Westminster Hall Sitting of 10 December 2003

Preamble
[MR. FRANK COOK in the Chair]

Financial Services Jobs (Outsourcing)
Motion made, and Question proposed, That the sitting be now adjourned.[Mr. Ainger]
9.30 am
John Barrett: I am delighted to have secured this important debate because it highlights not only a local concern for my constituents and those living throughout Scotland's capital, but a national concern, as shown by the number of hon. Members who contacted me before the debate. I am grateful for their interest.
That said, I hope that hon. Members will understand if I concentrate part of my speech on the impact that outsourcing has had on my home city of Edinburgh, which is heavily dependent on the financial services industry. One term that we shall hear a number of times today is "offshoring". That relates to jobs that were formerly done in this country but which have now gone abroad. Local newspaper headlines along the lines of "City hit as 2,350 Aviva jobs go east" and "50,000 jobs lost to India" have, understandably, heightened local concerns, as shown by the number of letters, telephone calls and e-mails that my constituency office is receiving. The issue will also be the subject of debate during tomorrow's meeting of City of Edinburgh council on a motion tabled by the Liberal Democrat group leader, Jenny Dawe.
I want to mention the work of my constituency neighbour, the hon. Member for Edinburgh, North and Leith (Mr. Lazarowicz), who is present. I hope that he will contribute to the debate. We have already had a joint meeting with interested parties, a practice that I hope can be continued, because one thing is clear: there is cross-party concern on this issue and the concerns are spreading to many homes throughout the country in the run-up to Christmas.
I accept that this is not just a local concern for Edinburgh or even Scotland as a whole; most UK call centre jobs remain in the south-east, and the Lloyds TSB losses will have a massive effect on Tyneside. This is far from just an Edinburgh problem, so I look forward to hearing contributions from other hon. Members on issues local to them. I also accept that outsourcing is not exclusive to the financial services industry. However, the announcements by HSBC, Lloyds and Aviva, which stand out from the rest, show the particular relevance of outsourcing to this industry. That is why I mention it in the title of the debate.
A number of other jobs have already gone overseas, and that has been the case for many years. Last week, I read about sporran and kilt production in India, which is even considering producing whisky and exporting that to Scotland. Today, however, I shall concentrate on the financial services industry.
Much has been written about what is happening in the global marketplace, why jobs have moved in the recent and distant past, who will be the winners and losers, and
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why our colonial past and the spread of the English language have resulted in particular risks for our country. I hope that this debate will add to the debate that is already taking place up and down the country on an issue that will affect thousands of individuals and their families in years to come.
Last week's announcement by the Secretary of State for Trade and Industry about setting up a study of the call centre industry is warmly welcomed. I hope that this debate will allow hon. Members to feed into the early stages of that study. The announcement is welcome partly because it contrasts starkly with the Prime Minister's comments last Wednesday. If he thinks that by saying that the job losses are just the way of the world he will soothe the fears of the people he serves, he is sadly mistaken. The Government, the Department of Trade and Industry and the Secretary of State must not downplay these issues, although admittedly the study recognises that there is a problem that needs to be addressed. Of course, the Government are right to say that we are not in a panic situation yet. However, the problem is part of a trend and we need to address it now, or we will face a very serious crisis in the not too distant future.
Why is the outsourcing of jobs, and financial services jobs in particular, so important? The UK call centre industry employs more than 790,000 people in more than 5,000 call centres. It employs almost 4 per cent. of the working population of Scotland, with nearly 100,000 people working in such centres. The figures for other parts of the country are just as stark. More than 4 per cent. of the employed population work in contact centres in the north-east and north-west of England. In many cases, the rise of the service sector, financial services and contact centres has occurred in parts of the country that suffered from a serious fall in manufacturing. The thought of yet another upheaval in industry in those areas brings dread to many people.
The first Adjournment debate that I secured was on the manufacturing industry in Scotland. In that debate, the former Secretary of State for Scotland, the right hon. Member for Airdrie and Shotts (Mrs. Liddell), made the point that the decline in manufacturing could be tolerated because of Scotland's booming service sector. I did not buy into that argument, but if it is true, the movement, or at least the beginning of the movement, of service sector jobs from Scotland to the Asian subcontinent should deeply concern us.
Answers to my parliamentary questions have revealed a 16,000 net decrease in manufacturing jobs north of the border in the past year. Without question there is greater dependence in Scotland on financial services, and the future of that industry is key to the future of the country. I accept that jobs move and that little in the global market remains the same. I am also aware that it is not all one-way traffic; there are benefits to companies in terms of cost reductions. We will naturally try to encourage jobs to come to our country, and it would be naive to think that other countries will not do the same. We welcome improved opportunities in the developing world so that those ravaged by hunger and poverty can hope that one day their lot will improve.
I would not advocate building barriers and pretending that the outside world does not exist. We have gained much over the years from becoming an

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international trading nation. A new set of problems must now be tackled so that the financial service industry does not become a victim of those who seek short-term financial gain instead of long-term security.
The figures on outsourcing show, perhaps contrary to some comments by the DTI, that people are right to be concerned. Firms have outsourced more than 50,000 jobs that serve UK customers to India over the past two years. India is not the only destination for jobs; South Africa, Malaysia and the Philippines have also gained from outsourcing.
In many cases, the job transfers have formed part of a pilot, but any experiment is carried out for a reason. Steve Tatlow, the assistant general secretary of Lloyds TSB Group union said:
"You don't spend money on a pilot if you don't think it's going to be a success."
If companies find the pilot to be successful, as some already have, surely they will follow it up. What will follow remains the big question and we will have to wait for the answer.
Outsourcing of call centre work is expected to increase by 25 per cent. over the next five years. Andrew Stewart, the managing director of the industry consultant Troika, has warned that 40,000 jobs in life and pensions and general insurance, along with 60,000 in banking, are likely to be moved abroad within the next few years. The announcements made last week by three financial giants—HSBC, Lloyds TSB and Aviva, owners of Norwich Union—have rightly received much publicity. The combined intentions of those companies amount to the transfer of about 7,000 jobs abroad. Those companies stand out because of the numbers involved, but it would be wrong to say that they are alone. The list of companies that have transferred jobs overseas, or are considering such a move, is extensive and includes Powergen, British Airways, British Telecom, Vertex, Thomas Cook, Prudential, Citigroup, JP Morgan, Scottish Widows, National Rail Enquiries, Tesco, Abbey National, Barclays, BSkyB, Royal Sun Alliance and Churchill Insurance. That extensive list shows the scale of the trend.
As was recently reported by the business section of the BBC, the list of processes that can be moved to the Asian subcontinent is almost endless and includes customer reservations, telemarketing, payroll processing, insurance claims and credit card and loan applications. Many contact centre jobs have already gone. Yesterday there was an announcement about legal jobs moving. Tomorrow it will be accountancy. Accountants should be warned that they are next.
It is not difficult to work out the reasons for this turn of events. British Telecom's workers in India are paid approximately 75p to £1.25 an hour compared with the £5 to £10 paid to contact centre staff in the UK. All the evidence suggests that labour costs are on average 40 per cent. cheaper than those in the UK, despite the fact that many call centre workers on the Asian subcontinent have two university degrees.
It would be wrong to suggest that we can compete with such low wages, and we should not try to do so. The Government are to be commended for the work that they have done to improve worker pay, and that
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progress must not be squandered. There are, however, other ways in which the Government can help. I will talk about those in a moment.
As I mentioned, the outsourcing of jobs has taken its toll on workers in Edinburgh. Some 60 of the 187 jobs at Norwich Union in the capital will be lost. That follows earlier job losses in July when the company shed 900 jobs nationwide. Abbey National has plans to move an estimated 100 Scottish Provident jobs from Edinburgh and Glasgow, and last month Lloyds TSB-owned Scottish Widows revealed plans to move several back-office processing jobs to India. All the evidence suggests that in the event of further outsourcing, Scotland in particular will be hit hard. Contact Babel, the call centre industry analysts, produced a report that concluded that Scotland was especially vulnerable to the trend that we are now seeing. It stated that the spectre of "mass unemployment" now hung over Scotland—hardly the backdrop that we want in the run-up to Christmas.
I should make it clear that not all financial companies have taken the decision to outsource. Standard Life, for example, one of the biggest employers in Edinburgh, with around 8,000 staff, has been firm in its commitment to keep jobs in the city and the country. Its director of human resources, Marcia Campbell, said:
"We have no plans to move any customer service roles overseas. We believe that having customer service operations at the heart of the organisation in Edinburgh delivers a real competitive advantage for Standard Life. We have one of the lowest staff turnovers in our industry and the depth of experience which has been built up could not be replicated by moving jobs elsewhere."
Similarly, the Royal Bank of Scotland, which will open its new headquarters in my constituency, employing around 3,000 staff, has confirmed its intentions to keep its call centre and other staff based in the UK. The Bank of Scotland, which employs some 7,000 people in Edinburgh, said after piloting the offshoring of some operations:
"After considering all the facts, we have decided not to pursue this option. We concluded that the best outcome for our staff, shareholders and customers is to continue to employ people in countries in which we operate."
I applaud those views and have carefully filed those comments away should the suggestion of a U-turn ever come about. On the positive side, it does show the corporate responsibility for which many of us in this place push so strongly. The success of large and, in some cases, multinational companies has come from the ability, tenacity and hard work of their UK staff. It is easy to understand the anger of those who feel betrayed when that hard work is repaid by the transfer of their jobs overseas. It is not only the company that deserves the loyalty of its employees; the employees who build it up also deserve its loyalty.
The big question is what we, and the Government, can do. I accept that these questions are not easy to answer, but we must have a strategy and a mechanism to deliver job protection, rather than the void that has existed so far. The study announced by the Department of Trade and Industry comes on the heels of a similar effort in Scotland—the setting up of the financial services strategy group, chaired by the Scottish Deputy First Minister and Minister for Enterprise and Lifelong Learning, Jim Wallace. The group's membership is impressive and includes the chief executive of Standard Life, the Bank of Scotland governor, George Mitchell,

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and the chairman of Scottish Enterprise Edinburgh and Lothian, Jim McFarlane. It is important for the group and the Government to work closely together to formulate a thoroughly integrated strategy for the protection of Scottish and UK financial services jobs.
The Secretary of State for Trade and Industry rightly said that we have a competitive international market. Our heads must not be in the clouds. We must not think that there is a magic solution or, as I said, that we can compete with low wages. I also oppose the view expressed by some that trade barriers should be erected to try to prevent the drift of jobs to places like India. We have a good trading relationship with that part of the world, which benefits us far more than it damages us. We must learn from the experiences of companies like the ones that I mentioned earlier, which have, for whatever reason, decided against outsourcing. What works well for them must be replicated to ensure that the business market remains competitive. Clearly some businesses see the UK as having lost that competitive edge. We need to work towards understanding how and why that has happened and what can be done to regain our pole position.
The various polls of public opinion on the issue of outsourcing have proved interesting. The research group Mitial found that 60 per cent. of the UK public were opposed to the idea of outsourcing jobs and a similar poll found that 78 per cent. believed that companies had not clearly addressed customer opinions on the migration of jobs. That may not be too surprising. However, the survey delivered by the TUC last September found that 63 per cent. of respondents would take the location of jobs into account before making a purchase.
The potential for consumer power is considerable. Several constituents have already contacted me, telling me that they have already cancelled or intend to cancel their policies with a certain financial company not only because of its decision to outsource a substantial number of jobs, but because of the way that the announcement was made. We will have to see whether that attitude and type of action will increase over time.
I am keen for other hon. Members to have an opportunity to contribute to the debate. However, as I have said, there is concern that what we are seeing now may be the thin end of a large wedge and that more substantial outsourcing and job losses will occur soon. The Government take pride in the levels of employment in the UK. Although I accept that such an accomplishment is important, I have to warn the Minister that if she responds to the debate merely by trumpeting the well documented employment figures, she will leave those concerned about the future of their jobs feeling let down.
In the run-up to Christmas, I can imagine the best possible present for the thousands who work in the call centre industry and financial services industry would be a commitment from the Minister that her Department and the Government take the matter seriously, perhaps more seriously than the Prime Minister suggested last week, and that a strategy for the future protection of such UK jobs will be a priority in the new year. I assure
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the Minister that many hon. Members and many thousands outside this place will listen closely to her words.
Several hon. Members rose
Mr. Frank Cook: Order. Those hon. Members who are well versed in the protocols of this Chamber will not be surprised to hear the following announcement. This is a 90-minute Adjournment debate and normal practice is to commence the three winding-up speeches 30 minutes before termination—in other words, at 10.30 am. Seven hon. Members seek to catch my eye, four of whom wrote to alert me beforehand that they wished to speak. I appeal to everyone to make their comments pertinent and as brief as possible, and to be judicious in accepting and responding to interventions. In doing that, hon. Members will help the Chair to allow everyone to speak.
9.47 am
Hugh Bayley: I believe that politicians should tell the truth, even if it makes them unpopular when they are the bearers of bad news. The sooner that we face an unpleasant reality—the reality that India can now do some office jobs more efficiently than we can in Britain—the sooner our businesses will start to adjust to the new competition and the more British jobs we will save.
I regret the loss of financial services jobs, whether those jobs are lost in my constituency-where, following the recent announcement by Norwich Union, the number of redundancies will thankfully be few—or elsewhere in the UK. I want the financial services industry to minimise the number of redundancies and to retrain and redeploy the maximum number of staff, but simply wringing our hands and blaming the companies, or the Government, will not help the workers. That is as useful as shouting at the driver of an express train when it is racing towards us, and asking the driver to stop. We should not pretend to ourselves, or to the public, that protectionism provides an answer. If we put barriers in the way of trade, it is like putting concrete blocks on that railway line. It may derail the train, but it will crash where we are, not where it started the journey, and we are likely to get hurt as well.
So what can we do? We can slow the process if we help financial services companies in this country to operate in an efficient environment. Companies in India get a lot of help from the Indian Government, who are creating new cities and industrial parks to house the new call centres and back-office administration jobs. They are investing to make their IT revolution happen. Norwich Union Life Insurance, which has its headquarters in York, in my constituency, says that City of York council helped it to find new premises when it recently expanded its operations at Monk's Cross and at Clifton, which are both in York, and when it needed to dig up a road at short notice to lay a communications cable. It has a good working relationship with the local authority. However, in some of the other cities in which it operates, it does not have such a helpful and flexible response from the local authorities. It would help industry if York's attitude were more common.
We need to argue through the World Trade Organisation for a level playing field. I read in The Sunday Times a few weeks ago that the Indian quango,

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Software Technology Parks of India, has been given a corporation tax holiday until 2010. We need to amend the general agreement on trades in services, or GATS, to ensure that such unlevelling of the playing field cannot take place. To do that, we need to achieve a deal in the Doha trade round, and to do that, we, as a developed country, need to make concessions to developing countries on agriculture trade reform, which is where developing countries gain most from world trade. It is in our interests to make concessions to developing countries in the trade round so that we get the benefits that we need in GATS at the high-tech end of trade negotiations.
We need also to adjust now; later will be too late. We can already see the train on the track, or as Gary Withers, chief executive of Norwich Union Life, told me earlier this week, we can see the tide coming in. Those who respond early and plan changes at their own pace can avoid many redundancies. For example, earlier this year Norwich Union established 1,200 jobs in call centres in India, which resulted in just 21 redundancies in the UK. The alternative to globalisation is to watch costs in one's company rise, to lose UK customers as a consequence and to end up making emergency job cuts to try to balance the books. That could cost thousands of jobs.
How can it be that one can outsource thousands of jobs to India and lose far fewer in the UK? Suppose that a company wants to create 2,300 administrative jobs. Taking into consideration such factors as the salary, the cost of the premises and the tax paid by the employer, that might cost £19,000 per job in the UK, a total of some £45 million. The same exercise in India might cost £4,000 per job for salary and on-costs, or £10 million in total. To that, one should add the same again, some £10 million, for telecoms links to the UK. A saving of some £25 million could be made, but where would be the benefit to Britain? First, it would be in the telecoms. They might well be provided by BT or Cable and Wireless, so half of the cost of a relocation might come back to the U K. Secondly, the saving of £25 million could be used by the company to develop and market new products in the UK or in other markets overseas in which it has subsidiaries and from which it repatriates profits to the UK.
The expenditure in India could help the British economy, too. If a British company pays sterling for the resources that it buys in from abroad, that sterling will eventually be spent by somebody abroad to buy goods or services from Britain. Even the spending power of the Indians who are earning in the offshore subsidiary will buy goods and services, such as mobile telephones and insurance policies. Aviva, the parent company of Norwich Union, has set up an insurance sales subsidiary in India and the profits from that can be repatriated.
The insurance industry is going through a period of great restructuring. I believe that in 10 years or so, we will end up with six or eight massive global companies. I would like some of those leading companies to be British—perhaps the Pru or Aviva—but if our companies do not retain their competitive edge, they could be swallowed by others. I would rather see
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Norwich Union still in the driving seat, with its headquarters in York, than it becoming a subsidiary of a company with its headquarters in Baltimore or Berlin.
Finally, we parliamentarians should spare a thought for India. When I was a child, our image of India was of a country facing endemic famine:of a man wearing a loincloth and holding a begging bowl. India still has more people living in absolute poverty—on less than $1a day—than any other country. However, it is changing fast. India's skills and hard work, its enterprise and its investment in education, together with our aid, and investment, are turning India into a development success story. It is in our interests that India should prosper, as we would be paying the country less in aid and we would export more goods there. India would benefit from development, but so would we. We do not make ourselves richer by keeping Indians poor.
Several hon. Members rose Several hon. Members rose
Mr. Frank Cook: Order. That was a move in the right direction, but it was not tight enough. We now have 34 minutes to accommodate the six hon. Members who seek to catch my eye. I call Mr. Peter Luff.
9.56 am
Mr. Peter Luff: Thank you, Mr. Cook:five minutes it is.
I agree with every word spoken by the hon. Member for City of York (Hugh Bayley) save for one. India does not want our aid. It is already an economically successful country, and it can develop its own way to success. I speak as chairman of the Conservative Parliamentary Friends of India. I was there recently on a two-week visit, and I saw many of the issues at first hand.
I agree with the hon. Gentleman that there are three basic reasons why we should resist the seductive arguments and tell the truth. First, it is in the interests of the survival and success of British companies. Secondly, it is in the economic self-interest of the United Kingdom. Thirdly, it is about morality—helping India out of the poverty that has afflicted it for far too long. Indeed, the openness of the IT sector in India stands in stark contrast to the many sectors that are still too heavily protected, particularly the retail sector. The success of IT in India is an exemplar to the Indian Government and the Indian people, showing that free trade can bring real benefits; it has been responsible for driving the liberalisation process in India.
I must tell the hon. Member for Edinburgh, West (John Barrett) that that is not a problem, as he said, but a challenge. I concede that it poses a challenge to the British economy, but it is not a problem. That is a big difference. As the Government have said, we need to drive up skills in the UK to enable us to compete in the globalised economy. There is no point in crying over spilt milk or trying to pretend that we can put that genie back in the bottle; it has happened. However, if we do not respond appropriately, our constituents will pay a heavy price.
There is a mythology about India. People say that it is has a low-skill economy. That is not so; highly skilled jobs are now going to India. For instance, Indian bankers are returning from New York, where they

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earned £500,000 a year, to work in Mombai; they are on lower salaries but have a much higher standard of living because of the country's low labour costs. India is changing fast, and those dramatic developments surprise those who are not familiar with the country. In a few years, India and China will rule the economic world. We need to understand that reality and adapt to it. We must not try to resist it. We need to engage with India, not to treat it as a problem.
As the hon. Member for City of York said, through our monstrous agriculture policies, we have for years forced India to export agricultural jobs. For many years before that, during the time of the British empire, we forced India to export its manufacturing jobs to Britain. The boot seems now to be on the other foot, but as the hon. Gentleman said, there is a mutual benefit to be had from responding appropriately. The correct response will lead to gains for all. The hon. Member for Edinburgh, West told us that Tesco's chief executive, Sir Terry Leahy, had spoken about investing in India. Sir Terry said:
"Indeed, by remaining competitive and innovative, we will create an additional 13,500 jobs in the UK this year, and over 2,000 jobs specifically in Scotland."
So a zero sum game is not being played. Of course it is painful for the individuals who from time to time lose their jobs, but more people will gain jobs if we respond appropriately.
Businesses cannot just stand by and watch their global competitiveness being eroded. The US economy has already benefited to the tune of some $16 billion in cost savings, while the British economy has saved only $1 billion. The nightmare scenario of the hon. Member for City of York will come true unless we respond appropriately and achieve the same cost savings. That is the way to maintain effective corporate strength and job creation in the UK. Companies have to make a difficult choice. If they do not outsource, they will probably go under. Some jobs may be lost in the process in the short term, but the gains are considerable.
In the specific context of Scotland, I ask the hon. Member for Edinburgh, West whether he has seen the report by Professor Phil Taylor of Stirling university and Professor Peter Bain of Strathclyde university. It noted that Scotland has had a net growth of 10,000 jobs in call centre employment during the past three years, while in the same period, the number of call centres in Scotland grew from 220 to 290. Of those approached by the authors, 92 centres said that they expected to add more jobs by 2006. Doom and gloom should not be preached. The job losses always make the headlines, and the successes are often ignored.
It is also important to remember that in Britain we are gaining from the outsourcing of call centre jobs from the continent of Europe to Britain. We are gaining employment from other European countries, and I have a word of warning to the Minister on that. We need to maintain not only our skills but job market flexibility, which is also key to that process. What is more, Indian businesses are investing heavily in the UK, including in a call centre in Belfast, and generating jobs in many other sectors too.
My message is simple: we have nothing to fear from the process. We must regard it as a challenge to address honestly and openly, and if we do, India and Britain both gain.
10.1 am
Mr. Jim Cousins: I congratulate the hon. Member for Edinburgh, West (John Barrett) on securing the debate, which is not simply about call centres, but our future knowledge base, because where the call centres go, many ancillary services will follow. We are talking not just about what my hon. Friend the Member for City of York (Hugh Bayley) described as office jobs, but about a great prospect for the future.
Some 1,000 jobs have been lost at Lloyds TSB in Newcastle. We are not losing our old economy, but our new economy—an economy that we have had for only 18 months, announced in the presence of the then Secretary of State and accompanied by a snowstorm of booster press releases. Those employed at the Lloyds TSB centre in Newcastle are largely young people and disproportionately from the British Asian community. The passion for opportunity, coupled with the lack of opportunity, especially in Newcastle, is a feature of that community. I always bear that fact in mind and want to stress it in debates.
Certain features of the financial services sector are of great importance. My hon. Friend the Member for City of York said that all the tax would come back to us, but the Government need to consider the corporation tax situation for companies that relocate. Will we face a major problem with future corporation tax revenues when companies relocate, particularly if that is accompanied by us losing a great part of the knowledge base that is associated with them?
We need to consider what data protection issues arise as a result of relocation because information about British consumers will be held on a massive scale in another jurisdiction. We also face regulatory issues. Every time I ring Lloyds TSB as a customer, I am asked whether I want to buy my gas from the company. In future, changes to financial services will allow banks to sell insurance and other products. What is the regulatory position of sales made over the phone from another jurisdiction? That applies especially to some of the relocations that directly affect insurance, which has important regulatory implications. As someone from Lloyds TSB explained to me at a meeting in the City only last week, call centres are in the front line of our defence against financial crime. How will the relocations affect that? How will British legislation on financial crime be reflected and carried out in relocated call centres?
Parliament recently passed draconian legislation—correctly, I thought at the time—on terrorism that involves money laundering. What implications does that have for the relocation of major information and service delivery centres for finance, banking and insurance services to other jurisdictions? The Government need to apply their mind to such issues rather than simply deliver rather old new Labour lectures on the need for workers to face change.
10.5 am
Annabelle Ewing: I congratulate the hon. Member for Edinburgh, West (John Barrett) on securing this important and timely debate. He set out clearly and concisely the importance of the financial services sector to the Scottish and UK economies and,

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therefore, the importance of call centre and back-office jobs in that sector. Like him, I have a direct constituency interest because Norwich Union, or its parent company Aviva, has a significant operational base in Perth. It was previously the headquarters of General Accident. Sadly, however, with all the subsequent amalgamations in the insurance business, that is no longer the case.
Aviva's announcement last week of its intention to offshore 2,350 jobs next year caused some alarm in Perth among both the Norwich Union staff and the wider population. Fortunately, this time we were assured that there will be no direct impact on jobs in Perth. None the less, the staff remain fearful about what lies ahead.
Financial services sector companies that are off shoring jobs say that it brings great cost savings— 40 per cent. in some cases—and that that is good news for everyone. I wonder if, and to what extent, those savings will be passed on to the consumer. The process appears first and foremost to be shareholder driven, not consumer driven.
Given the time constraints, I shall focus on giving the Minister some helpful suggestions. The Government's response to date has been somewhat disappointing. An initial period of silence was followed by some hand wringing, then the Prime Minister said, "Well, that is the way of the world", and finally, last Friday, the Secretary of State for Trade and Industry was forced to act. The Minister shakes her head. She will have the opportunity to comment when she responds. In any event, it is welcome that the Secretary of State is to commission a study into the sector.
I understand, however, that the study is limited to call centre jobs and offshoring. Will the Minister at least assure us that she will speak to the Secretary of State with a view to making representations to widen the remit of the study to include back-office IT and administrative jobs? That is crucial. As the hon. Member for Newcastle upon Tyne, Central (Mr. Cousins) said, it is the added-value jobs that are increasingly being shipped offshore. He also said that we should consider the extent to which the offshoring of jobs in the financial services sector is compatible with legislation, in particular the plethora of European Community single-market financial services legislation, to which all such companies are subject.
The Minister should consider the implications for data protection. Life insurance and health care insurance work are increasingly being off shored. Such work involves extremely sensitive information. Companies are moving from a paper-based approach to scanning paper online, and crucial issues of data protection should be examined. I urge the Minister and the Government to take on board what I think are helpful, constructive suggestions to consider how we can stand up for jobs in Scotland and throughout the UK in the important financial services sector.
10.10 am
Mr. Mark Lazarowicz: I declare an interest as the unpaid chair of a parliamentary group for Scottish Financial Enterprise. I congratulate the hon. Member for Edinburgh, West (John Barrett) on securing this debate.
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Not surprisingly—I am his constituency neighbour—my constituents have expressed the same concerns on this issue, which he set out very well.
I want to take up a couple of points made by my hon. Friend the Member for City of York (Hugh Bayley) and the hon. Member for Mid-Worcestershire (Mr. Luff) about the response that we should make to the move towards outsourcing jobs in the financial services sector and other sectors. It is not my position and, I suspect, that of other hon. Members in the Chamber, that every job that is outsourced should be regarded as a retrograde step. I recognise that in many cases that option makes the best business sense for companies and is in the interest of the remaining employees in this country. However, I cannot accept the argument that outsourcing is always inevitable and that nothing can be done about it. We accept, as an objective of the Government, that we must try to defend our manufacturing industry. As I understand it, decisions taken on the defence industry are specifically designed to maintain employment in this country, and we have heard that the Indian Government do not care to protect employment. Like other hon. Members, I am suggesting that our response to outsourcing should be more discriminating. We should not assume that there is nothing we can do in every case and that outsourcing is an inevitable effect of the global market.
A number of considerations have a bearing on our approach to the loss of jobs and outsourcing. First, when companies choose to outsource jobs, they should be bound by the same rules that would apply if they were transferring their business within the UK or the European Union. They should be prepared to pay the extra costs of the loss of pension rights and other benefits that they would probably have faced if they were transferring jobs within the UK. The same rules should apply if companies are outsourcing jobs outside the European Union. That may mean that some outsourcing would not take place. It would certainly mean that the workers whose jobs would go if companies moved abroad would get better compensation for their loss of employment.
Secondly, it is noticeable that the financial services companies that have made it clear that they do not intend to outsource are extremely successful and have shown a strong commitment to this country. So companies do not need to outsource to be successful. The hon. Member for Edinburgh, West mentioned the Royal Bank of Scotland, which has its headquarters in Edinburgh, and Standard Life, a mutual company. It is clear how important it is for the Government to take decisions to encourage companies to stay owned and headquartered in this country. They should not intervene to prevent people from entering the market, but should encourage strong UK-based companies, particularly in the regions and nations of the UK.
We must encourage new businesses. That applies to Edinburgh and Scotland in general, where the business formation rate is too low. It also applies to part of northeast England. Above all, there must be a recognition of the scale of the threat to the financial services industry in Edinburgh, where it is a major private sector employer, and in other parts of the UK. I welcome the decision taken by the Scottish Executive and the Secretary of State for Trade and Industry to set up a working group on the subject because the issue is

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important, particularly for Edinburgh. I want an action group to be set up for Edinburgh, involving the Scottish Executive, the Government, the city council and industry, to determine the best response to the challenge that we face as a result of outsourcing.
On the morality of responding to the outsourcing of jobs to India or elsewhere, the problem is that such policies will not benefit the landless poor or the urban poor who are on $1 a day or much less. Instead, those policies sometimes benefit the highly educated sectors in those economies and, above all, the financial services companies themselves. Such moves do not necessarily result in sustainable development in those countries. We already know, for example, that some of the jobs that have been outsourced to India are now being subcontracted to China.
I am not arguing in favour of protectionism, but my comments emphasise what a complex phenomenon globalisation is. The issues are not as simple as they sometimes first appear. However, let us not assume that the process is inevitable or that there is no response other than simply sitting back and accepting that such moves will take place. We should recognise that the issue is complex and that Governments in countries such as India are trying to support their jobs and economies. Let us also ensure that we are as proactive in defending our jobs and interests as those other countries are in their own way.
10.16 am
Mr. Robert Key: I congratulate the hon. Member for Edinburgh, West (John Barrett) on raising such an important issue. I have no intention of going over ground that has already been covered in this excellent debate.
A constituent of mine, Kate Williams, drew my attention to the serious impact that outsourcing jobs in the financial services sector has had in my constituency. She e-mailed me on 17 September, saying that she worked in the insurance sector and that the company that she worked for was involved in outsourcing. She said:
"I feel worried for my job, which is sad because I am only 21. Many employers in Salisbury are in the position where outsourcing is a feasible and real option."
She worked for Friends Provident, which has 900 employees in my constituency. It is an excellent company with a record in corporate social responsibility that is second to none. I am grateful to the chairman, the chief executive officer and the Amicus branch secretary for educating me a little on the problem of outsourcing in financial services.
The big conversation now should be about where the new jobs are coming from. In the 1970s and 1980s we lost 4 million jobs in steel, shipbuilding, railways and coal, but the UK defied the prophets of doom and we ended up with lower real unemployment than in 1967. I am old enough to remember the reaction of previous Labour Governments to the winds of economic change, as are other hon. Members in the Chamber. The policy was to subsidise declining industry and technology and to tax sunrise industries and jobs. Who can forget the selective employment tax and the Wilson-Castle fiasco, "In Place of Strife"? Perhaps no-one in that era really
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believed that the nation's whole economy could be transformed in a generation. Well, it was, and we had better believe that it can be again.
In the 1980s and 1990s, the new jobs came from service industries, including financial services, and information technology. Millions of new jobs were created. It was all made possible by the introduction of supply-side reforms in the economy, which made UK plc competitive at home and abroad, and the deregulation of industry and financial markets. The answer to the outsourcing problem for this country does not lie with new regulations or Government-imposed labour market rigidities, yet that is exactly what is happening. The Government are forcing financial services out of the country.
EU employment legislation such as the working time directive is starting to bite in the financial services industries. Growth in the housing market at the same time as a downturn in equity markets has brought new business to the protection market, which is operated by insurance companies and underwriters. There have been huge shortages of trained, senior underwriters. Companies have had to bring people out of retirement to cope, but it is much easier to source the new demand from India. For example, physicians in India are trained to the same standards as our own, are half the price and are quicker to train in assessing medical risk.
The demand does not just affect call centres or clerical jobs, however. India is producing 1 million graduates a year who are hungry for work. The Indian economy has a glittering future. We should also keep an eye on China, as it is not far behind.
The Treasury's new capital regulations for the financial services industries mean that insurance companies have to hold more capital. That leads to rigidity and inefficiency in resource allocation, and to companies becoming internationally uncompetitive. That is a mistake.
The problems have been accelerated by the stakeholder price caps. Ron Sandler's report in summer 2002 criticised the financial services industries for being inefficient, but the price caps that were imposed forced companies to put costs first, even if that meant outsourcing. That shows a failure to understand the financial services market.
The products sold by the financial services industries are now very similar, but what differentiates them for the consumer is the service offered by the company. The harder the Government squeeze companies on cost, the more jobs will be outsourced. The risk-takers running the industries recognise that there is a limit to outsourcing. In India, call centres train their work forces in accent—whether it should be British or American—and in the cultural backgrounds of the markets that they serve. However, for the customer, a policy is often a once-in-a-lifetime purchase, and a good insurance company, such as Friends Provident, wants to stay customer-based, in close contact with and in full understanding of its customers' needs.
The Treasury is sitting on the fence over price capping. The industry wants to know what the new regime will be, and the uncertainty is not helping it. Will the Chancellor please make up his mind? Will he also roll back the 1997 plundering of the financial services

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industries, and restore the 5 billion a year that he took away in dividend tax? Perhaps he will tell us something about that in his pre-Budget statement later today.
It is said that the French and German Governments protect their financial services industries, but I suspect that that is fanciful. Let us talk about language. The Germans, and many other EU nations, are naturally protected against outsourcing, because German is not spoken by people in China, India or anywhere much else. The French may use francophone Africa to outsource some jobs. For the British, however, the world, particularly India arid, in future, China, is our oyster. It is ironic that the genius of the English in exporting our language has become our Achilles heel.
Amicus does not advocate protectionism any more than I do. It reasonably asks employers and the Government where the new jobs are to come from. It also fights for employees in the financial services industries whose clerical jobs are at risk and who will not be able to cope with information technology. As the Salisbury branch officer said, "When their jobs go to India, where will they work—McDonalds?"
The big conversation must be about where the new jobs will come from. I have an informed hunch about that—science. The UK is not just resistant to science; it is anti-science. Powerful pressure groups and the ostrich-like media rant and rave against progress in science and technology, yet science makes the UK a cutting-edge contributor to a new world order. Instead, public opinion and prejudice forces scientists and businesses, especially those in biotechnology and nanotechnology, away from the UK, and discourages young people from studying science at school and university. That trend must be reversed. Future jobs will depend on science education, science education, science education.
Mr. Frank Cook: Thank you, one and all, for maintaining such splendid momentum; it has made my job so much easier.
10.23 am
Paul FlynnThank you, Mr. Deputy Speaker, for ensuring that we all have a chance to speak, by giving us timely reminders on the limits imposed.
My reason for speaking is that, in my constituency, 1.700 people work for Lloyds TSB, and there are several other call centres. The current position is worrying for those workers. I congratulate the hon. Member for Edinburgh, West (John Barrett) on securing the debate. The problems that we experience in Wales are similar to those that he mentioned; my hon. Friend the Member for Preseli Pembrokeshire (Mrs. Lawrence) experiences a similar situation in her constituency.
We have lost the long-established manufacturing jobs that were highly skilled and permanent, and that we thought would last until our grandchildren's time. Those jobs have been replaced by jobs in call centres, which have always been candy-floss jobs—they look wonderfully attractive when they come in, but quickly disappear, leaving a sickly taste in the mouth. Such jobs are not well rooted, and it has always been a concern
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that the agencies that attract new jobs into the area place far too much reliance on the long-term nature of call centre jobs. I will not repeat the many worthwhile points that have been made by hon. Members. We all see that there is a sad inevitability about what is happening. However, I will take up a point made by the hon. Member for Salisbury (Mr. Key), as he made it political.
When Tony Benn was a Minister, an enterprise was set up in my constituency through the National Enterprise Board. Does anyone remember that far back? The company was known as Inmoss and for nearly 20 years it provided highly skilled, cutting-edge jobs in the high technology business. It was a world leader, and it was set up through a Labour Government enterprise. Sadly those jobs were siphoned out of my constituency. They exist now under a nationalised French company in Grenoble. It is sad that one cannot equate this between one party and another.
I believe that what has been said is right. No one has argued that we should apply protectionism. Many have argued against it. We have protectionism for one industry, farming, and it has a doubly bad effect on developing countries. It subsidises our production, sells it below price to the developing world and puts up barriers to their production. It is unfair to tell workers in our constituencies who face the prospect of losing their jobs, particularly at this time of year, that there should be one rule for agriculture but an entirely different set of rules for them and that they are to be exposed to the full blizzard of international competition and to take the consequences.
It is right to support the Amicus campaign. There is a special value in call centres where we can have direct contact with someone who lives in these islands, and accents and cultural backgrounds are understood. Progress can be made. One accepts that there is a highly competitive business out there, but the rules that were imposed on the financial service industries are correct. There was a long period in which they behaved in a way that could not continue in many areas. For the past 20 years the financial service industries have behaved in a cavalier way towards their customers.
Judging by how their pensions and endowments fared during that time, many people may have concluded that they were more likely to be robbed by someone sitting on the other side of a polished desk, speaking in a soft voice and wearing a pinstriped suit, than by a burglar or a mugger. Unfortunately, if one loses out on pensions, endowments or other financial services, the theft goes on for a much longer period. We have a serious problem here, and the answer must lie in enterprise and innovation, which can ensure that we have jobs with added value.
I am concerned about vulnerable areas such as my constituency, where there have been heavy losses in manufacturing jobs. However, there has not been a drop in employment. Probably more people are employed in my constituency than at any other time in the last 50 years. It is extraordinary how resilient the economy becomes. We must ensure that we at least give the same kind of protection to those jobs as other countries clearly do. We cannot write this off as an inevitable

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force. We cannot stop the train—it is coming—but we can slow it down, and we can ensure that the destruction that it leaves behind is not as serious as it might be.
10.28 am
Brian Cotter: First, I congratulate my hon. Friend the Member for Edinburgh, West (John Barrett) on initiating the debate. It has clearly brought out many interesting points. He produced an enormous number of statistics showing how serious the problem is not just in his constituency, but in many other parts of the country. I am pleased to see that the Secretary of State has initiated an investigation into this. I shall look forward to seeing what comes out of that. There are many issues to be addressed, including the competitiveness of our own service industry.
Although it is regrettable that businesses choose to move their operations overseas, we should draw a few lessons from what is happening. First, we must meet the challenge by identifying how we, as politicians, can make the UK a more attractive place for companies to invest in. Cost is a major factor for many companies choosing to outsource their operations abroad, and many choose to move to places such as India because of the availability of a highly skilled, highly trained work force.
To get businesses to invest in Britain, it is imperative that the Government invest in the British people and equip them with the skills that are needed to keep the UK as a leading international competitor. Despite being the world's fourth-largest economy, we rank 12th out of 15 EU countries and 18th out of 30 countries in the Organisation for Economic Co-operation and Development in GDP per head, which is the best single measure of living standards and competitiveness. The training gap is affecting British productivity, and unless we act to boost the skills of our workers, companies will continue to look abroad to access the skills that they need to make their companies competitive.
Secondly, we must ensure that those who are unfortunate enough to lose their jobs as a result of the announcements have access to maximum support from the relevant Government agencies to help them to find alternative employment as soon as possible. It has been said that call centre workers are today's miners, and many colleagues have referred to manufacturing, where many jobs have been created but in which there is a risk, once again, that those jobs will go. The service industry provides an important boost to many communities where jobs are disappearing, especially in manufacturing.
Our job is to create sustainable communities in different regions of the country, so that the outsourcing of jobs does not have a disproportionate effect on local communities. The Government stressed that the regional development agencies should play a key role in achieving sustainable economic growth in the regions, and the Liberal Democrats supported that, so why are the Government not allowing the RDAs to get on and do it? Why do they have to spend valuable time and money complying with Whitehall diktats? As outlined in a recent National Audit Office report, the Department of Trade and Industry forced one RDA to write a £500,000 corporate plan that was so irrelevant to the
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agency's needs that it had quickly to draw up another. Would not that time have been better spent actively promoting the region's long-term economic expansion rather than wasting time and resources complying with the orders of the vast army of Sir Humphreys in the DTI? As the Minister knows, my party is very concerned about the DTI and centralisation.
Thirdly, despite the distress caused when companies choose to move their jobs overseas, we must resist the urge to plump for protection. It is no use our lecturing other countries on the merits of free trade within the WTO if we restrict the right of British businesses to purchase labour from other nations. Rather than protecting jobs, such an approach would make workers more vulnerable by damaging the long-term competitiveness of British industry and undermining foreign investment. Furthermore, the United States' experience has shown that commercial investment can pay dividends at home. A recent report by McKinsey Global Institute found that every dollar that a US company invests abroad boosts the US economy by $1.45 to $1.47, a point to be taken on board. By investing abroad, UK companies can consolidate their interest in Britain, allowing them to create more jobs at home and attract increased levels of trade and investment, which will sustain the economy in the long run.
We should remember that despite the announcements, Britain retains a strong trade in services, with service exports currently at £82 billion—a situation that we must continue to promote—and imports at £69 billion. It is also likely that the continued outsourcing of jobs to India will force up wage rates there and make the area not quite so attractive in the long run.
Fourthly, although we must ensure that businesses are not hampered by restrictive constraints, we must recognise that they have responsibilities towards both their staff and customers. As such, it is essential that companies wishing to relocate should consult fully with their employees about any proposed changes and offer as many voluntary redundancy packages as possible.
Furthermore, companies wishing to relocate must remember that consumers will vote with their feet if they object to their corporate policy—an issue that we are addressing at the moment. Research by Amicus, which has been referred to already, shows that 68 per cent. of customers take into consideration the location of call centres when purchasing services, and 70 per cent. feel that businesses have a moral duty to remain based in the UK. That is something for businesses to consider.
A British company will have to consider carefully whether it wants to risk its corporate reputation by making such a move—a factor that will influence the market much more effectively than the introduction of restrictive Government regulations. The other point is that customers are unlikely to support the outsourcing of call centres if they believe that the company fat cats, to use a common expression, will be the only beneficiaries of any savings. The companies concerned would be foolish not to pass on savings to consumers.
The chief executive of National Rail Enquiries recently claimed that outsourcing the service to India could save the train operating companies up to £25 million over several years. If the jobs at the two

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existing Newcastle call centres move abroad, there will be an understandable public outcry if passengers do not see the benefit of savings in reduced ticket prices.
Many companies have found that far from improving customer service, the outsourcing of services has upset many consumers, who have been unable to communicate effectively with call centre staff in far-flung corners of the globe. We must accept that the outsourcing of financial services is a phenomenon that is likely to continue if British businesses are to maintain their competitiveness within the global economy. However, the challenge for politicians is not to prevent that happening by protectionist means, but to build an economic and skills base that will make British firms never want to leave.
10.38 am
Mr. Henry Bellingham: I should like to declare my interest as stated in the Register of Members' Interests and to congratulate the hon. Member for Edinburgh, West (John Barrett) on securing this debate. We have had an excellent, wide-ranging discussion and a lot of contributions.
Several companies have been mentioned, including British Airways, Barclays, Aviva, HSBC and, most recently, National Rail Enquiries. I agree with the Liberal Democrat spokesman, the hon. Member for Weston-super-Mare (Brian Cotter), that there is a special dimension to National Rail Enquiries, as taxpayers' money, in the form of grants to the train operating companies, has arguably been used in exporting jobs.
I want to refer to the point about onshoring. I have been contacted by about a dozen constituents who are IT consultants. They are struggling to find work as a result of the extra work permits that have been issued to IT consultants from the Indian subcontinent, and there is certainly an argument that too many permits have been issued.
There is no doubt that the Government's reaction in announcing the study is to be welcomed, but the Secretary of State's comments at the CBI conference were complacent. She appeared to be relaxed, and indifferent to the problems of those individuals. I agree with my hon. Friend the Member for Mid-Worcestershire (Mr. Luff) that this is a challenge rather than a problem, but it is certainly a problem for people who have lost their jobs.
The Leader of the House and part-time Secretary of State for Wales said in the House last week that
"companies that outsource part of their work create a big return for this country".— [0fficial Report, 4 December 2003; Vol. 415, c. 658.]
He welcomed the jobs exodus, saying that it was good news for India's economy and the poor. That is insulting to the people who have lost their jobs and who will have a miserable Christmas. The Government are right to set up the study, but they should listen to what businesses are saying. Towns and cities in east Anglia are also affected, and every business that I have spoken to or corresponded with has made it clear that there are two main reasons for the problem: the skills shortage, and the huge increase in red tape, regulation and employment legislation.
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The skills problem has already been mentioned, especially by the hon. Member for Weston-super-Mare. Despite the Government's claims, the problems of literacy and numeracy are not being resolved fast enough. The Ofsted report published yesterday says that nearly half of teaching in English primary schools is inadequate, mainly because teachers do not know enough about literacy and numeracy, and that a quarter of all I 1 -year-olds—more than 150,000 children—move on to secondary school without reaching the expected levels in English and mathematics. The Government missed their targets last year and will almost certainly do so again this year. Unless we can sort out these basic problems in literacy and numeracy in schools and address some of the vocational skills shortages, we will not deliver to British businesses the pool of skilled labour that they need and deserve.
As my hon. Friend the Member for Salisbury (Mr. Key) pointed out in an interesting and historical discourse, this Government inherited an economy that was in very good shape and a supply side that was the least regulated in Europe and the envy of the world. By 1997, the balance between employer rights and employee rights was probably fair. The work-life balance was also probably just about right. Above all, the previous Government secured an opt-out from the social chapter.
Since then, however, there has been an avalanche of burdens and extra pressures. Individually, those burdens and regulations are not show-stoppers or deal-breakers. It is the combined weight now bearing down on business that is starting to destroy entrepreneurial growth and that, above all, will destroy jobs, especially in small and medium-sized enterprises. The problem has been hidden to some extent by the large number of extra jobs that have been created in the public sector. The result is simple: Britain is no longer the best place in Europe in which to do business.
A recent CBI survey contained worrying findings. Some 70 per cent. of business leaders believe that in the past five years the UK has become a less attractive place in which to do business, and that the situation has worsened since 2002. Two thirds of business leaders believe that the Government place a low priority on delivering a favourable business environment, and 75 per cent. believe that the Government are less business-friendly than they were five years ago. Ministers should certainly take note of those beliefs.
Some 44 per cent. of business leaders are under pressure to outsource activities abroad. That indicates just how globally mobile businesses have become, but it also illustrates the scale of the problem that we are discussing today. The Government must examine some of the home-grown legislation that is being introduced. In the past few years, we have had employment legislation that includes the right to flexible contracts—another home-grown measure—and we now have the Employment Rights Bill. That represents another shift away from management's right to manage. I hope that the Minister of State does not share the Secretary of State's seeming obsession with the work-life balance agenda, they should be talking about skills, lifting the burden of regulation and, above all, listening to business and giving businesses the climate that they want.

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As for Europe, since we gave up the opt-out from the social chapter we now face the agency workers directive. If temporary workers are given full contractual rights after six weeks, that could be damaging; it will add to the pressure on businesses to move abroad. We shall be equally powerless to do anything about the information and consultation directive, which will also put more pressure on business. As my hon. Friend the Member for Salisbury pointed out, although the working time directive does not come under the social chapter because it deals with health and safety, we secured an opt-out for individuals, who can opt out of that directive by agreement with the employer. That is a satisfactory arrangement, and it suits everyone extremely well.
Every business organisation and trade association to which I have spoken has been completely unequivocal about the fact that the individual opt-out is vital to the general health not only of their competitive position but of business generally. It is pretty well mission-critical to the health of British business. Although the Greek presidency tried quite hard to push for the removal of the individual opt-out, it did not reach the agenda of the last Employment Ministers Council. However, it remains in the background and is almost certain to come back at the next Council meeting.
I find it depressing that we are getting mixed messages from the Government. First, Socialist MEPs are pushing hard to have the UK's individual opt-out removed. Stephen Hughes, the secretary of the group of European Socialist MEPs, together with Alejandro Cercas Alonso, has helped put together an "own initiative" report on the subject. The Government have said that they are keen to keep the opt-out. Where do they stand? Do they support their MEPs in Brussels? Will they support the initiative to have it removed, or will they listen to our business organisations, particularly those that represent smaller businesses, who have been pushing hard to keep it? The opt-out is popular with firms and employees alike.
As my hon. Friend the Member for Salisbury pointed out, the supply side of the economy is vital. Unless that is right, and it is maintained at its current level, the atmosphere for business will become a great deal less favourable. Unless the Government, and particularly the DTI, get a grip not only of the skills problems but of the overall regulatory framework, the steady flow of jobs offshore could become a torrent. We need a fundamental change of approach. I hope that the Minister is going to tell us that there will be such a change. If not, the results of next year's CBI survey, -Is Britain a good place to do business?", will be considerably worse than this year's, and those were a great deal worse than last year's. We look to the Minister to take action, and we hope that she will listen to what business is saying.
10.48 am
The Minister for Industry and the Regions (Jacqui Smith): I am grateful to the hon. Member for Edinburgh, West (John Barrett) for leading this useful and constructive debate on an increasingly important subject.
I reassure hon. Members that all Ministers and the Government take the matter seriously. We share the concerns of those immediately affected by plans to send
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financial services work offshore. We know that such announcements are painful, and that they affect many of the communities left devastated by the loss of manufacturing industry 20 years ago. We also take seriously their effect on local employment, not least because, as my hon. Friend the Member for Newcastle upon Tyne, Central (Mr. Cousins) pointed out, they fall disproportionately on certain groups. However, we need to put the matter into perspective.
I agree with the hon. Member for Mid-Worcestershire (Mr. Luff) that this is not a zero-sum game. Headlines do not always tell the whole story. They miss the thousands of jobs created or safeguarded by companies choosing to locate in the UK. They also miss the many companies that consider offshoring but choose to stay in the UK. Headlines report the jobs relocated to Asia and other developing countries, but not the 1 million people employed in the UK financial services sector.
Despite the words of doom from the hon. Members for Salisbury (Mr. Key) and for North-West Norfolk (Mr. Bellingham), I must pause to note that, judging by the latter's contribution, Opposition policy on developing the financial services sector mainly comprises people seeing less of their children and working longer hours. I am not sure that that is the most appropriate way to develop the sector. In 2002–03 alone, it saw inward investment creating more than 5,000 jobs. The recent decisions by a number of firms to offshore their back office operations must be set in that context.
As several hon. Members said, the decision about where to locate operations is a commercial matter for companies. Labour costs are one issue that companies may well consider, but there are others. Falling communication costs, coupled with the spread of technology, have made it easier for some services to be provided across long distances and international borders, including in developing countries. However, even if services could be undertaken abroad, companies may also, and many do, factor into their considerations the need or desire to be located close to their customers. For that reason, many companies choose not to offshore.
Those companies, and in particular those that took the decision to offshore but now wish that they had not, say that they failed to envisage the difficulty of managing staff, of maintaining standards when staff are thousands of miles away and of offering proper customer service if staff, however good their education, have never been to the UK. Companies weigh those issues seriously in making their decision.
We do not yet have the information that we need about the scale of or motivation for offshoring. We see examples of activity, but we need to open up the debate on offshoring to understand better what is happening and what motivates both companies that offshore and companies that do not.
Annabelle Ewing: Will the Minister give way?
Jacqui Smith: No.
We must also deal with some fundamental misunderstandings. The first is that the UK call centre industry is in terminal decline. In reality, we have more call centres than any other European country and new

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centres are opening all the time. Estimates vary, but industry experts suggest that there are about 5,500 UK call centres, employing almost 400,000 workers. The skills and vital local knowledge of our work force, the stable economic background created by the Government, and the UK's strong IT and telecommunications infrastructure mean that we remain well placed to attract call centre jobs in a competitive market. Given our language, location, infrastructure and customer service skills, Britain remains in a strong position to attract, in particular, high added-value call centre work.
The second misunderstanding, which was ably identified by my hon. Friend the Member for City of York (Hugh Bayley), is that protectionism offers a solution. Protectionism is clearly not the right response. UK exports are worth £270 billion a year; that includes £86 billion of service exports. Many jobs depend, as my hon. Friend outlined, on open markets abroad. Given our leading position as a global exporter of services, we must keep pressing for further opening up of markets for our exports. We are doing that in Europe through the proposed new services directive and in the wider world through the Doha round of the World Trade Organisation.
We cannot at the same time have a protectionist response to offshoring by companies at home, and nor should we. As we saw when the EU expanded to include poorer countries such as Ireland, Greece, Spain and Portugal, as they have grown, so have we. Our exports to them have increased., generating jobs and profits here, as has their investment in the UK. There will be opportunities to enable developing countries to develop further.
I agree with my hon. Friend the Member for Edinburgh, North and Leith (Mr. Lazarowicz) and with parts of the contribution made by my hon. Friend the Member for Newport., West (Paul Flynn). Instead of taking protectionist measures, we must enable and encourage firms in the UK to invest in new technology and work force skills. I agree with the hon. Member for Salisbury that we must ensure that our excellent science base is translated into business success. We must also move into advanced, high-value activities. We should continue to make the UK an attractive place in which to invest and do business. Our response to competition is not to be complacent, but to recognise the arguments that have been made about protectionism. There are three arguments.
First, we should be raising our game, ensuring that companies and their staff continually upgrade their skills and technologies. That is why in July we published our White Paper entitled "21st century skills—Realising our potential", which outlines the strategy of the DTI and the Department for Education and Skills for tackling the skills challenge. It firmly links skills to productivity, competitiveness and economic performance at national, regional and local levels. It details, for example, the way in which e-skills and other skills have developed, and how that will continue to make the UK an attractive place in which to base that work.
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Secondly, I agree with the hon. Member for Westonsuper-Mare (Brian Cotter) that, where jobs are lost, we must do everything that we can to help people to find new jobs, and new skills, if necessary, as quickly as possible. We shall call on the services of the reformed Jobcentre Plus, particularly its rapid response service, which focuses on redundancies where particularly intensive work is needed.
Thirdly, we are taking action to do even more to build strong and sustainable economies in all regions of the UK. I ask the hon. Member for Weston-super-Mare to return to the NAO report on RDAs, particularly the section that emphasised the progress and success of RDAs over the last five years. Those successes include raising the business birth rate, forging strong partnerships between the regions, universities and business, developing the skills that the regional economy needs, attracting more inward investors and improving local infrastructure.
All that success is important but, as I suggested, there is much more that we need to know and do. That is why, last Friday, my right hon. Friend the Secretary of State announced in her speech to the CBI Welsh conference the publication of a DTI consultation paper entitled "The Impact of Increasing International Competition in Services". Copies have been placed in the Library of the House. The paper outlines the main issues, and highlights areas for further research, and is intended to lead an informed debate giving all stakeholders an opportunity to contribute. We should bear in mind the fact that the consultation will be an important way of addressing some of the issues, such as data protection and financial crime, raised by my hon. Friend the Member for Newcastle upon Tyne, Central, and by the hon. Member for Perth (Annabelle Ewing).
The Secretary of State also commissioned a new call centre competitiveness study to ensure that we maximise the advantages that I have outlined, as we compete worldwide for more high-skill, high-value and high-wage call centre jobs. Our record shows the priority that the Government have given to job creation: there have been more than 1.7 million new jobs since 1997. We know that we cannot rest on our laurels, and our policies will continue to be geared to our long-term economic interests, based on our ability to innovate, to produce high-value added goods and services that need a highly skilled work force, high-calibre managers, forward-looking unions and knowledgeable consumers.
The Government take seriously the issues that this interesting and informative debate has raised. As well as taking the initiatives that I have outlined, we shall be discussing the issues with all interested parties, including employers, trade unions and businesses—both those who have decided to offshore and those who have decided not to—in a round-table seminar in the new year.
The Government will be focusing all their efforts on keeping the UK economy strong and stable, generating more and better jobs by raising skill levels, supporting enterprise and raising business innovation and productivity. We will also be vigilant as regards the impact of globalisation on regional and local economies. We will ensure that the UK economy is best equipped to respond to such challenges and that it has the successful individuals that it needs.

Berkshire Healthcare NHS Trust
11 am
Mr. Andrew Mackay: I commence by thanking Mr. Speaker for granting this extremely urgent debate. It is much appreciated by the people of Berkshire, who are deeply concerned about the financial position of the Berkshire Healthcare NHS trust. Secondly, I convey the apologies of my hon. Friend the Member for Maidenhead (Mrs. May), who is at the Children of Courage awards. She would have been here otherwise, because she takes a keen interest in the problem.
I will put a number of points to the Minister and I trust that she will answer them fully. First, which is the most vulnerable group of people in our society? I suggest that it is the mentally ill and those with mental health conditions and problems, closely followed by their carers, who do an outstanding job, and whom we should commend.
Vulnerable people in my constituency and throughout Berkshire are at their wits' end and are deeply distressed. The reason for that is very simple: it was revealed earlier this year that the new mental health trust that was set up for the county in April 2001 had overspent by £11.9 million and that the deficit had to be made good quickly. That means that there will be cuts of £8.1 million this year. My constituents cannot understand why Ministers are telling them every day on radio and television and in the newspapers that more taxpayers' money than ever before is going into the NHS, when there will be cuts of £8.1 million at the sharp end—where trusts are having to deal with mental health and mental illness in Berkshire. The Minister must tell us why we need the cuts if all that extra money is going in.
The trust has come up with one or two ideas as to where the cuts will fall. It has suggested the drugs budget. If it can make large cuts in the drugs budget, that will imply that it was wrongly prescribing over-expensive and unnecessary drugs, which would be a public scandal. However, I suspect that the drugs that people desperately need will no longer be available and will be replaced by cheaper, weaker and less effective substitutes.
We are told that patients who receive treatment out of area will be brought back into area. In principle, I am in favour of that. However, if patients can be brought back into area, will that, too, mean that there has been a scandalous waste of resources and that patients were unnecessarily going out of area? On the other hand, does it mean, as I suspect it does, that many of my constituents will get inferior treatment because it will be cheaper to look after them in area, even where specialties are not properly available? That would be a disgrace.
We are told that there will be a staff freeze. We all know what that means—when people leave, their positions will not be filled. That is fine if there has been unnecessary over-staffing. However, I suspect that the staff are as necessary as they were when the trust was set up and that reducing staffing levels will mean that certain services and care are no longer available in my constituency. That is deeply unsatisfactory.
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We need the Minister to say why the huge deficit and overspend occurred in such a short space of time—less than two years. Two reasons, or excuses, have been given. One is that the trust had no idea that the deficit and overspend were rising because accounting and auditing were done nationally, and the computer was not working. We have all heard the excuse about the computer being wrong rather than the people, so I have some doubts about that. However, I want the Minister's comments.
The second reason, or excuse, is more feasible. We are told that the trust was not funded properly when it was formed from entities taken from a lot of other organisations and trusts. We are told that, as a result of creative accounting, those other organisations and trusts kept more assets and income than they should have done and, therefore, that the trust never stood a chance. If that is true, whose fault is it? The answer is that it is the Secretary of State's fault. When the Government start changing trusts and creating new trusts, it is the Secretary of State's duty and responsibility to make sure that they are properly funded and set up and that deficits do not occur. So the Minister must tell us why we are in this situation. We need to know who was responsible and what will be done.
We also need to know what will happen next. It cannot be right that, through no fault of their own, vulnerable people and their carers will suffer for other people's mistakes and incompetence. I will not stand idly by and watch the cuts take place. Nor will the people of Berkshire, huge numbers of whom have signed petitions organised by the mental health voluntary action alliance and others. It is essential that the Minister tell us that the Government will intervene to ensure that the cuts do not take place. At a time when, as I said, more money is going into the NHS from taxpayers than ever before, it is inconceivable that vulnerable people should suffer such cuts in services.
Another concern that the Minister must address is accessibility. She will appreciate that access to mental health facilities, treatment and services is vital. Under strategic health authority proposals, most services will be concentrated at Prospect Park in Reading, which is a long way for my constituents and those who live in Windsor, Maidenhead and Slough to travel. That is most unsatisfactory.
There are also suggestions that vital wards—wards 12 and 14—at Ascot's Heatherwood hospital, which serves most of my constituency, will be reduced or abandoned altogether. Today, we want an undertaking not only that the cuts will be reversed, but that there will be good local access and that the very wrong plan to concentrate all resources at Prospect Park will be turned down. The Minister will have had reports of the huge meeting at the Madjeski stadium in Reading just a month ago. All sorts of stakeholders attended and they rejected the proposals virtually unanimously.
I paint a very bleak picture indeed. The county's Members of Parliament, who represent all three political parties, are broadly united in their disgust at what has happened and they are demanding action. There are some very frightened, vulnerable people who do not know what Christmas and the new year will bring. We are all looking to the Minister for an appropriate response.

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In that respect, I should tell the Minister that her colleague, the Minister of State, the hon. Member for Doncaster, Central (Ms Winterton), woefully failed at Health questions recently, when she told me that there was no problem in Berkshire. One can imagine how disgusted the people of Berkshire were when they read the Hansard report of those exchanges. I should also tell the Minister that the written response from the Minister of State, the right hon. Member for Barrow and Furness (Mr. Hutton), failed to address any of the questions that I put to him then or any of those that I am putting to her now. I therefore sought this debate out of desperation.
I intend to sit down two or three minutes early, so that, in the remaining 18 min utes, the Minister has every opportunity to reply in detail to the very serious questions that I have raised.
11.12 am
The Parliamentary Under-Secretary of State for Health (Miss Melanie Johnson): I congratulate the right hon. Member for Bracknell (Mr. Mackay) on securing this debate. I obviously listened carefully to his concerns about the financial position of the Berkshire Healthcare NHS trust. I should say at the outset that I agree that there are significant challenges ahead and that the local NHS needs to respond to them.
Before I deal with the specific issues raised by the right hon. Gentleman, I want to place in context the circumstances faced by the trust in delivering quality services. I am pleased that he did not criticise the quality of those services, but merely the financial position and the issues arising from it. As he will know, the trust provides secondary mental health care, learning disability and substance misuse services for Berkshire and it serves a population of 900,000.
The trust continues to perform well in meeting mental health targets, particularly in its development of crisis resolution teams, which are working across east and west Berkshire and making a real difference to people. The community services have also extended their working hours, including evenings and weekends, so that patients and their carers can access help and support when they need it.
The right hon. Gentleman opened his remarks by saying that vulnerable people were involved. Nobody would disagree with that, least of all me. He also said that carers were concerned about the situation. I understand that, faced with such financial difficulty, people—particularly such vulnerable people—receiving the services and their families will be concerned. The right hon. Gentleman asked why we are in this situation. He is right that record sums of money are going into the NHS, and the NHS in Berkshire is no exception. In the 2002 Budget, the Chancellor announced the largest sustained increase in funding in any five-year period in the history of the NHS. The plans mean that between 2003–04 and 2007–08 expenditure on the NHS in England will increase, on average, by 7.4 per cent. a year above inflation—a national increase of £34 billion. For the three-year period that I have mentioned, Bracknell Forest primary care trust will receive an increase in its revenue allocation of some £20.8 million-29.52 per cent. I am sure that the right
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hon. Gentleman will agree that substantial extra sums are going to the NHS in his area. The issue is not the amount of cash not going into the system. The right hon. Gentleman is right that what we say about money going into the NHS is borne out by the fact of the extra investment.
Our policy is to devolve much of the money to local trusts so that they can buy health care for their populations. Primary care trusts have specific local knowledge and expertise. They are the key drivers for improving health, securing the provision of all health services and integrating health and social care. To reflect that greater responsibility, they now also control 75 per cent. of the total NHS budget.
Before I talk about the general financial position of the trust and what has led to the present circumstances, let me respond to the right hon. Gentleman's comments on drugs budgets. We are not aware of any cuts to drugs budgets. That is not part of the financial recovery plan for the trust.
As to the current position of the trust and the concerns that have been raised, it has already had significant additional resources. Annual expenditure must remain within the resources that have been allocated by Parliament. I am sure that the right hon. Gentleman would not urge on the Government any less discipline than we wish to impose ourselves. It is now the responsibility of strategic health authorities both to deliver overall financial balance for their local health communities and to ensure that each body achieves financial balance. There is a degree of flexibility as to how that is managed locally. Where financial balance cannot be achieved in the current financial year, SHAs can agree to recovery plans that phase the recovery of deficits over a longer period.
Thames Valley SHA has been working closely with Berkshire Healthcare NHS trust since June, and they agreed an outline recovery plan in July. The SHA has also provided interim support for the trust, so that it has more than one year in which to return to financial balance. The trust has made significant efforts to bring its financial position under control, and it needs to continue to do so. I understand from the Thames Valley SHA that the trust is on course to bring down its deficit to around £5 million by the end of March 2004. That is a significant achievement, considering that an overspend of about £11.9 million was projected in June. I cannot disagree with the right hon. Gentleman: the task is challenging. However, I should make it clear that I expect the challenges to be met with a minimum impact on local people. Indeed, both Thames Valley SHA and the trust assure me that, despite the problems, the trust will maintain delivery of safe and secure mental health services and key service targets.
How did the trust come to be in the position that it is in? I can outline some of the key issues for the right hon. Gentleman in that regard. The trust had not signalled any forthcoming financial difficulty, nor, I understand, did any of its papers before the end of the financial year in March 2003 indicate that there were any financial difficulties. It was therefore a surprise when the trust found itself in that position. We could speculate on whether that was appropriate—I would almost certainly share the right hon. Gentleman's view that it was not. I understand that the then director of finance has since left the post.

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The deficit appears to have been caused by a number of factors: the move of the learning disability homes to the independent sector, poor financial controls, investment in the modernisation of services such as the assertive outreach and crisis resolution services, the transfer of the management and provision of services for the people of south Oxfordshire to Oxford mental health trust, and the development of improved services through the transfer of services from Fair Mile hospital to Prospect Park hospital.
Faced with the deficit, the SHA has agreed a recovery plan and, broadly speaking, the trust is on target to deliver on it. Obviously the bulk of the deficit will be reclaimed—recovered, as it were—this financial year. The rest will have to be reclaimed in the next financial year. The right hon. Gentleman did not mention the report that PricewaterhouseCoopers issued and I do not know whether he has seen it.
Mr. Mackay indicated dissent
Miss Johnson: The right hon. Gentleman shakes his head—I am told that the report is available and was part of the public papers of either the SHA or the trust. Berkshire Healthcare NHS trust commissioned the company to undertake a financial review of the process and procedures in the trust, following the emergence of the deficit. As a result, the recovery plan has been agreed. It is leading to the recovery of the substantial part of the deficit, which is expected by the end of March 2004. That should reassure the right hon. Gentleman that the matter is being taken in hand again.
Mr. Mackay: It is all very well to say that the deficit is being reduced. Fair enough, but that is not the problem. The problem is that services have been cut. The only way to make such huge reductions in the deficit is to cut services to the most vulnerable people.
Miss Johnson: I have already said that I expect the challenges to be met with the minimum impact on local people. I am afraid that the right hon. Gentleman has not supplied me with any details about the impact that the recovery of the deficit has had on local people, with which I could address the points. If he wishes to write to me or to the Minister of State, my hon. Friend the Member for Doncaster, Central (Ms Winterton), we shall look at the points in more detail.
There has been a public consultation on the issue, involving a meeting in Reading on 6 November, to which the right hon. Gentleman referred. Around 120 people attended that meeting, where they looked at the options for the proposed new model of care for people with mental health problems in Berkshire. That was an all-day session; it brought together service users, carers, primary care trusts and local authorities. The work focused on a range of possibilities for a hub-and-spoke model, with local services supported by specialised hospital care. Twelve options, using five criteria, were
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considered. The Reading PCT and the Windsor, Ascot and Maidenhead PCTs together, as the lead commissioners for mental health services in the county, are considering the findings of the day to agree the best way forward. Due process of further consultation will be followed, and a full report will also be made to the Thames Valley SHA, which will discuss the options in early January. There is an ongoing process in respect of significant changes—or even more minor ones—to the service configuration.
I shall now discuss the local services in more detail. The main aim of the recovery plan is to bring mental health services even closer to where people live in the community—the hon. Gentleman made the point about the distance of some parts of the county from, for example, Reading. That includes bringing back to Berkshire patients who have been receiving treatment in other parts of the country so that they receive care closer to their families and friends. In response to the financial challenges, the trust is looking more radically at the provision of mental health services locally and how they can be improved.
The trust has developed a vision for local mental health services that will enable the provision of services locally, with a centre of excellence for those needing inpatient care. That model, which was discussed. involved, for example, the possibility of more community support in terms of day care, enhanced crisis services, expansion of community health schemes, closer liaison with accident and emergency, more community rehabilitation, extra support for older people and more day hospital services. That was the type of thing discussed at the meeting on 6 November. All the models were discussed and the comments made are being considered.
There is a lot more work to be done, but hon. Members, including the right hon. Gentleman and the hon. Member for Maidenhead (Mrs. May), can be reassured that work is in hand and that there will be an opportunity for them to express views on behalf of local people as part of that process.
In conclusion, I have taken serious note of the concerns raised by the right hon. Gentleman on this important subject. He and I agree that there are challenges ahead for the Berkshire Healthcare NHS trust. I hope I have reassured him that a lot of extra money has gone into the trust. I expect the health community to respond to the challenges and significant efforts to be made to achieve financial balance. I am sure the right hon. Gentleman will agree with me that that is necessary to achieve sustainable services and to deliver key targets. The Thames Valley SHA and the local health community must continue to support and guide Berkshire Healthcare NHS t rust during this period. I am sure they will welcome the interest, concern and support of their local Members.
11.28 am
Sitting suspended until Two o'clock.

Consumer Credit
2 pm
Mr. Mark Lazarowicz: It is a pleasure, Mr. Cook, to speak in a second debate in Westminster Hall today. I begin by drawing attention to my declaration in the Register of Members' Interests. I am also an unpaid director of the Centre for Scottish Public Policy, which recently received sponsorship for a project from Co-operative Financial Services.
Hon. Members who know of my interest in these issues will be aware that I have spoken from time to time on debates on this subject, and have put my name in the ballot for the draw for Westminster Hall debates. Perhaps I should now start doing the lottery regularly, given that I have managed to come out of a ballot only two days after the publication of the White Paper on consumer credit and at the same time as the pre-Budget report. It certainly makes the debate timely, even if it faces competing attractions elsewhere.
The White Paper has been a long time coming, but that is understandable given the complexity of the proposed measures. I am glad that the time was taken to ensure that the package is comprehensive and will go a long way to tackling the problems that many of us have raised here. The White Paper is valuable not just in what it proposes, but for the information it provides about the impact of heavy levels of debt on individual consumers. Getting into debt does not just affect people's pockets; it can have severe personal consequences. The stress can affect people's health. High levels of debt can cause marriage and other family breakdowns.
The consequences of over-indebtedness are often worse for the lowest income groups who are more likely to have debts with serious repercussions such as eviction, imprisonment, disconnection or repossession. The consequences of getting into debt can be much worse for such people because they are less able to reorganise their lives in the way that people on higher incomes can.
Debt affects the affluent and the poor alike; but escaping the jaws of debt can be much harder for the poor, particularly if they fall prey to loan sharks. Some legal lenders focus on the poor and charge excessive rates of interest. In any debate on debt or credit it must be emphasised that debt is not bad by itself. Most of us now have a mortgage and as a result live in accommodation that we could not have enjoyed unless we had been saving for 20 years or more. Borrowing and lending is at the heart of economic activity. The problem is not debt but over-indebtedness, with people being dragged into debt that they cannot sustain and which has serious consequences.
People get into debt for many reasons and there are many solutions to the problem, but too many people are encouraged, or enticed, into entirely unsuitable credit arrangements and that is a major cause of excessive levels of debt. Cracking down on the businesses and the business practices that bring that about is a major solution to the problem. That is why I welcome the White Paper, and why I wanted to raise the issue of consumer credit again in Westminster Hall.
In the time available, it would not be right for me to comment on every aspect of the White Paper. I shall highlight four areas in which I support the proposals in
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principle, and suggest ideas—and how they might be implemented-that can be developed in detail. I hope my hon. Friend the Minister will consider them; if he cannot respond today, I hope that he will do so on another occasion.
First, I strongly welcome the proposal to make lenders provide standard information, such as the so-called honesty boxes. It is vital that information should be provided in that way. I am glad that the Government and the industry have taken that initiative, and I congratulate the Nationwide building society, which is the first institution to take up the idea. Customers need to know the real rate of interest that they will pay on a loan or a credit agreement and the real cost to them of buying goods or services on credit. They need to be able to compare like with like, and they should not be bamboozled by clever language or glossy advertising designed to obscure the reality of the financial deal that they are being encouraged to sign.
The key is that the information provided must be simple and easy to understand. It is important to be transparent, but transparency loses much of its appeal if it is accompanied by excessive complexity. There is little point in producing so much information that few people bother to read it, and it cannot be effectively drawn to people's attention. I hope that the Government and the industry take that on board when the proposals are developed in the next few months.
There is an argument that if products are so complex that the essential details cannot be set out and explained simply, clearly and succinctly, they should not be on sale to the general public. I should like the Government at least to consider that point.
I am pleased that, in the White Paper, the Government are proposing to widen the current definition of extortionate credit terms. The law already allows loans of that type to be struck down but, in 25 years, few successful challenges to credit agreements have been made. It is disappointing that there are no proposals in the White Paper for extending the definition, but I welcome the fact that the Government have set out a clear timetable for introducing such proposals.
How the definition of extortionate credit is extended is crucial to the success of the strategy in the White Paper. If the redefinition is broad enough, it will encourage lenders to exercise their own self-discipline, which would go beyond any formal regulation by the regulators or by Government. Lenders will be much less likely to risk advertising and selling products that they know are, to be blunt, dodgy—even if they fulfil the strict terms of the rules—if the products are at risk of being struck down later. Extending that definition is crucial to the success of the Government's package.
Malcolm Bruce: I apologise for missing the start of the hon. Gentleman's speech. I have just struggled in after taking two hours to get from Heathrow. He makes an important point. Does he acknowledge the Government's difficulty in this matter? They want a definition that deals with cowboys who rip people off but does not destroy the cash, small-debt market. Interest rates are not the only measure, and the Government must get the balance right.
Mr. Lazarowicz: I accept the hon. Gentleman's argument. That balance must be struck, which is no

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doubt why the consultation on the details has still to take place. However, I was talking about the type of offer or arrangement that everyone knows is wrong or dodgy, but which does not lend itself to the type of solution that the law provides. We must make it clear that such an agreement will not stand up and can be challenged successfully.
What is described as a "stakeholders group" will be consulted on the proposal. I hope that because I have mentioned that group, my hon. Friend the Minister will give an assurance that when he sets it up, it will include representatives of consumer and advice organisations from Scotland, given that the financial sector in Scotland is so important and, of course, the separate Scottish legislation and legal system covering some of this sphere.
The Minister for Employment Relations, Competition and Consumers (Mr. Gerry Sutcliffe): I do not want to stop the discourse that my hon. Friend is unleashing on us, which is welcome, given the White Paper. On the point about the body and Scottish representation, I can give that undertaking now.
Mr. Lazarowicz: I welcome that assurance, which will be welcomed also by the sector in Scotland.
Something must be done about the way in which some lenders market their products. If we spend any time watching daytime television and reading adverts in newspapers, time and again we will see advertising that is designed to prey on the poor and vulnerable. I strongly welcome the Government's proposal in the consultation documents accompanying the White Paper to tighten the rules on consumer credit advertising, but again I have one or two doubts as to whether the proposed new regulations will go far enough. These suggest, among other things, that advertising must be in plain English. With some adverts, the problem is not that they are not in plain English; they are often very plain indeed. The problem is the way in which they are set out and the practice of giving the impression that the service offered—perhaps, say. by a debt management company—is a public service rather than a commercial offer.
I am worried that it is the nature of the shadier end of the business that people will always try to get round, whatever rules are designed to prevent that practice. I wonder whether powers should be given to an appropriate regulator—be it the Financial Services Authority, the Office of Fair Trading, the Department of Trade and Industry or even local councils—to step in and issue a stop notice to end such advertising, in the same way as stop orders can be made in respect of other trading practices.
Last but not least, there must be much wider provision of financial education and free debt and money advice. The White Paper recognises that, which is one of the very good points in it. Much good work has already been undertaken by the industry, as many hon. Members will know. An exhibition in the Attlee suite in Portcullis house shows the work being done on financial education by many financial institutions and advice agencies. I invite hon. Members to visit that exhibition later this afternoon.
Good work is being done, but we must ensure both that there is provision throughout the country and that what is provided nationally fits in well with local advice
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and education. We do not want so much advice to be provided that the public are not sure which is bona fide, which is supported by the independent agencies and by the Government and which is simply commercial marketing masquerading under the cloak of advice. Perhaps there should be a national brand to which independent advice service providers can sign up, so that the public know where to go when they want independent advice and education, as that is so important.
These comments are made in the context of my general welcome for the White Paper. Reforms are urgently needed. I am sorry that they will not be taken forward in the current year's programme. However, I understand why; the measures are complex and it is important to get them right. I welcome the fact that the proposed statutory instrument will be taken forward as soon as possible.
It is essential that the reforms that require primary legislation are included in next year's legislative programme. I understand that the proposals have received wide support across the sector and across parties. I hope that the welcome that they have received will make it easier for my hon. Friend the Minister and the Secretary of State to achieve the necessary time in the Queen's Speech and the Government's programme in the next legislative year.
Mr. Frank Cook: Order. I feel that it might be advisable for me to remind those hon. Members who have not been in Westminster Hall for some time that it is the practice to commence the first of the three wind-up speeches 30 minutes before termination, which means 3 o'clock. I am sure that hon. Members will bear that in mind when making their contributions and accepting and responding to interventions.
2.15 pm
Ross Cranston: I congratulate my hon. Friend the Member for Edinburgh, North and Leith (Mr. Lazarowicz) on securing the debate. I hope that after the debate he will give me some advice on how to be as lucky as he has been in recent times.
I also congratulate my hon. Friend on the work that he has done in setting up the all-party group on debt and personal finance—a group that is much needed in this place. I also congratulate him on hosting this afternoon's exhibitions by a group of agencies that focus on financial education and information, a topic that he emphasised in his speech.
I welcome the White Paper; it is high time that such measures were taken. As early as 1978, I was publishing pieces criticising measures such as the rule of 78. Over the years, I have criticised the Consumer Credit Act 1974 and pointed out the need for it to be amended to accommodate it to the modern credit industry. I congratulate the Minister, and hope that the necessary legislation will be introduced in the next parliamentary Session. It is certainly needed, although a certain amount can be done by means of statutory instruments.
I shall highlight a few issues. The first issue—the need to ensure that credit providers lend responsibly—was raised a number of years ago when Lord Borrie was the director general of fair trading. There is much concern

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at present about over-indebtedness, and it is certainly the case that some parts of the community, generally the lower-income groups, are taking on a burden which may become too great, if, for example, there were illness or family tragedy, and which might, in some cases, lead to personal bankruptcy. The White Paper is useful in bringing together information that demonstrates that such problems are faced particularly by low-income groups.
The British Bankers Association, in the briefing that it produced for the debate, makes the point that over-indebtedness is not generally a problem, and I accept that point. We have a healthy economy, with low inflation and high employment, and over-indebtedness is not faced by the majority of people. However, there are vulnerable people in the community who are potentially over-indebted and so, as my hon. Friend the Member for Edinburgh, North and Leith said in his opening remarks, it is important that financiers and credit providers lend responsibly. I therefore welcome the notion that guidance will be provided. It seems to me that that must be taken into account in the licensing process by the Office of Fair Trading so that if lenders, even reputable lenders, are advertising credit irresponsibly they must be brought to book.
Mr. David Drew: I congratulate my hon. Friend the Member for Edinburgh, North and Leith (Mr. Lazarowicz) on all his work on this subject. I received the memo from the British Bankers Association but I must say that its view that it only engages in responsible lending is completely contradicted by my local citizens advice bureau. It makes it clear that even the most reputable banks often approach people who are clearly in debt on the basis that the bank will be able to secure the money that it is owed regardless of other debts that are being paid. That is a serious problem, and I hope that my hon. Friend will comment on it.
Ross Cranston: I did not completely accept the BBA briefing. As my hon. Friend rightly says, all lenders must ensure that they lend responsibly. The brief produced by Citizens Advice and the work that it has done over several years, particularly the detailed report on over-indebtedness that it produced two years ago, pointed out that even high-street names sometimes promote credit irresponsibly. We must consider the problem across the board.
The licensing system is a powerful tool. It is proposed that we move away from five-year licensing, and I had initial doubts about that. However, I have been persuaded by the White Paper that it is better to award a non-renewable licence as long as there is constant monitoring of all credit providers, as my hon. Friend the Member for Edinburgh, North and Leith rightly said, and action is taken if they step out of line. It is also pointed out in the White Paper that some exemptions, which are no longer defensible given the development of the consumer credit market, will be removed. Powers of investigation comparable to those of the Financial Services Authority are necessary and are proposed in the White Paper, and I welcome that.
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I shall now move on to the topic of extortionate credit bargains, which my hon. Friend the Member for Edinburgh, North and Leith mentioned. The White Paper addresses the issue of whether there should be an interest ceiling. I am sympathetic to the idea of an interest ceiling. Having seen some cases that Citizens Advice has brought forward, with interest rates of more than 1,000 per cent., I understand the argument for a ceiling. However, any ceiling will be arbitrary. I can accept the proposals in the White Paper as long as the extortionate credit bargain provisions are properly enforced.
Historically, the measures in the Consumer Credit Act 1974 have not worked, and that has been a failure on the part of the courts. In outrageous cases, in which interest rates and credit practices were completely unacceptable, the courts found that the tests for unconscionability set out in sections 139 and 140 of the Act were not satisfied. If there were variable interest rates, the courts found that the tests were not satisfied. In a commercial context there must be variable interest rates, but the consumer context is different. None the less, the courts found those to be acceptable under the provisions.
I welcome the proposals in the White Paper to update the 1974 Act and to introduce a broader test of unfairness, and we look forward to seeing the detail. In particular, I welcome the proposals, already included in the Enterprise Act 2002, to enable consumer groups to take collective action on behalf of individual consumers to pursue unacceptable credit practices.
I understand that there is a disagreement between the Department and the National Consumer Council about redress mechanisms. It is important to provide a redress mechanism for individual consumers who get into problems. In other comparable jurisdictions, there is provision for credit tribunals. The courts here have failed, so we must provide another mechanism. What will that be? The National Consumer Council is keen that the financial services ombudsman should provide that service. The White Paper addressed the issue, although it does not come down on one side or the other.
Mr. Sutcliffe: On that matter, we are still consulting. My hon. Friend will know that there is a review of the financial services ombudsman and that discussions with the consumer groups are continuing. We want to be clear about what the redress mechanism will be. We are speaking to the National Consumer Council.
Ross Cranston: I thank my hon. Friend for that. I welcome the Government's commitment to a new redress mechanism, and I hope that a clear conclusion on what that will be can be reached as soon as possible. The financial services ombudsman provides a suitable mechanism that is cheap and quick for consumers in that area. I should like my hon. Friend to consider whether that model, or something based on the ombudsman service, is to be introduced.
I should like to talk about some of the specific provisions. Penalties for early payment are subject to the rule of 78 that I mentioned earlier. The White Paper usefully points out the benefit of abolishing that rule, especially for lone parents and low-income families. I was disappointed that the director-general of the

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Finance and Leasing Association was very critical about that proposed abolition. He has a technical point about the securitisation of consumer credit receivables, and I understand why the problem of retrospectivity concerns him. He says:
"These changes could lead to a trouble-makers' charter where all agreements could potentially be challenged."
He goes on to criticise the removal of existing penalties retrospectively. I welcome the comments of both the British Bankers Association and of the director-general of the Consumer Credit Trade Association, who said:
"I don't think anything in this paper is a surprise."
The issue of early penalties has been raised over many years, so the proposals in the White Paper cannot be a surprise to the industry. As in the book of Daniel, the writing has been on the wall for the rule of 78 for some time; the industry has been found wanting in this area and judgment day has arrived.
Finally, I shall say a few words about new mechanisms. The White Paper mentions in passing the promotion of credit unions. The Economic Secretary to the Treasury, my hon. Friend the Member for Wentworth (John Healey) recently visited the Castle and Crystal credit union in my constituency, which was celebrating its tenth anniversary. That union is developing collection points all around the borough. One in the Castle and Priory ward, which is a deprived ward in my constituency, involves the possibility of using a post office as a collection point.
The big surprise about credit unions is why they have not taken off in this country as they have in other comparable jurisdictions. The Treasury has been doing useful work in trying to promote them. In my constituency, a theatre company called Urban Voice recently visited the Castle and Priory ward to perform an hour-long play called "Living on the Never Never", which highlighted some of the difficulties that people can get into with certain ways of borrowing money. That work is necessary, and we have to promote the idea of credit unions. We need people in deprived communities to be switched on to the notion of putting savings into credit unions and borrowing from responsible bodies such as them.
I want quickly to mention two other institutional changes. The OFT must be an effective enforcement body, but in recent years, competition policy has dominated its agenda. It has responsibilities for consumer protection as well, and it is vital that the resources and commitment of the OFT are addressed to that area. The other institutional change is with legislation. We need amendments to the Consumer Credit Act 1974 on the statute book as soon as possible.
2.31 pm
Mr. Wayne David: I began to take an interest in indebtedness and consumer credit soon after I was elected because I visited my citizens advice bureau in Bargoed for a meeting with its manager. I asked him point blank what issue was brought to the citizens advice bureau more than any other, and without hesitation, he said that the real problem facing people in that community was massive indebtedness. He explained how hundreds of people came in with the most pitiful tales of how they had got into dire situations.
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Soon after that, I began to hold constituency surgeries and have similar cases brought to me by my constituents. I should like to cite two examples that reflect a much wider problem. The first example is of a young woman, who came to my surgery and explained that she was an unmarried mother whose son was on drugs. He had been having difficulties with his local suppliers in paying for his habit. and with the law. She had been in touch with the police, who had been helpful, and then came to me because she was having enormous difficulties with a local loan shark, whom she had met in her local club. She explained how one night, when she was with her friends and feeling upset, someone suggested that she should have a word with this nice, helpful young man, who could provide some ready cash.
Rather naïvely perhaps, the young woman accepted £200 from the man with a vague verbal agreement about her paying it back when she was able. A couple of weeks later, he turned up at her house and started making threats to her, demanding not just the original £200, but a further £200 as interest. There had been no agreement other than a verbal comment and a nod and a wink in a club. Then, when she was unable to pay back that money, the threats, intimidation, bullying and physical violence began. In desperation, she came to me, and we managed to sort something out with the assistance of the police and citizens advice bureau. I suspect that that is just one case among many and will be replicated time and again not just in Bargoed but in many other communities throughout the country.
A second woman who came to my surgery explained that she had taken out a loan of £20,000—a significant sum. She did not have a prosperous background, but she signed a credit agreement to pay an interest rate of only 1.97 per cent. a month. That did not sound much to her, or to me. She did not realise that that is an annualised percentage rate of some 22 per cent. Before she knew it, she was paying back well over £70,000 for a £20,000 loan. She could not meet the repayments and found herself in court, with a bill around her neck of well over £100,000, which was completely beyond her means. She had had no idea that she could possibly get into such a situation. The transaction was perfectly legal as the company that loaned her the £20,000 was properly registered.
I feel strongly about the issue, and very much welcome the Government's initiative. In 2002, the Welsh Consumer Council conducted an in-depth survey of levels of indebtedness in greater Gwent. It concluded that indebtedness was greatest in some of the poorest communities in Wales, mainly in the heads of the valleys. Uncomfortably for me, it confirmed that some of the worst cases of indebtedness and borrowing from unregistered moneylenders were in a Caerphilly borough, part of which I represent. The report concluded that some 7 per cent. of the respondents in the Caerphilly borough who had used credit in the two years before the survey was conducted borrowed from a moneylender, compared with only 4 per cent. overall. The figure of 4 per cent. is bad enough, but 7 per cent. is extremely worrying.
As a result of that survey and my experience, I ran a campaign with my local newspaper, the Rhymney Valley Express. The campaign had three objectives. The first was to alert people to the activities of loan sharks and unscrupulous registered moneylenders. We were simply

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encouraging people to be less trusting and to ask lenders more questions before they got themselves into difficult situations. The concept of public education is very important.
The second objective was to let people know that there are alternatives to moneylenders and loan sharks. We stressed the fact that there are, for example, two credit unions in the Rhymney Valley, which are expanding and proving to be very effective. I am glad that the White Paper refers to credit unions, because they are the alternative to loan sharks for many ordinary people in working-class communities. I encourage the Government to do as the National Assembly for Wales has done and give every possible support to the development of credit unions in this country. The National Assembly has given excellent support to credit unions in Wales through objective 1. That was a tremendous fillip for the movement in Wales, and we are making progress because of it.
The third part of our campaign was arguing the case for legislative changes, especially to the Consumer Credit Act 1974. We made several suggestions to the Government in a seven-point plan, some of which reflected ideas that were mooted nationally and centrally by citizens advice bureaux, and others that arose from our practical experience. The first of our seven points was that the Consumer Credit Act should be changed to outlaw extortionate interest rates. The second was that serious consideration should be given to an interest rate ceiling, which would mean that interest could not be charged above a certain rate. The third was that all credit agreements should be required to show the total amount to be repaid by the borrower over the term of the agreement. Fourthly, we suggested that credit agreements should show the average interest rate for a particular type of loan, alongside the interest rate figure actually charged in the specific agreement.
The fifth point was that all lenders should be obliged to recommend that the potential borrower take independent advice before agreeing to end a loan agreement. The penultimate point was that there should be provisions to make the early settlement of loans fairer and easier. Finally, we said that when the Consumer Credit Act is modified it should be simplified and made more straightforward and understandable.
I recognise that not all those seven points were accepted in the White Paper. On my evaluation, it seems that four of the seven were. That is a significant step forward. As my hon. Friend the Member for Edinburgh, North and Leith (Mr. Lazarowicz) mentioned, there is the crucial reference to replacing the term "extortionate test" with a wider "unfairness test". That is important. However, I would be grateful if the Minister could clarify what it means. I understand that the European example has been taken on board and that we are taking European legislation into account. Given the importance of the terminology, I would appreciate some clarification.
The White Paper is a milestone. There has already been a great deal of consultation and a long gestation period. Many people throughout the country will welcome it. It is a huge step for the Government to take, and I would like to see it firmed up as legislation as quickly as possible.
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No matter what legislation we have, what alternatives to loan sharks there might be or whether loan sharks are outlawed, at the end of the day we need a greater understanding of what indebtedness means. I would like to see greater discussion of credit and indebtedness in schools.
2.42 pm
Malcolm Bruce: I will ensure that the other two winding-up speakers have at least an equal share of the time. I congratulate the hon. Member for Edinburgh, North and Leith (Mr. Lazarowicz) on the work that he has done on this initiative, which is extremely timely given the publication of the White Paper and the development of public concern about the statistics, which have been a matter of debate in recent months.
I hope that we all recognise that credit is a vital component of a healthy economy. There has been a huge development in credit and the varieties of credit, giving many people more choices and opportunities. Clearly, that has also led to a situation in which some people have been forced, seduced or have in some other way got themselves into a position where they are out of their depth, to use the jargon. It is worth reflecting on one or two statistics that bear that out. Over the last year, 33,945 people have been served with bankruptcy orders; almost the end of the line in terms of failure. That figure is 13 per cent. higher than that for the previous 12-month period. The increase in the latest quarterly statistics is 17 per cent. compared with the equivalent period the year before.
Personal debt has risen by 50 per cent. The average person now owes more than £5,300 in unsecured loans; the average annual household debt stands at more than £37,000. The focus of attention has been on two things—apart from some ill-chosen responses to Select Committees by certain people that should know better—that concentrate the mind. First, there are products that are appropriate and not appropriate for different sorts of debt. Secondly, people do not always realise what they are paying and what it is costing them.
In a way, Mr. Barrett did us a favour—even if he did not do himself a favour—when he admitted before the Select Committee on the Treasury that he would not borrow from his credit card company because it is too expensive. That revelation was compounded when the Office of Fair Trading revealed only two or three weeks later that it had forced Barclays to withdraw its credit card advertisement of 0 per cent. interest for life. It occurred to me that there might have been a change of policy, because if 0 per cent. for life meant what it said, even Mr. Barrett would surely borrow on his bank's credit card. The fact that he chose not to do so was a further reinforcement that the bank did not mean what it said, but something quite different. It is such practice that the White Paper is trying to address—successfully, I hope—by setting up measures and responsibilities that will enable people to be protected and better informed.
It is important that the first recommendation of the White Paper is the duty to lend responsibly. The Minister will be aware that, on the matter of fair trading policy, the Liberal Democrats have suggested that we ought to discuss the duty to trade responsibly. Although

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we did not succeed in getting that point into the Enterprise Act 2002, the concept is being considered by the European Commission and may yet form the foundation of a general trading standard. It would not preclude the need for other specific regulations, but it would give a peg to demonstrate where someone had clearly traded unfairly and, in the context of credit, lent irresponsibly.
As the hon. Member for Edinburgh, North and Leith has said, there are some stark examples in the White Paper of people being drawn into taking out loan after loan, thus compounding their debt until the interest ends up being about five or six times the total capital payment. That is extortionate, even given that long-term loans have a high multiplier. The steps that the White Paper proposes will be effective if we can really work with the grain of the operators in the market, and identify the rogues—the problems and practices that we are trying to eliminate—without destroying the variety of products that people want and can choose responsibly.
I shall mention briefly the role of credit cards, as opposed to bank loans and mortgages. I am astonished by the number of people, even among those who one would think were reasonably confident about financial services, who have significant amounts of credit that they repay monthly on a credit card, but who clearly have access to cheaper forms of credit. One argument is that it serves them right; if they cannot be bothered to use the facilities available to them, perhaps they should pay the extortionate rate. However, helping people by making the comparators and the real costs clear helps the market to operate. That is a proper role for the Government; to give people information to enable them to work in the marketplace with confidence and surety. If something sounds too good to be true, it probably is, but if the regulation that we are putting in place is effective, it might mean what it says. That will be the real test; whether a bargain really is a bargain, rather than a come-on. If we can get that right, it will be extremely beneficial.
I hope that the Minister will not take that amiss because, in other contexts, my colleagues and I have expressed some concern about the cost and size of both regulation and his Department, which has more than 10,000 staff and a budget in excess of £5 billion. I do not say that those services are not required. The right hon. Member for North-East Hampshire (Mr. Arbuthnot) and I have discussed this matter. Have the Government assessed whether they would require extra staff, or a redeployment of staff, and what cost might be involved? I do not say that there is no role for the Department, but it is important that we should know what we are letting ourselves in for.
I should like to address the small loan and cash-based borrowing at what is patronisingly called the lower end of the market, that which involves small amounts of borrowing. I am a strong supporter of credit unions. Although I am not directly involved with one in my constituency, I attend meetings of the very active Strathbogie credit union, which operates over an extensive rural area and to which I am happy to give support. They serve a useful purpose, enabling many people to save, borrow and manage the fluctuations in their incomes. They feel that some FSA regulations are restrictive in their scale of operation, but it is necessary
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to maintain a balance. I would give wholehearted support to any measure that the Government might take to strengthen, deepen and broaden access to credit unions across a wider community.
One of the cash debt collection companies regarded by the Consumer Credit Association as extremely reputable has told me that it is concerned that the measures might adversely affect it. It explains that there are those for whom even a credit union requires too much of a commitment; in particular, one has to save with a credit union before one can start to draw money out. People can find themselves in a situation in which they need money immediately. They are vulnerable and can fall into the hands of people who will exploit them as illustrated in the White Paper; they are locked into a cycle of debt at a disproportionate interest rate, and they are taken for the little that they have.
We have to deal with that, but we must also take account of those who work in the cash-based credit market who maintain that they are giving a genuine service to such people. They do so at a high cost with good reason; they regularly send people to collect debt because—to use movie-type jargon—they have overheads. However, those overheads are real; they have to employ the people to make the collections.
I do not suggest that those firms should not be subject to regulation or investigation, but they have expressed to me their concern that if they were over-gulated—if simple interest rates were attached to some of their agreements, for example—it might make them sound extortionate and make them fall foul of the regulations. If that were the case, they would withdraw from the market. That would leave their clients with nowhere to turn but to criminal money lenders who, it has been suggested, profiteer on contraband cigarettes and alcohol. They have cash that they can use to make more cash by lending it to people who have none and putting the heavy twist on them, both physically and by getting an extortionate amount of money.
Mr. Sutcliffe: I agree with what the hon. Gentleman is saying about small loans and protecting people in the marketplace. I am aware of representations that have come from the licensing agency about which he is talking, and I will take them into consideration.
Malcolm Bruce: I am grateful for that assurance, because I am certain—even without having heard the Conservative contribution—that all of us would like there to be a climate in which lending is open, transparent, understood and fair, and that credit is not operated in a way that is abusive, extortionate and on the margins of reputability. At the same time, we do not want to destroy a vital, viable and diverse market. The figures for the extension of credit are a matter for concern, and could become a serious issue, not just for people at the lower end of the income scale. I am still interested to know what developments the Government expect in the information and education that influence people's understanding and use of credit.
I am amazed, as I have already said, that people whom one would expect to have a reasonably good handle on how to obtain and use credit still manage their finances wrongly. Many use the wrong products and even have wrong balances, either because they do not

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regularly review their finances or because they do not have enough understanding. As the hon. Member for Caerphilly (Mr. David) said, 1.5 per cent. per month works out at more than 20 per cent. a year. Although most people understand the difference, they do not always make the calculation.
Of course, the credit card companies are constantly pushing us. I do not know how many letters I receive a week, but they all go unopened into the bucket. However, I guess it is different for people going through a bad patch when a letter arrives saying that £10,000 is available or that they can transfer their balances. On the other hand, some sharp people can do very well out of transferring balances every six months. One need never pay interest if one shops around, but how many people have the time to do that? The credit companies are hoping for inertia. They want to seduce people into using that money or transferring their balances and accumulated debt onto one card; they want people to build up debts and to pay a heavy rate of interest. We cannot ban or outlaw that, but we can help people to understand the information that they receive. It should be transparent; comparisons should be made on the same basis, and people should understand their rights.
That brings me to the escape and penalty clauses. I raise two slightly contradictory points. People who are paying a reasonably competitive rate of interest— good from the lender's point of view—and who pay regularly may find that their circumstances have changed for the better. They may wish to reduce their indebtedness; it seems wrong that they should face a penal redemption rate, particularly if they are paying a flexible rate of interest. It would be commendable if the Government were to address that issue.
My overhanging concern relates to fixed mortgage rates. That is being discussed in the newspapers, but people are reluctant to go for fixed interest mortgages, particularly if they have experience of lower interest rates. One of the deals that mortgage providers offer is a fixed-interest mortgage for a significant time, but we want that to be longer than two or three years. It should be five years or even 10 years, but borrowers will have to make a risk assessment of what the interest rates will be over those 10 years. However, one consequence of the fixed rate is that people often want to exploit the situation. They will say, "Well, things have improved. I have decided that the flexible rate is cheaper, and I want to opt out." There has to be some balance to the deal; those who take the risk of a fixed rate should share the benefits, but it must be done fairly and equitably
In that context, the White Paper and today's debate are timely. I hope that interest rates do not go up much, but we may be seeing the beginning of an upwards turn. It is clear that if interest rates go up by 1 or 2 per cent., the figures that I gave on the rates of bankruptcy and indebtedness will rise sharply. That could cause problems for the British economy; such a move could result in a significant downturn or slowdown. We need to ensure that when people take out loans, particularly mortgages, they build in a margin for an increase in the interest rate. They must not borrow right to the limit, so that an increase of even 1 or 2 per cent. tips them into a position where they simply cannot manage their borrowing. Of course people should be responsible, but
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the mortgage providers and the regulators should ensure that the information that they make available to the public helps them to be responsible.
2.58 pm
Mr. James Arbuthnot: I echo the congratulations given to the hon. Member for Edinburgh, North and Leith (Mr. Lazarowicz). The debate is suspiciously timely; it is almost as if he knew the White Paper was coming. I congratulate him on his prescience and on being so highly informed; the opening of the debate was worthwhile and useful. He gave an interesting analysis of the problem.
I also echo the hon. and learned Member for Dudley, North (Ross Cranston), who congratulated the hon. Member for Edinburgh, North and Leith on his work in the all-party group on debt and personal finance and on the e-mail that he sent us all today about the day of financial education. I am looking forward to visiting the citizens advice bureau, the Financial Services Authority, the British Bankers Association, the personal finance education group and especially "then add the rest", as it says at the end of the e-mail.
Today's debate is worthwhile and timely and we have heard some interesting speeches. The hon. and learned Member for Dudley, North dissected many of the White Paper's details in his usual highly experienced manner. The hon. Member for Caerphilly (Mr. David) gave two moving constituency examples of why the issue is so important. I particularly appreciated the comments that the hon. Member for Gordon (Malcolm Bruce) made about credit unions and the need to strengthen and deepen them. He also expressed fears about people being scared into the arms of criminal money lenders, which we must be careful to avoid in any action taken on this important issue.
There has been a huge shift, in this country and in the world, in the way we run our finances. We used to save money in order eventually to spend it on something that we had decided in advance that we needed. Now, much the more usual course of events is to spend money and then try to work out how to pay it back. If one thinks about it, there is no particular reason why the course we take now should be more fashionable than saving. There is a lot to be said for saving. At some stage we might be able to return to the savings culture that we used to have. However, with tuition fees, the likelihood of graduate debt being about £33,000 by 2010 and the prospect of the savings ratio halving, it might take a long time to do so. I should very much like to see a savings-based society rather than a debt-based society. We can achieve that only gradually, but we should move towards it.
We are now a debt-based society, as the hon. Member for Gordon said. He set out how much debt we have and said that for most of us debt is not a problem. On the contrary, it is a huge convenience and in many ways powers the economy. For all too many individuals, however, the consequences of getting into debt can be devastating, as the hon. Member for Edinburgh, North and Leith said. A quarter of the people who go to citizens advice bureaux with debt problems have visited their doctors because of stress and anxiety. Many people do not even know to go to the citizens advice bureau, while many others find themselves in debt through failures in the benefit or child support systems or for reasons that are none of their doing.

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For such people credit cards are often the way through the problem in the short term, but the expense of credit cards can create much larger problems in the longer term. The hon. Member for Caerphilly said that such people are the most vulnerable in other ways—he was referring to people who live in the heads of the valleys—and he is absolutely right. Those people are likely to suffer most as a result of debt.
I should like to pay particular tribute to the people in citizens advice bureaux, who are the front line of dealing with debt. In my constituency we have two excellent citizens advice bureaux, in Fleet and Bordon, but they are the same all over the country. MPs and the population of the country rely heavily on people in citizens advice bureaux. Those highly trained volunteers are very successful in dealing with problems caused by debt, out of which they are utterly dedicated to helping people. I admire and sympathise with citizens advice bureaux all over the country; many other voluntary organisations do the same thing. I do not know how we would cope without them.
The White Paper, rightly, has been the main subject of today's discussion and a great deal in it is welcome. At first sight, I particularly liked the section on transparency. We would like to see the proposals on easily comparable rates and terms translated into action. The abolition of rule 78 and the penalties for early repayment is welcome. Transparency is essential to understanding debt.
I wonder about some of the details in the White Paper. Will the increase in the size of print mean that people receive masses of large-print bits of paper, which they will not want to wade through, instead of a small illegible piece of paper? A way of not telling somebody something is to tell them so many other things that they get drowned in the mass of paper.
I should like the Minister to address the question of the programme. Page 97 of the White Paper states that the primary legislation is subject to the parliamentary timetable as soon as parliamentary time is available. It is a shame that the White Paper came out a mere two weeks after the Gracious Speech. I wonder whether that means that the legislation will not get into this year's programme.
I do not necessarily want all the points to be dealt with by legislation as opposed to voluntary codes of practice. The Opposition would like to see as much as possible of this creditable move towards transparency being achieved through voluntary codes rather than burdensome regulation. We will, of course, examine the fine print of the primary and secondary legislation. The Government have a history of producing 15 new regulations a day. Although many aspects of the White Paper have been welcomed by the businesses that must respond to it, we want to look at the detail of the regulation and legislation.
Several Members have raised the issue of financial education. The hon. Member for Gordon referred to Mr. Barrett's remarks to the Select Committee. Mr. Barrett's decision not to accumulate debt on his credit card is fine by me, and the Secretary of State's decision not to have a credit card at all is also fine by me. We need the dissemination of knowledge and informed judgments to the whole community. The Consumers Association would like to see a radical overhaul of financial education, which must be right.
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Sir Howard Davies said that we needed to improve financial literacy. We also need a national strategy for improving people's knowledge of their finances and the way in which they work. We must remind people that they should not believe everything they read in an advertisement; if something sounds too good to be true, it probably is.
3.9 pm
The Minister for Employment Relations, Competition and Consumers (Mr. Gerry Sutcliffe): I am delighted to respond to an excellent debate and to contributions from all hon. Members. We may disagree on political issues, but there has been a general welcome for the White Paper.
I congratulate my hon. Friend the Member for Edinburgh, North and Leith (Mr. Lazarowicz) on securing the debate. It is not suspicious; he is clearly a lucky man. I hope that he has the same success in the national lottery. I also congratulate him on his activities on wider consumer affairs issues, because not only has he facilitated the work of the all-party group and work on financial education, he has worked tirelessly on behalf of consumers. When I became the Minister for consumer affairs in June, one of the first letters I received came from my hon. Friend on hallmarking. He was to the forefront of the debate about hallmarking, and I congratulate him on his efforts. He now knows that the Government have been successful in protecting British hallmarking.
One of the reasons I came into politics was to protect, help and support people in our communities and to ensure that they are not exploited. The White Paper has been a long time coming and there has been some criticism about that, but we were right to take the time and to consult widely with a variety of organisations. As was said during the debate, the British consumer credit market is the most mature in the world and has developed greatly over the years. A figure that interested me was that before 1974 there was one credit card—Barclaycard—and annual debt was around £32 million at today's prices. There are now 1,300 credit cards and billions of pounds of debt.
It is important to consider the White Paper in the context of a changed market. I want to put on record my grateful thanks and that of my Department for the work done by many groups in contributing to the White Paper, including consumer groups, citizens advice bureaux, the National Consumer Council and many other organisations that gave the consumers' point of view. I thank also the industry for the way in which it participated and supported the White Paper.
The White Paper is vital to our manifesto commitment to deal with loan sharks. Hon. Members have told us about illegal lending and pressure on individuals.
Ross Cranston: I wish to ask about the hit squads that are foreshadowed in the White Paper. Will they operate against illegal lending? Will they operate in my area of the country, the west midlands?
Mr. Sutcliffe: The good news for my hon. Friend is that the answers are yes and yes. The pilot programme of loan shark hunters will take place in Glasgow and the

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west midlands. It will involve cross-agency working and bring together the police, trading standards officers and local authorities. Part of the problem, to which my hon. Friend the Member for Caerphilly (Mr. David) alluded, is that people do not come forward because they feel threatened. There is a criminal element; some inappropriate lenders use illegal lending to launder money and for various other criminal activities.
The loan shark hunters will be in place—the pilot scheme has received £2 million of investment—and we will ask local authorities and others to consider possible ways of rolling out such schemes across the country to ensure that other people are given that opportunity. The issue is important to the Government and to many MPs. We know of many cases in our constituencies in which people—usually the vulnerable and those on low incomes—are threatened by unscrupulous lenders.
As I said, the White Paper reflects the maturity of the industry and how things have progressed. I was grateful for the contributions made by the hon. Member for Gordon (Malcolm Bruce) and the right hon. Member for North-East Hampshire (Mr. Arbuthnot), to which I shall return in a moment. The British Bankers Association memorandum to us is an example of how things have changed. I cannot resist the opportunity to mention its third point:
"Lessons have been learnt from the last recession. In the late 80s, the UK had enjoyed an economic fool's paradise with: artificially low interest rates followed by a Budget which threw cash at the middle classes in tax breaks, and threw fuel on the blazing housing market by setting a future date for removing dual tax relief —a consumer gold rush to joint ownership concluded the folly in late 1988."
Lessons have been learnt, but I do not know whether the right hon. Member for North-East Hampshire has learned them, as I did not hear him make the point that we are in the situation that we are in partly because of the previous Government's policies.
I was proud to be in the Chamber today for the pre-Budget report and to hear the Chancellor set out the macroeconomic conditions faced by the UK. More people are in work than ever before, which helps credit-related issues. I agree with the right hon. Member for North-East Hampshire that there has been a culture change in how people deal with credit, and I accept and understand that a savings culture is vital. But Britain's progress means that legislation must reflect the current situation. The Consumer Credit Act 1974 is 30 years old, and it is time to ensure that we have a credible Act and a credible regime that meet the requirements.
Individual agreements must be clear, and people must be able to understand what they are letting themselves in for. On the other side of the equation, we must have an effective enforcement regime. New powers have been given to the Office of Fair Trading, which now has the opportunity to investigate to see whether people are lending appropriately and responsibly, and the credit licensing regime is being overhauled. We are telling people that we want a fair marketplace that is still competitive, and the White Paper deals with that.
Every national newspaper carries advertisements for loans, and it is hard to determine how much one must pay back. The idea behind the honesty, or summary, box is to make that clear and simple. There are two ways
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of calculating the APR, which confuses people. The White Paper also considers the possibility of obtaining an agreement to ensure that there is only one way of calculating the APR.
Summary boxes make it clear how much people are borrowing, the length of time over which they must pay and how much they will have to pay back at the end of the period. They will also tell people how much longer it will take them to pay back the loan if they pay only the minimum each month, and how much more they will pay over the lifetime of the loan. We are also consulting on the size of print. We want to ensure that we do not overburden the industry but, for the sake of transparency, it must be clear at the start what people have to pay back and how much they are borrowing.
The form and the content of the credit agreement must be easy to understand. Some forms are very complicated, and people do not understand them. When people are hard pressed, they sometimes enter into loans and agreements that they do not fully understand. All they want to do is to obtain the loan and get the money. We have worked with the industry and with consumer groups to produce credit agreements and forms that are easy to understand.
My hon. and learned Friend the Member for Dudley, North made a good point about the early settlement of loans. I had never heard of rule 78 until I went into the detail. How can it be right to penalise people who want to pay off a loan early? That cannot possibly be appropriate, and I am quite sad that although the White Paper has generally had a good welcome, certain elements in the industry are against the proposals on early settlement of loans. We will return to that because it is important to get it right. Some 70 per cent. of people want to, and do, pay off their loans early and they should not be penalised and charged for that. We accept that there is an administration element and that it is important to have an accommodation for any administration costs, but that rule clearly needs to be changed.
Malcolm Bruce: I agree with the Minister, particularly on short-term, medium-term and variable-interest loans. However. does he accept that there is a potential problem in trying to get people on to fixed-interest loans if they can get an easy early repayment as soon as the market has moved favourably? Clearly, people will not offer fixed-interest loans if they are not equally balanced.
Mr. SutcliffeYes. The Chancellor referred to that this morning, and there will be a survey and report by a group set up to examine what can be done.
We are in an era of new technology, and people want to borrow over the internet. It is important to have online agreements that are sustainable, understandable and protect people's interests.
The credit licensing regime is vital. It is important that people who lend act responsibly and are appropriate people to lend. The details of the regime will ensure that that is what takes place. Lenders will have to make sure that they are appropriate people to lend and that the risk element is well considered. I am particularly pleased about the powers that we are going to give the Office of Fair Trading, trading standards offices and others to hold spot-checks to examine the appropriateness of what lenders do.

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The loan shark hunter regime that we are introducing will enable us to tackle problems such as that raised by the hon. Member for Gordon, who said that we must not stop legitimate lenders lending at low rates, with what appear to be high APR charges. If we removed that situation, their borrowers would be forced into the hands of illegal loan sharks. That was an issue when we considered whether to have a ceiling on interest rates. The hon. Gentleman was right; if the need to collect administration or other charges built into the cost of the loan forced people out of that market, the next people that come along will be the loan sharks and illegal lenders. Although vulnerable people do not often come forward, we will enable people to be prosecuted on evidence that will be collected in various ways. That will push those people out of the marketplace. It is important that they understand that the regime is in place, so that they perhaps cease to prey on the vulnerable in our constituencies.
We are considering the abolition of financial limits, on the basis that people need protecting no matter how much they have borrowed. The issue of consumer redress is important, and the alternative dispute resolution process is something that we will look at when trying to find the best way of dealing with the matter. My hon. and learned Friend the Member for Dudley, North suggested using the financial services ombudsman. We will look at that in light of the review, and if that is the best route we will consider it. We are consulting on that at the moment.
As I have said, we are working with trading standards offices on the pilots in the west midlands and Glasgow to target illegal lenders. They are the worst loan sharks, as my hon. Friend the Member for Caerphilly said, seeking out vulnerable people. The pilot will help us to identify the extent of illegal lending and how best to deal with it in a practical way so that we offer best practice to the other authorities.
I am a strong supporter of credit unions. I have seen in my constituency how they can deal appropriately with people who are outside the normal regimes. However, there is an issue relating to the 12-week saving requirement; people have to save for 12 weeks before they can get a loan from the credit union. Some interesting alternatives have been suggested in Glasgow and elsewhere, and there may be a way of offsetting that by direct grants or whatever. We have to be careful because the aim is to encourage people to save and to play their part in a responsible way. People who are in a crisis need money quickly and must not be forced into illegal lending.
The credit union movement needs to be supported. I have worked with the Financial Secretary to ensure that we do that. Every local authority should have a credit
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union officer. I have a slight concern about there being two national associations and about the infighting between them, which has not helped the situation. That can be resolved. Whether a credit union is community or employee-based, it can contribute tremendously and can offer alternative sources of funding.
My hon. Friend the Member for Edinburgh, North and Leith mentioned the OFT. I pay tribute to trading standards officers. They are the Cinderella service of local authorities. They do not seem to receive adequate funding when the budget is dished out, yet we ask them to do many things; their impact on our communities is tremendous. I hope that the new powers for the OFT and the support that we give to trading standards officers and local authorities will mean that their work is helpful.
My hon. Friend the Member for Caerphilly raised many points. He was particularly moving when describing the cases of intimidation. I welcome his campaign and that of his local newspaper to try to put things right. He had seven recommendations and we have delivered four of them. I hope he feels that that is a step in the right direction. He also made the point about credit unions and how we need to develop them, and asked about the definition of extortionate credit.
The OFT will take account of responsible borrowing, and will help the adjudicator to decide whether a credit transaction is unfair. Unfair practices could include the mis-selling of products, unacceptable high-pressure selling, aggressive debt collection and irresponsible lending. Consumers will be protected in cases of excessive charges for defaulting. That will include measures such as requiring default interest to be fair and reasonable and prohibiting compound interest on cost and charges. Traders will be required to give debtors a set time to pay costs or charges before interest is charged. We are considering whether the proposal should apply also to existing agreements.
We have talked about the maturity of the credit market. The hon. Member for Gordon welcomed the White Paper and explained how he saw the need for a balance between regulation and ensuring that we deliver. Unfortunately, his press release did not quite show the same spirit of consensus on how we approach these issues. However, as these matters go through the House, I am sure that his characteristic fairness will come through and he will admit that the Government occasionally get it right. He reminded me that the Liberal Democrats wanted to do away with the Department of Trade and Industry. Clearly, we have proved that if it did not exist, we would have to invent it.
Time has run out. I welcome hon. Members' contributions. This is a good White Paper and I am sure that people will benefit from it.

Prevenar
3.30 pm
Keith Vaz: I am most grateful to you, Mr. Deputy Speaker, for the opportunity to raise in this Chamber the case of Lachlan Fewster and the availability of the vaccine Prevenar. I am also very pleased that Scott and Maria Fewster are at Westminster today. Scott and Maria Fewster lost their only son, Lachlan, to pneumococcal meningitis in April this year. They state that his death could have been prevented if he had been inoculated with the vaccine Prevenar. Before the attack in April, like all fun-loving youngsters, Lachlan had always been full of energy. He died in hospital within hours of falling ill. Mr. and Mrs. Fewster believe that if Lachlan had received the vaccine he could still be here with us today. Losing a child is one of the most devastating things that can happen to a parent, as my wife and I know only too well, and it is Scott and Maria's commitment to raising awareness about their son's case that has convinced me to raise the issue today.
Childhood immunisation has been one of the greatest successes of modern medicine. In the last half-century, previously life-threatening and disabling diseases such as polio and diphtheria and, thanks to the success of the more recent immunisation programmes, HIB meningitis and meningitis C, have been virtually eradicated in this country. Despite that success, some serious diseases remain. Pneumococcal disease is caused by the bacterium pneumococcal pneumoniae. I apologise for my pronunciation of these words, but I am doing the best I can, considering that they are so technical. Pneumococcal infection can cause a variety of different illnesses, including life-threatening serious disease such as meningitis, pneumonia and blood poisoning. The consequences of serious pneumococcal infection in children can be devastating and potentially more severe than the consequences of other infectious diseases against which children are already routinely vaccinated. Despite the availability of effective antibiotics, serious pneumococcal diseases carry a significant risk of death or severe disability.
Every year, serious pneumococcal diseases, such as meningitis, blood infections and pneumonia, devastate the lives of thousands of British children and their families. Babies and young children under two are most at risk. One of the most devastating forms of pneumococcal disease is meningitis, which is the second most common form of bacterial meningitis in the United Kingdom and among its most life-threatening. Media attention inevitably focuses on meningitis B, and children are immunised against meningitis C, but many parents are not even aware of the pneumococcal form of the condition. Some 15 per cent. of children, or one in six, who contract it will die. Despite rapid medical advances, that figure has sadly remained the same for more than 20 years. The chances of a child dying from pneumococcal meningitis are twice as high as for meningitis B and C. As I mentioned earlier, Lachlan died within hours of contracting pneumococcal meningitis. Furthermore, children who survive infection are twice as likely to suffer long-term and severe neurological complications as children infected with other forms of meningitis. A recent analysis found that one in six children who survived pneumococcal
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meningitis subsequently suffered mental retardation; one in seven developed epilepsy or other seizure disorders; and one in four became deaf. Another recent British study showed that one in four children suffer severe to moderate disability following pneumococcal meningitis. There are many facts and figures, but I want to go beyond the statistics and provide a first-hand perspective and insight into the disease.
The story of Lachlan Fewster was recently brought to my attention when I received a letter from his parents, Scott and Maria. Mr. Fewster is the headmaster of Whitehall primary school in Evington, Leicester—the school at which my mother, Merlyn, taught for a few years when we first moved to the city.
Lachlan was aged just two years and nine months when he died of pneumococcal meningitis in April. He had recovered from the same form of meningitis in March last year after fighting the infection in hospital for nearly a fortnight. At the time, Maria and Scott were told that he had suffered no after-effects. They never dreamed that he would contract the same disease a year later and that it would claim his life.
After Lachlan's death, Scott and Maria discovered that he had been born without a spleen and, as a result, had a significantly reduced immune system. They did not know about it because Lachlan was not screened after birth and he was not considered to be at risk after his first episode of meningitis last year.
In April, the pneumococcal meningitis was stronger and Lachlan lost his fight for life just 10 hours after falling ill. Doctors could not save him, as the bacteria spread so quickly and poisoned all his organs. His parents believe that the tragedy could have been prevented if Lachlan had been given the Prevenar vaccine, which has been licensed but is not routinely available on the NHS.
The knowledge that Lachlan could still be with us haunts the family each day. With my support and that of many others, they are currently campaigning for a routine childhood pneumococcal vaccination. They launched a petition in Leicester last week, which has already received hundreds of signatures.
At present, the NHS provides the vaccine only when a child is deemed to be vulnerable to meningitis—if their immune system is weak, for example. Had Scott and Maria known of their son's reduced immune system they would have insisted that he have an inoculation, and they would have even paid for it themselves. The current price of Prevenar is £120, which would be dramatically reduced if the vaccine were routinely available.
I am glad to say that Maria is expecting a baby in January, but she wants to ensure that her new baby son or daughter is protected. Scott and Maria urge that Prevenar be routinely given to all under-twos. The Fewsters are not alone in their suffering: four children a month die from serious pneumococcal infection such as meningitis, and each time parents are outraged to find that a vaccine is available that may have saved their child.
Research from the campaign group Raising Awareness of Paediatric Pneumococcal Infection and Disease—RAPPID—found an unequivocal response from parents with regard to pneumococcal vaccination. When informed of the facts, 92 per cent. said that they

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were in favour of their children receiving the extra jabs to protect them from the devastating effects of the disease.
As I said earlier, the effects of the infection do not stop at meningitis. When the pneumococcal bacteria enter the bloodstream and multiply, a particularly life—threatening form of serious pneumococcal disease can occur. Septicaemia blood poisoning—can also cause serious organ damage and ultimately death. The disease is also generally acknowledged as the leading cause of severe bacterial pneumonia in children under two years old and overall in any age group. Many people are not aware that babies can develop pneumonia, which is a particularly dangerous condition in young children. In the United Kingdom, it is estimated that one in 200 children are hospitalised as a result of pneumococcal pneumonia before their fifth birthday. Pneumococcal pneumonia is responsible for the most serious types of pneumonia, which sometimes require surgery to repair the damage caused and, as I said, can result in death.
There is growing concern about the use of antibiotics to treat infections, which I understand. Fears about the steady increase in antibiotic-resistant strains of bacteria already seen in many parts of the world are real and becoming a major source of concern in this country. For example, recent figures from Scotland show a tripling of the rates of resistance to penicillin and other antibiotics during the past decade. The problem is twofold. First, the effectiveness of drugs vital in the line of defence against serious diseases such as meningitis is being eroded. Secondly, in an attempt to rationalise unnecessary antibiotic uses for minor viral illnesses, the more serious causes of recurrence, such as those caused by pneumococcal diseases, are being treated later.
A routine immunisation programme to prevent the most serious forms of pneumococcal disease would also produce additional benefits in reducing the amount of less serious illnesses commonly seen in young children. It could help reduce pressure on the perennial problem of NHS beds, reducing the number of GP visits, the prescription of antibiotics and demand for surgical treatment.
The efficacy and safety profile of the pneumococcal conjugate vaccine are not in question. It has been shown to be highly effective as a vaccine, with an established safety profile generated from experience of the nearly 50 million doses administered to more than 10 million children worldwide. The vaccine has been part of the routine childhood vaccination schedule in the United States since its introduction in 2000. There, it is recommended for all children under the age of two and is part of a federal childhood immunisation programme. It has had a huge, immediate and sustained impact on serious pneumococcal disease cases, such as meningitis and septicaemia. Recent data published in the New England Journal of Medicine detailing figures compiled by the US national Centers for Disease Control and Prevention show a 69 per cent. reduction in pneumococcal diseases in children aged under two since universal use of the vaccine was introduced in 2000.
It does not stop there, as there is an added benefit to the rest of the population. Routine immunisation of children in the United States with the pneumococcal conjugate vaccine has been shown to reduce the incidence of serious pneumococcal diseases among unvaccinated children and adults, thereby extending the
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benefits to parents, carers and grandparents. In fact, just a couple of weeks ago at a conference in Cardiff on infection, the potential benefits were applied to the United Kingdom population, showing that a routine immunisation programme could save 2,000 lives a year.
The European Commission granted marketing authorisation for Prevenar in all 15 EU countries on 5 February 2001, effectively meaning that it was available for doctors in the UK. However, little use of the vaccine occurred until January 2002, when the Department of Health recommended Prevenar for infants and young children up to two years of age in groups with conditions that increase the likelihood of infection and children for whom infection is likely to have a worse prognosis. That includes infants or young children without a spleen, with sickle-cell disease, leukaemia and other malignancies, diabetes or HIV, or with respiratory, cardiac, kidney or liver impairment. However, it is widely acknowledged that the vast majority of pneumococcal disease occurs in children who are otherwise perfectly healthy and happy. Through the introduction of a routine immunisation programme, a major health gain could be won for British children.
Prevenar is also recommended for use in at-risk infants and young children in a number of other EU countries, including Denmark, Germany and Italy. Those countries are also considering the introduction of Prevenar as a routine vaccine for all infants and young children in the context of their national immunisation programmes. Other EU counties, such as France and Austria, have already implemented wider use of Prevenar. In France, recommendations for its use in at-risk children from two months to two years of age are particularly wide reaching. Within the EU, Austria has become the first country to make it available.
Government experience with implementing at-risk vaccination programmes in the United Kingdom shows them to be an inefficient way of protecting vulnerable groups and individuals, as there is no established way of measuring compliance with recommendations or associated health outcomes. So why does the Department of Health appear to be so slow in introducing the new vaccine for all children under two? That would be the best way to ensure that the most vulnerable are protected. Cases of meningitis C and resulting deaths have tumbled by a staggering 90 per cent. since the programme began. With the US experience and in the face of the facts, I ask why it has not been introduced.
On the issue of recognising universal vaccination as the most effective way to achieve protection, the Department of Health should be commended for introducing pneumococcal vaccination for all adults aged 65 and over. I have already talked about the effects on young children.
It is also recognised that cost might be a consideration with this particular vaccine. However, on inclusion in the national routine immunisation schedule, the NHS public service agreement would negotiate a contract price for Prevenar outside the basic NHS price for the Department of Health, as it does for all other routine vaccines. Furthermore, considering the widespread benefits of vaccination—not only to those immunised, but to their families and to society as a whole through

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the herd immunity observed in the US—the programme is clearly cost-effective. Ultimately, what price can we put on a baby's life or a child's damaged future?
Can the Minister put on record when the Department of Health intends to introduce the Prevenar vaccine for all children under two as part of routine immunisation? An obvious first step would be to say whether the new immunisation programme is in the Department's identifiable spending plans for 2004—05. If so, when will it be introduced? May I meet the Minister to discuss these matters?
The death of this little boy from Leicester will be with his parents, their family and friends for ever. I hope this short debate, in a small way, can prevent further deaths from happening.
3.47 pm
The Parliamentary Under-Secretary of State for Health (Dr. Stephen Ladyman): I congratulate my hon. Friend the Member for Leicester, East (Keith Vaz) on securing today's debate and on his interest in this matter. My congratulations also go to Scott and Maria Fewster on trying to turn a personal tragedy into a measure to protect all children. It is a tribute to them that they have taken such an interest after what happened to their family.
The Department takes seriously the subject of how best to prevent pneumococcal infections in children. It is of great concern to us. I would be happy to meet my hon. Friend to discuss the matter further. If he contacts my office, we can arrange a meeting as soon as he likes.
We take all vaccine-preventable childhood illnesses seriously. Our vaccination programmes have been enormously successful. Nowadays in this country, we never see a child crippled by polio and wearing callipers, which was not an uncommon sight when I was a schoolboy. That is because polio has been eradicated from Europe through vaccination. Smallpox has become a disease of the past. Cases of diphtheria in children are rare, and tetanus infections in infants are also a thing of the past. We have not seen a death from acute measles in this country for 10 years.
All those diseases used to put children at risk. Immunisation has protected them from those and other preventable diseases for years, and continues to do so. An example of our commitment to childhood immunisation was the introduction of the meningitis C vaccine in November 1999. We were the first country in the world to introduce it, and it has been a huge success: cases of meningitis C in children have been reduced by 95 per cent. since the campaign began.
We were the first country to introduce that vaccine because of the collaborative work of agencies such as the Public Health Laboratory Service—now the Health Protection Agency—the National Institute for Biological Standards and Controls, and the Institute of Child Health, which form the Department's vaccine evaluation consortium. That is a unique collaboration of Government-funded, but independent, organisations and institutions. The consortium was able to carry out the studies needed to show that the vaccines were safe and effective.
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That said, the Department is very careful when considering the introduction of a new vaccine into the childhood immunisation schedule. We have to be sure that it is safe and effective in preventing disease. We must know the number of doses that children need to be protected, and at what age the doses should be given. We need to be confident that introducing a new vaccine into the childhood immunisation schedule will not interfere with the other vaccines being given.
I caution my hon. Friend against drawing on experiences in other countries; such things are not directly comparable because all countries have different immunisation regimes. We have to decide what suits our country, regardless of the risk-benefit analyses of other countries.
We also have to think of the practicalities of introducing a new vaccine into the programme, such as whether that would mean extra visits to the GP's surgery, more injections per visit, or the combination of more vaccines in one injection. Also, we must constantly check that our current vaccines are keeping levels of disease down and consider whether further booster doses will need to be added to the immunisation schedule.
It is also important to remember that not all countries offer the same vaccine programmes. For example, we offer the meningitis C vaccine to infants, but it is not routinely offered in the United States. In the United States, vaccines are offered to infants at two, four and six months of age. In the UK, we use an accelerated schedule, offering vaccines at two, three and four months. Those differences between countries' immunisation programmes depend on many factors, such as the risk of a particular disease in a specific country.
I agree with my hon. Friend that pneumococcal infection in children can be serious. The Department already recommends that the vaccine be given to children among whom pneumococcal infection is more likely to be common or more dangerous. "At risk" children include those with severe dysfunction of the spleen, asplenia, chronic renal disease, immunodeficiency or immunosuppression, chronic heart disease, chronic lung disease, diabetes mellitus, and those with a cochlear implant. We already offer protection to more vulnerable children.
In some instances, the risk factors are clear from an early age, but sadly that was not the case for Lachlan. We are already seeking advice about adding pneumococcal vaccine—and Prevenar in particular—to the routine childhood immunisation schedule. The Joint Committee on Vaccination and Immunisation gives independent expert advice on vaccination issues. It has considered the available evidence, and stated that more information and underlying evidence is needed to gain a better understanding of the impact of offering pneumococcal vaccine to children. The available evidence does not allow for an accurate prediction of the burden of disease that is vaccine-preventable.
However, the Committee is aware that the Department is funding research to find out more about the vaccine. The research is assessing the level of protection that the vaccine offers infants in the UK, the optimal schedule for the vaccine in infants, whether there is a need for a booster dose in the second year of

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life to maintain protection, and the impact of introducing the vaccine into the childhood schedule on the protection given by the other vaccines.
Those are important questions that need to be answered. We are hopeful that the studies will provide the information needed to make a clear, evidence-based decision about the vaccine, and in particular about the benefits that it would bring, the potential risks and the best schedule for giving the vaccine to infants. Some of the trials that examine the protection offered by the vaccines in the UK schedule are close to completion, and the JCVI has been kept informed of their progress.
We are also keeping a close watch on the impact of the introduction of Prevenar on children in the United States. We are especially interested to see whether there is evidence of serotype switching—where the strains of bacteria against which the vaccine protects are replaced by strains that are not vaccine-preventable. That would reduce the effectiveness of the vaccine in protecting against the disease. We also want to assess whether vaccinating children has reduced the rates of disease in older age groups, as my hon. Friend suggested.
There are many uncertainties in the evidence, especially about the amount of disease that is expected to be prevented by a vaccine in both the short and longer term. That is why, as far back as 1996, the then Public Health Laboratory Service put in place an enhanced surveillance system for pneumococcal infections.
The purpose of the enhancement has been to provide us with the best possible estimates of the disease burden to inform our economic modelling, and to serve as a baseline ahead of any introduction of a vaccine. The JCVI is kept closely informed of all the evidence as it develops.
It is important to note that the UK is not alone in awaiting further evidence before making a decision on Prevenar. Other European countries are in the same position. I believe that the US is the only country that routinely offers the vaccine as part of its childhood immunisation programme.
We cannot ignore the financial implications of introducing new immunisation programmes. Prevenar is not cheap. The price that the US Government pays for
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one dose of Prevenar is about the same as that for one dose of all the other vaccines routinely used in our childhood programme. If it were to be introduced into the routine childhood immunisation schedule in the UK, it would cost millions of pounds—probably £100 million or more to protect all children up to the age of two years.
However, I am reassured to hear from my hon. Friend that the price of Prevenar could fall dramatically if it were introduced into the national programme. I should be grateful if he would let me have any relevant information that would allow us to plan for lower prices, since we have based our estimates on the present US Government's contract price, which is already discounted from the private sector price.
We anticipate the possible use of the vaccine in the childhood immunisation programme, once we are reassured about its impact and have completed the risk-benefit analysis. However, I sound one note of caution. In the US, there have been shortages of pneumococcal conjugate vaccine, so that the full recommended schedule could not be implemented, and we would want to address that issue.
We understand the potential benefits, and that is why we are funding trials and studies on the pneumococcal conjugate vaccine's possible use in the UK. Its introduction into the childhood programme has the potential to be a positive step and, as my hon. Friend pointed out, may reduce pneumococcal disease in older unimmunised age groups, particularly where the burden of disease is high. It is also likely to reduce the quantity of antibiotics used to treat infections, which is another concern.
As soon as there is good evidence that the vaccine will deliver real benefits, provision will be made for it in the Department's spending plans. I am sure that my hon. Friend will understand the importance that the Department places on basing its decisions on immunisation issues on independent scientific advice. We take seriously our responsibility to ensure that we have the safest and most effective national childhood immunisation programme. I look forward to meeting my hon. Friend to discuss the matter further.

Gulf War Veterans
3.58 pm
Mr. Paul Tyler: I am pleased to have the opportunity to raise this issue again. I welcome the Minister to the debate, and remind him that I have a special interest in the subject—not a financial interest—as a member of the Royal British Legion Gulf war group.
It might be helpful to hon. Members if I were to explain why I came to be involved. There is a particularly large number of veterans in Cornwall and the south-west because there is a large population of service families in the area. However, after the eventual revelation that many British troops were doused with dangerous levels of organophosphates in 1991, I became involved in the matter as chair of the all-party group on organophosphates. Significantly, for this debate and others in this Chamber, that revelation came after two years of misleading ministerial assurances to me and other hon. Members that none of our service personnel could have been exposed to such a risk.
Throughout the 12 years since the first Gulf war, I have been especially frustrated by and ashamed of the extent to which veterans and their families have been hung out to dry by the Ministry of Defence. They have not received the care and attention that those who serve the nation in our armed forces should be entitled to expect. Surely the least they should receive is consistent support and regular, reliable information. I hope later to demonstrate the more forthcoming attitude of the United States Government and Congress.
My many colleagues across parties and I hoped that lessons had been learned before the Iraq war earlier this year. That was the subject of a similar debate in this Chamber on 5 February. In that connection, I was shocked by the parliamentary answer that I received on Monday to a question that I tabled on behalf of the family of Sergeant Steven Roberts, who came from Wadebridge in my constituency. Sergeant Roberts was the first British fatality in the recent Iraq war. He was killed on 24 March, and there were several outstanding questions about his death that his widow and mother wanted answered. For example, was he ordered to pass on his reinforced flak jacket to others thought to be more vulnerable? Exactly who fired the fatal shot? Did his gun jam?
The Secretary of State told the family in September that the special investigation branch—the SIB—of the Royal Military Police would shortly report, but they have heard nothing since, or at least they had not on Monday. The Minister of State, the right hon. Member for East Kilbride (Mr. Ingram), who is responsible for the armed forces, told me then, more than eight months after Sergeant Roberts's death, that there was still
"evidence … to be collected and … witnesses … to be interviewed."—[Official Report, 8 December 2003; Vol. 415, c. 276—7W.]
Surely the trail must be getting cold.
We have just heard of a similar shocking case. Eight long months after the family of Marine Christopher Maddison from Plymouth were told that his death was caused by an enemy attack near Basra, the MOD has admitted that he must have been killed by so-called friendly fire. What an appalling way to aggravate such a
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tragedy. Those whose loved ones join the services to protect us deserve better. I very much regret that the lessons of what I might call Gulf war I appear not to have been adequately learned for the families of victims in Gulf war 2.
On the illnesses that veterans have experienced, I hope that the Minister will save time in his reply and not bother with the usual linguistic games about the alleged difference between a single Gulf war syndrome and the more general but identifiably distinct Gulf war illnesses. I always refer to the latter, and I think that most of my colleagues do. I am happy to stick with that. The treatment of veterans remains the core issue, whatever the semantics of Whitehall.
The first subject that I shall address under that heading is pensions. My hon. Friend the Member for Hereford (Mr. Keetch) recently established that the MOD has forced victims of Gulf war illnesses to quit the Army rather than being medically discharged. The latter would mean automatic eligibility for a medical pension; the former offers nothing. That system is known as manning control. The National Gulf Veterans and Families Association has claimed that at least 400 of its members have been forced out in that way. The manning control policy is intended to allow the removal of soldiers whose services are no longer required after six, nine or 12 years. Under the policy, they are supposed to be warned 12 months in advance if they are to be discharged.
The Secretary of State has admitted that the MOD' figures for the numbers that were manning controlled were distorted. In a letter to my hon. Friend the Member for Hereford, he said that more had been affected by the manning control system than was originally suggested to my colleagues. Documents shown to The Daily Telegraph reveal that MOD Ministers seem to have misled Parliament over the extent of the manning control policy. Despite claims to the contrary, those leaked documents show that lists of soldiers are still being considered for manning control and sent to their units. Shaun Rusling, to whom I pay great tribute for his indefatigable efforts on behalf of veterans of the National Gulf Veterans and Families Association, rightly described the revelation as a national disgrace.
Vaccination records are an important part in the development of the problems. I draw the Minister's attention to the questions tabled as long ago as January by his noble Friend Lord Morris of Manchester to Lord Hunt, then Under-Secretary of State for Health. Lord Morris asked about the effect of combining anthrax vaccine with other vaccines. The response was that vaccines are licensed by the Secretary of State for Health; the vaccine should be used alone, not in a cocktail. That information was included in the product summary provided to doctors. It was apparent in a matter of a few days from the evidence of Captain Beverley Green, who served in the Gulf in the Queen Alexandra's Royal Army Nursing Corps, that the vaccine was not used alone. The information given by the Under-Secretary in the other place was not helpful.
Lord Morris asked Lord Bach whether the vaccine was licensed at the time of the Gulf war of 1990–91, whether the guidelines were in place, and whether other vaccines had similar limitations. The Under-Secretary in the other place promised that a letter would be written and be placed in the Library. On 7 March, my Liberal

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Democrat colleague, Lord Clement-Jones, asked for a similar response and an undertaking was given. It took until 9 October for the letter to be put in the Library. I followed it up with a question in the House of Commons. It became apparent that it was only in 1998 that the instruction was given that the vaccine should only be used alone. Therefore, it obviously was not available at the time of the first Gulf war.
It was shown in a table summarising information that there was no proper co-ordination with other vaccines at the time of the first Gulf war. It was admitted, amazingly, that there were problems with vaccination records; many personnel did not carry what was described as the BMed27 forms—details recorded on either temporary nominal rolls or BMed27s—and they were often not transcribed on to F Med4s. Therefore, there were no proper records of who had been vaccinated, when vaccination had taken place and whether it was with the notorious cocktail of vaccines, simultaneously.
Perhaps most alarming, the instructions for nerve agent pre-treatment sets, the so-called NAPS tablets, which contain a special bromide, were and are not subject to restriction on co-administration. Therefore, after an eight-month delay between the original question and the answers given to Lord Morris, there was no real information about the situation in 1991 beyond the confession of ignorance and the lack of record.
That admission—the lack of adequate vaccination records—blows to smithereens the assurances given in both Houses about the effective monitoring of all those who were inoculated in the original programme before the 1991 hostilities. As the Minister knows, since 9 October Lord Morris has pursued through several other questions the discrepancies that are still apparent. I do not have time to go through them now, but I hope there will be an opportunity for a face-to-face discussion between Lord Morris, other colleagues in the Royal British Legion group and the Minister.
On the position of other official bodies in the recognition of Gulf war illnesses, the Ministry of Defence may insist that there is no inherent connection between these illnesses and service in the Gulf, but others are equally sure of the likelihood of a connection. I refer to the inquest on Major Ian Hill, the conclusion of which was reported on 25 November. While serving with the Royal Army Medical Corps, Major Hill flew to the middle east in January 1991 to help to set up operating theatres. Within four days of arriving, he was ill with flu-like symptoms. He was diagnosed with bronchial pneumonia, sent home a month later, and failed to recover. He suffered psychological profile changes: he could not sleep, he was irritable, and he had mood swings and short-term memory loss, which are common among those suffering from the Gulf war illnesses. He attributed that to the NAPS tablets that he was given before the war. Consequently, he helped to establish the National Gulf Veterans and Families Association. At his inquest in Warrington, the coroner, Mr. Nicholas Rheinberg, said that he did not
"believe it would do justice to Ian Hill to describe his death as natural causes. I am going to describe his death as natural causes to which his military service in the 1991 Gulf War campaign was a contributing factor."
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That is just the latest example of the Ministry of Defence being out of step with other authorities that are examining the issues.
I shall briefly refer to the American experience, which contrasts with the situation in this country. I am grateful to the intern in my office—she is on loan from the United States—for all the work that she has done, and I will not be able to do it justice given the limited time. The US Department of Defence and the Department of Veteran Affairs established effective counselling services immediately after the 1991 conflict. They were concerned to ensure that soldiers' illnesses were dealt with pre-emptively rather than waiting for them to become established. President Clinton set up a coordinating board and a presidential advisory committee on the subject in 1994.
In 1995, President Clinton issued executive order 12961 and set out a clear statement that the purpose of the committee was to
"determine whether the government is doing all it can to discover the causes of Gulf War veterans' illnesses, and determine whether the government is delivering quality care to those veterans who are ill."
An effective programme of research, examination and monitoring of the health of veterans followed. The committee made a number of recommendations and conducted several large-scale Government research projects, eventually producing its findings in the final report of December 1996. Those findings said:
"Prudence requires further investigation of some areas of uncertainty, such as the long-term effects of low-level exposure to chemical warfare agents and the synergistic effect of exposure to pyridostigmine bromide and other risk factors."
The final report detailed symptoms that all veterans that have suffered ill health in this country would recognise. They included stress that affects
"the brain, immune system, cardiovascular system, and various hormonal responses."
The committee recommended that the
"Department of Defence and the Department of Veteran Affairs should perform long-term mortality studies of Gulf War veterans appropriate for investigating cancer rates in the Gulf War veteran population in the coming decades",
and that the
"entire federal research portfolio should place greater emphasis on basic and applied research on the physiologic effects of stress and stress-related disorders."
It concluded with the following statement, which was posted on its website:
"Approximately 697,000 men and women answered the call to serve in Operations Desert Shield and Desert Storm. In many important ways—through medical care, outreach, and research—the nation has begun to pay its debt to these service members. It is essential, now, to move swiftly toward resolving Gulf War veterans' principal remaining concerns: How many US troops were exposed to chemical warfare agents, and to what degree?"
I wish that we had the same firm statement of purpose from the British Government.

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There have been suggestions in the United States that all the symptoms can be attributed to post-traumatic stress syndrome. However, Congressman Bernie Sanders wrote to the presidential advisory committee to say that that clearly was not the case. He said that there could have been
"many more signatures on that letter. I must tell you that it was not a partisan issue. Democrats, Republicans, conservatives, progressives—all responded because very few people today in the House of Representatives and I expect in the Senate as well, and I expect within the veterans community, and I expect within the United States of America, today accept the conclusion that only stress was the cause of the problems."
Others in the United States have since echoed that view.
I compare and contrast the legislative action that has been taken in the States under the Veterans Benefit Act 2001 with the lack of specific legislation here and our apparent lack of urgency in dealing with the issue. The US legislation dealt specifically with the illnesses that we are considering and tried to address them meaningfully.
Members of the US House Subcommittee on National Security, Veterans Affairs, and International Relations visited the House of Commons, and I was privileged to be one of the Members from both Houses who gave evidence. It was an interesting exchange of views. At the end of it, the previous presidential candidate, Mr. Ross Perot, who was part of the team, said:
"This is not stress. This is troops in combat wounded by chemical agents. Our Government is now being very aggressive on this issue. But our real challenge is to get the British Government to take the same kind of aggressive attitude and get them to react."
I must conclude if I am to give the Minister a reasonable opportunity to reply, and I am happy to do so. I should say that I am not alone in expressing concern about such issues. The hon. Member for East Hampshire (Mr. Mates), a fellow member of the Royal British Legion Gulf war group, is serving on a Select Committee this afternoon but wished to be associated with my remarks. Many of us, inside and outside the House, hope that the Minister will be able to give us a comprehensive progress report today.
More important, I wholeheartedly endorse the view of my colleagues in the Royal British Legion group that continuing MOD confusion, contradictions and contortions reinforce the case for some form of independent inquiry. I appeal to the Minister to agree to meet representatives of the RBL group to explore the best way for such an inquiry to be set up, and to ensure that it is expeditious and avoids the pitfalls of yet more over-legalistic bureaucracy.
4.16 pm
The Parliamentary Under-Secretary of State for Defence (Mr. Ivor Caplin): I congratulate the hon. Member for North Cornwall (Mr. Tyler) on securing the debate. I begin by paying tribute to the work of the all-party Royal British Legion group. I would be happy to attend a meeting of the group if the group's officials thought that it would be helpful and appropriate.
Without doubt, the Government have taken the issue of Gulf veterans' illnesses seriously. I do not want to reflect today on what occurred between 1992 and 1997, but I do know that the Labour party is keeping the commitments that we made to them.
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More than 53,000 United Kingdom armed forces personnel deployed to the Gulf in 1990 to 1991. Only a minority, albeit a very important minority, are ill. We all want to know why. However, there is still no medical or scientific consensus on the cause or causes of ill health among some Gulf veterans. In July 1997, we published a policy statement, "Gulf Veterans' Illnesses: A New Beginning", setting out how the Government would address veterans' health concerns. Many of the commitments that we made in that document have been fulfilled, and it continues to underpin our activities. First, it makes it clear that all Gulf veterans will have prompt access to medical advice from the Gulf veterans' medical assessment programme—GVMAP. Secondly, it makes it clear that there will be appropriate research into veterans' illnesses and factors that might have a bearing on them. Thirdly, it states that the Ministry of Defence will make available to the public the information that it possesses that is of potential relevance.
I shall say a little about each of those areas. The Gulf veterans' medical assessment programme was set up by the previous Government; during the past 10 years, it has seen nearly 4,000 patients, some more than once. The programme's focus was set to provide as full a diagnosis as possible to veterans concerned about their health. The majority of patients seen were well when they were seen. A number of patients referred to the programme have concerns about mental health conditions. Since July 1999, when appropriate, the programme has referred Gulf veterans to a countrywide network of specialist psychiatrists and psychologists for their expert assessment and diagnosis. Veterans who have left the armed forces will use their GP, and any treatment recommended by the medical assessment programme will therefore be carried out within the NHS.
The Ministry of Defence remains committed to the long-standing arrangement that war pensioners should be given priority in NHS hospitals for examination or treatment relating to their pensioned disablement, subject always to the needs of emergencies or other cases that demand clinical priority as determined. I can assure the House this afternoon that my departmental officials continue to liaise with their colleagues in the health service to ensure that periodic reminders about the priority treatment arrangements are issued to hospitals, GPs and other key players in the referral process.
I am pleased to say that the responses to the voluntary Gulf veterans' medical assessment programme satisfaction questionnaires show that 96 per cent. of patients who complete them are satisfied with the service that the programme provides. I encourage all Gulf veterans who are concerned about their health to attend the Gulf veterans' medical assessment programme.
The second issue was research. There is good scientific evidence that as a group, Gulf veterans report more ill health than other comparable groups, but that the pattern of this ill health is not unique to Gulf veterans. They report the same symptoms and conditions in the same rank order as United Kingdom Bosnia veterans do, as do UK military personnel who did not deploy to the Gulf. The only difference is the increased frequency with which Gulf veterans report such symptoms. Some Gulf veterans have recognised medical conditions, but a large number of non-specific, multi-system, medically unexplained symptoms have also been reported.

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It is worth reminding the House that specific diseases, disorders or medical conditions and medical syndromes each have common features such as a set of physical signs and/or symptoms that distinguish them from other medical conditions. Gulf veterans do not present with an identifiable and distinct pattern of symptoms or signs. The consensus of the international scientific and medical community following extensive research on the matter is that there is insufficient evidence to enable such ill health to be characterised as a unique Gulf-related illness or syndrome. For that reason the Government's approach must be guided by the scientific and medical evidence, which is why we do not recognise "Gulf war syndrome" as a medical condition.
I accept the point that the hon. Gentleman made; I, too, refer to Gulf veterans' illnesses. However—I want to reassure him on this point—that does not stop Gulf veterans who are ill claiming a war pension. War pensions are awarded not for a list of disorders but for any disablement that can be accepted as caused or made worse by service. At the end of June 2003, about 2,500 Gulf veterans were in receipt of a war disablement pension. That figure includes awards for both Gulf-related and non-Gulf-related illnesses.
As I said earlier, we want to find out why some Gulf veterans from the 1990 to 1991 conflict are ill. Our current research programme will cost at least £8.5 million to complete. The Medical Research Council provides independent scientific advice on the research programme. Last year my hon. Friend the Member for Kirkcaldy (Dr. Moonie) announced that we had asked the MRC to undertake an independent scientific review of all UK research work that had been carried out into Gulf veterans' illnesses in an international context, and to advise on whether there were any areas appropriate for future research. The MRC's recommendations were published on 22 May 2003.
The Ministry of Defence has taken particular note of the review's conclusions and recommendations for further research. A number of the recommendations were scientifically complex and the MOD is discussing with the MRC how they may be taken forward, the data they are expected to yield and the priorities that should be attached to them.
In that context, the Government are not convinced that a public inquiry would help answer the basic question why some Gulf veterans are ill. In the present circumstances it is only through scientific and medical research that we are ever likely to be able to establish the causes of veterans' illnesses in the Gulf.
The third strand of our approach is openness. The MOD has made a lot of information public in response to inquiries from veterans and others, and continues to do so. Information and reports are made available on our website at www.mod.uk/issues/gulfwar.
The hon. Gentleman raised the issue of my noble Friend Lord Bach's response to Lord Morris, the first paragraph of which I should like to place on the record.
"Further to my letter of 17 September … I am writing in answer to your Parliamentary Question of 4 February … about the medical countermeasures used to protect our personnel during the 1990–91 Gulf Conflict. Again, I would like to say how sorry I am that you have had to wait for so long for me to do so." — [Official Report, House of Lords, 9 October 2003; Vol. 652, c. WA67.]
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My noble Friend rightly gave an apology. However, in respect of what happened in 1991, it seemed as if something new had been revealed in some of the press coverage of that answer. In fact, there was no significant disclosure of any new information in that answer. The key points had been published some years earlier—they were not new.
Mr. Tyler: Why, then, did it take six months to write that letter?
Mr. Caplin: I hope that the hon. Gentleman will forgive me for saying that we have apologised to Lord Morris and he has accepted our apology. The point of the letter and the answer was to place on the record all those issues that had been referred to previously. That is what we did. However, it was nothing new, and nothing that had not been known before in the public domain.
I want to stress that the well-being of the personnel that we deploy is of the greatest importance to us. We have made some important improvements since the 1990–91 Gulf conflict. For example, we have introduced a new operational medical record form which is now in use and should ensure that health events while personnel are on deployment are recorded more systematically than in the past. We have acknowledged that the earlier Gulf conflict revealed shortcomings in our medical preparedness. A number of personnel were not up to date with their service standard vaccination. There is clearly a need to ensure that our forces are ready for worldwide deployment at all times. Vaccination status is an important aspect of such readiness. Our policy guidance has been modified to ensure that troops are routinely immunised, so there should be no need for personnel to receive a combination of vaccines on deployment.
We have improved the briefings that are given to personnel on health-related matters, and Permanent Joint Headquarters now commissions up-to-date medical intelligence briefings for those areas of the world where it is judged that UK forces are likely to operate. Our personnel who are deploying on operations receive pre-deployment and in-theatre briefings on health and hygiene matters, which are based on the assessment made by PJHQ. There are also briefings on the nature and management of combat stress reactions and other psychological stresses of conflict.
Arrangements to limit the effects of post-traumatic illnesses in the armed forces have been developed over a number of years, and they will continue to be reviewed in the light of medical developments in the field of stress management and treatment. Those measures have been applied, where it is appropriate, to Operation Telic. We have expanded the remit of the Gulf veterans' medical assessment programme to allow all regular and reservist service personnel, and MOD civilians who deployed during Operation Telic, to be seen by their doctor. I can tell the House that 13 veterans of Operation Telic have been referred to the programme and I have applied for war disablement pensions.
On 7 May my predecessor announced that we are to look closely at the health of personnel employed during Operation Telic. Three main studies are being conducted. First, there is a study into the physical and

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psychological health of Operation Telic veterans by Professor Wesseley's team at Guy's, King's, and St Thomas' hospitals. Secondly, a study is being undertaken by the Medical Research Council Institute of Environmental Health at the university of Leicester to identify, collect and analyse data on relevant exposures that might have been encountered. Thirdly, the Institute of Medicine in Edinburgh is carrying out a study to establish normative values of urinary uranium in a military population that did not deploy to the Gulf. We also intend to monitor the mortality and cancer rates of Operation Telic veterans.
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The hon. Gentleman asked me about the United States. Perhaps I could write to him on my discussions with Secretary Principi. I assure the House that the Government are committed to addressing this complex and difficult issue and to understanding why some veterans of the first Gulf conflict are now ill. We have made every effort to learn from the lessons of that conflict. Of course, we cannot guarantee that deployed forces will not suffer injury or ill health, but we are doing everything we can to minimise the risks. That is our duty, and we recognise the importance of that obligation.
Question put and agreed to.
Adjourned accordingly at twenty-nine minutes past Four o'clock.