Westminster Hall Sitting of 25 February 2003

Preamble
[MR. EDWARD O'HARA in the Chair]

Employment (North Wales)
Motion made, and Question proposed, That the sitting be now adjourned.—[Mr. Woolas.]
9.30 am
Mr. Martyn Jones: I am delighted to have the opportunity to debate employment in north Wales and to give the Chamber a chance to reflect on the Labour Government's positive achievements in the north Wales economy.
Labour Members have a great deal to be proud of in north Wales. However, I am sure that my Front-Bench colleagues will not allow that success to be usurped by any hint of complacency. It is essential that our employment successes in the region are sustained, and that can be done only in a vibrant economic environment—one that the Government have skilfully and successfully maintained since coming to power in 1997.
I am sure that many of my hon. Friends will want to speak this morning, so I intend to keep my remarks as short as possible. However, I am delighted to see at least some representatives here from other parties. One, a Conservative Member, is not from north Wales but he is none the less welcome. It is a refreshing change to see the Conservative party showing an interest in employment in the region; it did not seem to do so when it was in power and had Members in north Wales. I look forward to hearing about the party's support and praise for what Labour has done for the north Wales economy since 1997, and for the levels of job creation in the region.
I am delighted also to see a representative of the Welsh nationalist party here. Constituencies such as Meirionnydd Nant Conwy have benefited most from Labour's policies over the past six years, and they have experienced the largest falls in the number of jobless. Against that background, it is little wonder that the hon. Member for Caernarfon (Hywel Williams) should have come to pay tribute to the excellent work done by the Government not only by protecting jobs in those constituencies but by maintaining the right economic conditions to allow companies to expand and create more jobs for places such as Pwllheli and Blaenau Ffestiniog.
Finally, I am of course delighted to see here today so many of my hon. Friends from north Wales. I am sure that my hon. Friend the Member for Alyn and Deeside (Mark Tami) would have told us about the exciting work going on at Airbus.
Chris Ruane: He is in Northern Ireland.
Mr. Jones: Yes, he is on parliamentary business in Northern Ireland. It therefore falls to me to mention Airbus at Broughton. Recent investment has not only
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protected jobs in that part of north Wales but ensured that hundreds of jobs in Welsh supplier companies throughout Wales will benefit. In that vein, I am sure that my hon. Friend the Member for Vale of Clwyd (Chris Ruane) will tell us about the huge success of the Optronics technology and incubation centre in St. Asaph.
I am sure that my hon. Friend the Member for Ynys Mon (Mr. Owen) will tell us about the exciting future that lies ahead for Holyhead, and about the plans for the ferry port and the possibilities for Royal Air Force Valley. That much-needed investment provides hope for a part of Wales that has lagged behind for too long.
I initiate this debate because it is worth reminding ourselves of exactly what Labour inherited when we took office in 1997. Opposition Members like to promote the myth that Labour inherited a very happy ship; if only that was the case. Nationally, 3 million people were unemployed, and 250,000 young people had been unemployed for over six months. One million jobs had disappeared during John Major's years as Prime Minister. The economic landscape in north Wales was equally bleak. People should remember the Tory legacy that we inherited: the national debt had doubled between 1992 and 1997; interest rates were above 15 per cent. for one year and above 10 per cent. for four years; and inflation was over 10 per cent.
Let us contrast that decline in economic achievements with what Labour has secured in the six short years since it came to office. North Wales is enjoying its lowest unemployment for 27 years, and youth unemployment has been cut by 76 per cent. We have the lowest inflation for 30 years—and the lowest in Europe—and the lowest long-term interest rates for 40 years. We also have the lowest mortgage rates for 50 years, which is saving home owners an average of £2,400 a year compared with 1979.
Wales is top of the UK league for business support grants. The rate of job creation is 10 times higher than the UK average, and 36,000 new jobs have been created since 1999. North Wales has built up Europe's highest concentration of food manufacturing and processing businesses. That is an incredible turnaround in the fortunes of the north Wales economy, and that is precisely why we re-elected the Labour Government in 2001.
Before Opposition Members jump up and down, I should add that there have been individual setbacks along the way, and none has been more serious than those in my own backyard, in Wrexham. As the Minister knows, there have been job losses in recent months. Most notably, 230 jobs were lost at Owens Corning before Christmas, and 300 jobs went at Sharp Electronics earlier last year. There were quite separate reasons and circumstances behind those job losses.
In Corning's case, the increase in global competition in recent years has affected the Wrexham plant's competitiveness. The message from that is that all companies must study their costs so that they stay competitive, retain market share and hold on to jobs. That is nothing new, and it will always be the case in the truly global economy that we have today. Sharp's reasons for job losses were based on the acute decline in demand for video recorders and the probable rise in demand for DVD players.

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Both sets of job losses were a great blow to Wrexham and its prosperity, but the overall economic context in north Wales is one of stability and increasing prosperity and confidence. It is against that background that new jobs continue to be created across the region. The examples of job losses that I have given are extreme, and it is disappointing that we experienced them in north Wales. However, the day-to-day success of the economy provides a very different picture, and I will briefly tell hon. Members of the success stories from our region.
Last year, clothing retailer Matalan made a huge investment of £1.1 million in Rhyl, creating 100 new, non-tourism jobs for the constituents of my hon. Friend the Member for Vale of Clwyd. Local construction company Watkin Jones is expanding its operation at the Britannia park in Bangor. That will create 70 new jobs, taking the total at that site to 500 or more. Again in Bangor, the Book People—one of the UK's largest direct mail booksellers—has opened a new facility and created 180 permanent jobs. Interestingly, ETL Solutions will expand its work force in Blaenau Ffestiniog, in the constituency of the hon. Member for Meirionnydd Nant Conwy (Mr. Llwyd), to 25. That is the result of private finance and regional selective assistance from the National Assembly.
Those are not symptoms of an economy in decline; far from it, they are a testament to an economy that is confident, vibrant, attractive to investors and a good bet for prosperity and growth. In discussing the success stories, it is important to recognise Government support for the creation of such an environment. I congratulate the Welsh Assembly on backing north Wales entrepreneurs. Through such mechanisms as the Assembly investment grant and regional selective assistance, small and large companies have secured direct help from Cardiff.
The Assembly investment grant is discretionary and it is aimed at smaller businesses making capital investment in Wales. It helps companies to expand, to modernise or to restructure and assists with the setting up of new businesses, which are crucial in encouraging new ideas to flourish in north Wales. Regional selective assistance is a focused, discretionary grant scheme administered by the Assembly. It contributes towards the fixed cost of capital investment projects that will help to produce or safeguard jobs in the assisted areas.
I pay tribute to the work of the Welsh Development Agency in the whole of Wales, not just in the north. Labour's success has been not only in grabbing big headlines but in creating the right conditions for small and medium enterprises to start or expand in a way never before envisaged. On these Benches we recognise that small businesses are the backbone of the north Wales economy, and they make a massive contribution to the region's wealth and success.
Finally, I make a plea to the Minister. An improvement that will help north Wales greatly in the coming years is the introduction of broadband technology. The Welsh Affairs Committee, which I have the honour and pleasure of chairing, recently reported on broadband and made recommendations to the Government. The Committee fully supports the Assembly's aims and objectives, as set out in the
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document "Cymru Ar Lein", or "Online for a Better Wales". However, many of the objectives will be realised only with the support of the United Kingdom Government.
Wales lags seriously behind regions of the UK in many aspects of the exploitation of information and communications technology, and there is a danger that areas in which services are slow to become established will suffer from a growing digital divide. Businesses, individuals, public services and the economy of north Wales can only benefit from investment in broadband services. I shall end there, so that my hon. Friends can have their say about their constituencies and the economy of north Wales, and about the success story and the opportunities that lie ahead.
9.42 am
Hywel Williams: I congratulate the hon. Member for Clwyd, South (Mr. Jones) on having secured the debate. It is timely, because employment, or lack of it, has been a central concern of Welsh politics, not least in north Wales, for many years. We must look at the long-term picture. I am happy to play a part in success stories, as is my party, and I shall refer later to a number that have been brought about in my constituency by objective 1 funding. My party welcomes the fall in long-term unemployment, particularly the scourge of youth unemployment, which has led to the problem of migration from north-west Wales. The problems associated with unemployment have affected north-west Wales over the life of many Governments. We have experienced the solutions proffered by successive Governments, including the big project, the instruction to "get on your bike" and the injunctions to be more enterprising which come with the—usually unspoken—condemnation that we Welsh people have some sort of congenital deficiency in the enterprise department. Those answers have never been more than partially successful. Projects such as building nuclear power stations mopped up medium and short-term unemployment to a degree, but some projects brought long-term costs with them.
Albert Owen: The hon. Gentleman mentioned nuclear power. Does he accept that Wylfa nuclear power station in my constituency, which is the only nuclear generator left in Wales, contributes a quarter of Anglesey's GDP? It is very significant as it is the largest employer; it has been there since the 1960s and could last another 10 years. Instead of dismissing it, will he agree that it makes a major contribution to the local economy?
Hywel Williams: That is an interesting intervention. There is a nuclear power station on Anglesey, and hon. Members will recall that nuclear power was put on the back burner by the announcement yesterday, so I am not sure that the Government share the hon. Gentleman's confidence in its long-term future. However, Anglesey's economy is certainly dependent—some might say over-dependent—on large-scale projects. That is the point that I am making.
Studies such as that done by Lovering on the building of Trawsfynydd nuclear power station show that big projects have often had a negative effect on local economies, depriving local enterprises of their best and

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most skilled workers, who are drawn away by bigger pay packets. However, those may be available only during the construction phase and, in the long term, only for a minority of workers. I know of local workers employed on a succession of big projects who had to keep moving on; for example, once the Dinorwig pump station project was completed, they moved on to the channel tunnel. When that was completed, who knows where they went?
For those people at least, coming back to north Wales was not an option because the local economy was going through another big post-project slump. That is quite apart from the serious consequences for the local economy of the siphoning off, away from the area, of the profits of big enterprises. Small businesses spend locally. Big ones, on the whole, do not. McDonald's, of course, purchases and delivers everything from its centres, from the buildings to the ketchup on the tables.
Those considerations apply equally to the longstanding injunction to the people of north Wales to "get on your bike". Getting on their bike brought some relief to the more mobile and the more desperate, but it distorted local unemployment figures and denuded our economy of the very people whom we need to ensure long-term prosperity. Generation after generation has had to leave north Wales—and the valleys as well, for that matter—to work elsewhere and to contribute to the prosperity of other places. That is to say nothing of the negative effect of that migration on Welsh language and culture.
As to our supposed lack of entrepreneurial spirit, we might call that interpretation a classic case of blaming the victim. Economic activity is weak, and that is presented essentially as the fault of individual economic actors, rather than as being caused by more fundamental, long-term structural factors such as low investment, concentration of Government funding in the south-east and lack of venture capital. There is low investment in structural economic goods, such as railways, roads and, as the hon. Member for Clwyd, South mentioned, broadband.
I understand that the ludicrous suggestion has been made that the broadband map for Wales, instead of being Wales-based and following the objective 1 and non-objective 1 areas, as the National Assembly has argued, should be based on a division of Wales, linking north Wales with the north-west of England, mid and south Wales with the midlands of England, and Cardiff with Bristol in a putative Severnside. That is reminiscent of the discredited economic thinking of the 1950s, with its wilful disregard for the unity of our country. It pays no heed to the business reality of working in the context of economic planning by a Government for Wales at a Cardiff-based National Assembly. I ask the Minister to assure the Chamber that the proposals are to be dumped.
Mr. Nigel Evans: The hon. Gentleman seems to be ignoring the economic reality too. He will know that the people of north Wales tend to look towards the north-west of England to do business, and that there is great interaction between the two areas. The same applies to south Wales and Bristol. That is a two-
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way street, but the hon. Gentleman seems to want it to be completely cut off, instead of wanting proper interaction between England and Wales.
Hywel Williams: On the contrary. Conservative and Labour Governments devolved power to Cardiff, and the structure for economic planning in Wales is the Assembly. That is why the objective 1 map is cut into east and west, and why broadband should be planned on a Wales basis. That is the context within which businesses, large and small, must work. They do not look to the north-west for economic development; they look to Cardiff, to the WDA.
There is an over-concentration of Government investment in south-east Wales, and especially in southeast England and the Thames valley. Wales, and north Wales in particular, gets nothing like its fair share of Government research and development spending per head of population. We would receive a great deal more if we had a regional policy that actively directed Government investment and jobs away from the golden triangles of south-east Wales and south-east England.
North Wales suffers from a lack of venture capital, and the Venture Capital Association showed in its recent reports that venture capital is overwhelmingly invested in the south-east of England—48 per cent. is invested there. Those are private investment decisions, but they take place under a Government who are obsessed with developing south-east England rather than the English regions or Scotland or, for heaven's sake, Wales.
Chris Ruane: The hon. Gentleman is right to point out past mistakes, but will he give no credit for action that has been taken, such as the establishment of Finance Wales, by a Labour Administration in Cardiff to make venture capital more accessible in Wales? Will he give credit for the research and development centres in St. Asaph in my constituency, the Optronics project and the centre at Parc Menai in Bangor?
Hywel Williams: Indeed, I began my remarks with a welcome for the growth in certain types of employment. Per head of population, however, north Wales has not had its fair share of investment. I hope that the hon. Gentleman accepts that. He and I should be working to increase the proportion of research and development spending.
The north Wales economy is weak and less able to sustain growth from inside—the Chancellor's famous "endogenous growth." The economy has many very small enterprises of one or two persons. In other circumstances those could be the engine of economic renewal and growth, but they struggle to prosper in a hostile climate without the capital backing to weather storms and to expand. When a business in my constituency catches a cold it can prove fatal.
Not for nothing are north and west Wales an EU objective I area; they are defined as such by their low GDP, which is the result of low investment and low levels of economic activity. The Catalyst report of December 2002, "The Challenge of a Longer Life—Economic Burden or Social Opportunity?", illustrates the regional element clearly. It shows that between March and May 2000, the activity rate for men aged 50

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to 64 and women aged 50 to 59 were 61.3 per cent. in Wales, compared with 76.8 per cent. in south-east England. We have an under-employed work force, and that is a long-term structural problem.
That is also, however, an opportunity, as I am sure hon. Members will agree. We have the work force; we have people with the life and work experience to take jobs, if there were jobs available. Unemployment in north Wales is higher than in many other parts of the country. Last month, at 4.8 per cent., unemployment in my constituency was the sixth highest in Wales. I will not argue now about how we arrive at those figures, but the broad point is that unemployment in north Wales, and in north-west Wales in particular, is higher than elsewhere.[Interruption.] Indeed, as I have already said twice, we have a seen a welcome drop in unemployment. However, I am concerned that in my part of north Wales unemployment remains higher than elsewhere. Why does that disparity exist?
I see the hon. Member for Ynys Môn (Albert Owen) busily working on his speech. Perhaps he would like to include the following statistic: although unemployment in my constituency is the sixth highest in Wales, unemployment in Ynys Môn is the second highest at 5.9 per cent. That compares with 2.9 per cent. for Wales as a whole.
There are hopeful developments, and I pay tribute to Government agencies and those entrepreneurs—in small and large businesses—who are making sterling efforts. I note briefly the small business sector in my constituency, which is overwhelmingly important. Small businesses form the major part of Gwynedd's economy and are the potential engine for growth. It is a truism, but if every small business employed one extra person, we would be out of the mess that we are in. However, there are hopeful developments, such as Gwynedd council's objective 1 scheme, the business development grant, which is funded with European money. Extra money will come from London eventually.
Chris Ruane: Delivered by Labour.
Hywel Williams: Eventually. That cost someone his job in Cardiff. He is now doing penance by taking the Hunting Bill through the House.
Chris Ruane: Very skilfully.
Hywel Williams: Indeed. We all extend our sympathies to him.
The business development grant to fund new jobs in the small business sector in Gwynedd has been hugely popular and tremendously oversubscribed. The capital set aside for two years has been exhausted in only a few months. That is an excellent example of the local public sector priming and supporting organic economic growth, with support from the Assembly, the Government and the European Union. Before hon. Members point it out, Gwynedd has so far received approval for objective 1 grants to the tune of £12 million, which is very useful indeed.
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Another example of potential job creation is in a sector that sometimes sets people's pulse racing: call centres. I say "potential", because on the WDA's list of 164 call centres in Wales, which employ more than 20,000 people, only one is in Caernarfon. That is the Manweb centre, which employed some 25 people when I visited it some time ago. Those are valuable jobs, but there are only 25 of them. There is another call centre that, as far as I can see, does not feature on the WDA list, which is the Galw centre in Porthmadog. That is a rural project supported by the Cymad rural development agency, but it employs only six people. That, with the 25 jobs in Caernarfon, is the sum total of call centre employment in my constituency.
There are some interesting points in the WDA's brochure for call centres. The WDA points out that Cardiff has half of call centre employment and one third of the centres. Newport has 20 per cent. of the jobs and 10 per cent. of the centres. Swansea has 20 per cent. of the jobs and 13 per cent. of the centres. There is room for growth. Some 1.1 per cent. of the people employed in call centres in the UK are in Wales.
Mr. Martyn Jones: Is it not the case that call centres tend to be based in areas where the accent is recognised as being understandable? Consequently, there may be a problem in Caernarfon.
Hywel Williams: I doubt that my constituents would agree that their accent is not understandable. With such matters it all depends on where one starts. After all, London is a long way from everywhere. However, the hon. Gentleman raises an interesting point, and I shall refer to language skills.
The vast majority of call centres are located in Cardiff, Swansea and Newport. Some 75 of the 164 call centres listed by the WDA are in the south-east-42 are in Cardiff—yet only 12 of those listed are in north Wales, and only one is in Caernarfon. On the hon. Gentleman's point, one would assume, perhaps naively, that in a bilingual county some call centres would be located in areas where there is an unemployed work force that includes older people with life skills to help them in their work, or that they would be located in areas where there are linguistic skills, so that the service can be provided in both the languages used in the country. There is no reason why call centre work cannot be remote from the main centres in, say, Cardiff or London—that is the blessing of the new technology.
What does the WDA tell us about linguistic skills? It is quite instructive. Of course, the WDA works in the private sector, but its pitch is that 14 per cent. of staff speak major European languages and 16,000 foreign nationals live in Wales. There is not a single mention of the Welsh language, but given that Government call centres deal with the local population, rather than foreign businesses and exports, there is a strong case for considering the issue.
Albert Owen: Is the hon. Gentleman aware of a call centre in my constituency which deals with travel information? It provides a full bilingual service and employs disabled people, giving them an opportunity to come into the workplace. Unfortunately, private sector funding is wanting, but the centre is a huge success, and I agree with the hon. Gentleman that others are too.

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They do not have to be in Cardiff; the centre in my constituency serves the whole of Wales by providing Wales-wide integrated bus and train information.
Hywel Williams: The hon. Gentleman makes a valuable point; indeed, it makes itself. However, there must be the political will to site centres, particularly those that provide Government services, away from the golden triangle in the south-east. We are looking for that political will from the Government, and I ask the Minister to give us an assurance that proper consideration will be given to locating the new Jobcentre Plus call centre in north Wales and, if possible, in northwest Wales. The centre will create 250 long-term, rather than fly-by-night, jobs, which will be well paid by local standards. If we have a call centre in Swansea, we also need one in the north-west, for the reasons that I outlined earlier.
The nature of unemployment and employment in north Wales is instructive for developments in the UK, where the not-so-hidden hand of Government favour has made the south-east of England massively rich, while making it increasingly difficult for people on average incomes to live there. The Minister will no doubt note that help is available, but RSA grants, for example, are falling, as the Financial Times noted yesterday. We need a proper interventionist regional policy for Wales and the UK. Investing in the poorer regions in the north and the west is a political choice, and it is a question of priorities.
10.2 am
Ian Lucas: I congratulate my hon. Friend the Member for Clwyd, South (Mr. Jones) on securing a debate on the essential issue of employment in north Wales. It is particularly important in the Wrexham area, which is often described—particularly by me—as the economic powerhouse of north Wales.
Wrexham is commonly associated with manufacturing employment, and 28.5 per cent. of employees in Wrexham are in the manufacturing industry. Interestingly, that is more than twice the UK average, which shows that manufacturing in Wrexham is strong, vibrant and continuing.
However, Wrexham also has an intensely successful service sector. When I first moved there 16 years ago, the town centre was in the process of redevelopment. Locally, it was called a bombsite, and it remained in that condition for seven or eight years. My hon. Friend the Member for Clwyd, South is nodding sagely; he clearly remembers the situation well. I am delighted to say, however, that hon. Members who visit the town now will see how vibrant and strong a cultural centre it is. Its cinemas, shops and pubs regularly attract people from poorer climes such as Chester. Friday nights are a delight to behold and are often very busy.
The service sector is attracting finance and good jobs, which we should not decry, because they play an important part in our economy. They are often flexible jobs, and we should encourage rather than criticise the creation of such jobs when we discuss unemployment. It is telling that so far in the debate we have heard little about the service sector.
I shall concentrate on modern manufacturing because it is especially important in my constituency, as I mentioned. I do not want to talk about the past and the
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traditions of mining at Llay, Gresford and Bersham in Wrexham, and steel making in Brymbo in my hon. Friend's constituency. With due respect to the hon. Member for Ribble Valley (Mr. Evans), a tradition of inward investment has developed over the past 20 years, especially in Wrexham. Two substantial companies from Japan—Sharp Manufacturing, as already mentioned, and Hoya Lens, a Japanese company—have invested heavily in Wrexham and have been very successful for many years.
Sharp Manufacturing is an interesting case in point. It has developed worldwide expertise in renewable energy, especially in photovoltaics, which, given the publication of the energy White Paper yesterday, are very much in the news. The development of that new technology in Britain is not as advanced as in other parts of the world. The successful 100,000 roofs programme in Germany has led to the domestic introduction of photovoltaics, so that renewable energy is used in households much more widely than it is here. That is also the case in Japan.
Sharp knows what an excellent work force it has in Wrexham in north-east Wales, and I hope that the energy White Paper will also show that Sharp is a worldwide investor and that Wrexham, and Wales, are great places for the future development of renewable energy and investment in photovoltaics. I hope that the chairman of Sharp Manufacturing, whom I shall meet later today, will understand how strongly members of the Government believe that renewables must have a future and that there should be investment in photovoltaics in Wrexham and Wales.
Hoya Lens is a very interesting company that benefited from inward investment—before 1997, to give the then Conservative Government their due. Last autumn, it secured a visit from the lord lieutenant and received the Queen's award for export—a tremendous achievement for the company, and the result of the hard work of its management and employees. It has become clear in my dealings with the company and on my constituency visits that one of the reasons for Wrexham's success in manufacturing is the close working relationship between management and trade unions. They talk to each other, deal with difficult times together, and share the spoils of success. Any business must succeed on that basis. It is sensible to adopt that approach, and to work together especially when times are difficult. The best example of that, of which we are all aware, is the excellent work done by the AEEU and the Airbus company in the immediate aftermath of 11 September and the flexible, sensible and long-term way in which the company and the work force responded to that crisis.
We must not forget that not only Airbus in north Wales provides employment to workers in our area. Only last week, I visited Mayflower Aerospace in Llay in my constituency, which works closely with Airbus and supplies components to it. A huge and developing aircraft sector is developing in north-east Wales that we must cultivate, strengthen and develop.
Wrexham is in one sense a victim of its own success, because for many years it had grant-aided status. I have said that there was substantial inward investment in the past. Because of that success and the fact that Wrexham's unemployment rate is now 3.2 per cent., compared with over 20 per cent. 20 years ago, it no longer has grant-aided status. That means that the town

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and the economy must compete with objective 1 areas to the west and east, which obviously has its difficulties. Benefits that were offered in the past cannot now be offered to certain companies to bring them to Wrexham. We must therefore do all that we can within the local economy to ensure that there is the right infrastructure for development.
At times, there are disappointments. My hon. Friend the Member for Clwyd, South referred to the jobs lost at Owens Corning last autumn. We face intense competition. It is clear whenever I talk to representatives of industry in my constituency that that is the one thing that is constant. There is competition from other objective 1 areas, as we have heard. There is also competition from abroad, including from the developing countries in central Europe—the accession countries—which can often offer lower wages and sometimes cheaper jobs. They may not be able to offer the same skill levels as our area, but they are certainly real competitors. Companies often move to such areas if there are setbacks in our economy.
There is also developing competition from the far east. We are all aware of the intensity of the competition in a worldwide market and a worldwide economy. Therefore, we must create a strong infrastructure. By infrastructure, I mean two things—a strong physical infrastructure and a strong education and training infrastructure.
I shall deal first with the physical infrastructure. The Wrexham industrial estate in my constituency is huge. It has employers such as Kellogg's, Tetrapak and JCB Transmissions, which employ large numbers of workers with a high skill level in excellent jobs. The estate has been very successful in competing with the different areas of the country and the other parts of the globe to which I have referred.
The one thing that the estate lacks, as I often hear from managing directors and trade union representatives on the estate, is a decent road connection. The current road connection is along Hugmore lane, and is precisely that—a lane. It is not good enough that such a developed and intensely successful industrial estate should have a road connection of that nature. That has been discussed for the past 20 years, so it was a matter of grave concern when the Welsh Assembly Government recently decided that a proposal for a link road to the industrial estate should be rejected. I should like my hon. Friend the Minister to pass on in his discussions with the Welsh Assembly my concern that the necessary road infrastructure is not being provided. That disadvantage for the local economy needs to be addressed.
The second type of infrastructure that is necessary in a high-skill economy such as north-east Wales is the one that will create the strongest and best work force. That involves close links between education and industry. I am very happy with the work to develop close links with local industry that is being done by the North East Wales institute and Yale college, which are in Wrexham, and by Deeside college, which is outside my constituency. One reason why north-east Wales in general and Wrexham in particular have been able to develop as they have is that they have a good, loyal work force and a strong culture of learning, developing and
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extending skills. The nature of the work force that we need means that that has to be done with major universities and learning institutions, and I welcome that great work. We need to extend it, but we are seeing real benefits and the prospect of improving our work force and making them even more competitive.
One area that needs development in my constituency is the culture of entrepreneurship, which is lacking generally in north-east Wales. In Wrexham, there are 2.24 registrations for VAT for every 1,000 adults compared with a UK average of 3.41. That is a consequence of there being no great tradition of entrepreneurship in our area, and we have often looked to larger employers to provide work. That is beginning to change, partly because of the good work done by the Welsh Assembly Government with European funding for projects that aim to provide skills to villages that have a mining or steel background.
In places in my constituency, such as Llay and Gwersyllt, work is being done with the local council to develop an entrepreneurial culture and improve employment prospects in those areas. That is a long-term goal, and it will not happen overnight, but progress is being made. If we are to have a strong economy in the long term, we need a society in which individuals start their own businesses and eventually take on employees themselves. That has not been common in the past in our area, but there is no reason why it should not be in the future.
The view from Wrexham is positive. We have a strong manufacturing economy, but we need to do things better and cultivate an atmosphere of entrepreneurship for smaller companies. Unemployment has fallen substantially in my constituency since 1997, and we must continue to work to reduce it further. I am confident that with low interest rates, a strong economy and a loyal work force, that will be done.
Mr. Deputy Speaker: Two hon. Members have indicated that they want to contribute, and I remind them that there are three Front-Bench spokesmen and the winding-up speeches must start at 10.30.
10.18 am
Chris Ruane: I shall keep my comments as short as possible. I am aware that some Members have taken 20 minutes for their speeches, but I hope to give my hon. Friend the Member for Ynys Môn (Albert Owen) at least half the time left.
The economic success in north Wales has not been an accident or a legacy of the Conservative party. It has been the result of deliberate actions of the Labour Government since we came to power in 1997, and I can give examples. Labour has secured objective 1 funding for Wales, especially for Denbighshire and Conwy, which were left out initially. Labour has utilised grants in Wales to develop parks such as the St. Asaph business park, which was developed under the Tories 11 years ago but created only 100 jobs in seven years. Under Labour, some 1,500 jobs have been created since 1997, and an extra 1,000 are expected. There will be as much development in the next eight months as there has been during the past eight years.

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We should also consider the heritage lottery, which under the Conservatives was used for the playing fields of Eton and to spend £12 million on the Churchill diaries. Labour's philosophy is to use the heritage lottery funding for places where there is heritage, architecture and poverty and to benefit towns such as Denbigh and Rhyl, which between them will receive a £12 million package. We have also had social justice, with the minimum wage, which has helped the poorest in our society. The Conservatives said that that would cost hundreds of thousands, if not millions, of jobs, but that has not occurred. In my constituency, unemployment has decreased by almost 50 per cent.
When the Conservatives were in power, there were no further education colleges in my constituency, but under the Labour Government two have been established, in Rhyl and Denbigh, giving access to education for 4,000 local people. The Labour Government have provided the infrastructure, but the extra jobs have been provided by the hard work of local business people in my constituency. Those business people include John Sutherland from Vanguard, Mike and Shaun Walsh from Anglia Building and Tony Palframan from Phoenix Glass, ably supported by Steve Pender. They are local lads, some of whom grew up on the same council estate as I did. They are contemporaries of mine who have prospered through their hard work and have provided employment opportunities for hundreds of people.
Under the Conservative Government, there was no foreign inward investment in my constituency, but under this Government two key investments have been made—by TRB, a Japanese automobile component manufacturer, and Pachem, an Austrian company, providing work for more than 200 people. There are large employers in my constituency such as Thales and Hotpoint, which between them employ more than 1,500 people. Some of those jobs, especially at Thales, are highly skilled—50 per cent. of satellite glass that circulates the globe is made in Bod St. Asaph.
There are also successful small employers in my constituency, such as H & D Fitzgerald. Heather and Dennis Fitzgerald employ only 10 people, but their company is the chief density calibrationist in the world, and exports to 70 countries. CMG Payroll is involved in intermediate labour force, which is key to getting longterm unemployed people back to work. Clogau Gold, one of the foremost jewellery brands in the whole of the country, is in my constituency, as is Tweedmill, a retail and tourism development that is one of the top 10 tourist attractions in north Wales. Tweedmill had growth of £900,000 in 1996 and £7 million this year. I could mention many other companies—Buckle Insurance, Craig Bragdy pottery and Caradon, for example. There is, therefore, a good tale to be told about my constituency. The Government have provided the infrastructure, but the people in my constituency have created the wealth, jobs and opportunity.
Looking to the future, we will need to look after the traditional sectors—retail, agriculture, tourism and energy—which have all been hit hard over the past 10 to 20 years. However, we must also diversify and create specialisms. In an earlier intervention, I mentioned that the speciality in my constituency was opto-electronics—the optic project based in the St. Asaph business park. That project has a £50 million investment objective,
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which will create 22 new companies every two years, and an estimated 900 highly skilled jobs. That will make north Wales, and St. Asaph, one of the top opto-electronic centres in the world. That is what we should be aiming for. We do not want crumbs from the table—we want the best for Wales.
We should concentrate on specialisms, whether it be software in Bangor, opto-electronics in St. Asaph or aerospace in the Deeside area, and should train our young work force in those areas. Education and training are key to such development. Our universities—I hope that Wrexham will obtain university status—and our further education colleges should be tied into local training for local needs, not only to support the companies that are currently in the area, but to attract new companies in future.
We have a bright future. Will the Minister consider the issue of structural funds, which will come to an end in 2006? We have done great things with structural funds. My constituency, and the wider county of Denbighshire, have the highest draw-down in Wales—£140 for every man, woman and child, and those funds have been put to good use. Will the Minister ensure that we get a good deal after 2006 and that there is justice both for my constituency and for Wales?
10.24 am
Albert Owen: I, too, congratulate my hon. Friend the Member for Clwyd, South (Mr. Jones) on securing this important debate.
Unemployment has affected my constituency rather more than other constituencies in Wales. Throughout the 1980s and the early 1990s the levels equated with those experienced in the 1930s. It is said that during the period of boom and bust in the 1980s, Anglesey just got the bust. That is a little unkind, but the period resulted in mass depopulation which had a profound effect not only on the economy, but on the social and cultural fabric of north-west Wales and Anglesey in particular. Our young people were haemorrhaging away as a result of the lack of job opportunities.
There has been good news since 1997. According to the House of Commons research department, unemployment in my constituency, based on residence base rate, stood at 2,451 in December 1997. That fell to 1,855 in December 2002, which represents a drop of 36 per cent. in that period. Equally impressive is the fact that in the last 12 months unemployment fell by 15.4 per cent. However, that rate is still too high at 5.6 per cent. compared with the Welsh average of 3.5 per cent. However, male unemployment was over 18 per cent. for the whole of the 1980s. Before I was elected to the House I was a manager of a centre for the unemployed. I saw at first hand the blight that high unemployment is on communities and individuals.
I support the thesis that the Government set out that low unemployment and low inflation can co-exist through sensible macro-economic policies and planning. The impact of Government policies such as the minimum wage has also been profound in my area. It has benefited more than 2,000 low-income families. Indeed, of those 2,000 families almost half saw their wages double from £1.80 an hour to £3.60 an hour. Instead of the downturn forecast by the Opposition, jobs have been created since the introduction of the minimum wage.

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I mentioned the macro-economics of the Labour Government but, as my hon. Friend the Member for Vale of Clwyd (Chris Ruane) said, it is down to the businesses themselves. We must create the confidence. The policies that the Government have introduced have helped, but we need the infrastructure. Roads are a basic form of infrastructure that was sadly lacking during the 1980s. The dualling of the A55—the road to opportunity—stopped at Llanfair PG under the Conservatives. It was meant to link Chester and Holyhead on the way to Dublin. I can recall lobbying the Wales Office when this Government were elected. My right hon. Friend the Secretary of State for Wales was the Under-Secretary of State at the Welsh Office at the time and he gave the go-ahead for that road-building project so that we got that basic infrastructure.
I do not accept that north Wales, north-west Wales or Anglesey are on the periphery. That is just a London-centric, Cardiff-centric view. Anglesey is at the heart of the British Isles, bang in the middle between mainland Wales and the island of Ireland. We need to look westwards. That is what happened when the port of Holyhead submitted a major bid for objective 1 status so that it could attract trade from Ireland. I was happy to lead a delegation to the Under-Secretary of State for Wales, my hon. Friend the Member for Islwyn (Mr. Touhig), and to the Secretary of State for Transport after I had met with the Minister for Economic Development from the Welsh Assembly and Members of the European Parliament.
It was a real partnership of Westminster, the Assembly and Europe working together that secured that £3.4 million bid. In addition to that sum there was £9 million of private investment, making Holyhead the principal port on the western seaboard. It enjoys the benefits of the Celtic tiger economy. The fastest growing economy in the last 20 years has been in Ireland. The Irish tiger merges at Holyhead with the Welsh dragon. The claw and the paw meet. It gives a real Celtic lead to economic revival.
As there is not much time, I will concentrate on another major job boost in addition to the port of Holyhead, which is RAF Valley. At a time when jobs have been contracting in military bases throughout the United Kingdom, last year 100 additional jobs were announced at RAF Valley in the private sector working with the military establishment. This is a huge boost to the area; 90 of those jobs will be highly skilled civilian jobs. The employees will learn their trade and work and live in the area rather than having to leave the area after training as was the case during the 1980s and 1990s.
My campaign is to get civil aircraft landing at RAF Valley. It has huge potential and it has been underused for many years. The only people who use it now are rich individuals who fly in on chartered flights. I want to see a people's airport there that can bring business people to the area, who can link up with the rest of the United Kingdom. That is important. I hope that the Minister will continue to help; I know that the Wales Office has been proactive.
Confidence is growing in my area because the Government have invested in its infrastructure. It is wanting on new technology such as broadband, as my
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hon. Friend the Member for Clywd, South and the hon. Member for Caernarfon (Hywel Williams) said. We must work together to achieve a proper infrastructure in new technologies. Yesterday's White Paper will be of great assistance to us. We should run with that and say that north Wales is the place for renewable energy. Let us be proactive. In the port of Holyhead we are talking about constructing windmills that can be put out to sea anywhere. Let north Wales have those skills and develop in a positive way.
10.31 am
Mr. Roger Williams: I, too, congratulate the hon. Member for Clwyd, South (Mr. Jones) on obtaining the debate. He welcomed all hon. Members to the debate this morning, including some hon. Members who were not actually present, but he neglected to welcome me. I am concerned as to why I was left out.
Two hon. Members here are refugees from the Standing Committee on the Hunting Bill. It must be a great relief to them to have the opportunity to debate the serious issue of employment in north Wales. We have had a good debate. The one aspect that I expected to be given more prominence but has been left out is the public sector, which is very important in Wales and, of course, in north Wales. Not only does it provide employment, job opportunities and a promotions system and job progression that are sometimes unavailable in smaller companies that are active in the Welsh economy but it contributes hugely to the quality of life that people enjoy in north Wales.
I supported the increased investment in public services. One of the problems will be providing training and education for people in social services and the health sector, from care workers to consultants. We desperately need more opportunities for training so that those skills can be made available. The same applies to education. There is a shortage of teachers in many disciplines in schools in Wales.
I would like to make one point in particular to the Minister about public sector employment. The two-tier system in public services that have been put out to tender is a scandal. For instance, in a number of local authorities in Wales where residential homes have been externalised, employees who transferred over were protected by the Transfer of Undertakings (Protection of Employment) Regulations 1981 and are now protected by contracts of employment. However, people employed after that time often have much worse terms and conditions, with much less pay and holiday entitlement. It is a scandal, and I am pleased that the Government have announced that they will do something about it. I urge the Minister and the Wales Office to play a full part in ensuring that the situation changes as soon as possible.
Manufacturing has been mentioned. Other speakers have demonstrated a huge swell of optimism, but things are not so rosy everywhere. I think particularly of KTH Wales Limited, the aluminium forging company in Llanidloes, which has experienced great difficulties. It has lost almost 250 jobs, which is a huge burden for a small community—in terms of the proportion of the population in employment, it is the equivalent of 25,000 jobs lost in Cardiff. I am pleased that both the Secretary

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of State for Wales and the Assembly's First Minister have shown a great interest in the matter and are working well with the action committee on Llanidloes.
However, there are lessons to be learned. The first is that problems can arise if a small community depends on one employer who gets into difficulties. Secondly, Wales has previously been sold as a country that can bring to inward investors the benefit of low unit costs based on low pay rates. However, with the enlargement of the European Union, there is a danger that such businesses will move to other areas with low wages. The Government have not merely to reduce unemployment but to improve the quality of the employment that is available to people in Wales, so that Wales can compete on the basis of more and better skills rather than by turning out low-value products that are dependent on a low-wage economy.
My final concern is the transport system in Wales. The hon. Member for Ribble Valley (Mr. Evans) has mentioned that Cardiff is involved in the economy of Bristol and the west country. Cardiff and south-east Wales could be involved with the economy in north Wales as well if there were better transport between south and north Wales. That would make for very large improvements, not only in north Wales but in mid-Wales. There seems to be no real determination to put that right. I hope that the Minister will address the issue, because it is key to improving the economy of Wales—especially in the north.
Mr. Elfyn Llwyd: I agree with what the hon. Gentleman has just said. I urge, through him, that Ministers intervene in the question of the proposed cut in franchisees' costs by the Strategic Rail Authority. The all-Wales franchise will inevitably mean further cuts in railway services.
Mr. Williams: The hon. Gentleman makes a good point. I hope that the Minister will address that issue as well. The hon. Member for Ynys Môn (Albert Owen) made an important point about improving RAF Valley so that air transport could he spread throughout Wales. A hub and spoke system based in Cardiff would ensure that air transport, which is so necessary for the development of modern industries, would be available to the whole of Wales.
The challenge to the Government is not to reduce unemployment, although there are unemployment blackspots where particular effort is needed, but to improve the quality of employment in Wales so that young Welsh people have the opportunity to stay in Wales and have a full career based in the businesses there.
10.39 am
Mr. Nigel Evans: I congratulate the hon. Member for Clwyd, South (Mr. Jones) on securing this debate. I hope that it will not replace the St. David's day debate, which was to be held tomorrow but has, for understandable reasons, been moved. I hope that there will be an announcement shortly as to when it will be rescheduled.
If this debate has proved anything, it is that there will not be a referendum on the euro during this Parliament. Not one Member has mentioned the importance of joining the euro to the vitality or economy of Wales. That is important, and I noticed it.
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The hon. Member for Brecon and Radnorshire (Mr. Williams) mentioned the importance of the public sector—heck, we know that. It has grown dramatically since 1997, not only in Wales but throughout the country. I was interested, though not surprised, to read the Government's plans for the Welsh Assembly. It is proposed to scrap the post of Secretary of State for Wales and to reduce the number of Westminster MPs who would be able take part in debates such as this, but to increase the number of Assembly Members in Cardiff by eight. That is another example of growth in the public sector created by the party to which the hon. Member for Clwyd, South belongs. That is not the way to create a vital economy in Wales, and certainly not in north Wales.
I think that it was the hon. Member for Caernarfon (Hywel Williams) who said that London was a long way from north Wales. In many respects, Cardiff is also a long way from north Wales. It seems that north Wales is losing out, and we need to refocus to ensure that all parts of Wales benefit from any upturns or increased economic vitality in the United Kingdom.
From travelling around Wales, I must say that Ynys Môn is one of the most attractive parts of the United Kingdom, never mind Wales, and I am very fond of it. The hon. Member for Ynys Môn (Albert Owen) mentioned RAF Valley. He did not have enough time to go on at length about it, but I agree with him completely. It is important that something is done about the regional airports in Wales, and to consider how commercial traffic can be facilitated in getting to Ynys Môn and north Wales generally, to open up the area. It is important that business people do not think, "Goodness me, Ynys Môn is five hours away by road from many parts of Wales, never mind England." If we can open the region to commercial traffic and show that business people can get from parts of England into north Wales very quickly, it would boost employment prospects.
Albert Owen: Does the hon. Gentleman realise that RAF Valley is not only easily reached from England but is only eight minutes from Dublin airport?
Mr. Evans: The hon. Gentleman mentioned looking westwards. Swansea is also looking to get a hub in Ireland and then in the huge markets of the United States of America. There is no reason why RAF Valley ought not be looking ambitiously at such potential.
The hon. Member for Clwyd, South mentioned broadband, which is important. We do not want Wales to be left behind in the information technology revolution; nor do we want rural areas to be left behind in comparison with urban areas. He also mentioned call centres, and there is no reason why north Wales ought not to get its fair share of them. He was skating on thin ice when he said that callers could not understand what people in north Wales were saying. Many call centres are located in Scotland, and people there might be accused of suffering from the same disadvantage.
Mr. Martyn Jones: I thank the hon. Gentleman for giving way during such a short speech. The people who establish call centres reckon that the accent in southern

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Scotland is considered trustworthy, and therefore useful. I am sure that that is also true of Caernarfon, but at the moment that is not certain.
Mr. Evans: The ice is getting thinner every time the hon. Gentleman speaks.
I want to concentrate on agriculture, a sector in which there are real problems in respect of incomes in north Wales. The incidence of suicides among depressed farmers is much higher than for the rest of the population and we must try to tackle that. Manufacturing has been mentioned and is also vital. The DTI manufacturing advisory service, Cymru, has produced a glossy supplement. It is the first edition, but unless it helps manufacturers throughout Wales, I hope that it will be the last. We want real help and the best way to accomplish it for businesses and for services is to listen to what they are saying.
A list was produced of factory units facing closure over recent months. Eastern Europe and the greater attractiveness of EU accession countries has been a problem, and we must do all that we can to retain our employment. Hon. Members will recall the survey of Welsh businesses conducted by the Federation of Small Businesses, which highlighted as a major problem the volume, complexity, rate of change, interpretation and implementation of EU legislation. That helps to explain why businesses are not expanding as they should be. Red tape is a real problem.
The front page of today'sFinancial Times states:
"The Better Regulation Taskforce will report Whitehall officials to the National Audit Office claiming that they are producing `poor quality' assessments of the burden of new red tape. The British Chambers of Commerce estimates the cost of regulation to business has climbed by £20 billion since 1998."
Something must be done about that, and we need to reflect more on the burden of red tape. We have all received in the post the "Have You Heard? By Law" leaflet outlining all the health and safety rules and regulations that businesses have to comply with. It specifies a host of rules and regulations that people have to abide by and it is estimated that it would cost 100 for the entire pack to be displayed in offices.
Is it not time that we talked to businesses and offered a commonsense reduction—perhaps a bonfire of unnecessary regulations as well as the bonfire of quangos that we were promised a long time ago? Our businesses—particularly small businesses, which have always been the engines of employment growth in local areas—must be given every opportunity to expand. The hon. Member for Caernarfon was right to refer to small businesses, rather than the bigger boys, sourcing and networking locally. We should therefore give small businesses in north Wales as much support as possible.
I have noticed a touch of complacency in the debate. I fully understand what Government Members are doing, but we must be more realistic about the problems of north Wales. Transport infrastructure is one key problem that requires attention. The perceived remoteness should be completely eradicated. North Wales people have the skills and a good quality of life, which means that businesses would be welcome to start up there.
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Sadly, in Ynys Mön, unemployment stands at 5.9 per cent., substantially higher than in areas such as Montgomeryshire and north Cardiff where unemployment is 1.7 and 1.9 per cent. The disparity between areas of the lowest and the highest unemployment in Wales is considerable. I am not the greatest enthusiast for the National Assembly of Wales, but we should encourage it to redirect its attention to the problems that I have mentioned. I recall that during the halcyon days of 18 years of Conservative Government the Welsh Development Agency commanded great respect as an institution and secured a good deal of inward investment. Now it is competing against several development agencies throughout the United Kingdom, so the competition is stiffer.
I hope that the Minister will start to address some of the problems that I have mentioned today. There is no reason why we should not work together to try to lift the burdens of taxation and national insurance contributions—a tax that will start on I April—and all the other rules and regulations that hamper businesses in Wales. We should let those businesses grow. We will be looking carefully to see whether, in the Budget, the Government will start to pay a little more respect to the hard work, energy and commitment that our businesses give to the people of Wales.
10.50 am
The Parliamentary Under-Secretary of State for Wales (Mr. Don Touhig): In the short time available to me, I shall try to respond to all the points raised this morning.
I congratulate my hon. Friend the Member for Clwyd, South (Mr. Jones) on securing this debate. It has been an important debate and we have heard many interesting contributions. Unemployment has fallen in every region of the United Kingdom since the 1997 general election, and it has fallen also in every constituency in Wales. In particular, since 1997, north Wales has seen unemployment fall by 40 per cent., youth unemployment by 84 per cent., and long-term unemployment by 61 per cent. Furthermore, Wales has seen the biggest increase in employment of any part of the UK and the biggest fall in the inactivity rate.
I think that all hon. Members accept that a major factor in that change has been the new deal programme. New deal is working hard in Wales; it has delivered substantial reductions in long-term unemployment and long-term youth unemployment. The better Wales target is to help 30,000 people under 25 years of age to leave unemployment and move into work or training by April 2003. That target is being achieved; by September 2002 more than 27,000 young people had already secured jobs.
That is a significant achievement, and I pay tribute to the staff of the employment service, Jobcentre Plus. There has been a sea change in the way in which the service focuses on getting people into work and on making sure that people can move from benefits into work. There are now 61,000 more jobs in Wales than there were last year. Despite the hits caused by the job losses that hon. Members mentioned, Wales continues to attract new job opportunities. That large increase in the number of jobs in Wales represents a high proportion of the total job increase in the UK as a

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whole; it is real evidence that the employment gap between Wales and the rest of the UK is closing. We are moving towards full employment.
In his pre-Budget report, my right hon. Friend the Chancellor of the Exchequer confirmed an extra £2.3 billion of planned public investment in Wales over the next three years. We should contrast that with the 20 per cent. cuts proposed by the Opposition. That investment will put Wales on the road to becoming a high-quality, world-class economy. That is vital to our future prosperity. For instance, the £427 million of objective 1 funding committed to 759 projects in Wales is expected to create more than 6,000 jobs.
To create jobs, we need more businesses with enterprise and innovation, and with a commitment to invest and develop. In recent weeks, I have seen for myself that we have such business in Wales. I visited Airbus with my hon. Friend the Member for Alyn and Deeside (Mark Tami). What a company that is; it has a huge commitment to investment and to modern apprenticeships. That is the way forward for such companies. I also visited rural Wales, and saw Rachel's Dairy near Aberystwyth. That small business, started by one person, has now expanded to provide quality jobs producing and marketing good Welsh products, which is so important.
I went with my hon. Friend the Member for Preseli Pembrokeshire (Mrs. Lawrence) to visit Petroplus at Milford Haven; that is an exciting development. I visited also a small industry, Llanboidy cheese, which works hard and is developing a market for Welsh products. That is to be encouraged. Wales has people with the vision, ambition and enterprise necessary to make businesses grow, and we need to encourage them.
The pre-Budget report contains good news for business in Wales. Business success means rising employment, and a stable tax base means that we can fund our public sector investment. Corporation tax has fallen for 5,900 companies in Wales, which is also to be welcomed. The first half of 2002 saw more than 2,000 new businesses created in Wales—a 60 per cent. increase over the same period in 2001. On top of that—it is a startling figure—the number of self-employed jobs in Wales is rising. About 165,000 people now run their own businesses in Wales—that is 13.3 per cent. of the work force, compared to 11.9 per cent. in the United Kingdom. That is encouraging, as it shows that we have the confidence to go out and start businesses and help our economy to grow.
As a result of the Government's measures, the unemployment rate in Wales is now lower than the average of the European Union average, the United States and Canada. It is now at the same level as that of the United Kingdom. Such achievements are possible only in a stable economy, with low inflation, low interest rates and low unemployment. We have succeeded at quite a lot in the past few years, but there is still a great deal to do. Colleagues have mentioned that there is no room for complacency, and that is right.
I want briefly to respond to comments made during the debate. My hon. Friend the Member for Clwyd, South insisted that there should not be complacency, and there will be none. Working in partnership with the Labour-led National Assembly we shall push forward
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our agenda for investment and the growth of the Welsh economy. We certainly remember, as he reminded us, the legacy left by the Conservative Government.
My hon. Friend also raised the important issue of broadband. The Government have responded to the Select Committee's report—which highlighted good practices in the NHS in Wales—and we are working closely with colleagues in the Assembly to deliver broadband across Wales as quickly as possible. That is our objective.
The hon. Member for Caernarfon (Hywel Williams) welcomed several measures that have reduced unemployment. He highlighted difficulties in his constituency, but unemployment has fallen by 60 per cent., which I am sure he welcomes as much as we do. I found it hard to follow some of his arguments. He seemed to suggest that there was a major conflict between large and small employers in an area. I understand that some difficulties can exist, but I think that the mix is essential for the expansion and growth of the economy.
I am sorry that the hon. Gentleman developed an idea that was somewhat isolationist with respect to broadband. The broadband provision that is planned will provide economically viable geographical parcels throughout the United Kingdom. Public consultation led by the Department of Trade and Industry has shown that the restriction of the parcels to Welsh national boundaries is not what business wants; that is not what is required. My colleagues in the Assembly have agreed to be bound by the outcome of the public consultation. The DTI and Assembly officials are working closely together to secure the maxium broadband coverage across Wales.
The hon. Gentleman made an important point about the Jobcentre Plus call centre. I take every opportunity to encourage the development of such projects, and always, like my right hon. Friend the Secretary of State, bring to the attention of colleagues in Government the need to think of Wales as somewhere to locate. Shortly I shall be in Swansea to open the Pensions Agency. That shows that the Government are investing by moving Government facilities and jobs where appropriate.
The hon. Member for Caernarfon mentioned the drop in regional selective assistance grants and referred to aFinancial Times article, of which I have a copy. The DTI has made it clear that regional selective assistance is demand led. Companies are required to bid for the funding. If bids have fallen back, that is the reason for a reduction in RSA.
My hon. Friend the Member for Wrexham (Ian Lucas) made some important points about the strength of the manufacturing industry and the service sector in his constituency. We certainly want to encourage that. My hon. Friend the Member for Vale of Clwyd (Chris Ruane) also spoke about the importance of public investment in his constituency. He talked about structural funds post-2006, and the Government are currently considering their response to the cohesion report. Discussions will take place between our Department and other Departments, and our Assembly colleagues.
My hon. Friend the Member for Ynys Môn (Albert Owen) expressed his appreciation of the investment that has been made in his area to reduce unemployment. I

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know how hard he has worked to bring about investment in the port of Holyhead in particular, and that is very welcome.
The hon. Member for Brecon and Radnorshire (Mr. Williams) raised the issue of the two-tier system in the public sector. My right hon. Friend the Secretary of State and I will play a full part in developing the Government's views and policies. I am glad that the hon. Gentleman welcomes the recent initiative that we announced. He made particular mention of KTH at Llanidloes. I know what a blow the news was to the community. The First Minister in the National Assembly has asked Team Wales to investigate how we can respond and help there.
I can reassure the hon. Member for Ribble Valley (Mr. Evans) that the St. David's day debate will be rescheduled and will take place shortly. He touched on regulation and the problems that it may cause to business. The Government are committed to ensuring that regulation is fair and effective. We are trying to provide as much protection as possible to business and industry in that context. The Government have listened; they listened and responded accordingly when business and industry suggested that they could reduce the administrative burdens of the national minimum wage.
Last week I was in Belgium. I was struck by the fact that unemployment levels are higher there. I met Ministers and officials who were impressed by our efforts to reduce unemployment. In particular, they were pleased to hear about our new deal initiatives. In spite of the worst global slowdown for nearly 30 years, Wales is achieving great things—more jobs, more opportunity and more investment. Every constituency in Wales is benefiting. We have achieved much and we must be confident. It is important to show the confident face of the new Wales. We may be on the edge of Europe geographically, but there is no reason why we should not be at the heart of Europe economically. The first step is to have confidence in ourselves and Welsh business and industry. If we all work together and show that confidence, Wales will have a good future. We will build on the strong economy and develop prosperity for all our people.

Credit Card Industry
11 am
Mr. Barry Gardiner: Even though he is my hon. Friend the Member for Edinburgh, South (Nigel Griffiths), I trust that, as a good son of Hawick, the Minister will not object if I ask him to take a mental journey with me to the other side of Scotland, to where I grew up in Glasgow. Whenever yer mither wantid a pint o'milk, we bairns would be sent doon the street tae Cuthbertson's dairy. The milk would be there in the crates, but there'd be nae wifie tae tak yer thruppenny piece, so ye'd leave it in the honesty box.
It is many a long year since I have seen an honesty box—some would say, "What do you expect when you move down to live among the English?"—but lo and behold, I walked into the Terrace Cafeteria yesterday and found, by the coffee machine, a brand new honesty box. I considered that a tremendous omen for the debate, because I am calling for an honesty box in the credit card industry, albeit one of a slightly different nature.
Last week, the Office of Fair Trading reached a preliminary conclusion that MasterCard was charging an unjustifiable fee to retailers' banks for every transaction processed. The effect of that 1.1 per cent. charge on the value of every transaction is, of course, passed on to consumers in higher prices. The regulator announced that
"these fees act like a tax on retail transactions that is paid by all consumers in shops that accept credit cards".
Given that there are about £84 billion worth of transactions each year, that amounts to £924 million.
Charges and fees in the credit card industry are therefore topical, but I wish to focus the Minister's attention on the other side of the industry—the card companies' relationship not with the retailer but with the consumer. Last year, the deputy director of the Isaac Newton Institute for Mathematical Sciences, Dr. R.E. Hunt, submitted a memorandum to the Treasury Committee's inquiry into interest rates in which he stated:
"Despite 'assiduous research', there are still some obscure aspects of the charging regime which it has been impossible to deduce even from the small print."
Dr. Hunt is a lecturer at the university of Cambridge department of applied mathematics and theoretical physics, so if that is impossible for him, it is almost certainly as clear as mud to the average consumer. As he says,
"The need to read the small print significantly increases the difficulty of the calculation. Various vital facts are buried there."
In this debate I have one aim. Quite simply I want to make the small print bigger. I want to dig up the hidden charges and make them explicit, so that every consumer can know up front what they are getting when they decide on a particular credit card.
About a year ago, the Department of Trade and Industry asked APACS—the Association for Payment Clearing Services—to participate in its consultation process on the workings of the Consumer Credit Act 1974. Its submission, which I am confident that my hon. Friend the Minister will acknowledge, was extremely detailed and helpful. It focused on credit card annual

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percentage rates, how they should be presented to the consumer and how they should be calculated. Let me explain the problem. The APR represents the total charge for credit. Indeed, it is defined as such in the Consumer Credit (Total Charge for Credit) Regulations 1980. However, there are different ways of calculating the total charge. The assumed length of repayment, and the impact of such things as annual fees and minimum monthly repayments can be varied, so perverse results occur. In some circumstances, a card that would charge £4,040 to repay just £2,500 has an APR of 14.9 per cent., whereas a card that would charge a more modest £3,127 to repay the same £2,500 has a higher APR of 16.4 per cent.
The consumer tends to imagine that the APR is simply the annualised interest rate applied to the outstanding balance after the credit-free period has elapsed in any month. It is not. The APR is, at best, a one-dimensional view of the cost of credit on any card, and the number of customers for whom it is directly relevant is small. The APR is of no relevance to the 34 per cent. of credit card users who recently claimed in a Mintel study to pay off their balance in full each month. Of far greater relevance to such people is the size of any annual fee or the length of any interest-free period before repayments must be made.
The credit card companies have, over the past few years, begun to introduce other, hidden costs, such as late payment fees, which are usually about £20, one-off fees on foreign transactions, which are usually around 2.75 per cent. per transaction, and fees for going over one's credit limit, which are, again, about £20.
Another hidden cost is the transaction fee and interest chargeable on cash advances. Many issuers charge 2 or 3 per cent. of the transaction on any cash advance, subject to a minimum of £5. On a relatively small cash advance of £50, for example, the transaction fee is a whopping 10 per cent. of the transaction. Indeed, using a credit card to obtain cash is one of the most expensive ways to borrow money. Many issuers charge higher interest rates on cash advances than on purchases, despite already levying a cash advance handling fee, so the eventual cost to consumers who do not pay their balance off in full can be enormous.
Unsurprisingly, such matters are generally not in the promotional material that credit card companies send out. Even those things that may be heavily promoted as benefits of the card can have hidden costs. Many cardholders believe that if a 50-day interest-free period is provided, all new purchases will accrue no interest charges until that 50-day period has elapsed. In fact, that will normally be the case only when there is no unpaid balance left over from the previous bill and the new purchases during the current month are paid in full before the due date. If an unpaid balance is hanging over, the new purchases will attract interest from the date of purchase, and the grace period will not apply. Once again, the small print will catch the consumer out.
Fundamentally, the Minister can approach this consumer problem in two ways. First, he can impose standardisation of product on the industry, which is to say that each credit card company can calculate its key financial indicators in exactly the same way, and offer essentially the same interest on the same intervals, with
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the same interest-free periods and the same fees and handling charges. Secondly, he can ensure that there is absolute transparency about the fees and charges that each company levies, and impose standardisation of presentation of costs and benefits, so that the consumer can easily compare one card against the other. If the Minister chooses the first route, he diminishes consumer choice; if he chooses the second route, he increases it and educates.
The honesty box is a way of achieving the second option. It obliges every credit card company to standardise the presentation of all the relevant information about its credit card in a grid format, so that a customer can see, just by looking at the honesty box, how that product compares with another. I would dearly love to claim that the idea is original, but in speaking of the honesty box, I must at least be honest. It was first thought of by Senator Charles Schumer, who led the passage of a Bill to that effect through the US Congress in 1988. The honesty box is part of the United States' Truth in Lending Act, and it requires the disclosure in a tabular box format of all financial information that it considers the consumer will need when evaluating a credit card offer.
In this country, the honesty box has already been adopted by the Nationwide, but although this is welcome, we should remember that the benefits of the honesty box flow from comparability, not from virtuous unilateralism. The benefit of honesty and humility here is that I can claim something much better than originality; I can claim that it works. In the United States, the Schumer box, as it is known, is regarded as an integral element in the drive for greater consumer transparency. It empowers people to make the correct decision about which credit card may be most appropriate to their needs. It does this, not by forcing companies to provide information that is not already available in the small print, but by drawing together all the disclosures spread throughout the text into one readily understandable and easily comparable matrix.
I was delighted to learn that the Under-Secretary of State for Trade and Industry, my hon. Friend the Member for Edinburgh, South was to respond to the debate, as I know that he is passionately committed to consumer protection and just as passionately committed to consumer choice. I am confident that he, like me, wants to see not a standardised product but genuine competition with different products offering different benefits at different prices to the consumer. It is essential that we bear it in mind that consumers' needs vary; some may require a credit card that charges a low rate of interest because they choose not to pay off their balance in full each month. For them, other benefits such as cashback or air miles are minor considerations when choosing a card. For those who usually pay all their balance but who travel as part of their work, it may be extremely important to know what penalty charges are incurred for late payment and what handling fees are levied on foreign transactions. Those who always pay in full by direct debit will have little regard for the APR or for late payment penalties; however, they may find it useful to compare cashback or gift incentive schemes.
The honesty box should include all the indicators. A full list would include an introductory interest rate on promotions; balance transfer interest rate; purchase interest rate; cash advance interest rate; cash advance

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handling fee; annual card fee; credit limit; minimum repayment; date from which interest commences; interest-free period; order in which payments are applied—that is chronologically or to higher interest-attracting transactions first; a tariff of charges and penalties for breaking conditions of the agreement; insurance on goods purchased, travel insurance and other insurances; cashback; reward schemes; and affinity schemes.
With so many variables, it is scarcely surprising that consumers can make substantial savings on the cost of using their credit card by choosing one that suits their needs. It is equally unsurprising that most consumers cannot find out which card best matches their needs when the information is hidden away in the small print of the 1,300 credit card brands available in the UK. It has been calculated that if all the consumers who pay off their balance in full each month switched to a cashback card, they would save a total of £125 million per annum. Lack of transparency is one of the main hindrances to consumers capturing that benefit.
However, if the honesty box is to be effective, it must cover all methods that companies use to market to consumers. It will not be enough for card companies to place the box solely on their printed promotional material. They must also supply information when they advertise their products on the internet or via multimedia text messaging, and even over the telephone. In short, we need to be comprehensively prescriptive, and prepare for all the emerging media of modern marketing. Consumer choice does not end when the customer has signed their credit card agreement. Card companies must send a revised honesty box each time that they change any of the fees listed. In that way, the consumer will be guaranteed simple financial information on which to base their financial decisions.
I welcome the Department of Trade and Industry review of consumer credit, but the Minister knows as well as I do that that review and any legislation that arises from it is unlikely to manifest itself in the immediate parliamentary future. Equally, I welcome the Government's submission this month to the EU draft consumer credit directive, which stated that
"information should be clear and comprehensible, and key information should be presented as a whole".
That is exactly what the honesty box ensures. I urge the Minister to do whatever is in his power to implement it now.
11.15 am
The Parliamentary Under-Secretary of State for Trade and Industry (Nigel Griffiths): My hon. Friend the Member for Brent, North (Mr. Gardiner) has done Parliament a great service in raising an important issue that touches on the lives of so many people. Like my hon. Friend and, I believe, all hon. Members, I recognise that consumer credit and debt are important to us all. My hon. Friend has developed considerable expertise in an area that I take equally seriously and that the Government are taking steps to address. He gave us some shocking examples of misrepresentation of facts and lack of clarity. At a time when personal debt is increasing, it is important that the public fully understand what is involved in credit card transactions.
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I am grateful to the National Association of Citizens Advice Bureaux for supplying me with its latest figures on indebtedness, which show a dramatic increase in the number of debt inquiries that it handled between 1996–97 and 2001–02, from 789,000 to more than 1 million. My right hon. Friend the Chancellor will take some comfort from the fact that the numbers of tax debt and utilities debt inquiries have dropped, and the number of housing debt inquiries is also down; however, the NACAB inquiry figures show that the number of consumer debt inquiries has increased the most, from 406,000 to 647,000. That is why the debate is so timely.
We need to be especially vigilant about the information available to consumers. Of course I want all consumers to be able to master their finances: I firmly believe that people need to be able to take appropriate decisions about their finances, and to understand the choices that are open to them and the implications of those choices. That lies at the heart of the issue raised by my hon. Friend. We in Government need to be able to create the right regulatory framework to facilitate a competitive market environment and to ensure appropriate consumer protection. Transparency of credit agreements is vital—we must look at the amount of small print in agreements, and identify ways in which lenders can minimise the risks and agreements can be made easier to understand. That is critical to a successful market in credit, in which there is fairness on both sides.
We are taking two key actions. Having set up the taskforce on over-indebtedness—I will come to its workings and findings in a moment—we have also undertaken a review of the provisions of the Consumer Credit Act 1974. The taskforce on over-indebtedness has considered the question of transparency in consumer credit agreements in some detail. It recommended that all lenders should be required to provide certain key financial information to potential borrowers in a clear and understandable format. It has reviewed existing cancellation rights, examined the content and form of credit agreements and considered how small print could best focus on the main rights and responsibilities of consumers, explain the key terms and, most importantly, use plain language.
The working group has been firmly backed by the Under-Secretary of State for Trade and Industry, my hon. Friend the Member for Welwyn Hatfield (Miss Johnson), who is responsible for consumer affairs. She endorsed demands on the part of consumers for sufficient information to enable them to answer the three key questions: how much will it cost me as a consumer, how much will it cost me if it goes wrong—my hon. Friend the Member for Brent, North mentioned the £20 charge, which is not widely known about—and can I afford it? That means that consumers need information about whether or not the loan is secured, whether the interest rate is fixed or variable, the term and total cost of the loan, and the total amount payable.
APRs can be helpful when comparing different credit deals, provided that the level of advice to which my hon. Friend referred is adhered to, but the frequency, number and amount of repayments are also important. Consumers should know whether a deposit is required and whether there are any additional charges, cancellation rights or early settlement terms. The taskforce on over-indebtedness indicated that the information is already required under consumer credit

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legislation; the purpose of today's debate is to highlight the failings in the enactment of that legislation in the handling of consumer credit and credit deals. As my hon. Friend said, the key is how the information is presented to consumers. It must be presented in a way that is clear and easy to identify and understand. We are examining the statutory requirements on pre-contract information and the format and content of credit agreements.
My hon. Friend the Under-Secretary is consulting on revised regulations and inviting suggestions on improvements for consumers as part of the current review of the Consumer Credit Act 1974. She is well aware of the need to take action on greater transparency, alerting people to the effects of reducing the minimum payments on credit card balances, and the need for clear guidance to consumers on how credit card cheques work. She spelled out those details in her response to the over-indebtedness taskforce's work. The Act is now almost 30 years old. It was enacted to regulate consumer credit at a time when the market was far smaller and less sophisticated than it is today. We need to update the regulatory regime and ensure that it is relevant to the modern credit environment.
We are determined to implement our 2001 election manifesto commitment to tackle loan sharks—another subject that my hon. Friend the Member for Brent, North is particularly interested in and concerned about on behalf of his constituents and all consumers. The consultation document published by my hon. Friend the Under-Secretary entitled "Tackling loan sharks—and more!" has elicited many helpful responses, and she will publish the response to that consultation next month. I know that my hon. Friend the Member for Brent, North and other hon. Members will take a keen interest in that.
My hon. Friend discussed in some detail the merits of what he called honesty boxes—illustrative tables in credit advertising and literature that set out in a clear, standard format the key rates, charges and benefits. He advocated that they be adopted as an industry standard to allow consumers to make informed and accurate comparisons between the terms and conditions offered by different lenders. I entirely agree with that approach. Consumers must be able to shop around and make clear comparisons between the offers made by different credit card companies.
The Department of Trade and Industry has met the OFT, APACS—the card issuers trade association—and consumer groups to discuss a standard format for advertising interest rates. As my hon. Friend said, it is difficult for consumers to compare different credit card offers. Lenders make different assumptions about usage, so a 6.9 per cent. APR on one credit card is not the same as a 6.9 per cent. APR on another. That was not
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Parliament's intention when it ensured that APR information would be made available to the public, and such a situation does not help consumers—indeed, it can lead them to make the wrong decision.
I am pleased to tell hon. Members that agreement has been reached on the need for a standard format. There is enthusiasm for adopting the type of honesty box that my hon. Friend described. As he said, it is already a legal requirement in the United States of America, where it is called the Schumer box, after the senator who championed it. My hon. Friend will be pleased to know that we are also giving active consideration to the merits of taking such an approach to other credit products. In that way, consumers may in time become familiar with the format in which key information is provided.
Our Government are pursuing the most radical overhaul of consumer credit legislation for a generation. It is being presided over by my hon. Friend the Under-Secretary and shows our commitment to ensuring that consumers are informed and protected. The changes are long overdue, and the speed of change in the credit market over the past decade, particularly in relation to credit cards, has highlighted the need for up-to-date, flexible legislation that provides the appropriate levels of consumer protection.
Like hon. Members, we recognise that it is ultimately for individuals to reach decisions about the commitments that they make, and that is as it should be. However, those should be informed decisions, and people must have information that allows them to compare different offers. They must be allowed to see what interest rates will be charged and be able to work out what they will end up paying for credit. Most important, they must be able to compare one company's offer with another's. That is why the Schumer box in the United States has so much to commend it. It is also why the Gardiner box—I hope that it will be known by that name, because my hon. Friend has championed the issue—is such a viable option in this country and it should be given active consideration.
There is no doubt that we have a mature and valued consumer credit market, and we are well ahead of countries such as Germany in terms of the possession of credit cards by individuals. People can therefore make purchases remotely and do not have to carry around large amounts of cash. All hon. Members greatly respect and value the industry, and we welcome its fullest cooperation in ensuring that it adopts the best practices. My hon. Friend the Member for Brent, North has outlined one of them, and he commands widespread support.
11.29 am
Sitting suspended until Two o'clock.

Urban Post Offices
2 pm
Mrs. Annette L. Brooke: I am pleased to introduce this important debate at such an apposite time. Against a background of 3,500 post offices being closed between 1979 and 1997 and the closure of a further 1,700 up to the end of last year, the first post office closures under the urban reinvention programme are being confirmed. Furthermore, 1 April looms, when the phasing-in of all benefits to be paid through the banking system will begin.
My constituency is made up of both rural and urban areas, and I emphasise that I am concerned for the future of all post offices, but it seems sensible at present to concentrate on urban post offices. There is the question of how an urban post office is defined: in principle, that should be straightforward, but I am aware of at least one dispute over a post office which has been designated as urban, but which currently serves a small community surrounded by a green belt.
I come to this debate having heard confirmation of the first closure in my constituency under the reinvention programme: Hillbourne post office, which is 10 minutes from my constituency office. In addition, local media are reporting proposed closures in Poole and nearby Christchurch. I am sure that the number of hon. Members supporting this debate reflects the level of concern across the country.
There have been many debates on the future of post offices. We all accept that post offices form a vital part of the social fabric of our country. In the suburbs of my constituency, there are many distinct communities of which the local post office is the focal point. The people most dependent on those post offices are the elderly, the disabled, single parents and the less well-off.
The local post office is often the last retail or cash outlet in the community. I have heard stories of elderly people making a trip to the post office every day, sometimes just to buy a single stamp. The visit performs the vital function of keeping them physically active and providing social contact with others. In addition, a post office being located within a shop carries spillover benefits through the provision of goods for customers and extra spending in the overall business. The closure of a local post office can have adverse effects on many people's lives, and it is important not to focus merely on commercial viability.
The performance and innovation unit report on the Post Office published in June 2000 made 24 recommendations, including shutting some urban branches to improve the prospects of those remaining, and investing in the remaining branches to make them more attractive. The proposals announced last October identified £180 million to fund the closure of urban post offices, with grants for updating individual post offices limited to £10,000. It is to be welcomed that the special fund for deprived urban areas has, at long last, been announced.
I am going to quote the Minister, I am afraid. He said that a rational case could be made for changes in the post office structure and that
"a properly planned, properly managed process, which will protect access to the post office network in every urban area" —[Official Report, 15 October 2002; Vol. 390, c. 229.]
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was desirable. It is very difficult to disagree with that statement. However, today we have an opportunity to evaluate the progress made so far. It is difficult to argue that there should be no closures, but I cannot accept that 3,000 post offices one third of all urban post offices—should be shut.
Post office business has been declining for several years. Until recently, dealing with benefit payments still accounted for about 40 per cent. of post office income, but the rush to introduce automated credit transfer in April 2003 has really been the final straw for many postmasters. There may well be efficiency arguments for the change, but consumer wants are important.
The Secretary of State for Trade and Industry wrote to all MPs in October 2002. He said:
"We have been keen to listen to the concerns of all our customers. They told us that two of the most important things to them were still to be able to collect their money from the Post Office and to be able to collect it weekly. Both of these options will be available."
Letters outlining the options for benefit recipients who currently collect their benefits at the post office are being sent out on a phased basis to a total of 16 million people. The options are the ordinary current account in a bank or building society, the new basic bank account and the Post Office card account. By 10 January this year, 103,000 customers had opted for payments to be made to bank or building society accounts, but only 26,000 had opted for a Post Office card account. Only the Post Office card account will allow cash to be collected from post offices. It is therefore important that the post office competes with the other options on a level playing field. If our post offices are to survive and if the Government are determined not to defer the changes, it is essential that the process be handled well.
Sandra Gidley: Does my hon. Friend not agree that there are alarming reports suggesting that the Post Office card account has not been adequately promoted and that most people are unaware of the advantages of having such an account? That is especially true for those whose current accounts are in deficit, because their benefits will be funding their overdraft. Many people do not realise that a Post Office card account would give them access to the cash.
Mrs. Brooke: My hon. Friend makes some important points. For example, applying for a card account seems much more complex than applying for other accounts. Is it necessary to refer potential customers to a call centre? It seems that recipients are being actively discouraged from using Post Office card accounts, and the agencies do not seem to be promoting them as strongly as the other options. The National Federation of Sub-Postmasters is concerned that the Department for Work and Pensions is planning to encourage existing customers to open a basic bank account rather than a Post Office card account.
Many are concerned about the start date of April 2003. For example, there seems not to be a significant gap between the trial for the Post Office card account and its widespread implementation. The timing of the dispatch of personal identification documents to eligible benefit recipients is another matter for concern. The pilot scheme in Tyne and Wear showed that many people were not prepared to have their benefits paid into

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bank accounts or card accounts. They refused to choose any of the options, but I have yet to hear a full explanation of what will happen after 2004 to those who continue to refuse. An exceptions service is due to be introduced, but when will full details be published? Will the Inland Revenue, the Veterans Agency and the Department for Work and Pensions all use the same exceptions service? With only 34 days to go, many questions remain.
I am particularly concerned about how the new system will operate for the blind and partially sighted. Indeed, I tabled an early-day motion on the subject, and I hope that many hon. Members will sign it. The cash machines already installed in nearly all post offices present a problem for many blind and partially sighted people. In a letter of 21 January to the Dorset County Association for the Blind, a local benefits manager wrote:
"I have spoken to our head office, who tell me that before the machines were installed there was extensive consultation with the RNIB, who did approve the final design."
That misinformation is alarming. The Royal National Institute of the Blind is asking the Post Office to introduce a new PIN pad, and in the meantime to offer an alternative to those who cannot use the existing PIN pad. The current pad has a small display with little contrast, its small keys are very close together and people have a particular problem finding the number 5.
I understand that the RNIB's initial recommendations were ignored. I was pleased to hear today that the problem is at long last being acknowledged. A spokesperson for the Post Office has admitted that mistakes were made in the development process and that
"we have not acted upon the representations from the RNIB and other disability groups."
Will the Minister tell us today exactly what will happen? How much precious money will have been wasted? More importantly, what provisions will be made for blind and partially sighted people and when will such provisions come into effect? I hope that a specially designed PIN pad will be available at every post office along the lines of the big button phone. Those suffering from arthritis, for example, will also require suitable equipment.
Age Concern is worried about elderly people being required to remember a personal identification number, a concern with which I have every sympathy. Exceptions will have to be made for those unable to cope with such a system. I have real anxieties that people who forget their number or who lose it will be unable to access cash for a few days. Some of those who receive benefits and pensions are among the most vulnerable in our society, and confusion and hardship must be avoided. In addition, anything that makes the collection of cash from post offices more difficult will affect the income of the whole operation and will deal a body blow to the whole network. There is a case for deferring the implementation of the programme for direct credit payment for the time being.
The other side of the coin is that there should be support for initiatives to increase footfall into post office branches to generate more income. Sadly, the Government announced the end of the "Your Guide" initiative, which was designed to turn post offices into
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information centres. Perhaps the Minister will outline what plans the Government have to support initiatives to generate more income from post office branches. Failing to protect current income on one hand while failing to support other replacement income streams on the other will mean maximum cuts in the network not minimum ones.
Simon Hughes: Does my hon. Friend agree that the case that she makes is often entirely undermined because the Post Office, when asked what the contract would be, is very unclear, and those who want to make a financial contribution do not know the score? Does she remember that several times I raised with the Minister's predecessor and with others a case in the Elephant and Castle? There, someone wants to run a post office and is willing to make it income generating with other business. This person has tried to get goalposts for setting up a business from the Post Office, but they can never get any that do not move. That must change if post offices in my hon. Friend's constituency and in mine are to continue.
Mr. Deputy Speaker: Order. That is rather a long intervention.
Mrs. Brooke: I thank my hon. Friend and agree with all that he says, which fits in well with what I intend to say about the closure of the post office in my constituency. There, the postmaster was happy to accept the proposed package. His business had been declining for a long time, and he had already given up on the shop in his business as it was not even worth his while to employ staff. He did not want to stay around to watch his business decline still further with the introduction of ACT—indeed, he was pretty demoralised several years ago, after the Government made their first announcement, when he realised what would befall post offices in 2003. Perhaps that had already taken the heart out of his incentive to run his business and contributed to its decline.
The agreed procedures were adhered to: posters were put in the window, local councillors and the local MP were contacted. I visited local post offices to see how the customers were reacting. They were upset, but they understood the postmaster's position, as they were aware that it had been a long time since they had queued at that particular post office. There was no petition and no general outcry against the closure of the post office. It was regrettable and a nuisance, but customers knew that a well-respected postmaster was making the best business decision, given the pay-off. There were several post offices within the required distances, and details of alternative provision were clearly set out.
Mr. Christopher Chope: Does the hon. Lady accept that it does not make any difference if there is a local outcry or a petition? There was a petition with 1,000 signatures and an enormous local outcry about the Stanpit post office in Christchurch, and Postwatch objected. Despite all that, the decision to close the post office was rubber-stamped.
Mrs. Brooke: That is precisely my fear. Let me make it clear to the Minister that I do not object to all post office

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closures. I am aware of one that is quite sensible. What frightens me is mass closure and the fact that individual circumstances are not considered.
I made representations, in my view, thoughtfully and not confrontationally. I asked about the post office that was likely to pick up customers. What parking arrangements would there be for disabled people? Was there sufficient capacity to provide a good service at peak times? The letter that I received from Post Office Ltd. confirming the closure told me that parking for the disabled was a matter for the local authority—thus pushing the problem on to someone else—and that the postmaster had indicated that he could cope with the expected extra customers. There was no mention of any investment of £10,000 or even £1,000 to improve the facilities. Where were the proposals for the brighter, better surviving post offices? I was very disappointed with the reply, because some good changes could have been made to ensure that that post office would survive.
How many post offices whose proposed closure prompts an outcry, as described by the hon. Member for Christchurch (Mr. Chope), will be reprieved? One feels that once the poster goes up, the result is a foregone conclusion. There is a case for some closures, but we are on a slippery slope in assuming that so many urban post offices should be closed. I fear that the Government are helping us towards the slippery slope by insisting on rushing ahead with ACT.
I should like to see the evidence of investment in surviving post offices and a real attempt to change the business management culture in the Post Office. I should like to see details of the Government's plans for supporting initiatives to promote extra business in surviving branches. If we cannot have "Your Guide", which many of us thought was rather good, what can we have? We all have a part to play in encouraging people to use their local post office before they lose it.
2.17 pm
Mr. Tony Lloyd: The Government deserve congratulations on one part of the post office closure programme: the decision about post offices in some of the most deprived urban areas. I have a vested interest—you have a similar one, Mr. Deputy Speaker—in that every ward in my constituency is in the bottom 10 per cent. according to the measures of deprivation used by the Office of the Deputy Prime Minister. The Government negotiated with the Post Office an agreement that in those areas no post office should close if there was not another one in a half mile radius—as opposed to the mile radius used as the standard in closures nationwide. The problem is that although the Government have put up the money, the Post Office is not honouring its agreement.
After a Westminster Hall debate on 5 November—a bonfire of Post Office vanities, so to speak—David Mills, the chief executive of the Post Office, wrote to me about my remarks. He said:
"I refer to your comments alleging a closure programme by `deception' and 'subterfuge' and your accusation about 'deception and lying on the part of the Post Office's most senior management'."
No doubt he was very upset, but the accuracy of my comments has been borne out by the actions of the Post Office even since he wrote to me.
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I want to draw the Minister's attention to some post office closures in my constituency. The closure of the Rusholme sub-post office predates the present closure programme. For a long time, the Post Office insisted to me that it was actively seeking new premises to which to relocate the sub-post office. When Mr. Mills wrote to me in November, however, he already seemed to have given up the ghost. He said:
"It is regrettable that the Rusholme branch had to close in the first place but at least there is now a better prospect of Post Office services in the area being maintained in the longer term."
That was the first official notification that I had received that the Post Office had given up looking for new premises. The local community and I are entitled to object strongly to the closure programme that the Post Office has implemented by deception.
The situation got worse, however. One local subpostmaster—hon. Members will see in a moment why I do not give his name—told me about a meeting that he and other sub-postmasters had with Post Office middle management. One manager told them, "Of course, the closure of Rusholme is a matter of interest to only one or two Members of Parliament," by which he meant me and my right hon. Friend the Member for Manchester, Gorton (Mr. Kaufman). It is unacceptable for managers to say that the issue is trivial when many of my constituents have been extremely inconvenienced and are deeply aggrieved by the Post Office's programme of closure by subterfuge.
In his letter, the chief executive referred to the decision to close the Lower Oldham Road post office. The Post Office said that it was closable because it was within 0.4 miles of the next nearest post office, at Newton street. That post office is in a very busy part of the city centre, but the closed Lower Oldham Road branch lies in an area of enormous deprivation, and many elderly people depended on it. That aside, we have constantly disputed the distance given by the Post Office, and one local community activist, Richy Carrothers, walked from the Newton Street branch to the Lower Oldham Road post office with a measuring wheel. He discovered what we had always maintained—that the distance is more than half a mile. The Post Office is wrong, and I have to accuse it of cheating; that is what its actions amount to. It is not difficult to measure the distances involved, and if Richy Carrothers can do it, the Post Office can. I am still waiting for it to rescind its decision, because it is in breach of the spirit and the letter of the closure programme.
The result is that people are nervous about the future of post offices in the whole of my constituency. The Clarendon Road post office in Whalley Range is up for sale, but the rumour is that it will be summarily closed and that the Post Office will allow it to disappear from the system. That is the concern among local people, such as Chris Paul, who are campaigning to keep it open. The Post Office always says that it is not breaching the letter of its programme and that there are reasons for a closure, such as the lease running out. Of course, such things happen in business, but a Post Office that plans its affairs should understand how must time is left on a lease, and it should be able to say whether a lease needs renewing or whether alternative premises need to be found.
I appeal to my hon. Friend the Minister to talk seriously to the Post Office and to make it aware of my strong challenge to it. Specifically, it is carrying out a

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programme of closure by deception, and the problem is being compounded by the unacceptable remarks of its staff in private meetings.
Mr. David Lepper: My hon. Friend has remarked several times on the veracity of comments made by the Post Office. Does he agree that its public reputation has suffered because of its handling of the consultation process? I have in mind the Havelock Road, Bates Road and Ditchling Road post offices in my constituency. The date for objections was set nine days before the Postwatch consultation meeting in the constituency. Members of the public who attended the meeting rightly expected their views to be taken into account, but the Post Office had no intention of listening to those views at the consultation meeting.
Mr. Lloyd: My hon. Friend makes a powerful point on which I wanted to conclude. I tell the Minister that in the end the Government will come under criticism if the Post Office mishandles the closure programme. The examples given by my hon. Friend, and those from my constituency, have led to great cynicism among the public.
I make a plea to the Minister to get a grip on the Post Office. Can he persuade it that the kindest way to describe its handling of matters so far is "clumsy and inelegant"? I prefer the words I used earlier—what has happened amounts to cheating and lying, although that is less elegant on my part. The issue matters enormously, because the Government accept that the Post Office is a vital link, especially in the most deprived inner urban areas, where it is often the only facility around which the community can base itself. Numerous other local small businesses depend on that facility. We want to fight to save our post offices, and we look to the Minister to help us to make the Post Office honour its responsibilities.
2.25 pm
Andrew Selous: Like the hon. Member for Mid-Dorset and North Poole (Mrs. Brooke), who commenced this debate, I should like to mention the fact that rural post offices in my constituency have closed down. I am sure that all hon. Members are equally concerned about post office closures, whether they be in towns or villages. For pensioners to have to travel miles by bus from their village to a neighbouring village or town to get a pension is as unacceptable as it is for those in towns to have great difficulty in accessing post office services.
I am especially concerned about the Downside post office in south-east Dunstable. The Post Office recently announced that it intends to close it on 19 March, in spite of the fact that it is the first post office closure in the whole country to which Postwatch, the consumer watchdog that works on behalf of all post office users, has formally objected. That raises the question of what the purpose of Postwatch is if, after having considered the cases of some 300 post offices in which it acted responsibly and did not formally object to closure, it is overruled by the Post Office the first time that it objects. Hon. Members are entitled to ask what is the point of the consultation exercise.
Mr. Andrew Robathan: I met the chairman of Postwatch today. Postwatch is incensed about the
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closure that my hon. Friend mentions. Downside is the right post office to keep open in Dunstable, yet it is likely to be closed solely because that suits the Post Office, rather than because it suits the customers.
Andrew Selous: I am grateful for that intervention from my Front-Bench colleague. I look forward to his support and that of the Minister in our ongoing campaign to keep Downside post office open, or, failing that, to open a new one almost immediately next door to it.
I share the concerns expressed by the hon. Member for Manchester, Central (Mr. Lloyd) about the consultation. My view of that process is that it is, frankly, a sham. I was given the great honour of being asked to chair the public meeting at which the closure of the Downside post office was discussed. A wide range of community organisations attended the meeting: officers from the town council and the district council, local councillors from all the different parties, the head teacher from the local lower school and many people from the local community. The meeting lasted well over an hour and a half. However, in the formal response that I received from Mr. George Hooper of the eastern area, there was not one reference to any of the concerns that had been raised. What is the point of consultation if concerns are not addressed by the Post Office at a public meeting? That leads to considerable cynicism among our constituents about the role of Postwatch and the consultation.
Mr. Chope: Does my hon. Friend accept that Postwatch also believes that the fact that it deals only with the customer relations side of the Post Office adds to the public's cynicism? It is concerned that people think that this is all a public relations exercise and that those in the Post Office who are involved in taking the decisions have already made up their minds and nothing will change them.
Andrew Selous: I wholeheartedly agree. That is the impression that my constituents and I have. We will appreciate anything that the Minister can do to change things; I know that he is as concerned as the rest of us.
Mr. Mike Hancock: It is interesting that in the case of the closure in my constituency, the Post Office agreed to come to a public meeting only yesterday, a week after the closure was announced, and not before.
Andrew Selous: Exactly the same thing happened in my constituency. Some of us were cynical when the Post Office said that it was extending the consultation process, and our cynicism has been borne out. The concerns raised at the meeting have not been addressed in the letter that I received from the Post Office.
The Post Office claims that there is a neighbouring post office less than half a mile away. The furthest part of the Downside estate is well over a mile and a half from any other post office. A large number of its elderly residents do not have cars and cannot access public transport easily, if at all. There are also many young families, who will have great difficulty travelling a mile and a half with children in pushchairs, through an estate

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and up the busy A5 main trunk road to the next available post office. It is unacceptable for such people to have to do that.
I have already heard that many home helps, who collect pensions and other benefits for elderly residents in Downside, will be unwilling to go to the next nearest post office. Distance is not the only measure. What about topography? Dunstable is a hilly town; people will have to go up and down hills and endure the considerable traffic pollution along the main trunk road—with its danger for young children—to get to the nearest post office.
Despite the fact that Martins, a huge national business, with a branch some 20 yds from the threatened post office, has offered to run a post office from its premises, the Post Office has had what I can only call the arrogance to claim that there is not a business case for a post office in that location. Martins is already a successful, thriving business in that parade of shops. Surely the addition of post office services will bring extra revenue, so how can the Post Office claim that it is not a viable business? That is not a decision for it to take; the management of Martins and the local branch want to go ahead, but the Post Office is apparently unwilling to countenance the idea.
My second major concern is the reason that the Post Office picked that particular post office in Dunstable. No post office closure is ever popular; there are downsides to the closure of any public facility. However, there are several post offices close together in the centre of Dunstable. If one had to pick a branch to close—the Post Office lost £163 million last year, so I understand why it would want to make closures—it would not be that particular one.
I am also worried because the Post Office seems to have done no analysis. The only other post office on the south-west side of Dunstable is owned by a group of stores that has been bought by Tesco, which has publicly said that it does not intend to maintain the post offices in those shops. There is therefore a danger that the other post office on the south side of Dunstable, albeit not very convenient to get to from Downside, will also close. There is evidence that the Post Office has not considered the sustainability of neighbouring post offices.
Downside is situated in the Manshead ward, which is already in receipt of single regeneration budget funds. It is ridiculous that on the one hand the Government are pumping about £750,000 into that ward to sustain and revive the community, while on the other hand they are taking away a vital community facility. It looks amateurish; it is as if the left hand does not know what the right is doing. The good work that the SR B money will do will be undermined by the closure of this post office.
When Mr. Hooper of the Post Office came to the public meeting, he said that it would lose up to 41 per cent. of its income because of the transfer of benefits and pensions to automatic credit transfer. That is a huge loss of revenue for any business. The Government have to bear responsibility for taking that amount of income away from post offices. It is worrying. As a member of the Select Committee on Work and Pensions I visited the new Pension Service call centre in Burnley; the first
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in the country. Mention of the Post Office and its card account is made only right at the end of the script that will be used by all the telephone operators when our constituents ring in to claim their pensions. It is an afterthought; all the other options are pressed on people first. Only if they fail to pick any of the other options are they offered the Post Office option—they almost have to hold out for it.
The Department for Work and Pensions seems to be working against the Post Office and our constituents' ability to access local post office services, in another example of unjoined-up Government. I implore the Minister to have words with his counterparts in the DWP to do something about this issue.
I raised the issue of the Downside post office with the Minister's office two weeks ago and I am grateful that he is here to respond to the debate. I look forward to his response with interest.
Several hon. Members rose
The Deputy Speaker (Mr. O'Hara): Order. Hon. Members present will note how many wish to contribute to the debate. The wind-ups must start on the hour.
2.37 pm
Linda Gilroy: I had not intended to make a contribution to the debate, so I shall be brief. I congratulate the hon. Member for Mid-Dorset and North Poole (Mrs. Brooke) on securing a debate on such an important topic. Post offices are very much part of the fabric of our society and it is important that we enable the future survival of their network.
The truth is that people are not using post offices as much as they used to. Whereas a few years ago 26 per cent. accessed their benefits and pensions payments via bank accounts, that figure has now gone up to 42 per cent. We know how that has happened: reference has been made to the number of Government agencies, from the Veterans Agency to the Inland Revenue, that are seeking to modernise their services, and to the payment of working families tax credit and pensions.
We have to try to balance the consequences for post offices against our duty to safeguard taxpayers' money. It is important that those various agencies are able to get the benefits they deliver to people at a minimum cost to the taxpayer. However, the Government are investing £1 billion in rural and urban post offices over the next few years to try to help them to make the transition through change that is happening in any event as people change the way in which they do business, using cash machines and the internet as well as making direct debit transactions through their bank accounts. The investment of £1 billion is not insignificant, but post offices are concerned about the changes none the less. The problem is as much the uncertainty as anything else—trying to work out what their cash flow and business will be, particularly in the next two years, is fraught with uncertainty.
I thank my hon. Friend the Minister for meeting a delegation of four sub-postmasters from the Plymouth district recently, and one reason why I wanted to make a contribution to the debate was to put on record some of the issues that we were able to explore with him. We discussed the way in which the forms do not give a level

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playing field when people are considering whether to open a Post Office card or bank account, and the Minister has agreed to examine some aspects that were drawn to his attention. Post offices are keen to make the most of their new role in banking, but the sub-postmasters made the point that people do not see the Post Office as a bank. As the banking services are introduced, there is a huge job to do to change the public perception of what post offices can do with and for people.
We are talking about some 9,000 small businesses facing considerable uncertainty in the coming year or two. That is the number in urban areas, and I think that the number in rural areas is similar, if not greater. The post offices are small businesses run by enterprising people who are part of the fabric of the community, and one thing that came out of our discussions, to which I hope my hon. Friend the Minister will refer in his concluding remarks, was the positive way in which he greeted the point that the Royal Mail and Post Office will not give independent advice to those post offices as small businesses in their own right. That is for all the reasons referred to by hon. Members, not least because some of the best post offices are not necessarily the ones that the Post Office wants to survive.
Post offices are run by enterprising business people. I hope that my hon. Friend the Minister will comment on the work that he can do with the Small Business Service and the Under-Secretary of State for Trade and Industry, my hon. Friend the Member for Edinburgh, South (Nigel Griffiths). They should examine how the Small Business Service can help those post offices during the next two years by examining them as individual businesses, not as the Post Office views them.
What are the new opportunities for post office services? How can they make the most of them? What opportunities exist for them to diversify, especially locally? They should consider the work that they pick up everywhere, from local authorities to housing associations, and how to make the best of those opportunities. In cities such as Plymouth, after the urban reinvention programme and the emergence of the network through that, is there a case to set up some sort of co-operative that will help post offices to examine the opportunities for local business, as opposed to what they do with the Post Office nationally?
I conclude by thanking my hon. Friend the Minister for meeting the sub-postmasters, and I look forward to his response. I apologise in advance if I have to leave in the middle of his comments, because I have another delegation from Plymouth to meet. I do not get many from as far away as Plymouth, but they are up to see me about the local health service.
2.43 pm
John Barrett: Like other hon. Members who have spoken today, I have rural post offices in my constituency. There are three of them, but it is the urban post offices that we are here to talk about today. In my constituency, 18 post offices are classed as urban and, like the rural post offices, they are under threat because of the uncertainty surrounding the way in which benefits and pensions will be paid in future.
Urban post offices are threatened by the reinvention programme. Its title implies a positive development, but it is a closure programme. As Postwatch has said, the
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estimate of approximately 3,000 closures is too high—such a large number of closures is unnecessary. We are seeing a plan that suits the Post Office. Some closures may be necessary, but there must be a co-ordinated approach with a comprehensive list for each area.
Hon. Members talked about distances, but it has been pointed out that distances can be arbitrary. They can cover hills, or areas that have a good bus service and are between neighbouring post offices. Often, the best alternative would be if two post offices merged, but the Post Office is picking off individual post offices, which may not be in the best interests of the community. I want a comprehensive approach to a service that many people, especially pensioners, disabled people and the elderly, find absolutely vital.
Constituents such as Val Murray, who came to my office, will have real problems if their local post office closes. The next post office might be within an acceptable distance, but the distance of a mile can be a real problem if there is no bus service and someone does not have a car. A mile will not be a great problem in other parts of my constituency where the vast majority of householders have cars, but it will be a problem in other areas.
Individual post offices have not yet been named, but I am concerned about the consultation process. Examples given by hon. Members show that process to be seriously flawed. The one-month consultation does not give many community groups, community organisations and individuals the opportunity to play their part, nor does it lead them to believe that the Post Office is likely to listen.
A third of urban postmasters expressed an interest in closing their branch, but most people are interested in a compensation package until they find out what it is, and who can blame them? Most people asked whether they would be interested in discussing compensation for early retirement or redundancy would want to know what the package was.
People are constantly given the reason that there are too many post offices too close together, but one only has to look in any city street and see Starbucks, Costa Coffee and Café Nero to know that it is not just the distance between similar businesses that makes them survive or not be viable. Individual small businesses are often part of a larger business, and in most areas—certainly in most cities—we would certainly be closer to having bigger, brighter and better post offices if they were regarded as vibrant small businesses that could be encouraged.
Some 8,000 people in my constituency have signed a petition to say that they are worried about the future and are concerned about the plans that are yet to unfold. Many people do not know what the impact of ACT will be. They also wonder where the universal banking services are. There is confusion ahead, and if we are to find a way forward, we should accept that post offices are parts of other businesses.
The closure programme will have the same effect on post office services that the Beeching cuts had on the railways. We will look back and say that it was definitely a mistake. Post offices are one of the best retail networks in the country and, I believe, the largest retail network in the United Kingdom. We should build on that, make use of it, and work in conjunction with local authorities,

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banks and tourism agencies to develop those businesses. We should use information technology, whether in the form of cash dispensers or the web.
Some post offices may close, but they should not close just because they are too close to another post office. They should be allowed to close only if the service can still be delivered. Any idiot can close down the least profitable part of a company and then say that they are getting a better return on the capital invested, but if the urban reinvention programme means what it says, it is time to reinvent the Post Office. It should come up with something better than the current closure programme. Pensioners, the elderly, carers and those who use the service deserve that, and the Post Office will deserve a hard time in many communities if it does not listen to local concerns during a consultation period, which is often much too short.
2.49 pm
Mr. Robert Syms: First, I congratulate my neighbour, the hon. Member for Mid-Dorset and North Poole (Mrs. Brooke) on securing this important debate. Poole recently suffered a major blow with closures in Bourne Valley, Newtown, Hamworthy and Stert. The latest closure announced—it is out for consultation—is of the much loved Heatherlands post office just off Ashley road. I agree with what other hon. Members have said: the consultation is something of a sham. If we are at the start of a process that may end in the closure of many post offices, the consultation process should be far more robust and pay attention to the concerns of people on the ground.
I also agree with the comments about the morale of sub-postmasters. I think that most of them have concluded that there is not much of a future. There seems to be a lack of trust in the Post Office with regard to putting sub-postmasters' interests at the heart of things, so they are taking the package and running. One cannot criticise them for that, but it does mean a diminution in service for most of my constituents. I have many elderly constituents, and mobility is a very big issue. We receive all the standard letters, which talk about alternatives within 0.8 of a mile, 1 mile or 1.5 miles, but it is difficult for many of my constituents who are not mobile to get to local post offices. Post offices still provide important services for the community and are an important source of advice.
In Poole, many of my constituents are considering what is next and are very concerned about what the future will bring. The post office programme is happening at the same time as BT is closing many of its telephone boxes, so public services are tending to be substantially diminished. There is a general concern, and I hope that the Minister will be able to give us reassurances today.
I agree with the hon. Member for Mid-Dorset and North Poole that there are concerns, particularly at the Dorset County Association for the Blind, in respect of cash machines in post offices. The hon. Lady explained the concerns well. If the Minister does not have an explanation today, I hope that he will at least go away and consider the matter, because the community is concerned.
2.51 pm
Mr. Mike Hancock: I apologise to the Minister and my hon. Friend the Member for Mid-Dorset and North Poole (Mrs. Brooke) for not being present at the beginning of the debate. Like the hon. Member for Plymouth, Sutton (Linda Gilroy), I was at a meeting with a delegation from my constituency.
I am delighted to be able to take part in the debate, because a number of post offices are under threat in my constituency. Since 1 January, two have closed—that is, one has physically closed and another will close in a couple of weeks. I shall focus on the process of consultation. The Post Office informed me on 31 December that the Langstone Road post office was to close. Despite the fact that it was a holiday period, we were told that the deadline for consultation was 3 February. However, even though there were barely three weeks, more than 1,500 people signed a petition and hundreds of letters were written. All three parties on Portsmouth city council supported a campaign to keep the post office open, and there was widespread support for the campaign led mainly by the Portsmouth pensioners association.
Despite all that, and despite four attempts to get representatives of the Post Office to come to a meeting, all offers were declined until after it had announced its decision to close the post office. If we are to have consultation, why do not people come clean and say that it is a sham and that people should not waste their time campaigning? If the example of Langstone Road post office is anything to go by, no one else could come to any other conclusion. Those events were mirrored in the decision to close Castle Road post office in Portsmouth. The process was exactly the same, although I believe that even more people objected to that closure. Again, no effort was made to find a compromise or alternative properties in which to locate the post office.
My mind goes back to the succession of debates that we have had in the House over the past year and a half in which Ministers have given assurances that they would promote the sub-post office network and that efforts would be made to give people a proper choice in how their pensions and so on were paid. However, we have heard about the experience of the hon. Member for South-West Bedfordshire (Andrew Selous) at the call centre in Burnley, where he was told that the Post Office was the last thing to be mentioned when people sought advice.
I am convinced that the urban post office has a part to play in our communities. The constituency I represent is probably one of the smallest, although it may be one of the half dozen most densely populated in the country. The people suggesting that in a city such as Portsmouth a journey of half a mile across pretty major roads is not difficult for elderly people to contemplate have obviously never tried that journey on foot.
I have read the explanation for the various alternatives offered to people after the most recent closure. One suggestion is that there is an alternative post office 0.6 miles away along busy roads—but on level terrain. There is no public transport available. The other alternative is 1.5 miles away along busy roads—although crossings are available and the terrain is level. I do not know where the people who write that sort of

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letter come from, but they talk about elderly people or young mothers with their kids in a pushchair walking a mile and a half in a busy urban environment like the centre of Portsmouth. People who write such letters are completely out of touch with what the Post Office suggested it would have, which was an urban network of post offices that related to communities.
The two closures that have taken place in Portsmouth since the beginning of the year are the tip of the iceberg. Like other hon. Members I believe that the closure of urban post offices will accelerate. but in whose long-term interest is that? One group who will be sadly disadvantaged are the communities who want post offices to flourish. People will not use the post office unless the services it provides are services that they want. The Post Office does not do enough to attract customers into its urban sub-post office network. That is apparent to anyone who has seen how difficult it is for any sub-postmaster or sub-postmistress to get new attractions into their post office. There is resistance across the board to what they want to happen.
I am bitterly disappointed that we have had to have this debate again today. I believed the Government when they said that they would do all they could to sustain the urban post office network, but that has not been borne out by any of the evidence that they have provided. Again, I congratulate my hon. Friend the Member for Mid-Dorset and North Poole on securing the debate. I hope that the Minister will show slightly more commitment and that he will say that enough is enough—that the Government will do more to protect those post offices that are left and that we will not have any more sham consultations. He should not ignore 1,500 people, a unanimous city council decision or the groups that actively serve the community when they ask for positive consultation. Let no Post Office official ever again write to say that he will not come to a meeting until after he has made a decision to close a post office, but that he will come to explain to people where they can go in future. That is wholly unacceptable.
2.57 pm
Mr. Christopher Chope: The hon. Member for Portsmouth, South (Mr. Hancock) and all those present for this debate and our constituents feel collectively that we are the victims of a Government confidence trick. The PIU report before the last general election made 24 recommendations, and in accepting them the Prime Minister said he would work positively to ensure that all sub-post offices were able to become government general practitioners. That is what he said before the general election. I raised the matter with him at Prime Minister's Question Time before I knew of the threatened closure of the Stanpit branch post office in my constituency. I accused him of
"bribing sub-postmasters with £180 million of taxpayers' money to close down their services".
His response was:
"we are putting in a lot of extra investment so that those sub-post offices that can survive and that have a viable future are given one."—[Official Report, 6 November 2002; Vol. 392, c. 281.]
The Stanpit post office had a viable future, but Ministers and Government policies have taken it away. When the Prime Minister referred to investment he really meant redundancy money. At £180 million, that works out at an average pay-off of £60,000 for each sub-postmaster.
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This is a cruel confidence trick and the involvement of Postwatch merely increases the cynicism. What is the point in having a consumer protection body with no power to prevent the closures? It involves itself in consultation, but in the few cases in which it objects to the closure, such as the one referred to by my hon. Friend the Member for South-West Bedfordshire, and the case of the Stanpit post office—nothing happens. It is just an expensive process in which the poor consumer is the loser.
It is no wonder that the Prime Minister finds it difficult to sell his Iraq policy to the British people when on something as straightforward as the future of urban post offices, he is proved to be someone who uses words that are open to different interpretations. He has now lost the confidence of the people.
2.59 pm
Dr. Vincent Cable: I congratulate my hon. Friend the Member for Mid-Dorset and North Poole (Mrs. Brooke), who has performed a useful service in giving local colour and flavour to a big national problem. What we are witnessing is a collision in slow motion, and we are beginning to see the casualties. Last week, I visited a local postmaster who is being paid up under the programme. He is being compensated for his business, but he is in his early 50s and has no prospect of an alternative livelihood. He has given up his life and holidays to serving the local community, yet he is embittered and feels a lack of support. There are many like him.
I shall focus on several specific issues. The first is the nature of the mass closure movement. As my hon. Friend the Member for Edinburgh, West (John Barrett) said, the concept of urban reinvention is a bit of a joke. Those who have some memory of how the story evolved will remember that, four or five years ago, a series of parliamentary questions were tabled by the hon. Member for Great Grimsby (Mr. Mitchell), myself and others about what ACT might mean to individual parliamentary constituencies. They were days when the Government and the Post Office were more open, and we received a helpful answer. We were told that the implications of losing the £450 million income were a 40 per cent. cut in the network of post offices and a closure rate of 70 or 80 per cent. in densely populated urban areas with low-income customers, such as inner-city Manchester and south Portsmouth.
The Government have now packaged those effects in what they call an urban reinvention programme, but we are seeing the direct logical consequence of that loss of income. We are supposed to be protected by provisions that ensure that post offices will be rationalised but remain open, and that 95 per cent. of people will have access to a post office within half a mile. However, the contributions of the hon. Members for South-West Bedfordshire (Andrew Selous) and for Christchurch (Mr. Chope) and of my hon. Friend the Member for Portsmouth, South (Mr. Hancock) explained the problems. There are problems of logistics, as half a mile up a steep hill is not the same as half a mile on the flat, and half a mile across dual carriageway is not the same as half a mile across a park. People could be switched to a post office that has different opening hours, is congested or does not offer a full range of services. There

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will be many other problems, such as people with walking difficulties being directed to a post office without a car park.
There must be a proper mechanism to ensure that when such difficulties become apparent, there will be a legitimate system of appeal and discussion with the authorities. For reasons that have been given, particularly by the hon. Member for Christchurch, the Postwatch mechanism is not strong enough—indeed, the situation is worse than that, because a deliberate attempt is being made to conceal information. For the past few months, I have been trying to get the Post Office to give me a list of the post offices that will be closed. There is no reason why it should not give me such a list. If we had it, rather than simply deal with problems case-by-case as they arise, we could map a picture of how our areas will be affected and make rational judgments about which closures to support and oppose.
The Post Office has refused to give me the information, but it is available. It has been given to Postwatch, but it will not pass it on to us. I have asked the Post Office the reason for that, and it said that it is obliged by a code of conduct to give Postwatch the information, but it is not obliged to give it to us. At some inconvenience to itself, Postwatch has agreed to give me and other hon. Members the information, but why is the Post Office—in effect, a Government operation that is funded by £400 million of taxpayers' money—operating in such a high-handed, arrogant and unco-operative way? I have written a rude letter to Mr. David Mills about that, but the Minister should take the point to heart. The Government are paying for the programme, and the Post Office is a public service. They should insist on more transparency.
Mr. Robathan: I have similar problems. I have been trying to find out from the Post Office which post offices have closed in each of the past few years. It said that it does not know and that it does not hold such details centrally. That must be nonsense—every organisation must know what outlets it has.
Dr. Cable: The answer is that the Post Office does know, but providing the information would be too inconvenient. There is no more to it than that.
Eighteen million consumers face a major social change. The Minister, for whom I have a great deal of respect and who usually handles his brief extremely well, managed to insult most of our constituents by responding to a question on consumer impact by saying that this was merely getting rid of ration book technology and that people should get up to date. People have positive reasons for choosing to use the Post Office system, but at present there is an enormous disconnection between people's clearly expressed preferences and what is happening.
The National Federation of Sub-Postmasters recently commissioned a very professional survey through MORI to ascertain what consumers wanted. The results were clear: only 6 per cent. of pension and benefits recipients who have a current account said that they would prefer to get their benefits by ACT. It also found that more than 93 per cent. of people who have a bank
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account and 83 per cent of those who do not said that they would prefer to continue to receive their pensions and benefits in cash rather than by ACT. That is an 80 or 90 per cent. preference. However, that preference is not being responded to. I received a letter this morning from the Under-Secretary of State for Work and Pensions, the hon. Member for Croydon, North (Malcolm Wicks), giving me the latest figures on the take-up of the Post Office card account. Of 215, 000 replies, only 16, 940 requested a Post Office card account. That is only 5 per cent. What happened to the 80 or 90 per cent. who wanted to have this system but who have not requested it? That is odd.
Thanks to my hon. Friend the Member for Mid-Dorset and North Poole, we had part of the explanation. First, the process of getting the cards is extremely complex and difficult—requesting the personal invitation documents, presenting them, and going through the application process. We also know that people have been actively discouraged. Whatever tactful words Ministers may use at the centre, we know that junior officials further down the departmental food chain have been told that they must get the numbers down—that that is their job. Some of them have been quite abrasive in going about it. People have told me that they have been threatened—"Get into the bank or you will lose your benefits or suffer delays in your payments." Little sensitivity is shown at that level.
People have been discouraged in other ways. Department for Work and Pensions promotional literature makes it clear that there is a preference for a bank account. The Inland Revenue, when talking about tax credits, does not even give people the option of having a Post Office card account. Of course, it is clear that the Treasury is driving that blatant and cynical attempt to discourage people from using post offices.
Linda Gilroy: Does the hon. Gentleman accept that it is incumbent on us to ensure that our services are delivered at the lowest possible cost to the taxpayer?
Dr. Cable: Yes. In her contribution, the hon. Lady acknowledged that there has been discouragement in Plymouth. She is correct to say that a more efficient system of electronic transfer would create savings. That is why we cannot simply make appeals to keep the old system going. We must find new sources of income for the post office network.
Several hon. Members asked about what had happened to the Government's promise to introduce a general practitioner system. We know that "Your Guide" was trialled and that it was a success. However, the Government decided not to back it. However, we were left with the thought that the Government saw merit in providing a general practitioner information service through the post office network. Perhaps the Minister will tell us what happened, as such a service would help to make the network more viable. Can the Minister tell us what is being done to make more use of the post office network to encourage electronic commerce? That could generate additional income. There is enormous potential synergy between large numbers of people coming into their post offices to use technology to order goods and to use post offices for delivery. The Post Office offers a good logistics system, but little is being done by the Government to promote it.

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The hon. Lady is right to say that the future of the post office network must have a sound economic foundation. We are not asking for indefinite subsidies, but there are other ways to achieve that. However, since the PIU report was published, the Government's approach to alternative sources of income has been wholly passive.
Finally, I wonder about the readiness of the system. I understand that the electronic payments system that underpins the Post Office card account was to have been trialled three months ago, but that the trials are still taking place and are not due to finish until a mere five days before the new system comes into effect. That is contrary to all good practice with complex IT systems. We know that the IT systems used in Government Departments have been chaotic and unsuccessful. I want some assurance from the Government that the electronic underpinning of the Post Office card account system is properly organised and fully ready for D-day.
3.10 pm
Mr. Andrew Robathan: Mine is the 10th speech in this debate, and I suspect that none of the speeches have given the Minister much comfort. I congratulate the hon. Member for Mid-Dorset and North Poole (Mrs. Brooke) on initiating the debate. It is probable that almost everybody will have agreed with everything said in all nine speeches—and probably in the 10th—because we all come to the subject from the same position.
We are talking about a sustainable future for all post offices, whether Crown, rural or urban. We have heard how communities value post offices. However, they face a crisis. The world is changing and more people will use ACT, but the crisis is happening now. At least 40 per cent.—it was suggested a moment ago that it is 45 per cent.—of post office network revenue comes from the payment of benefit transactions. That will be scrapped over the next two years from April. The question is what will happen then.
The urban deprived post office fund will do a little to help. Hon. Members may recall that the Office of the Deputy Prime Minister expected the fund to become operational in the summer of 2002, but it was finally announced on 30 December. Another £150 million a year for the next three years will be available for rural post offices. That will have an impact, of course, but what then? The cynics will say that those three years will take us neatly past the next general election.
What is the sustainable future for the post office? The hon. Member for Mid-Dorset and North Poole spoke about the bias against the Post Office card account. Some may not know that there has been a spat between the DTI, which looks after the Post Office, and the DWP, which provides the money to pay the post office network—backed, of course, by the Treasury. The DTI lost the argument, because the purpose of changing benefit payments is simply—and understandably; I do not knock it—to save public money. It will save between
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£400 and £430 million a year. If that money is taken from the post offices—ACT will cost the DWP next to nothing—what will the post office network do for income?
I reiterate briefly the journey made by the Post Office card account customer. It is about how people can be deterred from asking for a card account. The first stop is that the customer gets a letter asking him to supply some account details; no further action is required. However, those who do not supply account details have a further 18 further steps to take before being given a Post Office card account. The form is designed specifically to ensure that people can receive their payment anywhere so long as they choose ACT.
Documents from the DWP make no mention of a Post Office card account, nor do those from the Inland Revenue. They have no box to tick, and do not include a question asking whether people want a Post Office card account. Sub-postmasters have been forbidden to advertise them, and they are not allowed to market them. The Post Office card account is third on the list of options that will soon start appearing in post offices.
A parliamentary question was answered yesterday by the Department for Work and Pensions about housebound pensioners accessing Post Office card accounts. It said that some housebound pensioners might find that a bank account may be better to meet their personal needs. Yet again we are being pushed in that direction. I would say that they should be allowed to choose. A letter from the Veterans Agency, which is part of the Ministry of Defence, states:
"Additionally, we have had so many requests for this option"—
that is the Post Office card account—
"that it may take us time to respond to all the requests…please rest assured that this does not mean we have not actioned your request, it simply means that due to the high demand, it will take some time to take the required action of 23,000+ requests."
So, people do want Post Office card accounts. I say to the Minister that he should let them choose.
Child benefit was one of the first benefits to be transferred to universal banking. Will the Minister tell us what concerns have been expressed to him about the money that is intended to benefit children going into joint bank accounts? He and I are of an age, and he might recall the debate some 30 years ago, when there was a concern that feckless and possibly drunken husbands or partners might get their hands on the money and waste it. That is the main reason why it is always paid to the mother. Has the Minister any such concerns? Perhaps society is so much better now that there are no deprived or excluded mothers who might suffer.
I was glad to hear the four Liberals who have spoken so well, especially the Minister for Twickenham—I am sorry, the hon. Member for Twickenham (Dr. Cable); that was not a Freudian slip. I disagreed with very little that he said. I was glad to hear of his support for the Post Office. The Liberals are good at campaigning and we all know their campaign pack, which says:
"The last post? Start campaigning now and just keep going!"

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It is a cracker and received a massive response. The pack continues:
"'Our…post office is…vital,' say the residents of Bloggstown. …There has been a massive response to the Lib Dem campaign to save local Post Offices".—
although it has yet to start—
"'Both locally and nationwide the Liberal Democrats are getting a very positive response to our campaign,' said Joe Bloggs".
John Barrett: Will the hon. Gentleman comment on how that fits in with the Conservative campaign in Dumfries and Galloway, which is being run on almost the same lines?
Mr. Robathan: I am sure that that is an excellent campaign, but it does not contain junk like this:
"We have had an excellent response to our campaign, with hundreds of local residents signing the petition…Post Office campaign heads for Downing Street."
That is the stuff. And then, wonder of wonders, it is
"designed to be printed as a double sided A5 election day leaflet. It should be delivered to supporters (and those we are squeezing)".
I should like to tell the hon. Gentlemen and Ladies of the Liberal Democrats that that was designed for last May's local elections when we won a seat from them in Gilmorton, notwithstanding all that junk.
Nevertheless, Liberal Democrats have made many good points. The issue is the future of the Post Office. The PIU report of some 32 months ago was welcomed by the Prime Minister with the words,
"I welcome this report which the Government fully accepts."—[Official Report, 15 October 2002; Vol. 390, c. 240.]
The problem is that it has not been enforced. There is no e-commerce, there are no one-stop shops, there is no internet learning and access. Loyalty to the post offices around the country, of which we have heard today, is remarkable. They are valued by people in all communities, even though they might not always go into them. I went to Lutterworth post office last week during constituency week and the sub-postmaster told me now concerned he was about his future. That is a big post office in a big town. I heard, also, that people who had applied for Post Office card accounts, although they had given no telephone number, were being telephoned by the Department for Work and Pensions to ask them whether they really wanted them.
What is the future? Everybody wants to know. The Government should come clean. What are the long-term plans? After the next election, and after £450 million has been spent, what then? Will the Minister tell us about the discussions between the National Federation of Sub-Postmasters and the Post Office that are going on now? I understand that they are completely bogged down because there can be no agreement yet about how much money can be awarded for each benefit transaction, or financial transaction, for a card account. He will say that it is not his responsibility, but I fear that it is. We know that the problems of the post office network are huge. However, it is a great asset, with over 17,000 outlets, reducing under the urban network reinvention Programme to 14,000 or 15,000. It offers a great opportunity for a dynamic retailer and we all wish to see
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the post office network continue. Sub-postmasters, the public, towns, villages, pensioners, mothers and everyone else who ever uses a post office want to know what the long-term policy is. What is the sustainable future? We are talking about a publicly-owned asset, funded by public money. We want to know whether the post offices in question will still be here in 10, 20 or 30 years.
3.19 pm
The Minister for E-Commerce and Competitiveness (Mr. Stephen Timms): I too start by congratulating the hon. Member for Mid-Dorset and North Poole (Mrs. Brooke) on securing the debate. It has been an excellent, useful discussion and, as she said, very timely. The issues raised are relevant to almost every Member of the House. There are very few who will not be affected to some degree by the unfolding of the programme.
The hon. Lady was helpful in providing an example of how the process is supposed to work. She agreed that the Hillbourne post office in her constituency should close, and she described the process, which worked well. I think that her one disappointment was that she did not see evidence of the improvement in the remaining post offices that should be an important part of the process. Applications for funding under the investment grant scheme are now being made, and we shall begin to see the benefit of those investments. Whether any are progressing yet in her area I do not know, but the opportunity exists. As a result, improvements will be made leading to the bigger, brighter, better post offices that everyone agrees are the right way forward for the network.
I do not accept the charges of deception made by my hon. Friend the Member for Manchester, Central (Mr. Lloyd). I am sorry that he used that term. He might be right about the inelegance, another of the terms that he used, and I shall certainly look into the points that he—and, indeed, my hon. Friend the Member for Brighton, Pavilion (Mr. Lepper) and the hon. Member for Portsmouth, South (Mr. Hancock)—raised about the process. The examples that those hon. Members gave do not sound to me like instances of the process working as it should. Nevertheless, I am grateful for the example provided by the hon. Member for Mid-Dorset and North Poole of the process working properly. Both the Government and the Post Office intend that her experience, rather than the one recounted by some hon. Members who have spoken, should be the common one.
Central to our policy is the need to maintain a viable nationwide network of post offices, accessible in every part of the country. The process of rationalisation and modernisation in the urban network will involve some hard choices and some disappointments, but the process is essential, if we are to achieve our objective and strengthen the viability of the urban network in the changed business conditions in which it operates.
I welcome the remarks of my hon. Friend the Member for Plymouth, Sutton (Linda Gilroy). We had a useful discussion with the sub-postmasters from her constituency who came to see me. My hon. Friend made several helpful suggestions, including the one about the Small Business Service, which she has, I know, raised with the Under-Secretary of State for Trade and Industry, my hon. Friend the Member for Edinburgh, South (Nigel Griffiths), who has responsibility for small businesses. That approach may well be very useful.

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I am grateful to the hon. Member for Twickenham (Dr. Cable) for his kind remarks about the way in which I discharge my duties. I should like to reciprocate with a compliment to him, but I do not apologise for what I said about moving beyond ration book technology. The successful network of post offices that we all want will have to be based on good technology and modern services provided in ways that meet today's needs, not on simply continuing to use systems that were invented in the second world war, when ration books were in use.
I do not agree with the hon. Member for Mid-Dorset and North Poole that we should delay change. It is essential to proceed. I expect the card account to be available in April as has always been planned. We shall over a two-year period transfer benefit recipients on to the new arrangements in a carefully planned way. That will certainly be a case of very good practice in implementing an IT system, drawing on the lessons learned from the past. My hon. Friend the Member for Plymouth, Sutton gave some figures showing that if the Post Office tried to continue by simply carrying on doing things as it has always done them, especially in its benefit business, but in other respects as well, it would dwindle and its turnover would decline. Instead, it needs to use new technology. We have invested £500 million in technology for the Post Office to ensure that it has a viable and attractive future by offering services, especially banking-based services, which the new technology will allow.
The hon. Member for South-West Bedfordshire (Andrew Selous) spoke about the case of the Downside post office in his constituency. He raised some persuasive points in his contribution, and he has, as he said, already raised the matter with me. I am not in a position to comment on the circumstances in his constituency, but I tell him that it is essential that the observations of Postwatch are weighed very seriously indeed in the process. That is not only my view, but that of Post Office management as well. The hon. Gentleman made an interesting point about the possibility of the post office moving into the newsagents next door. I shall pursue the points that he made.
The hon. Member for Christchurch (Mr. Chope) was rather less thoughtful and constructive in his contribution. Unlike him, we take the view that when sub-postmasters choose to leave the network because they can see that their business is dwindling, it is right that they receive a payment in compensation. The hon. Gentleman suggested that the payment in question was rather large, and he talked about it as a bribe. However, that payment is what the postmaster would have expected to get if he sold his business two or three years ago. That is a fair payment for people who are leaving the Post Office, and who, as the hon. Member for Twickenham said, have served their communities for a long time. However, in addition to the funding that we have provided for that, we have also made available up
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to £30 million for investment in improving the post offices that remain. Applications to that fund have now started to come in.
Mr. Chope: Does the Minister accept that that must be matched funding? In the case of Stanpit post office, the Purewell alternative was told that its facilities were adequate already, so it would not qualify for any additional funding. Furthermore, if the objective is to encourage people to visit post offices, why are the Government discouraging people from using the Post Office card account?
Mr. Timms: The hon. Gentleman is wrong on the second point, but on the first point, there does need to be matched funding from the postmaster. That is absolutely right. The real boost to the post offices that are left is that they will gain additional customers from the post offices that are closing. Given the prospect of more business and the offer of a grant, it is reasonable that postmasters should be asked to make a contribution towards the cost of that expansion. I expect that offer to be widely taken up.
On the hon. Gentleman's second point, we have been clear right from the start of the process that everybody who wishes to continue to receive their benefits in cash at the local post office every week will be able to do so, either through an ordinary current account or through one of the new basic bank accounts that are becoming available, which can be fully accessed at any local post office, or through the Post Office card account. People can choose the option that suits them best.
A number of hon. Members talked about the PIU report, which started the debate and which the Government entirely accepted. It is important to recognise why the urban post office needs restructuring and why the income of the Post Office network has declined. The reasons date back over a long period. Past under-investment is certainly one factor, but greater mobility and changes in shopping and financial habits have also sharply reduced customer numbers.
The hon. Member for Edinburgh, West (John Barrett) said that the Post Office had the biggest retail network in the country. Actually, the Post Office has the biggest retail network in Europe. The network is very large indeed and is highly trusted, which is one of the Post Office's great assets and a reason why I am very optimistic about its future commercial prospects. Other networks, such as those of the retail banks, have also been scaled back, and post office networks in other countries have been through similar changes. I understand that in Germany, consistent profitability of the post office network has been achieved by reducing the number of post office branches from 30,000 to 13,000. That reduction goes a great deal further than is proposed in the UK. Other countries have also embarked on a similar process—
Mr. Deputy Speaker: Order. Time is up.

Carers
3.30 pm
Mr. John Bercow: I welcome the opportunity to highlight the issue of alleged fairer charging for the receipt of home care services. The starting point for this debate, to which I welcome the Under-Secretary of State for Health, the hon. Member for Tottenham (Mr. Lammy), is the issue in November 2001 by the Department of Health of guidance to local authorities entitled "Fairer Charging Policies for Home Care and other non-residential Social Services". In practice, that has effectively entailed the extension of means-testing for the provision of and payment for such services, despite the pledge made by the right hon. Member for Dunfermline, East (Mr. Brown) when shadow Chancellor in 1995 to ensure that means-testing for elderly people would be brought to an end under a Labour Government.
Let us be fair and clear. There is what might be considered a positive side to such a policy: the very poorest and most vulnerable people in our community pay nothing for the receipt of services on which they depend. The negative side of the policy, which it is my business to highlight, is not merely that rich people end up having to pay substantially more for their home care services, but that a great many people who can in no sense be considered rich will face exponential rises in their costs. Even when they are not paying the maximum, which they do if they have savings over £19,000, they inevitably have to pay an enormous amount more. If they have substantial savings under £19,000, they still face big increases.
What is the effect of the policy in Buckinghamshire? Previously, the maximum charge was £38.50 per week. Bucks county council social services department estimates that 52 per cent. of adult social care clients now pay nothing towards their care because any charge would take their net income below the trigger for charges of £122.69 per week. Many who paid the old county council maximum of £38.50 now face astronomical rises of three, four, five, six or even seven times the level that they previously paid. The maximum in Buckinghamshire is £280 a week. It can readily be seen that people who previously paid under £40 per week now face a massive increase in bills.
Consequently, it is scarcely a surprise that I have been besieged with scores of letters from constituents from Lillingstone Lovell, Luggershall, Buckingham, Aston Clinton, Chearsley, Haddenham, Fairford Leys, Winslow, Ford, Lower Hartwell, Quainton, Long Crendon, Waddesdon, Stewkley, Drayton Parslow, Wing, Cublington and other areas besides. All are aggrieved about their increased costs, but I will highlight three cases.
First, a 92-year-old lady living in Buckingham who previously paid £38.50 a week is now confronted with a bill for £81 a week. For the benefit of the Chamber, I shall quote her:
"Needless to say, I have never received a high wage, but despite this I have endeavoured to be careful with my money and saved as much as I have been able. I now find that I am being penalised for my thrift, as I now have to pay the maximum charge for my home care services, whilst many, who have not taken care of their money, have their care provided free of charge. That seems to be anything but fair and would be totally unnecessary if only the Government would increase the county's grant."
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Secondly, a constituent in Stewkley informs me that her husband, having previously enjoyed relatively good circumstances, had a stroke 16 months ago. She says that it has affected his right hand side
"and he is confined to a wheelchair. He now has a cancerous ear which has to be dressed every two days as grafts were not successful. He can only stand with support and cannot get to the lavatory unaided. He sleeps with a urine bottle between his legs at night which he manages to change with his left hand when full, hopefully not spilling the contents. Everything now depends on me. I am older than he is (80 on January 3), have an extremely painful hip which I am waiting to have replaced any time now and I am not in very good general health. I cannot sleep due to the pain."
Previously, she and her husband paid £88 every four weeks for magnificent service from carers, whom we all admire. The cost is now to rise to £840 every four weeks which, not surprisingly, is beyond her means.
Thirdly, I highlight the case of Sally Davis, MBE, from Quainton, which has been publicised in my local media and has become something of a cause celebre in the community. She suffers from multiple sclerosis and, as she has savings of more than £19,000, is eligible for the highest charge of all. Previously, she paid £38.50 a week. Initially, Buckinghamshire county council thought that she would have to pay £176 per week. Now it has been assessed that she is likely to face a bill of £264 per week for her home care services. She is wheelchair-bound. In order to enjoy the independence and dignity in her home that she is entitled to expect, she needs those services.
I appeal to the Under-Secretary to recognise the nature of the existence of people such as Sally Davis who suffer from serious disabilities. Everything costs. There is a cost for gardening, a cost for shopping, a cost for cleaning, a cost for the maintenance of a car, and a cost for a driver to take her in that car to the places where she needs to go. She has been consistently aided and supported by a neighbour, David Leeming, who on the strength of his experience has founded the Really Caring Group.
I stress that Mr. Leeming has legitimate concerns about, and criticisms of, Buckinghamshire county council and the way in which it has applied the policy. I am open-minded about those criticisms. It is vital not just that there should be an appeal system but that the county council should ensure maximum awareness of the opportunities that that system offers. In addition, there is a powerful argument for a very thorough—perhaps more thorough and exacting than hitherto—assessment of disability-related expenditures that such clients necessarily incur and which have to be factored into the equation when determining the costs that they should pay. Even taking account of those criticisms of the county council, we must recognise the fact that for it to cut the maximum charge from its present level of £280 per week to £100 per week would cost it £700,000 a year.
I want to put the essence of the problem to the Under-Secretary as fairly and concretely as I can. In order to maintain what is customarily described and readily understood as a standstill budget, in order to cover inflation, the Government's national insurance increases, rises in demand for services and some Government-imposed additional responsibilities, Buckinghamshire county council would have to impose a council tax rise of 4.1 per cent. In order to pursue the

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anti-waste policy of spend to save, of which the Government approve, the county has to incur further expenditure amounting to an additional 0.3 per cent. rise in council tax. Resource equalisation—shifting money from the shire counties to the Government's friends in the north—involves a massive increase of 7.5 per cent. in Buckinghamshire's council tax. As a result of largely inspector-driven improvements in social services—Buckinghamshire county council already spends significantly above its standard spending assessment—the council is required to increase council tax on a phased basis by 1.5 per cent. per year for some time. Furthermore, a 1.4 per cent. rise in council tax is required for the increase in expenditure on education from the council's chosen figure of £201 million to Ministers' preferred figure of £206 million. Buckinghamshire is spending 27 per cent. above its SSA, but has the second lowest allocation in respect of social services of any authority in the country. The reality of £126 per head contrasts with the shire county average of £149 per head—£23 below that average—and the national average figure of £180 per head.
The Government—both the Minister for Local Government and the Regions and the Minister of State, Department of Health, the hon. Member for Redditch (Jacqui Smith) take this view—have argued that Buckinghamshire should have implemented the policy in two stages. The council's view is that that would imperil its finances, which are already under pressure as a result of its discriminatory and unfair treatment by the Government.
The royal commission on long-term care, which reported under the auspices of Sir Stewart Sutherland in 1999, recommended the provision of free personal care. I do not necessarily cavil at such a policy, which would certainly be widely popular with our constituents and would avoid means testing and the inevitable injustices that flow from it, but Buckinghamshire estimates that it would cost £4.5 million a year. The difficulty is that the Government want to pursue a policy whereby payment s based on needs, but people cannot afford these exorbitant and astronomical rises.
The Aylesbury Vale carers association drew attention to the real danger that people, fearful of being unable to cope, will opt for a short cut and, because they are worried sick about being plunged into debt—when an anti-debt culture defines their very being—will decide instead to reduce the care. I should like to refer, in all sincerity, to the moving and important letter that I received from Isobel Houlston, a carer support worker at the association, who highlights that very anxiety:
"Some people receiving domiciliary care services are so concerned"—
she is referring to the alleged fairer charging policy—
"that they are planning to reduce their care packages. One anxious carer says that her father may cut his homecare by half, but as he is totally dependent upon this care she will feel obliged to step in and fill the gap. As a result she will risk losing her job. It seems that the Social Services are unable to prevent people from reducing their care packages, even if this places them at risk of neglect or harm, or places unmanageable pressures on already overstretched caring relatives and friends."
I do not doubt for a moment the good intentions behind the Government's policy. I have even gone so far as to concede—the world is not made up of all right on one side and all wrong on the other—a beneficial side to
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an aspect of the Government's policy. Those who pay nothing will gain: in many cases they pay nothing on account of their low incomes, which are nothing to do with fecklessness or improvidence. Such people are in low paid work and cannot afford the high costs, so they deserve to receive care for nothing—and I say that to the Under-Secretary without qualification or hesitation. However, I appeal to him to see the other side of the argument. People may suddenly face massive increases in their costs as a result of the local application of a nationally driven policy.
The Under-Secretary may say simply—although I hope that he does not—"Well, it's up to the county to do it differently. It should phase the policy, make concessions, show compassion, and recognise the need to support people better." He should recognise that it is difficult for a council to do that if it does not receive adequate monetary support from the Government.
Let there be a partnership between the Government who are seeking, perfectly legitimately, to implement their policy at national level, and the councils that are expected to give effect to that policy at local level. If councils are to do so in a way that is fair and effective, they need the resources and the wherewithal. I appeal to the Under-Secretary for those resources, and I await his reply with interest.
3.45 pm
The Parliamentary Under-Secretary of State for Health (Mr. David Lammy): I congratulate the hon. Member for Buckingham (Mr. Bercow) on securing a debate on an issue that is of great concern to his constituents, and that has aroused much interest in Buckinghamshire. I also congratulate him on the manner in which he opened the debate.
I will explain some of the reasons why we needed to introduce the guidance on charging for home care. When we came to power, there were considerable variations in charging policies between councils. The Audit Commission's report, "Charging with Care", published in May 2000, exposed the full extent of those variations. Many issues needed to be addressed.
Councils' policies were inconsistent across the board. That meant, for example, that a person in Birmingham might have to pay nothing for their home care, whereas someone in the same circumstances in a neighbouring council—say, Wolverhampton—might have to pay the full charge. Councils' policies were not transparent: users and carers often did not have an understanding of how charges were calculated. In some places, the systems and procedures that councils adopted were obscure. The policies had the effect, in many cases, of reducing income to unacceptably low levels.
The hon. Gentleman concentrated on the concerns of those with limited savings. It should however be emphasised that for many people in the previous system such unacceptably low levels of income were par for the course. Councils could charge people on low incomes or benefits, with the result that those people could be living on an income that was below basic income support levels.
The policies could also be a disincentive to work. If a council decided to take a user's earnings fully into account, there was little incentive for that person to seek

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or remain in work. Moreover, disability benefits could be taken in charges, without taking into account any disability-related expenditure.
Against that backdrop, and in the light of those problems, it was right for the Government to act. In November 2001, we issued guidance to councils entitled "Fairer Charging Policies for Home Care and other non-residential Social Services". It is worth mentioning that councils, users and others had been asking for guidance for some time. The context was that the councils asked and the Government responded, and it is right that that should be put on the record.
The new guidance will have a number of benefits. A user's net income will not be reduced below basic levels of income support, plus a 25 per cent. buffer. I am not sure that the hon. Gentleman mentioned that. Users will not be charged a flat rate without taking account of their resources. Councils must take into account ability to pay and disregard earnings, thus removing a barrier to work for disabled people. The overall approach of the guidance is that local councils will retain real responsibilities and some discretion in charging policies. For example, it will still be open to councils not to charge, and some across the country will decide not to do so. It is right that I place that on the record too.
If councils charge, they must decide what proportion of costs to recover through charges. The guidance sets out essential requirements to ensure fairness in assessing a person's ability to pay a charge and to ensure consistency with the Government's overall social care objectives and policy on social exclusion.
Mr. Bercow: The Minister is right to highlight the 25 per cent. point, which I do not dispute. Does he however accept that it is intolerable that Mrs. Sally Davis, to whom I referred a few moments ago, should face a bill that is both £10,000 more than the previous bill and £10,000 more than her income?
Mr. Lammy: The hon. Gentleman may not like my saying this, but a key determinant of what Mrs. Sally Davis faces are the conclusions reached by the local authority. In Buckinghamshire in the past, a flat rate was charged regardless of income—whether one was very poor, moderately well-off or very well-off. The authority then implemented the current system over a short period, which I shall come to. Mrs. Sally Davis finds herself where she is largely because of the way in which the system has been implemented.
I turn to the funding that the Government have made available to Buckinghamshire, which was a key part of the hon. Gentleman's remarks. Because councils retain substantial responsibilities, it is vital that they give proper priority to the key processes, including consultation, communication with users and reviews. The guidance includes advice on those issues and obliges councils to undertake effective consultation.
The hon. Gentleman referred to savings. The guidance states that councils may take account of a user's savings, but are not obliged to do so. Savings may be taken into account to calculate tariff income on the same basis as set out in charges for residential accommodation guidance. Currently, tariff income is
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assessed if the user has savings of between £11,750 and £19,000. Users with more than £19,000 may be asked to pay the full charge for the services. That is more generous than some previous policies, when a quarter of councils had saving limits as low as £3,000.
Providing incentives to work is an important issue. I want to make it clear that our policy is to encourage and enable people, including disabled people who wish to work, to do so. Charging policies should avoid creating disincentives to work. That remains our objective. Our intention in the draft guidance was to propose that councils treat earnings more generously than other income in order to ensure incentives for disabled people to work. The argument advanced during consultation for more generous treatment of earnings was convincing.
The guidance on disability benefits requires that they may be taken into account as income only if councils also assess a user's disability-related expenditure. That means a more sensitive test of the ability to pay a charge where a council wants to take benefits such as the disability living allowance and attendance allowance into account. That would ensure that charges do not reduce a user's net income to below basic levels of income support, plus a 25 per cent. buffer. That approach will allow disability-related expenditure at levels higher than the benefit concerned to be taken into account. The outcome would be that many users with high care needs would not pay a charge, or would pay a lower charge. Many users commenting on the draft guidance regard the proposals as a positive advance, although I acknowledge that some want us to go further.
I must say to the hon. Gentleman that it is a balancing act, and one acknowledges that some people may be dependent on the policy objective of a particular local authority. Nevertheless, we were right to issue that guidance; indeed, local authorities asked us to do so. It was right that we included safeguards for people, especially those on low incomes. It was also right that we had that 25 per cent. buffer and that it is up to the local authority to decide whether those that can afford to pay do so. How that should take shape clearly pertains to the implementation of the guidance.
We said that the guidance should be implemented in two phases: from 1 October 2002, users receiving income-related benefits will have their net incomes protected from charging, as already described. Users whose disability benefit is taken into account and who receive more than 10 hours' home care weekly will have their disability-related expenditure individually assessed. The guidance specifically states that councils should not introduce new policies to charge against disability benefits without also assessing their disability-related expenditure.
Mr. Bercow: I understand what the Minister says about phasing, but whether the policy is phased in over two, five or 25 years does not matter to my constituent who has to pay £840 every four weeks rather than £88 every four weeks, or to Mrs. Sally Davis who faces a 400 per cent. increase. Those constituents cannot, and will not, afford to pay it.
Mr. Lammy: There are three issues. First, Buckinghamshire council was on a flat rate. Secondly,

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phasing is important. Had Buckinghamshire council followed the guidance, it is likely that the hon. Gentleman's constituent would not be in the situation that he describes until April 2003. Thirdly, I was about to explain the consultation process that needed to take place to ensure that proper benefits and assessments had been made that might also pertain to the eventual outcome of that constituent's costs.
From 1 April all other parts of the guidance will be implemented. That includes any users whose disability benefits are taken into account—including those who receive 10 hours or less home care weekly—having an assessment of their disability-related expenditure. Those parts of the guidance that provide for a minimum-required treatment of savings will also be implemented. All users who receive a charge assessment should also receive expert benefits advice.
Several practical difficulties have arisen from Buckinghamshire county council's decision not to implement the guidance in two planned phases. The approach is not mandatory, but there were very good reasons for proceeding in such a way. Any council that decides to implement the guidance more quickly than suggested needs to take care not to underestimate the amount of work that implementation will involve. The council would also need to take sufficient time to ensure that it anticipated and resolved any unforeseen problems of implementation. To that extent, I draw the hon. Gentleman's attention to what the guidance says at paragraph 20 or thereabouts. As seems to have happened in Buckinghamshire, a failure to consult properly could lead to inappropriate decisions and could be detrimental to users. The county council's decision—
Mr. Deputy Speaker: Order.

Financial Flows (NHS)
4 pm
Ms Julia Drown: The national health service plan sets out a vision of prompt, convenient and high-quality services that treat patients as partners, and the Government have worked hard to make significant progress towards that end. There has been major investment in the NHS as well as huge reform, and that is ongoing. However, I am sceptical about the proposed reform in "Reforming NHS Financial Flows", and I am pleased to have the opportunity to raise some of the potential problems.
My first concern is that Members of Parliament have not been properly informed of this major change in the way in which NHS institutions are financed—a change that could ultimately have a huge impact on patient services. MPs did not receive the discussion document, and this is the first parliamentary debate about it. That is surprising, given that the proposals have the potential to recreate the Tories' disastrous internal market. The proposals will have significant political ramifications and should be subject to adequate parliamentary scrutiny.
Part of the background to the document is the principle of supporting patient choice. No one wants to say no to choice, and I certainly support the Government's use of choice for patients who have been waiting a long time and who can be referred to other units. However, making it a Government priority to provide choice for all patients at all times may lead to distortions in the NHS that overall will not produce the best patient care. Creating a system in which people who have to wait less than a month for treatment are given a choice between two hospitals should not be a priority over getting down longer waits in the health service. For example, 102 patients are waiting between 10 and 12 months for orthopaedic operations at Swindon's hospital, and 1,070 are waiting up to 10 months. Focusing on reducing those waiting times is the priority for my constituents.
The truth is that, to create choice, surplus capacity is needed, and despite the huge increase in health service resources, few parts of the health service have surplus capacity. I would not support creating surplus capacity in some parts of the country if the funds could instead go to meet the real shortfall in resources elsewhere.
The document says that patients will benefit from the ability to choose between providers, knowing that funding will not be an obstacle. However, that cannot happen. To keep control over the budgets, commissioners will have to set limits—cost and volume contracts—so when the contract is complete or ahead of schedule, funding will be an obstacle to the ability of patients to exercise choice.
At the centre of the new proposals is the move towards a nationally agreed set of prices in an attempt to make commissioners focus on the quality and volume of service provided, thereby minimising the transaction costs and conflict involved in local price negotiations—getting hospitals to manage costs efficiently, and creating greater transparency and planning certainty in the system.

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However, the national tariff will not be a national tariff. The Government have said that each hospital will have the national tariff altered to reflect the local market cost factor, so they themselves are saying that there will be different prices in different areas. The Government's document also makes it clear that commissioners will have to cap the number of operations that they can buy, because they have to manage their budgets. If a hospital says to a commissioner, "We'll give you a cost and volume contract and offer 10 per cent. more procedures free above the cap," their price per patient will not be at the national tariff. The hospital might gain from that, but such deals would in effect bring back price competition to the NHS. Will the Government outlaw hospitals making such offers?
The system in Victoria, Australia that is cited allows bonuses when waiting list targets are hit—again moving prices away from the tariff. Will that be allowed here? Using a national tariff seems to ignore the way in which costs are built up in the NHS. There will always be cheap hospitals and expensive hospitals. Some cost differences can be categorised crudely and summed up by a market forces factor, but others cannot be categorised so simply. High land costs or building costs could mean that a procedure at one hospital is more expensive, while the same procedure at an asset-poor hospital will necessarily have lower costs. That can happen within primary care trust areas, but it is at PCT level that the market forces factor applies.
Is it right that the hospital on land of a higher value makes a loss on each operation that it does, even if it is at least as good as other NHS providers? If a hospital finds itself in that position, will it be allowed to sink into deficit, ultimately seeming unviable, even if it provides excellent services? How would the Government react if a PCT were following all the Government guidelines and achieving the targets, but because of the costs in local hospitals could do so only by massively overspending? Would commissioners have to send their patients further afield? Is it right that a hospital on cheap land necessarily makes a profit on each operation because of that? Will the system definitely lead to the best use of NHS moneys and the best patient care for our constituents? Where is the incentive for efficient hospitals to stay efficient if they get more than they need for their procedures?
The cost of any procedure depends on what else is happening in a particular trust. It is good practice in busy hospitals to have an operating theatre reserved for emergency work only, so that other operations do not have to be cancelled. However, if that theatre is used only 50 per cent. of the time, theatre costs in the hospital would be spread over fewer operations than in a hospital that uses its resources 100 per cent. of the time. The national tariff will be calculated from averages across the NHS, which would probably imply a funding level at nearer the 100 per cent. usage of theatres rather than the ideal emergency theatre capacity level. The hospital that runs a quality service will make a loss on that aspect of its service. Is it right that it is penalised for running that quality service?
Many complex details affect the cost of treatment at each individual hospital. Those are best understood by the individual managers at a local level, and
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negotiations on price for clinical services should remain in the hands of those best suited to judging value for money—those commissioning the services. However, as I shall explain later, it is wasteful to draft each year's contracts at such a level of detail.
I have shown how we will not have a national tariff, and how hospital and commissioners may start talking about prices, but even if prices were not altered by hospitals doing deals with commissioners, commissioners would not necessarily ignore the difference in prices between different hospitals in the way that the Government intend. Prices will be different because of the different market-led factors that are reflected in prices, so it would be tempting for commissioners, if they could, to send their patients to areas where the market costs happened to be lower.
Let us consider a procedure costing £2,000 on the national tariff. That procedure will cost £2,029 in Swindon, £2,060 in Oxford and £1,968 in Bath. That is £100 cheaper in Bath than in Oxford. That could be a hip operation, of which our PCT in Swindon buys 400 per year, mostly from Swindon. If they could be bought from Oxford, and the PCT had the choice, it could be worth it trying to move 100 operations from Oxford to Bath, freeing up money to treat an additional nine patients. That looks like an efficiency improvement and a patient gain of 9 per cent., but the tariff price may not reflect the reality of NHS resources. In the example, Bath may employ expensive agency nurses to see the extra patients while Oxford nurses are underemployed. That would not be a good use of NHS resources.
I described earlier how hospitals would be able to offer deals to give PCTs different prices from the Government's set tariff. Even if the Government outlaw such deals, how can they stop commissioners and hospitals having effectively the same conversations as happened on prices in the internal market, and still happen to an extent today? Commissioners will be interested in how the prices they pay compare with actual costs in hospitals, so the talk will be about profits and losses made in each hospital on each procedure. If I were a commissioner and knew my local hospital was getting more money than it needed for a particular operation, I would say that the excess funding should go towards the first stage of its next investment plan. There is danger of the same complex internal market discussions on price occurring but in a different format.
That points to my major concern: the proposed financial flows will reintroduce competition and an internal market into the NHS. The Tories' internal market was a disaster. It promised money following the patient but did not deliver it. It used clinicians, managers, accountants and administrators in wasteful exercises of questionable benefit to patients. The costs of hospitals were divided into the individual procedure level to become prices, which were then added back together again with volumes to create a contract sum to argue about with each commissioner. That destroyed valuable co-operation in the NHS. The administration was like digging a hole and filling it up again—not the sort of job creation needed in the NHS.
A recent research study from Bristol showed that the internal market was, if anything, detrimental to health. It suggested that between 2,000 and 4,000 more people died from acute heart attacks in hospitals subject to competition between 1991 and 1999 than would have

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been the case without competition. How are the Government going to avoid a repeat of the wasteful Tory internal market?
Commissioners will have to negotiate their contract and look at the data for each service, so management time will be wasted number-crunching, rather than about examining particular services where changes can deliver better health for communities. The time of clinicians, accountants and administrators will be diverted into bureaucracy and away from analysing resources in the NHS. As with the internal market, that is likely to cause huge frustration for NHS staff.
Given that procedure costs are different in different hospitals, why are the Government proposing to pay hospitals the same procedure price? Does the evidence suggest health benefits from the new proposal? To take the Swindon example, our acute trust is looking forward to the new regime because its costs are below the national average, so it will be well rewarded by the new system. Conversely, the PCT is likely to be in an extremely difficult position because when the trust's prices are increased in line with the national tariff, it will have to pay more for the same level of activity that it currently buys at the cheaper local rates. The PCT had a serious deficit to start off with; the last thing that it needs is to have to pay more money for the same level of activity with no promised increase in quality of services. More funds will go into acute services when the real pressure is to develop mental health and community services. How will Ministers respond to such difficulties arising from Swindon and elsewhere?
Even if hospitals are not in competition with each other over prices, will they not compete over activity? If a clinician knows that 10 more patients can be squeezed in at £2,000 each, and fixed costs have already been covered, that will make a big impact on the budget. Similarly, a department losing those 10 patients will have a major hole in its budget, perhaps leading to cuts in its services. Once again, I ask whether that is the best use of resources.
To reduce transaction costs and disputes, the Government should adapt the block allocations that were used in the 1980s, which are partially in use now. The current system is too bureaucratic and needs to be simplified. That would mean not individually pricing everything, but concentrating commissioner and provider discussions on where changes could be made to services in order to focus money where it is needed most, which would encourage co-operation between providers who would not be in competition at all except at annual budget rounds. Having worked in the NHS when the system was like that, and having seen the difference between it and the internal market, I can testify that the advantages of co-operation are real and tangible. The Government are missing an opportunity by failing to develop such a system now.
Part of a new approach should be to encourage—or perhaps even insist on—more benchmarking exercises that provide a genuine comparison between similar services in different hospitals, in respect of staffing levels, clinical outcomes and patient satisfaction. That would help to achieve best practice across the NHS.
I agree with some parts of the plans for 2003–04, which are basically a sophisticated waiting list initiative. The proposals dictate the price at which additional
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waiting list cases will be paid for and, similarly, the sums that will be taken away if the initiative is not met. Given that that is above the standard block contract agreed for the previous year's activity, it should not lead to any long-term instability or unfairness in hospitals. It could mean some commissioners paying more than they need to for waiting list initiatives, which I regret, but it has the advantage of simplicity for a small portion of NHS budgets and will not create massive competition.
However, the price will also be used as the sum to take away at the full cost level if the normal level of activity has not been achieved, which could create real difficulties for hospitals. If a shortfall in activity has been caused because a hospital, despite doing all it could, was unable to recruit, and covered by using more expensive agency nursing, could we justify taking fixed costs, which represent far more than it costs to treat patients, away from that hospital? I imagine that the Government would describe that as penalising poor performance. However, if all reasonable attempts had been made to treat patients, would it be justified to penalise a hospital that was already under great pressure? A true partnership, which the Government want to develop, would understand such circumstances and negotiate a way forward with that hospital. The policy could lead to serious instability in hospitals.
Finally, the system again seems questionable when the national tariff is to be used with private sector providers. Many private hospitals are already doing well, and should be able to perform operations at not much more than marginal cost. To pay the full cost would give additional and unnecessary profit to the private sector, at the expense of public sector providers that would be able to put the extra funds to better use.
I have outlined only some of the potential problems. The Government know of the experience of Victoria, Australia, where a system led to what is called DRG creep—the coding of diagnosis-related groups of procedures to more expensive bands. That is a further worry for Swindon's PCT, and additional administrative audits would be required to counter it. Is that the best use of NHS resources?
I hope that the Government will look again at their plans for 2004–05, to encourage more co-operation between hospitals and commissioners. Commissioners should be allowed to concentrate on the few areas that they can change in a year, rather than trying to consider every service all the time. Administrators, accountants and managers should not be used on number-crunching exercises or on trying to come up with clever deals; instead they should be considering whether the real resources of the NHS make the best use of funds in the interests of the health of the community.
The proposals set out in "Reforming NHS Financial Flows" need to be revisited and revised. I am not convinced that a national tariff would work; it fails to take account of the various complexities that I have laid out. It could work if it were used to fund only out-of-area flows of patients. However, used for all activities, the plans are bureaucratic and likely to introduce competition between hospitals.
The Government may point to countries that have developed similar systems, and say that the system led to a better use of hospitals, but our starting points are not the same. Fixed costs for a procedure would of course be

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a better replacement for the US system of specified feefor-service agreements. However, there is no evidence to show that that system has been tried or that it has improved English health services.
The proposals are too close to the failed Tory internal market to give the public confidence that they will work in the interests of patients. I hope to see a parliamentary and NHS-wide debate on the proposals, and a consideration of alternative systems of funding hospitals—systems that encourage co-operation, not competition.
4.17 pm
The Parliamentary Under-Secretary of State for Health (Mr. David Lammy): I congratulate my hon. Friend the Member for South Swindon (Ms Drown) on securing a debate that is important to all our constituents. My hon. Friend mentioned a great deal and it is unlikely that I will be able to respond in full. I therefore undertake to write to her to follow up points that I cannot answer now.
The way that money moves around health care systems has always been and still is an important area of policy, both in this country and elsewhere, which is why the debate is so important. In the NHS of tomorrow, patients will have greater choice. That is fundamental to the debate. There will be a greater plurality and diversity of services, and NHS organisations will have greater freedom. As my right hon. Friend the Secretary of State put it, we cannot run the NHS solely from Whitehall.
The NHS has received and will continue to receive a substantial growth in funding. The budget in 2002 set out an annual average increase of funding for the NHS in England of 7.4 per cent. in real terms over the five years 2003–04 to 2007–08. To get the best out of those extra NHS resources, we are establishing a system of payment by results. My hon. Friend knows that in April we increased taxes, in large part to fund the reform that we want in the NHS. Those tax increases must bear results.
I want to consider how things work now and why we need to change the way in which money moves around the NHS. The current system has no inbuilt direct financial incentives to improve access, deliver efficiency or reduce costs. In fact, areas that are not meeting targets are often given additional funding to help meet those targets. There are no financial mechanisms to support the movement of patients between providers. In fact, hospitals that are doing well are often prevented from using spare capacity by budget ceilings. We want to create a system that facilitates sustainable reductions in waiting times and helps to match capacity to demand. We need to be able to support patient choice by ensuring that funding can follow patients. We want to reward providers who provide services efficiently, and above all we want a new system that is both fair and transparent to all. I make it clear that financial flows in themselves will not achieve that, but all hon. Members know about a plethora of Government policies aimed especially at national standards that also go along that path.
Ms Drown: My hon. Friend says that there are no incentives and currently no way in which money can
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follow the movement of patients, but will he confirm that it is in the hands of commissioners to reward that performance, to place contracts with the more efficient hospitals and to give incentives to organisations to change health practice if that is what the commissioners want to achieve? There is nothing to stop them from doing that, and some very good commissioners do so.
Mr. Lammy: My hon. Friend makes a good point, but that has not been the case—it is not the everyday, every week or every month practice of the overwhelming majority of commissioners currently in the NHS.
My hon. Friend made some very valid statements about the previous regime and the purchaser-provider split. That split occurred not only in this country, but in other western democracies such as New Zealand and the United States of America. However, we now need to go one step further, embed that, and see that choice and access as a key part of the NHS, so that my hon. Friend's constituents, if they cannot get an operation in a particular trust, have the choice to go somewhere else, and so that financial flows assist that process.
Our commitments from this year are to introduce a regime under which all providers are contracted for a minimum volume of cases to achieve waiting time reductions for key waiting list procedures. Providers will lose money on a cost-per-case basis for failure to deliver the volume of services they are commissioned to provide, and they will earn extra resources on a cost-percase basis for additional patients that move to them. In the medium term, we will move to a system in which all activity that takes place in acute hospitals is commissioned against a standard tariff, using either health care resource groups or other appropriate measures.
Those changes will mean that instead of providers being paid according to block agreements, as sometimes happens now, they will all be paid for the activity that they actually deliver according to a national tariff. My hon. Friend expresses concern that the tariff is not truly national. I want to assure her that there is a national tariff, but that it rightly reflects the differences in purchasing power across the country. In time, the national tariff will apply to all providers of NHS treatment. Local commissioning will focus on volume and quality, not price. That is vital—not price. Through the market forces factor, it will take into account unavoidable cost differences across the country, including variations in the cost of land and wages.
Ms Drown: Is my hon. Friend saying that the Government will outlaw the sort of deals that I referred to, whereby a hospital could offer a local commissioner 10 per cent. more operations for free?
Mr. Lammy: My hon. Friend makes a specific point. However, I cannot stand here today and outlaw all the various scenarios that could arise. It is important that the policy beds down. This is a complex matter that has preoccupied the minds of great health economists throughout the world. It is likely that as the national tariff develops it will need adjustments and tweaking. Providers who operate more efficiently will be able to retain most or all of the surplus that they generate for deployment in their trusts for the benefit of patients and

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staff. However, we will support less efficient providers to help them to improve, and, where necessary, we will bring in new management through franchising.
We recognise that the transition to the new system may be challenging for some parts of the NHS. My hon. Friend and others expressed concerns at the implications in the changes for trusts with particularly high or low costs. To facilitate this, we will introduce the standard tariff in a very limited way from this year. In the first year, it will not apply to baseline levels of activity; thus it accounts for only 0.5 per cent. of hospital spending. This first stage will allow the service time to learn to use the new tools effectively and will incentivise additional activity in key areas without causing financial destabilisation. That is one reason that I do not want to get into the business of giving undertakings at this point. We will handle the transition path for trusts by introducing the national tariff carefully. We are developing proposals to ensure that primary care trusts and other health care trusts can manage the transition without causing significant financial instability.
In the three minutes available to me, I want to emphasise that this is not a return to the internal market. The new financial system sets out to avoid the mistakes of the old internal market, under which, as the Secretary of State pointed out, purchasers dictated through administrative contracts where patients could be treated and the NHS undertook prolonged negotiations over the price of each service provided by each hospital. Every purchaser had to keep and update a complex list
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of all the prices for every hospital with which they dealt. The internal market was unfair; it had a two-tier system of GP fundholders and others, and it lacked openness and co-operation. The new system of payment by results will be different. Patients will, in time, be able to choose the hospital in which they wish to be treated and the time of their referral.
That choice is important. I witnessed the exercise of that choice last week, in St. Anne's hospital in my constituency. Patients from all over north-east London and parts of Essex are exercising the choice to have their cataract operation done at St. Anne's if there is a waiting list at their local hospital, and ambulance transport to St. Anne's is available to them. Patient choice will be vital to future developments. PCTs and other commissioners will know precisely what the cost of treatment will be and that it will be the same treatment wherever the patient is treated. Prices will be set and regulated nationally. Hospitals will not be able to offer special deals or prices to attract work or to keep it; they will compete on quality, access, waiting times and standards.
Those changes are not happening in isolation—payment by result is just one tool available to PCTs—nor are they just about acute elective work and sucking activity into secondary care. We will continue to develop and to refine the system as we progress.
Question put and agreed to.
Adjourned accordingly at twenty-nine minutes past Four o'clock.