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Volume 281: debated on Wednesday 17 July 1996

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[MADAM SPEAKER in the Chair]

Co-Operative Movement

Motion made, and Question proposed, That this House do now adjourn— [Mr. Bates.]

9.34 am

I must start with a declaration of interest as I am a fully paid-up member of both the Labour party and the Co-operative party. I stand here as an official Labour and Co-operative party Member of Parliament. At the forthcoming election I shall stand as an official candidate of both parties. Indeed, it is my hope that the media will so designate me and my 25 colleagues who will also stand as Labour and Co-operative candidates.

It should not trouble Conservative Members that the Co-op is a loyal supporter of the Labour party. We are not troubled by the firm support given to the Conservative party by its retail friends and other friends in big business. It is not surprising that the people's business should support the people's party via its own political party. The difference is that the Co-op supports the Labour party via the Co-operative party quite openly, whereas one is never quite sure which businesses do or do not support the Tory party, not least because businesses operate under such a variety of trade names.

The Co-operative party was set up in 1917 to put co-operators into Parliament. It is the political party of the co-operative movement. Our first Member of Parliament was elected for Kettering in 1918. We currently have a parliamentary group of 15, with four in the Lords and six Members of the European Parliament. We also have more than 700 local councillors. Our first Member of Parliament took the Labour Whip, and from 1925 the Labour party and the Co-operative party have been linked by a formal national agreement.

I should mention at this point that following the new proposals on openness and transparency in the House, the Co-operative party has just written a new agreement with the Labour party to ensure that that transparency is there for all to see and to understand. It is only the fourth time since 1945 that that agreement has had to be renegotiated.

There are three key concepts of great importance to the co-operative movement. First, the Co-operative party is a political party representing the co-operative movement. Our candidates stand as joint representatives of the Labour and Co-operative parties. That link is also declared in our election literature so there is no pretence or camouflage.

I hope to demonstrate by example what co-operative principles mean in practice. To take a wider view, the co-operative movement in the United Kingdom is significant because of its economic impact and the diverse range of products and services provided by its members. Co-operatives are active in retailing, insurance, banking, agriculture, housing and in a variety of industrial and commercial activities as worker co-operatives and credit unions. Those unions are the fastest growing sector of our movement and they enable members to save together to provide loans at very low rates of interest.

The diversity of the co-operative movement is reflected in the range of services organised co-operatively and include taxi drivers, actors' agencies, general practitioners and even some symphony orchestras. I hope that Members who belong to the Wine Society, which was founded in 1874, will not be too surprised to learn that it is also a co-operative. Tower colliery in south Wales is one of the newest and most successful co-operatives, showing what can be achieved when workers come together for their mutual benefit.

Co-operatives make a major contribution to the economic life of this country. The ubiquitous Co-op, with nearly 5,000 outlets, is a force to be reckoned with on the high street and out of town. It has a combined turnover of about £7.5 billion and employs about 120,000 staff nationwide. Following the creation of Milk Marque, the co-operative that replaced the milk marketing boards, the turnover of the agricultural co-operative movement approaches that of the retail sector.

Other sectors are much smaller but provide the crucial element of choice to their members. Latest estimates suggest that about 10,000 co-operators are working for their own benefit in 2,000 worker co-operatives. I pay tribute to the industrial common ownership movement, which is to be congratulated on the work that it has done since the introduction of the Industrial Common Ownership Act 1976.

Tenants are exercising control of their living environment in more than 530 housing co-operatives. There are 500 credit unions, encouraging their members to save and providing low-cost finance to members, many of whom lack access to traditional forms of credit. For instance, in my constituency, there are now three credit unions, all in what might be termed areas where income is at a premium, where people have often been exploited with high-interest loans. Through the new system of credit unions they are gaining access to low-cost finance. An increasing number of employees of large organisations, such as British Airways, the local authorities and the police service, have joined credit unions or formed credit unions of their own.

Co-operatives are dynamic organisations, responding to their members' needs and gaps in the marketplace and in the competitive environment in which they operate. Imaginative projects are developing in every sector. In the past two years, The Creative Consumer Co-operative Ltd. raised more than £800,000 in a share issue to open a chain of shops entitled Out of this World. These embodied the value of ethical customers—those who want to shop for a better world. Its fourth shop, in Oxford, is about to open, following in the footsteps of Bristol, Newcastle and Nottingham. Four more are planned, responding to the demands of shoppers in towns and cities throughout the country.

In February this year, Lord Merlyn-Rees, with the support of the Co-operative bank, launched the Co-operative Housing Finance Society. It seeks to build on the advantages of fully mutual housing co-operatives, by creating a financing system that will achieve lower funding costs and greater availability of loans to housing co-operatives. Already, agreed facilities of about £24 million have been put in place, with commitments from the Nationwide, Woolwich and Alliance and Leicester building societies.

I mentioned the recent formation of general practitioner co-operatives to respond to the demands of their new contract. Co-operatives of nurses and care workers are also springing up, and a great deal of interest is being shown in co-operatives as a vehicle for delivering health care. That process culminated in a research study by the Department of Health into the relevance of community well-being centres to the objectives in "The Health of the Nation".

Recently, in response to the Government drive towards the total privatisation of residential care for the elderly, my colleague, my right hon. Friend the Member for Manchester, Wythenshawe (Mr. Morris), launched his co-operative care initiative to set in train the process of setting up not-for-profit day centres and residential homes, to offer a service that responds to the wishes of elderly people, many of whom are anxious that their care is being bartered on the open market.

The first such schemes are due to be announced later this year and will come on stream soon afterwards. In the black country, in Walsall, a carers' co-op, Walsall Carers' Co-operative, has already operated for about five years, employing about 150 workers who also own the business. They have done a splendid job in co-operation with Walsall social services, providing excellent services for many people in that borough.

Credit unions are expanding rapidly. I welcome the discussions between the two organisations representing credit unions nationwide, and hope that they will lead to more effective representation to national Government of their members in future.

Following years of growing disenchantment with agricultural co-operatives, the creation of Milk Marque shows a growing recognition by farmers that their interests in the marketplace can best be represented by the co-operative form of enterprise.

Overlaying all that activity has been the formation of a representative body for the co-operative movement—the United Kingdom Co-operative Council. Established four years ago as a successor organisation to the National Co-operative Development Agency, the UKCC has undertaken many useful studies. It has established a forum for discussion of relevant issues and created a voice for the co-operative movement in its dealings with Government and Government Departments. Perhaps the most beneficial effect of the formation of the UKCC has been the increasing recognition and understanding of the common concerns of each of the different sectors of the co-operative movement and the need for a unified approach to finding solutions.

I shall briefly consider several of these concerns. Much heat—but often, sadly, not much light—is generated when the Government attempt to establish what is commonly called a level playing field. Even a superficial comparison shows that that does not exist between co-operatives and their competitors in the company sector.

Whereas there have been successive Companies Acts in the past 17 years, the Government have not even taken the opportunity to include co-operatives in many of the provisions of those Acts. Administration orders, created in the reform of the insolvency laws, allow companies in financial difficulties the option of continuing trading in a form of receivership which allows the possibility of re-establishing the business as a going concern at some time. That option is not available to co-operatives, which must either merge or go bust when they could be offered an alternative that might lead to a better outcome.

Registration of a co-operative is significantly more expensive than registration of a company, and more bureaucratic and time-consuming. As a result, many co-operatives can and do register as companies under the Industrial Common Ownership Act 1976. In recent years, most new co-operatives have used the company format in preference to the more traditional Industrial and Provident Societies Acts, and this is likely to continue, even with the limited changes made in recent deregulation orders.

That failure adds considerably to the confusion that currently exists between co-operatives and companies. Not all organisations registered under the Companies Acts are companies, and not all organisations registered under the Industrial and Provident Societies Acts are co-operatives. Co-operatives should have a clear identity, which specifies the unique difference between them and their competitors in the company sector.

Many would comment that recent reforms in company legislation and in the legal framework and regulatory regime for building societies and friendly societies, requiring greater disclosure and accountability to members or shareholders, give co-operatives an added advantage. That is

Member investor confidence is as crucial to the success of a co-operative as shareholder confidence in the company sector. The retail co-operative sector has therefore introduced a code of best practice in corporate governance, which it hopes will achieve the highest standards of transparency and accountability. That followed a report of an eight-member working party which examined the unique features of co-operative organisations. Its key recommendations included the disclosure of contracts and remuneration of chief executives and directors; regular reviews of members' activity, policy and practices; and clear and detailed annual reports, providing balanced and understandable assessment of the society's financial situation, which can easily be understood by its members.

Members welcome the higher standards inherent in current company legislation as a reflection of their commitment to the co-operative movement's ethical values of openness, honesty and social responsibility.

Most seriously, co-operatives are disadvantaged by company law and taxation regimes. In a recent consultation exercise carried out in the co-operative sector, considerable concern was expressed about its future status, arising from the flood of conversions of major building societies. Among the reasons given by the Halifax, Abbey National and the Woolwich for their decision to demutualise were: the need for greater access to capital; diversification; risk; and, in some cases, size. Interestingly, any claims that conversion would achieve greater efficiency have been rather muted. Perhaps that has something to do with the conclusions of the recent Government review which showed that the sector not only ensures diversity and choice but is characterised by organisations that are financially strong, well capitalised and efficiently managed. That has been amply borne out by independent research comparing building societies with their competitors in the private sector.

The consultation document, including the Minister's last-minute additions to it, was published in March and contained proposals for a new building societies Bill. It has proved a disappointment. It certainly does not live up to the claims that it will give equal treatment to societies that remain mutual and those that convert. With the Government remaining deaf to the pleading of the sector for protection against speculative short-term investment, it is clear that if building societies' status is to be assured, that will depend on their own determination.

I remind Members that the original purpose of our building societies was to provide a haven for local investors—in bricks and mortar; to ensure that people who wanted to build and live in houses in their own communities had access to reasonably cheap finance; and to give local trades people in the construction industry an outlet for their work. The system worked remarkably well, and only in recent years has the deterioration in a local approach become apparent.

A recent Touche Ross report highlighted a number of key ingredients for success, among them the leadership and the membership of a building society. That is already recognised by a number of societies that remain committed to their mutual status—most notably, the Nationwide and the Bradford and Bingley, not to mention my local society, the Birmingham Midshires.

I welcome this return to the original objectives on which the movement was founded. Quite apart from the abject failure of the Government to recognise the co-operative sector as a valid and viable form of business, the lessons for the mutual movement, which includes the co-operative sector, must include a recognition of the dangers of losing touch with the membership and of power residing with a management over which members have little or no influence.

Co-operatives are democratic organisations, based on the principle of one member, one vote. As commercial organisations, co-operatives also have to work in a competitive environment; hence they need to raise capital to expand their businesses. These two pressures often conflict and push a co-operative in opposite directions, but both are critical to its success and must be considered as such.

I start from the premise that co-operatives should be financed in a way that allows them to achieve their primary objective of providing benefits to their members. That means that they must remain under members' control. In short, the guiding principle is that labour shall employ capital: not the other way round. But in a world dominated by the owners of capital, co-operators have often been limited by a rigid adherence to the principles of their movement, which call for a limited return on capital.

More recently, there has been a widespread recognition—reflected in the new co-operative principles agreed at the International Co-operative Alliance congress in Manchester last year—that co-operatives must secure adequate finance in a way that does not sacrifice the members' control of the enterprise. That clearly implies change, albeit limited.

Capital can be raised from only three sources: from members, from internal sources, or from outside the co-operative movement. Recognising the limitations on the first two sources, the debate in recent years has concentrated on opportunities to raise capital from outside, and the consequential impact on the organisation and its members. It should be admitted at the outset that a number of recent studies in different sectors have tried to show that there is no shortage of capital, and that the main problem for co-operatives is to make better and more efficient use of the capital already at their disposal. I do not want to enter that debate today, although I recognise that we must all strive towards the most efficient use of available resources. There is broad agreement, however, that if the co-operative form of enterprise is to become more widely accepted, access to new sources of capital must be made easier.

Consider as an example the creation of the permanent interest-bearing security as a mechanism for raising funds for the expansion of building societies. Experience has led to the creation of a specialised market for this type of security, in recognition of the special mutual features of building societies. The same would apply to co-operative societies, which would require a similar type of special security in recognition of their unique co-operative nature. The complex legal requirements and costs attached to raising finance—listing particulars and issuing prospectuses—militate against traditional share offers for the development of co-operatives.

An alternative would be to seek new ways of tapping funds from the retail savings market. Currently, co-operatives, mainly in the retail sector, raise capital both from members and by co-operative bond issues. Both ways encounter increasing difficulty competing in the sophisticated retail savings market. The advent of PEPs and TESSAs, offering tax incentives, is having a devastating effect on this traditional source of income from members' funds—yet when the matter was raised in the House the Minister objected to a co-operative TESSA on the grounds of the costs of compliance with the financial services and banking Acts. Retail co-operatives are already subject to heavy compliance costs associated with the co-operative deposit protection scheme. Indeed, escalating compliance costs have become a political hot potato, especially among smaller financial institutions such as friendly societies.

In any review of compliance costs, recognition of the special features of member organisations might offer opportunities for co-operatives to raise funds in the retail market.

Democracy lies at the heart of co-operative activity, but for that democracy to be meaningful members must be fully informed and in a position to exercise their responsibilities as owners of the business. Hence the importance of member education. In recent years there have been numerous examples across all sectors of the movement of innovative programmes to ensure that members and—especially—directors have the knowledge required to undertake their statutory duties. An interesting case in point has been the formation of the Institute of Co-operative Directors in the retail sector, requiring members to undertake a course of study leading to a diploma and to further opportunities to undertake higher studies. Although membership is by no means universal among directors in the sector, the institute has been judged a success and has made a major contribution to improving the skills of lay members undertaking the stewardship of large and complex retail organisations.

Ordinary members must be kept informed. That may mean members receiving a copy of the annual report—although I recognise that in the agriculture and retail sectors, both of which have large numbers of members, the costs may prove prohibitive. Participation rates in the democratic procedures of co-operatives vary greatly. In worker co-ops rates are generally high, although they decline as organisations increase in size—not invariably, but usually. Credit unions and housing co-operatives tend to have lower participation rates, depending on size and circumstance. Perhaps understandably, retail societies, with their large numbers of consumer members, are at the bottom of the participation league. Rarely do more than one in 100 of their members participate.

I believe that democracy is important enough for co-operative societies to carry out a democratic audit. The registrar should therefore have a monitoring role to ensure that societies are democratically as well as financially sound.

I hope that my remarks have sufficed to show that, far from being a relic of the Victorian era, the co-operative movement is innovative, flexible and responsive to the demands of a changing society. Over the past 30 years, there have been numerous problems, and major obstacles to the movement's success still lie ahead. The movement also has many strengths and opportunities for future expansion.

I remain confident that the co-operative movement will continue to make a significant contribution, not only to the economic well-being of the country but in providing an opportunity for its members to contribute to the social and community objectives that form an integral part of its work.

9.59 am

First, I declare an interest as a Co-operative party-sponsored Member of Parliament with, as outlined in the Register of Members' Interests, no personal gain.

I congratulate my hon. Friend the Member for Wolverhampton, North-East (Mr. Purchase) on securing this debate. Since coming to the House, he has been a consistent advocate of the principles of co-operation and we in the co-operative movement have every respect for his efforts in that respect. They are much appreciated.

I welcome this debate because it provides me and other hon. Members with an opportunity to speak about the co-operative movement. I shall concentrate on its contribution to the economic and social life of Scotland. Not only do co-operatives make a major contribution but they are innovative and responsive, often developing products and services in sectors of the economy and parts of the country where their capitalist-based competitors fear to tread. The co-operative retail sector, for example, could be regarded as a misnomer as it includes the funeral undertaking service, travel concessions, agriculture, insurance and banking.

Last year, the co-operative movement contributed more than £700 million to the Scottish economy. More than 80 per cent. of that trade came from the two largest societies, CWS and Scottish Midland, both of which show a remarkable resilience to the threats posed by their competitors and the increasing concentration of the major players in the sector. The co-operative movement welcomes competition because, ultimately, it is a consumer movement and competition provides a service to consumers.

The co-operative movement does well in Scotland partly because of the strong relationship between those organisations and the communities that they serve. Long before most of the major retailing groups had established a presence in Scotland, Scottish CWS had committed itself to serving the more remote communities of the highlands and islands. That culminated, earlier this year, in the opening of the first super-store in the Western Isles. Situated in Stornoway, the development will make a major contribution to the local economy, employing 160 staff and providing a wide range of services, with 12,000 different products on offer.

Similarly, Scottish Midland, with some 20 per cent. of co-operative trade, has expressed its confidence in the Scottish economy by re-opening a former super-store in Dundee and purchasing a new fast-growing retail business in the profitable toiletries market. Both organisations considerably increased their investment in new stores and other facilities and are confident that they can continue to improve services and benefits to members in all parts of the country.

Latest estimates suggest that there are some 400 agricultural co-operatives and a multitude of fishing and other related co-operatives in Scotland. Those contribute to the strength and vitality of the farming and fishing industries, which are vital to the Scottish economy's success.

As my hon. Friend the Member for Wolverhampton, North-East said, one of the fastest-growing sectors of co-operative enterprises is the credit union movement. In the past two years, it has grown by 18 per cent. and 15 per cent. respectively. It has 113 member organisations in Scotland, which was more than 20 per cent. of the UK total at the end of last year. Those provide much-needed credit facilities to some 70,000 members. The concept of mutuality suffered a severe blow in the 1980s, which, in years to come, will be regarded as a selfish decade. The credit union movement is a demonstration of practical mutuality, which is commercially successful but also contributes to the social and cultural benefits of those involved.

In the 19 years since its launch in 1977, the Scottish Co-operative Development Committee, recently renamed Employee Ownership Scotland, has played a major part in the creation of some 100 worker co-operatives of which almost half are in the Greater Glasgow conurbation. Its decision to refocus its activities following a major review is a recognition of the new funding regime following changes in Scottish local government and the Scottish Development Agency. It reflects the growing attraction to both sides of industry of giving employees a stake in the workplace and it forms a sensible partnership with its continuing work as a development agency for worker co-operatives. I emphasise the principle of co-operation. Neither side of industry and commerce has anything to fear from advocating the principle of co-operation because everybody then feels that he or she has a stake in the business or enterprise and contributes accordingly.

Scotland is also the home of the business community movement in Britain. That originated from an initiative of the Highlands and Islands development board to set up a community co-operative programme in the mid-1970s. Similar developments followed through the establishment of a specialist unit by Strathclyde regional council, followed by similar units in other regions of the country. As a former member of Strathclyde regional council, I was well aware of that work and participated in it. Obviously, the work ceased with the unfortunate demise of that council, which, in years to come, will be regarded as an act of vandalism.

Although no official statistics exist on the extent of the community business sector—the matter has been raised in questions to the Minister—rough estimates suggest that there are some 400 training enterprises in the United Kingdom and that, remarkably, more than half of those are in Scotland.

My hon. Friend the Member for Wolverhampton, North-East mentioned the lack of adequate sources of capital for the development of co-operatives. The high street banks, with the obvious and honourable exception of the Co-operative bank, do not really understand co-operatives or the motivation of those who set them up. The conventional view is that, with no equity, the balance sheet looks decidedly risky, even when members' financial commitment to the co-operative is substantial. Unreasonable demands for security are often made on members and there is the risk that the bank, through some misunderstanding, will pull the plug in circumstances where the co-operative is still viable. As one would expect, that has led to many co-operatives, even when they have a strong case for support, to be wary of approaching their local banks for loan finance. The venture capital companies are all but cut off from the co-operative sector as they cannot take an equity stake in the enterprise. The experience of convertible preference shares or other quasi-equity has been fruitful for neither party.

Co-operatives do not have access to the long-term capital markets. As a result, a number of co-operative organisations, mainly in the agricultural sector, have converted to company status. But that is not a solution for those committed to the principles and ethos of co-operative enterprise. The picture is similar in the public sector. Last July, I raised the related issue of support for co-operatives in Scotland in a question to the Scottish Office Minister and was referred to Scottish Enterprise. On 18 July 1995, I received a reply from the chairman, Professor Donald MacKay. Although he said that he encouraged
"the creation and growth of businesses",
he saw no difference between co-operatives and what he termed
"a whole range of structures that can be adopted by businesses".
Sadly, that approach is all too common among development agencies, which seem ill at ease with structures that deny them control in circumstances where investment has gone sour.

I fully understand the pressures on Scottish Enterprise and Employee Ownership Scotland to increase Scotland's business birth rate, which languishes at the bottom of the national league tables. However, that could be helped by a more flexible approach that respects the differences in ethos and structure of co-operatives by working with members to achieve joint objectives. Most of my constituency has now moved into the geographical area of Lanarkshire development agency. I certainly detected a more aware and more flexible approach to the principles of co-operative business in my earlier relationships with Lanarkshire development agency and I look forward to a long and fruitful relationship with that agency. Attitudes to co-operatives, in both the public and private sectors, must become more enlightened if co-operatives are to make a more substantial contribution to employment in Scotland.

The recent publication of a resource pack by the United Kingdom Co-operative Council, which my hon. Friend the Member for Wolverhampton, North-East mentioned earlier, describes how to set up and run a co-operative. The pack will be circulated to every Department of Trade and Industry office and business link office and should go some way to breaking down the present barriers of incomprehension.

Does my hon. Friend agree that attitudes in this country are way behind those in many other European countries, which have a much more positive approach to financing and supporting co-operatives? The international aspects of the co-operative movement are not properly understood in this country. Tens of millions of people, in Europe and in other continents, are involved in co-operatives, including producer co-operatives and other co-operatives that are at the fore of the economies of those countries, especially those in Europe. We should give greater emphasis to that in our discussions in this country.

The European Union is having an increasing effect on attitudes in this country and certainly many lessons can be learned from European Union countries from their attitude to the principles of co-operation. I agree with my hon. Friend.

As well as European Union developments, I hope that the introduction of a Scottish Parliament by a future Labour Government, not to mention a Welsh assembly and regional government in England after the next election, will benefit the co-operative movement. I see that the hon. Member for Langbaurgh (Mr. Bates) is in his place. There are not many Scottish Conservative Members and I imagine that the hon. Gentleman will sit on the Opposition Front Bench after the election. I hope that he will tell the powers-that-be about what I have said today. A Scottish Parliament would provide an opportunity more adequately to respond to the opportunities to develop the co-operative sector as a major contributor to increases in the affluence and well-being of the people of Scotland.

10.11 am

I congratulate my hon. Friend the Member for Wolverhampton, North-East (Mr. Purchase) on initiating this debate. Like the previous two speakers, I am a member of the Co-operative party as well as the Labour party. The Co-operative party exists to promote the interests of a different way of arranging industry and retail transactions. Co-operatives provide a different form of ownership from private, Government or local government ownership of industry, because all those who work in a co-operative industry, including sometimes the customers of a retail organisation, share ownership.

I shall refer to a particular form of co-operative that has developed in my region of south Wales. South Wales has seen huge industrial change, more so than many parts of the country, over the past few years and it has seen continual dramatic change for the past 30 or 40 years. Early in this century, the south Wales economy was completely dominated by one major industry—coal mining—in which some 500,000 people were involved. By 1984, the coal-mining industry had shrunk to 20,000 people and, today, the deep coal-mining industry is represented by a single colliery, which is a co-operative.

I shall tell the House a little of the history of south Wales. The National Union of Mineworkers was developed by the strong South Wales Miners Federation, which debated in 1913 what should happen to the mining industry and how it should be developed. We know that the mineworkers eventually came to believe that nationalisation was the answer, but back in 1913 the leader of the South Wales Miners Federation, Mr. Noah Ablett, argued that nationalisation would be bad for miners in the long run and that the workers should be involved in the ownership of the industry—in other words, a co-operative. Sadly, he did not win the argument at that time, but it is interesting that that argument was being made by far-sighted leaders.

We know the sad history of the miners' strike and what followed thereafter. In 1984, 20,000 miners worked in south Wales in 22 pits and, today, we have just one pit. But that one pit, Tower colliery, is now a beacon of co-operation and an inspiration to workers, throughout this country and abroad, who wish to form co-operatives.

Tower colliery became a co-operative venture in December 1995. A few years earlier, the then owners, the National Coal Board, had described that colliery and other collieries in south Wales as fundamentally uneconomic and a waste of Government money because they produced coal that could not be sold. Under the inspirational leadership of Tyrone O'Sullivan, the workers in that colliery have proved that they were being deceived and that those who were running down the industry may have had a political purpose when they deliberately closed pits that would have had a profitable future if they had been run by people who believed in them. Tower colliery has, uniquely, been given that opportunity. It is run by people who believe in the enterprise and who share ownership, so they have a mutual interest in ensuring its success.

There are 235 owners of Tower colliery—the work force of the colliery. Each contributed an initial £8,000 in 1995 to buy the project. It was difficult for them to raise that money because they are not wealthy people, but they made a significant contribution of capital to the project. Of course, that was not enough and they had to raise more capital from the banks. They had to convince capital owners elsewhere that they would succeed and it is to the credit of Barclays bank that it contributed to the setting up of Tower colliery.

Contrary to the expectations of many, and perhaps the hopes of some, the pit has made a profit of £3.5 million in the first 18 months. It is expected that that profit level will double next year. Every single underground worker in the industry is paid at least £20,000 per annum and even the lowest paid surface worker gets £236 a week, which is a significant wage in the top of the Cynon Valley. They are not frittering away their profits on increasing wages—they are investing in new plant and equipment so that they will have a profitable future.

The wage rates have not been achieved by paying bonuses to people who produce faster than others—each and every worker is paid the same wage, and the rate is significantly better than that paid in the private sector. This work force has a common destiny and an interest in ensuring the success of the enterprise. Tower colliery is an example of what co-operation is and can be about. It has been achieved in the face of a hostile Government who closed many pits that could have been successful co-operatives. I am not saying that all of the 20 pits that were in existence in 1984 could have done what Tower colliery has done, but half a dozen could have if they had been supported by a Government who wanted that to happen.

I thank my hon. Friend for coming into the House—I told her that I would mention her constituency. She was instrumental in achieving the publicity and the pressure to make the co-operative movement a success. In 1995, she spent some time sitting underground in the Tower colliery until the Government were forced to see sense. I congratulate her on behalf of the people of the Cynon Valley and the co-operative movement.

Tower colliery is an example of what can be done. I hope that a new Labour Government will understand that co-operatives are there to be nurtured and promoted, and that they are a better way of arranging industry than the old-fashioned nationalisation which has often proved not to be the success that was hoped.

10.22 am

I declare an interest as a Labour and Co-operative Member of Parliament, and I shall be standing as a Labour and Co-operative party candidate in the next general election. I am chairman of a co-operative in my home town of Bilston.

In this expansive debate on the values and the principles of the co-operative movement, I shall dwell briefly on the promotion of housing co-operatives as an ideal way of harnessing personal responsibility in meeting housing need and the right of all people to participate in the key decisions affecting their home and environment, which should be available to all through a strong housing co-operative movement playing its part in the sustainable regeneration of urban and rural communities.

It saddens me to tell hon. Members that the Government have failed the housing co-operative sector. As chairman of the all-party parliamentary group for housing co-operatives, I am extremely disillusioned with promises that have been made by successive Ministers. In 1992, the "Time for Action" campaign was launched with the prime objective of reversing the decline in investment in housing co-operatives by securing positive support from the Government and the Housing Corporation. The campaign was launched against a background of declining investment in housing co-operatives.

In 1975, the Campbell report recommended that 10 per cent. of the Housing Corporation's annual development programme should be used to fund new co-operative housing development, but the best that was achieved was 6 per cent. in the early 1980s. Hon. Members can judge the steady rate of decline for themselves. In 1990–91, 4.3 per cent. was dedicated by the Housing Corporation; in 1991–92, the figure was 2.4 per cent.; in 1992–93, it was 1.94 per cent.: in 1993–94, 2.7 per cent.; in 1994–95, 1.8 per cent.; and in 1995–96, 0.6 per cent. That is despite the fact that in 1993–94 the Housing Corporation set a target of 3.44 per cent. of the approved development programme for rented housing co-operative development.

In the local authority sector, the rapid growth in tenant management co-operatives and other forms of tenant control is being slowed down by the inflexible arrangements for administering the right to manage granted by leasehold reform through the Housing and Urban Development Act 1993. In the year of the introduction of the right to manage, 32 proposal notices were served by tenant management organisations, compared with 80 to 90 new prospects in the preceding 12 months.

Tenant management organisations are threatened again by the Housing Bill, which fails to take account of them in the local housing company provisions. I am meeting the Minister for Local Government, Housing and Urban Regeneration and members of the all-party group on this issue later today, and I hope that some progress can be made.

I draw hon. Members' attention to this lack of positive support for housing co-operatives and other forms of tenant control. Even though there is growing acknowledgement of the benefits of this potentially dynamic third force in meeting our country's housing need, what better evidence could there be than the recent Price Waterhouse report, entitled "Tenants in Control", which concluded that housing co-operatives and other tenant management organisations were very effective mechanisms for securing improved housing services, higher levels of tenant satisfaction and more economic running costs. It is time that the Government gave this sector of housing the positive support that it needs.

10.28 am

I congratulate my hon. Friend the Member for Wolverhampton, North-East (Mr. Purchase) on introducing the debate. He made a comprehensive speech and referred to every aspect of co-operation that I can think of. I congratulate him on getting the debate and on its content—a remarkable survey of co-operation and what it can contribute to the British economy and British social life.

I have a double whammy of a declaration of interest. Long before I joined the Co-operative party, I lived in south Wales—there seems to be a south Wales connection today—and I started what I think was the first co-operative development agency in England and in Wales: the West Glamorgan co-operative development agency. I also started a consultancy that gave advice to workers' co-operatives. I have been a consultant for 20 years and I run my own consultancy, giving advice to co-operatives both at home and abroad. I am particularly interested in industrial or worker co-operatives. The day after I joined the Co-operative party, I became the secretary of the Swansea Co-operative party. I am now a sponsored candidate and I have been closely associated with the co-operative movement for a long time.

This morning's debate illustrates the belief that co-operation can play an important part in our economy. I have given advice to overseas countries which are often looking for ways of breaking through a tidy retail sector where there is no competition and where agreement between a group of stores keeps prices high for the consumer. Such countries are looking for an alternative that will provide real competition. Many people fear that, if there were no co-operative presence on the high streets in the United Kingdom, the big five retail supermarkets would have a stranglehold on the British consumer. We play an important role in the retail movement.

My attitude to co-operatives is sometimes considered quite radical. I believe that, if we achieve a synthesis between consumer and worker co-operation in the retail sector, we will have a more effective co-operative system. I argue within the movement—in the good co-operative tradition—that we should change the nature of co-operation to involve the workers more fully.

I am always pleased to point out that there is a workers' co-operative in one of the smartest areas of London. The Peter Jones store, which is part of the John Lewis Partnership—a workers' co-operative—dominates Sloane square. When hon. Members look for new initiatives for good-quality shopping centres—as I am now doing in my constituency—and for an anchor tenant that will bring prestige to a shopping development, they look to the Co-operative Wholesale Society, the Co-operative Retail Society, an independent co-op or the John Lewis Partnership workers' co-operative, which is one of the most successful, high-quality retailers around.

Workers' co-operatives are exciting. I agree with the Leader of the Opposition's continued emphasis on stakeholding: it is a genuinely exciting idea. As a co-operator, I believe that the people of this country are missing out. Co-operation is a tried and tested way of giving people a stake in society. The hon. Member for Langbaurgh (Mr. Bates) smiles, but he should visit deprived estates where poverty really exists—and it is present in every constituency represented by 651 Members of Parliament. We can offer people hope by giving them a stake in society.

One way to do that is to get people involved in credit unions so that they are not abused by those who offer exploitative terms of credit. Some people cannot obtain credit: the high street banks will not allow them to open accounts. Increasingly, the poor in our country have no access to the usual means of finance and they are prey to ghastly people who ratchet up interest rates and force them into a cycle of poverty and debt. Many people do not understand how deep the problem goes. Credit unions present the opportunity to borrow money at reasonable rates of interest. I believe that the Government have a strong responsibility to open up the credit union sector in order to combat poverty in our country. An incoming Labour Government would address that problem.

Co-operation can also help to break the cycle of welfare dependency. All parties recognise that the welfare system has gone wrong in some areas, and the way in which we tackle the problem is crucial. If we introduce people to co-operation, they could set up small co-operatives and take charge of their own lives—whether running small workers' co-operatives, running housing estates or owning houses in small housing co-operatives. They are ways of giving people a stake in society and of returning to a participatory style of life that has been lost.

I think that all hon. Members share in the excitement about what co-operation can achieve. How exciting it would be if we had a Government who believed in co-operation, in breaking the cycle of poverty and in giving people a stake in society and allowing them to become fully democratic. I have been a Member of Parliament since 1979 and I have witnessed a worrying slide away from democracy. A large percentage of the population do not vote. They do not care about democracy: they think that it is not for them. If we get people involved in the community and give them control of their lives, we will break through and they will become democrats again.

Many co-operative opportunities are available, but the Government must speak with a firm voice and say, "We will do something about this." We have some of the best ideas around—other countries desperately want to see what we have to offer. We have the necessary mechanisms in place. Why do training and enterprise councils not back co-operatives? They are supposed to support enterprise. They do that in other sectors—sometimes they do a good job—but they are doing very little to assist with co-operation.

I approve of business links—I think that the scheme is doing a fair job. However, it would do even better under a Labour Government, who would give it more power and energy. We want to help co-operatives as well as other enterprises. My hon. Friend the Member for Wolverhampton, South-East (Mr. Turner) spoke of housing and my hon. Friend the Member for Cardiff, Central (Mr. Jones) referred to the Tower colliery. This country can achieve many things because we have a culture of co-operation: we do not have to invent it. New, exciting, relevant and up-to-the-minute ideas are waiting to be nurtured.

10.36 am

I want most warmly to congratulate my hon. Friend the Member for Wolverhampton, North-East (Mr. Purchase) on his initiative in securing this important debate. He appreciates that I could not have been here from the outset without cancelling, at very short notice, a commitment to constituents that I made more than two months ago.

The House will have sensed that, for many of us, this is a familial occasion. Many of my hon. Friends will have declared their interest in the debate as co-operatively sponsored Members of Parliament. I declare my interest, with legitimate pride, in a movement that has achieved so much for people all over this country and all over the world over the past 150 and more years.

By securing this debate, my hon. Friend is focusing parliamentary and public attention on a movement that is as admirable an example of principle and achievement as Britain has to offer. I have the great good fortune of having been sponsored as a Member of Parliament by the co-operative movement for 32 years and as a co-operative parliamentary candidate for 41 years. I rejoice in that—more especially since most of the federal institutions in the co-operative movement in this country are based in my native city, Manchester, and because I am the city's first ever co-operatively sponsored Member of Parliament.

I am delighted that my hon. Friends the Members for Edinburgh, Central (Mr. Darling) and for Middlesbrough (Mr. Bell) are here on the Opposition Front Bench. Both of them have given long and devoted service to the co-operative movement. I know, as a former president of the movement, in what very high regard they are held by co-operators in Scotland and in the north-east of this country. I am very glad as well to see that my hon. Friend the Member for Cynon Valley (Mrs. Clwyd) is with us for the debate. Again, she is someone who has taken a lifelong interest in the co-operative movement. I hope that the Minister, when she replies, will do so helpfully, by which I mean positively.

10.40 am

It is a pleasure to follow my right hon. Friend the Member for Manchester, Wythenshawe (Mr. Morris), who has made a long and distinguished contribution to the co-operative movement over the years. My hon. Friend the Member for Middlesbrough (Mr. Bell) and I are grateful to him for his kind remarks. He will know from his own experience of speaking from the Front Bench that it is nice when kind remarks are aimed in our direction. We are most grateful and we shall make the most of it.

I congratulate my hon. Friend the Member for Wolverhampton, North-East (Mr. Purchase) on the debate. He raised a number of important points on which I want to touch. Our colleagues, the hon. Members for Glasgow, Rutherglen (Mr. McAvoy), for Wolverhampton, South-East (Mr. Turner), for Cardiff, Central (Mr. Jones) and for Huddersfield (Mr. Sheerman), made useful contributions and emphasised the importance of co-operation, to which I shall return in just a moment.

People who follow these matters will see that, on the Opposition Benches, there is substantial interest in the co-operative movement. It is far from being something from the past. As my hon. Friend the Member for Rutherglen said, we believe that co-operation is a model on which we can build in the future.

It is important to emphasise the value, the importance, of the co-operative movement and the ideals behind it. As my hon. Friend the Member for Ilford, South (Mr. Gapes) said, there are lessons to be drawn from Europe on this. My hon. Friend the Member for Wolverhampton, North-East emphasised the importance of demonstrating the value of co-operation not just to the general public but to the members—the co-operators. Indeed, many of the speeches dwelt on what has happened to the building societies in the past two to three years, and we now have an opportunity to learn from that. It is important to demonstrate the benefits of mutuality and of co-operation before the movement transforms to more conventional types of ownership.

People who have listened to the debate will see that the importance of the co-operative movement is there for all to see—perhaps we should shout about it more often—for example, in the credit unions. As my hon. Friend the Member for Huddersfield said, too many people do not have access to conventional financing from banks, because banks are losing interest. Ironically, with all these conversions and changes, there will be an increasing temptation for the institutions to cherry-pick—to pick the people with the best prospects—and those who need the benefit of finance at a price that they can afford will be turned away from many of the institutions. It is tragic when former mutual societies—now public limited companies—do that, as I fear some will.

As my hon. Friend the Member for Wolverhampton, South-East said, the importance of the co-operative movement is there in housing co-operatives, in retail, agriculture and others parts of industry. These are excellent examples of where co-operation works. It is important that we encourage this form of ownership, and Government policy should be directed towards such diversity. We live in a changing world. We live in a dynamic economy, and any dynamic economy should have different forms and models of ownership that are able to be operated on a level playing field, and then people can choose which form is appropriate for the venture in which they are engaged.

As was emphasised by every hon. Member who spoke in the debate--I think that I am the only hon. Member who is not a Co-operative Member of Parliament, so in that sense I have no interest to declare—the ideals of the co-operative movement and the Labour party are almost identical. Indeed, the Labour party has always recognised that individuals prosper best when they co-operate together. That is what socialism is about. That is what the ideals of the Labour party are about. We want to encourage co-operative endeavour for the benefit of members. As has been said, it is an integral part of our view of a stakeholder economy: where people come together and have a stake in the enterprise in which they are engaged, and everyone, whether in management or on the shop floor, is bonded together in the same endeavour—the success of the company or institution.

More than that, it is a direct form of ownership. It is like partnership or employee share ownership. It is an opportunity to ensure that people who work in an enterprise feel part of it and committed to it. As my hon. Friend the Member for Cardiff, Central said, it has moved on from the old models of nationalisation, which did not provide direct ownership. Indeed, one reason why nationalisation lost support was that many people did not have that intimate relationship between themselves and the institutions in which they worked. I believe that co-operation, having a stake in the place where one works, is vital, and that is very much at the core of the Labour party's philosophy.

I said that we should learn from building society experience. It is a great pity that the benefits of mutuality were never passed on, never demonstrated, to members of building societies. Ironically, only recently have building societies realised that they have to show their members that there is value in mutuality. Many now pass on the benefits of mutuality in the shape of lower interest rates; others give re wards for long service to savers who stick with them for a long time. The co-operative movement has to learn from that. It is best to show the benefits of co-operation before people start talking about conversion to plc status. If mutuality has benefits, let us hear about them now. Do not wait until there is pressure to convert.

I understand the pressures to convert. Many hon. Members referred to the understandable concern about access to capital. I understand those difficulties, and we certainly do not take the view that the co-operative model, the mutual model, is the only one. In any economy, a variety of options should be open. We should not get ourselves into a position where people do not feel that there is any value in maintaining the co-operative because the benefits of it have not been passed on to them. It is a great pity that building societies did not demonstrate the value of mutuality long before now. It has come very late in the day, and that is a great pity. As my hon. Friend the Member for Rutherglen said, in years to come, many people will regret the passing of many of the substantial building societies.

As my hon. Friend the Member for Wolverhampton, North-East said, much work has been done to demonstrate how the Government could assist the co-operative movement, and we look forward to hearing what the Minister has to say about that.

My hon. Friend mentioned a number of issues, including access to capital, taxation and, in particular, compliance costs, about which I feel strongly, particularly for the financial services industry. The Economic Secretary and I have had many debates about this, and I do not suppose that we shall see eye to eye on it today, any more than we have in the past, but I believe that, as part of reforming and simplifying the Financial Services Act 1986, we could help many institutions that find the compliance costs out of all proportion to the benefits that are gained. That point does not apply only to co-ops and credit unions, as it is happening right across the industry. That is an example of where the Government could assist.

It is important that, if the Government are to encourage more co-operative endeavour—they should regard it not as something from the past, some quaint model, but something that is quite normal and wholly beneficial—they must do so not through subsidies or intervention but by ensuring a climate in which the co-operative movement can flourish.

I hope that the debate will ensure that the next Parliament, if not this one, will address some of the problems. The Labour party knows where it stands. Perhaps we shall find out whether the Government understand the value of co-operation. Sadly, I do not think that they have been converted to that cause.

10.48 am

I congratulate the hon. Member for Wolverhampton, North-East (Mr. Purchase) on raising this important subject. It has been a wide-ranging debate, and I suspect wider than many people who have no knowledge of the co-operative movement would have expected. It has become clear that not only is the co-operative movement well represented and very active throughout the country but there is a strong co-operative presence in the House.

I also congratulate others who have taken part in the debate, including the right hon. Member for Manchester, Wythenshawe (Mr. Morris) and the hon. Members for Wolverhampton, South-East (Mr. Turner), for Glasgow, Rutherglen (Mr. McAvoy), for Huddersfield (Mr. Sheerman), for Cardiff, Central (Mr. Jones) and for Edinburgh, Central (Mr. Darling).

As has been pointed out today, considerable benefits are being experienced because of the strength and diversity of the co-operative movement. As the hon. Member for Wolverhampton, North-East knows, most co-operatives in Great Britain choose to register under the Industrial and Provident Societies Act 1965. He may be interested to learn that, while the links between the Labour party and the co-operative movement are well known, many Conservative clubs are also registered under the Act.

There are some 11,000 industrial and provident societies, with 10 million members and assets well in excess of £30 billion. Retail societies provide services for nearly 7 million members. Many of us who live in towns are used to shopping at the Co-op: the suit that I am wearing was bought from the Ilkeston Co-op, and I am sure that, if any hon. Gentlemen wish to improve their sartorial elegance, the Ilkeston Co-op will be only too happy to oblige.

I am pleased that attention has been paid to credit unions, which is a strongly growing sector. They provide a source of finance that would not otherwise be available. Their activities are enormously diverse, and a large number of people continue to enjoy the benefits of membership. That demonstrates that the co-operative movement has a valuable role.

I was interested to read about the aims of the United Kingdom Co-operative Council, to which I think we can all subscribe. The council proposes to provide for discussion and debate in the wider co-operative sector, to seek to represent the interests of co-operatives, to raise the profile of the sector, to maintain and develop contacts with co-operative organisations outside the United Kingdom and to initiate and support study, research and other activities consistent with the council's aims. I wish it well. It recently produced a considered report relating to primary legislation for co-operatives. I fully understand the thinking behind its approach, and appreciate the amount of effort that went into formulating the report. As hon. Members will know, the Government do not propose to introduce a new co-operatives Bill, but we are considering the content of the council's proposals very carefully.

One of those proposals is the establishment of a co-operatives commissioner, originally as head of a new statutory body, but now, it seems, as someone who would continue to be served by the staff of the Registry of Friendly Societies. The commissioner would have one role supervising co-operative societies, and another as the Government's chief source of advice on the sector. It appears, however, that we already have such a figure in the Chief Registrar of Friendly Societies. The registry is a statutory body—a Government Department—and it advises us.

Since the publication of the UKCC's proposals, it has become clear that there is no consensus within the sector on what new powers or responsibilities the commissioner should have. I feel that, for the moment, our attitude should be, "If it ain't broke, don't fix it"; but some aspects clearly need to be addressed. I hope that we are already addressing them in part with our deregulation proposals, which are contained in the Deregulation (Industrial and Provident Societies) Order 1996.

The order was made on 3 July this year, and will come into force on 1 September. It will give effect to seven proposals. The first is to reduce the minimum number of members required to form a society from seven to three. The hon. Member for Wolverhampton, North-East expressed concern about the fact that there was a difference between registering as a co-op and registering as a company, evidently feeling that it was easier to register as a company than as a co-operative. By reducing the minimum to three, however, the order should encourage small, new mutual organisations to adopt the industrial and provident legal structure that they may well consider appropriate to them. I believe that we shall start to see the benefits of that at the beginning of September, and I hope that the measure will resolve the problem identified by the hon. Gentleman.

The order makes other proposals that are appropriate to the co-operative movement, and will make it easier for it to flourish with as few unnecessary rules and regulations as possible. The order will reduce the requirement for up to nine signatures when a federal society applies for registration: only the secretaries of the first two corporate members will be required to sign the application. It will allow more time for societies to submit their annual returns: they will now have seven months from the end of the year. That will reduce some of the pressures that some societies experience.

The order will extend the deadline for recording a charge against a society's assets from 14 days to 21, and will allow societies to submit late charges without a High Court order, subject to the protection of third parties. That proposal brings societies into line with companies. The audit requirements for non-deposit-taking societies under the 1965 Act and the Friendly Societies Act 1974 will be relaxed, and that too will bring societies into line with companies. I hope that that, in conjunction with the preparation for group account changes, will remove some of the barriers that the hon. Member for Wolverhampton, North-East identified, and will give us—if I may use that corny old expression—more of a level playing field, so that co-operatives will not feel forced to go down the road of company registration if they do not wish to.

The principle of mutuality has featured in much of what has been said today. That principle is very strong in co-operatives. For once, I agree with the hon. Member for Edinburgh, Central: it is essential that co-operatives show the benefits of mutuality first. They must ensure that those benefits are tangible, and that their members are aware of them. Many building societies have woken up to that need rather late. If people are not aware of its benefits, mutuality may disappear, and those people will say that they wish that they had some form of mutual organisation. In the case of both building societies and co-operatives, mutuality in its numerous forms has served the country well for many years, and will continue to do so.

Points were raised about the availability and employment of capital. That is, of course, a complicated subject. If the rules allow it, a member can take up to £20,000 in share capital: that limit is laid down in the 1965 Act. As for commercial borrowing, societies' own rules will specify what they can do.

Wider issues were raised, including the issue of tax-exempt special savings accounts. It is proposed that, if a society's rules are silent on the subject, the society cannot offer TESSAs. If it wishes to do so, it must comply with the appropriate Acts. There must be regulation to govern such matters; if there were not, we should have a free-for-all rather than the investor protection that we all want. I assure the House that the Government are actively considering financial services regulations that are as appropriate as possible. The minute I sit down, I shall run from the House to give a speech on regulation and its future in this sector, because there is a need to ensure that it is more appropriate, better targeted and less bureaucratic, not just for the co-operative movement but for the wider financial services industry.

Other points were raised by hon. Members. The hon. Member for Rutherglen mentioned the importance to the Scottish economy of credit unions and a new store that is being set up there. He was concerned in particular about banks' attitudes to co-operatives and thought that their value was perhaps not as well known as it should be. I will take that matter up in my meetings with banks because I want to ensure that there is a variety of structure in this country and that, if people want to form a co-operative and if that co-operative will benefit, they can do so.

Clergy Pensions

[Relevant document: The Fifth Report from the Social Security Committee, House of Commons Paper No. 340 of Session 1995–96 on Church of England pensions.]

11 am

My colleagues and I in the Church Commissioners are grateful for your great help, Mr. Deputy Speaker, in allowing us to have this debate in prime morning parliamentary time on important matters relating to Church of England pensions.

The Order Paper shows that the fifth report of the Select Committee on Social Security, House of Commons paper No. 340 on Church of England pensions, is relevant. In that context, I should like to express warm thanks to the hon. Member for Birkenhead (Mr. Field), the Select Committee Chairman, and to thank Committee members, especially my hon. Friends the Members for Cheadle (Mr. Day), for Westbury (Mr. Faber), for Colchester, North (Mr. Jenkin), for Gainsborough and Horncastle (Mr. Leigh), for Dover (Mr. Shaw) and for Harrow, West (Mr. Hughes), and the hon. Members for Islington, North (Mr. Corbyn), for South Antrim (Mr. Forsythe) and for Vauxhall (Miss Hoey), for all their services: for the probing and painstaking, yet sympathetic and constructive, way in which they have occupied themselves with the sensitive issue of Church of England clergy pensions, for their attendance at endless meetings to take evidence and to consider drafts and so on. The House and particularly the Church Commissioners are very much in their debt.

The Church Commissioners are of course accountable to Parliament, and the Select Committee's inquiries and reports have given rise to two debates about Church of England affairs on the Floor of the House within the space of 14 months. That is a striking signal of Parliament's concern for its responsibilities, and it will greatly encourage people outside who depend on a proper oversight of the commissioners' exercise of stewardship, which the Select Committee has certainly undertaken.

The Select Committee's fifth report addresses directly the issue of clergy pensions. I need not remind colleagues that pensions generally have been one of the major financial issues that Parliament has considered in recent years, so Church of England pensions fit into that general picture of reform, but with some specially complex features and variations.

The Church Commissioners' forerunners were established to relieve the poverty of the poorest clergy, and to rationalise the Church of England's endowments so that the new towns and cities that were springing up during the industrial revolution could be churched and ministered to. It might be taken for granted now, but the unique nationwide ministry of the Church of England was sustained during those Victorian and Edwardian decades of rapid change, moving with the people from its rural idyll in pre-industrial revolution times into harsh, urban locations, where the Church of England could so easily have chosen not to venture.

Despite all that has happened in the intervening century and the growth of secularism, the decline in churchgoing, and Matthew Arnold's "melancholy, long, withdrawing roar" of the sea of faith, the Church of England has retained its nationwide ministry. As has often been said, the clergy are, in some of our most deprived cities and city areas, the last remaining representatives of the professional classes. Everyone else—lawyers, solicitors, local government officials—has retired to the leafy suburbs. It is the clergyman who remains at the heart of the inner city, keeping the Christian gospel of care and compassion alive in precisely the sort of bleak, unpromising places where it is most needed.

The Church Commissioners' funds have been a primary source of support, helping all parishes with the cost of ministry and, in particular since 1954, with pensions.

Does my right hon. Friend agree that the work of clergymen of all faiths in the inner cities is significant, but that that of the Church of England is especially significant because of the peculiar constitutional position that professional clergymen and the Church of England have: they have a statutory responsibility for universal coverage of the country, which no other faith has?

I am much obliged to my hon. Friend for reminding us of that and for putting it on the record; the Church of England is unique. The very fact that we are discussing the Church Commissioners' affairs underlines the fact that that statutory duty and responsibility is vastly underpinned by the Church Commissioners' funds—the parliamentary charity with which we are concerned today. The two go together. I take my hon. Friend's point.

During the 1980s, however, the commissioners' resources have became overextended and their need for more income has led them in recent years to invest too heavily in property. Both the Select Committee's reports on Church of England affairs have had some harsh things to say about that, and the lessons have been taken to heart. The property portfolio is being slimmed down on a controlled programme and the proceeds switched into equities here and abroad, which offer the best long-term prospect of promoting income growth in line with projected expenditure.

The proportion of assets in commercial property has halved from a peak of more than 50 per cent. in 1990 to 23 per cent. at the end of 1995. In the same period, borrowing has fallen from more than £500 million to just £23 million. In the past three years, the value of the total fund, which was written down by the notorious figure of £800 million between 1989 and 1992, has risen by £600 million. Expenditure has been cut to the same cash level as in 1989 and a further £18 million is being cut this year and in 1997. Those reductions have not only helped to reduce the income deficit; they have enabled the commissioners to start rebalancing the investments.

That recovery should reassure Parliament of the commissioners' renewed competence and professionalism under the leadership of Sir Michael Colman, who took over as First Church Estates Commissioner in 1993, but the longer-term structural imbalance between assets and liabilities, which was crystallised by the investment losses to which I have referred, must still be rectified.

The Church of England has accepted that the commissioners' assets cannot stretch to carrying the whole cost of pensions and honouring their other trusts and commitments, of which my hon. Friend the Member for Colchester, North has just reminded us. The implications of the present situation are dramatically illustrated by the pattern of expenditure on stipends and on pensions. In 1986, the two categories of expenditure were in balance, at £35 million a year each. By 1995, the ratio had moved almost two to one in the direction of pensions, the cost of which more than doubled in that decade. That was a deliberate improvement in the pensions position and a reflection of what the Church of England felt was right and proper for its retired pensioners. It was associated with the introduction of a compulsory retirement age for clergy, who had in many cases simply soldiered on since the stipend was their only source of income. If the change in the ratio were allowed to continue, the commissioners' ability to fund ministry in poorer parishes would be wiped out.

In essence, the Church of England's proposals for funding clergy pensions are to split the liability in two, with a closed and ultimately self-liquidating scheme for past and current beneficiaries and a new fully contributory scheme for future entrants. The dividing line would be some fixed date in the future—for the sake of illustration, 1 January 1998.

Under the new arrangement, the commissioners will meet the cost of past service liabilities accrued up to the date of change—pencilled in for 1998—and dioceses will raise funds from parishes to meet the cost of pension contributions after that date. The General Synod in York approved the continuation of the current scale of pension benefits for future service last Monday, with the support of the diocesan boards of finance. For the record and to remind colleagues, in the round, the pension represents two thirds of the previous year's national stipend per 37 years of service. The national stipend is in the region of £14,000 a year, in addition to which a lump sum of £26,750 is also available for the retired clergyman.

The General Synod has endorsed and committed itself to continuing that frame of pension provision. It is accepted that the Church Commissioners will have to make transitional provision to reinforce the limited impact of pension contributions for the new scheme in early years. Discussions about that interim help are at an advanced stage between the commissioners and the diocesan boards of finance. The latter are planning to take on the full cost over six or seven years.

One key principle for shaping the new arrangement that has been of particular interest to the Select Committee is that the commissioners should be empowered to use capital for pension purposes. That is a radical innovation and an unprecedented departure from the basis on which Parliament originally legislated to set up the commission. Until now, only income flows from the capital, and not the capital itself, could be disbursed by the commissioners. I shall say more on that sensitive issue.

A draft pensions Measure to give effect to the new contributory proposals was approved by the General Synod of the Church of England last November. The Measure is now before a Revision Committee of the Synod. Recognising Parliament's particular interest in draft legislation that involves the commissioners' assets, the Synod has invited interested parliamentarians to submit suggestions for the Revision Committee's consideration so that Parliament can influence the drafting of the Measure before it is set in concrete. This debate is one of the obvious opportunities for that input, and the Select Committee's report is another primary source of input to the pension Measure's revision stage.

The first recommendation of the Select Committee is that the new powers that the Church of England is seeking should provide for the full application of the more general, secular legislation passed by Parliament recently to regulate and control pension schemes in the round, particularly matters relating to the so-called minimum funding requirement. The Church of England intends that the new arrangements should offer the same safeguards as secular schemes, subject essentially to the same regulations and controls, but adapted where necessary to reflect the practical realities of the Church of England's fund-raising arrangements—essentially through parish donations—and, in the case of clergymen, the technical lack of an employer. The pensions board is in discussion with Government Departments about those issues.

The Select Committee's second and fourth recommendations concern the use of the commissioners' capital. Parliament has an interest in that matter, since roughly one third of the capital derived from the Crown and was given in trust for the maintenance of the clergy of the Church of England in the deployment to which my hon. Friend the Member for Colchester, North referred. The other two thirds of the capital derive from Church sources. Parliament set up the Church Commissioners in 1947 to consolidate and hold in trust those capital sources and resources on behalf of Church and state for the same common purpose: the maintenance of the clergy of the Church of England in that national and statutory deployment to which my hon. Friend referred. The Select Committee is understandably cautious, therefore, about the expenditure of capital.

Hon. Members may wonder why capital has to be spent at all. I am afraid that the answer is sheer practicality. The commissioners' projected pensions expenditure, including transitional help for the dioceses, would greatly exceed their likely income unless they suspended other expenditure—breaching their trusts and imposing additional burdens on dioceses—or repeated the errors of the 1980s by moving back into high-yielding investments, such as property and gilts, at the expense of future capital and income growth. The power to spend capital, if given to the Church of England by Parliament, would enable the commissioners to meet their obligations while pursuing a prudent and fruitful investment policy.

Another aspect needs to be borne in mind, however, especially by those who may suspect that the use of capital is an exercise in selling the family silver. Under the proposed arrangements, a new fund of contributions from dioceses will build up as the commissioners spend the capital needed to satisfy the past service liability. Although not an exact symmetry, as the sand flows out of one hourglass, fresh sand will be flowing into another.

I was puzzled when the right hon. Gentleman referred to the six-year period. I come from another Church background. We realised that the change would take longer. Secondly, is there a place for the clergy contributing to their pensions, which is what we have done in our Church? That has resulted in a marked improvement in the pension schemes.

The time frame to which I referred relates to pension liabilities that will arise from the new entrants contributory scheme. In the early years, although vast sums will not be flowing in, there will not be a vast number of beneficiaries. By definition, the scheme will be for people who are at the outset of their careers. Contributions to and demands on the fund will, to some extent, increase in parallel.

The difficulty with the hon. Gentleman's second point is that Church of England clergy are not exactly highly paid. They receive a stipend of about £14,000 a year to bring up a family. If they were asked to make a pension contribution, their stipend would have to be raised to offset the extra cost, and that would place further obligations on parishes to supplement the stipend. There would be the additional disadvantage of further national insurance contribution liabilities for the extra money given to clergy to offset pension contributions. On balance, it was felt that a contributory scheme from the parishes only was the most rational proposal. It was simply an exercise in how to use resources most efficiently, given the overarching presence of that dark shadow—the state tax and national insurance collector.

The Select Committee's second main recommendation would enable the commissioners to meet their obligations for the first five years, including the transitional support needed to cushion the introduction of pension contributions. Leaving aside for a moment whether these changes should be effected by a Church of England Measure or by a Bill in Parliament, the Committee's proposals would go quite a long way to meeting the Church of England's requirements. I know that many in the Church of England would prefer the commissioners to acquire a permanent power to spend capital on an unlimited scale, including the power to transfer capital to a new pension fund. It must be admitted that the Select Committee's recommendations inevitably leave some uncertainty about how the commissioners could manage their commitments after the recommended five years. It is in this context that some in the Church of England find a major attraction in being allowed to have a fixed and final capital transfusion; it would cost about £1.2 billion or £1.3 billion to wipe out future liability in one fell swoop.

Sir Michael Colman's evidence to the Select Committee, and his note reproduced on pages 25 to 30 of the Committee's report, underline the commissioners' reservations about draconian transfers of capital, at least until there is an established contribution flow into the future service fund. An initial limitation on their power to spend capital would effectively defer the issue of a wholesale transfer of capital, and I hope that the Church of England will accept that what the Select Committee proposes in this, its most significant recommendation, can be the basis on which the Measure is revised and moved forward.

If it is possible to secure an accommodation with those who have drafted the General Synod's propositions and members of the Revision Committee, I suspect that the Church of England might press for the stipulated period to be not five years, as recommended by the hon. Member for Birkenhead, but a period to tie in with the likely required transition period for support for the new fund, which is more likely to be seven years. The Revision Committee favours inserting a seven-year maximum on the length of the transition period. That might be a more appropriate time frame, chiming in with the harmony that may arise if the Select Committee is happy for its five-year recommendation to be extended to, say, seven years.

At the end of the transition period, if all goes well, the Church of England will be able to show that the new arrangements are working smoothly and that parishes have proved their ability and willingness to meet the cost of pension contributions. Further legislation might then be simply a matter of finishing off what had already been well begun.

I turn finally to the Select Committee's comments about the implications of the Turnbull commission's recommendations for the control of Church Commissioners' assets under some future structural framework of change. Turnbull recommended in the report, "Working As One Body", that the proposed archbishops' council should take over the Church Commissioners' responsibility for applying their income. The commissioners' role would ultimately be reduced to managing assets and declaring, so to speak, an annual dividend to the new council.

Work on Turnbull is more complex and less far forward than the pension proposals. The steering group under the aegis of the two archbishops is charged with the follow-up to the report, and this follow-up group is addressing a wide range of key issues using the Turnbull report more as a vision than as a cut-and-dried blueprint.

The evidence given to the Select Committee by Philip Mawer, Secretary-General to the General Synod, was a clear exposition of the case for reforming the commissioners and their role by Measure as opposed to Bill. This is the way in which Church legislation has been handled for more than 75 years, and it enables the Church to design its own proposals in its own time with its own internal and external consultations. The Church is alert to the fact that, on issues affecting the commissioners' assets, Members of this House and of another place would like input into the drafting, as is in effect provided for by the Select Committee's recommendations on the forthcoming clergy pensions Measure and by this debate.

The Select Committee's report sets out with equal clarity and robustness the opposite case: that proposals affecting the independent control of the commissioners' assets—in this case the application of their income—should be legislated for by Bill rather than by Measure. This suggestion has, I am bound to say, caused considerable anxiety in some quarters of the Church of England, who fear that it would represent retrogression from the devolved powers granted by Parliament in 1919.

I hope that colleagues in the House today and members of the Select Committee will allow me, for the moment at least, to sidestep this, the Committee's fourth and most controversial recommendation—effectively that changes that might arise from the proposed Turnbull organisational reforms should be the subject of a parliamentary Bill rather than a Measure. The key phrase in the recommendation is "further changes", to distinguish these from the pensions Measure that the report majored on. At present, such changes have not been officially, specifically and finally formulated, and must lie in the realm of the hypothetical. The scale and scope of what may in the end be proposed will properly determine the shape of a Bill versus Measure debate, but we are simply not there yet.

I hope, however, that at least today's debate and the immense impact that the Select Committee's inquiry and recommendations had on the Church of England draft pensions Measure will indicate that Parliament has not been, and cannot be, bypassed, even on the minutiae of what is proposed in Church Measures.

11.28 am

It is always a pleasure to follow the right hon. Member for Selby (Mr. Alison) in these debates, and it is particularly so today. Once again, we are witnessing the ability of some Members of Parliament to maintain their friendships with different, if not disparate, groups, both in the House and outside, and to be able to tell the truth as they see it. In an age when roughing up politicians is more popular than the national lottery, it is a pleasure to draw attention to those hon. Members who add distinction to public life. In that context, I am happy to draw attention to the contribution that the right hon. Member for Selby always makes to our debates and to the welfare of the nation.

I would also make a second general comment by way of introduction, and that concerns the performance of the commissioners. I wish to emphasise what the right hon. Gentleman has said about the leadership of the commissioners and the stewardship that they are giving us. The Select Committee has given a clear vote of confidence to Sir Michael Colman, the First Church Estates Commissioner, to Patrick Locke, the secretary, and to the staff of the Commission for the way in which they have recovered from the shocking event of losing so much of the historic resources only a few years ago. The Select Committee was critical at that time, and obviously that remains in our memory, but as we move into a new area where confidence is required, it is important that the Select Committee can, without any equivocation, make that recommendation to the House about its feelings for those who currently work for the Church Commissioners.

Technically, today we are debating what is happening about pensions, particularly pensions for the clergy of the Church of England, but we cannot do that in a way which divorces our debate from the English nation. We cannot understand the history of England without considering how it is interwoven with the history of the Church.

One of the many great distinguishing marks of the Anglican Church in Britain is the fact that, because of its closeness to the English nation, it has understood how much religion the English are prepared to take, which is not very much. It has designed its ministry according to that fact rather than in ignorance of that fact; hence the importance of the Peel reforms of the late 1830s and 1840s which gave us, first, the ecclesiastical commissioners and then, as the right hon. Member for Selby said, the Church Commissioners in the 1940s. In regrouping the historic assets, Peel and the Church Commissioners sought to ensure that clergy would be paid for in those areas which could not pay for their clergy.

Owen Chadwick's biography of Hensley Hanson showed how, at the start of his career, he was a deep opponent of establishment, subsequently became a fan of establishment, and then, when he saw that there was a possibility of a Labour Government appointing bishops, became an opponent of establishment again. At the start of his career, after graduating from Oxford, he was appointed to act as a tutor to one of the great shipping families in Merseyside. It was as a result of his observations of life in Birkenhead and the way in which the Church tried to perform its role of administering to the nation that Hensley Hanson became a convert to establishment. He did not believe that the poorest areas of Britain could support their clergy.

In a sense, that is the backdrop to today's debate and the concern expressed in the Select Committee's report that, while it is crucial that past pension commitments are honoured, we 'want to do so in a flexible way so that the commissioners can fulfil their other great historic role, which has been to maintain a national presence in Britain while having a real understanding of the English and their religion. If that is broken, it should be broken by the populace itself, not because we have not got right the financial affairs of the Church Commissioners and their relationship with Synod.

Having made those introductory remarks, I want to address my comments to two aspects of the report. The first concerns the pension proposals themselves. The second concerns the Select Committee's recommendation—which the right hon. Member for Selby, for good reason, sidestepped today—on whether the moving of the historic assets away from their current stewardship should be by Bill or Measure.

The question which most concerned the Select Committee, arid which we now have a chance to debate on the Floor of the House of Commons, which a hope the Revision Committee will be able to consider, concerns the form of the pension proposals that are implicit in the Measure. Because people, perhaps rightly, are sensitive about the comments that we make, I preface my comments by saying that I am not trying to criticise those people who drew up the draft Measure. They clearly had instructions from Synod to establish pension schemes, and the Measure does that. However, I am anxious that they should think further than the mere form of the legislation that they at some stage will ask the House to approve.

It is implicit in the Measure as currently drafted that the form of the pension provision will be a company pension scheme. I want to suggest three reasons why, when the Church, both as Synod and as diocesan boards of finance, and even more importantly as local parishes, begins the debate in earnest on the form of pension provision, it will find that the company pension model is unsatisfactory because of the financial liabilities that it will place on diocesan boards of finance and parochial church councils. Unless other reforms are adopted, those two bodies will be asked to accept unqualified, open-ended financial liabilities.

Diocesan boards of finance and parochial church councils are charitable bodies, the first by registration and the second by declaration. If one considers how the Charities Act 1992 impinges on their duties, it is clear that they must act prudently and should not commit themselves to debts which amount to more than their assets; yet that is what we shall be asking them to do if we go down the route of an ordinary company pension scheme type model for the second pension scheme that will be enacted by the measure.

The first scheme relates to past entitlements which have already been earned, for which the commissioners take responsibility. and the diocesan boards of finance and parochial church councils would take responsibility for the second scheme. We cannot ask them to undertake that responsibility because, with the best will in the world, they cannot meet it. They cannot know that they will have the resources to meet that responsibility. That is not to say that they should not meet them, but that they should design a pension arrangement so that they can meet them.

I wish to emphasise what the hon. Gentleman is saying. The bodies that he has described do not decide the terms and nature of the liabilities that they will enter into. The benefits of being in the pension scheme are decided by the trustees of the pension scheme, so they would be taking on liabilities that they simply could not control.

Not for the first time the hon. Gentleman puts the point better than I. With that emphasis, I leave my first objection or worry about the current provisions that we are considering.

Some people have begun to understand what the obligations will be under the charity regulations. Many hon. Members will have become separated from charities with which they have been involved because their attendance here does not allow them to attend the charitable boards regularly. Is it not possible that people who have played an enormous part in the life of their parish church councils, and who would probably have been prepared to commit themselves in future, would hesitate to do so if we were to go down that route?

That is part of my worry. Again, my hon. Friend makes that point in friendship to those drafting the Measure, not in a hostile manner. We are anxious that when the Measure comes to Parliament, it should be in the best form that we could propose—not best in that it is the most popular in today's terms but in that it is a contract sustainable over the generations and not merely in the first year of its existence.

My second concern is that the parochial church councils, and especially the parishioners, will be anxious when they realise that the clergy will be dealt with in different ways under the proposals. I understand why the commissioners want to meet the future pension liabilities of bishops, deans and what are extraordinarily called the higher clergy, but most of us would think that there is no higher calling than that of parish priest. The higher clergy may have additional responsibilities, but the cardinal role of parish priest should not be undermined.

If I were an ordinary parish priest in Birkenhead, I would be slightly anxious that my future pension liability was to be met from the second fund, which will be dependent on what the laity contribute each year, while those of senior clerics would be met from the historic assets. That is not acceptable. It will cause problems in this House and even greater problems with the laity in our parishes. They will feel that that is not fair treatment of the clergy who bear the burden of the day, especially those who have the toughest parishes, whose children are often beaten up at school because they speak with slightly different accents and whose houses are regularly ransacked by yobboes. We should treat that group as the most privileged, and not subject it to risks to which we are not willing to put bishops, deans and other clergy.

Thirdly, it is a fantasy to think that even if the House voted half the assets over to a new pension scheme, it would close the commissioners' responsibilities. They would not be able to defend the rest of their assets from a company pension scheme that cannot maintain its flow of income. There would be enormous moral pressure on them to hand over yet more assets to meet any deficit that the dioceses or parishes did not meet.

I therefore propose a form of pension provision that I believe is sustainable in the long run and that can safeguard the remaining assets of the commissioners once they have met their current liabilities to past pension commitments. I hope that the Church will consider seriously a personal pension scheme, whether group or individual. That would be a simple form of pension provision that would be easily understood. The assets that would be built up would be in the name of the priests. The assets would not be collectively owned, lost or damaged if anything untoward happened to the scheme.

Clearly, the House would have to take into account the circumstances that the Church will have to meet under a personal pension scheme, which, I believe, would unlock the door to a much wider pension reform for people who are not in funded pension schemes and who have no cover other than the state retirement pension. That would give the House the opportunity to consider personal pensions to which contributions may be irregular. We should accept that people should not be fined or lose assets because of irregular contributions.

People should be allowed to pay small inheritances into their pension schemes. While I do not think that any of our clergy do the lottery, the pension scheme should allow winnings to be paid in rather than dissipated. People should clearly understand that the scheme is theirs. A unit trust-backed, individually owned personal pension scheme would give maximum security to our clergy and allow parish church councils and diocesan boards of finance to enter into a legal agreement honestly, knowing that their commitments can be fulfilled. The Church, by seeking such a Measure, would unlock the debate that we need about how to universalise second-funded pension provision.

I have taken a long time, so I shall speak only briefly on the historic assets. I shall try to choose my words carefully and I hope that my brevity will not be misunderstood. When we considered the difference between a Measure and a Bill, in no way was the Committee trying to overturn the 1919 settlement, whether by frontal attack or in a subtle manner. We were trying to register only that while the Church rightly has all the self-government given it by the Church of England Assembly (Powers) Act 1919, the historic resources of the church and nation are a different matter from all the other Measures considered in the House, such as the ordination of women or the alternative service book, which largely put aside the Book of Common Prayer.

My second point is addressed to the Archbishop's advisers. He has an enormously difficult job to manage the Church in an age in which it is not an easy task. There are many centres of power to which he is responsible—the Synod, the commissioners and Parliament. When his advisers help him to respond to reports from this House, I hope that they will not do so in a partial spirit. If they do, they will guide him into even greater troubles than he currently has to manage. Above all, they should help him to take a global view rather than the partial or campaigning view of any of the different sects that are trying to gain dominance in the Church.

Thirdly, the theology of the matter has come into play. We are told that it is an offence to think that the Church cannot do precisely what it wants because it is the physical representation of Christ in this country. That sounds fine as theology, but we should remember that the Anglican Church was established by the Crown. Even if it were formally disestablished, everyone in Britain is subject to the rules and regulations made by Parliament. It would not give the Church special privileges, although they may claim that its theology was only as old as the Tractarians. The Tractarians have done much mischief to the English Church and this is clearly part of their legacy.

The Turnbull report is a deeply un-Anglican document because it believes that one can concentrate power. It says that it is establishing an archbishops council, but it is a model of the Roman curia. The Church is free, if it wishes, to opt for that reform, but it will not be sustainable because it is trying to graft something on to a body that will reject it.

The Anglican Church was established in an age of great extremes, and those who founded it tried to find a middle way to accommodate those extremes. Part of that settlement meant that although we are always taught that we are a clergy-led Church, historically we have always been a laity-led Church. That lay representation has devolved power through many Church institutions. To try to group them together because one is passionate about the ministry of the Church is to try to take a short cut that will flounder.

That is a personal comment. The Church has every freedom to embark upon those reforms; the Select Committee merely asks in innocence whether the Church cannot achieve most of the reforms that it wants to introduce as a result of the Turnbull report without even coming to the House. The Select Committee put down the marker—and my right hon. Friend the Member for Selby, the Second Church Estates Commissioner, has emphasised the point publicly at most opportunities—that when we come to the ownership and control over the historic assets of the Church, we have a different agenda from all the other subjects that have been presented to the House since 1919.

11.50 am

The Parliamentary Under-Secretary of State for the Home Department
(Mr. Tom Sackville)

I shall not attempt to answer the debate, as is sometimes the role of the Minister, but simply make a brief intervention to welcome the fact that the debate is taking place and to make a couple of points on behalf of the Government.

First, I thank my right hon. Friend the Member for Selby (Mr. Alison) and the hon. Member for Birkenhead (Mr. Field) for their thoughtful contributions. I am sure that many people would wish that the deliberations of the House were carried on in today's atmosphere more often. We are aware that there are those who are involved in Church matters, be it their local church or wider than that, and there are others who have little involvement. Those hon. Members who are present are deeply involved in Church matters—perhaps there should be more.

All of us are aware of the difficulties that the Church faces in the latter part of the 20th century. Some of them have been referred to already.

When I arrived at the parish of Irnham in Lincolnshire on Christmas eve, following a long drive through rush-hour traffic, I found that I had been volunteered to accompany five carols at midnight at the local parish church. That filled me with some alarm because my musical talents are more in the nature of a nightclub pianist than a church organist. I had been volunteered because the regular organist had gone down with pneumonia. When I arrived at the church to practise, I got an inkling of why that might be. None the less, everything went off well. My main problem with the rather simple instrument that I had to play was in discovering the trick of getting the last verse played much louder than all the rest so as to go out on a heroic note without one of those pedals that change the settings. I finally solved the problem by asking my sister-in-law, the estimable Mrs. Bevan, to sit beside me on the bench and pull out all the stops for the last verse. That was the first time I understood the full force of that phrase.

I congratulate the Church Commissioners on having pulled out all the stops to get the affairs of the Commission back in order. There is no doubt that the affairs of those who are or will be eligible for a pension from the Church are in the best possible hands. Sir Michael Colman and my right hon. Friend the Member for Selby and his colleagues should be congratulated on what they have achieved.

Those who are employed by the Church live for a long time, perhaps because they have a fulfilling career, so there is a huge liability, which we must take seriously. Whatever changes are made, we must be certain that they are in line with recent pensions legislation so that the pensions and any other arrangements that are made for those involved have the full protection of the law.

As for whether any changes should be achieved by Measure, I hope that some arrangement can be reached so that we can continue the honourable long tradition of affecting changes in Church matters by Measure. As has been suggested, it is quite possible that some transitional or partial change in the arrangements could be achieved by Measure, but in the end it will be a House of Commons decision. It is perhaps worth placing on record that if a radical proposal was made to transfer a substantial part of the funds of the Church Commissioners, the House may decide that a Bill was required—as it might regarding any radical change to the Commission.

For 13 years, I have often listened to my right hon. Friend the Member for Selby reporting on Church matters. It is a sad fact that he is retiring from service in the House, because there will be a great gap. Over the years, he has made a huge contribution to steering that difficult relationship between the Church and the state. As they say in show business, I am sure that he will be a hard act to follow.

11.55 am

None of us comes to debates unencumbered by our experiences and personal histories. I was brought up as a Welsh Presbyterian and then accepted into the Church of England while at university in England. For the past 30 years, however, I have been a communicant in the disestablished Church in Wales. I am therefore able to combine sympathy and objectivity in the debate.

I speak with some trepidation, because I am an expert in neither ecclesiastical nor legal matters—I am certainly not an expert in ecclesiastical law. The way in which we approach such matters in the House requires a good deal of care as well as sympathy.

It is clear that important principles have to be dealt with and financial problems need to be resolved regarding the Church of England's pensions for its clergy and the responsibilities of Parliament to respond to its proposals.

The right hon. Member for Selby (Mr. Alison) has, as always, made a massive contribution towards enabling us to understand our responsibilities and the way forward. The report of the Select Committee on Social Security is a valuable contribution, because it refers to matters that need to be considered and resolved.

It is inevitable that one of the difficulties that we must face is how Parliament should respond to proposals to resolve the problem. When we last debated the issue on the Floor of the House, I expressed the view on behalf of the Opposition that the resolution of the long-term problems would require primary legislation. At the time we understood that the Archbishop of Canterbury and his advisers felt that that contribution had been helpful to the debate. That view about primary legislation was not questioned, and it has just been in the past couple of weeks that a different view has been expressed to us.

We are sympathetic to the need to deal with the immediate problems as expeditiously as possible—that desire informs the recommendations of the Select Committee. As the right hon. Member for Selby acknowledged, provision for the longer term requires difficult questions to be answered. It has been said that there is nothing, including pensions, in the long term as well as in the short term that cannot be resolved by Measure. Indeed, that is the view of the right hon. Member for Selby. Some of the briefing documents have suggested that, since 1919, there has been no case of a Church of England matter being dealt with other than by Measure.

The briefing from the House of Commons Library reached a similar conclusion. The basis for the expeditious treatment of Church of England matters was clear when it was pointed out in 1919 that only 33 out of the 217 Church Bills that had been introduced from 1880 to 1913 had been successful. The position has been greatly improved by the existence of an expeditious way of responding to matters resolved by, and proposals brought forward from, the Church authorities.

The Church of England Assembly (Powers) Act 1919 set up an arrangement whereby Parliament could deal with those matters expeditiously, and explicitly stated that the Measures
"shall have the force and effect of an Act of Parliament on the Royal Assent being signified thereto in the same manner as to Acts of Parliament".
A question remains. I have been told that, although Parliament has the power to introduce legislation, it has never done so, and that that even applied to the establishment of the Church Commissioners in 1947. In reading through the briefings and texts in the Library just before the debate, however, I was surprised to read of the Church of England Convocations Act 1966, which represented the use of an Act by Parliament after 1919.

I argue that we have a responsibility to consider the right means, by Act or Measure, to resolve the issues before us. That needs proper discussion to ensure that we fulfil the responsibilities of Parliament in the right way.

The responsibilities are obviously shared. The recommendations leading to the 1919 Act came from the Convocations, and that was regarded as important in showing that the Church Assembly's powers rested on the authority of the Convocations as well as Parliament. Similarly, the responsibility to help to resolve those issues is shared by Parliament and the Church authorities. That was demonstrated again after disestablishment, when the Church in Wales did not take over its share of funds. Instead, a different settlement was reached: in effect, the Church in Wales was disendowed at that time. I believe the position in Ireland to be similar.

I mention those points to show that a responsibility rests on Parliament to ensure that what it does is an appropriate response to the proposals of the Church authorities. We should properly understand our responsibilities as well as our powers. As the Minister rightly said, there is an element that requires sensible discussion and resolution, so that Parliament and the Church can proceed co-operatively in agreement, and so that we do not end up arguing about constitutional issues that might be an obstacle to a proper, lasting resolution of those issues.

The Select Committee report is a helpful contribution to the process of working towards a solution; but an interim solution, which is what is suggested, must be seen only in the context of a clear view of the long-term resolution of issues and how Parliament is asked to respond.

The Select Committee report makes the point, reinforced by my hon. Friend the Member for Birkenhead (Mr. Field), that many of the reforms that the Church wishes to make can be undertaken without requiring endorsement by Parliament. I am sure that the reinforcement of that point today will be regarded as helpful. I am sure that Parliament would wish to encourage progress wherever possible.

Obviously, the reference in the report to the limit to a five-year arrangement is an attempt to say that a step forward can be taken, with agreement, in sympathetic consideration of the problems that confront the Church. In response, the right hon. Member for Selby made the valid point that a seven-year arrangement might be preferable to a five-year arrangement, and I am certain that we would be sympathetic to that variation on the recommendations of the Select Committee.

This matter will be easier to resolve in the context of a long-term agreement or settlement. I hope that my comments today will be regarded as helpful, so that the issues can be discussed, formally and informally, as soon as possible, to try to find ways to prevent us from encountering procedural blockages, which would not be in the interests of the Church or of Parliament.

I am sure that parliamentarians and Parliament will be willing to listen to the views of the Church authorities and to seek a resolution that meets the needs of the Church of England, protects the poorer parishes and thus the needs of the inner cities—for which the Church has a deeply felt and recently voiced concern—and allows Parliament to fulfil its responsibilities in accordance with the law. Obviously, clarification on the procedure is needed, and it is sensible for that to be discussed as soon as possible by all the parties involved.

We must be careful not to interfere in the Church's independent decision-making responsibilities, but we must ensure that Parliament fulfils its separate and distinct responsibilities. Parliament and Church are very different in their constitution, culture and decision-making processes. Partnership and the sharing of responsibilities between different organisations are always difficult. There is an obligation on each to respect and understand the duties and responsibilities of the other. Dialogue is necessary to achieve what my hon. Friend the Member for Birkenhead described as a sustainable solution to intractable problems.

I welcome the briefing and information with which we have been provided in the past few days by the Church authorities, and the authorities' willingness to engage in discussion about the responsibility that Parliament must fulfil. It is right that we should seek to resolve those issues together, and I thank the right hon. Member for Selby for seeking today's debate. It has allowed us to express a wish, which the Minister also expressed, to resolve these matters by agreement, to tease out the correct responsibilities of Parliament and to establish a way forward that will be sustainable and deal in the long term with the issues. If we do so, it will allow Parliament and the Church authorities to sleep securely in their beds at night.

12.6 pm

I am grateful for the opportunity to participate in the debate, and I very much welcome the comments by my right hon. Friend the Member for Selby (Mr. Alison). He struck exactly the right note, and reflected many of the Select Committee's anxieties as well as our enthusiasm for the Church Commissioners and the confidence that we now have in them.

I pay tribute to Sir Michael Colman. He took on the difficult task of repairing the procedures and the management of the assets under the charge of the Church Commissioners and—perhaps much harder—the task of repairing the commissioners' reputation.

It should be well understood that our most recent report reveals a switch in emphasis from our previous report, which strongly criticised the way in which the Church Commissioners had handled their affairs. That switch in emphasis may have caught some other participants in the debate about Church affairs a little off guard.

I can well understand why the Synod, having been frustrated year after year in its investment policy and by the lack of support for projects that it considered important, should feel that the mismanagement of the assets should herald complete reform and change of the Church Commissioners. That is not the Committee's view. The Committee strongly feels—I am sure that the hon. Member for Birkenhead (Mr. Field) would endorse this—that the commissioners have repaired themselves effectively and can once again become a firm financial anchor for the Church of England, to the benefit of the Church of England and the whole nation.

The role of the Church Commissioners depends principally on capital. The Church Commissioners are the capital of the Church—the two are indivisible, which is why that capital has such a peculiar status in the minds of those who serve on the Select Committee and, I hope, of those who serve in the House. I remind my right hon. Friend the Member for Selby of what he said at the press conference about our report. He said that he would regard any Measure that significantly depleted the capital of the Church Commissioners—apart from the current pension position—as "inexpedient", and that it would be so regarded by the Ecclesiastical Committee of this House. It is not for me to prejudge any Measure that may come before that Committee, but my right hon. Friend's use of the word "inexpedient" reflected widespread concern in this House.

I endorse the warnings issued by the hon. Member for Birkenhead about going for a major single transfer to try to relieve the commissioners of the pensions obligation. Anyone who has been involved in occupational pensions knows that it is impossible accurately to measure what that obligation is. Moreover, if such a transfer is made, who will be responsible for any resulting deficit, and who will own any surplus? This applies especially to the sort of closed fund that has been mooted to deal separately with historic pension liabilities, while new liabilities are taken on by a different fund.

I also endorse what the hon. Member for Birkenhead said about the type of pension that should be available to clergymen. Traditional occupational pension schemes are a legacy of a more paternalist age when pensions were designed to attract people to certain forms of employment and to keep them there. The idea of portable pensions is relatively new, as is the idea of the personal ownership of pensions.

Public confidence in pensions is not strong at present, so we should not be surprised to find that the clergy worry about their pensions, given the recent history of the Church Commissioners. We want the enthusiastic support of the laity to help to provide the funds for these pensions. That is why I think it would be better to come up with some sort of group personal pension scheme that allowed parishes to see exactly what they contribute to their clergymen's pension funds. It will be much easier to attract the funds if people can see the purposes for which they are used—easier, for instance, than asking parishes to contribute to a general fund of indefinable liabilities that is not owned by anyone in particular.

We are presented here with a huge opportunity to open up new forms of giving to the Church of England, to attract new funds that allow parishes and parishioners to see that they are contributing to the pension of a particular individual. We also want to give clergymen a heightened sense of security. Given the size of their stipends, it may be inappropriate to ask them to contribute to their own pensions, but there should be no obstacle to giving clergymen and women more control over the contributions made on their behalf. That is a more realistic way of controlling liabilities. I refer to an individualised money purchase scheme that enables people to benefit from what they have put in, instead of building up an undefinable liability that may eventually end up on the books of the Church Commissioners, thereby reducing their ability to pay for the work of the Church throughout the nation and especially in poorer parishes.

I reiterate the point about the 1919 settlement and to place on record the assurances given when the Bill was passing through Parliament. Introducing the Bill to the House of Lords, the Archbishop of Canterbury said that it
"does not take away from Parliament any power which it at present possesses … Although there is an increased power of doing work better, I am by no means anxious to suggest that it is freeing us from State control in its proper place. It does not do so."—[Official Report, House of Lords, 3 June 1919; Vol. 34, c. 989.]
Subsequently, in 1935 a report from the Archbishops' Commission summarised the impact of the Act—I quote from paragraphs 36 to 39 of our report—as follows. The Church of England Assembly (Powers) Act
"left constitutional relations of Church and State substantially unaltered. The sole legislative authority after, as before, its passing is the King acting by advice of the two Houses of Parliament. What the Enabling Act did was to offer an alternative process by which Parliament could determine the advice which it should give the King. The Church Assembly"—
the predecessor of the Synod—
"is entitled to 'frame legislation'; if it does so, Parliament considers whether or not it shall advise the King to give effect to the legislation so framed."
Now comes an important assurance:
"Moreover, the old power of legislating by Parliamentary Bill without any reference to the Church Assembly remains unimpaired."
It is of course unlikely that Parliament would initiate Church legislation without the consent and involvement of everyone in the Church of England. The quotation dates from 1935, long after the 1919 Act had been passed. At the very least it legitimises the discussion between parliamentarians and members of the Church of England about the appropriate role of Parliament in Church affairs.

12.17 pm

I dare to intervene briefly, first to congratulate my right hon. Friend the Member for Selby (Mr. Alison) on the way in which he introduced the debate. I join others in thanking him for the tremendous service that he has given to the role of Second Church Estates Commissioner over the years.

I hope that the cardinal objective of those managing the Church of England's investments will always be to maximise those investments. Of course the Church cannot be amoral; it will not want to invest in certain companies or places. But I hope that it will not reduce its property portfolio on the grounds that it wants nothing to do with property. Rather, it should reduce it so as not to depend entirely on one sector of our economy.

I share the view of the hon. Member for Birkenhead (Mr. Field) that we cannot divorce any discussion of the clergy's pensions from other Church matters. I very much hope that those who allocate the national lottery funds will recognise the importance of conserving the splendour of our ecclesiastical architecture. By that I mean not just our great and wonderful cathedrals but our glorious parish churches—including churches that do not belong to the Church of England.

I have been immensely informed by this debate, but it has brought me once again to the realisation that parishioners must make whatever financial contribution they can to their church. It cannot just be left to the Church Commissioners. I recognise the difficulties: while there may be money in the leafy suburbs, it is hard to come by in city centres. But I would like much more twinning of churches between the leafy suburbs and city centres. I hope that that can be encouraged, although it is obviously a matter of personal priority and commitment in the individual parishes.

In conclusion, I should like to make a point for discussion. I am not competent enough to judge whether the changes should be brought about by, if not enshrined through, a Measure by the Synod or a Bill in Parliament. As a member of the Ecclesiastical Committee, I sometimes regret the straitjacket of that Committee's purpose, which is merely to find Measures from the Synod either expedient or not expedient. I should like much more interchange so that a Measure from the Synod could be brought before the Ecclesiastical Committee and ideas and thoughts carried back, just as we are trying to encourage much of the legislation in the House to go to Special Standing Committees and be given more time for consideration before the remaining procedures.

As a distinguished ex-member of the Whips' Office, how would my hon. Friend feel about the occasional substitution of parliamentary Bills for Church Measures? He will understand the implications, from a Whip's point of view, of what might then arise.

After six and half years in the Whips' Office, my scarred memory leads me to believe that anything is possible, although the Whips' Office tries to avoid most things. I understand the point that my right hon. Friend makes. I would like the Ecclesiastical Committee's role to be more flexible, but I recognise that that in itself would require the 1919 Act to be amended.

Petrol Supplies (Highlands And Islands)

12.21 pm

I am grateful for the opportunity to discuss the supply and price of petrol in the highlands and islands, as the matter is causing increasing concern not only to those who live in the area, where cars are not a luxury but a vital lifeline for people to go to work, to shop, and to visit the doctor or chemist. There is no choice when public transport is minimal or non-existent. The matter also concerns bodies involved in rural affairs, particularly those responsible for promoting the economic and social welfare of the area, such as the local enterprise councils and local authorities.

I am well aware of the widespread concern about high petrol prices and continuity of supply in other parts of rural Scotland, particularly in the Borders area represented by my right hon. and hon. Friends; but, as the title of this debate suggests, I shall concentrate today on the highlands and the unique situation of the many islands.

First, I shall give some examples of real prices and real places. I have brought along a map to assist the Minister, who may wish to refer to some of those places. The average cost of leaded petrol in the highlands and islands is 65.5p a litre, whereas the average cost in Edinburgh is 57p a litre. The average cost of unleaded petrol in the highlands and islands is 60p a litre, whereas, in a place like Dunfermline, it is 52p. For leaded petrol, a village in Shetland pays 66p a litre; Dornoch pays 67p; Ullapool pays 62p; and Tiree, an island in my constituency, pays 74p.

Someone heading to Tiree from Glasgow may fill up his car at Dumbarton and pay 54p a litre. He will travel through Tarbet on Loch Lomond, where the price goes up to 60p, on to Inverary where it costs 63p, and to Oban, where it goes down a little to 60p. He then drives his car on to the ferry, and pays a single fare of £65 and an extra £9.85 if he has a passenger. He arrives on the island of Tiree, to be faced with a price of 74p a litre. On the island of Colonsay in my constituency, Mr. Charles Mackinnon, who operates the school bus, would pay 49p a litre for diesel in Glasgow but must pay 86p a litre on the island.

A number of recent reports and surveys reflect growing anxiety at spiralling petrol costs and the future of supplies. The Rural Scotland Price Survey gives definitive figures showing the knock-on effect on the cost of living in those areas. In a paper published last month, the Scottish Consumer Council makes a telling statement:
"All of the 15 least accessible travel-to-work areas in the UK are in Scotland. Ten are in the highlands and islands."
A report issued last January by Halcrow Fox for the Highlands and Islands Action Group on Hydrocarbon Fuel Issues found that petrol prices in the highlands and islands
"are up to 11 per cent. greater than in urban locations in Scotland."
The excellent submission by the Western Isles council to the Trade and Industry Select Committee draws attention to the fact that, in 1981, despite a lot of pressure, the Office of Fair Trading declined to take action, but eventually did so in 1987 by referring the matter to the Monopolies and Mergers Commission. However, it declined to conduct its own investigation into rural prices, and the MMC conclusion at that time was negative.

The Petrol Retailers Association, which gave evidence to the Trade and Industry Select Committee on the subject on 4 June, criticises the role of the Office of Fair Trading, and accuses it of failing to provide details of its market monitoring. I believe that it should be much more responsive to the concerns of those who want answers to the problem of petrol costs.

The Office of Fair Trading may not have much in the way of resources, but I hope that the Minister will encourage it to monitor the market. That would be easier to do if pricing were more transparent at wholesale level. Despite the fact that petrol prices have been falling at forecourt pumps throughout the UK, they have remained unacceptably high in the highlands and islands. The MMC has said in the past that it is all due to sparse populations and geographical factors, but that is no answer. The problem does not appear to rest with the small retailer who may put only up to 3p on a litre, simply to stay in business.

My second point—I hope the Minister will address it—is about the rapid closure of retail outlets for petrol, which is happening at an alarming rate, for a number of reasons, including the cost of upgrading petrol stations to meet increasingly stringent requirements such as storage tank testing and modifying pipe work as demanded by the petrol recovery directive; and increases in the real price of petrol to encourage the switch from private to public transport. That is laughable, because there is no public transport in many areas.

I have been told, but I cannot confirm the information, that Shell will not renew its contracts with garages that sell fewer than 2 million litres of petrol and diesel a year. The closure of petrol stations will have disastrous consequences for the availability of fuel and for jobs. It has been estimated that more than 600 jobs could be lost in the highlands and islands in the next 10 years, with four out of every 10 filling stations facing closure.

At the end of June, the Pier garage on the island of Jura in my constituency closed, leaving the island without any petrol or diesel. The owner has been offered a grant, but cannot find the rest of the money required to make up the total for capital investment. The island of Coll is in a similar position, because the cost of replacing the antiquated pump and tank is beyond the means of the retailer who provides the only outlet on the island.

I have a copy of a letter that was sent to my hon. Friend the Member for Inverness, Nairn and Lochaber (Sir R. Johnston)—I am glad to see him in his place—earlier this month about the non-existence of petrol and diesel outlets in the Acharacle area. The writer states:
"About forty years ago, there were five petrol pumps in this area, and hardly any cars. Now most households have at least one car, and there is no petrol in the Acharacle area … Tourists coming into the area now are having great difficulty, not knowing about the petrol situation."
Apart from the effect on people living and working in the area, the lack of petrol outlets will have a detrimental effect on the tourist trade, which is such an important industry in the highlands and islands.

Will my hon. Friend stress to the Minister that the problem, as she has argued throughout her speech, affects the whole highlands and islands area? For example, Miss Wallace, who runs the Kinlochewe service station in the Wester Ross area in my constituency, has been to see me. Her letter to me states:

"My own fate after 28 years in this business is bad enough, but the demise of numerous stations will inevitably send shock waves through all the businesses as all are dependent on the tourist trade."
Those comments, and those that my hon. Friend has quoted from her constituents, underscore the need for the action that she has recommended.

I am grateful to my hon. Friend for that example. There are many such examples, and an increasing number of letters in our post bags stress what is happening in the highlands and islands.

I have tried to give the Minister a picture of what is happening, and I would like him to tell me what can be done. Will he refer the matter to the MMC, so that we can find out what the oil companies and supermarket chains intend to do in the light of threats to continuing supply, as a result of—it appears—private price wars in urban areas?

Can he also say why there is no national distribution network, and will he consider a derogation from the strictest legal requirements to upgrade petrol stations in remote areas? Will he also consider realistic financial support directed towards investment in the petrol stations and to the pump price of fuels? Will he consider establishing an investment fund, financed by the oil companies, to assist the small retailer? I thank the Minister for listening to the debate, and I hope that I have impressed on him the gravity of the situation. I look forward to his reply.

12.35 pm

I congratulate the hon. Member for Argyll and Bute (Mrs. Michie) on securing the Adjournment debate. I am also pleased that, as I reply to her, my right hon. Friend the Minister of State, Scottish Office is in his place.

I may be an Englishman, but I take no persuading that Scotland is arguably the most beautiful country in the world. The hon. Lady may be surprised to learn that I have visited Orkney, Shetland, Skye, Harris, Lewis, North Uist, South Uist, Benbecula and Barra, and have travelled extensively in mainland Scotland. I realise that not all those places are in her constituency, but when I looked across the Pentland firth, I strongly suspect that I was in the constituency of the hon. Member for Ross, Cromarty and Skye (Mr. Kennedy).

The Minister did not get the Tory nomination in any of those places.

No, I did not, to my lasting shame. It is hard to repair my frailty and inadequacy in that regard, and it is extremely uncomfortable to be reminded of my failures in such a public forum.

The grandeur of Scotland is matchless, and remoteness is a part of it, but it is also also part of the problem of petrol and petrol pricing. If I fail to answer any of the points that the hon. Member for Argyll and Bute raised so gracefully in her eloquent speech, I invite her to meet me, and perhaps she would write to me to let me know the key points on which she would like further comment.

The hon. Member spoke about the need for an MMC investigation into petrol supplies in the highlands and islands. As she knows, the commission reported on the supply of petrol by wholesale in the United Kingdom in February 1990. It examined petrol prices in the highlands and islands in detail, as an example of the problem of petrol prices in rural areas. The MMC found that average prices in the highlands and islands were higher than in the rest of the United Kingdom, and higher than in the rest of Scotland.

It has been argued that customers are paying high prices for petrol because of lack of competition. It is true that petrol stations are not thick on the ground in the highlands and islands, and the nearest competitor to every station may be some distance away. However, a number of factors may contribute to the higher prices for petrol in the highlands and islands than elsewhere in Britain.

The MMC concluded that the higher prices charged in the highlands and islands were primarily the result of loss of economies of scale, which resulted from low turnover at individual petrol stations, which itself resulted from low population density. The average site volume in the highlands and islands was about one fifth of the United Kingdom-wide average.

Fixed costs spread across low volumes of sales tend to mean that higher prices for individual sales must be achieved if outlets are to make a profit or break even. Therefore, their profits may be the same as, or even lower than, outlets in other areas, despite the fact that their prices may be higher. Higher costs of transport to remote locations and less intense competition at both wholesale and retail level are additional factors. The Monopolies and Mergers Commission found no evidence that wholesalers were making excessive profits from sales.

The hon. Lady will be aware that, under the competition legislation, responsibility for considering and, if appropriate, investigating allegations of anticompetitive behaviour or abuse of monopoly power lies with the Director General of Fair Trading, John Bridgeman. It is for the director general to consider whether the situation warrants a reference to the Monopolies and Mergers Commission. The independence of the director general is a fundamental part of our competition framework.

The Office of Fair Trading has been keeping the supply and pricing of petrol under review, and has been investigating individual complaints about petrol pricing in the highlands and islands. It has found no evidence that the conclusions reached by the Monopolies and Mergers Commission in 1990 no longer hold good.

Madam Deputy Speaker, you may be aware that the Director General of Fair Trading gave written evidence to the Trade and Industry Select Committee hearing on petrol pricing on 26 June. He reported that he had looked into recent developments in petrol retailing, including Esso's "Price Watch" campaign, and had found that price competition was strong but not predatory. Furthermore, he considered that consumers were benefiting from cheaper petrol prices as a result of this competition between the oil majors and the supermarkets. However, if the hon. Lady or any other hon. Member has evidence of anti-competitive practices by petrol retailers or wholesalers in the highlands and islands, I urge them to bring it to the attention of the Office of Fair Trading.

In recent years, there has been a widening of the retail price differential. It has been suggested that this is because the MMC was given misleading information about the price of petrol in the highlands and islands during its investigation, and that this should be investigated. I have not seen sufficient evidence to justify any such review. Rather, the widening of the retail price differential reflects the fact that prices have been falling in urban areas as a result of increased competition between the large oil companies and the supermarkets.

It is undeniable that price competition in petrol retailing is very keen at the moment. This is particularly true in areas of high outlet concentration, where the major oil companies and the supermarket-owned petrol stations are competing for market share—this is particularly true in the suburban part of the west midlands that I represent. This has resulted in the bottom of the price range being pushed down, rather than the top of the price range being pushed up.

Oil suppliers already give support to retailers through solus-tie agreements. This is an exclusive contract between the retailer and petrol supplier, usually for five years, which gives the retailer various advantages—ranging from help with infrastructure costs, guaranteed supplies of petrol, advantages from marketing under a brand name, and financial incentives. There are other incentives, including the retailer receiving advice on environmental issues and improvements to the retail outlet.

Other types of contract are available to the retailer, such as licenses and franchises, each giving different advantages and flexibilities. Some retailers may decide not to have any contract at all, preferring instead to negotiate with suppliers as and when they require deliveries. It is for individual retailers to decide what type of contract they want, and to negotiate with oil suppliers accordingly.

It has been suggested that petrol retailers in the highlands and islands might be subject to lower rates. The hon. Lady will no doubt be aware that the Scottish Office published a consultation paper about a business rates relief scheme for village shops on 7 June 1996.

The paper proposes that certain small general stores and post offices in rural villages will in future be entitled to at least 50 per cent. relief on their rates bills, and local authorities will be able to top this up to 100 per cent. In addition, local authorities will have wide discretionary powers to grant relief to other rural shops and businesses that are of benefit to the rural community. It will be for individual local authorities to determine whether independent rural petrol stations fall into this category.

I understand that many petrol stations in the highlands and islands are a number of years old, and the costs of replacement and upkeep will be high. Outlets may need to be upgraded to offer additional services, to keep existing customers or to attract new customers. Improvements must be made to comply with health and safety, and environmental, regulations. For example, the European Community directive on the recovery of petrol vapour during the storage and distribution of petrol requires outlets to have their pipework modified to minimise pollution by petrol vapours.

However, the directive applies only to outlets with a throughput of more than 100,000 litres of petrol per year. Also, it is possible to provide exemptions for outlets with a throughput of up to 500,000 litres per year in areas where emissions are unlikely to contribute significantly to environmental and health problems. The requirements of the directive do not apply to existing stations below 500,000 litres a year until 2004 and we would expect the exemptions to cover a large percentage of petrol stations in the highlands and islands.

There is a Health and Safety Executive requirement that storage tanks be tested after 20, 25 and 30 years, and biennially thereafter. There is a fee for the testing, and tanks that fail will have to be improved or replaced. As I mentioned earlier, fuel suppliers may well be able to offer financial assistance to their retailers for infrastructure improvements.

It has been reported in the press that the metrication changes that took place last October have imposed significant costs on petrol stations that sold petrol by the gallon. I understand that a large proportion of the costs referred to in press reports are probably related not to metrication but to the necessary upgrading of petrol stations to meet safety standards, which I mentioned earlier. The cost of converting a petrol pump from imperial to metric can he relatively modest—in most cases, I understand that it should not exceed £ 1,000. My Department has ensured that advice on conversion is made available through the National Weights and Measures Laboratory.

The hon. Lady has called for public sector support for investment in petrol station infrastructure. I do not see this as a workable proposal. If rural petrol stations were given special treatment, why not rural shops or rural pubs? Where would we stop? The money would have to come from somewhere, and the generality of taxpayers would have to pay.

However, the recently created Scottish rural challenge fund offers £500,000 to promote and support innovative new projects that would make a significant impact on particular social and economic problems in rural areas. This could include projects such as community petrol stations offering significant benefits to the local area.

It seems clear that higher petrol prices in remote and rural areas are not the result of anti-competitive practices by the wholesalers or the retailers, but reflect the supply and demand conditions in those areas.

The higher cost of supply and the low demand resulting from low population density lead to higher costs and thus to higher prices. The Office of Fair Trading will continue to keep the market under review, but I am afraid that low population density is not something that the Office of Fair Trading or the MMC can remedy. I thank the hon. Lady for her debate this morning. I note her concerns, and I understand them.

12.50 pm

Sitting suspended.

Solon Housing Association

On resuming—

1 pm

The subject of anti-social behaviour by what newspapers frequently call "neighbours from hell" has been a staple of social housing throughout the country for some time, and the Government are, of course, in the process of taking steps to provide local authorities with the power to do something about such behaviour. Whether authorities such as Bristol will actually use the power is another matter.

My reason for raising the subject of 50 Concorde drive in my constituency and the behaviour of its shifting population is not just to draw attention to another example of neighbours from hell; it is also to note that housing practices by local authorities, which it appeared had been stamped out in the 1970s, are beginning to re-emerge in the voluntary housing movement.

In my younger days in politics, I was an active member of a Conservative organisation known as the Bow Group, and it was in 1976 that I was first asked, as an officer of that group, to edit a draft pamphlet on the use of local authority tenants as weapons against owner-occupiers in property that the council wished to buy in the London borough of Hillingdon.

The pamphlet was written by a young Hillingdon councillor, Michael Lawrence—who has since achieved rather greater fame by going on to do other things, such as running the stock exchange—and it concerned the activities of a socialist-dominated London council, led then by the now infamous Alderman Bartlett, which was buying individual houses in an area that it wished to dominate for local authority housing and was choosing less than satisfactory tenants to occupy them, in the hope that other properties would then fall into the council's lap and obviate the need for compulsory purchase procedures.

The pamphlet noted:
"It has always been possible through existing powers for a local authority to turn itself voluntarily into an active acquirer and developer of land, and some Socialist authorities have been particularly aggressive in this field. People living within the areas of these authorities have had to fight to preserve their homes and protect their environment using any appeal procedures available to them, and have experienced considerable distress in the process. In some cases their existing rights of appeal have proved inadequate".
The aim of Hillingdon at the time was, quite clearly, the increasing acquisition of private housing for municipal development, changing the balance of ownership away from the private individual.

The Conservative Government were eventually successful in stamping out such socialist housing practices, not least by the repeal of the Community Land Act 1975. I should like to draw to the attention of my hon. Friend the Minister the fact that it appears that such practices are beginning to return, at least in the use of less than satisfactory tenants to change the character of a whole area, through the voluntary housing movement rather than through local authorities.

Solon Housing Association (South West) Ltd. purchased 50 Concorde drive in my constituency in the early 1990s, with, I believe, Housing Corporation—that is to say, public—money, and in early 1994 it moved in as the new tenants Miss McNeil and her two children, who are now aged three and six. Her brother, currently in prison, also gives 50 Concorde drive as his permanent address.

Solon, to quote from its statement of purpose, is
"a locally-based housing association providing and managing good quality homes, working with people in greatest housing need, primarily in the inner city of Bristol. It is committed to working in partnership with tenants, local authorities and other agencies to achieve this aim. It intends to achieve its aim by: new build schemes on in-fill sites; bringing empty privately and publicly-owned properties back into use; working in partnership with Bristol City Council in the redevelopment of the renewal areas; maintaining and improving our existing housing stock".

I am afraid that I cannot. I have little time, so I shall not be able to give way.

In its 1994–95 annual report, a copy of which I shall place in the Library, Solon lists the various factors that it takes into account in assessing or selecting tenants, and notes that it regards itself as accountable to tenants and applicants for housing to the housing corporation and to local authorities. The House will note that nowhere in its resounding list of objectives is there any mention of working with individuals who might be affected by the housing association's activities.

The House will also note that there is no mention of what the association actually does—purchase existing housing stock if already owned or tenanted—although the 1994–95 annual report, having stated its aims and objectives as excluding purchase in those circumstances, then goes on to mention that, during that year, 15 such purchases were made. In addition, and perhaps not surprisingly, there is no mention in the report—unlike many company reports—of the addresses of the directors; I doubt whether they live next door to a Solon housing association property.

As with many housing associations, substantial amounts of public money, through the Housing Corporation and the single regeneration budget, are applied by the association in furthering its aims as stated, although some of that money inevitably went into financing the rise in rent arrears held by the association on its books from 1993 to 1995.

I return to the central omission from any of the housing policies, transfer policies or acquisition-of-information policies set out by the association in all its documents. Nowhere is mention made of any consideration whatever being given to the suitability of the tenant to the house that they are to be offered to occupy, despite growing public concern at the effects of anti-social behaviour by tenants on their neighbours.

The Government's own Green Paper, "Anti-Social Behaviour on Council Estates", published in April 1995, noted:
"Such behaviour manifests itself in many different ways and at varying levels of intensity. This can include vandalism, noise, verbal and physical abuse, threats of violence, racial harassment, damage to property, trespass, nuisance from dogs, car repairs on the street, joyriding, domestic violence, drugs and other criminal activities such as burglary".
Inevitably, the majority—if not all—of these activities have been forced on the neighbours of 50 Concorde drive during the tenancy of that property, and the garage further up the street that goes with it, by Miss McNeil, her children and their juvenile visitors, who seem strangely reluctant to attend school during normal hours, and the more adult visitors who come to the house at all times of the day and night, frequently gaining entry by unorthodox means such as the bathroom window. Indeed, it is fair to say that there have been times when occupation of the house by the visitors has been more frequent than that by Miss McNeil.

As for the garages grouped further along Concorde drive—one of the garages automatically comes with the tenancy of No. 50—complaints consist of numerous youths hanging around, vandalising cars, climbing on and damaging the garage roofs, under the apparent leadership, or at least the spirited concurrence, of the McNeil family, adult and children, which makes improvement of those garages by other owners a complete waste of time. More seriously, arson inside the garage belonging to No. 50, and the regular destruction of its doors, have led other legitimate users of the garages to park their vehicles elsewhere for safety reasons.

But it is the conduct of Miss McNeil and her circle that gives most cause for concern. Its impact on their immediate neighbours extends to perhaps a dozen houses on either side. Since the matter was first drawn to my attention in 1994, I have received reports of threats against other children; of fighting in the house, the garden and the street outside; of people coming and going 24 hours a day—in particular, a series of men late at night—of rubbish and stolen cars dumped nearby; of glass strewn in the road in the presence of Miss McNeil and regular visitors; of alleged drug activity; and of all the more common regular annoyances to neighbours that are associated with a house of this type.

Police activity is inevitably limited to regular visits and the occasional arrest for aggravated vehicle taking. Also inevitably—this brings me back to the main purpose of the debate—the activity of the housing association has been between limited and non-existent.

I first wrote to Solon's housing manager in December 1994, after Miss McNeil had been a tenant for a little over half a year. I received regular complaints from the occupants of adjoining houses—and the occupants of the garages adjoining that belonging to No. 50—throughout 1995, as I have throughout 1996 to date, and I encouraged the complainants to write to Solon. In the absence of any observable action on the part of either the housing association or any of its directors or officers, I wrote requesting an urgent meeting with the director to discuss what action might be available to the association.

I wrote that letter on 8 February this year. After reminders from me, issued on 19 April and 9 May, a meeting was eventually arranged for 14 June. At that meeting, it was explained to me that the delay was due to the fact that, shortly after my original request for a meeting, Miss McNeil had produced a series of allegations of racial harassment—I have not been able to establish by whom—and the association had considered it inappropriate to meet me while such complaints were being investigated, and, inevitably, rejected. Needless to say, I am not sure that I accept that explanation. The 14 June meeting was of no value: it did not chart even a potential way forward.

I know that the Government are already aware of part of the problem, and proposing probationary tenancies in order to prevent the terrorising of neighbours in at least some of the ways that I have described. It is a pity that, in Bristol—and therefore in housing associations that depend entirely on Bristol to supply a substantial number of tenants for the properties they own, or control in other ways, in that city—the emerging opinion is that such probationary tenancies would oppress tenants, and are therefore not appropriate to housing circumstances.

The Government do not appear to be dealing with the possibility that housing associations—or, at least, this housing association; I cannot say whether it is typical—are returning to the socialist housing policies of the 1970s, when rented housing was used as an instrument of change in the character of an area. That is why I have raised the issue today. I have not done so in order to attack an individual tenant; I believe that Miss McNeil and those who surround her are symptoms of a greater malaise. That malaise is represented by the policy of inactivity adopted by Solon.

Solon receives substantial sums of public money. I do not believe that my constituents, who contribute that money, expect it to be used as an instrument for their own financial and social impoverishment.

1.14 pm

The Parliamentary Under-Secretary of State for the Environment
(Mr. James Clappison)

My hon. Friend the Member for Bristol, North-West (Mr. Stern) has raised some interesting points. I am sure that he will understand if I do not go into all the details of those points, but try to deal with the general concerns that he has expressed. I am particularly pleased that he has raised the important subject of anti-social behaviour, which enables me to tell the House of the Government's commitment to tackling that problem. shall return to the measures that vie are taking in a moment; first, however, I wish to deal with housing policy issues arising from my hon. Friend's speech.

The cornerstone of our housing policy is our acknowledgement that most people want to own their homes. We remain firmly committed to the continued growth of sustainable home ownership. During the next 10 years, we expect an additional 1.5 million householders to become home owners. Nevertheless, we recognise that some people prefer to rent. I am about to say something about housing associations and their role in providing social rented accommodation, but we are determined to sustain the revival in the private rented sector, which we believe can play a part in meeting housing need.

Private renting is important as a complement to the social rented sector. We are committed to maintaining an effective housing benefit system that helps low-income households to rent in both the private and social rented sectors. We are determined to learn from the mistakes of previous socialist Administrations, and to recognise in our housing policies that affordable rented accommodation need not be in public ownership.

As my hon. Friend may know, the Housing Bill that is currently passing through Parliament contains provisions that will, we hope, bring a further supply of private rented accommodation on to the market by easing some of the formalities that landlords must undergo before letting properties on assured shorthold tenancies and, in some circumstances, making it easier for them to recover possession in the case of that and other forms of tenancy. Since the late 1980s, when important reforms were introduced, there has been a substantial increase in the private rented sector. We look forward to a continuation of that.

My hon. Friend is particularly concerned about the housing associations. We have given social tenants a real choice between having a local authority as their landlord and having a housing association. Housing associations are now the main providers of new social housing. They have attracted more than £5.5 billion in private finance during the past five years to stretch public finance further—through the Housing Corporation and local authorities—so that more homes can be built. We continue to give generous support to the Housing Corporation's approved development programme, and about £1 billion of investment this year will attract a further £800 million in private finance.

The average cost of building a new housing-association home has fallen by about 40 per cent. in real terms. During a similar five-year period—the period that I have just mentioned—more than a quarter of a million homes for social renting or shared ownership have been provided by the building of new homes and the rehabilitation of old ones. In addition, about 60,000 lettings have been created through incentive and do-it-yourself shared ownership schemes.

The housing association movement is contributing to our regeneration objectives by rehabilitating existing empty properties and letting them to people in need, but the purchase of existing satisfactory street properties or new empty properties forms a small part of the Housing Corporation's programme—less than 8 per cent. of new homes in the corporation's development programme for 1995–96. Such purchases are approved for public funding where they meet locally identified housing needs on a most cost-effective basis.

I understand that Bristol has some 5,500 empty homes in the private sector, and that it has a strategy for bringing those back into use by working in partnership with housing associations in the city. I am sure that the House will be aware of the importance that we attach to bringing empty properties back into use. The vast majority of empty properties are in the private sector, although it is important for local authorities and others to manage their housing stock effectively to avoid empty properties. In Bristol, the local authority operates a common housing register with its housing association partners, so that it can work closely with them on the allocation of properties, and ensure that the best use is made of all available stock.

Housing associations play an important part in diversifying tenure to help to build balanced, stable and responsible communities—breaking down the barriers between old, sprawling estates and the rest of the community. The Housing Corporation's programme promotes mixed communities, embracing both tenure mix—rent and shared ownership—and a social mix of young and old and low-income and better-off groups. In 1996–97, 11 per cent. of the rent allocations and 30 per cent. of the allocations for new homes for shared ownership are for schemes that form part of a mixed tenure development. Around 80 per cent. of approvals are for homes that, when completed, will form part of a cluster of 40 or fewer social homes.

I listened carefully to my hon. Friend's comments on housing association tenants. As I have said, I am not prepared to go into the details of the matter, for reasons that he will understand, but it is appropriate to say something about housing associations' record. In general, they have a good record of responsible management, not just in terms of keeping their properties in good repair, but in achieving a good match between tenants and their properties, which is important.

It is in the interest of associations to manage their properties with care and consideration, so that they and their tenants are respected as "good neighbours" to other residents. In the particular case that has been mentioned, it is up to the housing association to consider what action might be appropriate, and to explore with Bristol council what solutions might be appropriate.

My hon. Friend is developing an important point, which is part of the core of my argument. To what extent does he have powers as a Minister to draw a case to the attention of the Housing Corporation, through which funds are channelled to housing associations, when it is felt, for any reason, that a housing association is not meeting the standards that he has outlined?

My hon. Friend will be aware of housing associations' position in respect of their tenants, and of housing associations' opportunities to recover possession in certain circumstances. I appreciate and will reflect on his important and interesting point on the relationship with the Housing Corporation.

I know that my hon. Friend will be interested in the Government's response to the problem of anti-social behaviour. Part of that response is ensuring that authorities and others concerned are aware of all the remedies available to them. The Association of District Councils's "Winning Communities" document covers the full range of remedies. The good practice unit of the Chartered Institute of Housing, funded by the Department of the Environment, produced another useful and practical document in December last year entitled "Neighbourhood Nuisance: Ending the Nightmare". I accept that neighbourhood nuisance can be a problem that results in a nightmare.

The Government believe that repossession cases need to be handled more quickly. Part of our response was the publication on 29 March of a Government-wide guide to getting the best out of the court system. It contains a quick reference list of steps to take, and more detailed guidance on the possession process.

Of course, we need a range of responses to different forms of bad behaviour. Those include—this will especially interest my hon. Friend—tightening tenancy agreements to make them more readily enforceable, using mediation and counselling to try to resolve disputes before they escalate, use of injunctions, and, if all else fails, seeking the eviction of the tenants concerned.

Above all, we must make it clear to tenants that anti-social behaviour is simply unacceptable, and that, in the worst cases, the consequences could be the loss of their home. The revised council tenants' charter, which was issued last summer, stresses that tenants have responsibilities as well as rights, and that those responsibilities include being a good neighbour. My hon. Friend will be interested in our proposals in the Housing Bill, some of which I have adverted to. In developing the proposal for introductory tenancies in the Bill, the Government were responding to an idea proposed by local authorities. A consultation exercise conducted last year showed a clear consensus that measures to deal with anti-social behaviour should be available for authorities, if they wish, as part of a wider strategy for tackling the problem.

The Bill provides for the existing ground for possession because of nuisance or annoyance to neighbours to be strengthened in four important ways. It will apply, first, to behaviour "in the locality" of the tenant's homes; secondly, to behaviour of visitors to the property; thirdly, to behaviour "likely to cause", in the words of the Bill, a nuisance or annoyance; and, finally, where a person has been convicted of an arrestable offence in the locality of the property.

At present, it can be difficult to mount a successful case for eviction. Some courts have interpreted
"nuisance or annoyance to neighbours"
as behaviour affecting those living adjacent to the perpetrator, but the effects of a tenant's behaviour can often be felt over a far wider area. The revised ground widens the scope to deal with such activity in the locality. That is an important addition. Similarly, frequent visitors to a flat or house can be disturbing to other tenants, so the activities of visitors will now be covered, which is another important addition.

Perhaps the most far-reaching of the amendments to the existing grounds for possession is the inclusion of behaviour
"likely to cause nuisance or annoyance"
as a ground for eviction. One of the most difficult aspects of obtaining a successful eviction is getting neighbours to testify against other tenants. Understandably, they are often too frightened to come forward for fear of reprisals.

The amendment's practical effect is that third-party witnesses, whether professional witnesses, local authority officers or perhaps even police officers, will be able to provide the evidence. Some local authorities have already taken that course, but others may have been deterred from doing so by doubts over whether the courts would accept such evidence. This provision will pave the way for far wider use of professional witnesses.

The Bill introduces a new ground for possession related to domestic violence. There has been growing concern not only about how such violence impinges on neighbours, but about the way in which, after the victim flees, the violent partner is often rewarded by remaining in the family home. That can be especially irksome for a local authority when that person occupies a much sought after family-sized property.

The amendments that the Bill makes to help speed up the repossession process will enable a landlord to start possession proceedings against a tenant as soon as a notice for possession has been issued, rather than waiting the customary 28 days in cases of nuisance or annoyance. In cases in which the court thinks it just and equitable, the notice can be dispensed with altogether.

The final element in the legislative package is a power to allow the courts to attach a power of arrest to an injunction taken out by a local authority or other social landlord, to prevent a breach of a tenancy agreement by anti-social behaviour. The Bill also provides a specific power for all local authorities to take out injunctions to restrain the behaviour of anyone who comes on to their estates to cause nuisance. The power of arrest will offer the victim immediate protection.

The provisions in the Bill apply to both local authorities and housing associations in their capacity as social landlords, with the exception of the proposals for introductory tenancies. However, housing associations can grant assured shorthold tenancies—


1.30 pm

I am glad once again to have the opportunity to raise issues relating to the Belling pension fund and to concentrate on issues that should have given us a red light and warning signals long before Belling finally went bankrupt in May 1992.

This is not the first debate that I have initiated on the Belling fiasco—I should call it the Belling fraud. Many former employees of that group will not get their full pension entitlement as a result of the frauds that took place. Mrs. Eileen Smith, the secretary of the pensioners' association, made it clear in a letter of 3 July to McKennas, the solicitors working with the Law Debenture Trust Corporation—the trustees—that the pensioners do not accept the liquidator's offer of £2 million.

Mr. Wignall—one of the people representing the workers who live in my constituency, although he lives just over the border in Accrington—recently received a letter from the pensions ombudsman, stating:
"There are … 60 other cases ahead of yours in the 'queue'."
He had requested that the pensions ombudsman investigate the problems relating to the Belling pension situation.

I accept that the Belling problem is not of the same size or extent as the Maxwell fraud, but to those involved, including many of my constituents, the effects are just as serious and the Government need to respond in a similar way. My constituents will not accept the view that Ministers have put forward that, because fewer people are involved and the scale is not the same, they should be dealt with differently.

I shall attempt to focus on how Belling was able to continue to trade when it was insolvent and to ask why the Department of Trade and Industry failed to pick that up and to stop it trading. Members of the pension fund feel that the Department has failed adequately to study what has happened since the crash of May 1992. It is the view of the pensioners' association that action could and should have been taken under the 1986 legislation. The association states that it is now certain that all the evidence in the possession of the liquidators, receivers and trustees had not been passed to the Department, as is required by law.

The issue is not of concern to my constituents in Burnley alone—indeed, a number of hon. Members have responded to their concerned constituents on the subject and another 37 have signed early-day motion 338 on the issue.

On 24 January, Charles Deacon, a lawyer, and Keith Fuller, a business man, were found guilty of swindling the pension fund of more than £2 million. The BBC special "Money Box" programme of 29 January highlighted the incredible frauds committed by Charles Deacon—Belling was not the only victim. The Minister has had a transcript of that programme. Anyone who did not see it would find that swindle and the others that Charles Deacon committed incredible and outrageous—they even involved using the name of the President of the United States.

The Deacon fraud was not the only one to which the Belling pension fund was a victim, although that would have been serious enough. Others within Belling were guilty of at least serious incompetence and, in the eyes of many, of fraud. Mr. Richard Belling did a last-minute deal in an earlier court case to save himself from having to go to trial. I cannot say that he was guilty of any criminal offence, but he was certainly guilty of incompetence and perhaps of desperation in trying to save his company in a way that did not add up legally and was not viable. As a result of those actions, the pensioners and those with deferred pensions stand to lose.

On 29 February, the Under—Secretary of State for Trade and Industry, who is to reply to the debate, kindly met the hon. Member for Edmonton (Dr. Twinn) and myself.

I am grateful to the hon. Gentleman for giving way and I congratulate him on his work on behalf of the pensioners, not just in his constituency but throughout the United Kingdom. Colleagues on both sides of the House have written to both of us, expressing their deep concern about what has happened. I am pleased that he mentioned the Maxwell fraud, because although the scale is different, for the individual pensioner's concerned it is the same. Hon. Members should be concerned about what happened.

The fact that someone can help themselves to pensioners' money must remain of great concern to my hon. Friend the Under-Secretary of State as well as to the House. I hope that because of this debate we will hear more about what can be done to stop such frauds taking place.

I wonder if the hon. Gentleman—

Order. That was far too long for an intervention.

Thank you, Madam Deputy Speaker, but I nevertheless welcome the comments by the hon. Member for Edmonton and agree with everything he said. His intervention shows that this is not a party-political issue, which is important. Hon. Members on both sides of the House are equally concerned about pensioners losing what they are entitled to as a result of such actions.

At my meeting with the Under-Secretary of State, I gave him a dossier that Mr. Wignall presented to me. Along with Mr. Conquest, he has kept me fully briefed on this complex case. They are both members of the pensioners' association that represents the workers involved. To give all the facts that I have on my files relating to the case, I would need several hours and not just a quarter of an hour.

On 19 March, the Minister replied to me in writing on several matters that I had put to him at the meeting. He wrote:
"it is for the liquidators of the company to form a view as to whether The Midland Bank acted beyond their remit and in effect directed the company's affairs. If they did and could be shown to have acted as a shadow director, the liquidator of the company could, if he thought it commercially prudent, apply to the court for an order that the bank contribute to the company's assets in the liquidation which would in turn lead to a larger dividend for the pension fund. However only the liquidator has the right to make such an application and it is for him to consider the extent of the bank's involvement in the company's affairs and the costs and likelihood of success of any action against the bank.
We also discussed at the meeting the level of compensation awarded by The Law Society. I understand that on their solicitors' advice, the trustees have accepted £577,000 by way of compensation from The Law Society together with payment of their legal costs. The sum is considerably less than the losses suffered by the pension fund as a result of the fraudulent activities of Mr Deacon and his associate and I would have been pleased to have seen a substantially higher level of compensation paid. However any settlement is a matter for the Trustees and the Law Society.
I have asked my officials to find out what the current position is relating to any disciplinary action which may be being taken or contemplated against the other professionals who were involved in the Belling affair and I will let you know the outcome of their enquiries as soon as possible."
I have written to the Law Society on several occasions, putting the case that its compensation should have been higher, having regard to other legal advice given to the pension fund and Belling at the time, and not solely the role of Mr. Deacon. Regrettably, the assistant director of the Law Society turned down that request, saying:
"My office has recently been in correspondence with Mr J Wignall who has raised the point that inadequate advice was apparently given to Mr Stewart by Messrs Vanderpump and Sykes as well as by Messrs Barlow Lyde and Gilbert. Regrettably, the opinion of this office is that any such alleged negligence would have no material effect on the Committee's decision. Section 36(2) of the Solicitors Act 1974 sets out the statutory limitations of the Fund which are to compensate an applicant for loss suffered as a result of the dishonesty of a solicitor or for hardship being suffered as a result of a failure by a solicitor to account for monies.
When reaching their decision, the Committee were of the opinion that the former Trustees of the Pension Fund had acted both in breach of trust, as they had previously been advised that they could not borrow money from the Pension Fund for the purposes of the Belling Company, and acted negligently in failing to take adequate steps to protect the money that they were improperly borrowing.
If either of these failures has its roots in inadequate or negligent legal advice taken by the former Trustees then that may well give a separate course of action against those giving the advice and in respect of which an indemnity should be afforded to the firms concerned by the Solicitors Indemnity Fund".
The process goes on and on but pensioners see no solution to their problem.

In another letter of 25 April 1996, the Minister said:
"As to action by regulatory bodies, the Institute of Chartered Accountants in England and Wales is still considering complaints made by Mr. Wignall against Mr. Keevil of Hereward Phillips, the auditors and Mr. Stewart, a director of the company. However, it does not appear that any disciplinary action is being taken by other regulatory bodies against their members in this matter."
It is not surprising that members of the pension fund feel aggrieved. They feel that the professionals and professional bodies have failed them. They are aware that recovery expenses to date total £2,281,185, with some £900,000 having gone to the lawyers. They believe that the Insolvency Act and Company Directors Disqualification Act 1986 have served no useful purpose.

We must consider the way in which costs mount in trying to recover moneys. Again, I do not make a political point when I say that, but it is wrong that people who have committed no offence should have to bear such costs to secure their entitlements.

In March 1993, a list of matters for investigation was presented to Buchler Phillips by pension fund members. Time after time, information has been presented to everyone and all the relevant organisations involved. It is clear to everyone that Belling was bankrupt long before May 1992, and it should have been clear that fraud had been committed in trying to save the company.

I shall take a little time to give a few of the indicators that point to that knowledge, but there is a great deal of other information on our files. In order to be brief I shall use the information that until relatively recently was confidential and therefore unavailable to me, the Department and others.

In the auditors' report from Hereward Phillips dated 22 October 1991, the auditors stated that the company had incurred
"a loss… £6,405,369… during the nine months ended 29 December 1990; and at that date its current liabilities exceeded its current assets by £1,482,345."
Regrettably, the auditors were unable take into consideration the fact that the proposed sale of Compound Sections, which they believed would improve Belling's situation, was the subject of fraud using pension fund moneys.

Indeed, the next auditors' report of 3 December 1991 stated:
"Following this sale revised borrowing facilities were made available to the company by its bankers."
Yet no reference is made to the £2.1 million towards this sale from the pension fund. As had been stated in Peat Marwick's report to the trustees only a month before, this money was used in the sale and paid directly to the bank. To be exact, the pension fund bought Compound Sections, and of this money £2.75 million was used to repay the bank and to extend banking facilities. Clearly the trustees were acting in the interests of the company and Midland bank and not in the interests of pension fund members in agreeing to use funds in this way.

Mr. Stewart and Mr. Belling were guilty of allowing this to happen—indeed, of enabling it to happen. On 22 October 1991, Belling wrote to Vanderpump and Sykes, solicitors:
"In view of the results for the year the auditors have felt it necessary to qualify the audit report. However if by the time they are required to sign their audit report the sale of Compound Sections Limited, and confirmation of on-going financing from the Midland Bank plc are both available, then they have confirmed that they would be able to give a clean audit report, without qualification."
Is it not strange to allow the sale of a subsidiary at an inflated price to its own pension fund to secure an unqualified audit statement? One must ask, why did the trustees agree to such fraudulent use of the fund, and why did the auditors accept the financial statements?

In a letter dated 10 December 1991, Mr. Stewart says that the pension fund trustees have had two independent reports prepared for them in relation to the acquisition of Compound Sections. One of these, from Greig Middleton, advised the trustees:
"The value of Compound Sections if sold on an open market as a going concern would be in order of £5.25 million, on the basis of a willing buyer and a willing seller."
That proved to be far from the true value because the company was ultimately sold for £1.25 million. Belling was its major customer. On 2 December the Belling pension fund paid £5.5 million for Compound Sections. In the letter of 10 December Mr. Stewart says:
"As part of the contract between Belling and Co Ltd and the Belling Pension Fund for the sale of Compound Sections Ltd Belling warranted a profit of not less than £750,000 for both the years 1991 and 1992.
In the event that this profit is not achieved Belling will pay to the Pension Fund a 7 times multiple for the shortfall in 1991, and a 31 times multiple of any shortfall in 1992 subject to a maximum of £1.25m in respect of each year."
It is not even as though the trustees had not been warned about using the pension fund for such a loan. In a letter dated 19 September, Harlow, Lyde and Gilbert, solicitors, stated:
"We do not believe that the trustee has the power under the Trust Board to make loans and take security therefore.
The Trustees must determine that the investment will benefit the fund and will not place at risk the part of the fund so invested. We are concerned, given the relationship of the Company to the fund that some doubt may be cast upon the exercise of the trustees' power to invest in the manner proposed."
The solicitors also express alarm about the valuations of Belling, stating that, at £14 million, it is grossly inflated. Indeed, they go into great detail about the relationship with the bank and further show that the valuation was unrealistic.

On 21 September 1990, Barlow, Lyde and Gilbert again confirmed:
"Counsel is in no doubt that the Trustees are not empowered by the Trust Deed to make loans and take security… At law, investments made by trustees on the security of property must be secured by first mortgages. The Trustees will appreciate therefore, that even if we assume that the valuation of £14 million expressed in the valuation of May 1990 is accurate… and given that Midland Bank plc require priority of £8.5 million the maximum amount of any loan would be approximately £833,000 if the Trustees are to have benefit of this provision. Any such loan should be secured by a first mortgage. Unless the company discharges the first mortgage in favour of Midland Bank plc, there are substantial doubts as to whether the trustees can properly invest in the Company in this way."
The closing tone of the letter warns:
"if the Trustees have any doubts whatsoever about the solvency of the Company, any investment in the Company should be avoided. It is possible that if the Company became insolvent within the term of the loan the monies advanced may be irrecoverable and any security granted would be liable to be set aside."
The closing advice stated:
"Having had the benefit of Counsel's view in relation to the issues which we perceive in this transaction we cannot recommend that the Trustees invest in the company at this time."
Yet, in a letter to Midland bank in April 1991, referring to the purchase of Compound Sections, Mr. Stewart stated:
"We have now received Counsel's advice that it is legally possible for the Pension Fund to acquire this property. This amends our earlier understanding of the provisions of the Pension Trust Deed. The Pension Fund Trustees… are now arranging for the appropriate professional advice."
Where did that contradictory advice come from, or had the trustees disregarded the advice given to them?

In a letter dated the same day to the corporate bank manager of Midland bank, Mr. Stewart instructed the trustees that the bank
"as a condition of advancing further monies to the Group have requested that any surplus monies resulting from the winding up of the Pension Fund should be paid into the account of Belling and Company Limited with the Midland Bank.
The bank requires an irrevocable confirmation from the Pension Fund Trustees that they will do so."
Mr. Stewart's final assertion in this letter shows just how serious the company's position was at this time:
"It is one of the conditions which the bank is requesting before it is prepared to advance further financing to the Company, without which it will be difficult for it to continue to trade, thereby putting the livelihood of the members of the Fund at risk."
The following month, Mr. Stewart arranged to meet Mr. Deacon to discuss a substantial loan of $50 million, interest of $3.5 million on which had to be paid up front and is shown as a borrowing, without authority, from the pension fund on 30 June of £2.3 million.

Despite a worsening scenario, Mr. Stewart again wrote to the trustees of the fund on 1 July 1991 asking for the pension fund to pay surplus moneys into the company's account. He ended his letter saying:
"You will understand that without the support of our Bankers it will not be possible for the Belling Group to continue to trade".
One must ask how Belling continued to trade for another 18 months—nearly two years—before it went bankrupt. Warning bells should have sounded and the Department of Trade and Industry should have acted. Many professional organisations and advisers failed to give the necessary signals and act properly. It is a disgrace that ordinary honest working people have lost out on their pension entitlement as a result of what took place in those sad events of 1990, 1991 and 1992.

1.50 pm

The Parliamentary Under-Secretary of State for Trade and Industry
(Mr. Phillip Oppenheim)

I congratulate the hon. Member for Burnley (Mr. Pike) on securing this debate on a matter with which he has been closely concerned, as has my hon. Friend the Member for Edmonton (Dr. Twinn), and which has been the subject of much consideration.

In responding to the debate I begin by extending my, and the Government's, sympathies to those who have been affected by the failure of Belling and Company Ltd. and the apparent shortfall in that company's pension fund. I am aware of the distress and anxiety caused by the circumstances of this case.

Occupational pension schemes are established under trust law and it is therefore for the scheme trustees to decide which, if any, legal actions to pursue and to take action on the legal costs likely to be incurred. That is exactly what has occurred in this case.

For the hon. Gentleman's information, Department of Trade and Industry officials have been told by the trustees that, on their solicitor's advice, they have now accepted £577,000 by way of compensation from the Law Society together with their legal costs. They have also recovered £200,000 from the former directors of Belling—£40,000 from Mr. Stewart and in excess £150,000 from Mr. Belling. Inclusive of offers that have been made for settlement, recoveries for the pension fund should total approximately £3.43 million.

I am also pleased to say that the actuary's latest projections are more optimistic than hitherto in that members who were pensioners on 12 February 1993, the date on which Belling went into liquidation, will continue to receive benefits in full. For other members, benefits earned before 31 March 1988 will be able to be provided in full, and guaranteed minimum pension benefits which relate totally to service after 31 March 1988 when the plan was contracted out will also be able to be met in full.

Benefits earned after 31 March 1988 in excess of the guaranteed minimum pensions are not likely to be able to be provided in full. However, I emphasise that the guaranteed minimum amount will be provided. That category of benefit comes last in line and the uncertainties remaining as to the final position of the pension fund make it difficult to predict how much, over and above the guaranteed minimum, will be paid.

The facts concerning the important issue of directors' disqualification are as follows. On 29 May 1992 two insolvency practitioner partners of KPMG Peat Marwick were appointed joint administrative receivers of Belling and Company. The administrative receivers were appointed by the company's bank, the Midland bank.

The Company Directors Disqualification Act 1986 provides that where a company goes into administrative receivership and voluntary liquidation among other insolvency proceedings the insolvency practitioner concerned has a duty to report to the Secretary of State if it appears that the conduct of any director makes him unfit to take part in the management of a company. In order that the insolvency practitioner can have time to consider all the relevant facts the legislation allows him up to six months to make his report.

In the case of Belling, the joint administrative receivers submitted a report in December 1992 and subsequently the joint voluntary liquidators submitted an interim return on 30 September 1993 as at that time they did not have sufficient information to form an opinion as to the directors' conduct. That report was finally received by the disqualification unit on 29 July 1994.

I can confirm that the administrative receivers, but not the voluntary liquidators, did identify what they considered to be aspects of misconduct on the part of the principal directors, Mr. Belling, Mr. Clifton and Mr. Stewart. Those gentlemen were also directors of Belling Pension Fund Ltd., a trustee of the Belling Company Ltd. retirements benefits plan, and Mr. Belling was also a trustee of the pension fund in his personal capacity.

The reports submitted by the administrative receivers and voluntary liquidators were considered most carefully by the Insolvency Service's disqualification unit. Those reports raised questions about the directors' conduct, but they did not provide sufficient evidence to justify disqualification proceedings being taken against them. Any proceedings would have had to have been commenced within two years, that is, by 28 May 1994.

I emphasise that disqualification orders are made for the protection of the public but they also penalise the directors concerned. The courts therefore require a very high standard of proof before they will make a disqualification order. The Secretary of State must, therefore, decide, on the balance of probabilities and on the basis of the facts of each individual case, whether it is expedient in the public interest to commence disqualification proceedings. It would not be a proper exercise of his discretion to proceed where a sufficient case could not be made out.

In securing the passage of the Insolvency Act and the Company Directors Disqualification Act, the Government gave a statutory form to their commitment to ensure that those who abuse the privilege of limited liability—through wrongful trading—can be made personally liable, or can be prevented from enjoying that privilege for a set period by being disqualified. That power is used extensively and more than 3,000 individuals who have been disqualified bear witness to that. However, in all cases there was sufficient evidence to show that they should be disqualified, which was not so in this case.

The protection of pensioners is crucial. Since the Maxwell and Belling cases, the Government have secured the passage of the Pensions Act 1995, which should ensure that all pension schemes are properly run in the interests of their members, and that if a fraud such as that perpetrated in the Belling case occurs the scheme will receive compensation. Therefore, the Government have acted on behalf of pensioners as a result of the Maxwell and other cases. Action can be taken against trustees and directors only if they prove to be seriously negligent or fraudulent, which was not possible in the Belling case. It was open to the liquidators or the pensioners to take action if they felt that they had a strong enough case.

The real villains of this piece, Mr. Deacon and Mr. Fuller, have been appropriately dealt with and the efforts of the trustees in recovering money for the pension fund have brought about a significant improvement in the financial position. I do not see what further action my Department could take at the moment to improve the position of the pensioners on whose behalf the hon. Member for Burnley and my hon. Friend the Member for Edmonton have argued so eloquently in the House and at meetings in the Department.

It seems that the effects on the Belling pensioners will not be as severe as was first thought and that they will all receive, at the very least, the minimum guaranteed amount, and, in most cases, an amount in excess of that. I take this opportunity to wish the trustees well in their efforts to restore the fund to as near a solvent position as possible.

It being two minutes to Two o'clock, the motion for the Adjournment of the House lapsed, without Question put.

Sitting suspended, pursuant to Standing Order No. 10 (Wednesday sittings), till half-past Two o'clock.