provision of home care services. For the sake of my constituent, but above all for the sake of her clients, she should not have a VAT bill to pay, just because the Government have failed, after five years of waiting, to get their act together.
1.44 pm
The Economic Secretary to the Treasury (John Healey): I congratulate the hon. Member for Newbury (Mr. Rendel) on securing the debate on such an important issue. It is a reflection of his strong track record in the House. He speaks up on such issues both in policy terms and to make active representations on behalf of his constituents, including individuals who are sometimes affected by residential care matters. The constituent in this case has been affected as a provider of services to people in their own homes.
The hon. Gentleman raised some important matters, and I am glad of the opportunity to reply, because improving the standard of care for elderly people in care homes and their own homes is a priority for this Government. I am sure that the hon. Gentleman will agree that the national service framework for older people, which was published last year, is a significant step forward. With the new National Care Standards Commission now being merged with the social services inspectorate, an important element of protection and consistency for elderly people, many of whom are very vulnerable, has been introduced into the system.
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The hon. Gentleman will also know about the significant additional spending that the Government have put into personal social services. It is available to support the services to take care of people in their own homes and in residential care homes. Nationally, resources have increased on average in real terms by 3 per cent. a year between 1996–97 and the current year. In addition, as we recently announced, the real terms increase between 2003–04 and 2005–06 will be the equivalent of 6 per cent. per year. That is in stark contrast o the record of the previous Government, who between 1992 and 1997 oversaw a real term's annual growth of 0.1 per cent. It is an important context for what will be a more technical discussion.
The Government are keen to see initiatives for the development of not only better standards in care homes but intermediate care services of rehabilitation and support, which can increase individuals' independence and help them remain in their own homes and out of institutionalised care homes for longer. I welcome the hon. Gentleman's greeting for our proposals for an extra-statutory concession, and it may be helpful to give some background detail to our decision to introduce it. I will then explain why I dispute his contention that there has been a long delay in the introduction of the measure per se, by explaining its crucial link to the proposals for amending Department of Trade and Industry regulations for governing the activities of employment agencies.
The activities, nature and regulation of employment agencies and bureaux are at the heart of the proposal to introduce an extra-statutory concession. At present, employment bureaux can arrange their affairs for VAT purposes so that they act as either an agent or a principal in supplying staff. The hon. Gentleman touched on that point. For the sake of clarity, an agent is someone who makes arrangements for the supply of goods and services by another person. When care services are arranged through an agent, even though one invoice and charge may be raised, there are two distinct supplies: the agent's services—the making of arrangements for the supply by someone else, such as a self-employed worker—and the care service itself, which is supplied by the worker.
As in the case of Mrs. Reed in the hon. Gentleman's constituency, who had to make a choice as part of setting up and running her business, personal businesses must choose either to use an agent to arrange for the supply of an exempt service on their behalf or to act as a principal. A principal is a person who makes or receives a supply, so when an employment bureau is a principal, for VAT purposes it is akin to an employer of staff in that it is responsible for providing the services carried out by them. A principal does not therefore merely make arrangements for the supply of a third party, but supplies the services carried out by its staff.
The introduction of the extra-statutory concession is crucially linked to the proposals that were produced by Government and led by the Department of Trade and Industry and which, as the hon. Gentleman rightly said, were published in 1999. The amendments and reform of the regulation of the private recruitment industry were aimed at providing employee protection to temporary workers supplied by employment bureaux. It was thought that a side effect of those changes would be that employment bureaux acting as agents, which previously

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had to charge VAT only for the service of making arrangements, would have to charge VAT on their total fee, including the agency worker's salary costs. Following close scrutiny by the Treasury and on the Chancellor's initiative, we investigated ways of minimising the potential VAT impact of the DTI's proposed changes on home care services so that people in their own homes were not faced with increased VAT payments—hence the extra-statutory concession.
The concession means that when the new DTI regulations come into effect, people in their own homes who are in need of care will not pay VAT on the wages element of taxable care. The arrangement fee will, however, remain taxable in the same way. The hon. Gentleman quoted correctly our intention of introducing the concession to coincide with the DTI regulations. The DTI is considering the many responses to its consultation document. As the hon. Gentleman will appreciate, several complex issues—not least the tax dimensions—are connected with the proposed changes. I hope that the hon. Gentleman will regard what he rightly described as our "clear statement of intent" as our determination to introduce an extra-statutory concession when the regulations are introduced and for the purpose that I explained earlier.
There is therefore no sinister reason for the delay in introducing the extra-statutory concession; the matter is perfectly simple. We announced that we would introduce the concession when the DTI regulations are laid before Parliament and that position remains. The concession is being introduced to offset the danger that people who purchase care that enables them to continue to live in their own homes will be liable for extra VAT, particularly on the costs of the care services and the relevant worker salaries. I hope that the hon. Gentleman recognises that our statement of intent in that regard remains clear and strong.
Mr. Rendel: I quite believe the Minister and the Government when they say that they will introduce that concession when the DTI changes its rules. The danger for people like my constituent is not that they might be charged VAT and have to pass that charge on to their clients because they already have to do so as they are not bureaux and agencies that work in the way that will be affected by the DTI change. They have to charge VAT now and their clients already have to suffer, and they will go on doing so because the longer the DTI takes to make its changes, the longer it will take for the extra-statutory concession to come in—unless the Minister can do something about it straight away.
John Healey: The hon. Gentleman makes a fair point but if my memory serves—I will check the Official Report—he said that Mrs. Reed had altered the way in which she provides her services and that they are now supervised by a nurse. The key element for the provision of care is therefore not liable to VAT, although the commissioning or arrangement fee still is, as I have explained. The hon. Gentleman will correct me if I am wrong, but I believe that that is, understandably, the position that Mrs. Reed has taken.
Mr. Rendel: The Minister is right that, because Mrs. Reed changed her arrangements, she has got round the problem. However, there will be other people throughout the country who are still providing services directly, without medical supervision. Mrs. Reed has had to employ people deliberately to get round the VAT problem, which seems an absurd way to do it.
John Healey: We concur at least on the way in which Mrs. Reed organises her business. It is a quite sensible adaptation to the provision of services. Clearly, the quality of services that she offers to people living in their own home cannot be reduced or damaged by the involvement of a qualified nurse.
We are discussing the territory of VAT in care services, and the hon. Gentleman has made a number of powerful points. I hope that he at least recognises that the Government are aware of the impact that VAT can have on care services and vulnerable or sick people, both in their own home and in care homes.
VAT is not chargeable on care services that form part of the care or treatment of a person in a nursing or similar residential home. That includes care provided by staff employed by the institution, and care provided by contracted staff. Nor is VAT chargeable on medical, personal or nursing care services provided or supervised by a nurse, whether they be provided in a nursing home, another home or someone's own home. We have just discussed that point. VAT is not chargeable on any welfare service, including care services, in a residential home or at a home that is provided by a charity or a local authority under a statutory duty. Mrs. Reed is clearly running an agency that is a business. She now delivers such services under the supervision of a nurse, so the workers' salaries are not subject to VAT.
As the hon. Gentleman knows, we are constrained to some degree by long-standing agreements with our European partners. The United Kingdom can maintain existing VAT zero rates and exemptions but, under the same Community agreements, we may not introduce new reliefs or make anything more than marginal adjustments to existing reliefs. Currently, there is no exemption for the services of employment bureaux, so there is a significant constraint on our ability to reduce the VAT chargeable on the arrangement fees or commission services of agencies such as that of the hon. Gentleman's constituent. Clearly, it would be more than a marginal adjustment to try to shoehorn such an exemption into an existing relief.
That does not mean, however, that we can do nothing in this sector. Indeed, I hope that the hon. Gentleman recognises that we moved rapidly in March when a High Court judgment on VAT and residential care threatened to limit the exemption for residential care. We immediately put VAT exemption beyond question through the Value Added Tax (Health and Welfare) Order, which was statutory instrument No. 762/2002. I hope that the hon. Gentleman sees that as evidence of decisive and prompt action to confirm that vulnerable people will not face VAT on residential care. We are determined to ensure that vulnerable people do not face a greater VAT burden than is absolutely necessary.

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I end by confirming the timing of the extra-statutory concession, as the hon. Gentleman requested. We still intend to introduce the concession immediately the new Department of Trade and Industry regulations are laid. I cannot, however, assure him on the retrospectivity that he seeks on the VAT payable by people such as his constituent at present. I hope that he feels that this short
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debate has been valuable. Our general approach to social care is that we are committed to increasing the level of funding, and determined to raise standards of care and to ensure that tax, as a proportion of costs, plays no greater part than is necessary.
It being Two o'clock, the motion for the Adjournment of the sitting lapsed, without Question put.