On a point of order, Madam Speaker. I seek your advice and guidance. On page 167 of "Erskine May", the author writes:

"In the Commons no place is allotted to any Member: but by custom the front bench, on the right hand of the chair, called the Treasury bench or government front bench, is appropriated for the members of the administration. The front bench on the opposite side, though other Members occasionally sit there, is reserved by convention for the leading members of the Opposition. It is not uncommon for senior Members, who art constantly in the habit of attending in one place, to be allowed to occupy it as a matter of courtesy."

I draw three matters to your attention, Madam Speaker. First, two weeks ago hon. Members from the Conservative Opposition placed green cards on the Opposition Front Bench and attended Prayers in preparation for Scottish questions. I drew the matter to your attention, and hoped that, as I had done so, you would accept that a precedent had been established and green cards could be placed on that Bench.

Secondly, there is nothing either in "Erskine May" or in any Standing Order that I have been able to obtain that allocates any other Bench behind the Opposition Front Bench to any particular Member from any particular party.

Thirdly, accepting that there seemed to be no precedent to prevent us from doing so, my colleagues and I put green cards on a number of spaces in preparation for this afternoon's Budget debate. My colleagues came here this morning to pray in those places, expecting that that would establish their position for the business of the House today.

I seek your guidance, Madam Speaker. It is not my intention to cause difficulty today—[Laughter.]. I simply want to establish that this Parliament is in one respect different from the previous Parliament, and, indeed, from any recent Parliament, in that there is a substantial large block of Members from a third party.

With the help of the Library I looked up the records, and found that when that was last the case, in the 1920s and 1930s, the leader of the then Liberal party spoke regularly from the Front Bench. I ask your guidance, Madam Speaker, as to how the will of the electorate as expressed at the general election can be properly reflected in places in the House.

Further to that point of order, Madam Speaker. May I ask you to reflect on two things? First, the matter is one which hon. Members ought to be able to sort out without involving the Chair—as on the occasion several weeks ago, when I placed a green card in the place at present occupied by the hon. Member for Bath (Mr. Foster). The Liberal Democrat Chief Whip rang me and explained what had happened before, so I did not use the card and did not provoke an incident.

Secondly, there are occasions when an hon. Member comes to the House with a prayer card, to take a place which is later used by a senior member of his party, a matter which I hope can pass without comment. We must move on, and the Liberal Democrats should not do again what they have tried to do today.

Further to that point of order, Madam Speaker. The hon. Member for North Cornwall (Mr. Tyler) has been slightly disingenuous in his description of what happened today, and there are matters that touch directly on your authority. Having been in the Chamber since before 9 o'clock, I can describe what happened. My hon. Friend the Member for Worthing, West (Mr. Bottomley) is right that we should be able to sort out these matters, but that is not the case. The Serjeant at Arms and your Secretary came into the Chamber—making it clear that they were doing so on your instructions—and told senior Liberal Democrat Members that what the Members were seeking to do was unacceptable, as the Benches above the Gangway were reserved for members of the official Opposition, while those below the Gangway were a free for all for anyone.

Given that the Serjeant at Arms made clear to senior Liberal Democrat Members what your ruling was, it is a gross discourtesy, not to the House but to you, that five Liberal Democrats have sought to assert themselves on the Opposition Front Bench. I hope that the House will understand that the Liberal Democrat Members could have been in no doubt about your ruling. It is clear that senior Liberal Democrat Members either have not sought to assert control over junior Members or have deliberately flouted what you said.

Further to that point of order, Madam Speaker. I have been in this House for 18 years, and the system of prayer cards is an abuse of our procedures, which should be brought to an end. The reality is that many hon. Members come into the Chamber allegedly to pray, but, in fact, all they are doing is booking their seat for the day. We all know that that is true and we should stop it. I ask you to set in train an inquiry into how that matter can finally be resolved. If I want a seat in this House, I will come in and take it. If a prayer card is on the seat that I have selected, I will remove it in the event that the Member has not turned up to pray.

What happens is an abuse and I appeal to you to bring this silly practice to an end immediately.

Further to that point of order, Madam Speaker. I seek your guidance in respect of the proper construction to be placed on the passage in "Erskine May" to which my hon. Friend the Member for North Cornwall (Mr. Tyler) referred. You will be aware that the passage refers to the fact that the Opposition Front Bench

"is reserved by convention for the leading members of the Opposition."

Am I correct in saying that the convention has force only so long as it is universally recognised within the House, and that if it fails to continue to have universal recognition, its effect as a convention is diminished? Am I also correct in saying that if an hon. Member breaches Standing Orders, the Chair has the opportunity, the right and the obligation to exercise certain disciplinary powers? If there is a breach of convention, am I correct in saying that those powers are not available to the Chair?

Further to that point of order, Madam Speaker. In respect of the convention described by the hon. Member for North Cornwall (Mr. Tyler), the critical issue is that it is defined by reference to the reason for the rule. The reason for the rule is, undoubtedly, to allow the proper conduct of business in this place. The official Opposition sit where they always do to deal properly with the business of the House. In that context, the Liberal Democrat Members are out of order, as the business of the House cannot be conducted if they remain in their place.

Further to that point of order, Madam Speaker. Unless I misheard him, the hon. Member for North Cornwall (Mr. Tyler) said that, from time to time, the Opposition Front Bench could be occupied by senior Members of this House. I am looking at Liberal Democrat Members, and in no circumstances could any of them be described as a senior Member of this House. Am I right that the success of Parliament and this House of Commons—and of this Chamber in particular—is based upon convention, tradition, precedent—

Trust.

My hon. Friend is right. Is it not time that tradition, trust and precedent—which have led to the success of this House and made it the envy of the world—were implemented and honoured again?

Further to that point of order, Madam Speaker. I hesitate to intervene in a war on the Opposition Benches, but it does not really matter where a person sits for Prayers, because the Lord is no respecter of persons. However, it does matter for the convenience of the House. Therefore, it is proper for the official Opposition to sit in the appropriate seats. Equally, with a degree of good will on all sides, Benches should be reserved for the enhanced numbers of Liberal Democrat Members, and those Benches should properly be those above the Gangway. With a degree of good will on all sides—and without bothering you, Madam Speaker—the House can surely reach a decision.

Further to that point of order, Madam Speaker. As you know, I am a very tolerant person, but it seems to me that common sense would dictate that we have either reserved seats or a free for all. I do not mind which it is, but it must be one or the other. We cannot have seats reserved for some and a free for all for others.

Further to that point of order, Madam Speaker. I am not sure whether Prayers have made us any better tempered. I wish to refer to the Dispatch Boxes. I have not been a Member for as long as some of the earlier speakers, but I understand that the Dispatch Boxes play a special role in the life of the House. It is traditional for Ministers to speak from one Dispatch Box and for the Leader of the Opposition, or his nominated subordinates, to speak from the other. Would it not be inconvenient for the House if the Leader of the Opposition and his immediate subordinates had to put prayer cards in each day to have access to the Opposition Dispatch Box?

Have hon. Members finished with their points of order? Good.

It is custom and practice that the Opposition Front Bench is reserved for the official Opposition, and I shall see that that is maintained. It is also custom and practice that the area below the Gangway is for the minority parties. I shall look at all the points of order that have been put to me this morning, but I have never known grown-up people to behave—[Interruption.] I want my voice to be recorded. I have never known grown-up people to behave in such a crass and childish manner. I think that it is time that Members of this House grew up. If they do not, I shall want to see the leaders of the Conservative and Liberal Democrat parties very soon.

I hope that those Members now on the Opposition Front Bench who are not members of the official Opposition will do me the courtesy of removing themselves right now while I am on my feet. [HON. MEMBERS: "Hear, hear."]

I am taking no further points of order. We have business in this House, and I hope that hon. Members will resolve this in the next hour and behave in a more adult fashion. I am ashamed of this morning's proceedings.

On a point of order, Madam Speaker.

Is it on another matter?

No.

No, it cannot be on the same matter. I have made my ruling.

May I take the House back to the less contentious issue of high street shops? I am grateful to the Minister for Small Firms, Trade and Industry for coming to the House to spend some time on these important matters. The issue may not be highly charged politically—and I do not want to make a highly charged party political speech of any kind—but it is important, early in the new Parliament, to recognise that there are problems facing small family retail businesses, particularly in the high street, throughout the United Kingdom. It is also an appropriate day to raise the matter, because the Budget may have significant ramifications and consequences for small retail businesses. The Minister has time to nip across the street before lunch and insert the odd paragraph in the Chancellor's speech. The importance of the financial or economic context in which small retail businesses must survive should be recognised.

At the time of the election, going around my constituency in south-east Scotland, I was struck by the number of people who were concerned about the blight that they felt was beginning to affect some high streets. They spoke of the acute need for support for the built environment throughout the nation. When I made further inquiries, I was surprised to find that that feeling existed not just in south-east Scotland, but throughout the country.

The Government said in their election manifesto that they were anxious to give small businesses a major role, and I hope that the Minister will recognise that retail shops are an important part of the small business sector. I am not talking about rural or village shops, or post offices; their needs were addressed in the previous Parliament. Nor am I thinking of shops in small towns. In the previous Parliament, the Select Committee on Trade and Industry produced a valuable report on larger conurbations; we await the Government's response, which I hope will be positive and will give succour to small retail shops. I am more concerned about small communities—market towns such as eight or nine in my constituency, including Hawick, Kelso and Jedburgh—containing between 5,000 and 15,000 people. The economic centre of such a community is its high street, where historically—for centuries, in many instances—the retail sector has existed.

Those high streets are the backbone of the local community, functioning as a social meeting place as well as providing retail goods. People need a place where they can meet and exchange news, views and gossip. Social intercourse is as important to the local community as the business that is done in the high street. In my constituency, there is a real danger of blight in such areas. Blight is a pretty drastic word, but the situation is now serious.

Once the problem had been drawn to my attention, I took note of what had happened in the recent past. One of the difficulties that bedevil the Government relates to the collection of statistics about, for instance, turnover and closures. There are some statistics—small newsagents have been monitored carefully by their trade association, and the community pharmacy campaign has been investigating individual sectors—but I suspect that the Government will find it hard to establish the way in which the trends are developing and the problem is building up.

There is anecdotal evidence, however. Anyone who wanders along the high streets of the United Kingdom will see that the atmosphere of diversity, wealth and colour is not what it was. Most premises are occupied either by banks and other financial institutions or by off-licences, which are doing very well. I know that the Government are concerned about that. There is an increasing number of charity shops, which is also causing concern.

The reasons for what is happening are many, varied and complicated. As I said at the outset, the Budget is an important part of the equation: the economic climate is a vital aspect. In my area, there are signs that things are beginning to pick up. Long may that continue, and I hope that the Government will use this afternoon's Budget statement as an opportunity to promote such developments.

Sociological factors are also having a dramatic effect on the high streets. Increased mobility enables people to travel further in order to shop and I fear that the situation will get worse before it gets better. Competition from supermarkets has also had an effect. In some market towns, there is a supermarket at one end of the high street—serving a useful function, it must be said—and an open market with a car park at the other end, functioning at the weekends. Twin pressures are exerted by the organised power of big commercial businesses such as Sainsbury, and competition from market traders and stallholders. Those pressures may have been underestimated in the past. Transport policy is another problem. The difficulty of convenient parking on the high streets is a major disincentive: in the past, people were much more willing to walk to and from shopping centres.

One of the main reasons why some high streets have suffered so much is that, because of financial constraints, local authorities have found it difficult to organise strategies to enhance local areas and underpin the high street environment. I hope that, if it achieves nothing else, this debate will lead to the recognition that not just central Government but local authorities have a vital role to play. I hope that the Government will acknowledge that. I also hope that central Government and local authorities will consider the effect of non-domestic and water and sewerage rates on the economic viability of some small family businesses.

I know that it will not be easy, but it would be a real step forward if a tax system could be established for the small retail sector that was more directly related to profitability. At present, if some of the small family businesses in the high streets of my town were required to pay rates on the basis of what they had earned at the end of the year, they would be receiving handouts from the local authority. Some are on the very margins of profitability. The issue is not simple and it is not new, but this Parliament should give it urgent attention.

Local authorities have an important function in setting the rules for planning and development. The previous Secretary of State for the Environment, the right hon. Member for Suffolk, Coastal (Mr. Gummer), is a man with whom I have little in common, but he did some sensible work—perhaps too late—in trying to redress the balance between town centres and out-of-town supermarket development. The physical environment is extremely important for our high streets.

Tourism is an extremely and increasingly important industry and is promoted by a positive high street environment. Tourists look forward to being able to take advantage of a pleasant and interesting high street; those in south-east Scotland are not finding what they expect. We ignore at our peril the impact on the tourist industry of letting our market town centres fall into too much decay.

Corner shops and high street shops are increasingly a soft target for crime. The plate-glass window is an inviting target on Friday nights when people have drunk too much and are showing youthful exuberance, to put the kindest possible construction on it. The insurance companies have begun to put enormous premiums on replacing those windows, some of which are curved and extremely expensive. That knocks the stuffing out of family businesses that have to replace glass at great cost three, four or half a dozen times a year and to pay increased premiums. That is dispiriting, debilitating and demoralising.

In the middle term, the next 10 or 15 years, we face the prospect of additional pressure from electronic shopping. Information technology is moving on and we have electronic banking. The President of the United States was properly encouraging people to think about global marketing for small companies, and there may be some advantages in that, although I do not see how the sale of children's shoes in the high street could gain much benefit from access to the Internet.

None of those points will be new to the Minister, but they are worth putting on the record. The problems are getting worse and putting increasing pressure, day by day and month by month, on people trying to earn a living as retailers in small market towns.

My constituents are concerned about charity shops. I understand the emotional reaction, as people are worried that their high streets and market squares are being taken over by those shops and feel instinctively that they are responsible for the degradation. That analysis is superficial and wrong, because charity shops have a valuable role to play.

My generation and that of my parents and grandparents had more extended families and a hand-me-down system of recycling children's clothes, and five or 10 years ago some local charity shops were offering a valuable service in replacing that system, but things have moved on a long way since then and major national charities with big merchandising departments now take advantage of rate relief and the empty spaces in our high streets. Of course, we all support the causes for which they raise money, and I recognise, because they tell me so with monotonous regularity, that they are also under great pressure because of the national lottery.

The extent to which charity shops are filling gaps in high streets is beginning to be a matter for concern. The Government should examine carefully some of the rate exemption rules and whether they are being observed as punctiliously as they should be. I have no evidence for it, but my constituents feel that charity shops are taking unfair advantage of some of the exemptions.

Charity shops have an indirect impact on the downward spiral in high streets because they can afford rents that would fall if they were not there; in their absence, the owners of empty shops would be prepared to consider rent reductions to a level at which a bona fide small family business would be viable. They are unwittingly distorting free market processes.

We do not want to be antipathetic to charities and we want to keep the best of what they provide in our high streets, but we must recognise that there are now too many of them and that they have an indirect collective effect on the economies of our high streets.

I accept that it is not easy for the Government to have a hands-on, direct impact and transform the situation overnight—there are many underlying causes of the problem and the background is complex—but will the Minister acknowledge that there is a difficulty? I am sure that she does not need any extra tasks, but I hope that she will commit herself to a serious examination of the problems and lend a listening ear to those in the sector.

One of the problems that bedevil the sector is the fact that it does not have a united voice and an overarching view; it does not have access to the public relations machine of Sainsbury and other supermarket chains. The Federation of Small Businesses does valuable work, but it finds it difficult to bring together the many strands of the sector to give it the authority that it would like.

Will the Minister explain how the Government intend to deal with the cross-departmental nature of the problem? She is not in control of crime or local government, so the House would be grateful if she could explain how the different departmental perspectives can be brought to bear on the problem. On Budget day, we do not need to be told again that there are difficulties with money, but a little pump priming could go a long way.

A cross-departmental task force would give us some confidence that the Government are serious about dealing with the situation, although I know that they are reviewing much of the legislation, and one would expect nothing different from a new Administration, after 18 or 19 years of government by another party.

Although others have tried before her, will the Minister consider the problem of how non-domestic rates are unrelated to profitability? We have precious little time to find a solution to that, if we are to make some positive improvements to the lot of small retail businesses. The Minister should consider the use of local partnerships, probably spearheaded by local authorities, which could be pump-primed. That would enhance the built environment. Local enterprise companies also have a role to play in encouraging small projects to renew the built environment of high streets.

It is a hard but important task. I hope that the Government will commit themselves to studying the matter seriously during the current Parliament. They should work with those who represent the needs of small businesses in high streets to make some progress. I know that my hon. Friends and I will be constantly at the Government's shoulder to put pressure on them at every opportunity, so that the problem can be addressed robustly and effectively in the years to come.

Thank you, Mr. Deputy Speaker, for allowing me to speak in this important debate, which has great relevance to the people of Motherwell and Wishaw. I agree with much that the hon. Member for Roxburgh and Berwickshire (Mr. Kirkwood) said: there is a need for a coherent policy for town centre regeneration.

The need for a coherent policy to encourage small retail shops is abundantly clear, especially in the main street of Wishaw. The retailers of Wishaw have been left to pick up the crumbs left from years of industrial decline and falling disposable incomes. At the same time, they have had to face the problems of spiralling overheads and a dwindling customer base.

The debate also allows me to make my maiden speech in the mother of Parliaments. I have the great honour to be elected as the first locally born and bred Labour party Member for the constituency of Motherwell and Wishaw. To be able to represent the community in which one has been brought up and where one lives is a great honour and it is a source of great pride not just to me, but to my family, friends and neighbours.

I should like to acknowledge the members of the Motherwell and Wishaw constituency Labour party who worked tirelessly for my election. I should also like to thank the voters of Motherwell and Wishaw who gave me and my party their trust on 1 May. I look forward very much to working on their behalf in the years to come.

The man whose footsteps I follow, Dr. Jeremy Bray, is not only my predecessor but a close family friend. I was his parliamentary election agent in the general election campaigns of 1987 and 1992. I am sure that all hon. Members would like to join me in wishing Jeremy and his wife, Elizabeth, a long, happy and healthy retirement.

Jeremy Bray was born in Hong Kong in 1930. He enjoyed a truly global education, which started at Eastnor village school in Herefordshire. He then attended Clefoo missionary school, China; Aberystwyth grammar school; Kingswood school, Bath; Jesus college, Cambridge and, finally, the illustrious Harvard university. He was a journalist, economist, mathematician and author.

Jeremy first entered Parliament as the Member for Middlesbrough, West in 1962. In 1965, he led the campaign against cigarette advertising. It seems that it has taken some of us nearly 32 years to catch up with Jeremy's advanced thinking.

My predecessor enjoyed various stints as Parliamentary Secretary—in the Ministry of Power in 1966 and in the Ministry of Technology in 1967, a post which he held until his resignation in 1969. He lost his seat for Middlesbrough in the 1970 general election, but re-entered Parliament as the Member for Motherwell and Wishaw in October 1974. Later, the constituency was renamed Motherwell, South. He was reappointed Labour's science and technology spokesman in 1989 and held that post until 1992.

To me, Jeremy Bray's finest performance in the Chamber was in April 1990 when, still recuperating from a life-saving heart bypass operation, he determinedly turned up to speak in defence of his constituency steelworks at Ravenscraig. Those works and its 10,000 steelworkers ultimately suffered from what they described as a death by a thousand cuts. To his great credit, Jeremy fought against every cut along the way. I had the honour and privilege to be Jeremy's parliamentary election agent and I now have the even greater honour of being his successor.

Until recently, Motherwell and Wishaw was at the heart of industrial Scotland. Indeed, to many we were the heart of it. The area played an integral part in a proud industrial heritage. That heritage gave conception to the famous steelworks of Lanarkshire, Dalzell, Clyde Alloy and Ravenscraig. They all played a crucial part in the manufacturing sector of Scottish life but, today, after years of dereliction, only Dalzell remains in operation.

The steelworks had a fiercely proud and efficient work force who prided themselves on their steel-making expertise. Indeed, as a Ravenscraig steelworker for 14 years, I hope that in my new parliamentary career I am able to find the same level of friendship, honesty, professionalism and dedication among my fellow parliamentarians as I did among my fellow steelworkers at Ravenscraig.

When those same steelworkers were about to retire or be made redundant, they used to say, "Listen son. You can take the man out of the steelworks but you can't take the steelworks out of the man." How right they were.

Motherwell and Wishaw, and Lanarkshire as a whole, might have lost the steelworks, but we have not lost our steel determination to rebuild our communities and create a new dynamic base for the manufacturing service sectors that will become the new heartbeat of our resurrection from industrial decay and decimation. Our small retail shops have a major part to play in that resurrection.

The regeneration of Motherwell and Wishaw, and of Lanarkshire, has already started. Inward investors realise the potential of an area where workers have shown their ability to adapt to modern technology and work practices. The area, which is at the heart of west central Scotland, is rich in skilled labour and modern purpose-built units and has a first-class infrastructure. It is an area in which people look after their neighbours and recognise the importance of family ties. They genuinely want to create a better life style for their children and their children's children.

Motherwell and Wishaw is made up of two towns with their own distinctive areas. Forgewood, Jerviston, Flemington and Muirhouse are among those in Motherwell and Craigneuk, Netherton, Coltness and Pather are among those in Wishaw. The constituency is also home to the old mining communities of Cambusnethan, Waterloo, Overtown, Carfin and New Stevenston on its outer edges.

As hon. Members have probably gathered, Motherwell and Wishaw is not an area of leafy country villages and rolling meadows, but it is a constituency with a heart and with feeling. It has a steel determination to rebuild itself for the new century and the new millennium. As a new Labour Member with a new Labour Government, I very much look forward to playing my part in its resurrection.

I congratulate the hon. Member for Motherwell and Wishaw (Mr. Roy) on his maiden speech. His comments about Ravenscraig will have struck a great resonance in many of Cornwall's tin miners, who suffered at the same time—it was not that long ago. I remember our feelings of solidarity with that part of the country although, of course, we were a long way away from it.

Small family retail shops have been the mainstay of shopping centres for decades and have provided jobs that contributed directly and indirectly to the local economy. Until recently, a number of small shops in my constituency took produce from local suppliers up and down the Tamar valley, where small horticultural operations provided them with fresh fruit and vegetables, but the rapid decline of the small shops and the prosperity of our town centres has knocked out many small horticultural operations and so caused even more job losses. The combination of high rents, the foolish introduction a few years ago of so-called upward only rent reviews, the imposition of the uniform business rate and the extraordinary growth of out-of-town supermarkets even in very rural areas have all contributed to the loss of small retail concerns from our high streets.

The latest competition, as my hon. Friend the Member for Roxburgh and Berwickshire (Mr. Kirkwood) mentioned, comes from charity shops. I am certainly not against charities trading in the high street. In many respects, they provide a useful service to the community, but their enormous growth in recent years has had some detrimental effect. They have affected some towns in Cornwall, where they have put out of business long-standing second-hand shops and shops that traded in used furniture. They are helped by their ability to use voluntary labour and to receive business rate relief. They sometimes pay higher rents, but they can also pay lower rents because of the value of covenants on leases. Many landlords greatly value the opportunity of leasing premises to a national charity rather than to a small family firm that may be considered vulnerable. All that makes for uneven competition.

Many local councils try to raise additional income—using one of the few means possible—from their car parks. As local councils' responsibility for the rates of retail operations has been removed, they have raised car parking charges. Perhaps they have had slightly less interest in the health and prosperity of the main street because of the operation of the uniform business rate. Not unnaturally, more shoppers choose to avail themselves of free parking in out-of-town centres, being unwilling to pay ever-increasing car parking charges in our towns.

Sales by small retailers have declined considerably over the past 10 years with the rise in out-of-town retailing, and more and more in-town units are being left empty.

I agree with my hon. Friend about the effect of the uniform business rate on smaller towns. Does he agree that a significant problem for market towns in constituencies such as ours is that they fall between the assistance that is available from the Rural Development Commission, rural development area status and so on, and the urban programmes that apply to larger towns? While that does not fall within the responsibility of the Minister, she may wish to make that point to her colleagues. Our market towns are suffering from competition from larger conurbations.

I agree with my hon. Friend. That is one of the many issues that need to be addressed in a comprehensive review.

The situation in the high street has been made worse recently by the amalgamation of building societies, some of which have moved from the high street, and the reduction of the number bank branches. Often, such units are harder for ordinary retailers to occupy. They stand empty, gathering dirt and dust and creating blight on the high street. Town centre planning policies must take account of those new developments, which affect almost every high street in every town. They are changing the shopping scene and the way in which we use our high streets.

I hope that the Government will urgently consider ways to support the remaining small retailers. They have a distinct function, particularly in respect of competition. They are fighting a difficult battle, but if there is not to be a further drift to what would be almost a monopoly for the large supermarket retailers, which now have some 60 to 70 per cent. of all retail sales, some provision needs to be made for small retailing units in our high streets.

The former Government recognised the problems of small village post office stores. Many grateful post office storekeepers in my constituency were very pleased. Although it came rather late in the day and was rather modest, that initiative addressed the problems. Virtually the same problems are hitting our high streets. Some towns are considering the use of town centre managers to co-ordinate the activities of retailers in the high street by bringing them together to market themselves more forcefully to local consumers to provide some measure of competition for large out-of-town retailers, but they need additional assistance. If the retailing centres that form a valuable part of our smaller towns are not to decline further and family businesses are not to continue to close, they need support.

This has been an important and interesting debate. I congratulate the hon. Member for Roxburgh and Berwickshire (Mr. Kirkwood) on having chosen the topic. I thought that the debate would range far and wide, and it did, but it focused on some real concerns. Many issues were raised and much of what the hon. Gentleman said chimed with what was said by other hon. Members. I hope to be able to respond as fully as possible. The headline topic for this debate is small retail shops. The feelings expressed by many hon. Members show how socially essential we believe small independent retailers can be.

We had the privilege of hearing the excellent maiden speech of my hon. Friend the Member for Motherwell and Wishaw (Mr. Roy). He paid a sincere and well-deserved tribute to his predecessor, who is a friend of us all. I have no doubt that what he said about his constituency, his pride at having been born and brought up there and his great feeling for the area will mean that over the years he will be a fine and able representative and make an outstanding contribution to the work of the House. We also heard a good contribution from the hon. Member for South-East Cornwall (Mr. Breed), who echoed some of the concerns that have been mentioned.

The contribution of this vital sector is important. Small retail shops provide the variety, choice, vitality and diversity that consumers desire. It is that vitality, diversity and convenience which the public—the people we represent—miss so much when those shops disappear. I shall explain later how the new Government are determined to improve matters by forging an effective partnership with all sectors of business in this country.

I shall first put the United Kingdom's retail sector into context. Retailing is vital to our economy. Sales of about £160 billion mean that it accounts for almost one quarter of gross domestic product expenditure. Retailing gives direct employment to almost 2.5 million people, with many others providing services to support that activity. The retail sector also accounts for more than 30 per cent. of the UK's commercial property portfolio. Those are impressive statistics.

It is helpful to place the sector in context and show its importance and value, but is the Minister satisfied that the statistics available to her are disaggregated to the extent that she can identify what is happening in the high street? The statistics are important and powerful, but I suspect that the vast majority of that value is generated by much bigger businesses than some of those on which we are focusing this morning.

It is interesting that those independent outlets contribute about 25 per cent. of the figure—they play a significant part.

Today's debate has provided us with an opportunity to acknowledge the significant part that small retailers play in our day-to-day lives. Many people enjoy having the daily newspaper delivered through their front doors, although I suspect that hon. Members' enjoyment depends on what the daily newspaper has to say. Unlike the independent newsagent, however, we do not have to get up at 4 or 5 o'clock in the morning to organise deliveries. At the other end of the day, when people drop in at their local convenience store to buy essential items that they need, they may meet a shop owner who has already been working for more than 12 hours. It is a hard, competitive and difficult life. As the hon. Member for Roxburgh and Berwickshire and others have said, competition from larger supermarkets and other retailers has made business even tougher.

The hon. Members for Roxburgh and Berwickshire and for South-East Cornwall mentioned the problem of crime, which is a real problem for many of our small retailers. The Forum of Private Business, one of our small business organisations, has done a great deal of valuable work on this subject, which is a matter of concern. There clearly needs to be close co-operation between the police, local authorities and the business community to ensure that our town centres are as safe as possible. I know that when my right hon. Friend the Home Secretary introduces the crime and disorder Bill in the near future he will have those considerations very much in mind.

The reasons why retail competition is so strong are as many and varied as the topics in today's debate. Changing life styles and expectations, differing family circumstances, new product ranges and consumer services, the growth of supermarkets and other large stores, have all combined to produce a dynamic sector. If one stands still in retailing, as in any business undertaking, one loses ground.

The Minister spoke about crime, a subject which causes as much concern in small shopping centres as in large town centres. The outgoing Administration made grants available through the Home Office for closed circuit television in many centres. Does the Minister agree that that programme should be developed and extended in future? There is plenty of scope for partnership between local authorities, retailing organisations and local traders groups, but financial prompting is often needed. Perhaps the Government will see their way to providing it.

In opposition, we always supported closed circuit television, which can be very useful. In the Wood Green shopping area in my constituency, we are about to install closed circuit television after an enormously successful pilot project. A possible assault on a police officer was prevented and a missing child was returned to its parents. I agree that close co-operation between all the major players is necessary and I will bring the hon. Gentleman's remarks to the attention of my right hon. Friend the Home Secretary.

While considering the good things that the sector has to offer, we must acknowledge that there has been a substantial reduction in the number of retail businesses in the past 10 years. Almost 50,000 retail businesses have disappeared in that time, the vast majority of which have been single shops. While some of those businesses may have been taken over by larger retailers, the hon. Member for Roxburgh and Berwickshire graphically described, through the example of Hawick, what many hon. Members will also know from their constituency mailbags and surgeries—that a large number of those small retail businesses have been forced to close. That has brought severe hardship to the shop owners and their families, as well as in many cases the loss of lifetime savings and even retirement nest eggs. The policies of the previous Administration have certainly contributed to the pain suffered by independent retailers.

I do not intend to dwell at length on the failures of the previous Administration, but I feel that I must comment on the approach taken to planning policy, an important subject which the hon. Member for Roxburgh and Berwickshire outlined. The latter part of the 1980s saw a virtual free for all on retail planning which led directly to the disappearance of high street diversity and a reduction in consumer choice. I acknowledge that two attempts were made in this decade to reimpose tighter retail planning guidelines and that the sequential test for new retail shopping developments, together with impact assessments, now provides local planning authorities with a much sounder base against which to judge planning applications.

As my ministerial colleagues have made clear, we do not propose to review the English retail planning guidelines at present, although we are concerned to see them applied firmly and consistently and to monitor their effectiveness. However, the review of the Scottish retail planning guidelines which started in March is continuing.

Those stricter guidelines were too late, however, to save many small independent retailers. It was a classic case of leaving the stable door open for too long. While I accept that consumers have welcomed some of the new out-of-town developments, the consequences of the then Government's planning guidelines for small high street retailers cannot be over-estimated. There are too many examples of shopping centres and high streets closing. People do not go to areas where there are boarded up shops, and a vicious circle is created. People do not want to go to shops in those areas, so the shops close and crime proliferates. We all have experience of that as constituency Members of Parliament.

What do the new Government want to do? First, we have made it abundantly clear that we regard small firms as vital to the success of an enterprise economy. A healthy, vibrant small business sector creates wealth and employment and generates new ideas and products—small retailers fall within that category. We are determined to deliver the right conditions so that small retailers and other small businesses can thrive and grow.

The Government are firmly committed to making Britain a prosperous and competitive nation. Last month, my right hon. Friend the President of the Board of Trade outlined the Department's agenda to achieve that. It is a programme to forge a real and effective partnership with business. The "Competitiveness UK" agenda comprises a number of different elements and I assure hon. Members that the role of small and medium-sized enterprises, especially small retailers, will be part of that agenda.

Unified business rates have been mentioned today and there is no doubt that the system is widely disliked and perceived as being unfair. That message came out loud and clear at the "Your Business Matters" conference set up by the previous Government. It also emerged from the report undertaken by the Institute of Directors, which brought together some of the comments made during that consultation process. The small retail sector has certainly had to bear the burden of that system.

We are committed to carrying out a full consultation with the business community about returning to a locally set rate. One of the advantages of localising the system is that it gives a locus for the major partners—local authority, police and business community—to get together on many issues, such as closed circuit television, cleaning up town centres or other exciting initiatives in the high street. Where the local authority, police and business community—especially the small retail sector—all work together, the effect in terms of delivering an enhanced service cannot be underestimated and we strongly support such collective efforts.

Several hon. Members mentioned the growth of charity shops—an issue which is frequently raised by the retail sector. Our debate has been a well-balanced one and it has been acknowledged that the alternative to the presence of charity shops would probably be vacant premises, boarded-up shop windows and a generally rundown appearance. However, I also understand the strength of feeling among small retailers who regard charity shops as unfair competition.

This is a sensitive issue and Parliament has previously recognised the importance of charity shops to the fund-raising efforts of charities. In the United Kingdom, we are proud of the generous support that so many people give to various charities. Specific legislation allows, in certain circumstances, a partial and discretionary relief on rates. Charity shops are, of course, a valuable source of revenue for the charities concerned and I am sure that we have all seen reports of how charities' funds have dropped dramatically recently. Charity shops often enjoy the benefits of being staffed by volunteers and of reduced rentals for the property.

I can only say that we have no plans at present to change the current overall position on charity shops, but we will keep in close contact with hon. Members on both sides of the House who wish to raise these issues and with the business community in general and the small retailers sector in particular.

I have already touched on town centre improvements. Combinations that bring together local authorities, police, business, chambers of commerce and other organisations help town centres to grow and prosper.

We will also work within Europe to ensure that British views are heard and respected. We will shortly complete the Government's response to the EU Green Paper on commerce, which was published late last year. Cross-departmental work was mentioned and I assure the House that, in co-ordinating the Government's response, we are ensuring that such work and consultation take place.

We shall also be seeking other ways to help the UK retail sector where resources permit. I was very pleased that among the recent announcements of winning bids in the sector challenge was a successful bid from the Booksellers Association. The Booksellers Association project is based around improving members' competitiveness by creating an Internet site which delivers information both to members and to the public. The association has a broad membership of which some 2,000 are single site shops and a key objective of the project is to ensure that those small retailers add value to their businesses by helping them to compete more strongly.

We are also considering a proposal for support for a project aimed specifically at small grocery shops. The project will aim to increase the awareness of the benefits of using modern technology in those shops. I am sure many hon. Members will wish to join me in paying tribute to the small grocery shops which, in many towns, are the cornerstones of their communities and, moreover, are now run by members from our ethnic minority communities. They make a great contribution not only to the commercial viability of our towns and villages, but to the social fabric of our lives. Pensioners and other people who may not have ready access to a car find such shops extremely helpful.

New technology has been mentioned and I believe that it can play a significant part in the lives of small retailers. I recently visited a well-established, family-run business in my constituency and went behind the scenes to see how everything was baked fresh on the premises. New technology is playing its part in that business.

Has the Minister's Department considered the potential of lottery terminals which, for better or worse, are in many shops nowadays? They are an underused information technology connection which could provide a much wider shop floor to isolated or small shops. Is that something her Department has considered?

No, but I was about to say that in our manifesto and in the documents on the small firms sector that we produced in the run-up to the general election we discussed our ideas for what we called the enterprise zone, whereby small and medium-sized enterprises could be put on-line with a dedicated site on the Internet. In that way, small businesses would have access to information that might be of great use to them. If the hon. Gentleman will write to me on that subject, I shall be only too pleased to consider his comments and bring them to the attention of my right hon. Friend the Secretary of State for National Heritage. Plans for the enterprise zone are under way and the hon. Gentleman may find the proposals of great interest when they are launched.

The Government are also pushing forward with help for small retailers in respect of training. Advice and support are, of course, available to all firms through training and enterprise councils—local enterprise companies in Scotland—and business links. Small firms may receive assistance to improve their in-house capacity to train or to work towards the investors in people standard. We certainly want to see more initiatives to help the independent owner-manager, because in the past owner-managers have been somewhat left out of some of the training initiatives. As the Minister responsible for small firms, I am concerned to ensure that we do not forget the training and skills that owner-managers wish to acquire as their businesses grow and prosper and they want to move forward.

A number of projects are already examining the needs of small retailers. Five projects involving groups of small retailers, under the skills challenge, are nearing completion. Meanwhile, a management development project currently under way in Lincoln aims to design and deliver a retail management development programme for owner-managers of small retail outlets. The programme also involves branch managers of larger retail organisations in Lincoln and the surrounding areas. The programme draws on sector standards and aims to improve the competence of the participants, thereby helping them to improve the performance and competitiveness of their stores. I welcome such projects. There is much to be gained in retailing and other aspects of business life from small and large firms working together for their mutual advantage.

We have had a very good debate today, although it is difficult to do full justice to the importance of the independent retail sector in such a short time. I nevertheless thank the hon. Member for Roxburgh and Berwickshire for bringing the subject to the House today; I also thank other hon. Members for their positive contributions.

I hope that I have shown that the Government are already taking action to help small retail shops and are determined to push on by tackling other areas such as business rates. That will involve many Departments working together in the type of co-operative initiative for which the hon. Gentleman has called. We shall make sure that that co-operation is enhanced; our response to the EU Green Paper on commerce gives us the context in which to do that.

There is clearly a great deal of interest in the House in this subject. We will certainly give it the full attention that it deserves. Our small shops are vital to life in the United Kingdom, and they deserve our support—and the support of constituency Members of Parliament at local level. I can assure the House that the Government will give these shops all the encouragement that they need to enable them to succeed: they deserve no less.

On a point of order, Mr. Deputy Speaker. May I draw to your attention a very serious matter relating to the deliberate release of information about the contents of the Budget to journalists before the Budget has been delivered to the House? Can you confirm that the last time that a Labour Chancellor deliberately released contents of the Budget that he was about to deliver in the House he subsequently felt honour bound to resign as Chancellor of the Exchequer?

Earlier today, I was contacted by journalists who told me that they had received explicit confirmation from the Treasury that the Budget would, among other things, include the abolition of tax relief on private medical care for the half a million elderly people in this country who provide for themselves. There is, I think, no precedent for the Treasury giving such advance briefing on such matters, and in today's Financial Times there is a statement that, following market stories about the possible abolition of advance corporation tax credit,

"A senior member of the government said: 'The markets are bonkers … we are pressing ahead.

This is, of course, an extremely market-sensitive matter, as well as a matter affecting the authority of the House. Can you confirm that when, in the past, the contents of Budgets have been leaked by those who have not been authorised to do so, there have been police investigations of the matter? Would it not be appropriate in this case that you or Madam Speaker authorise an investigation, establish who is the

"senior member of the Government"

who has been leaking matters to the press on highly price-sensitive issues, have them brought to the House and have the details of your investigation brought to the House, so that we may know why the Treasury is now behaving in such an extraordinary fashion for which there is no satisfactory precedent?

Further to that point of order, Mr. Deputy Speaker. On the occasion in 1947 when something similar occurred—leading to the resignation of Sir Hugh Dalton—subsequent to the matter being raised in the House a Select Committee on the Budget Disclosure was set up. As things develop today, as the information becomes clearer, would you not accept that that course should be followed and that the matter should be thoroughly investigated, because this is not only a matter which affects the markets but a great contempt of the House?

Further to that point of order, Mr. Deputy Speaker. You may recall that in September 1996 it was widely leaked in the press that profit-related pay would be phased out in the November Budget—which did happen—allowing a large number of companies to set up PRP scams before the Budget. No disciplinary action was taken against the Ministers responsible and no investigation was undertaken by the House or by the Treasury. This is synthetic froth; the House should get on to the debate.

First of all, it is not the responsibility of the Chair to rule on matters which occurred in the past. As to the present matter, it seems to me that it is a Government matter and not one on which the Chair can rule as to what has happened. Ministers will have heard what has been said and doubtless there will be opportunities, today or subsequently, for further comment on the matter.

Now.

On a point of order, Mr. Deputy Speaker. You will be presiding over the Budget statement this afternoon and in your capacity as Chairman of Ways and Means you must surely be deeply disturbed by what has been said by my right hon. Friend the Member for Hitchin and Harpenden (Mr. Lilley). May I ask you to suspend the sitting to make investigations and then to report back to the House as to whether you are satisfied that the Budget has been leaked? If it has, it is a situation wholly without precedent because, despite what my hon. Friend the Member for Stone (Mr. Cash) correctly said about the late Dr. Dalton, the circumstances in that case were very different.

I do not believe that this is a matter on which the Chair can rule. If the alleged leak has taken place, it is a matter for the Government to pursue; it is for the Chair to determine that the Budget statement will still be delivered in the normal way.

Further to that point of order, Mr. Deputy Speaker. I entirely accept that this is a matter relating to the Government, in that the Government are the culprits, but the point made by my hon. Friend the Member for Stafford—

Stone.

I am sorry. The point made by my hon. Friend the Member for Stone (Mr. Cash) was that on previous occasions such things have been dealt with as a matter for the House and investigated by a Select Committee of the House. Surely it would be appropriate to consider whether we should take similar procedures on this occasion to investigate the deplorable insult to the House and the dangerous treatment of the markets by the Government.

Further to that point of order, Mr. Deputy Speaker. What is the position? No allegation has been made by a member of the Opposition that the Chancellor of the Exchequer leaked the Budget. That has not been alleged. What has been alleged is that some minor official in the Treasury may have made a statement that was subsequently commented on by a member—possibly—of the Government to a journalist. In other words, we have a series of hearsay statements which the Opposition are seeking to turn into a major scandal. They will fail.

Further to that point of order, Mr. Deputy Speaker. The hon. Gentleman may be unaware that the Financial Times states:

"A senior member of the government said".

It was not an official. As you will know, Mr. Deputy Speaker,

"A senior member of the government"

is the code for the Chancellor himself.

This is not an matter that can be debated at this moment. There is a subject for debate before the House at present. I do not believe that it is for the Chair to rule as to whether subsequent action is taken. Any decision which might or might not be justified for the purposes of investigation by a Select Committee or any other means would not be determined by the Chair.

Obviously, there will be other opportunities for such a matter to be raised if it is justified, but I can see no point in these proceedings continuing further at this time. We must move on to the debate.

I was delighted to see the full attendance by Opposition Members for the debate; I thought that, after 20 years of maintaining an overvalued exchange rate, they had actually come along en masse to testify to their conversion to a belief in competitive exchange rates. Now that they are leaving the Chamber because they cannot face hearing the catalogue of their failures, I am a little disappointed, especially because this is an extremely important subject—potentially more important than this afternoon's Budget statement in its effects on the British economy. I am delighted, therefore, to have the opportunity to draw attention to it in this debate.

We are facing an unprecedented increase in the pound sterling exchange rate—in other words, in the competitive price of our exports on export markets—which has taken us back to the levels that we were at when we were in the exchange rate mechanism. The pound is now at a five-year high. That is the prelude, in my view—in my fears—to an industrial blood letting of the type that the two previous highs, in the early 1980s and the early 1990s, produced in British manufacturing.

The exchange rate has the potential to undermine anything that the Chancellor does. Unless British industry has the prospect of competitiveness—in other words, of generating profits—we shall not get the investment that we want in our economy. Unless there is a prospect of demand for industry's product, we cannot generate new jobs and put people back to work.

The exchange rate rise threatens both profitability—and therefore investment—and employment. The facts are stark. In the year to April 1997, the pound rose by 17 per cent. against the ecu, by 22 per cent. against the deutschmark, by 7.6 per cent. against the dollar—which is rising itself—and by 26 per cent. against the yen. Those are the currencies of our competitors.

This morning, The Guardian says that the pound is 26 per cent. higher against the deutschmark and the franc than it was last August. Those are horrifying figures. That direct loss of competitiveness comes at the end of a long period in which the pound has been overvalued. Indeed, it is a long period in which our relative export unit cost—the measure of our prices against those of our competitors for manufactured goods—has risen.

John Mills has calculated for me that, from 1973 to 1997, the loss of competitiveness on relative export unit costs was between 40 and 50 per cent. It is difficult to have a more precise calculation because the bases keep changing but an increase of 40 to 50 per cent. in the price of our manufactured exports is disastrous for competitiveness. What would happen to Sainsbury if it faced such price rises on its shelves when Asda or Tesco did not? Sainsbury would quickly close, which is the effect of that sustained rise on the British economy.

What can British industry do? Although it can cut costs, fire workers or stop research and development and other measures that contribute to its long-term survival, it can do none of those on a scale adequate to compensate for the increase in its prices which the exchange rate has forced on it against its will and its judgment—a force outside its control. That rise in prices threatens it with disaster.

People tell me that exports are doing well. So what? Firms continue to export without profit just to retain their share of the market because they know that once they are out of the market, they cannot get back in. That has been the history of British failure for 20 years, so companies naturally try to keep their exports going without a profit by holding their prices against the rise in the currency. That, however, is a finite process—it cannot continue for a sustained period. People said that trees had survived the drought, only to find that they suddenly collapsed because they had been rotting from the inside.

The main threat from the rise in the exchange rate is to manufacturing, because that is our front line. Manufacturing generates 60 per cent. of our exports. It is an extremely competitive market, which is becoming ever tougher and more competitive as the industrial power of the young dragons of the far east grows. Price is crucial in manufacturing exports because they must be sold at a price that generates a profit sufficient for companies to invest, stay in the game and expand. Unless their exports grow, they are dead in today's competitive world. And unless we can sell exports at a price that allows all that, manufacturing companies' long-term prospects are disastrous. They must run at full capacity and use that capacity to keep down their unit costs. As exports suffer, capacity usage declines and unit costs rise.

All that does not happen immediately, but early warnings are already appearing in company reports. I have been poring over company reports, profitability forecasts and warnings issued by companies, which show that companies are cutting investment, transferring production overseas and slimming down their work force. Profitability is now falling rapidly in crucial sectors, such as building materials; textiles; food manufacturing, which is a problem for Grimsby; pharmaceuticals; the tourism and leisure industry; and in oil.

British Steel has supplied a briefing to Members of Parliament warning of the consequences in dire terms for British Steel and all the firms who use its products if the exchange rate rise continues. It says:

"Britain's loss of competitiveness will also damage the UK's attractiveness to inward investment.

Sterling's overvaluation will have an increasingly negative effect on UK manufacturing industry exports.

The surge in sterling's value against the German DM (and other ERM currencies) is already adversely affecting the competitiveness of the UK economy."

ICI has issued warnings along the same lines and is sensibly transferring production overseas. Stirling Tubes in Walsall, Pilkington, the British Tourist Authority, Vero and Halma—new technology companies have fantastic names—have all issued warnings. I notice that they are all quicker to warn of the adverse consequences under a Labour Government. Under a Tory Government, they might have kept quiet for longer. I hope that the Government will respond to the warnings, but those companies are certainly quicker to cry pain under Labour whereas under the Tories they tended to grit their teeth and suffer. They do not do that now because they know what the consequences will be, and those will inevitably occur after a time lag. First, there will be cuts in research and development and in what is necessary to keep up with the field; secondly, investment and in everything necessary for survival will be cut; thirdly, jobs will then be cut and unit costs will go up. Eventually, the firm will go under.

The tragedy is that we have seen it all before. Each time, we have had the same comfortable reassurances that we are getting now. We are assured that we can weather the problem and that British industry is competitive, lean and mean because it is dynamic. That is rubbish. The consequences for British manufacturing are the same now as they were in the two previous bouts of overvaluation. It is simply a truism to say that British industry is competitive at this exchange rate. By definition, any firm that still exports is competitive at this exchange rate. The problem is whether it generates sufficient profit to continue. In reality, it does not. Companies cannot learn to live with such a high exchange rate; they can simply learn to die with it.

The laws of economics and of elasticity and demand will not be suspended for new Labour, just as they were not suspended for the Tories. Exactly the same will happen now. The symptoms, the overvaluation and the warnings are the same as in 1979–82, when the Thatcher Government generated a massive overvaluation, and in 1989–92, when we belonged to the exchange rate mechanism. The collapse of the ERM afforded us some relief and made us competitive again—without disastrous inflationary consequences.

People say that if the pound comes down, we shall face inflation. That was disproved by the ERM experience. The same will now happen with consequences for manufacturing and for our balance of payments. The reverse J-curve effect occurs here. Just as with a devaluation, things get worse before they get better as the J-curve effect makes the balance of payments adverse initially before improving it enormously. With an overvaluation, therefore, it is the other way round and the reverse J-curve effect makes the balance of payments better before making it worse long term. Those balance of payments consequences will occur next year, when the balance of payments deficit will rise. The public sector deficit will also rise because workers will have been fired and will pay less taxes, and expenditure on benefits will also rise. Moreover, the public sector borrowing requirement will rise as a consequence of the decline in manufacturing.

We must tackle the central question: "Why is that happening?" This country has always been predisposed to an overvalued exchange rate because in our economy finance is strong while manufacturing is comparatively weak. The manufacturing industry is less listened to by the Government and has less influence on the counsels of the nation than the finance industry, which sits at the centre of our economy with its glorious City dinners attended by Chancellors and thinks that it speaks for the nation. Its interests lie in high interest rates—that is what the finance industry lives by. The interests of finance are in an overvalued exchange rate, because that allows it to acquire assets and to manipulate money around the world. Those are not the interests of manufacturing. Finance has always been too strong and too much heeded in our economy.

On my hon. Friend's point about causes, will he comment on the fact that £30 billion is being injected into the economy by building societies acquiring plc status and paying people bonuses with their own money? Does my colleague think that that has a bearing on the heating of the economy?

My hon. Friend is right. I shall deal with that later. It is ludicrous that £30 billion of purchasing power is allowed into the economy. Even if people do not spend the money that they get from the shares, they still feel more confident. They feel that they have more money, so they spend more. That will produce a rise in interest rates. The Bank will warn of inflation, demand, and the threat of overheating, interest rates will go up and the consequence of that will fall on manufacturing—on the jobs of the people who are spending the money. It is one of the stupidities of our economic policy that that goes on. I agree with my hon. Friend.

The last two overvaluations were the prelude—or the consequence, because they occurred under the Tory Government—of wilful stupidity. That still exists because the Bank still influences our economic policy, but the stupidity was mainly that of the Government. In the first great Thatcher deflation, which was associated with enormous overvaluation, which in turn was the instrument of that deflation, the psychology was that British industry is like an English public school boy—it must be made vigorous, healthy, good and virtuous by exposure to punishment in the form of cold showers and frequent beatings. Manufacturing was subjected to such treatment, and 1.8 million jobs were lost as a consequence of that overvaluation.

The second overvaluation was caused by the Government's infatuation with the exchange rate mechanism. That lost us almost a million jobs in manufacturing, and about 1.5 million jobs altogether.

Now there is a little less wilful stupidity. The Government have changed, but we face the EMU mess. It cannot be described as anything else, much as my hon. Friend the Member for Rotherham (Mr. MacShane) would like to rush in and support it. There is uncertainty about whether ERM will go ahead, which is causing instability in the markets. The growing fear is that there will be a soft euro, which is bringing more money to the United Kingdom to push up our exchange rate.

Europe's problems are causing problems for us because they have the effect of raising our exchange rate. That will continue, because Europe will not clear up the mess quickly. It is staggering to see how elites are trying to force down the throats of electorates a monetary union that they do not want and whose consequences they know will be severe for them.

We will get no relief from Europe, which will go on causing us problems. The second cause of our problems is the fact that our interest rates are high—astonishingly high in real terms. I have a table from the Treasury. I believe that parts of it are wrong, but the Treasury figures show that real interest rates in 1996, adjusted for inflation, were 2 per cent. They are, of course, higher now because interest rates have gone up. In the 1970s, they were 0.75 per cent. or 0.5 per cent.—that was in 1977, for example. In some years, we had negative real interest rates. Now they are at a record high level.

The result is that money is coming to this country. The Swiss exchange rate is rising, but the Swiss are not paying interest on the money coming into Switzerland. We are paying generous interest rates, which attract more money to Britain.

Like a self-trussed turkey voting for Christmas, we have delivered ourselves to markets, by the decision to hand interest rates over to the Bank of England and, having given up the monetary weapon, by our commitment not to use the fiscal weapon by increasing tax rates. That is perfectly acceptable to markets, confidence grows and people come in to invest in sterling and push our exchange rates up.

It was curious to give control of interest rates to the Bank of England at any time, but it was daft when interest rates have such an effect on the exchange rate by which we live and on the basis of which our exports succeed or fail in world markets; and it was crazy to do so at a time when the pound was going up anyway. That concession of interest rates pushed them up further because the Bank's thinking is, "When in doubt, raise interest rates." Its highest wisdom is to put up interest rates. It always thinks that the economy is overheating. Any glimmer of growth, and the Bank of England is howling that the economy is overheating. Three per cent. growth is pathetic by any standard for rebuilding our manufacturing base and generating jobs and well-being for the people, but the Bank is panicking. The financial committee warns of overheating and says that it is terrible.

The Bank always thinks of manufacturing industry as greedy workers and greedy shop stewards demanding more money if the economy expands. The real pressures for inflation come from the financial community and the City—as my hon. Friend the Member for Normanton (Mr. O'Brien) said, by pumping out money from demutualisation, which is in its interest—and from high pay in the City and lax credit. Most of the economic revival in the UK is due to an increase in the money supply produced by credit being poured out by the financial institutions.

The Bank blames manufacturing and, instead of dealing with the causes—the financial community itself and its methods of operation—it clobbers manufacturing with high interest rates and an overvalued exchange rate to make it suffer for the sins of others. That is a marvellous way of running an economy, but it is disastrous for any country whose economic base, like ours, is not wide enough and needs to be expanded. The asset inflation generated by finance, and not wages, is the only true cause of the current inflation.

The Bank of England is fighting inflation long after it is dead. That is necrophilia. Inflation is no longer a threat. It is in a glass case somewhere in south-east Asia. The enhanced competition of those economies, plus the breaking of wage inflation and the power of labour in the UK, which has been a tragedy in many respects, means that inflation is dead, yet the Bank of England is still clobbering manufacturing industry, which it sees as the cause of inflation. That is crazy economics.

Can my hon. Friend guide us by explaining why our inflation rate is none the less still significantly higher than that of the United States and most of our European partners, including those growing more strongly than we are? If wage-led inflation is dead, why is the anger over fat-cat pay feeding down into the labour market? We are seeing serious claims for 5, 6, 7 and 8 per cent. pay rises this year in many sectors.

I hope that my hon. Friend does not identify with the Clobber the workers theory of economics, which the Bank of England propagates. I hope that he will say something about information such as that published by British Steel, which affects his constituency vitally.

Our difference in inflation is marginal. The experience of the past few years both in the United States and the United Kingdom is that a fall in the exchange rate does not generate the inflationary consequences that were widely feared. For practical purposes, inflation is dead. To put it at the centre of economic policy, when the real problem is insufficient jobs, insufficient growth and a weak industrial base, is to live in the past and to fail. Whenever we get an expansion in the UK, we kill it.

I have been following my hon. Friend's logic closely and I agree with much of it, although not with his general position on these matters. If he argues that interest rates are at the core of high exchange rates, what does he suggest is the best way to manipulate interest rates down? Can he give us his agenda?

I am grateful that my hon. Friend is following my argument—with enthusiasm and joy, I hope, as it affects his part of the world as well as mine. I shall deal with the matter shortly. I did not say that interest rates were the only cause of high exchange rates. I said that turmoil in Europe was one of the major causes, as well as the strength of finance and the prevailing orthodoxy in economic management, which is attractive to speculators in this country. All those are part of the equation and must be taken into account.

I was arguing that the first response was to clobber manufacturing, and that raising interest rates was one of the instruments by which that was done. However, we live by manufacturing. It provides most of world trade and is the basis for most of our trade deficit. Do we in Britain never learn? We are heading the same way as we were before two previous disastrous blood lettings, at a time when we need to widen our industrial base and develop new industries. Manufacturing has been through 20 years of slimming down and overvaluation and it is suffering from anorexia instead of having a lean, mean, "Let's get at the markets" mentality. The position will be made worse by the battle against inflation that dominated the late 1970s and the 1980s. Overvaluation as a means of fighting inflation will have the same consequences now as it did then.

I do not want those consequences to occur under a Labour Government. If we are not going to redistribute wealth and increase taxes—and it is right not to increase taxes—we can generate the extra public spending that we need only through economic growth achieved through getting people back into work. How can we achieve that when overvaluation is leading us into the economic trap that I have just described? We cannot narrow the tax base any more by such blood letting without disastrous consequences for Labour's programme as well as for borrowing and without producing exactly the circumstances that lead inevitably to more cuts and more deflation in the public sector. People will then say that the public sector is too big to be supported by the shrinking industrial base.

We are following the economics of folly. The Government cannot afford to be locked into a downward spiral with a shrinking industrial base and more unemployment justifying more cuts in the public sector. We must expand our industrial base by remedying its two basic problems. First, we must remedy the deficiency of demand for what the British economy can produce at full capacity. Secondly, we must offer the prospect of profitability. British manufacturing is just not profitable enough. We have to make it more profitable by generating demand. We should reduce the exchange rate and let the economy move into export-let growth.

Supply-side measures will not produce those improvements. I am all in favour of supply-side measures such as upgrading skills and training, but supply does not generate its own demand. Governments generate demand, not supply. We need extra demand and a sustained prospect of competitiveness.

A lot of rubbish is talked about economic and monetary union. It has been said that unless we commit ourselves to monetary union, inward investment will no longer come to Britain. There are fears that we will be excluded from Europe. That is total nonsense. Foreign investors want not stability, but a competitive base from which to export. We can provide them with that only if we have a competitive exchange rate on a long-term basis. That would guarantee that if companies set up here they would be able to produce and export profitably in Britain and sell at a profit internally and overseas.

We already have problems because we do not have a competitive exchange rate and we have to offer foreign investors bribes to come here. For example, Nissan was offered £28 million more regional development money in Sunderland than we could offer in Humberside. So Nissan went to Sunderland. The same applies to Toyota, Jaguar, to Ford—to develop a new model and a new engine—and to BMW. All those companies were bribed with taxpayers' money to come to Britain or to stay here because the exchange rate was not sufficiently competitive to lure or to keep them here. As a result of our obsession with an overvalued exchange rate, the taxpayer has to pay out more to keep firms here and to keep Britain attractive to inward investment.

We should also bear in mind the fact that much of our so-called inward investment involves the retained profits of overseas firms that have already invested here. In terms of attracting new overseas investment, France has a better record than we do. Retained profits represent a large component of inward investment into Britain. However, those retained profits will not remain here if exchange rates remain high. The money will be invested overseas. That is what Imperial Chemical Industries and other big British firms are doing. Ford is sourcing more from Europe. Those are the symptoms of extended overvaluation and if it continues, Britain will no longer be attractive to inward investment. We will not be sufficiently competitive to justify foreign investors coming here rather than somewhere else.

The message is clear. The prospect of sustained overvaluation may be one reason why Toyota has been hesitating about making a second investment into Britain. We have the pound down and make the exchange rate competitive to allow exports to fall in price or to generate more profit for investment in Britain and to use the existing capacity to make imports dear.

We should use the price mechanism, which is now our only weapon for changing our competitive position, to reduce our labour costs through a cheaper exchange rate. It will be claimed that raw material prices will also rise and, of course, they will, but our role is surely to add more value to our imports and to export them at a higher price. That higher price is set by a competitive exchange rate.

If the elasticity of demand for imports and exports together is more than 1, we get direct and immediate benefits from a more competitive exchange rate—from devaluation. The elasticity of demand for British imports and exports is somewhat lower than that of our competitors. In Britain the figure is 1.51, in Japan it is 2.35 and in Germany it is 1.81. It is above the crucial balance figure of 1.

Devaluation will work. Indeed, it is the only way to expand our exports and to stop the continuing and remorseless fall in Britain's share of world trade. That is still going on and we have to turn it round. So how do we do it? I hope and believe that it is not beyond the wit of the Government to address a major problem. It has to be tackled. We might say that it is not as bad as people think, but those words would be spoken in the wind in six months' or a year's time when the consequences come through. We have to act now whatever comforting words are said.

We must move towards long-term competitiveness. Why does not my right hon. Friend the Chancellor use his mouth as a weapon and talk down the exchange rate? If he is committed to long-term competitiveness and announces that commitment, there will be an effect on the exchange rate.

Is not the inevitable consequence of my hon. Friend's arguments that in the end he will become a passionate supporter of the single currency as we could well have the opportunity of locking ourselves in at a sensible rate? In that case, speeches such as that by my hon. Friend would be unnecessary in future.

I should have expected that. Fortunately, I have five pages of rejoinders to my hon. Friend as I knew he would be here this morning. However, the simple answer to him is spherical objects. There is no possibility that we will be able to lock ourselves into the single currency at a competitive exchange rate. We shall have to lock in at the market rate and, if it is the current market rate, it will be as disastrous as it was last time. My hon. Friend and I both know that.

In any case, my hon. Friend is trying to raise a divisive red herring in the Labour party. He knows that we are not going in in the first round and the decision will not be taken until after the next general election, so why is he trying to stir trouble in an ideological fashion in the middle of my speech? My hon. Friend is trying to hold me up as I approach the conclusion of my speech.

:My hon. Friend has said that today's debate is about the consequences of a high exchange rate, although he has spoken about the means of reducing it. We should be debating the means today. My hon. Friend referred to market rates, conditions of deregulation and markets. How would he propose to manage the exchange rate down to a level that he would consider to be competitive?

I am grateful to my hon. Friend for taking me back to the main thread of my speech—and, indeed, bringing me to a conclusion.

First, we have to use the influence of my right hon. Friend the Chancellor's opinion and announce that our rates are uncompetitive and that the Government's objective is long-term competitiveness through the exchange rate. If my right hon. Friend says that, it will shift the perspective of the markets and bring down the exchange rate.

Secondly, it is silly to be dumping huge quantities of money on the market through demutualisations—some 30 billion quid, with another £16 million to come from further demutualisations. There should be a moratorium on demutualisation.

Thirdly, we must get interest rates down. The Bank of England must be made aware of the problems it is causing. It appears to be wholly unconcerned about the exchange rate. Perhaps it is because it does not suffer the consequences—indeed, the financial community reaps the benefit through an ability to invest overseas and to manipulate money around the world. It is manufacturing that suffers the consequences.

I would like my right hon. Friend the Chancellor to take everything back under his control. A Chancellor must have power over both monetary policy and fiscal policy. He cannot run the economy without both weapons—he needs a two-gun holster. If my right hon. Friend does not take back control—and as we have not yet passed legislation, he could still intervene in these matters—the Bank of England must be pressured and persuaded to reduce interest rates.

We also need to control credit. Why not require deposits with the Bank of England, varied and charged interest or not, according to the lending policy of the institution making the deposit? We should control credit in the economy. It is silly to allow people to pour credit on to the market—it is the money supply that is causing the consumer boom and making everybody panic. If we do not control credit, the Chancellor's only recourse is a lax economic policy. He could not fund the debt. He could get ways and means advances from the Bank of England and not pay interest on them, but that would be viewed as irresponsible economics. It would be a blow to confidence. However, that is the only alternative to effective control of credit and a policy of lower interest rates, which would bring down the pound with a sure and certain touch. The alternative is a long anorexia and another industrial winddown, which we cannot afford.

The real devaluation necessary, based on the competitiveness figures, is in the region of 35 per cent.—shock, horror. In fact, the American dollar has gone down 40 per cent. since the over-valuation of the mid-1980s, without any disastrous consequences. Indeed, there has been a direct benefit to American manufacturing and the American economy. I am not saying that we should devalue by 35 per cent. at once; we should work to get the pound down over a long period. We should make that a central objective of policy so that the markets will know what we are doing and react accordingly.

We cannot treat the pound like a phallic symbol, so that the whole country—and especially the media—are proud when it is hard and filled with post-imperial tristesse as soon as it softens. That is not what the pound is about—it is a market-clearing mechanism and it has to float. It has suffered from 20 years of over-valuation. We need 20 years of competitiveness to get back into the manufacturing game and for Labour to achieve its policies. Therefore, we should simply announce that the pound is over-valued and that Labour believes in a competitive exchange rate. What is a competitive exchange rate? It is the rate at which we can balance our trade in conditions of stable growth and full employment.

I congratulate the hon. Member for Great Grimsby (Mr. Mitchell) not only on obtaining this Adjournment debate, but on his choice of subject. He knows that I agree with a great deal of what he said. By saying that, I am not sure whether I am doing his reputation and prospects any harm or putting the kibosh on my own.

I declare my interest as I am the chairman of the Manufacturing and Construction Industries Alliance, which was launched within the Palace of Westminster—with the support of all political parties—to move the interests of construction and manufacturing up the public, political and parliamentary agenda.

I am glad to take this opportunity today to support the hon. Gentleman in his arguments, although I intend to concentrate primarily on the subject of interest rates, which have a dramatic influence on exchange rates, which in turn are damaging British manufacturing.

I shall begin with construction because it is a barometer of the overall success of our economy and it generates such demand in its own right—demand for building materials, fixtures, fittings, carpets, curtains, steel, brick, concrete, cement, furniture, electrical goods and decorating materials. It is a driving force for many parts of industry, including retail and, of course, manufacturing industry.

I am sure that I shall take all hon. Members with me when I say that the manufacturing sector is important because it is the only non-inflationary source of sustainable economic growth in this country or in any other. That is why, when I saw that manufacturing industry was part of the debate, I immediately took an interest. I am delighted to be making a contribution.

As the hon. Gentleman said, we are a trading nation. Despite the importance of the service sector and invisible trade—especially in the financial sector—we need to export manufactured goods to survive and to have a stable, progressive, successful economy. From the hon. Gentleman's argument and philosophy, I am convinced that that is also his objective. That is why I strongly support what he said.

The two important sectors of manufacturing and construction are linked not only by their comparative importance, but by the way that they have borne the brunt of the recent economic recession. The hon. Gentleman described what has happened as blood letting. Those two sectors have been seriously and adversely affected by the blunt way in which successive Governments, Conservative and Labour—and, indeed, the Governor of the Bank of England—have used interest rates as the sole panacea for all economic problems.

It is obvious to anyone who has been involved in industry, especially those who need to export their products, that high interest rates raise the level of exchange rates. If the level of exchange rates is raised, Britain will become less competitive. The current high level of interest rates has forced up the value of sterling and brought about the debate this morning. That high level has created an almost insurmountable barrier to many of our exporters. It has placed a dampening hand on the first emerging breaths of confidence in the construction sector, whether it be business and commercial construction or domestic construction.

To take up the hon. Gentleman's remarks—and I entirely endorse his position—the use of interest rates is too blunt. It is too insensitive a tool to be deployed responsibly to manage our sophisticated economy. It is far too powerful a tool to have been passed into the largely unaccountable and undemocratically answerable hands of the Governor of the Bank of England, whose ideological purism and dogma-driven lust will lead him to maintain rates at higher levels than can be justified. It will leave us in an uncompetitive position compared with other countries in Europe and in other parts of the world.

The hon. Member for Great Grimsby referred at some length to the European Union, and some interventions related to Europe. The majority of our trade is done outside the European Union. [Interruption.] Indeed, it is. The Confederation of British Industry and others put out a lot of misleading statistics, but I assure the hon. Member for Rotherham (Mr. MacShane), who is shaking his head, that the majority of our trade is done outside the European Union, so what goes on there is of only partial interest to us.

We have a robust and healthy economy. I say that as an opposition Member: like many of my hon. Friends, I have been in the Opposition before, although for the past 18 years I have, from time to time, sat somewhat uncomfortably on the Government Benches. Our healthy and robust economy is due, at least in part, to the policies of the previous Conservative Government. It is a fact that the ogre of inflation, if not dead, is certainly firmly under control. Spiralling inflation, such as we saw under both Labour and Conservative Governments, was a product of historical, social, political and economic conditions, which no longer apply: that is, if we are to begin to believe even one word of what the new Government tell us about abandoning their bad old ways.

If the new Chancellor of the Exchequer is committed to prudent management of the economy—dare I say, following the prudent management of the Conservative Government—why must interest rates remain so unnaturally high? The hon. Member for Great Grimsby, in his interesting speech, said that interest rates in this country are abnormally and unnecessarily high. Why must British business face high interest charges when it seeks to borrow to invest in new plant and machinery and in the development of new products, which are vital if we are to remain competitive and forceful in international world markets? Why must the British service and commercial sectors face unnaturally high property prices? Why must home owners, whose support new Labour is pledged to nurture, face unnaturally high mortgage costs? We may hear some further unfortunate and bad news this afternoon.

Handing the control of interest rates to Eddie George at the Bank of England was an irresponsible and reckless folly, for which our economy may yet pay an extremely high price. The House should be able to debate that policy in considerably more detail in the near future.

High interest rates and their inevitable impact on exchange rates impose burdens, without which companies would be able to compete more effectively and become more profitable, and thus pay more taxes. The Government receive more in tax from business when there is a rise in economic growth. Without those burdens, more jobs would be created and the burdens on our social security system would be reduced. The Government would benefit, because they would get people back to work, which is one of their major objectives, for which I commend them. Putting people back in work, particularly when they are currently unemployed, would reduce the substantial social security benefit bill.

I want to send a clear message to the Chancellor of the Exchequer, who will deliver his first Budget later today. We would all be better off if he reduced interest rates, if not today, at least in the near future, because that would have an immediate impact on exchange rates.

It is a tragedy that the British economy might be hit by a double whammy: the higher interest rates that we are already experiencing and, sadly, the higher taxes that are imminent. The hon. Gentleman's message was clear. We should give our economy the boost of energy that it needs to maintain its current progress in the right direction. To bring that about, we require a reduction in interest rates, not an increase.

I expect that the comments I am about to make will fall on fertile ground among some Labour Members. We should review capital gains tax, so that unquoted companies are not unfairly penalised. We should review capital allowances, so that businesses are positively encouraged to invest: they could be targeted or capped if necessary. We should invest so that we remain competitive and are able to export, create jobs and generate extra growth in our economy. To that end, fiscal incentives are good.

I shall now say something that will perhaps not fall on such fertile ground. I believe that we should abolish inheritance tax to secure the future of many family firms. It is in family firms that real growth in industry and commerce takes place and where the majority of jobs are created. In many instances, inheritance tax is a disincentive.

We need to hit the housing market like we need a hole in the head. Housing, construction and manufacturing are a driving dynamo of our economy, and we should encourage those sectors. Mr. Eddie George regularly talks of still higher interest rates. Unacceptably high interest rates, reductions in mortgage interest relief at source, which is a small but valued help to families buying their own homes, increases in stamp duty, which is an anomalous tax that I believe should be abolished, and the possible ending of the capital gains exemption for the family home would be retrograde steps and could turn our economy from its positive, encouraging, upward course and put it into a state of stagnation and depression.

We should look to the long term and aim for low interest rates and low exchange rates. That would enable the people and businesses of this country to create genuine wealth, and to contribute meaningfully to the future of our economy and the creation of jobs.

I am grateful to my hon. Friend the Member for Great Grimsby (Mr. Mitchell) for initiating this debate. We have heard two remarkable speeches. The contribution of the hon. Member for Macclesfield (Mr. Winterton) contained radical thinking about the importance of manufacturing. His Front-Bench colleagues should listen to him, but, alas, I fear that his remarks will fall on stony ground, because in the past 18 years there has been one long assault on manufacturing.

My hon. Friend knows that in the pantheon of socialist history, thinking has always been a left-wing deviation. I congratulate him on a speech full of ideas and thoughts, some of which were deviant. If I allow an occasional thought to slip into my speech, I hope that my hon. Friends on the Front Bench will take no notice, and will excuse my foray into the world of ideas.

Some contradictions have to be faced. If the high exchange rate is so bad for employment, why is unemployment falling as the pound is rising? If high interest rates are so damaging for British manufacturing exports, why did the high interest rates and the high pound of the early 1980s coincide? The Library has published an excellent document on economic indicators dated 1 July 1997, which shows that the last time that we had a trade surplus in manufactures was in the early 1980s, at the time of high interest rates and a high exchange rate. The situation is complex. I hate that dreadful cliché "multi-faceted", but there are many unintended consequences and the matter is difficult to get right.

I want to make a case in support of my hon. Friend the Member for Great Grimsby for a lower pound, but I want to make a stronger case for a stable pound. We have suffered, not just in the past 18 years, but in the past 30 years, from the incredible yo-yo pound sterling, going up and down. The graph in the excellent document from the Library resembles a map of the deep ocean. It has more peaks and troughs than the Swiss alps. We should aim at a lower and stable rate. I do not regard the exchange rate as a market-clearing mechanism, as my hon. Friend seemed to suggest, which we should leave bouncing happily up and down like one of those ping-pong balls on a column of water at a fun fair.

We have a specific problem in manufacturing. I have a constituency interest, in that British Steel is the major employer in my constituency. It has taken a 50 per cent. hit on profits. Last year, it had profits of £1.1 billion for investment, pay, jobs and dividends; this year, its profits are less than £500 million. A great British success story such as British Steel cannot be asked to plan for the future, to pay fairly, to treat its shareholders well and to invest here and abroad if, from one year to the next, it takes a 50 per cent. hit on its profits. That has happened because British Steel, like many engineering manufacturers, has its products posted in deutschmarks for export to Europe.

Every engineering firm in my constituency is taking that hit on profits and employment. I warn my hon. Friends on the Front Bench with all seriousness that employment in the UK may have peaked. I fear that there will be a time lag before the immense hit that all our manufacturing sectors are taking starts to feed through into workers being laid off.

Not only manufacturing is affected. Many service companies are affected. The boss of a distinguished architectural company not unconnected with the millennium dome reported to me recently that he had had to lay off staff because he was losing orders overseas.

British tourism will take an immense hit, as will British Airways. It has become much more expensive to come to Britain compared with last year. It is fine for those such as the shadow Chancellor, who has a nice house in Normandy. He will have a lot more to spend on it this summer. But the high pound is damaging the promotion of British tourism and services.

That is true even in the micro economy—the world of conferences. Britain has become a key conference centre for Europe. In the past two or three years, orders for conference packages of interpretation, hotels and so on increased, but we are now losing orders to French or German companies, which can offer products in deutschmarks or French francs that undercut what we can offer posted in English pounds.

So I say to my hon. Friends and to the hon. Member for Macclesfield (Mr. Winterton), who is a doughty champion of manufacturing, that the service industry has also been badly hit by the exchange rate. The creative economy—the film and video economy in which Britain is a world leader—has also taken an immense hit.

I should love to enter into a long debate with my hon. Friend the Member for Great Grimsby about what we can do, but perhaps we should leave that for some other occasion. I want to put forward four simple ideas. First, the Treasury should drop its sublime arrogance. When the pound was high before the ERM debacle, it was the best thing that could have happened to Britain. Remember that? Two years ago, the pound slumped and that was the best thing that could have happened to Britain. Now, the pound is up at DM2.80, and that is the best thing that could happen to Britain.

The Treasury has the memory cells of a mite. It must humble itself and learn from other countries, perhaps from the United States, where for 10 years the dollar has been traded at a highly competitive rate, reflecting a rise in US exports. What lessons can we learn from the United States? Perhaps we can learn from the Netherlands, where unemployment is lower, interest rates are lower and the trading sector is stronger than in the UK. We might learn from Switzerland where, thanks to monetary measures, the value of the Swiss franc against the deutschmark has been reduced, not increased. There, not the invisible hand of the market but the visible hand of the policy makers has been applied.

Secondly—I am sorry to disagree with my hon. Friend the Member for Great Grimsby on this point—we have to maintain a low inflation policy. There are virtues in creating the independent Monetary Policy Committee for the Bank of England. I do not want our Chancellor, or in 20 years' time some Conservative Chancellor, waking up worrying about interest rates every morning of his life. The United States, which probably cleaves to many of the values about which my hon. Friend spoke, has an independent central bank. One could enter into the debate elsewhere. I should like the central bank to be advised by a committee with a more regional and manufacturing outlook, but we can discuss that later.

Thirdly, we must consider the unmentionable—labour market policy. The countries that have kept unemployment, inflation and interest rates low have an active labour market policy that does not allow wage demands to feed through into inflation. It is not clobbering workers; it is the essence of social democracy. Britain's adversarial labour market with one side up and one side down has not worked. I advise my hon. Friend the Minister to turn her attention to labour market policy in order to keep a stable exchange rate.

Fiscal measures need to be used seriously, and I am looking forward this afternoon to innovative and imaginative fiscal measures in order to ensure that there are no further increases in interest rates and no further need to increase the pound's strength.

Finally, we come to the question of Europe. We shall not debate that today. I should prefer the British pound to be stable in the—

In a graveyard.

in the euro, with the other economies that have a much higher percentage of their economic base located in manufacturing than we do, which requires stability. There is no lead on that at the moment. We are not in a graveyard; we are in a complete vacuum. The Confederation of British Industry has climbed back on to the fence, saying that the euro should be put off for two years, as if it will not happen—do not see the euro; do not hear the euro; pretend it does not exist. That debate will have to resume. In a year or two, when the underlying manufacturing strengths of a low inflation and low interest rate euro are compared with the problems of not cleaning up the mess that we inherited from the Tories, it will come back to haunt us.

Yes, there are policy measures. The pound can be discussed. I do not want to advise my hon. Friends on the Front Bench to talk it down, yet that has worked in other countries. We need a competitive and stable pound with which our investors can invest, our buyers can buy and our sellers can sell, knowing over a long period what its worth will be.

I apologise to the hon. Member for Great Grimsby (Mr. Mitchell) for having missed the first half of his speech.

What was the rest like?

I undertake to read it in Hansard to ensure that I do not miss anything of importance. However, listening to the second half of your speech—I mean, his speech, Mr. Deputy Speaker—made me think that I had heard it before.

The hon. Gentleman came to my college when I was an economics undergraduate. In his speech there, he talked about the overvalued pound and the plight of the manufacturing sector and argued that we definitely needed a devaluation. That was 10 years ago—1987—when the deutschmark was at 3.5 to the pound. That is the hole in the hon. Gentleman's argument: he has been arguing for devaluation almost whatever exchange rate we have had. That would be a continued devaluation.

I apologise for interrupting the hon. Gentleman again, but that is not true. I have argued consistently for a competitive exchange rate, although sometimes that would have been more competitive than at other times. That is not an argument for constant devaluation.

With due respect, it seems to me that that was exactly your argument. You talked about going for a competitive pound, but in 1987 you seemed to think that that was lower than—

Order.

Mr. Deputy Speaker—

Order. When I am on my feet, hon. Members must sit. The word "you" is being used again. Can the hon. Gentleman try to remember the right form?

I apologise, Mr. Deputy Speaker.

In the speech that the hon. Member for Great Grimsby made to my undergraduate colleagues and me, he said that if we devalued, even from DM3.5 to the pound, we would get a competitive exchange rate. Now, however, he suggests that if we devalue from about DM2.7 we will get a competitive exchange rate. At what level does he believe a competitive exchange rate lies?

I believe that the hon. Gentleman's remedy is a recipe for inflation. He argues that we should slash interest rates and have a lower pound, which would surely stir up inflation. The worst aspect of his proposals is that they would damage manufacturing industry—the sector of the economy that he hopes to help—because the spiralling inflation that his policies would cause would produce short-termism in British industrial investment. Industry would need to consider financial factors all the time instead of the real aspects of its business.

The real issues that face people who run a business are the training of their staff and investment in research and development. If there is spiralling inflation because of ever devaluing exchange rates, they are reduced to financial jiggery-pokery instead of dealing with the real elements of their business success. That is why an independent central bank is a good idea, and a good policy for manufacturing industry. It would set a stable framework for our macro-economic policy and help the Government in their attempts to bear down on inflation over the long term. That would reduce short-termism in the British economy and such a reduction is the one thing that manufacturing industry really needs if it is to invest for the future.

The hon. Member for Great Grimsby seems to have a bizarre understanding of how the exchange markets set exchange rates. He thinks that the Chancellor of the Exchequer has a powerful voice and can suddenly talk down the pound at will. I am sure that past Chancellors would say, "If only." If only they could open their mouths and the exchange rate would go wherever they said.

The idea comes from cloud cuckoo land. There is no way in which the Chancellor could push the sterling exchange rate in any long-term direction just by opening his mouth. Serious macro-economic policies are needed to direct the level of the pound and I am afraid that the hon. Gentleman gave no indication of the policies with which he proposed to direct that level.

For example, the hon. Gentleman seemed to suggest that we should loosen monetary policy, while giving us no idea what he wanted to do with fiscal policy. That is where the tough questions for setting macro-economic policy lie. If he really wants to reduce the level of the pound he needs to propose a massive tightening of fiscal policy.

In simple terms, that means that we must ask the hon. Gentleman whether he proposes to slash public expenditure or to increase taxes massively. The logic of your argument means that you have to—I am sorry, Mr. Deputy Speaker, I mean the hon. Gentleman has to—answer that question. He failed to do so.

The hon. Gentleman also failed to tell the House what type of exchange rate regime he wanted—a flexible or a fixed regime. I am worried that he seems to have taken no account of the need for stability in our exchange rates. He proposed neither a fixed exchange rate system nor support for the single currency.

Having made those criticisms of the hon. Gentleman's speech—

A speech I made 10 years ago.

The criticisms are still pertinent today, because the hon. Gentleman's arguments have not changed.

None the less, I welcome the debate, because it gives the Minister a chance to state Government policy on exchange rates—or perhaps the Chancellor of the Exchequer will enlighten us on Government exchange rate policy this afternoon in his Budget statement. Until now, we have heard nothing.

The policy seems to be one of benign neglect and we have seen the currency appreciate with no comment by the Treasury. That policy is not sustainable in the long term. We need a clear signal of the Government's attitude to the pound sterling and of their future policy as Britain prepares to move towards the single currency. I hope that, in her reply, the Minister will state clearly the Government's policy on the exchange rate.

I congratulate the hon. Member for Great Grimsby (Mr. Mitchell) on initiating this interesting debate and all who have played a part in it. I also take the opportunity to welcome the Economic Secretary to the Treasury to her post, the ministerial counterpart of mine. I look forward to debating matters such as these many times with her.

First, I must say from the Opposition Benches, in case there is any doubt—although my hon. Friend the Member for Macclesfield (Mr. Winterton) will have left the House in no doubt—that there is as much sympathy for and interest in manufacturing industry on our side of the House as there is on the Government side. In my election address, directed to a constituency in which engineering is extremely important, I took the trouble to mention the subject, as well as information technology. It is of great importance to us all.

In terms of the analysis offered by the hon. Member for Great Grimsby, some parts of manufacturing industry are undoubtedly feeling the pinch. He cited British Steel as a clear example; I could add agriculture to the others that have been given. As everyone will know, agriculture is an industry whose financial arrangements are somewhat distinctive, but the effect of green pound revaluations has much the same, although an indirect, effect.

I pause to make the point that things can vary over time. Certain industries may be able to bear a high exchange rate for a period, but it may cause difficulties in the longer term.

As for the Opposition's approach, first, there is no simple policy of targeting the exchange rate. There have been excursions into that idea in the past—I need not return to them now—but they met with little success.

Secondly, there must be a middle way between the danger of abandoning all approach to fiscal prudence—at times it seemed that that was the hon. Gentleman's argument—and the equal and opposite danger that may be described as neurotic over-caution in the conduct of fiscal and monetary policy.

Thirdly, whatever the exchange rate is at any one time, it can be no cop-out or substitute for the adoption of policies designed to support business success and competitiveness. In that context, I cannot understand why the Government wish to go ahead with the minimum wage or sign the social chapter.

The Government have been left a golden legacy by my right hon. and hon. Friends—a strong economy. It will take a long time for that to dissipate and be lost—but lost it can be, if the wrong policies are adopted. For reasons that have a lot to do with electoral credibility, the Economic Secretary and the Chancellor have invested a great deal of effort in emphasising fiscal prudence. That is fine and good, but the danger is that it may lead to excess zeal and end up damaging the real economy. That is the substance of the argument we heard in the speech from the hon. Member for Great Grimsby.

The cumulative impression being given by the Government suggests a tendency towards this excess zeal. First, we had the remitting of monetary and interest rate policy to the Bank. Now, there is all this talk of an alleged black hole in the finances, based on a changed set of highly pessimistic assumptions about the course of policy. We also have had some heavy briefing—I put it no higher—from the Chancellor about his readiness to put up taxes today. He would do well to remember the example of the first Labour Chancellor, Philip Snowden, and he would be ill-advised to adopt such reactionary policies. The big danger at the moment is that all this self-indulgent talk of retrenchment will build pressures that feed into the existing buoyancy of exchange rates and may create in due course an unwelcome hard landing for the British economy.

I congratulate my hon. Friend the Member for Great Grimsby (Mr. Mitchell) on securing this debate, which takes place on a day when there is considerable interest in the performance of the economy. We have seen on two occasions this morning great posturing from the Opposition on matters unrelated to the substance of this debate, yet when it comes to matters of considerable substance the Opposition Benches are almost empty. An intriguing development is the use of these Adjournment debates to hold the Government to account in relation to policy and then not to leave sufficient time for the Government to explore the policy options.

We were, as always, treated to an engaging canter through macro-economic policy by my hon. Friend the Member for Great Grimsby, who referred to self-trussed turkeys and the pound as a phallic symbol. We heard from the hon. Member for Macclesfield (Mr. Winterton) about the dogma-driven lust of the Governor of the Bank of England. These were unusual phrases to be used in a debate on this subject.

Many interesting points have been raised; some I can agree with, but a considerable number I cannot. Not the least of those was the comment made by the hon. Member for Macclesfield that inflation is dead, a point made also by my hon. Friend the Member for Great Grimsby. For ordinary people, inflation is a significant element in how they control and plan their lives, and gaining control of inflation is of considerable significance.

The remark by the hon. Member for Kingston and Surbiton (Mr. Davey) that he had heard a number of the points made in this debate before was correct, as this debate on the nature of the exchange rate and its relationship with the overall performance of the economy has been going on for more than 20 years. With respect to my hon. Friend the Member for Great Grimsby—whom I admire greatly—there was a touch of deja vu in my mind in relation to some of his remarks on devaluation.

I take this opportunity to welcome the hon. Member for Daventry (Mr. Boswell) to his responsibilities. I look forward to engaging him in debate in the years ahead. The Government have inherited an economy that has repeatedly gone through periods of boom and bust, with too little long-term stability. Our record of economic stability is one of the worst in the G7 and, since 1979, the United Kingdom has experienced the two deepest and longest recessions since the war.

As my hon. Friend the Member for Great Grimsby pointed out, our inflation performance has been poor also. Over the last full international economic cycle, from 1982 to 1993, the UK's inflation rate was higher than any other G7 country apart from Italy. Short-term interest rates are higher than in most other major industrialised countries and long-term interest rates—as my hon. Friend pointed out—have been well above the average for the major G7 industrial economies. That record reveals the lack of credibility of the previous Government's ability to meet their inflation targets, and it is why my right hon. Friend the Chancellor has made clear that the commitment of this Government is to secure long-term stability and, from that, economic growth.

Changes have been made in monetary policy to enable the country to secure the basis of sound finances and the criteria for setting the level of inflation. We are taking politics out of the matter, so that businesses—manufacturing businesses in particular—are in a position to plan ahead to secure economic growth.

The Government share the anxieties about the exchange rate, but there are no short-term fixes—despite what my hon. Friend the Member for Great Grimsby suggested. There is a need for a stable and competitive exchange rate, consistent with the Government's objective of price stability. That is one of the main reasons why we are committed to creating an environment of macro-economic stability. Low inflation and sound public finances are necessary conditions for sustained exchange rate stability and are sensible objectives in their own right for the management of the economy. Monetary policy has to be guided by the long-term needs of the economy and not just by short-term political considerations. In putting monetary policy into that long-term framework, we believe we are in a position to create the climate for growth and competitiveness.

The subject of this debate was not just exchange rates, but raising long-term growth and competitiveness. I disagreed with my hon. Friend the Member for Great Grimsby on the price mechanism, which he said was the only way to secure competitiveness. Securing competitiveness is much more complex than that and the Government have acted to put in place mechanisms to secure long-term competitiveness.

The appointment of my noble Friend Lord Simon as Minister for Trade and Competitiveness in Europe underlines the Government's commitment to taking forward growth and competitiveness. Lord Simon will play a leading role in completing the single market and will call for firm action to be taken against illegal state aid, which distorts the operation of markets and the criteria for long-term growth. He is also chairing the interdepartmental ministerial group on competitiveness and the single market, on which I serve as the representative of Her Majesty's Treasury. It will consider how to improve EU competitiveness as an effective means of improving the performance of United Kingdom firms in world markets, thus creating sustainable jobs and greater prosperity.

I accept what the hon. Member for Macclesfield said about improving export performance, particularly in relation to manufacturing, but we must not forget the other aspects of the economy which require good export performance. The Government are establishing a new export forum to revive the United Kingdom's export performance. One critical element in that is improving the skills and training of the work force, so that it becomes internationally competitive. That underpins many of the announcements made by my right hon. Friends in the two months since the Government were elected.

We are investigating ways to improve the advice and support available to small and medium-sized businesses that need to be brought much more into the export market—the background from which I come. I know only too well that it is important to provide the right economic conditions in which investors can make decisions with greater certainty to allow companies to plan for the future. The announcements made by the Government since our election underpin our commitment to invest in infrastructure, technology and people as the keys to future economic success. In addition to the economic criteria determined by monetary and fiscal policy, they are critical elements in ensuring this country's growth and competitiveness.

In the next few hours, we will hear from my right hon. Friend the Chancellor about his plans for the future of the economy. I think that I can say without in any way prejudging his comments that he is committed to ensuring that the British economy is put on a sound footing for the future so that we can achieve economic growth and competitiveness into the next century. That will enable all our people to benefit and will enable us and our industry to play a part in world markets.

On 12 December last year, I initiated an Adjournment debate about the problem of the ever-mounting noise on the M20 between junctions 3 and 5. I make no apology for returning to the subject six months later. I do so because we have a new Government, and whether they choose to follow or to change the policies adopted by their predecessor is a matter of profound importance to my constituents. The Minister will note that I have broadened the ambit of the debate to cover the area between junctions 2 and 5; I will explain why later.

No doubt the Minister will have familiarised herself with the background of the issues that I shall raise. As she will know, the M20 is the primary route through Kent to the continent, and, by virtue of its geographical position, the primary route from the whole of Britain to the continent. At junction 3, which is in my constituency, two branches of the national motorway system meet. The branch from the north, the M20, carries traffic from London, traffic through the Dartford tunnel and traffic from the north and east of London to the channel tunnel. The other branch, represented by the M26 spur of the M25, carries traffic from the south and west of the country to the continent.

It was inescapable that that section of the motorway would be densely used, especially after the opening of the channel tunnel. Those living along the section of the M20 between Wrotham and Aylesford—following the boundary changes, Aylesford is now in the constituency of the hon. Member for Chatham and Aylesford—are suffering from the noise and environmental disruption.

Inevitably, the initial projections of the volume of traffic that would be carried on that section of the M20 were substantial underestimates. The section between junctions 3 and 5 was opened to traffic in December 1971, having been built with three lanes in each direction. Less than 20 years later, in 1989, the then Secretary of State for Transport, Mr. Paul Channon, announced in his White Paper "Roads for Prosperity" that the section would be widened to four lanes in each direction. That announcement set in train what I can only describe as probably the single most botched piece of motorway planning since the start of the motorway programme.

First, the announcement was made with no indication of how the widening would be carried out and what new land would or would not be required. As a result, the homes of 2,000 or 3,000 people living near that section of the motorway were blighted, which made them either unsaleable or saleable only at sacrificial prices.

Secondly, the Department of Transport had to spend some £30 million of taxpayers' money on the purchase of some 300 houses under statutory blight procedures. It transpired, however, that the purchase of virtually all those houses had been unnecessary, as the most desirable way of widening the section involved using the existing curtilage of the motorway, and no additional land would be required. Effectively, £30 million of taxpayers' money had gone down the drain. I made a formal complaint about the waste of money to the then Comptroller and Auditor General, who strongly criticised the Department of Transport's handling of the scheme.

The final instalment of this sorry saga came just seven and a half years after the original announcement of the widening scheme. In November last year, the then Secretary of State for Transport, my right hon. Friend the Member for North-West Hampshire (Sir G. Young), announced that the scheme was to be abandoned. Quite apart from the fact that further millions of pounds that had been spent on design, consultation and planning went down the drain, the announcement was another sad example of the extraordinary mishandling of the scheme.

For my constituents, the widening arrangements had had one potentially redeeming feature. Built into them was the adoption of substantial noise abatement measures, such as noise barriers and new earth contours. Under the last Government's policy, however, because the road had been opened after 17 October 1969, the abandoning of the widening scheme meant the automatic abandoning of all the noise mitigation measures. My constituents are living alongside the main road artery between Britain and the continent, and the Highways Agency forecasts that, even without any widening, traffic on the road will at least double over the next 20 years.

Let me put two specific policy issues to the Minister. The first relates to the Government's policy on noise barriers, and the second to road surfaces. The last Government's policy on noise barriers was set out by the then Minister for Railways and Roads, John Watts, when he replied to my debate on 12 December. He said:

"the Department is required to provide noise mitigation in circumstance where we act as a developer by building a new road or substantially altering an existing one. We are not obliged to do so to deal with noise levels resulting from increased use of an existing unaltered road. I made it clear in answer to a parliamentary question earlier today that we have, in exceptional circumstances and where funds have been available, exercised a discretionary policy for providing noise barriers on roads last improved before 17 October 1969, but that policy is not applicable in respect of this section of road, which opened to traffic in 1971.—[Official Report, 12 December 1996; Vol. 287, c. 512.]

He went on to confirm that the cut-off date was not statutory but a matter of policy, which means that if the Minister is so minded she can change it without further legislation.

I tabled a parliamentary question to the Secretary of State to find out whether the present policy would continue or whether he would provide noise barriers on the M20 between junctions 3 and 5. The Minister replied:

"It is not possible to justify the expenditure of public funds on providing noise barriers along this section of the M20, as this would mainly be of benefit to people who either bought property in the vicinity of the M20 in full knowledge of the noise from traffic, or were compensated for the loss of value of their property when the road was first built, in anticipation of the growth of traffic on it.—[Official Report, 25 June 1997; Vol. 296, c. 520.]

Will the Minister reconsider that policy, which appears to be—I hope that I am wrong—an endorsement of the previous Government's policy?

There is an extremely compelling case for reviewing the policy. The Minister's statement that the expenditure could not be justified is strange, in that only a few months previously, until November last year, the Department of Transport found no difficulty in justifying the use of public funds for the construction of noise barriers and other noise abatement measures along that section of the motorway. I accept that that was done in the context of the widening scheme, but I do not believe that the Minister would argue that, merely because the widening scheme has been abandoned, there will be a considerable reduction in the noise disturbance.

The Highways Agency's figures show that, even without the widening scheme, the traffic on that section of the M20 will double. There is no evidence to suggest that there will be any material diminution of the volume of traffic using it, simply because the widening will not proceed. The cut-off date of 17 October 1969 for the discretionary policy of constructing barriers on existing roads looks increasingly anachronistic. Surely policy should be determined not by some past cut-off date, almost 30 years distant, but by the present environmental realities.

The present policy is based on the Department effectively disowning any environmental responsibility for what happens on existing roads. The Department is effectively saying that any intensification of existing use, creating increased noise and environmental disturbance, is not its responsibility and that it washes its hands of it. That position is not taken by those who operate airports in this country, and it would certainly not be allowed to be taken by companies in the private sector.

I recently had complaints about a company operating a sawmill in my constituency and I regularly get complaints about quarries. We do not allow private sector companies to say that, because they have planning consent, they can carry on intensifying use and creating more and more noise disturbance at ever-higher decibel levels for any number of hours in the day. We bring to bear on them the planning authority, public health legislation and the Health and Safety Executive. The Department cannot continue to operate a policy under which it simply walks away from the environmental consequences flowing from intensification of use of existing roads.

In the previous debate that I secured, I asked the then Minister for Railways and Roads, Mr. John Watts, whether he could consider whether the new road surfaces being tested by his Department could be applied to the section of the M20 about which I am concerned. I have deliberately extended the geographical ambit of this debate to cover the area from junctions 2 to 5, because on the section between junctions 2 and 3, heavy lorry traffic makes considerable noise as it goes past the village of Wrotham and up the steep gradient of the north downs to the top of Wrotham hill.

As recorded at column 514 on 12 December 1996, the then Minister replied relatively positively to my request for the motorway to be used for testing new road surfaces. When I tabled a question to the present Secretary of State asking him whether that section of the M20 could be used to test the quieter road surfaces being developed by the Department, the Minister replied:

"When the M20 between junctions 3 and 5 needs attention as part of planned maintenance, the possibility of using it to test novel forms of quieter road surface developed by the industry will be considered."—[Official Report, 25 June 1997; Vol. 296, c. 520.]

Will the Minister extend her consideration of using the quieter road surfaces to junctions 2 to 5, for the reasons that I have explained? Will she, either in her reply or by letter, as the matter may require some research, give me the fullest possible information about when the Department plans to carry out resurfacing on that section of the M20? Perhaps she may say more firmly than in her written answer that the Department intends to make every possible effort to use quieter surfaces.

The issue is deeply significant for my constituents and those of the hon. Member for Chatham and Aylesford. I strongly believe that it will not be sustainable for the Department simply to walk away from the environmental consequences of the intensification of use of existing motorways. I am told that the Department of Transport in the Netherlands has as a policy objective the planned resurfacing of main roads, specifically, to try to reduce noise disturbance, and that it applies that policy on existing roads. I earnestly hope that a similar policy objective will be adopted by the Department in this country.

I congratulate the right hon. Member for Tonbridge and Malling (Sir J. Stanley) on securing this debate so early in the life of this Parliament. He has been a tireless advocate for his constituents in the matter and I welcome his raising it in the House, because it gives me the opportunity to explain more fully how the legislation dealing with the adverse effects of roads on the environment works.

There is no doubt that traffic noise is an exceedingly contentious issue, not least when defining what is a serious nuisance, because the perception of noise may vary from person to person and from place to place.

I recognise that people living near the M20 feel that they suffer the adverse effects of the traffic without receiving much benefit from the motorway. I must point out, however, that it plays a vital role in giving access to the single European market. The right hon. Gentleman detailed the precise importance of that stretch of our national road network; I believe that the effect of that access on our trade has benefited the nation. The efficient distribution of goods and other services brought about by that direct link to the continental motorway network has had a dramatic effect on society. Although we have had arguments to the contrary from the right hon. Gentleman, most of those effects have been essentially beneficial.

The right hon. Gentleman argued that the discretionary powers provided by the Highways Act 1980 to mitigate the adverse effect of roads on their surroundings have not been used to their fullest extent. It is important to understand the basis of the legislation and the principles of equity and consistency which underpin the way in which discretion has been exercised.

The fundamental principle originally established under the Land Compensation Act 1973 is that a public body that carries out development under statutory powers should provide compensation for the indirect effects of that development on adjacent land interests.

In addition to providing for financial compensation, that Act also gave the Secretary of State for Transport the power to make regulations imposing a duty or conferring a power on responsible authorities to insulate buildings against noise caused, or expected to be caused, by the works associated with road construction or improvement. That power was implemented in the Noise Insulation Regulations 1973. Further provisions contained in the Land Compensation Act included the power for responsible authorities to carry out additional measures to mitigate against the adverse effects of the construction, improvement, existence or use of the public works.

The provision for compensation was limited to public works completed on or after 17 October 1969. The same operative date was contained in the Noise Insulation Regulations 1973. It was not considered appropriate to specify a retrospective date limiting the power to provide other mitigation measures, because it was intended to cover deserving cases in which properties were affected by roads that had been completed before the specified date, which limited the exercise of the other powers.

It took several years for retrospective cases to be dealt with under the Noise Insulation Regulations. It was not until 1979, under the previous Labour Government, that the power to provide other forms of mitigation was activated. It was made clear at that time that the policy of providing noise barriers alongside existing highways was restricted to roads opened prior to 17 October 1969.

In each case, the decision to provide a noise barrier was subject to the requirement that that would provide a significant degree of relief to a substantial number of properties. It also had to be feasible to erect a barrier within the existing highway boundary as there was no provision for acquiring extra land.

Subsequently, the power to provide measures to mitigate the adverse effects of highway construction was included in the Highways Act 1980. In applying that power to new road construction, it was extended to include a power to acquire additional land on which to construct such measures. That has allowed a much wider view to be taken of mitigating environmental impacts, but the effectiveness of mitigation has always been measured against the number of properties that would otherwise need to be insulated under the Noise Insulation Regulations.

That power has been exercised only in very particular circumstances to provide an additional noise barrier alongside roads built since 17 October 1969. For example, additional noise barriers were placed on the A27 Havant-Chichester route, which was opened in 1988. That was possible because the Noise Insulation Regulations had been revised in that year and specifically provided an allowance for differences between road surfaces. The change meant that a significant number of properties became eligible for statutory noise insulation and it was considered appropriate to provide additional noise barriers instead.

In other cases, barriers have been erected after the road was opened only when the cost has been met by a third party. That has usually been as a consequence of a planning condition attached to residential development. Noise barriers have been provided at the expense of the developer to protect properties, which would otherwise not have been permitted.

This is quite a complicated matter and I have described the provisions of the legislation at some length. In summary, the exercise of discretion to provide noise barriers relates to roads built or improved after October 1969—where a developer or other interested party is prepared to cover all costs—and roads that have not been improved since October 1969 where it can be shown that barriers would provide a significant benefit to a sufficient number of properties suffering unduly from traffic noise.

I understand the argument presented by the right hon. Gentleman that the effects of increased traffic on the section of the M20 to which he referred make his constituents a special case. I am sure that he would acknowledge, however, that there are many sites around the country that are similarly affected by increased traffic noise, both from motorways and within towns.

To consider all those deserving cases equitably would involve substantial costs, even within the existing legislation. There is the issue of whether the public purse should provide benefits in kind to owners of property who either bought at a price reflecting its location relative to the motorway or received compensation when the motorway was first built, to offset the anticipated effect on the value of the property.

When a trunk road is planned to be constructed or improved, an assessment of its environmental impacts and the potential benefits of various types of mitigation takes into account the volume of traffic expected to be using it 15 years after the scheme is first open to the public. I acknowledge that one of the most important concerns discussed at the public inquiry into the proposals to widen the M20 between junctions 3 and 5 was the impact of traffic noise on the surrounding area.

I am aware that the inspector strongly supported the use of porous asphalt, as well as the proposed noise barriers, to reduce the adverse effects. But those measures were discussed in relation to the longer-term effect of the widening proposals.

The right hon. Gentleman was scathing in his criticism of the proposals to widen the M20 and their subsequent withdrawal. However, the draft statutory orders for the acquisition of a small amount of land, mainly needed to provide for additional mitigation measures, were not confirmed. That allowed the local planning authority the freedom to permit development on the land, and released previously blighted properties back on to the market.

I understand the intense disappointment that the right hon. Gentleman's constituents must have felt having been offered some prospect of relief by those widening proposals from the apparently inexorable increase in noise from traffic on the section of the M20 between junctions 3 and 5.

I have to say that the purpose of the mitigation then on offer was essentially to offset the anticipated effect of the widening. However, the assessment of noise impacts arising from the proposals used the updated method of assessing noise levels, which takes account of the type of road surface. It is likely that the original concrete surface and the subsequent surface dressing would probably not have been as quiet as they now can be with the use of modern construction methods.

The right hon. Gentleman referred to the seemingly inexorable increase in road traffic. The Government are committed to developing an integrated transport policy, and the upward trend in traffic growth will be re-examined. For the moment, I must ask the right hon. Gentleman to be patient until the appropriate maintenance programme for that section of the M20 is decided. I have taken careful note of his question and I will certainly ask my officials to respond to it as speedily as possible.

I can assure the right hon. Gentleman that due consideration will be given to noise when the time comes to renew the surface. The technology involved is moving very rapidly and, when the time comes, whatever firm of surfacing is provided should noticeably reduce traffic noise. The resurfacing of the M20 will be determined when an engineering assessment of the existing surface has been done. It is planned for this year and I repeat that I will ask my officials to respond as quickly as possible to the matter.

I referred earlier to the inspector's belief that porous asphalt could have helped in resurfacing. However, the extra costs for that are no more justifiable than those of noise barriers. It is many times more expensive to put down than other forms of surface and involves extra costs if used on existing roads because drainage arrangements have to be modified. It is more expensive to maintain the surface free of ice in winter—

Order.

Dyfed Powys health authority may seem an esoteric subject, but it does not to my constituents. It is a matter of keen concern to them, to others in the Dyfed Powys area and to me.

Health authorities buy medical services from hospitals—in the case of Llanelli, from the Prince Philip hospital and one or two smaller ones. If Dyfed Powys health authority goes bankrupt or runs out of money, the hospital services provided for my constituents will deteriorate. I thank my hon. Friend the Member for Bridgend (Mr. Griffiths) for meeting a delegation of hon. Members from the old Dyfed area some time ago. This debate should not be taken as a criticism of that meeting, which was very helpful. However, time has moved on and the situation is changing.

Dyfed Powys health authority resulted from a merger, under the previous Government, of Dyfed health authority and Powys health authority. The area covered by the Dyfed health authority had three acute hospitals and a small number of community hospitals, as they are described. The Powys area had no acute hospitals and a large number of community hospitals. To a city banker experienced in merger negotiations, that situation would have been ideal. One complemented the other: Dyfed provided the acute hospitals of which Powys had none, and Powys provided the community hospitals of which Dyfed had only a few. Real life is not like that, certainly not in the health service.

The new authority inherited many problems, most of them, I am sorry to say, from Powys. It has tried to resolve them. It made various suggestions some time ago to resolve them by closing many community hospitals—

Will the right hon. Gentleman give way?

Not at the moment.

The authority also proposed the reduction of services. Those proposals met with universal condemnation and were thrown out. Poor Dyfed Powys health authority is again trying to resolve the matter. In the autumn, it will no doubt advance other proposals. As far I can see, its proposals will aim to improve the financial situation. They will not be for the purpose of improving the health service. The corollary or obverse of improving the health authority's financial situation will be a deterioration of the health services provided for Llanelli and the other constituencies affected. There is not much use in looking at the matter from the point of view of trying to resolve the financial problems in that way.

I do not want to criticise anyone. I do not want to criticise Dyfed Powys health authority because it inherited difficult problems. I am not criticising my hon. Friend the Minister, who has also inherited a horrible situation, but I have several questions. I shall understand if he cannot answer them now. This is an Adjournment debate and, if he is not in a position to answer them, he will no doubt write to clarify matters.

I understand that health authorities make up accounts, although I am not sure in what form, or whether they are audited by outside, independent accountants. Has my hon. Friend the Minister received the 1996–97 accounts, if they exist, of the Dyfed Powys health authority? Are they properly audited? Who drew them up? Do they set out what one would normally expect to find in accounts—borrowings, assets, loans, liabilities, expenditures, and everything else that people would wish and need to know? When they appear—if they have appeared, fine—could he please place them in the Library for us to try to fathom? I know that it is a long way from mid-Wales or Llanelli, but at least the accounts should be open for inspection so that we can then ask questions about them. Are the accounts in a form that an accountant would not feel disgraced to sign?

My second question relates to debts. I do not understand the structure of health authorities. I tabled a question to my hon. Friend the Minister, which he properly answered quickly. Again, I make no criticism. Perhaps I was naive, but I asked what were the borrowings of the Dyfed Powys health authority from the Welsh Office. The answer that I got was approximately £2.5 million. That surprised me a little because various figures have been bandied around: deficits of £6 million and £7 million. I wondered whether I had missed something. Was it a very carefully drafted answer? I am sure that the £2.5 million figure is correct, but can my hon. Friend say whether there are other borrowings, loans, brokerages or whatever other words can be used to dress up debt? Has Dyfed Powys health authority borrowed secretly from somewhere such as the Drover's bank in Llangammarch Wells? Who knows whether there are liabilities to building societies in small mid-Wales villages? May we be told how much the health authority really owes? I am told that it has money somewhere that should be going to GP fundholders and that it borrows a bit, then pays it back again.

The right hon. Gentleman is making a powerful case about the finances of Dyfed Powys health authority. Does he agree that it is strange that, last October, it said that it would have a deficit of £9 million over the next five years; that in January it said that it would be £11 million over the next five years; and that, in meetings in my constituency in March, it said that, if compound interest were added, it would have a deficit of £38 million over the next five years?

We should leave compound interest to the Chancellor of the Exchequer, but I agree. I am as baffled as the hon. Gentleman, and that is one reason for this debate. Again, I do not expect my hon. Friend the Minister to be able to answer fully, but I hope that we can get some figures for the so-called deficit.

What is a deficit? I suppose that a deficit means spending more than is being earned. I do not how to apply that concept to such an organisation. From where does the money come? Does it come out of the dreaded public sector borrowing requirement? That would be terrible. I take it that the £2.5 million comes out of the dreaded PSBR, but what about all the other deficits? Are they added to the wretched borrowing requirement? We should like to be told the answer so that we can assess the position.

I shall now refer to 1997–98, this financial year; we have already asked for the accounts for the last financial year. I do not know how the health authorities are funded. No doubt, a sum of money is provided for them by the Welsh Office. I am told that there is some sort of formula for local authorities that is called the standard spending assessment. It used to be the rate support grant, but names get changed, although the reality does not.

How much money has the Dyfed Powys health authority received—or will it receive—from the Welsh Office for the next 12 months from this April to next April? We need to know how much it will be so that we know how much it is being paid. Is the figure plucked out of the air? At the meeting with my hon. Friend the Minister, he mentioned a long equation, which no doubt ends in nought—such equations for economists usually end in zero; I do not know why. Could my hon. Friend the Minister send me a letter explaining how the algebraic equation is arrived at? How is the figure arrived at? It is an important question because the spending figure is important. It tells us the amount that can be spent on buying services from the Prince Philip hospital in Llanelli and from other hospitals. I do not expect to be told the equation now, but we need to know it so that we can work out—or be told—exactly how much money is allocated for this year. What will the deficit be for this year? Apparently, there will be one. Is the deficit rolled on every year until the Welsh Office has to provide a loan?

The Llanelli-Dinefwr hospital trust operates the main hospital in my constituency, the Prince Philip hospital, and other hospitals, but there is still no negotiated contract. I raised that issue with my hon. Friend the Minister and he made some helpful comments. I am told that there is no negotiated contract between those hospitals and the health authority.

We have the extraordinary situation whereby a public body—the health authority—pays what it can. It is as though I went into Tesco in Llanelli, took a trolley full of food to the till and said that I could afford only £5 and the shop could possibly have the rest later. When will the contract be signed? If a contract is not signed on satisfactory terms, the Llanelli-Dinefwr hospital trust will run up debts. As the Minister knows, that trust runs a tight ship—it has never been in debt and it balances its books—but I am told that, if the situation continues, by the end of this financial year the trust could be in debt to the tune of at least £1.5 million.

In reply to another question, which is not relevant to this debate, my hon. Friend the Minister said that Morriston hospital was now in debt to the tune of £16.5 million. I do not want that to happen to my hospital trust. It would not be fair if it had to pile up debts that were not of its own making and then had to do something in future to try to reduce those debts. Could that contract be negotiated fast so that the trust does not run up a debt like the one that has been run up by Dyfed Powys health authority?

There is no solution to the problem to be found in measures to reduce the bureaucracy of the Dyfed Powys health authority. It is always possible to find savings in a bureaucracy, but that will not solve the problem. The difficulties should not be solved by cutting services. I am sure that my hon. Friend the Minister would agree that the problem should not be solved in that way. I am sure that he will also agree that we should not come up with a plan to solve financial problems by cutting services. We are not looking to improve hospital services in Llanelli, merely for them to be at least maintained. If the financial plans are put into operation, health services will deteriorate. People who voted for us and for my hon.

Friend the Minister at the last election did not vote for a deterioration in existing services—within realistic boundaries, they want improvements.

Ultimately, the only solution to the problem comes from money from the Welsh Office. That money must be used to wipe out the debts and place the health authority on a proper basis to ensure decent hospital services. I understand that now, a few hours before the Budget, is not the best time to talk about money, but there is plenty of it about. As a former Treasury Minister, I find it difficult to say that—it sticks in my gullet—but there is plenty of money. Even the City and the Confederation of British Industry want to increase taxes.

What is my right hon. Friend the Chancellor going to do with those taxes? I know that he is a Scotsman, but I hope that he will not put the money into a tin trunk under his bed. Everyone wants increased taxes and everyone wants the Government to have more money. Some of that money should be used for these purposes; I know that it is not easy, but there is no shortage of money at the moment. It is a question whether we have the will to use that money to sort out the problem which, although not of my hon. Friend the Minister's making, nevertheless exists. The problem can be solved only with money, not by the deterioration of hospital services in my constituency.

I congratulate my right hon. Friend the Member for Llanelli (Mr. Davies) on securing this important debate so soon in the life of the Parliament. I am grateful to him for bringing this issue to the attention of the House. The publicity that has surrounded the difficult financial position in Dyfed Powys health authority has aroused considerable strength of feeling locally and I welcome the opportunity to debate the matter in this forum.

Before we go into the detail, it is important that I explain something of the background to the position that we have inherited. Back in the early 1990s, as part of the market reforms, the previous Government decided that funding for health care should be population based—health authorities should receive money to meet the health needs of the residents living in the authority area. Money would follow the patient so that, no matter where treatment occurred, the health authority would still have to pay. Under that policy, the capitation formula used to distribute resources provided by Parliament showed that, if the total amount of cash were allocated solely according to population rather than on the old service basis, some authorities were not getting enough cash while others were receiving too much. Dyfed Powys was one of the authorities that was receiving too much.

To enable a more equitable distribution, a weighted capitation formula was introduced and the move to it was phased over five years. Funding by a weighted capitation approach seeks to take account of the need for health services in a population by adjusting the crude population share according to various factors. Those are chosen to show the relative demand for health services and include, for example, the relative death rate and the proportion of elderly people. I am quite sure that my right hon. Friend can be given information on how that formula works. This financial year is the last year of transition to that arrangement.

As a result of that readjustment to the existing capitation formula, over the past four years, the allocation for Dyfed Powys health authority has risen by only 19 per cent. compared to growth across Wales of 23 per cent. Nevertheless, the formula and the arrangements for its phased introduction were designed to provide time for the service to plan and were agreed with the NHS in Wales. While I expect that the process was manageable, it would have posed some difficult choices for the authorities involved.

Does the Minister agree that, even with a transition time, the provision in rural areas will not become any cheaper? We have therefore compounded the problem—the net income per capita is coming down, but the problems of increasing elderly provision are rising. That is why so many of our residents in Powys have been concerned about the future of the cottage hospitals which seem to be under threat for the very reason that the Minister was giving.

As services for the elderly are increasing, the capitation formula will be of some help. Like the hon. Gentleman, I am concerned about the future of the health service, not only in rural areas, but in industrial areas. Although the formula has been accepted by the NHS in Wales as a robust means of distributing resources, my officials have convened a working group consisting of a wide range of NHS interests in order to review the methodology. I believe that that is necessary for a number of reasons.

Since the formula was introduced, there have been developments in the approach to determining health need; health authorities in Wales have been reorganised; and new sources of information on the health status of the population have become available—for example, the Welsh health survey. We must consider, together with the service, whether any of those developments should influence our approach. It is my intention to ensure that the distribution of resources between health authorities in Wales is done in the most effective and efficient way, but, clearly, these are early days and we cannot predict the outcome of the review or its effect on any particular health authority.

That is for the future. I shall now answer one or two of my right hon. Friend's questions.

When it is reviewed, the formula must take account of rurality in relation to the provision of hospital services.

There is an element for that in the current formula, but there may be a need to consider whether its weighting should be increased. That is one of the matters that the review group will consider.

This year, Dyfed Powys received £265 million for hospital, community and family health services, including £257 million that is available for the authority's discretionary expenditure—that is, to purchase health services according to local priorities. The sum represents an increase in funding of 2.6 per cent. over 1996–97, which in cash terms means that the authority received an additional £6 million. As well as funding for hospital, community and family health services, almost £10 million was allocated to the authority for cash-limited general medical services—£600,000 more than in the previous year, or an increase of more than 6 per cent.

Of course, the move to weighted capitation funding has not been made any easier by the decision to reorganise health authorities. The new authority was created on 1 April 1996 and its unaudited accounts for its first year show a deficit of £1.9 million, adding to its inherited deficit of over £3 million. I assure my right hon. Friend the Member for Llanelli that such accounts do get properly audited and that he will be able to receive a copy of them. In addition, I cannot envisage any difficulty in placing a copy in the House in Commons Library.

In income and expenditure terms, the authority is obviously spending more money than it receives from the Welsh Office and, as I told my right hon. Friend when we met recently to discuss the matter, I have been asked to provide additional resources to help overcome that situation. In considering that, it should be recognised that, in allocating resources to authorities, the Welsh Office does not routinely keep cash in reserve at the centre. Consequently, we expect authorities to live within the resources allocated to them. Despite that, we try to be flexible and, in 1995–96, the Welsh Office provided a loan of £810,000 to the former Powys health authority, and, in 1996–97, provided the new Dyfed Powys authority with a further loan of £1.7 million. Therefore, as my right hon. Friend rightly said, the Welsh Office is now owed £2.51 million.

The authority has asked fir a further loan in the current year totalling well over £5 million. That is a considerable sum and, although it helps with cash liquidity to pay bills in the short term, it masks a much more serious underlying problem about the ability of the authority to maintain its existing level of commitments in future years. Cash injections in the form of repayable loans may have a part to play in managing the short term, but I would be unwilling to countenance their use as a substitute for addressing the underlying resource problem. Moreover, I am sure that, as a former Treasury Minister, my right hon. Friend would agree that, before I can reach a decision, it is essential that the authority produces a plan to demonstrate how it will get back to a balanced position. That is awaited, but, in the meantime, officials are giving the matter careful consideration and I hope to announce a decision this month.

From all of that, it is clear that the current contracting round with the authorities' main providers in the area is going to be very difficult and I can understand the frustration of all the trust chief executives. Representatives of the Llanelli trust have impressed on me their frustration—indeed, the small delegation from that trust which accompanied my right hon. Friend gave me a clear picture of the situation. I understand that, until contracts are agreed, temporary arrangements have been put in place to ensure that patient services—which must be the prime consideration—are not disrupted and trusts have a cash flow.

As I mentioned earlier, the provision of cash loans is not the only answer and neither can we add more money permanently to the allocation. That would create an imbalance in the move to a capitation-based mechanism and cause tensions elsewhere in Wales. The way forward is for the authority to develop a more acceptable strategy for the delivery of health care to its resident population than was proposed in the consultation document "Effective Care and Healthy People". That was intended to provide opportunities for residents and others to contribute to the review of health care provision in the area.

As my right hon. Friend will know, after considering the responses to consultation, the authority decided at its board meeting on 3 June that it should work with local interests to produce a revised strategy. A progress report on work towards completion of the revised strategy is to be made to the board in the autumn. It is now for the authority to take the matter forward, although I shall continue to take a keen interest and have asked to be kept closely informed of developments.

Of course it is not simply a matter for the health authority. The trusts in the area do need to play their part and, although I understand the difficulties they face, they must realise that resources are severely stretched. They will need to ensure that their organisations operate as efficiently and as effectively as they can. That will often mean careful consideration of the management of the capital estate, much of which is old, poorly maintained and in many cases not suited to modern health care techniques. Some estate rationalisation might therefore be necessary.

The Powys trust is developing proposals with the private sector for the rationalisation of patient and support services currently provided by Bronllys and Mid-Wales hospitals. That will enable the old establishment at Talgarth to be closed. Hospital services at Newtown will also be redeveloped in a new hospital to complement the services envisaged at Bronllys. The total cost of the two new developments is almost £19 million and negotiations are currently under way with the private sector to develop those schemes. The estate rationalisation flowing from the projects is likely to result in cost savings that will go some way to alleviate the financial problems of the authority.

In my right hon. Friend's constituency, the Llanelli trust is currently working with the Pembrokeshire and Derwen trusts in the development of proposals for elderly people that will incorporate alterations to Mynydd Mawr, Tumble and Bryntirion hospitals, and also for the reprovision of in-patient psychiatric services from St David's hospital, Carmarthen and Bryntirion hospital, Llanelli on to the Prince Philip hospital site. Those proposals will also allow some site rationalisation that may result in cost savings to the authority.

I was also interested in the plans that the Llanelli trust has in mind for an integrated model of care delivery in the Llanelli-Dinefwr area. As I explained to the chairman and chief executive of the trust when I met them with my right hon. Friend, the proposals need to he properly costed; nevertheless, it is encouraging that the trust and local GPs are working together. The GPs will need further to develop their thinking and perhaps consider producing clear, costed proposals for consideration as one of the locality commissioning pilots which I announced last Thursday.

From the Government's point of view, I think it important to recognise that the position that we inherited cannot be dealt with overnight. There will be situations like the one in Dyfed Powys when there is a need for everyone to pull together to ensure that patient services are not affected; that will entail co-operation and compromise locally.

My right hon. Friend will know that I have already suspended the eighth wave of GP fundholding. That will release £1.9 million, to be used to reduce cancer waiting lists and for developments in primary care. I announced a wide-ranging review of the number and shape of NHS trusts in Wales, and it will get under way soon. We are also issuing a White Paper in the autumn to abolish the internal market—

Order.

I welcome the opportunity to debate this important subject. I thank the Minister in advance for responding to this debate and to the previous one. I know that he is having a heavy day in the Chamber; I am sure that when he eventually returns to Gwydyr house he will insist on being served a good lunch of Welsh lamb or Welsh beef—a decent recompense for his hard day's work in the Chamber.

There is a crisis facing the livestock sector in Wales. I informed the Minister's office that I would concentrate today on the crisis in the beef sector, especially in Wales—although I understand that the issue is also important in the other countries of Britain.

I need not remind the House of the crisis that the industry has faced for the past 15 months. The difficulties that followed the announcement by the then Secretary of State for Health on 20 March last year have been severe for the industry. That statement will be etched on the memory of farmers for a long time to come. I shall not recount the events since then in any detail—merely say that I have attended more mass meetings of farmers who are worried about the crisis than I have at any time in the past 20 years or so.

Most farmers were under the impression that once the over-30-months scheme was nearing a conclusion the crisis would probably be over. They thought that confidence and prices would start to recover, but things are worse now than they were at the height of the crisis. Prices in the marketplace are lower and farmers are losing a considerable amount of money on the cattle that they sell for slaughter. Such losses cannot be sustained for much longer. Interest rates have been historically low, but there are signs that they will rise in the next 12 months, thus adding to the pressure on farm incomes.

I accept that the fall in beef prices is due to a combination of factors. First, there is the revaluation of the green pound and the failure of the previous Government to ask for European Union money to alleviate the consequences. I hope that the new Government will make positive moves to rectify that. Secondly, there is the importation of beef from EU and third countries—beef that does not meet the high hygiene standards in the UK imposed as a result of the BSE crisis. Thirdly, the market has yet to recover the full confidence that it enjoyed before the BSE crisis erupted.

Does the hon. Gentleman agree that British and Welsh beef is now the safest that can be bought anywhere in the world?

That is a good point. I shall reiterate it to the Government with some force before the end of this short debate.

The decision by the current Government to cut compensation for beef farmers entering the over-30-months scheme has caused considerable resentment in the industry. The Government need to recognise—whether we like it or not—that the compensation price affects the market price. The great danger that many farmers perceive is that the cut in the one will affect the other—the market price will fall even lower.

I acknowledge the considerable cost to the Exchequer resulting from the BSE crisis and I know that that cost has been revised upwards in recent days, but I hope that the Minister will recognise the importance of agriculture to the rural economy. We need to underpin that economy; anything that affects beef producers is bound to have a deleterious effect on the rural economy.

Farmers recently received a significant boost when McDonald's said that it would reintroduce British beef to its fast food outlets. That showed that confidence is returning to the industry. It is thus all the more surprising that many public bodies in Wales and the rest of the United Kingdom buy the vast bulk of their beef from abroad. When I looked into it, I was astounded by the scale of this purchasing problem.

I have a letter from the chief executive of the Naval Bases and Supply Agency stating that the task of procuring food for the armed forces is contracted to the Navy, Army and Air Force Institute. I am told that some British beef is purchased, but that

"the Armed Forces' requirement is mainly for frozen products and the majority of beef joints are sourced on cost grounds, from Brazil, Uruguay, Argentina, New Zealand and Australia."

So none of this frozen beef is bought in Wales or anywhere else in the UK.

I have also inquired about the purchasing policy of health trusts in Wales. Many of them are located in prime beef-producing areas. My office was able to contact eight trusts; of those that could supply me with information, none had a policy that ensured that local beef was purchased as a matter of course—although some local beef was used. They all said that they now had to ensure value for money. The trusts that gave me information included the Bridgend and District NHS trust, the Carmarthen and District NHS trust, the Clwydian Community Care NHS trust, the Derwen NHS trust, and the Glan Clwyd District General Hospital trust. Some of them did not even know where their meat came from.

I understand that most, if not all, of the trusts in Wales receive their supplies under standard contracts negotiated by Welsh Health Supplies, which is a business unit of the Welsh Health Common Services Authority, or WHCSA. The NHS in Wales ceased purchasing carcase meat some time ago, moving to prejointed frozen cuts. Under the current arrangements, those frozen cuts of beef, lamb and pork come from South America, New Zealand and the home market respectively. That may be good news for Welsh pig farmers, although there are not many of them, but it is very bad news for the vast majority of Welsh farmers who are lamb and beef producers.

The good news, however, is that WHCSA is reviewing the policy and the balance between frozen and fresh meat and asking for more flexibility to be applied to contracts. On behalf of Welsh beef and lamb producers, I ask the Minister to urge the authority to introduce these proposals at an early date.

I have also made some inquiries with local education authorities in Wales about their school menus. The Minister will be aware of the report in the Western Mail in March of this year which stated that most schools in Wales did not serve beef to children. At the time, 13 of 22 LEAs were operating policies that totally or partly excluded locally produced beef from school menus. Of those 13, seven operated a total ban on beef, one gave head teachers discretion to use imported beef and five excluded beef from primary schools. My office contacted some of those LEAs and found that, in Cardiff, beef is on the menu only in secondary schools. Even there, there is no policy of buying local beef and LEAs follow what is described as the value-for-money rule.

In Denbighshire, an area noted for quality agricultural produce, beef is banned in primary schools and in secondary schools, where beef is offered and there is a choice, there is no policy to buy local beef. All meat is bought through a purchasing consortium.

In Rhondda Cynon Taff, all the beef used is imported, although I am pleased to say that a review of that policy is taking place.

The purchasing policy of Ynys Môn and Gwynedd county councils specifies the use of locally killed beef in schools.

Needless to say, the farming unions in Wales want the Welsh Office to encourage public bodies not only to purchase beef, but to buy locally produced meat. They and I understand that no one can be forced to buy or eat Welsh meat, but the Government can use their considerable authority to encourage its consumption.

In a letter to me, the Farmers Union of Wales asks that the Government positively discriminate in favour of fresh, home-produced meat, the value and quality of which are second to none. It would also help if the Government advocated the specification of fresh as opposed to frozen products in public body contracts. Such a move would be greatly welcomed.

The NFU has told me that, following the decision by McDonald's Restaurants to obtain local beef, it is renewing its strong invitation to public bodies to source their beef from British supplies.

The industry generally welcomed the stance taken by the Minister of Agriculture, Fisheries and Food when he made it clear that he expected imports from the European Union to meet the standards on the removal of specified bovine material that must be met by British beef and that, if they do not, orders banning imports will be laid before the House. He repeated that warning on the Floor of the House during the recent debate on the common agricultural policy.

Given that that is the Government's position, that—as the hon. Member for Montgomeryshire (Mr. Öpik) said—beef is safer than it has ever been and that we now have stringent hygiene standards, I believe it is right to expect Ministers to encourage its consumption now. It is ironic, is it not, that while statements in the House and elsewhere are made about the nutritional quality of locally produced beef, hospital patients, members of the armed forces and schoolchildren are eating beef from every country under the sun except their own. It is ironic, therefore, that the Government are not bringing pressure to bear on public bodies.

I believe that we are entitled to ask today for a clear statement from the Minister that all contracts entered into by public bodies for the purchase of meat be reviewed so that locally produced meat can be considered. That can be done quite easily by stating that they should consider fresh meat as well as, or instead of, frozen meat. That would give public bodies a clear signal that they should buy local beef.

There are encouraging signs from the WHCSA and local education authorities. I am asking the Minister to give a clear signal to those that are not moving in that direction to consider their contract sourcing policy. Will he encourage the local education authorities who still refuse to have beef on their menus to think again?

I feel that a bigger battle lies ahead with the purchasing policy of, for example, the armed forces. I made contact with the Ministry of Defence during the period in office of the previous Government; I have done so again, and there appears to have been no movement on their part. Will the Minister talk to his colleagues in the Ministry of Defence and at least ask them to review the position? The public pronouncements on the value and quality of our beef will ring a little hollow unless those organisations of which the Government have control start to change their purchasing policies.

I know that the Minister will have listened very carefully to my speech today. I hope that he can respond positively.

I congratulate the hon. Member for Ynys Môn (Mr. Jones) on successfully securing this Adjournment debate. I am pleased to have the chance to respond on the important issues that he has raised. They are near to the heart, mouth and stomachs of consumers, who want safe food, and of producers, who provide it. The issue is one of confidence. I am convinced that confidence is justified.

Let me set out our approach to dealing with the impact that BSE has had on the beef industry—especially confidence in British beef. Throughout the crisis, the Spongiform Encephalopathy Advisory Committee has been a source of independent advice. It has advised on a range of precautionary measures to minimise the risk to human health. Scientists can never guarantee that there is no risk, but SEAC's chairman, Professor John Pattison, is on public record as saying:

"in any common usage of the word, beef is safe to eat".

That is the starting point for the restoration of consumer confidence in beef.

The leaders of the NFU in Flintshire were very grateful to my hon. Friend for receiving their recent deputation. The worries continue. The leaders of the National Farmers' Union of Flintshire—Mr. Idris Roberts of Pwll farm in Treuddyn and the farmer who leads the NFU of Flintshire in Carreg y Llech, Mr. Terrig Morgan, also in Treuddyn village, say that they still have considerable worries and urge the Minister and the Government to continue to do everything possible to help their industry.

I thank my hon. Friend for that intervention. I hope that what I have to say will be helpful and that other continuing negotiations will prove to be helpful.

The hon. Member for Ynys Môn mentioned the announcement made last week by McDonald's Restaurants that it was resuming use of British beef products in its United Kingdom outlets. I am very encouraged that that decision was taken as a direct response to the views of customers, and I believe that, last night, Burger King made a similar announcement.

In March 1996, directly after the announcement of a possible link between BSE and the new form of CJD, 70 per cent. of people surveyed by McDonald's Restaurants said that they would not buy British beef products. Now, however, there has been a complete reversal. A recent survey showed that 74 per cent. of people wanted McDonald's to sell British beef and it has followed customer preference. I am glad that Burger King has now done the same.

That is clear evidence that consumers' confidence in British beef is returning. Beef consumption as a whole is now only 3 per cent. below pre-crisis levels. In June, sales of beef in Wales were 42 per cent. greater than in the same period in 1996—the highest percentage increase in the United Kingdom.

I turn now to the issue of NHS trusts using British beef. Although NHS trusts are accountable to the Government, it is not our role to dictate what they should or should not do across a wide range of their responsibilities. Into that category falls the source of the beef provided to patients. Decisions about hospital meals are made by local management, in the light of central guidance.

Trusts in Wales as elsewhere, receive guidance on issues such as hygiene and dietary standards and are expected to provide patients with a choice of meals that respects their dietary needs. Information on CJD and BSE has also been sent to trusts, but the use or non-use of British beef has not been stipulated, and is not monitored centrally. However, I can tell the hon. Gentleman that I am receiving anecdotal evidence from trusts that they are reviewing that policy, and I hope that what is said in the Chamber today will give them confidence to make other moves.

The inclusion of beef on the menus of local authority schools is a matter for individual local authorities. They have been advised that there is no reason to withdraw beef from school menus, but they should continue to provide a choice of menu to accommodate different dietary and cultural preferences. I believe that beef can form a part of any well-balanced nutritional diet for our children, and I hope that local education authorities will take that view on board.

Before 20 March 1996, public bodies were under no obligation to restrict their beef supplies to those from Wales—or even from the United Kingdom generally. Indeed, the treaty a Rome prohibits public bodies from discriminating in favour of national interests. Consequently, Governments could not force public bodies to source their beef in Britain, even if they wished to do so. In any event, that should remain a matter for local discretion. Patients in hospitals, and school children and their parents are also consumers. Like McDonald's, trusts and schools that have stopped using British beef will use it again if that is what patients or parents and their children want.

Last summer, under the previous Administration, representations were made to the Ministry of Defence in a bid to reduce the armed forces dependency on imported beef. The MOD was supportive, but maintained that procurement of any goods should be on the basis of best value for money. The MOD purchases a limited amount of beef, but its decision to buy more imported beef is based on market conditions and suitable distribution services, rather than reaction to BSE. Perhaps the British beef industry should therefore speak to the MOD about how it might play a bigger part in supplying it.

The Government cannot force consumers, whether they be at home, in schools, in hospitals or in the armed forces, to buy and eat British beef.

Our role is to safeguard the public interest and to make sure that the public are aware of the facts so that they can make decisions for themselves. To that end, measures were, and continue to be put, in place to ensure the safety of public health. Cattle suspected of BSE are compulsorily slaughtered and their carcases destroyed. Healthy cattle more than 30 months old may not enter the human food chain—they are slaughtered separately and their remains destroyed.

Milk produced from cows suspected of having BSE may not be used for human consumption, despite the fact that infectivity has not been found in milk. Specified risk materials—the head, brain, spinal cord, tonsils and spleen from cattle over six months, and the thymus and intestines from cattle of any age—may not go into the human food chain.

Those measures are enforced by the Meat Hygiene Service, a Government agency. In addition, the State Veterinary Service makes unannounced audit visits to abattoirs to ensure that the controls are fully enforced.

The Minister says that he will not dictate to public bodies that beef should be on the menu, but will he positively encourage them to put beef back on the menu?

I hope that my speech will be a signal of encouragement to public bodies in Wales and the rest of the United Kingdom.

The hon. Member for Ynys Môn will also be aware that the Commission last week announced that it would take action against member states, other than the UK, that fail to enforce adequately the ban of meat and bone materials in feed for ruminants. I welcome the recognition that UK controls are now the strictest in Europe.

I also welcome the Commission's publication of rules for removing risk materials from meat produced throughout the European Union. I very much hope that the Agriculture Council adopts that measure in the near future.

Will the Minister assure us that if that is not accepted by the Agriculture Council, he will instruct authorities in Wales not to accept beef products from countries that refuse to follow those guidelines?

The hon. Member stopped me in my tracks; I was about to consider that very point. I am sure that he knows that the Minister of Agriculture, Fisheries and Food, my right hon. Friend the Member for Copeland (Dr. Cunningham), announced recently that we will apply the same controls to imported meat as we do to our own. This is not a ban on imports—the controls will apply in the United Kingdom—but it will reassure consumers that any beef that they eat here is produced with the same rigorous attention to safety.

We hope that those steps to restore confidence in British beef will be taken on board by the public at large. We know that the final step in restoring full confidence in British beef will be having the export ban lifted.

We have fulfilled the Florence pre-conditions and we now need recognition of the measures taken and sacrifices made. Lifting the ban will not be easy, particularly in the light of the negotiating failures of the last Administration, but we hope that this Government's constructive and positive approach to the Commission's ruling will pay dividends. We are, at this very moment, exploring with the Commission how we can best move forward.

We shall give a detailed technical response to the points made by the EU's scientific veterinary committee on our certified herd proposals very quickly. We recognise that consumers in all member states will be anxious to have full assurances in line with scientific assessment of the risk. At the same time, we will press for the ban's removal where those assurances can be given.

In addition, in order not only to restore the pre-crisis level of beef sales but to increase them, we need to make consumers more aware of the quality and versatility of the product. That can most effectively be done through efficient marketing and promotion activities. The Government are taking steps to promote beef and beef products.

The hon. Member for Ynys Môn will know that, in Wales, the body charged with undertaking that task on behalf of the Welsh food industry is Welsh Food Promotions Ltd., which is actively supported by the Welsh Office. In the past year, it has sponsored numerous promotional events, including the Welsh beef championships; promoted our beef at food events both at home and abroad; and is working with mainstream retailers to secure contracts for Welsh producers and processors. It also operates schemes such as the farm assured Welsh livestock scheme, with more than 3,000 members, to help give consumers confidence in the quality of Welsh beef.

I hope that Welsh beef farmers will also consider how they might come together, for example in co-operatives, to negotiate with supermarket chains and provide them with a ready supply of good-quality beef.

Are not animal welfare and environmental sustainability also relevant to the marketing of both Welsh beef and Welsh lamb? Are not extremely high standards of animal welfare maintained in the production of Welsh beef and lamb?

Yes. The hon. Member makes a worthwhile point. We must bear in mind the fact that both beef and lamb farming have extensive and traditional methods of rearing animals, and people can be reassured of the humane way in which the animals are brought up and cared for.

The measures that the Government and by agencies such as Welsh Food Promotions Ltd. have taken will restore public confidence in beef. Indeed, the evidence shows that that is beginning to happen already. The Government can demonstrate clearly the safety of British beef. Once that has been accepted by our European partners, British beef will once again take its place as a product of the highest quality on international markets. The Government are also negotiating with theCommission to create the means by which that can be brought about. In the meantime, we are actively involved in helping the farming and food industries to promote British beef to the consumer as a quality product.

I can only hope that all those involved in purchasing, on behalf of the public, in public organisations such as NHS trusts, local government and Government Departments, will take heart from the fact that the Government are confident that British and Welsh beef is a quality product, produced under the most stringent public health and safety conditions, and that all consumers can purchase and eat it with confidence.