As I look around the Chamber, I see several hon. Members who obviously spent substantial parts of their childhood playing "Monopoly". They will recall landing on "community chest" and hoping either to get a "Get out of jail free" card or, failing that, a card that says, "Your annuity has matured, collect £100"—that was in the days when £100 was worth something. When I used to play Monopoly, neither I nor any of my fellow players had a clue what an annuity was—and, in some respects, not a lot has changed. Yet The Observer newspaper recently pointed out that annuities are no longer something that appear only in Jane Austen novels but have replaced house prices as a topic of dinner party conversations in certain circles.

How has that come to pass? I suspect that I am not the only hon. Member who has received a growing number of letters from constituents who are concerned about the annuities problem. They are worried about low annuity rates and about being forced to buy an annuity at age 75. One example is my constituent from Thornbury, who is in his early 60s. He wrote to say that he had a self-invested pension plan from which he was drawing income in the manner allowed by the Inland Revenue up to the limits, leaving the capital largely intact. My constituent was concerned that, in a decade—the people of Thornbury are very far-sighted—he might be forced to buy an annuity with that pension pot, which would result in the loss of all his capital and leave him with a relatively poor pension. He writes:

"it seems unjust that I will be compelled to buy this annuity, lose my capital sum, and yet receive no additional income."

What are we to make of this issue? I am a simple man and, in my simple way of looking at the world, I like to divide it into the good guys and the bad guys—it makes life an awful lot easier. When I approached the annuities issue for the first time, it occurred to me that the chances were that Her Majesty's Government were the bad guys. That is a fairly safe working assumption.

In this context, what makes the Government the bad guys on first examination is that they force people at age 75, against their will, to convert their personal pension pot or similar into an annuity. Why is that a problem? It is well known that annuity rates are now relatively low—certainly compared with their level at the start of the decade. At the beginning of the 1990s, annuity rates were about double their present value. That obviously means that the pension that one can buy with a given personal pension pot is substantially less than it was in nominal terms. One could point out that the stock market has done relatively well during the same period and that therefore the pension pot would have grown. That would partly offset the difference—but only partly. There is a general perception among people in their 60s and early 70s that they are being forced to buy a product that will yield a relatively poor pension and cause the loss of all their capital.

Why is there a problem with forcing people into annuities at age 75? A typical strategy for money in a pension pot is that it begins life invested in high-risk, high-return, or middling-risk, high-return assets such as the stock market. Towards the end of one's working life, it is shifted into lower-risk assets such as gilts. When one converts to an annuity, for the rest of one's life, one buys a product that is backed by gilts—which are very low-risk but low-return assets. If one does not take out a pension particularly early in life, one could find that half the time one's money is invested in shares and the other half it is invested in low-yielding gilts. It is far from easy to see how, in a rational world, that is a sensible way to invest pension assets. It is difficult to see why, over a lifetime, one would want to invest half the time in low-risk, low-yield gilts. That is not a rational strategy.

That problem will not go away because, if the strategy of containing inflation is successful, gilts will continue to be low yield.

My hon. Friend is quite right: nominal yields will continue to be very low—although there is obviously a problem with perception. We have yet to generate a low-inflation culture. We recall that inflation rates were 10 per cent. at the beginning of the decade and I remember when inflation rates were 25 per cent. under the previous Labour Government. Against that background, nominal rates matter to people's perceptions of whether they are getting a good deal. Stable inflation over a long period would clearly be welcome. I am grateful to my hon. Friend for that intervention as I was about to turn to inflation.

As well as low annuity rates, a second reason for concern is the effect of inflation on people's incomes when they buy annuities. There are annuity products containing escalation that take some account of future inflation. When surveyed before retirement, most people tend to say, "Yes, I would probably get an annuity with some sort of indexation; I would not want my income to be eroded". However, that is not what people actually do because four out of five of them buy level annuities. In other words, they see how much less they would get in the first year and in the next few years if they bought an indexed annuity and say, "Hang on a minute, I would rather have 75 per cent. more in the first year and I'll take a gamble on inflation". While, in theory, one might think that indexed annuities are a good thing, in practice, most people do not buy them. Therefore, we are forcing people to buy a product that is likely to be eroded by inflation.

Inflation of only 3 per cent. for a decade would knock a quarter off a pensioner's real income. That means that as people get older—as they reach 80 or more—their living standards may fall dramatically. That issue will be increasingly important as the Government force people who buy stakeholder pensions to convert them into annuities and as more occupational schemes move towards defined contributions. That is why I initiated this debate.

As well as low annuity rates and the effects of inflation, a concern about forcing people to buy annuities is the inevitable loss of capital. When I first heard that argument, I thought that people wanted to have their cake and eat it. I thought that they were saying, "I'd like a pension—probably the same pension that I would have got anyway—and I want to keep all my capital." That seemed to be rather like saying to a car insurance company, "I'll buy my car insurance and if, after 10 years, I haven't claimed, I'd like my premiums back." Clearly, that would be unacceptable, but people are not saying that. They want a blend of a particular level of pension income and a particular level of preservation of capital. They have saved for their old age and taken the view that they might sacrifice part of their pension income now to preserve some of their capital to pass on to their children.

In principle, there is no reason why we should not allow pensioners to do that, subject to tax and other considerations to which I shall turn in a moment. In principle, there is no reason why we should want to force pensioners to sacrifice all their capital at the age of 75 if they were prepared to forgo some of their pension income in return for keeping part of their capital. On the face of it, therefore, the Government are the bad guys because they have removed from people, or are not allowing them, a choice at the age of 75. That choice will not, by any means, be appropriate for all pensioners, but it is appropriate for growing numbers of them.

I have read the report of the proceedings of the Standing Committees that considered the Welfare Reform and Pensions Bill and the Finance Bill, and this issue was discussed twice. The Government rest their defence for the age-75 limit—which seems somewhat arbitrary—on two main arguments. First, the dreaded Inland Revenue wants its slice of the cake. The argument is that if people were allowed to keep their money in the pension pot, they might inconveniently die, so they would never get their annuity and the Inland Revenue would never get the tax.

That concern is unfounded. If people who have begun to draw down income from their pension pot die, their spouse or dependant can convert the pension into an annuity that can be taxed anyway. if that is not the case, a special 35 per cent. tax rate will apply to those funds. I suspect that 35 per cent. is much higher than the rate that the Revenue would typically receive from an annuity, so it might receive more money if a few more people popped their clogs before they took out annuities.

If draw-down has begun, tax is not a problem. The only problem seems to arise if draw-down has not begun and the pension pot has not been touched. There is no reason why the law should not state that at 75, or another age, people should take out an annuity or begin draw-down. It is not beyond the wit of the Inland Revenue to ensure that it gets its tax take, while preserving choice for pensioners.

The Inland Revenue objection does not stand, but there is one closer to home for the Minister—a Department of Social Security objection, which is that pensioners might spend, spend, spend and blow the pot on riotous living. That might be welcomed, but the concern is that they would leave themselves in penury and throw themselves on the mercy of the stony-faced DSS.

I am not entirely convinced by that line of reasoning. First, as the Minister knows, there are strict Government rules on the amount that can be drawn down from a pot. There are clear limits on that, and one cannot simply blow a fund in one go. If we consider the sort of funds that we are discussing, we realise that draw-down will be appropriate only in larger funds. Some say that it would be suitable only in funds of over £100,000 and others say that £250,000 and over would be a suitable size. The idea that someone would blow £250,000 from a pension pot and then throw themselves on the delightful mercies of income support is pretty far fetched.

Secondly, there is no reason why there should not be further constraints on draw-down if the age limit of 75 were to be raised. Stewart Ritchie of Scottish Equitable, who is a member of the Government's pension provision group, has suggested that at age 76 or 77 there could be a slightly tighter limit. Instead of being the total amount that one could draw from a similar annuity, the limit could be a percentage of that figure. Obviously—I borrow Mr. Ritchie's example—we do not want to allow people aged 100, whose life expectancy is one year, to blow the entire pot, lest they inconveniently live to be 101. A safeguard is necessary, and that could be ratcheted in, but there is no reason for an absolute cut-off at age 75.

The final reason why the "people will just rely on the state" argument is not convincing is that most pensioners, particularly those who have carefully invested—such as my constituent, who has invested his money himself—are not about to go to the Ritz or Monte Carlo to blow all their money. They are very cautious, and they are motivated by the desire to pass on money to their children. The idea that they would spend all their money and throw themselves on the mercy of the state is implausible.

It seems that there could be little objection to allowing greater flexibility at age 75. A choice could be allowed between the purchase of an annuity and the commencement or continuation of draw-down, subject to certain restrictions.

I want to draw the attention of the House to another group of people who may also, in some sense, be the bad guys in this story—those who sell the income draw-down policies. They have not done themselves any favours in recent years. The early evidence on those policies reveals that tighter controls on the charges and conduct of those companies might be needed to go hand in hand with the reform of the age-75 threshold that I have already suggested.

This morning's Daily Mail contains a salutary warning about the possible mis-selling of income draw-down policies. It says that for two thirds of a sample of the 50,000 policies sold, there appears to be little documentation demonstrating why the policy was recommended. The Personal Investment Authority suspects that such a lack of documentation is often a proxy for mis-selling.

Is the hon. Gentleman aware that some companies will not allow draw-down recipients to change investment manager once they have started draw-down, which is surely outrageous in the present climate?

The hon. Gentleman, who is very learned on these matters, and to whose contribution I look forward, makes an important point about the regulatory framework within which the policies operate. There is considerable concern about that.

To give the House an example, the market leader in draw-down policies has produced statistics for them. Three years after the policies are taken out, they have to be reviewed to establish whether the pot is running down too quickly, in which case the amount being withdrawn has to be cut, or vice versa. The policies were introduced fairly recently, so we are starting to see the first round of three-yearly reviews. The alarming statistic is that one in three customers of the market leader whose policies have been reviewed since 1 January have had to accept cuts in their income. The average nominal drop is 20 per cent., which is substantial, because one must add on 10 per cent. of inflation over three years. People who have large pots can, it is hoped, cope with such fluctuation, but it is of concern to people whose income is borderline.

What has been the problem with those draw-down policies? Why has income from them fallen considerably? I shall briefly explain the three main reasons. The first, as I said earlier, is the fall in annuity rates, which are now substantially lower than they were three years ago, so the amount of money that people can get from an annuity based on a given pot will have fallen. In other words, if people had bought an annuity three years ago, they would have a higher lifetime pension than they do, because of the fall in annuity rates. Obviously, the converse would be true if annuity rates were rising, but the prospects of a significant rise are not particularly bright, so that problem may be with us for some time.

The second reason why many people are experiencing a fall in their income from draw-down policies is what is catchily known in the trade as mortality drag. If 63-year-olds have bought an annuity at age 60, the annuity provider will not have been sure that they will live to 63. Some people will have died at 61 or 62, and will have given the provider profit, allowing the company to put a little extra money into the annuity. If the annuity is recalculated for purchase at age 63, people have given away the fact that they lived for the preceding three years, so the annuity company considers them a worse risk and the annuity rate would be lower. That tends to reduce the amount that people can get from draw-down policies.

Charges are the third reason why some policies are not yielding good results, and this issue is of considerable concern. Moreover, if an income is drawn from the pot and the balance of the pot is then used for investment, that must battle against falling annuity rates, against mortality drag and against the fact that a big chunk of the money will be taken in charges. Against that background, unless the money is invested very well and the stock market does well, there is a risk—as the one in three people who took out draw-down policies three years ago and who now face a fall in their pension found out—of a fall in income.

I mention that situation to remind the House that income draw-down is not a one-way bet and may not be suitable for many pensioners with relatively modest pots. None the less, my judgment is that we should give pensioners—especially those with large pension pots, who may be more financially sophisticated—a choice. We need to tighten the regulation, but I am aware of no reason for allowing people draw-down for 10 years—during which all these problems can occur—and then suddenly, when they reach of 75, telling them that we cannot allow it any more. That is an arbitrary cut-off point, and there are easy ways around the problems that I have cited.

In conclusion, I repeat my call for the Minister to introduce greater flexibility into pensioners' choices at the age of 75. I believe that pensioners should be given a choice, and that the arguments about possible loss of tax revenue or increased benefit expenditure do not stand up. However—this is an important caveat—I also believe that investors need to be protected, and that the regulation of draw-down schemes needs urgent attention. If the Minister will promise to do both those things, he may convince me that he is, after all, one of the good guys.

I congratulate my hon. Friend the Member for Northavon (Mr. Webb) on presenting this important subject for debate and on the clarity with which he dissects even the most arcane problem. The problem of pension policy and annuities is especially arcane.

About three months ago, I submitted a written question to the Treasury, asking when it proposed to revisit the regulation—I believe of 1921—that makes annuities obligatory. The answer that I received had the tone of lofty condescension and complacency that we have come to expect from the Treasury at its worst. That provoked me into looking into the problem of pension policy.

I want to emphasise the scale and extent of the problem. There are probably about 5 million potential annuitants. That very large number includes not only the personal pension holders that my hon. Friend the Member for Northavon mentioned, but a large number of people in defined contribution occupational pension schemes, many of which are linked to annuities—often with very little choice—and people who have made additional voluntary contributions. In terms of numbers, the problem is extensive.

The scale of the problem in terms of its impact on individual pensioners also needs to be emphasised. Figures recently reproduced by the Library showed that, for a 65-year old pensioner with a pension fund of about £100,000, the annuity value had collapsed from about £11,000 in 1990 to £5,500 today.

In many senses, the problem is getting worse, for two reasons. First, as my hon. Friend the Member for Northavon has described, it is getting worse as a result of trends in the gilts market. It may be assumed that gilt rates are at an all-time low, but that is almost certainly not the case. Various factors are continuing to drive down gilt yields. If we succeed in joining economic and monetary union in a few years' time, one of the effects will be to push down the long-term cost of capital—that is one of the reasons for doing it. Long-term German bond rates are even lower than our gilt yields. That will be a factor pushing down our gilt yields even further. Barclays Capital recently did some long-term projections, which suggest that gilt yields could go as low as 2 per cent. Powerful economic forces are pushing down gilt yields, and therefore annuity rates, even further.

Another factor working in the same direction is the fact that actuaries are constantly taking into account revised assessments of life expectancy. As individuals, we may be able to get our revenge on the actuaries by living longer than we are expected to, but collectively, by definition, we cannot. The impact of that is necessarily to drive down annuity values.

I want to make a fundamental point on policy. Quite apart from the complexity of the matter and the impact of low annuities on individual pensioners, an important issue of principle is involved. It is a simple libertarian issue about whether people should have the freedom to make choices about how they manage their own personal finance. In this country, we have a tradition that is extraordinarily paternalistic and illiberal.

I quote from an 1888 report on which, I believe, the Government still draw heavily, which defined the basis on which state pensions should be dealt with in the 19th century. It argued against paying lump sums to pensioners as opposed to supplying a steady income stream. That report, written 110 years ago, said:

"The payment…of a lump sum is open to the obvious objection that in the event of improvidence or misfortune…the retired public servant may be reduced to circumstances which might lead to his being an applicant for public or private charity".

That is exactly the attitude that prevails today, except that for "public or private charity" one should read "income support". We fundamentally object to that paternalistic, illiberal view of personal finance, regardless of the specific circumstances of many of our constituents.

Let me summarise what appear to be the central objections to annuity payments—at least in the rigid framework in which they operate today—from the pensioner's standpoint. There is an advantage to others—notably the Inland Revenue, which has a steady stream of income to tax—but the disadvantages are essentially four.

First, as my hon. Friend explained at length, in practice most annuities are level annuities, so the pensioner is exposed to inflation risk. Inflation prospects currently look extremely good, but it requires only a fairly plausible set of circumstances, such as a collapse in the value of the pound, to take inflation back up to levels at which the value of such annuities is substantially eroded.

Secondly, in present circumstances, annuities represent an extremely bad deal. People get a return of roughly 4.5 per cent. when they could be getting 8 per cent. in building societies, or 15.5 per cent. if the private companies were able to deliver the return that they are promising. It is an extremely bad deal in relation to what those companies claim they can earn in the market.

Thirdly, conversion into an annuity involves handing over wealth. That issue has been covered at length.

A fourth point, which I believe my hon. Friend, in his other capacity as our social security spokesman, would usually emphasise, is that low annuity rates are an enormous deterrent to the Government's long-term policy on pensions. The Government are trying to promote the idea of stakeholder pensions. They have not gone for compulsion, so they depend on psychology and motivation, and yet they are doing so in a context in which anyone thinking ahead and looking at the way in which their pension policy will play out will be enormously discouraged from pursuing it.

We are not simply talking about the disadvantages of annuities as they operate at present. There are alternatives in the market—some of which my hon. Friend has described—but they need to be balanced against the costs. Draw-down schemes, or schemes with built-in equity elements, have commission costs. Above all, there are risks if one wants to pursue a high-return option to an annuity. However, the fundamental point is that individuals should be able to make that choice for themselves. That is the essence of this debate. There are alternatives in the market. The industry is sophisticated; it can provide them, especially now that, with the advent of the Financial Services Authority, its products will be regulated. Individuals should be able to make the choice for themselves.

I read from the report of an earlier debate that the Economic Secretary is promising a review of the problem. The results are expected in the autumn; we look forward to them. We look forward to much greater flexibility than the Government have demonstrated in the past. If the Government could unpick some of the rigidity and paternalism that have characterised British policy on pensions for the best part of a century, they would do us all a considerable favour.

I have great sympathy with the Minister, who will have to defend arguments of 30 or 100 years ago which the hon. Members for Northavon (Mr. Webb) and for Twickenham (Dr. Cable) have described as out of date and paternalistic.

I wish to cover some separate ground in the overall territory. My original focus was on my perception that there will be a massive growth in the volume and proportion of money-purchase pensions over the next decade or so. That is already in train. Companies are moving from personal pensions to occupational defined contribution schemes, and we now have the stakeholder scheme. It is likely that, within 10 years, the proportion of pensions that are not in a final-salary type of scheme will be the majority. No one seems to have thought about how these savings of money will convert into pensions. There is the assumption that annuities were always the way and that that must be the right way of doing things.

Final-salary schemes have been one of the great successes in delivering pensions over the past 20 or 30 years. Such schemes do not have all their money invested in gilts. They have the maximum spread internationally, with about 80 per cent. or more in equities. They pay pensions out of that rolling pot of money. That is why pensions have been so successful in this country, and why about £800 billion was accumulated during the 18 years of the Conservative Government. If the schemes had been forced to invest in gilts, which is what annuities do, the accumulated total might have been a third of £800 billion, with the result that final-salary schemes would have been unable to afford to pay the improved pensions that they are now paying.

That told me that it must be wrong to put such a great deal of money into fixed-interest investment because of archaic rules when people are likely to have a pension for 20 years or more. Despite the success in reducing inflation, that must be wrong from an investment point of view. People who retire at 65 are likely to live to 85, and many who retire at 65 are forced to buy annuities, depending on the scheme to which they belong. I have in mind especially certain schemes for professionals. Even people living to 75 may have widowed spouses who continue to live for 20 or 25 years. The trustees of any final-salary scheme would say that it would be grossly irresponsible to invest in fixed interest to such an extent.

A second area within this territory can be described as incompatibility. If, as a country, we are to have a roughly balanced budget, self-evidently the net new supply of gilts will be zero. If we are to have a huge and rising pool of money-purchase pension schemes that are obliged to buy gilts, it is simple to see what will happen in that supply-demand situation. Real yields will be driven down even further. Indeed, to some extent, that has already happened over the past two or three years.

The Pensions Act 1995 resulted in an increased pension fund demand for gilts, particularly on the part of mature pension schemes, as a result of safety arguments. As a consequence, the net supply of gilts has been very modest. Real yields have been about 2 per cent., against an average over the past 30 years of about 3.5 per cent. One of the arguments in the equation is that people's pots of money have increased in value because equity markets have performed well and interest rates have been low so that everything washes out. That does not happen, however, when there is a fall in real yields.

Unless there is much more flexible investment in money-purchase pensions for the future, the situation will stay as I have described it—and, indeed, worsen. The more virtuous the Chancellor of the Exchequer becomes in achieving his so-called prudence and a balanced budget, the lower will be the pensions that people will be able to buy with their savings if they are still stuck with having to buy fixed-interest annuities.

There is another immediate problem on which I have focused. I thought that it was well described in a talk given by the Governor of the Bank of England last week. The Governor pointed out that inflation in this country—as in America—is in a sense artificially low because of the financial problems of the emerging economies and the depreciation of their currencies. Mature economies are in a sense importing about 1 to 1.5 per cent. deflation as a result. That is mixing with about 3 to 4 per cent. domestic inflation and we are coming out with inflation at about 2.5 per cent.

The imported deflation will be transient and there is a strong argument that the real underlying rate of inflation in mature economies will be 1 to 1.5 per cent. higher. What is the level of inflation that long gilts are forecasting? It is bout 2 per cent. or less if we take 5 per cent. long gilt yields, which take off at 3.5 per cent., which should be the long-term real rate of interest. The assumption is that inflation will stay at about the present level and the sort of level predicted by the gilt market, which is extremely low. As the emerging economies catch up, and unless there are tight countervailing policies, western inflation will be somewhat higher than it is now.

In a way, people are being mis-sold, especially if they are buying non-inflation-indexed gilt annuities. They are buying a flow of income that apparently is expected to depreciate at only 1.5 to 2 per cent. per annum, but which is highly likely to depreciate by 2 to 3 per cent. per annum, all things being equal.

There is a problem at both ends of the scale. The dinner party conversation aspect, to which the hon. Member for Northavon alluded, is self-evident. I received a fascinating letter from one of my constituents, who has been one of the pioneers of high-tech venture capital investment. He wrote along these lines: "Over the past 20 years, I have pulled together all my friends and a good bit of our self-administered pension funds have been invested in high-tech companies. They have done incredibly well and there is a huge amount in our pension pots. It seems ridiculous that now we are coming up to 75—we are still keen to continue investing in this way, thereby creating jobs—we must tip the whole lot into annuities. At the very least we should be obliged to tip into annuities only the minimum to keep us off the state in future." That argument, as advanced by those who have generously provided for their pensions, is irresistible and unanswerable.

There is a powerful argument at the other end of the spectrum, which applies particularly to women. I hope that the Government will pay due heed to the report that is to be produced by Oonagh McDonald's committee. It is being worked on. There are hundreds of thousands of people with small money-purchase pension accumulations of £40,000 or £50,000. Many of these people are cautious and responsible women who have worked part-time. It is interesting that most of the people living in West Sussex—it is allegedly a prosperous part of the world—who have written to me are in that category. They to me along these lines: "It is unjust. I have struggled to put £50,000 in my money-purchase pension scheme. I shall be forced to buy an annuity with it and to chuck the capital away." They know that they can often get better running returns merely by investing in, for example, a portfolio of high-yield and corporate bonds. The returns from an annuity will be pretty poor and people are offended about losing their capital.

I am persuaded by Oonagh McDonald's view that, for people in that category, the paternalistic 19th-century argument about keeping them off the shoulders of the state is not worth anything. They are likely to do much better with their £40,000 elsewhere. If there were any chance of their relying on the state, they would be relying on it already. They are being treated like those who were threatened with the workhouse about 100 years ago. There is a strong case for a liberal attitude towards modest pension fund accumulations.

May I raise another issue relating to annuities that we have not covered? I should be grateful for the hon. Gentleman's views on the open market option. My concern is that a lot of people who build up a pension pot do not grasp the fact that they can buy someone else's annuity. They could suffer significant losses. Does he think that the regulation of that area is adequate?

The hon. Gentleman is absolutely correct and—at a tangent—another territory is relevant. When individuals surrender any form of insurance policy, there is no obligation to tell them that they could sell it for a sum significantly larger than that for which they could cash it in. It is desirable, would be relatively simple and no great regulatory burden, for people to be obliged to be told that they could sell any insurance policy, rather than cashing it in with the insurance company.

One answer to the conundrum is to make available annuities with more flexibility, such as equity-linked, variable draw-down and term annuities. America presents an interesting range of choice, and South Africa presents an even more interesting range. Ironically, South Africa's thinking is in advance of ours—it was much prompted by the trade unions, which objected strongly to their members being locked into financing the state. That is what having to buy an annuity amounts to. They rightly saw that pension accumulation offered, particularly for black Africans, a chance of a little economic freedom in accumulating their capital. Therefore, South Africa has a much more rational, flexible scheme.

People who buy an equity-linked indexed annuity are affected by a devious and unpleasant Inland Revenue rule, the effect of which is that they do not get the full benefit if such annuities do well. The Revenue says to insurance companies, "Keep the rest as a windfall profit." The gist of how the rule operates is that the Revenue correctly says that companies must allow for equity returns to fluctuate—they cannot take everything that is made in one year. However, if the bad years are not bad enough and the reserves do not get used up, people do not get the full benefit of what their annuity makes beyond what the companies are allowed to take. Not surprisingly, equity-linked annuities are not terribly popular and I am amazed at how clever and perceptive my constituents are. I pay tribute to them: they know of all those wrinkles and they have taught me a great deal that I did not know about this territory merely by raising all those points with me.

I utterly support the points that were made about the need for thorough review, more competitiveness and better regulation of draw-down alternatives. We have all been told that the Revenue is conducting a review of draw-down arrangements. I hope that it is wide ranging, because it should deal not only with the fancy formulas relating back to how much people can draw, but with the regulatory regime. I was amazed to find that, once people have taken a draw-down at 65, they cannot change the fund manager for 10 years. That is utterly against the spirit of the Government's stakeholder pension proposals and is quite inappropriate.

I do not know their validity, but I note that surveys show that about 98 per cent. of people approaching 75 who are required to purchase annuities seem to be unhappy about that. That issue came on to the screen in a modest way, but is now important. I suggest that citizens understand the problems and that forcing people into relying wholly on fixed-income securities for 10 or 15 years of retirement when long gilt yields have fallen below 5 per cent. and inflation is artificially low is a bad risk-return mix, even though their pots may have benefited a little from that. They know that that is not a wise use of their pension savings and they are becoming increasingly annoyed that they have to do it.

For the reasons outlined by the hon. Member for Northavon, I think that the Revenue and the Department of Social Security have been extremely reactionary. I consider the Revenue's arguments to be completely bogus. It will probably get more tax under draw-down; if the investments do that much better and if the income averages more than that under an annuity over the period of retirement, it will get the tax on that and on the lump sum at the end. It is likely to do better as a result of more flexibility.

If the Revenue argues that the timing of the cash flow is painful, the 35 per cent. tax on any sum that is left over could be increased to 40 per cent. That would not make much difference. If there is a statistical cash flow argument, it can be addressed. Whenever I read its arguments I think of Messrs Slow and Bideawhile because they represent bureaucratic obfuscation and thinking that comes from the 1920s, not from today. There has to be one or other method for the Revenue to satisfy itself that it is getting its fair tax take.

Another great argument is cited: "Ah, but we must do everything to make sure that people do not blow it all and then come on the state. People are living much longer." My response is twofold. First, if the Labour Government feel so strongly about that, it is rather strange that they have put in place a massive incentive for people not to save, not to accumulate pensions and to become dependent on the state. The pension top-up, with its link to earnings rather than to inflation, is a generous incentive to come on to the state for people who have either managed to avoid getting locked into a pension scheme or have done the very minimum. It is strange that the Government are providing a huge incentive to do something that they describe as profligate.

Secondly, we should look at behaviour. Any Member of Parliament with parents knows that people become more and more cautious with their money as they get older. Often, the problem is getting relatives to spend their money and have a decent standard of living. I have never seen a profligate 79-year-old burning up the town. I am sure that there must be one or two, but it is entirely false and unrealistic to assert that all those people over 75 will blow the lot as soon as they get the green light. Under present draw-down arrangements, they cannot do that.

I am increasingly coming to the view that even draw-down arrangements should be more flexible and more liberal. South Africa has providence scheme pension arrangements. People get their money and they can do what they want with it. Interestingly, most buy flexible equity-linked annuities, because all the administration is done for them, and time-termed annuities, which are still a useful instrument. There is no evidence, even in a country with a much lower standard of education than ours, that the money gets blown. South Africa has put in place a modest state old-age pension for those who have no other provision, so it has the moral hazard issue about which the Government—I think somewhat bogusly—are so concerned.

There is a big issue to be addressed, purely from the angles that I referred to at the beginning of my speech. If nothing is done, and if we still have a balanced budget, a huge and growing volume of people with money-purchase pensions will be condemned to buying gilt-based annuities. That will give them a very poor deal. Real yields will be extremely low and no pension fund manager would argue that the risk-reward mix was right. We need imaginative, radical thinking about restructuring the whole area.

I very much hope that the investigation by the Revenue, which the Government are using as a stalling mechanism to avoid answering the questions, will not be a pathetic fudge and a minor change to the draw-down regime. What is required here is a radical, rational reform based on what works in America, parts of Asia and other parts of the world. Pressure for that reform is coming from voters of all political shades. I believe that the Minister has had many letters from his constituents, so he knows how people feel about this matter. It should not be a cross-party issue; it is something that the people of our country want, and I hope that the Government will get a move on with it.

I echo what the hon. Member for Arundel and South Downs (Mr. Flight) said: the review should be wide ranging and constructive. In introducing the debate, my hon. Friend the Member for Northavon (Mr. Webb) talked about the Government being the bad guy. I think that he meant Government with a capital G—

No.

Well, perhaps the bad guy does not yet have a political label, but the political label will stick to the bad guy if the Government do not produce something constructive and far reaching out of the review.

I thank my hon. Friend the Member for securing this useful debate. The three speeches that we have heard so far will help me to explain the matter to my constituents and to help them see that there is a way forward. All three of the previous speakers hinted to the Government that they can proceed constructively by recognising that the elderly are not profligate and want to make effective provision for their retirement. The Government must realise that the nearer people get to retirement, the more nervous and cautious they become about their financial position. Although this problem may not arise until they reach the age of 75, people who are only approaching retirement phone me up in my constituency surgery because they read in the papers that financial analysis shows that the problem will not go away.

The gilt market is changing. As the hon. Member for Arundel and South Downs said, it could change even more dramatically if the Government achieve their claimed economic objective. That worry hangs over people. They should be able to relax and enjoy their retirement, having made reasonable financial provision, but, instead, they are uncertain about their future. An extremely strict set of rules is making it difficult for people to see how they can proceed in a flexible way. I hope that the Minister understands that concern and accepts the need to tackle the problem.

I have always worried when I see new products or new tax systems being introduced to encourage people down certain savings routes. New products are marketed effectively in terms of attracting people down certain tax routes to encourage them to save, but if one does the arithmetic, one finds that charges eat up most of that benefit. Moreover, by tempting people into various ways to save, one distorts the market. As has already been said, much of what should go to savers is taken away in fees, which are hidden in the whole investment structure. Thus, clarity and information are needed, as was said in Monday's debate on the regulation of the financial services industry.

As my hon. Friend the Member for Northavon said in an intervention on the hon. Member for Arundel and South Downs, we must ensure that people are informed about their right to sell insurance policies rather than cash them in. Apparently, there is a requirement that information should be provided, but it is not provided in a way that gets through to people. Many people make extremely bad financial decisions and one sometimes wonders why they ever considered them in the first place, yet they do so in their droves. Therefore, the market is clearly not working efficiently and effectively. As other hon. Members have said, products need to be competitive and people need to know that they can switch supplier, which is an effective way of ensuring a better return on an investment.

The Government must accept that this is not a temporary problem. They must also accept that the new structure of the economy that they have created means that we need new solutions. Even inflation at 1.5 to 2 per cent. amounts to a lot of inflation over someone's lifetime. In planning for their future, people must take into account the fact that investments are eaten away even by low inflation.

The purpose of this debate was to encourage the Government to look at the review and see that it is wide ranging. It is a real problem for many investors, but the potential for solutions exists.

My hon. Friend mentioned the effect of inflation. Will he reflect on the fact that, at 2 or 3 per cent. inflation, after a decade, people's investments are down by a quarter? If people retire at 60 and live to 80 and beyond, the oldest pensioners will be by far the poorest. Does my hon. Friend think that any policy implications follow from that?

The Minister will recognise that Liberal Democrat policy is immediately to tackle the problem of pensions for the elderly by providing a narrowly targeted benefit. Given the historical provisions that were made, the oldest pensioners are the poorest. By tackling that problem now, the Government could provide immediate relief for those who cannot provide a solution for themselves—they cannot go back and rearrange their financial affairs.

When constituents first brought this problem to my attention, they wondered whether there was a magic solution somewhere in Europe, which has had a culture of low inflation. Before this debate, I was discussing with colleagues whether they would welcome a helpful intervention suggesting that we look in that direction. I was advised that pensions provision in Europe is a bit of a scandal—

Like everything else.

I would not go quite as far as that.

In Europe, the unfunded state system has provided people with a security blanket and they have not needed to get involved with products that deal with a low-inflation market with long-term benefits for pensioners.

This debate has given the Minister some useful meat from which to come up with some effective solutions. If he does not do so, the "bad guy" label will stick to the Government.

First, I congratulate the hon. Member for Northavon (Mr. Webb) on securing the debate. It is clear, however, that the Liberal Democrat party has seen the bandwagon roll past it in the past few weeks and it is making a desperate scramble to board it. The campaign to scrap the compulsory purchase of annuities has been driven by the Conservatives, particularly my hon. Friend the Member for Arundel and South Downs (Mr. Flight), who spoke so well today. It is our clear view that the requirement to buy an annuity at the age of 75 should be abolished.

The hon. Gentleman should be careful when talking about bandwagons. The Liberal Democrat bandwagon in this debate consists of three Members, whereas the Conservative bandwagon consists of only two.

I do not need to remind the House that this is a Liberal Democrat debate. I notice that no Labour Member has spoken—let alone spoken with enthusiasm—in the Minister's welfare reform week, which is supposed to be so important but which is going like a damp squib.

The Government should act without delay because, with every day that passes, large numbers of people who have worked hard all their lives to save for their old age are seeing their efforts cast back in their faces. We are told that the Government have asked the Inland Revenue to consider the matter, but the Government cannot continue to hide behind such obvious delaying tactics. The growing sense of unfairness with the current compulsory system has been looming on the radar ever since the Government came to power. The fact that people are now really hurting and are complaining vociferously to their Members of Parliament about their predicament shows that the Government have already left it too late to make an appropriate change to the law. They must act now.

May I give the House a flavour of the sort of correspondence that Members of Parliament are receiving? One person has written:

"I have saved long and hard so that I would not suffer financially in my dotage and the value of my pension pot is worth even more than the value of my house. I resent very much now that I made this great effort only to find that, even with the addition of my state pension, I still fall short of the amount that is considered to give one an adequate lifestyle in retirement.… It is unacceptable to have absolutely no control over what is probably the largest amount of money that most people will have in their lifetime at a time when it is giving the lowest return."

We have heard many arguments about taxation. There are various ways in which the Revenue and the clever people at the Treasury could work out a compensating scheme for the Government. It has been suggested that people could be required to keep in a conventional annuity enough to cover at least the level of the minimum income guarantee. There must be dozens of other ways of achieving the aim, but my correspondent says:

"I would be quite willing to pay a lump sum to the Government equal to the income tax allowance made to me while accruing my pension if I could have the freedom to do what I wanted with the capital."

I am not sure that I would be prepared to do that, but it is another suggestion made by one individual who feels desperate enough to put such a deal to the Government.

All hon. Members who have spoken have said that the Government fear that people might go in for high living. My correspondent says:

"The Government may fear that some would go out and buy, say, a Ferrari with the money and then fall back on the state to support them. However"—

this is the key point—

"people who take the matter of their retirement seriously and save for it are hardly likely to do this."

We all agree that annuities involve a balance of risk. The choice of schemes for pensioners is wide and, to many, it must seem bewildering. Should they buy a fixed annuity or one that increases from a lower level of initial payment? Should it be linked to the retail prices index? Should it be a joint survivor annuity so that their spouse will benefit after their death? Should they opt for a guaranteed minimum length of payment? Should the annuity be "with proportion" or "capital protected"? Should they take the income in arrears or in advance? How often do they want payments?

The central point about the current position, which others have made, is that the current rates are low. The Association of Unit Trusts and Investment Funds paper, which has already been referred to, says that a man aged 65 with a pot of £100,000 could reasonably expect to get a guaranteed five-year fixed annuity with no escalation of about £9,000. A guaranteed five-year annuity with 5 per cent. escalation would be about £6,000. A guaranteed five-year annuity index-linked to the retail prices index would be about £6,500. That compares with a figure seven years ago of between £15,000 and £16,000. The drop has been substantial and must be very scary to people coming up to making such difficult choices about what sort of annuity to opt for.

Behind all the complicated choices and the consequences that flow from them there are two fundamental uncertainties: first, how long a person is likely to live; and secondly, what is going to happen to long-term gilt redemption yields. An individual could answer all the questions that I asked earlier in the most intelligent and appropriate way, sign up for an annuity on a Monday and die on the Tuesday. That would be bad luck, but there is nothing to be done about it. On the other hand, a life company could offer very generous payments to a heavy-smoking, heavy-drinking, overeating, never-exercising, highly nervous elderly man who then lives for decades. There is nothing that the company can do about that. An annuity is for life. Jane Austen rightly said that it was "a very serious business".

I want to speak up for the annuity. Somehow, its popularity, based on the conversion of capital to income guaranteed for the full term of life, has persisted down the centuries that divide us from Miss Austen's world. For those able to save money for their retirement—thankfully, that is now a large number of people—the annuity continues to be a popular choice. At an important level, annuities are regarded as the fairest way of sharing the risks of our mortality.

As the hon. Member for Northavon said, it is most interesting that, despite the wide range of annuities on offer today, and despite the actuarial information that should help people to make the right choice, the industry average for those who buy level-term annuities is 83 per cent. The AUTIF document refers to an office that surveyed people about to retire

"and found that most wished to buy an escalating annuity because they thought it was sensible to provide for future rises in the cost of living. But when it came to the actual purchase, the vast majority opted for a level term annuity."

Level-term annuities are popular because they answer an important psychological need, as well as giving people the guarantees that they require at that age.

There is a third party in the deal between the individual and the life company—the Government. The Government have obvious tax interests, but they must not be allowed to override other interests. The Government are also the final regulator of the balance of risk between the individual and the life company. A key Government responsibility is to ensure that the means of saving and providing income for oneself continues to be seen as a fair and reasonable way of sharing risk. As long as all those involved in the long chain from the young saver to the elderly pensioner retain a sense that the system is broadly fair, there is every reason to believe that the annuity will remain a popular means of providing for oneself.

I ask the Minister to imagine what it must feel like to be a 73 or 74-year-old who, through their own hard work, has saved tens of thousands of pounds for their old age. As the long-term gilt redemption yields have declined, that individual will have noticed that the cost of annuities has roughly doubled over recent years. They will get about half as much to live on as someone who saved the same amount and retired a few years ago. Their prospects will be substantially bleaker than they might reasonably have expected. Someone in that position knows that they are going to get a bad deal. They have done everything that successive Governments have urged them to do, passing over some of the pleasures of life to be able to stand on their own two feet in retirement, but the system has stuffed them. The Government control the system.

The fact that one group of pensioners who have worked hard and saved hard are getting a bad deal because they are being forced through no fault of their own to take out annuities erodes general confidence in the system. The Government cannot want that. Let us charitably assume that, one day, the Government sort out their muddle on stakeholder pensions. What if the dark cloud surrounding compulsory annuities rains down on that pet scheme? The previous Government saw how annuity rates were going and changed the law in 1995 to allow income to be drawn down directly from the pension fund until the pensioner reaches the age of 75. Enabling pensioners to defer the purchase of an annuity for 10 years or more was a sensible and popular measure. New financial products were developed to offer better choices to pensioners.

However, the problem facing those coming up to 75 is now substantially worse than that which faced the earlier generation. Government policy must respond and develop. The previous Government acted to ensure the basic sense of fairness in the system. Those who have waited may well have been gambling on a rise in annuity rates, but that gamble has clearly not paid off. They, and a new generation facing this area of difficulty for the first time, are looking to the Government to remove the age limit. We are asking for greater flexibility, so that people coming up to 75 can make their own informed decisions. The Government should at once free people from any artificial, arbitrary, unfair restrictions and let responsible people make their own decisions.

I welcome the debate and congratulate the hon. Member for Northavon (Mr. Webb), as others have done, on his success in securing it. The issue is important and, as several hon. Members have pointed out, it is attracting a great deal of attention at the moment. I also welcome the hon. Member for Windsor (Mr. Trend) to his place, and congratulate him on his appointment. I know that he will not take it amiss if I tell him that we shall miss the energy and vigour that his predecessor, the hon. Member for Grantham and Stamford (Mr. Davies), brought to our debates on such matters—but that, if he does not match him in terms of the length of his contributions, there will be no complaints from us on that score.

I also congratulate the hon. Member for Windsor on the fact that he has been able to make a policy announcement in his first contribution in his new role. Indeed, I have here the Conservatives' press release of yesterday announcing that, as the hon. Gentleman has told us, they intend to scrap the requirement.

It is not entirely clear to me, either from the press release or from what the hon. Gentleman said today, whether the Conservative proposal is to change the age from 75 or to abolish the necessity to take out an annuity at any stage. I must add that the outrage that he has expressed about the unfairness of it all would be a little more convincing if it were not for the fact, which he mentioned towards the end of his speech, that it was a Conservative Government who introduced the requirement in the first place. No doubt, I shall come back to some of those points in due course.

Let me reassure the hon. Member for Twickenham (Dr. Cable)—I have not consulted the 1888 report to find inspiration for what I have to say to the House this morning. I pay tribute to the expertise in these rather arcane matters that has been shown by everyone who has contributed to the debate so far.

First, I shall say something about the reformed structure that we are introducing for the pensions system, so as to provide background to the concerns that have been expressed about annuities. There is a pressing case for reform. It is true that pensioner incomes have grown faster than working incomes over the past 20 years, mainly as a result of the success of occupational pensions—but that overall average picture masks the fact that a significant number of older people have been left behind by the improvements that others have enjoyed. Some pensioners have prospered; others have not. That is why it is important to give priority to extra help for those who need it most urgently.

Every pensioner household will benefit from the £4 billion package that we have introduced for the life of this Parliament, but the lion's share of the extra money will be aimed at the least well-off. Through the minimum income guarantee, which several hon. Members have mentioned, pensioners receiving income support are now at least £160 a year better off than they were before April.

Next April, the guaranteed level will increase in line with earnings, which will bring another 20,000 pensioners within the minimum income guarantee. As we aim, in time, to uprate that guarantee in line with earnings, those whose income is just above the guarantee—a group often of particular concern, rightly so, both to hon. Members and to their constituents—will gradually be brought within its scope as its level rises. After next April's increase, a pensioner couple over 80 will be about £8 a week better off in real terms as a result of the changes that have been made since last year.

That is a substantial boost, and we can give it because we are ensuring that the extra money is available to those who need help most. The hon. Member for Arundel and South Downs (Mr. Flight), who is not in his place at the moment, described that as an extremely generous arrangement; I am not sure that I would go quite so far as that, but it represents a great improvement for the people who, rightly, look to the Government to provide improvements.

In addition, in the winter, every pensioner household will receive a £100 payment towards the cost of fuel, which will benefit about 10 million pensioners in more than 7 million households. The minimum tax guarantee, with additional uprating of pensioners' personal income tax allowances, means that, since the Budget, 200,000 pensioners have been taken out of income tax for the first time. Two thirds of pensioners now have no tax to pay.

A range of substantial changes have therefore already been made. Looking to the future, our election manifesto recognised that we need major reforms to ensure that future generations of pensioners can look forward to a decent retirement. Our review led to the Green Paper on pensions, published just before Christmas.

Everybody who can save for retirement has a responsibility to do so; in turn, the Government have a responsibility to provide security in retirement for those who cannot save enough, and to regulate effectively the private pensions system—an aspect of which is the focus of our discussion this morning.

Our strategy for the future, as laid out in the Green Paper, rests on four interlinked pillars. The first is the basic state pension, uprated at least in line with prices each year. That will not be means-tested or privatised. The second is the minimum income guarantee, which I have described.

The third pillar is the state second pension, and the fourth is our new funded stakeholder pension. The new state second pension is being designed to ensure that, in future, everybody with a lifetime of work and contributions behind them will build up a right to a pension that will be above the minimum income guarantee when they retire. In due course, we expect that pension to become a flat-rate scheme for those on lower earnings, with moderate and higher earners contracted out into funded pensions.

The fourth pillar—the stakeholder funded pension—will be a new type of private provision, combining the low overheads and high security that characterise occupational pensions with the flexibility of the best personal pensions. Those are being designed particularly to help those on middle incomes, from roughly £9,000 a year up to average earnings. However, they will benefit those on higher incomes as well.

With regard to both pensions in general and stakeholder pensions in particular, the Minister's document, released yesterday, did not seem to say anything about the costs, which were supposed to be 1 per cent. In the light of that paper, and of other consideration that the Government are undertaking, can he tell us whether he still expects the costs to be that low, or whether they will be higher?

We are issuing a series of consultation briefs about the design of stakeholder pensions. The first, issued on 2 June, was about minimum standards, including costs. We are consulting on the view that we expressed in that paper. As the hon. Gentleman rightly says, another document was issued yesterday, about employer access to stakeholder pensions. Our aim is that every employee in the land who does not have access to an occupational pension scheme should have access to a stakeholder pension in the future.

The hon. Gentleman is right to say that we did not revisit the subjects covered in the paper of 2 June, but that is because the subject matter of the next document was different. Four further consultation briefs will be published before the end of July, and will cover the full range of the decisions that need to be made about the details of stakeholder pensions.

We are driving a hard bargain on behalf of scheme members with our proposal for a 1 per cent. charge. We think that that is right, and that the Government and the industry need to work hard on stakeholder pensions to persuade people whose main knowledge of personal pensions is that they were mis-sold to lots of people in the past, that stakeholder pensions will be dependable, good value, and a good place to invest their savings.

That is the basis for the view that we expressed on 2 June. I have been heartened by the positive response to that proposal so far. We are considering the matter and consulting, and we shall listen carefully to what everybody says. The proposal has lit a spark of enthusiasm about stakeholder pensions.

The Welfare Reform and Pensions Bill sets out the basic legislative framework for stakeholder pensions. There will be a series of documents between now and July about the detail. We have a structure for pensions reform that is well thought through and has been widely welcomed. There has been lots of comment about the detail, and our task now is to get that right.

I readily acknowledge the widespread concerns about the requirement to annuitise a personal pension or a money purchase occupational pension arrangement. I have received numerous letters from hon. Members and constituents. The hon. Member for Arundel and South Downs said that I must have received many letters from my constituents, but in fact I have probably received more from his constituents, via him. Several hon. Members have also tabled parliamentary questions on the matter, and I have had discussions with both them and the pensions industry.

The present position is that members of a personal pension scheme must use their fund to buy an annuity by the time that they reach the age of 75, and—this has not been mentioned today—members of money purchase occupational pension schemes must buy an annuity when they retire. Before reaching 75, but after the age of 50, holders of personal pensions may draw income directly from their fund, subject to upper and lower limits. We have already had some discussion about income draw-down. We plan to introduce parallel arrangements for members of money purchase occupational schemes shortly.

The current arrangements for annuity deferral until 75 have been in place for three years, as the hon. Member for Windsor said. The Inland Revenue is conducting a review of how well the arrangements are operating and will assess the need for any changes later in the year. The review is considering annuitisation by 75. I reassure the hon. Member for Arundel and South Downs that it will be a wide and thorough review, and not the pathetic fudge that he feared. The results will be published in the autumn.

The rate for a level annuity has fallen sharply over the past five years. Apart from the change to a low inflation environment, people live about 10 years longer than they did 50 years ago, and there have been sharp increases in longevity in the past few years. That continuing trend clearly affects the annuity rates that can be offered, as the fund will have to cover a greater number of years in retirement.

Before writing off annuities, we should consider the whole story. I have some sympathy with the points made by the hon. Member for Windsor on the subject, although he seemed to be arguing both ways. He said that he was in favour of annuities and then said that people who had to buy them were getting a terrible deal. We must ensure that we do not encourage the view that taking out an annuity means bad value, which is often not the case.

I was not remotely attempting to write off annuities, although they may not be appropriate for everyone. We are in favour of choice. People of 75 who are allowed to continue with draw-down and to keep a capital sum might be better placed to pay for their own long-term care, whereas those who buy an annuity get a pension stream that will never cover long-term care costs. Might that be another attraction for the Government of more flexibility?

That is an interesting point. As the hon. Gentleman knows, we are considering the arrangements for long-term care and will make an announcement in due course. There are attractions in various forms of flexibility that are not currently available and we need to keep an open mind. Throughout this debate, hon. Members have been asking for greater flexibility, and no one has suggested that there is a panacea that would allow us to convert a lump sum pension pot into an income stream to support people through their retirement.

The current arrangements are easy to criticise, but it is hard to come up with genuinely radical alternatives. There is certainly scope for discussing the details and whether it might be appropriate to have extra elements of flexibility. The great virtue of an annuity is that it provides a guaranteed income for the remainder of a person's life, however long that turns out to be. That is an important virtue.

It has been suggested this morning that it is rather patronising to be concerned that people will blow their savings on a Ferrari when they retire. Whatever the other considerations, the Government would need to think long and hard before signing up to an arrangement that could lead to people facing a sudden financial crisis in their 80s or 90s. I have seen some suggestions for alternatives that are quite open about the fact that they run out after 25 years, on the ground that most people do not live longer than that after retirement, but it would be wrong to go down a route that could lead to a crisis for people at exactly the time in their life when they would least want to be confronted with one.

Annuity rates have fallen, but so has inflation. Lower inflation means that the purchasing power of a fixed-value annuity is now maintained much better than it was in the past. The rates for index-linked annuities are especially interesting. Five years ago, an indexed annuity would have produced an annual pension, for a man aged 65, of £6,600 from a fund of £100,000. The comparable figure today is about £5,800: a reduction of only £800 a year and a much smaller fall than that in the rate of level annuities.

That comparison is instructive and it is as well to bear those figures in mind in considering whether the value offered by annuities is significantly worse today than it was five years ago. The evidence does not support that thesis. Over the same period, people's pension funds have enjoyed the benefit of substantial stock market growth, and fund growth has helped to mitigate the effects of the fall in annuity rates.

The open market option for holders of personal pensions means that fundholders can shop around.

People nearing retirement will not have had the full benefit of stock market growth, because their fund should have been managed in recognition of their age.

That is a fair point, but, if one compares the past 10 years with the previous 30, it is clear that returns on equities have been very much better.

Life offices that act as annuity providers have a very good track record for security. There has been no significant failure associated with them, owing to the underwriting process that secures the payment to an annuitant so that the liability is matched to suitable assets. That feature, guaranteeing income, is the real strength of the annuity system.

There are already forms of annuity, such as with-profits annuities, that allow pensioners to share in equity growth; but that inevitably exposes the pensioner to increased risk. The hon. Member for Arundel and South Downs suggested that those were not widely taken up because of Inland Revenue rules. I do not agree. I think that it is the inevitable risk that has deterred people. They are available as an option for those who want them.

We have considered whether there is a viable alternative to annuity purchase that would guarantee income for the rest of the annuitant's life, but none has so far been identified. The Treasury is open to suggestions from the industry.

The value offered by annuities is not as poor as is often suggested. I have seen no evidence that the providers of annuities are making exceptional profits, which they would be if some of the criticisms that have been levelled at them were valid.

Stakeholder pensions are identified in the Welfare Reform and Pensions Bill as money purchase schemes. I want stakeholder pensions to enjoy—

Order. It is time for the next debate.

In 1949, a Labour Government gave us the National Parks and Access to the Countryside Act, which established national parks with the twin purposes of promoting their conservation and public enjoyment. It also established areas of outstanding natural beauty, where the objective was landscape conservation. I hope that today's debate—50 years after passage of the legislation—will allow us to celebrate our designated areas of outstanding natural beauty in England and Wales. I also hope, however, that we will not be afraid to focus on the weaknesses that have been exposed in the legislation over the past half century, or to consider how, in the years ahead, we might improve the protection of some of our most precious landscapes and habitats.

The designation "area of outstanding natural beauty" was created by section 87 of the 1949 Act. The first thing that we can celebrate is the very fact that that Government, in that legislation, recognised the need to maintain our most beautiful countryside as places in which to work, to live and to play while protecting its special qualities.

We can still, 50 years later, rejoice in the title of areas of outstanding natural beauty, as it tells us what we are talking about: some of the finest landscape and most environmentally important countryside in the whole of England and Wales. Although we might quibble about whether the countryside that we are talking about is truly natural, for most people the title communicates very well what we are trying to say, and does so far better than titles such as national park, nature reserve, site of special scientific interest, special area for conservation or special protection areas.

Unfortunately, it could also be argued that creating the title AONB was almost all the legislation did. The legislation called for designation of parts of our countryside as outstanding, and, in the title, explained why they should be so designated. To be fair, I should add that the Act also made provision for land-use planning arrangements, which, although possibly imperfect, have helped enormously in protecting those special places.

The Act did not provide for the administration of AONBs. It said that they should exist and why, but did not say anything about how—how they were to be managed—or about who was to manage them or to finance that management. That contrasts with the situation of national parks, which were created in the same legislation. Questions of who and how in relation to national parks were answered fairly clearly in the 1949 Act, and were further dealt with in the Environment Act 1995.

The failure to make provision for positive management of AONBs was not an error, but was a result of the thinking of that time—particularly in the Hobhouse committee's 1947 report, which led to the legislation and which stated:

"There are many areas of fine country in England and Wales which are not included in our selection of national parks but yet possess outstanding landscape beauty, are often of great scientific interest and in many cases include important holiday areas. While in the main they do not call for the degree of positive management required in National Parks…their contribution to the wider enjoyment of the countryside is so important that special measures should be taken to preserve their natural beauty and interest.

We recommend, therefore, that the Minister of Town and Country Planning should designate areas of high landscape quality, scientific interest and recreational value as Conservation Areas."

In the 1949 Act, those conservation areas became AONBs. I suspect that, even then, the belief that those areas did not require positive management was mistaken. Consequently, the need for such management has become ever clearer.

Perhaps, 50 years after passage of the Act, the most remarkable feature of our AONBs is how much has been built on such a flimsy foundation. I hope that colleagues on both sides of the House who represent constituencies that include AONBs, or parts of them, will take this opportunity to talk about what is happening—for good or ill—on their patch, to help Ministers as they assess the best way forward for landscape protection in those very special areas.

I should like—to set the ball rolling—to talk briefly about the AONB in my own constituency of Gower, to demonstrate not only some real achievements but some failings that were partly caused by the omission in the 1949 Act.

The fact is that the Gower peninsula itself set the ball rolling. In 1956, it became our first designated area of outstanding natural beauty, in recognition of the national importance of its landscape, particularly its coastal landscape, and its wildlife and clear historical identity. It began the process of AONB recognition across England and Wales.

For many years before designation, Gower had, quite rightly, been appreciated for its special qualities. Its complex geology produces a wide range of scenery in a comparatively small area. It ranges from the south coast's superb limestone cliffs and broad sandy beaches, to the salt marshes and sand dune systems in the north. Inland, large areas of common land—dominated by sandstone heath ridges—are a feature, and its rich natural environment of heath, grassland, fresh and salt water marsh, dunes and oak woodland were nationally renowned even before the war. That was reflected, from 1933 onwards, in a number of early acquisitions by the National Trust.

Nevertheless, it took some intense lobbying before, on 9 May 1956, L. Strang, chairman of the National Parks Commission, and his secretary, Harold Abrahams, signed the designation order. The designation has been a matter of pride for Gower residents ever since. However, even in 1956, Gower people were worried about the availability of resources, after designation, for maintenance and improvement of the environment in their area.

At the time, the then National Parks Commission proposed an extensive series of grants for landscape management. The proposal, however, was never implemented, so that the burden of providing resources for conservation of that nationally important area has fallen on local authorities, sometimes with the help of partner agencies. In fact, the nearest that we have come to putting into practice the National Parks Commission's 1956 idea occurred in the 1990s, under the Tir Cymen agri-environment scheme, in which Gower was a pilot area. The scheme enabled some very valuable environmental improvement work and enthused our local farmers. I hope that the scheme's replacement, Tir Gofal, will build on the earlier experiment's achievements.

Since 1956, it has been mostly up to local councils to try to protect the Gower AONB as best they could. However, with no statutory requirement for positive management, the record has been patchy. For example, in the 1960s, an AONB warden was appointed to implement small-scale projects and to patrol the area, but to do so without an overall strategic plan. When the warden retired in the early 1970s, his post lapsed.

Similarly, in 1973, when the importance of Gower's unspoilt coastline was recognised by its designation as a heritage coast, a heritage coast warden was appointed by the city council, and several initiatives on various degraded sand dune systems were implemented. However, there was no heritage coast management plan, and no links to wider AONB work. When the heritage warden retired, he, too, was not replaced. Time was lost, and, with it, stone walls, traditional boundary hedges, stone-faced banks, old barns and goodness knows what coastal and inland wildlife habitats also were lost.

Only in the 1990s, with publication of the Gower management plan and appointment of AONB staff, did conservation really move forward. Now, we have integration and co-ordination of the work of the agencies involved in countryside management in the AONB. However, a real threat is still posed by the absence of core funding and statutory responsibility. Gower AONB' s long-term protection is still by no means guaranteed.

I believe that the situation at the Gower AONB is similar to that of AONBs across the country. There are now 36 areas of outstanding natural beauty in England, and four such areas in Wales. Additionally, a large part of the Wye valley AONB is in England, with a smaller part of it in Wales.

All 41 AONBs, with our national parks, represent the finest landscapes in our country and are an absolutely vital part of our national heritage. They range from the Solway coast to the north Wessex downs; from the Norfolk coast to the Cotswolds; from the Cornish coast to the Clwydian range. Their beauty is matched only by their wonderful variety.

As I have mentioned national parks, I should affirm that AONBs are not second-class national parks, but are equal in quality. They are distinguished from the latter in the legislation on the basis of access for extensive outdoor recreation, not on the basis of beauty or ecology. However, although AONBs are equal in beauty and environmental quality, they are not equal in treatment.

National parks have authorities to manage their protection and public enjoyment. They also enjoy a high profile and guaranteed funding, which is not true of AONBs. Although AONBs often have to deal with national-park scale problems, they do so without resources that are anywhere close to those available to national parks. For instance, the Cotswolds, at 2,038 sq km, is much larger than the national parks, and the Chilterns, with 52 million day visitors a year, receives more visitors than most national parks in any year. Can it be right that the law fails to provide that those special areas must be managed to protect them, fails to identify anyone to do the job, and fails to provide for resourcing the work?

Even now, when, thanks to local initiative, a lot of good work is being done, 13 of the 37 AONBs in England have no management plan in place. Some have not appointed an AONB officer, or set up a joint advisory committee. With no statutory requirement and no long-term funding, that is hardly surprising. As an aside, I should tell the House that we in Wales do not even have the benefit of additional financial resources directed to the English AONBs as an interim measure.

The Countryside Agency submitted advice to the Government on the future of AONBs last June. The Countryside Council for Wales followed, with a similar submission to the Welsh Office in January. Both organisations expressed concern about the increasing pressures of modern society on our vulnerable high-quality country areas, and about the threat from changing farming economies to our treasured landscapes.

The Countryside Agency made specific recommendations to ensure effective management, adequate financial provision and improved development controls in our AONBs. It calls on the Government to give a lead in their planning decisions to demonstrate the very high degree of protection that AONBs should enjoy. It calls for a statutory obligation on all public bodies to have regard to the need to enhance the natural beauty of AONBs. It calls for highway authorities and the Highways Agency to act on their duty to have regard to the purposes of the designation of protected countryside, and suggests the use of transport policy and programmes to channel funds into schemes that protect our finest countryside.

The agency argues that agri-environment schemes should cover all farm land in national parks and AONBs. It calls for Government funds to cover the costs of management services for visitors and recreation in designated areas, and suggests that this funding be supplemented by lottery and European Union finance. It calls for local authorities to be statutorily required to pursue the objective for which AONBs were designated, and to produce AONB management plans.

The agency argues that local authorities, when they so wish, should be able to constitute conservation boards, with—as a minimum—consultee rights on planning matters, recreation and agricultural policies in their AONB. It calls for Government funding of the core costs of managing AONBs through a 50 per cent. grant. As a matter of interest, the Countryside Council for Wales argues that the grant should be 75 per cent., to give parity with national parks. Finally, the advice calls for Government finance for an AONB fund for special projects.

I know that the Government are considering the Countryside Agency's advice, but they have been doing so for 12 months now. At different times since last June, we have been told that the Government would respond soon, and then very soon. When my hon. Friend the Minister winds up, I hope that he might be able to be rather more specific as to when we can expect that response. However, if he could manage a phrase such as "very, very soon", or "very, very soon indeed", I would regard that as at least a step in the right direction.

I do not want to make a speech and intrude on the time available to the hon. Gentleman, as, unfortunately, another engagement means that I cannot stay for the rest of the debate. However, on this specific point, may I say how much I welcome what he has said? The Sussex downs conservation board is seeking increased powers along the lines suggested by the hon. Gentleman. My constituency contains an AONB, and the Sussex downs can be seen in the distance. What the hon. Gentleman has said should command wide support in the House, and I hope that a favourable response from the Government will not be too long in coming.

I thank the right hon. Member for that intervention, which fits nicely with what I have to say. I was about to refer to the private Member's Bill, the Areas of Outstanding Natural Beauty Bill, being introduced by Lord Renton of Mount Harry in the other place. Lord Renton is the chairman of the conservation board mentioned by the right hon. Gentleman, and that board is setting a good example for a possible way forward.

I know that I am not allowed to request legislation in this debate, and I do not intend to do so, but I have read the Hansard report of the Second Reading debate on Lord Renton's Bill in the other place. It was quite a literary debate, with quotes from John Keats, Rudyard Kipling, A. P. Herbert and even Bill Bryson, and it helped to clarify the matters that need to be addressed. It identified some key questions, which I shall list and to which I hope my hon. Friend the Minister will respond.

Are we going to be able to conserve our AONBs in the future without placing a statutory duty on local authorities? How can we make sure that all public bodies recognise and respond to the AONB designation in carrying out their functions in these areas? How do we ensure that every AONB in the country is positively managed, so that these landscapes and habitats can be properly protected in the face of increasing pressures?

How do we resource that management and the special enhancement and conservation projects that will come out of it? How do we ensure a cohesive approach to AONB management, when the AONB in question straddles two or more local authority areas? Can we justify the differences in levels of protection offered to AONBs as compared with national parks, when we know that they are equal in terms of landscape quality?

On Monday, my right hon. Friends the Deputy Prime Minister and the Minister for the Environment launched the new Countryside Agency. Quite rightly, the former pointed to the actions that this Government have already taken to improve the quality of life in our rural areas and to protect our environment. He stressed his determination to do more.

I know that the Minister is committed to the cause of conservation and, especially, to the protection of our finest landscapes. I hope that he will be able to address the questions that I have just asked, and outline Government thinking about protecting that invaluable resource—the 16 per cent. of our country designated as being of outstanding natural beauty.

The AONB designation applies nationally. Its purpose is to conserve the most important landscape heritage of the nation for the benefit of this and future generations. It is about long-term stewardship for the conservation of natural beauty, and it includes the protection of flora and fauna. Geological features, as well as important features of the landscape, archaeology and history, are also covered. When AONBs are working at their best, these national objectives are achieved through partnership with local communities. That is what we must build on.

I noticed that the press release for Monday's launch of the Countryside Agency was entitled "Everyone's a Winner in Tomorrow's Countryside". I believe that we will all be winners if we get the future of our AONBs right.

In this debate, we can celebrate the 50th anniversary of the 1949 Act. Despite its flaws, it was a landmark piece of legislation about how we live, work and play in the most beautiful parts of England and Wales and, at the same time, conserve their special qualities. Now, however, we need to ask whether it is time to create a new framework for areas of outstanding natural beauty for the new century—a framework for better management and fairer resourcing.

First, I congratulate the hon. Member for Gower (Mr. Caton) on securing a debate on such an important issue. He is privileged to represent a constituency that contains an area which, although I do not know it myself, my researcher Richard Thomas tells me is as beautiful as the Gower peninsula. I share the hon. Gentleman's concern that areas such as Gower should be afforded more effective protection.

This is the first time I have contributed to a debate specifically concerning areas of outstanding natural beauty, but I have contributed to many debates on the protection of wildlife, sites of special scientific interest, national parks and the right to roam. These issues are, of course, inextricably linked.

As the hon. Member for Gower stated, we are approaching the 50th anniversary of the post-war Labour Government's landmark legislation—the National Parks and Access to the Countryside Act 1949. I hope that this Government will act in a similarly radical and forward-thinking manner. As we approach the millennium, we need further countryside legislation. However, I have already expressed concern that a super Bill, combining access, wildlife protection, AONBs and hedgerow legislation, could end up failing adequately to address the needs of any of those areas—but I am prepared to be pleasantly surprised.

It is probably worth setting out the exact definition of areas of outstanding natural beauty. They are, of course, defined under the 1949 Act to which I referred earlier. According to the Library, the designation is

"supposed to conserve and enhance natural beauty, taking into account the needs of agriculture, forestry and other rural industries and of the economic and social needs of local communities.

Sustainable forms of social and economic development, which in themselves protect and improve the environment, are encouraged."

The purpose of AONBs must, of course, be to sustain the beauty of the area, but without freezing it in time—an argument that was stressed in another place as recently as yesterday.

The key difference between AONBs and national parks is that creating opportunities for recreation is not a specific purpose of an AONB. Another key point is that local authorities are supposed to take the special character of the landscape into account when creating policy and controlling development in AONBs, but, as the hon. Member for Gower pointed out, AONBs do not have legal statutory protection. That anomaly should be tackled because "taking into account" can mean different things to different people.

AONBs should be given the same status in that respect as national parks—the highest level of landscape protection. That should be reflected in planning policy guidance note 7. There should be a statutory duty on public bodies and local authorities to have regard to, and further the purpose of, AONBs.

Another feature of areas of outstanding natural beauty is that although they were designated under the 1949 Act, as the hon. Member for Gower said, that Act does not stipulate who is responsible for their management or funding. It is imperative that safe and secure funding from both central and local government be provided to make the AONB status truly effective. That is a view with which the Government have expressed some sympathy.

The hon. Gentleman said that he wanted AONBs to be put on a statutory basis, and I agree. Will he therefore support the Bill introduced by Lord Renton of Mount Harry, or something similar, to enable that to be done? Secondly, does he agree that the crucial requirement now is certainty? I have an AONB in my constituency—the south downs. The life of the south downs conservation board was extended for three years two years ago, so it will run out shortly. Certainty is desperately needed for those areas, where there is much concern about the long-term future.

My area does not want to be a national park. It wants an extension of the south downs conservation board. The best way forward is legislation to put that on a sustainable basis. Does the hon. Gentleman agree?

I thank the hon. Gentleman for his intervention. Some key points are made in Lord Renton's Bill, which I can support. I will be asking the Minister a question about the south downs shortly.

I believe that the Surrey hills is the nearest AONB to my constituency. It provides a place of relaxation and leisurely walks not merely for the residents of Dorking, Box Hill and Reigate, but for much of south London, including, I am sure, many constituents of mine from Carshalton and Wallington. Hence, there should be a national contribution to the running costs of that AONB.

The Liberal Democrats have supported the core proposals outlined by the Countryside Agency and the Countryside Council for Wales. I believe that the Government are also sympathetic to some of those proposals, which would tackle some of the problems that I mentioned. However, I do not believe they would deal with all of them. For instance, they would ensure that in consultation with others a management plan for the AONB was produced. They would ensure secure funding from central as well as local government, and they would require local planning authorities to consult the conservation board, where one exists, on development plans and applications for planning permission that are likely to affect an AONB.

However, the proposals would not solve every problem. For example, the conservation boards advocated by the Countryside Agency would have the power only to advise planning authorities. It is our view that there may well be a case for their having the power to veto developments that are contrary to the stated aims of an AONB. That is of particular importance if, as reported by the media yesterday, the Government are backtracking on their commitment to developing 60 per cent. of new homes on brown-field land. It is precisely areas such as the Surrey hills AONB that would be vulnerable to green-field development if that target is relaxed. I will be happy, of course, if it is merely media spin without substance that has suggested backtracking on that target. I seek a reassurance from the Minister now or when he replies that the Government are holding firm to their target.

I am sure that there is broad agreement in the House on the need to ensure that AONBs are enhanced for the benefit of both local communities and visitors alike.

It is time for the Government to answer some simple questions. Can the Minister tell the House what is his preferred status for the south downs? Does he favour boosted or enhanced AONB status, or does he believe that the downs should become a national park? Can he tell us whether he favours a statutory requirement for conservation boards to be set up, either for all AONBs or for those that cover more than one local authority area? Does he favour a power of veto for the conservation boards over intrusive development in AONBs? Has he negotiated with the Treasury over central Government funding for AONBs, either at the 50 per cent. or the 75 per cent. level that has been advocated?

Finally, when will the Minister make a statement? The hon. Member for Gower referred to "soon, very soon and very very soon". I understand that a reference was made to "pretty soon" in another place yesterday. I will listen to the Minister's response carefully. He has the ability to safeguard some of the most beautiful landscapes in England and Wales. He will need to demonstrate that they are safe in his hands.

Thank you for allowing me to speak in this important debate, Mr. Deputy Speaker. I take this opportunity to congratulate my hon. Friend the Member for Gower (Mr. Caton) on securing this debate on the 50th anniversary of the National Parks and Access to the Countryside Act 1949. My contribution will be short, but I fully support my hon. Friend's arguments.

Half my constituency is in an area of outstanding natural beauty—the Clwydian range, which also extends into the constituencies of my right hon. Friend the Member for Alyn and Deeside (Mr. Jones) and my hon. Friends the Members for Clwyd, West (Mr. Thomas), for Clwyd, South (Mr. Jones) and for Delyn (Mr. Hanson). My right hon. and hon. Friends support and are aware of the importance of AONBs in the Clywdian range, as they have all signed a charter of support in the courtyard in front of the Members' Lobby, and I know that they wish my hon. Friend the Member for Gower well in his efforts to secure funding.

The Clywdian range in my constituency includes the historic Offa's Dyke footpath, which runs along the brow of those hills. It also includes the Jesuit college of Saint Buenoes, from where the Victorian poet Gerard Manley Hopkins roamed the hills around Tremeirchion and looked down into the vale of Clwyd and the vale of Elwy and wrote poetry about the beautiful scenery that lay before him.

I firmly believe that those hills and green vales are a national treasure—a much neglected treasure and one that is kept on the cheap. As my hon. Friend the Member for Gower so eloquently illustrated, AONBs and national parks are considered of equal beauty and importance. I would even say that the Clwydian range in my constituency has greater beauty than many of the United Kingdom's national parks, but I could be accused of bias. Even though they are of equal beauty and importance, they do not receive equal funding, however. AONBs are the poor relatives of the national parks.

The long-term effect of that underfunding has been the under-utilisation of some of our most valuable and treasured assets. I fear that if long-term funding is not secured for AONBs, we may witness the degradation of those national assets. Funding for AONBs needs to be increased so that it is at least on a par with that of national parks. AONBs can play a key role in regenerating our rural communities, which have suffered so much in the past 10 years because of BSE, the strong pound and tighter regulations in agriculture.

My hon. Friend the Member for Gower asked us to share with him initiatives and good and bad ideas for the AONBs in our constituencies. I will share some initiatives from my constituency with my colleague and the House. It is intended, for instance, to extend cycleways in the rural areas and link them to the Sustrans national cycleway network. That will bring visitors staying on the coast of Wales into the rural hinterland in an environmentally friendly way. People from the coastal towns of Rhyl and Prestatyn, in my constituency, will be able to appreciate that rural hinterland—the mediaeval castles of Rhuddlan and Denbigh, the cathedral at St. Asaph and the marble church at Bodelwyddan.

Those areas of outstanding natural beauty should be a hook not only for visitors to Wales but for the local population. Managers of the AONB in the Clwydian range are taking another initiative. They will pilot free bus trips from the coastal towns of Rhyl and Prestatyn, where 45,000 people live—including some of the poorest people in Wales. Free transport will be provided for those who have no access to cars, to take them to the AONB so that they can experience the beauty that surrounds them.

To open up such sensitive areas as the Clwydian range to more visitors will require even more careful management to ensure that any development is sustainable and does not lead to any damage to the physical environment. I pay tribute to the managers of the AONBs of England and Wales—especially Mr. Howard Sutcliffe in my constituency. He manages the AONB on a shoestring budget and comes up with excellent new initiatives. He is committed to his work. That additional careful management will cost more. We need long-term, secure funding so that those who manage the countryside in the AONBs can concentrate on the task of management. They should not have to go to councils or quangos with begging bowls; nor should they have to lobby politicians: they should do what they are good at—managing the countryside on behalf of the public.

The financial position of AONBs in Wales is even more precarious than that of those in England. Over the years, the Welsh AONBs have been put at a disadvantage vis-à-vis their English counterparts, although they all started from a low base. There will be a chance to redress that imbalance with the advent of objective 1 funding, which will affect 15 counties in Wales; the remaining seven counties will be eligible for objective 2 funding.

There will be a total of £1.8 billion for Wales over the next six years. If we use that money carefully, we can ensure that our AONBs are brought up to scratch and that the facilities offered there are comparable to those offered by the national parks. However, objective 1 funding should be regarded as the icing on the cake; the No. 1 issue is core funding. That will ensure that the original vision, in the 1949 Act, will be achieved. I urge my hon. Friend the Minister to help us to achieve that vision.

It is a great pleasure to follow the hon. Members for Vale of Clwyd (Mr. Ruane) and for Gower (Mr. Caton), with both of whom I share membership of the Select Committee on Welsh Affairs—there is a danger of the debate becoming a little parochial. I was born and brought up in Swansea and can, therefore, advise the hon. Member for Carshalton and Wallington (Mr. Brake) that he is missing out by never having visited the area of outstanding natural beauty in Gower—the second most beautiful rural area in the country. However, I shall speak about Hampshire, especially the New Forest, which is, of course, the most outstanding area of natural beauty in Britain—even if it is not formally classified as such.

Before I begin my own comments, I shall relay the views on AONBs of the head of countryside at Hampshire county council—Mr. Merrick Denton-Thompson. He was good enough to write to me, hoping that I would be able to support the hon. Member for Gower in the general thrust of his remarks in the debate; I am happy to do so. Mr. Denton-Thompson points out:

"21% of Hampshire is covered by AONB designation which provides substantial protection from changes in land use. However there is often little or no co-ordination of the land management operations which play an important role in sustaining the outstanding characteristics of such areas. There is an urgent need for more integration between agricultural and environmental objectives within Government if AONBs are to retain their outstanding contribution to the beauty of the English countryside."

I am, of course, happy to endorse that in general, but I am sure that Mr. Denton-Thompson and others will appreciate that, sometimes, the same formula does not fit every instance of beautiful countryside. The New Forest is one such case. Some people would try to force the New Forest into the straitjacket of a national park. There are also those who would like to force the parliamentary representatives of the New Forest into a similar appliance. However, my hon. Friend the Member for New Forest, West (Mr. Swayne) and I are united in our belief that the New Forest has survived very well over many years, with special legislation that acknowledges its role as a unique, living and working forest. The forest would not have its current form were it not for the unique contribution of the commoners who raise animals there. That is essential for it to maintain its character.

In recent times, the problems of the commoners have greatly intensified; they turn their animals out on the forest only as a labour of love. They certainly make no profit from doing so. However, they are content to do so in the knowledge that special mechanisms protect their rights in the New Forest, and hence the particular characteristics of the forest that give it so much value in the eyes of the many people who are fortunate enough either to visit it regularly, or—as in my case—to live there. One of the mechanisms that protect the forest is the verderers court—an ancient institution that prevents change in the management of the forest that would be to its detriment. Another body that protects the forest is the Forestry Commission itself. The local authorities also play a serious and responsible role in keeping the forest as we want it to remain for generations to come.

The delicate interplay of all those organisations has an overall beneficial effect and keeps the balance of interests in the forest gently in equilibrium. We are concerned that forcing the New Forest into the straitjacket of national park status would centralise and bureaucratise control of the forest.

I thank my hon. Friend for his courtesy in giving way. Does he accept that, over the past 30 years, on every development versus environment issue, one or other of the local authorities in the area has been on the side of development? That does not inspire confidence in the prospect of a national park authority dominated by local authority interests.

As always, I wholly agree with my hon. Friend's comments on that subject. I much admire the Minister—I am pleased that he will answer the debate today—for the patience and consideration that he showed us when we made representations on that matter. My hon. Friend and I live in hope that the special status of the forest will continue to be recognised, and that the 50th anniversary of the National Parks and Access to the Countryside Act 1949—of which the Government are, rightly, proud—will not be used as an excuse to turn the New Forest into a national park. To celebrate the anniversary in that way might be to the advantage of the Government's PR machine, but would be to the disadvantage of the forest itself.

Other hon. Members want to speak so my remarks will be brief. I refer only to one other threat that seriously menaces the New Forest and to which I adverted on 26 November last year: that a giant container port will be built on the edge of the forest at Dibden bay. That container port would be part of the great port of Southampton. No one appreciates more than my hon. Friend the Member for New Forest, West and I the importance to the area of a successful port in Southampton. But the idea of giant container stacks, huge cranes, and enormous container lorries and trains trundling through the countryside, disfiguring the boundary of the New Forest, fills us with horror.

Sacrifices sometimes have to be made in the national economic interest, but if such a development is imposed on the forest, it will not be necessary in the national economic interest because there is a perfectly acceptable brown-field site in the constituency of the hon. Member for Basildon (Angela Smith) at the site of Shell Haven, an oil refinery which is closing. It is an example of cross-party co-operation that the hon. Lady and I have worked together to achieve something which might be necessary for the national economic interest, is certainly necessary for the interests of her constituents and is anathema to the interests of my constituents, so that the new container port is sited in the most suitable area.

The New Forest has been a jewel in the crown of the English countryside for 900 years. It can continue to glitter and to shine providing that it is protected from the twin threats of unnecessary designation as a national park and appalling desecration by the building of a container port far better suited to other parts of the United Kingdom.

I, too, congratulate my hon. Friend the Member for Gower (Mr. Caton) on securing this important debate on areas of outstanding natural beauty. I represent part of an area of outstanding natural beauty, which is unique in that it is covered by three local authorities and two nations—the Wye valley. It is unusual because it follows the outline of the Wye valley rather than a wider countryside area. However, that has not given it the protection that areas of outstanding natural beauty need. Under the previous Administration, under the minerals plan, there was a proposal for five sites for limestone extraction within the boundaries of the Wye valley. When the Labour Government of 1949 set up areas of outstanding natural beauty, they surely never envisaged that. As my hon. Friend the Member for Vale of Clwyd (Mr. Ruane) pointed out, pressures on such areas must now be addressed.

Does my hon. Friend agree that one problem facing areas of outstanding natural beauty is the burgeoning wind farm business which, even when outside the area, damage the aesthetic beauty of protected areas because they can be seen from them? Should not we be extending protection to those areas which are visible from areas of outstanding natural beauty?

I agree. We would not have a wind farm in the Wye valley, but we might on the limestone escarpment at its edge, and, if that was visible from other vistas, it would detract from the landscape's beauty.

When the Hobhouse report designated our national parks and the areas of outstanding natural beauty, it left out one or two important areas, one of which was the Forest of Dean. As the hon. Member for New Forest, East (Dr. Lewis) said, the New Forest was also exempt from the designation. The Forest of Dean shares many of the characteristics of that landscape. We, too, have a verderers court and an area which is administered by the Forestry Commission. We do not have commoners, but we do have sheep badgers. That same mix of beautiful landscape and heritage linked to agriculture, forestry and the area's culture meant that the Forest of Dean was not included.

In answer to my hon. Friend and the hon. Member for New Forest, East (Dr. Lewis), who asked about the effect of the Government's decision in respect of the verderers and the commons—I am not sure about sheep badgers—I have given assurances to both the hon. Member for New Forest, East and the hon. Member for New Forest, West (Mr. Swayne) on a number of occasions that the particular status of both groups would not be affected by the Government's decision.

I thank my hon. Friend for that information.

The Forest of Dean was left out and, over the years, we have considered ways in which to give our beautiful landscape some kind of designation to protect it. In the past, many areas have rejected the status of an area of outstanding natural beauty, seeing it as a second-class designation without the powers required to protect the landscape.

Consequently, in April 1997, the then shadow Secretary of State for the Environment came to the Forest of Dean to see the problems facing the area. He said that the area needed special landscape protection, and that proposal has been taken forward by the Government. Land use consultants have come to the area and reported that the Forest of Dean is an area of natural beauty and of national value. We all knew that before, but it is nice to see it in a report. That report is now with the Countryside Agency, which has the remit to take forward consultation on exactly the kind of protection that the Forest of Dean should have and what area it should cover. That is obviously a matter for much wider consultation during the summer and autumn.

In the past, we in the Forest of Dean have rejected the status of an area of outstanding natural beauty because we felt that it would not provide the protection that we wanted for our beautiful landscape. Moreover, the designation is concerned only with the physical landscape; it pays little heed to an area's culture and heritage. It has very little interest in the social and economic regeneration and health of an area. I hope that the Government, in their proposed countryside Bill, will consider an area of outstanding natural beauty mark 2, which would have an holistic approach to the social and economic regeneration of the countryside and the protection of its landscape.

Many who wish to have their landscape protected may be a little chary of such a designation because it has a bad name. Many know that landowners on the edge of an area of outstanding natural beauty prefer to be outside the area rather than within it because they see such a designation as a prescriptive planning hand on the development of their agricultural businesses.

We need a visionary approach to a new area of outstanding natural beauty, rather like the pares naturels in Europe, which are inclusive and have a certain remit for the area's economy.

Perhaps the hon. Lady is looking for national park status but with local management. Would she favour that sort of model, which might also be applicable to the constituency of the hon. Member for New Forest, East (Dr. Lewis)?

National park status also comes with its own problems. The national parks were rightly given a remit to provide leisure facilities for people from cities and other areas. There has been a problem, for example, in the Peak district, where the national park board has prevented the development of small rural activities and industries because it sees them as conflicting with the remit of the national park.

The Forest of Dean has an industrial background, although we are a rural community. We would resent not being able to develop our manufacturing sector in the villages and small towns of the forest. The direction in which a national park board wanted to move may work against keeping the economic livelihood of the Forest of Dean going. Although there would be certain advantages for others in national park status, we would reject it.

The protection of landscape of great beauty is done within a planning regime that is often seen to be restrictive and may not allow small rural and agricultural businesses to develop appropriately to keep people employed in the rural economy. There is a mismatch between the wish to enhance the natural landscape and the desire to keep it as a living landscape. People live and work in rural areas. A way forward that could be taken in a countryside Bill may be a land use planning designation that includes a wider remit to regenerate the local area.

I do not know whether my hon. Friend the Minister has read the land use consultant report for the Forest of Dean. I know that he has visited the area and has commented to me on the beauty of the landscape. I should be interested to know what he envisages for the Forest of Dean as a result of the consultation with the Countryside Agency. We have a great opportunity. I congratulate the new Labour Government on setting up the Countryside Agency with a wider remit than the Countryside Commission. There are opportunities for the Countryside Agency to come up with something visionary and new for areas of England and Wales of special landscape that will tackle the problem of preserving areas of great beauty while keeping a working countryside.

It is a pleasure to take part in this important and so far well-balanced, interesting and well-informed debate. I pay tribute to the hon. Member for Gower (Mr. Caton) for calling it. I find myself in the awkward position, in following the hon. Member for Forest of Dean (Mrs. Organ), of agreeing with almost every word that she said. It is an unusual position for me to be in, but none the less I pay tribute to her. I am not certain that I agreed with quite so much of what the Liberal spokesman, the hon. Member for Carshalton and Wallington (Mr. Brake), said. I have had occasion before to comment in countryside and rural debates that his constituency is some distance from the nearest area of outstanding natural beauty—not that that precludes him from having a view on the matter.

I am happy to point out that Surrey hills and Box hill are approximately five miles from my constituency, so the nearest AONB is not a hundred miles away.

I meant no disrespect to the hon. Gentleman. He and I sit on the Environment Select Committee together and I never miss an opportunity to pull his leg.

Rather than being five miles from an area of outstanding natural beauty, my constituency incorporates two. The Cotswolds includes such marvellous places as the villages of Badminton, Castle Combe and Lacock and the North Wessex downs—I must not repeat my maiden speech. I have a certain amount of experience of living and working in two AONBs and I want to talk about that rather than, like the hon. Member for Carshalton and Wallington, looking into them from outside. There is an important distinction to be made. Often, people talk at great length about how fine the landscape is and how much we like to go on holiday to areas of outstanding natural beauty. I go to one in Cornwall and enjoy it as a holidaymaker. I go fox hunting in another one—I just thought I would throw that in for the benefit of the hon. Member for Carshalton and Wallington. We all like to go for picnics in AONBs and see them on chocolate boxes. However, we are not talking about going to them for recreational purposes—we are talking about what they are, how they can be preserved, how they can be made better and how, as the hon. Member for Forest of Dean said, we can look after the people who live and work in them. Therefore, this is a useful and important debate.

I broadly welcome the thrust of the Bill currently in the other place, introduced by my noble Friend Lord Renton of Mount Harry. Much of the Bill is useful and it will strengthen AONBs in a variety of ways. It will impose a duty on local authorities to have due regard to and further the AONBs. Curiously enough, local authorities have not had to pay attention to them until now. The Bill institutes a duty to have a management plan. It is terribly important that there must be some kind of business plan stating how the AONBs will be managed. The Bill requires local authorities to consult conservation boards on planning. Those are useful provisions.

I have some reservations about the views of some interest groups including Friends of the Earth and the Countryside Agency, which believe that the Bill does not go far enough. They have talked about more stringent restrictions in AONBs. To go further than my noble Friend does in his Bill might cause some of the difficulties that the hon. Member for Forest of Dean mentioned.

The beauty of landscapes has not happened automatically over the centuries. They are not as God made them. If one walks in the Cotswolds, one sees a landscape that has been created by farming, hedgerows, walls, fields, sheep farms and the beautiful warm yellow buildings typical of the area. All those things were created by farmers, who are the caretakers of the landscape. The crisis in agriculture must worry all of us who care about AONBs. Not only past but current generations have created AONBs. My two—not exclusively mine, I hasten to add, but the two in my constituency—are traversed by the M4. People who like to denigrate my constituency say that it is junctions 16 to 18 of the M4 and a couple of miles either side of it.

Disgraceful.

That is disgraceful, as my hon. Friend correctly says. It is true that the M4 goes straight through the middle of my constituency. We have some vibrant companies such as Dyson, who makes his vacuum cleaners in Malmesbury right in the centre of the Cotswold AONB. Mr. Dyson is currently applying for planning permission to double the size of his factory from 1,100 employees to 3,000. The land is smack bang in the middle of an AONB. I have not yet come to a clear conclusion on the application. Do we say to Mr. Dyson, "Of course you must continue to expand. Your business is important to us. You employ up to 3,000 people"? Or do we say that the AONB is so overwhelmingly important that Mr. Dyson must be prevented from expanding and he can perhaps move to south Wales, Swindon or wherever? There must be a balance between considering the area as a picture on a chocolate box and considering it as a chocolate box within which real people live and work—a point made well so far in the debate.

We have to think not only about the beauty and the landscape, but about the economic and social attributes of the area and all the other things that go into the creation of an AONB such as that in my constituency. It is a living, working countryside. People who look at AONBs from outside forget about the rural poverty of many people in constituencies such as mine, and about the transport problems and the cost of petrol for people who live in an AONB. All they think about is going to an area of outstanding natural beauty on a Saturday to have a picnic. That is not what AONBs are about: they are about creating living, working places that are as vibrant as the towns.

I welcome the debate and many of the contributions. I thoroughly welcome most of the proposals in my noble Friend's Bill. However, I urge a little caution on the forthcoming rural Bill, which may be introduced in the next Session. We must find a way of preserving the beauty of our countryside that we inherited from our grandparents and ancestors, but we must never forget the vibrancy and economic importance of such areas. It is terribly important to maintain that economic vibrancy by preserving jobs and improving employment prospects in the area. We must constantly balance the everlasting, unchanging changelessness—in the words of the English Prayer Book—of the English countryside, which in my constituency straddles the vibrancy and economic importance of the M4 high-tech corridor.

I echo the congratulations offered by hon. Members on both sides of the House to the hon. Member for Gower (Mr. Caton) on securing this debate, not only because of the importance of the subject, but because it has given hon. Members the chance to take part in an imaginary tour of some of the loveliest areas of England and Wales, which is good for the soul and informs an important and topical debate.

Much mention has been made of the Bill before the House of Lords proposed by my noble Friend Lord Renton. It is worth putting on record that this House has held its own in the literary stakes. Those who are interested in the subject will have read the Second Reading debate on Lord Renton's Bill in the other place. It showed not only the expertise and experience that we have all come to expect from Members of that House, but it contained a surprising degree of poetry. Keats, Kipling and Wilde were quoted as illustrations of what AONBs evoke in some of our greatest writers. I am glad that, in our tour of the same subject, the hon. Member for Vale of Clwyd (Mr. Ruane) mentioned Gerard Manley Hopkins, and my hon. Friend the Member for North Wiltshire (Mr. Gray) mentioned the English Prayer Book. This House has held up its literary end.

I agree with the hon. Member for Gower about the necessity for a speedy response from the Government on the issues that have been raised by Lord Renton and by various environmental bodies, including the Countryside Agency. The Opposition welcome practical moves to improve the status and protection of AONBs. If the 1949 Act needs changing, we will not oppose any necessary moves in that direction.

It is worth mentioning in detail the ideas suggested by Lord Renton, partly because his Bill is closely based on the advice given to Ministers by the Countryside Agency—or the Countryside Commission as it then was. That advice fell into three main categories. The first was to establish statutory conservation boards on an opt-in and not a compulsory basis, which is an important distinction. The second was to secure funding from central and local government, and the third was to strengthen the protection given by the planning system. I am sure that the Government will consider each of those three areas, and will ponder how best to put each of them into legislation.

I agree with hon. Members that the Government should proceed quickly, but I urge them not to mix the vital countryside protection measures that we all want with more politically controversial proposals. The Opposition will support sensible legislation that updates wildlife and countryside protection laws, but it must not be mixed up with damaging and controversial legislation, such as right-to-roam measures or any new attempt to introduce anti-hunting provisions.

The future of AONBs and other areas, such as sites of special scientific interest, is too important to be put at risk, which it would be if the much-delayed countryside Bill were designed to cause political controversy. With that caveat, I hope that the Minister will give us some assurance that of all the delayed Bills that his Department has not yet got into the legislative programme, that one will feature in the next Session. If it is limited to measures that are wanted by hon. Members on both sides of the House, Lord Renton and the many conservation bodies that take a deep interest in these matters, we shall give it a fair wind, although we shall obviously have detailed comments to make. I hope that that strengthens the arm of the Deputy Prime Minister in negotiations with his colleagues about what will appear in the next Gracious Speech.

This is an urgent measure, but each issue is complex. I shall deal with them in turn, as they appear in the Renton Bill. My hon. Friend the Member for New Forest, East (Dr. Lewis) talked about the need for co-ordination among the various bodies that currently have powers over AONBs. There is clearly a strong argument for statutory management boards built on the south downs model. It is wise for Lord Renton to propose making that optional rather than compulsory. Different circumstances obtain in each AONB, not least the practical problem of the number of different local authorities that are involved in controlling an area. I strongly believe that permissive powers are better than an imposed centralised structure.

One may well ask the valid question whether an additional tier of bureaucracy that may emerge in some areas is the best way, in practice, to protect the countryside. We are all interested in the countryside. As my hon. Friend the Member for North Wiltshire said, AONBs are not merely picture postcard areas. If the imposition of an extra tier of bureaucracy hinders sympathetic development, it may, in the long term, do no good to the preservation of the beauty of these areas.

The Minister should also consider the duty of local authorities to act sympathetically to protect AONBs. As well as a sympathetic attitude, we all know that money is very important. AONBs are the equivalent of national parks in terms of landscape quality, but not in other ways. It has been said that although AONBs may not be the ugly sisters, they are the poor sisters of the national parks. They do not get the same support as national parks. Many local authorities will feel that they are in the same position. I urge the Government not to impose new duties on those local authorities without giving them the money to perform them effectively. The Countryside Agency reckons that 50 per cent. of the core management costs should come from central Government; others are bidding higher at 75 per cent. Will the Minister explain his thinking on this issue?

Recreation is clearly another difficult area. Too much of it would destroy an AONB: not just its natural beauty, but the preservation of its flora and fauna. I congratulate the Sussex downs board on its success in hiding the 32 million visitors to that area each year—not least in hiding them from each other—so that its beauty is not lost. I am sure that the Minister appreciates this essential point: if we destroy the flora and fauna that constitute an AONB, they are destroyed for ever. Sympathetic recreation is extremely important.

I feel most dubious about my noble Friend's Bill in the area of compulsory purchase. I have two reasons for wondering whether extending the powers of compulsory purchase is an appropriate way of protecting AONBs. First, responsible private ownership has proved to be the best way of ensuring the long-term protection of a managed landscape. I am encouraged by the tone of this morning's debate to believe that there is no instinctive prejudice on either side of the House against private ownership and the advantages that it can bring to our countryside.

A few months ago, The Field magazine wrote:

"The old threat of nationalisation of the ownership of land has been replaced by a gradual move to actual nationalisation of the use of land."

That is an overly dramatic statement, but it is an important and legitimate consideration. As long as its private owners behave sympathetically, too much intervention in the landscape may do long-term harm. Bodies such as the Country Landowners Association and the National Farmers Union have pointed out—as did my hon. Friend the Member for North Wiltshire today—that the landscapes are both settled and managed. They are not empty areas where people go for the weekend to enjoy the chocolate box scenery. The work that has been done to such areas—and which continues to be done within them—makes them attractive. We must not turn them into museums.

In that regard, I pay tribute to the work of the Rural Development Commission—which ceased to exist this week. I know from its efforts in my constituency that it has worked hard to provide the support for small local businesses that allows people to continue to live and work in villages and therefore preserve the health of the countryside. I hope that the RDC's good work will be continued not only by the Countryside Agency, but by the regional development agencies.

Will my hon. Friend confirm that we are concerned that the voice of the rural areas may be lost on the regional development agencies unless the correct people are appointed to those bodies? Someone must assume the former role of the RDC and continue to fight the rural corner within the RDAs.

I had restrained myself from making that point, but I happily agree with my hon. Friend. I also fear that the rural voice will be lost on the RDAs.

Although work should continue in AONBs, it is clear that they are not suitable for large-scale housing developments. The National Trust has expressed its concern about the way in which new housing developments may be accommodated within AONBs to meet the demand for housing in rural areas. That is a topical issue in light of the release of Rogers's report yesterday. An outcome of that report must be less pressure on AONBs for house building. I must admit that, although I live in hope, I have no great expectations. I agree with the editorial in today's edition of The Independent, which recounts the Deputy Prime Minister's response to the Rogers report. He said:

"It provides a wide range of interesting and forward-thinking recommendations to feed into ongoing work across Government and beyond'.

The Independent goes on to comment:

"It is hard to think of a phrase of Whitehall-speak to dampen enthusiasm faster."

New measures must be introduced quickly. The Countryside Agency, in its previous guise as the Countryside Commission, got it right when it said:

"We"—

that means all of us—

"have a duty to future generations to protect and care for these areas of beautiful countryside. If action is not taken, their integrity will crumble; their fabric will deteriorate."

I hope that the Minister will respond to calls for early legislation in this area. Such legislation must be practical, it must be based on the real needs of our countryside and it must not include measures that will damage the countryside. I hope that the Minister will bear that in mind and that he will win a legislative slot next Session so that the House may return soon to the consideration of this vital issue.

I, too, congratulate my hon. Friend the Member for Gower (Mr. Caton) and thank him for giving the House the opportunity this morning to celebrate the importance of areas of outstanding natural beauty in Wales and in England. I am particularly glad of the chance to respond to this debate.

My hon. Friend takes a special interest in AONBs and is very knowledgeable about them. As he demonstrated at the beginning of the debate, he is able to wax eloquently about AONBs in his constituency of the Gower, which—as he pointed out—was the first AONB to be designated in 1956. Because it was a trend-setter, the Gower clearly has a special place in the family of AONBs, and my hon. Friend's championing of it is typical of the loyalty and the pride that areas of special value inspire in people across England and Wales. My hon. Friend was certainly inspired by the countryside in the House this morning.

I was glad to meet recently my hon. Friend and a delegation from the AONB staff forum to talk about issues of interest and concern across the AONBs. As the name suggests, the staff forum is a grouping of the dedicated people who work in AONBs and who come together to exchange expertise and to champion the cause of conservation and the enhancement of those areas. At the meeting, they told me about some of the imaginative projects that are under way in our AONBs and of their concerns for the future. I look forward to meeting my hon. Friend and a further delegation from the AONB Association.

I turn briefly to a question raised by the hon. Member for Ashford (Mr. Green) in relation to the Rural Development Commission. I am grateful for the congratulations that he offered on the honourable work that that august body has performed and I agree with him wholeheartedly. However, I disagree with his interpretation of how the rural voice will be affected by its demise—a view that was also expressed by the hon. Member for North Wiltshire (Mr. Gray). I remind hon. Members that, when regional development agency boards were established, the Government insisted—this call has been repeated again and again by Labour Members—that the rural voice should be heard loudly in those august bodies.

We set out several criteria, the most oft repeated of which concerns the recruitment processes that we introduced for membership of RDAs. We insisted that if people failed the rural test in their interviews, they would not be appointed to the boards. Since then, in the context of RDA financing, we have insisted on a 20 per cent. ratio for rural and coastal communities and for coalfield areas—which, in most cases, straddle the two. That criterion is built into the economics of RDAs.

My hon. Friend spoke about the 50th anniversary of the National Parks and Access to the Countryside Act, which, I am proud to say, was enacted by the Attlee Government in 1949 and which provided for the designation of AONBs as well as national parks. I say that with pride because I was brought up in an urban coalfield area in the north-east of England.

One of the leading figures in passing the 1949 Act was Hugh Dalton, who was then the Member of Parliament for my constituency. He visited my parents on occasion to talk about matters of deep interest to him in his role as local MP. He used to wax lyrical about the importance of that legislation, as did one of my predecessors as Member of Parliament for Mansfield—Lord Bernard Taylor, who is, sadly, deceased. He was a leading figure and, at one time, Parliamentary Private Secretary to the Prime Minister, Harold Wilson. Lord Taylor was deeply engaged in the establishment of national parks and tried to build on the 1949 legislation. Like the hon. Member for North Wiltshire, I never miss an opportunity to mention such matters because, if nothing else, it makes me feel good. However, those matters are particularly relevant to today's debate. Various celebrations of that anniversary will occur this year, marking the successes that have been achieved while looking to the future. I cannot think of a more appropriate time, when we are about to enter a new millennium, for such celebration.

The formation of the AONB Association, in time for the 50th anniversary and over 40 years after the designation of the first AONB, is a demonstration of the increasing awareness of the importance of our AONBs. However, as my hon. Friend the Member for Forest of Dean (Mrs. Organ) pointed out, they have long been regarded by many as second-class citizens compared with our national parks, and many people who care for them are determined that this should no longer be the case. The AONB Association provides, for the first time, a channel for members of local authorities that look after AONBs, and others who are interested and involved, to further their common cause.

My right hon. Friend the Minister for the Environment and I very much regret that we have been unable, because of previous diary commitments, to take up an invitation to attend this year's conference of the AONB Association in Cirencester in September. Nevertheless, we wish it well, and hope to have the opportunity to participate in future events of that kind. I have given a commitment on that.

I am reliably assured that there are 37 AONBs in England and four in Wales. Those 41 AONBs all have special qualities, but they are very diverse in size and in landscape, ranging from one that includes the limestone grassland and pretty villages of the Cotswolds to one that is less than a twenty-fifth of that size—the salt marshes and cliffs of Arnside and Silverdale. Of course, we must not forget the Gower, which has an extremely varied range of coastal and inland habitats.

It is useful at this point to remember that the legislation recognises no distinction in the landscape quality between the two national landscape designations of national parks and AONBs. Each is regarded as being as beautiful as the other. The difference lies in the fact that national park designation relates not only to landscape beauty, but to wildlife and cultural heritage, and in the requirement for the parks to be substantial tracts of countryside that provide significant recreational opportunities. National parks have also traditionally been designated in our more remote upland areas.

The purpose of designating AONBs is, of course, to conserve and enhance the natural beauty of the landscape. Many of them undoubtedly also play a big part in meeting the huge demand for visits to the countryside, and they are visited by an enormous number of people who come for all sorts of reasons, as well as being enjoyed on a regular basis by those lucky enough to live in the area.

As everyone engaged in this debate is aware, the Government are firmly committed to protecting and enhancing our finest countryside. Indeed, we fully recognise the importance to the nation of our AONBs, which contain so many of our finest landscapes. We recognise also that the interests of the local communities who live or work in those areas are vital considerations. The contributions of farmers and other landowners to maintaining the landscape are of particular importance.

Will the Minister give way?

In a moment. First, I want to pay tribute to the hon. Gentleman's colleague, the hon. Member for North Wiltshire—which is almost as surprising as the hon. Member for North Wiltshire paying tribute to my hon. Friend the Member for Gower. I thank the hon. Gentleman for his remarks because in these debates we often lose sight of the role of the farming and countryside communities as caretakers of our rural areas. There often seems to be a lack of communication, and I am grateful to the hon. Gentleman for pointing out the important role of those communities.

The Minister has made clear his commitment to the principle of AONBs. I came fairly new to this subject and, as he probably knows, two years ago, my hon. Friend the Member for Arundel and South Downs (Mr. Flight) and I called for a debate to try to secure an extension to the south downs conservation board. The Government granted a three-year extension, which is due to expire in about 18 months. Before he concludes, will the Minister tell us whether the Government intend to make the arrangements for the south downs permanent? As he knows, and I have said before, there is widespread opposition to having a national park, but there is overwhelming local support for making the south downs conservation board permanent.

I hope to deal with that matter. If I can get through the rest of my speech in the next three of four minutes, I will give the hon. Gentleman that information.

Special consideration must be made of AONBs because of the recognition that their landscapes are of sufficient importance to have particular value to the nation as a whole. However, as I said earlier, we need to maintain a balance between that consideration and the need, which the Government's policy towards the countryside stresses, to sustain living and working communities as well as a ood-quality environment.

We have heard today about the advice on the future treatment of AONBs which the former Countryside Commission delivered to the Government last summer. I can assure hon. Members that the subject of the advice—which related to the future status of the New Forest and the south downs, as well as making recommendations for AONBs generally—is never far from my mind or that of my right hon. Friend the Secretary of State, and our postbags always contain letters about those matters.

Hon. Members will not be surprised when I confirm that I shall not today make any statement about the Government's conclusions on those matters. I can, however, confirm that they remain under active consideration in my Department and that we intend to announce conclusions very soon. [Interruption.] That is better than soon.

I understand that the Countryside Council for Wales has delivered similar advice about AONBs, although, because of the nature of the Welsh AONBs, it does not see the need to provide for statutory conservation boards. Those will be matters for the Welsh Assembly to consider.

The Government are sympathetic to the need to do more to foster a positive approach to the management and protection of AONBs into the next century. In that respect, we have already demonstrated our commitment by providing the Countryside Agency with an extra £2.5 million for work in AONBs in England this year. That will make a difference. It more than doubles the funds that were available to the former Countryside Commission for the support of AONBs, and it will allow a considerable degree of progress to be made in putting in place new management plans and new programmes, and in helping to provide additional expert staff. We shall continue to monitor progress on that to find out what is being achieved and what more needs to be done.

A great deal has, of course, already been achieved in AONBs through the enthusiasm and commitment of local people, by local authorities and other local partners working together, by the Countryside Agency in England and by the Countryside Council for Wales. I understand that at least 26 of the 41 AONBs currently have a management plan in place, and a great many have an AONB officer or a joint advisory committee set up by their local authority.

Of course, because AONBs are very different in size and nature, there is not only one way of managing them or caring for them. Some lie solely within the area of one local authority, which is generally best placed to co-ordinate a management programme. Others stretch over long distances, often following a geographical feature, such as the Sussex downs. In that case, and in other cases, several local authorities are involved.

The experiment set up by the former Countryside Commission and the local authorities in 1992 to form a conservation board for the Sussex downs has in many ways brought us to where we are today on the question of AONBs. In conclusion—

Order. We now come to the next debate.

I wish to draw attention to the £100 million that has been lost to the budgets of grant-maintained schools this year. In so doing, I shall focus principally on south-west Hampshire, because six of the nine secondary schools in the New Forest area are grant-maintained schools. They have become models of efficiency. Despite the fact that many of them have a very mixed social intake and have sought out and addressed special needs, they include some of the most successful comprehensive schools in the land.

On Monday, a BBC journalist approached me, preparatory to this debate, and suggested that the disproportionate success of grant-maintained schools in my constituency was a consequence of their rather generous funding, and that fairness required that that advantage be withdrawn and that all schools be placed in the same funding boat.

I would always suggest that the grant-maintained schools had enjoyed better funding, but I do not think that that equates to more generous funding. Grant-maintained schools—[Interruption.] If the Minister for School Standards will allow me, I shall point out that grant-maintained schools enjoyed a replication of the local education authority's locally managed schools budget, with a central add-on to cover the costs that would otherwise have been provided by the local education authority but which the schools were then required to provide for themselves. That gave the schools the liberty to spend that central add-on on their own priorities rather than on priorities determined for them by the local education authority.

Locally managed schools, under the local education authority, continued to receive quite significant discretionary grants throughout the financial year. However, they never enjoyed the principal benefit of being able to budget and plan on the basis of receiving that financing.

That form of funding for schools has now been brought to an end and replaced by fair funding. If by "fair" we mean equal, the Minister has achieved an objective, because all schools will indeed now be funded according to the same formula. Nevertheless, the grant-maintained schools have suffered a very significant fall in their budgets this year—so much so that the Minister has had to introduce a measure of cash protection to cushion them from the effects of that fall. The very existence of cash protection is a recognition of the less favourable environment that grant-maintained schools now enjoy, and that was not a Government objective.

That is a failure of the Minister's policy because, as the right hon. Member for Tyneside, North (Mr. Byers), the then Minister for School Standards, said, the Government's objective was not

"to cut the amount being spent on pupils in GM schools, but to increase the funding for pupils in other schools."

He said that he was engaged in a policy of

"levelling up."—[Official Report, Standing Committee A, 12 February 1998; c. 461.]

Levelling up is not the experience of grant-maintained schools in south-west Hampshire. I have in my hand a statement issued on 15 April 1999 by the headmasters of those schools. It may help to clarify the issue if I quote at a little length:

"We understood that one of the purposes of the Government's 'School Standards and Framework Act' was to extend the successful practices of the current Grant Maintained schools to all schools and the local education authorities were to be accountable for enabling schools to raise standards. Critical to the new Framework was the concept of Fair Funding …

Fair Funding should have extended the local management of schools formula to provide delegation of funds for almost all services to all schools, in effect incorporating elements of the Central Grant. As 8.7 per cent. was…agreed"

as the sum to be

"held back by the local education authority for such services, it would have been reasonable to expect that the local management of schools formula would provide additional delegation of this order.

Far from it. The extra delegated amount is nearer 2.8 per cent. and Grant Maintained schools typically find their income 5.9 per cent. short of their…commitments…Indeed, the reduction in real terms is so great that the extra delegation together with inflationary increases would give some Grant Maintained schools a cash income for this year some 4 per cent. lower than they received last year.

This situation triggers a measure of 'cash protection' which … leaves the schools funding this year's, incremental drift, pay rises and inflation from the equivalent of last year's income. These schools will need to lose teachers and support staff, reduce expenditure on educational resources and postpone improvements. Classes will be larger, computers fewer, books older and buildings less well maintained. The position is reflected also in the reductions to other 'special grants' where, for example, income for training teachers and regular income for capital improvements will halve.

In 2000–1, if cash protection ends, the position for some will become even more serious and an additional wave of budget cuts, typically 4 per cent. equating to 3 or 4 more teachers, will be necessary."

That statement is signed by the head teachers of Applemore college, the Arnewood school, Burgate school and sixth form centre, Ringwood school, Testwood school and Hardley school and sixth form.

Several of the schools that my hon. Friend has listed are actually in my constituency. I have a copy of a letter from Mr. Underwood, headmaster of Hardley school, to the chairman of the county council. Elaborating the thesis that my hon. Friend has advanced, he says:

"It is our contention that all schools"—

Order. Interventions must be brief.

I thank my hon. Friend the Member for New Forest, East (Dr. Lewis). Of course I am aware that Hardley school is in his constituency. He will be aware that, this year, as a consequence of this funding settlement, the school will have to function with 4.2 per cent. fewer teachers. It will be implementing a cut of some 20 per cent. in its funding of educational resources and it will have to spend its entire reserve, built up over nine years. Next year, if it loses its cash protection of £85,000, those problems will be compounded.

Does my hon. Friend agree that the same points apply to Highcliffe comprehensive school in my constituency, which is attended by many of his constituents?

That is indeed the case. The principal problem that is highlighted by the headmasters is that the key central add-on is not being fully replicated in the new extension of the local management of schools settlement. The money is not being passed on to the schools.

Will my hon. Friend give way?

If my hon. Friend will allow me, I must make progress.

This issue touches on the bureaucracy surrounding the local education authority, which I shall attend to in a moment.

When I drew the Minister's attention to the problem on 10 June 1999, I said that some schools had even introduced a measure of charging for lessons, which gave her an opportunity to lecture me on the nature of the law and gave rise to some very unwelcome press attention on those schools. On that occasion, I referred to charging for keyboard musical skills, which one school in my constituency had had to introduce as an understandable but regrettable consequence of the settlement. It is not breaking the law.

I now draw attention to the problems of the Arnewood school in my constituency. The Minister will be aware that we have a shortage of secondary schools in south-west Hampshire. It is very difficult to get into the Arnewood school, despite all sorts of expedients in the past few years to increase the capacity of the school. Even children living at the gates of the school who meet all the high priority criteria for entry to that school must be bussed to the constituency of my hon. Friend the Member for Christchurch (Mr. Chope) and cannot get into the school.

On 7 April, the headmaster wrote to me:

"I would like to draw your attention to the very significant funding difficulties that the Arnewood school is facing at the start of the new financial year. In general terms, we anticipate a drop in income this financial year of some £400,000, this with a level of protected funding without which in 2000–01 we can expect a cut of a further £200,000. In crude terms, this is a total loss of £600,000 over two financial years, which would mean losing 25 teaching staff."

I know, and the Minister knows, that not all those problems arise from the change in the funding of the schools. For example, £185,000-worth of the problem is the consequence of a mistaken formula used in the past for predicting the capitation of the Arnewood school. Nevertheless, the bald facts that the headmaster sets out in his letter are true.

In addition to the loss of funding, the damage done to grant-maintained schools is compounded by their finding themselves back under the dead hand of the local education authority's bureaucracy, from which they thought they had escaped. To give the House a taste of that, I shall treat it to a vignette, for which I am indebted to the headmistress of the Burgate school, who provided me with it. The letter is from Hampshire education authority.

Order. I gave the hon. Gentleman some leeway in allowing him to read out the entire contents of a headmaster's letter. I would not appreciate another letter being read into the record. Perhaps the hon. Gentleman will paraphrase the letter from the education authority.

I shall be brief, Mr. Deputy Speaker.

The letter is about the need to measure the floor space of grant-maintained schools. It explains why it is necessary to measure the floor space and adds, happily, that this feast of floor measurement will be an annual occurrence.

Before headmasters resign in horror, they should thank their lucky stars and count themselves fortunate that they live in Hampshire, which, despite the absurd machinations of the floor-measuring department, is a very good local authority. Hampshire emerged rather well from the statistics published last week. It passes on more than the entire standard spending assessment to schools. Administrative costs are only £76 per pupil in Hampshire, compared with the national average of £82. Hampshire consulted widely before deciding what proportion of its funds would be delegated to schools and what it would retain. The Minister must appreciate, however, that, last year, grant-maintained schools enjoyed 100 per cent. of their budgets and not, as this year, 85.2 per cent., with some services in kind, which the schools may not require and may not value.

Nothing could illustrate more graphically the policy blunder into which the Secretary of State has stumbled than the release last week of statistics and the attempt to name and shame local authorities. The principal instrument of raising school standards chosen by the Government is local education authorities. Their record on school standards is not a glorious one. Although the dispute has degenerated into an argument between the Secretary of State and the Local Government Association about how accurate the figures are, it is clear that the Secretary of State has a measure of reserve about the competence and motives of education authorities. Why did he bring grant-maintained schools, which were enjoying an efficient means of funding, back into the less efficient method of funding of local authority schools?

I suggest to the Minister that it would be more appropriate to proceed from now on by providing a budget directly to schools on the basis of the locally managed formula. I suggest also that the Government should make separate provision for funding what the hon. Lady regards as the proper functions of the local education authorities. She could then be sure that schools would obtain the funds that she thinks it proper they should receive, without putting herself in the absurd position in which the Secretary of State has placed himself. The right hon. Gentleman is now to be seen standing on the touchlines shouting at the players—in this instance, the LEAs—in the hope that they will take notice of what he is saying. The Government have chosen local education authorities as their instrument, but the figures released last week show that there is a complete lack of confidence—or at least some lack of confidence—in the LEAs. I hope that the Minister will take up my suggestions, and I give her that opportunity now.

First, I congratulate the hon. Member for New Forest, West (Mr. Swayne) on securing this debate and thereby giving me a longer time than I ever have when responding to Education questions to contribute to a debate that started with correspondence that has continued throughout the year.

Secondly, I acknowledge the interest shown by the hon. Gentleman's neighbouring colleagues, the hon. Members for Christchurch (Mr. Chope) and for New Forest, East (Dr. Lewis). I accept that they wish to do the best for the children in their constituencies. However we might differ about the different funding of education, I acknowledge a deep-seated commitment on both sides of the House in recognising that the future of our children matters. That is why it is so important to get school funding and what happens in school correct.

It was interesting to listen to the hon. Member for New Forest, West. There are 30 schools in his constituency, of which about half a dozen are grant maintained. It is interesting also that, although he spoke for slightly more than 15 minutes, he said not one word about any of the schools in his constituency that are not grant maintained. I applaud, as does the hon. Gentleman, the high standards that are attained by the GM schools in his constituency, and everywhere else. However, I wish to acknowledge—the hon. Gentleman failed to do this—the high standards that are achieved by many schools in his constituency that are not grant maintained, and have not had favourable funding in recent years. It is a cause for celebration wherever there is excellence, and not merely because excellence happens to be in GM schools. I regret that, in that regard, the hon. Gentleman's speech was somewhat one sided.

Will the Minister acknowledge that local education authority schools in Hampshire are enjoying an increased settlement this year as a result of the improved locally managed formula? The problem is being faced by the grant-maintained schools, and that is why I dwelt on them.

I an glad that my attack at least brought the hon. Gentleman to acknowledge the improved funding for most of the schools in his constituency and throughout the county since the Labour party came to government. He failed to say that the standard spending assessment in Hampshire has increased by almost £50 million during the first two years of the Labour Government, compared with a 5 per cent. increase over two years under the old county boundaries formula. That means that for children in the hon. Gentleman's constituency there has been a real increase of 6 per cent. for primary schools and 4 per cent. for secondary schools. That is to be welcomed.

When we took power, we were faced with a funding system that discriminated against children. That was not because some children were less important or needed less finance. They were discriminated against because their parents had chosen to send them to schools that did not have a GM label. The hon. Gentleman acknowledged—we must all do so—that, under the Conservative Government, there was a funding differential that was based merely on category of school. That Government had the necessary power and authority, and they could have found the resources to level up. They could have ensured that every school received the funding level that applied to GM schools. However, there was the ridiculous situation of budgets for GM schools increasing year by year in terms of revenue and capital, while real budgets for children in the vast majority of schools fell. I wonder how many angry words were spoken in the House by Conservative Members before the election on behalf of the vast number of children who were educated under the previous Government in schools whose funding decreased year by year.

Will the Minister give way?

Yes, but I give warning that, because of the extra time taken by the hon. Member for New Forest, West, this will be the last intervention I shall take.

I thank the Minister for giving way so that I can get in a completed comment. Is not the problem that the Government have said that they will level up and extend the funding advantages from grant-maintained schools to the rest, even though the effect of those changes is that over half the central funding, which was being distributed by the GM schools, is now being retained—by the county council in our case? That means that the funding environment for the GM schools is less favourable and, thus, the Government's promise has not been fulfilled.

That is the crux of the argument made by the hon. Member for New Forest, West. I shall deal with that now.

The previous Conservative Government acknowledged that there was an element of double funding for grant-maintained schools—that point was first raised by the Select Committee on Education, which had a Tory Chairman—and, well before the election, they introduced a degree of parity to the funding mechanisms. To some extent, we have furthered that. The argument revolves around the addition that was made for central functions held back by the local education authority.

On the element of double funding, the hon. Gentleman is right to say that that central annual maintenance grant gave schools extra money—I accept the figure of 8.7 per cent for schools in Hampshire—because they would no longer need the services of the local authority on which that money was spent. Hon. Members know that those schools were not charged for that money, but received the same service free from the Funding Agency for Schools. That is the element of double funding—it was delegated to those schools as central AMG, but not charged to them by the FAS. Central Government picked up the tab. We can debate that arrangement, but no hon. Member can justify it as fair and reasonable or as a funding system with which we should continue.

The previous Government remedied the error in the funding formula, and we have continued with that. I take the view that local education authorities need to do certain things, some of which concern managing the funding formula. When local authorities did not undertake such management for GM schools, the FAS did it. Someone has to manage the admissions system and the surplus places and make sure that there are sufficient places for children in LEA areas. That important measure, to which the hon. Gentleman referred, does not come free; it has to be paid for.

Schools do not want to have to manage those services by themselves—indeed, they cannot do so—so an element of what was central AMG has to be kept back by local authorities, and that has to be part of the education budget. Much of the dispute is about that remedying of the double funding element of central AMG.

Like the hon. Gentleman, I congratulate Hampshire education authority on the way in which it has delegated funding. Compared with other local authorities, it is to be praised. Although we always want more and are never complacent, I shall not criticise it on this occasion. It has delegated 85.2 per cent. of its funds to schools compared with 82.4 per cent. nationally and 83 per cent. for all shire counties. That increased delegation and the fact that Hampshire has passed the increase that the Government have secured on to the education budget means that every school in his constituency will benefit from increased funding, as he acknowledged.

I have two more points to make. On transitional funding, I admit that it is not easy to move from a funding system that was not fair and just to one that treats children on the basis that they are of equal value and have equal need for funding. Managing that transitional arrangement is not easy. We have acknowledged the contribution made by GM schools to the debate about schools' ability to run themselves. Much of the fair funding formula and much of the work that we have done take the best from the GM system as well as the best from the system of financing maintained schools.

Last year, we offered transitional protection at cash levels based on pupil numbers. Although the hon. Gentleman did not do so at Question Time, I am delighted that he acknowledged today that some of the difficulties of Arnewood school—and of another school, which may be in the constituency of one of his hon. Friends—arise from the difference between the number of pupils who attend the school and the number who were forecast to attend. Against the predictions of the LEA, the FAS decided to fund Arnewood school at such a level last year.

Whatever funding system was used this year, and even if the FAS had been managing the funding arrangement, there would have been a clawback from Arnewood school because pupil numbers were inaccurate last year. Indeed, it has come off better because transitional protection gave it protection based on its funding last year. The money that would have been clawed back in other circumstances was not clawed back. A bit of me says that the hon. Gentleman protests too much on behalf of Arnewood school, although I acknowledge the difficulty that transitional funding can offer

We have to remember that every school that receives transitional funding is receiving more money than a comparable school in the local education authority area. I say to Conservative Members that that is a criticism not of the funding that we have put into schools and the funding mechanisms that we have employed, but of the funding that most schools had to put up with in the years of Tory government. The key point is that such schools are receiving more than schools in similar circumstances. As we enter a period of increasing education budgets, the funding of all schools will increase to match the level that favourable funding gave to GM schools before the general election and beyond it.

Teachers have received an above-average pay increase in the past year, which I welcome, and, for the first time in many years, their increase was not phased, which meant an extra cost for school budgets. I have always been sympathetic to the position in which that put some schools—not some LEAs—so I am delighted to tell the House that, this morning, my right hon. Friend the Secretary of State announced in his speech to the inaugural meeting of the Association of Heads of Foundation and Aided Schools that transitional funding will be offered next year and will be uprated at 2.5 per cent. to take account of inflation.

We are being true to our word. We offered transitional funding for GM schools during our first year. We increased budgets throughout the local authority area so that the vast majority of schools in the hon. Gentleman's constituency could benefit. Transitional funding will continue next year and the budgets of GM schools will increase by 2.5 per cent. to take account of the pressures to which I have referred.

I was delighted to read a press release from Bob Lloyd, the chairman of the newly founded AHFAS, which says of my right hon. Friend's announcement:

"This is good news for all schools. We are delighted that David Blunkett has listened to the concerns raised … by AHFAS that the Government's increase in education funding was not being passed on to schools by LEAs. He is now taking action to ensure all schools are properly resourced."

That was our pledge at the general election and it now comes not only from the mouths of Labour Ministers, but from people who have been properly elected to represent foundation and aided schools. Bob Lloyd's remark that the Government are

"now taking action to ensure all schools are properly resourced"

means that, for the first time, extra money will go to schools based on need, not on category. I hope that the hon. Gentleman will welcome that announcement.

I doubt whether anything that I shall say in this debate will come as a surprise to the Minister, who has been assiduous in dealing with the welter of parliamentary questions that I have tabled on genetically modified foods and their implications for human and environmental health. I am pretty certain that he will already have read the Bill in my name—the Genetically Modified Food and Producer Liability Bill; I am equally certain that he will have seen the "Soapbox" documentary platform that I had on this subject; and I am fairly certain that he will have heard the "Farming Today" interview that I did this morning. He may at that time already have been out feeding his civil servants. I offer those introductory comments as a tribute to the Minister's assiduous commitment to public standards and food safety.

I want to use this opportunity to give equal praise to the national campaign that Friends of the Earth is launching today on the safety of food, specifically GM food. The campaign seeks to set up a platform that establishes society's basic rights and responsibilities, which, sadly, we do not fully have but which are entirely consistent with the values with which the Labour party came to office. When we came into government, we said clearly that the society that we wanted to take part in shaping had to strike a balance between rights and responsibilities.

I believe that the campaign needs to address three rights and two responsibilities. The rights are fairly simple: the right to know, the right to say no, and the right to grow safe food. Those rights must be balanced by the responsibility to protect the environment in which we live and the responsibility to put right the damage done to that environment.

On the right to say no, European Environment Ministers have recently been involved in discussing the framework of constraints that should exist on releasing GM organisms into the environment. I welcome the fact that they have tightened the rules within the past week, although I would have preferred it had they gone a couple of steps further and recognised the strength of the case for a moratorium on GM crop growing. There is still time for a decision to be reached on that.

One of the arguments used was that we may not be able to go as far as a moratorium because it could be illegal; that it would somehow interfere with international trade agreements. As such, it would require us to abandon one of the most important principles that has guided us through the ages: the right of countries, both nationally and internationally, to lay claim to the precautionary principle. That applies to medicines, drugs and all types of new products. It means that if we are uncertain about the risk to human or environmental health, we have the democratic right to say no and to define a pause within which to reflect on the risks involved. It cannot be right that trade treaties override the obligations to put public safety first that democratically elected Governments have to the citizens who elect them.

The second right, which follows, is the right to know. A huge amount of the debate on GM foods has focused on how much—or how little—we know about the foods that we already consume. It is extremely important that we go further down that path. It allows the public to exercise an informed choice and does not allow the food chain to be polluted, as it has been, by GM foods being secreted into it without allowing the public to make an informed choice.

The hon. Gentleman and I have discussed this matter before. As he knows, the Statutory Instruments Joint Committee, which I chair, recently reported to Parliament on the Food Labelling (Amendment) Regulations 1999. The Committee was concerned that the regulations did not require suppliers to state clearly on a product that it contained GM organisms. There was thus a danger of consumers buying GM foods without realising it. The Minister wrote to me, as Chairman, asking the Committee to look at the matter again. I am not sure that the Committee can "unreport" what it has reported, but it will look carefully at the matter.

Despite assurances that the Ministry had consulted widely, I am mindful of what Friends of the Earth—

Order. I must interrupt the hon. Gentleman.

I thank the hon. Member for Bosworth (Mr. Tredinnick) for raising the issue of labelling. I know that the Minister takes it seriously because I have raised it with him as well. I hope that the hon. Gentleman will deal with it in his own speech.

I should like to direct my comments about the right to know in a slightly different direction. One of the great frauds that have been perpetrated by the biotechnology industry on our democratic process is that we have been persuaded to accept a complete contradiction. We are told that genetic modification is revolutionary technology, yet that GM crops are no different from traditional crops—that we can deal with GM products as though they are equivalents. That is the term that has been used to push revolutionary products as though they were simply novelties.

We need to step back and reflect on the case to be made for moving the scrutiny process for GM crops from the food Acts to the medicines Acts. I have a fairly simple example for the House. It is now possible to produce a potato with its own insecticide factory chugging away inside it as it grows, thus avoiding the need for extensive spraying of pesticides. However, if someone were to go into a garden centre and buy pesticides off the shelf, cautionary warnings about the health risks from those pesticides would be spelled out in large letters. A potato with the same pesticides inside has no health warning attached.

There has been no scrutiny process that has allowed us to study not only the long-term implications for human health, but the short and long-term implications for the eco-systems within which these crops are grown. We need to establish new benchmarks against which scientific scrutiny can be measured if we are to have any confidence in the industry's claims.

The third right is the right to grow safe food. It is important to stress that this is not an anti-agriculture argument. Indeed, it is an argument in favour of agricultural rights. It is in favour of traditional agricultural processes and the protection of farmers' rights against the processes that are unfolding globally in terms of corporate exploitation of the land and the growers of food.

Last September, David Chaney, a farmer in Kentucky, pleaded guilty to a crime and was fined $35,000. He had pleaded guilty to the heinous crime of saving and replanting seeds—in this case, soya beans. He had to pay that fine to Monsanto because the soya beans had been supplied by Monsanto under new product licences, driven by patent protection, whereby there is an everlasting obligation to pay to the biotech companies royalties on their seeds. That seems perverse.

Suddenly, the whole history of human agriculture is on trial. To prosecute farmers for saving and replanting seeds is like prosecuting birds for flying, people for breathing or fish for swimming. It is the basis on which agriculture depends. Farmers have historic rights to save seeds—rights on which societies have always depended. We need to set down benchmarks that protect farmers' rights to save and propagate their own seeds.

I am pleased that in November last year a different farmer, Percy Schmeiser of Saskatoon, Canada, decided not to plead guilty because he had not bought any Monsanto seeds. They had simply turned up growing on his land. Monsanto prosecuted him, but he has put up a resolute defence, saying that if the seeds got on to his land, Monsanto should prosecute the wind and the bees—or perhaps he should have the right to prosecute Monsanto for an act of pollution and intrusion. The polluter should be prosecuted, not the farmer who ends up with the responsibility of clearing up the pollution.

In a press release on 29 September last year Monsanto, far from being apologetic, celebrated the fact that it had 475 such prosecutions across 22 states, with another 250 in the pipeline. They were all against farmers who had saved seeds. That nailed the lie that GM foods are about feeding the world. They are about biotech corporations seeking to take ownership of the global food chain. We need to protect farmers and the public against such monopolisation and takeover.

The hon. Member for Nottingham, South (Mr. Simpson) has done a public service by securing the debate and saying what he has said. I wholeheartedly agree with him. Does he agree that, given the piranha-like behaviour of the biotechnology companies, it is important that liability issues should be clearly established so that we know what rights farmers and consumers have? If something goes wrong with the environment and there is pollution of a farmer's fields or further on in the food chain—let us hope that there is not—it should be clear who is liable. It will not be the farmer or the consumer, but those who are seeking to introduce alien technology to our countryside.

That is absolutely right. I congratulate the hon. Member for Lewes (Mr. Baker) on the work that he has done on pushing that point forward. We must take the principle that the polluter pays much more seriously. I hope that recent changes in the framework agreed for the European Union may move the debate on beyond producer liability for processed food to liability for primary agricultural produce.

There must be a framework of clear, corporate liabilities for making good the damage that is done. That is one of the cornerstones of the Friends of the Earth's campaign that is being launched today—but before I touch on that, I should like to take the House back a couple of steps.

I am always confident that the Minister will have researched the background to the issues rigorously. However, he may not know that my starting point on the issue probably dates back to my mother. I remember being taken around the supermarkets as a child. I was a willing helper, loading my mother's shopping trolley. That worked well until I was stopped from putting something into the trolley. My mother refused to allow a tin of Argentinean corned beef to cross the front line of her shopping trolley because there was a huge food scare at the time about the safety of Argentinean corned beef.

My mother was an urban warrior, defending her right to feed her children safe food. I suspect that her inclinations are identical to those of most parents today, who make the same presumptions. They will not allow food that they believe may damage their children's health into their shopping trolley. Today's campaign may not be led by my mother, but it is led by the massed ranks of the Women's Institute, by Prince Charles and by the collectivity of environmental organisations around the country. They are telling the major retailers that we intend to hold their boards of directors corporately and personally liable for every aspect of environmental damage or damage to human health that follows from the introduction of GM crops into the environment. That responsibility needs to be locked into the centre of the debate taking place in this country, which also needs to take place in the House.

We have to see where the front line of democracy is being redefined. At times, the democratic debate is led from the House; on this issue, it has been led from outside. In many ways, the defence of democracy has moved from the Bar of the House to the barcode of the supermarket checkout, where the massed ranks of the public will be actively engaged in a process of not consuming food that they believe to be unsafe. I hope that we can persuade the environmental movement to go a step further. As well as defining the liabilities and responsibilities of producers, we could get them to introduce a different form of loyalty card. Every supermarket chain in the land seems to have its own loyalty or reward card. I should like to see the launch of a "loyalty to the land" card that people can hand in at the checkout, notifying the store that the bearer does not wish to purchase any goods with GM ingredients. The right to reject is also the right to choose safely and confidently.

I hope that my hon. Friend the Minister will also want to associate himself with a non-negotiable commitment to a safe environment, a more rigorous scrutiny process and the right to put loyalty to the land and loyalty to the public before the right of corporations to exploit the food chain and to enslave farming communities.

I congratulate my hon. Friend the Member for Nottingham, South (Mr. Simpson) on securing the debate. Without devaluing his other comments, I want to concentrate on the central issue of product liability. I congratulate him on his recent private Member's Bill, the Genetically Modified Food and Producer Liability Bill. We often hear too many speeches of complaint in the House and not enough follow-up action with parliamentarians using this place as a tool to achieve action. This is a working environment. The honour of being a Member of Parliament is a tool to be used. I do not expect that his Bill will make much progress in this Session, but that is not the intention. The Bill is a vehicle that can be ridden through many Sessions.

I cannot comment in detail on the difficulties of the farmers that my hon. Friend mentioned. I saw interviews with some of those farmers on television recently. The situation is not as clear cut as some people might think. It is not the norm for farmers to be able to save any old seed. There are very tight rules and controls governing the use of many seeds under the direction of the consent holders. Those who have researched the technology have intellectual property rights and are entitled to a return. Genetically modified foods are not in a separate category. That applies to many hybrid seeds that farmers want to use and which they have to purchase separately.

The other night, at a meeting in this place, I heard about the way in which seeds have been developed by a technique that I believe is known as mutogenesis. That horrified me far more than anything that I have heard about genetically modified seeds. If the public knew what had happened to seed development over the past 30 years there would be far more debate in this place, because that has happened in an unplanned way, with seeds being bombarded with radiation in the hope of something being developed that might be useful as a crop. We know far more about GM crops and foods than we know about their non-genetically modified equivalents. It is amazing, but most of the foods that we eat have not been subject to toxological examination as GM foods have been.

In response to what my hon. Friend said about potatoes that contain their own pesticides—we may call them biocides—I must make it clear that those potatoes are neither on sale here nor being grown commercially. Yes, technology is being used, and a vehicle may be developed to give us crops that contain their own armoury against the bugs that would otherwise eat them before we human beings get the chance to eat them.

The way in which those products are regulated is crucial because they are both a food and a pesticide at the same time. We must be very careful about how they are put on to the market. Part of our weaponry is to ensure that food is safe and does not contain products harmful to human beings. We examine thousands of products a year, looking for hundreds of different pesticides that may remain in them although they should not be there.

Early tomorrow, we shall publish a survey of pesticide residues in pears, which for the first time will specify brand names. A certain pesticide that is not allowed to be used in this country has been found in large but not harmful quantities in imported produce from Holland and Belgium. We shall give the details of where those products were purchased, both by supermarket and by country. We are policing the system all the time, and that is crucial.

As my hon. Friend said, we must bear in mind the right to know. There have been substantial changes in policy over the past two years, and we now publish veterinary medicine residue surveys, pesticide surveys and chemical contaminant surveys, with products identified by brand name. That puts a much greater onus on the importer and the producer to ensure that they know that their food is absolutely safe, and as clean and pure as can be.

My hon. Friend talked about product liability. He will know that on 3 February, in reply to an intervention on a debate on the same subject, I said to him:

"Civil liability for damage caused by genetically modified organisms is covered by common law developed in the courts. On the basis of common law principles, the firm holding the marketing consent for the GMO crop can be held liable in law for any damages arising from ill effects attributed to that crop. As I have made it clear in a scrutiny Committee upstairs, the Government support the proposal in the European Commission Green Paper on food law to extend product liability to primary agricultural producers."—[Official Report, 3 February 1999; Vol. 324, c. 864.]

Producers and importers of most products have indeed long been liable for any damage caused to consumers by defects in their products, but, under the EC directive on product liability, that is applied only to processed foods, not to primary agricultural products and game.

That has changed since I spoke on 3 February. The recent extension of the scope of the directive means that it now covers the whole food chain. The United Kingdom Government fully supported the move, and the Department of Trade and Industry is taking the lead in implementing the extension. As a result, consumers will be able to sue for damages caused by fresh or processed food without having to prove producer negligence—a small but important step in improving compensation rights for consumers. Those EU rules were adopted on 10 May, and will have to apply throughout the EU by 4 December next year.

I recently gave evidence to the Environmental Audit Committee when it was producing its report on GMOs and the environment, which also considered the issue of liability for environmental damage. Its report notes that, in the United Kingdom, liability for environmental damage is currently governed by the normal rules of tort law.

The issue of liability was considered by the Council of Ministers in Luxembourg last week as part of the debate on the revision of the directive on releases of GMOs. The UK issued a minutes statement calling on the European Commission as a matter of priority to consider, outside the framework of directive 90/220, the feasibility of, and the possible criteria for, a liability regime or regimes to cover the release and marketing of GMOs. In relation to liability for producers and those who own and control the technology, we are therefore tightening up at every possible opportunity throughout the food supply chain.

Two of the other issues are consumer choice and labelling. We are determined to secure consumer choice, which can and has to be achieved in two ways. The first is effective labelling, and the second is ensuring that there are alternatives. That is why we took the initiative a year ago in publishing on our website the details of 60 suppliers of non-GM soya that could be accessed by British food producers.

Within a month of coming to office, we also changed the policy on specifying ingredients on labels, which the previous Government had declined to do. Indeed, they said that there was no need for separate labelling because such foods were neither technically nor nutritionally different.

We introduced the regulations for packaged foods from 19 March. Labels must now conform to them, and it is a prosecutable offence if they do not. We gave the catering industry a six month lead-in, until 19 September, for non-packaged foods. That is the issue that the hon. Member for Lewes (Mr. Baker) raised, and wrote to me about, confusing the issue completely in the process.

On Friday, we shall publish the guidance notes on the regulations. I agree that they come three months down the line, but everyone knew what the plan was. They will now be published and distributed to 500,000 food establishments, so that there can be no doubt about what the rules are.

Propaganda against GM foods is often illustrated by a picture of a tomato, or we might see someone dressed up 6 as a tomato. That is nice and convenient—tomatoes are lovable products—but I must tell the public that there are no GM tomatoes on sale or imported into this country.

rose—

No, it is impossible to give way.

There are only three products that have been regulated and are on sale in this country. The first, as my hon. Friend the Member for Nottingham, South knows, is GM tomato paste based on a variety of tomatoes developed by Zeneca in his own constituency, at Nottingham university. The tomatoes are grown in p California and the tomato paste is imported. The other two products are maize and soya, which are also imported. There are no fresh tomatoes. However, because of misleading publicity, there has been a big drop in the sale of English tomatoes. People think that they are genetically modified, but they are not.

When the propagandists are at work, the points have to be balanced and we have to put the argument across as fairly as possible. We must avoid using misleading propaganda to make our case. There is plenty of evidence on both sides of the argument, for those who want to debate it rationally, and using misleading images to make a point is not the best way.

rose—

I am sorry, but it is impossible to give way now.

There have been several debates in the House on the subject, and there will be more. There have been more Select Committee inquiries, and other inquiries, published on the subject in recent months than on any other subject that I can recall. Nobody has come up with a shred of evidence, medical or scientific, that there is any problem with the safety of GM foods compared with the non-GM alternative. It is not as if we have not looked for such evidence; we have.

We have taken stronger powers, which were published on 21 May, to increase and open up the regulatory process. The new advisory commission on agriculture and the environment, whose members are currently being advertised for, will, I imagine, want to take on board one of the issues connected with the potatoes as early as possible. It will be an overarching body, and consumers will be represented on it, so I expect that it will press the regulatory committee and the scientific committees on whether GM foods should be regulated as pesticides, as a food, or both. The rules are different in each case.

We have taken positive action on a series of issues, and we will not stop there. The setting up of the Food Standards Agency is another way of dealing with food safety. The advertisements for the board and commission have appeared this week, and the Food Standards Bill is now passing through the House.

I congratulate my hon. Friend on making good use of the Floor of the House, and the procedures of the House, to advance his case. In general, we do not disagree with the points that he makes, especially those affecting the safety of food and the information available to consumers.

I rise both in sorrow and in anger to raise on behalf of my constituents the important issue of hospital waiting lists and ward closures at Broomfield hospital in the Mid Essex hospital trust area.

The Labour candidate in the general election campaign in West Chelmsford was a national health service consultant who spent a great deal of time criticising the previous Government's record on health care in West Chelmsford and elsewhere. I vividly recall a leaflet that was distributed, saying that he was proud to support new Labour's early pledges, one of which was to cut NHS waiting lists in West Chelmsford and the rest of the country.

I am devoting this debate specifically to my constituency and its problems. Some of my constituents were convinced by the rhetoric that new Labour would bring a new Jerusalem in health care and that if they turned up at Broomfield hospital for an operation, there would be consultants and doctors waiting at the doors, fighting to be first to operate on them. Sadly, that has not happened.

Over the past two years, the number of my constituents on in-patient waiting lists for 12 months or more has risen from 104 to 1,093. Too many of my constituents write to me to complain bitterly about operations being cancelled—in far too many cases not once but twice—because Broomfield hospital cannot provide the treatment as originally arranged.

There is a problem nationally that will come back to haunt Mid Essex with a vengeance in the current financial year, concerning what has happened to the 13-weeks-plus out-patient waiting list of people who need to see a consultant before even getting on to a hospital waiting list. In March 1997, there were 555 such people in mid-Essex; now the figure is 2,422, and I suspect that it is still rising.

The total waiting list figure has risen from 8,391 in March 1997 to 9,961 this April: a rise of almost 1,600 people. I asked the Minister then responsible, who is now Chief Secretary to the Treasury, what was the agreed waiting list target reduction for Mid Essex for 31 March 1999. His junior colleague the Parliamentary Under-Secretary of State for Health, the hon. Member for Barrow and Furness (Mr. Hutton) replied:

"The agreed waiting list target reduction for the Mid Essex Hospitals National Health Service Trust is to a list size of 9,738 at the end of March 1999."—[Official Report, 2 November 1998; Vol. 318, c. 416.]

Unfortunately, the task force was not even able to ensure that that target was met. In March 1999, just over 200 people above the target were on the waiting list.

I accept that the total waiting list figure, having ballooned from 8,391 two years ago to more than 11,500, has come down to 9,961; but that is still unacceptably high. I even questioned the Prime Minister on the problem. I accept that the right hon. Gentleman is not expected to know the intimate details of every health trust in the country, but my constituents would have found it more helpful if he had said that he would look into the problem and get back to me.

Instead, the Prime Minister, as has become familiar under new Labour, came back with the soundbite on the wider scale, telling us what was happening nationally. Interestingly, he also said:

"we are putting in … more nurses, more doctors and more capital spending—everywhere, including mid-Essex".—[Official Report, 9 June 1999; Vol. 332, c. 648.]

That sounded optimistic. I thought that perhaps the Prime Minister knew something that I did not know that was going to help my constituents.

I tabled a question to the Secretary of State for Health about those

"more nurses, more doctors and more capital spending"

in Mid Essex. His junior colleague the Minister of State, the hon. Member for Southampton, Itchen (Mr. Denham), replied. I hope that I am not harming his career prospects. He said that capital spending in Mid Essex was £12 million in 1997 and £7.3 million in the current year. To me, that is a £4.7 million cut; but the Prime Minister considers it an increase. I look forward to his explanation when he replies to the letter that I have sent him.

More perplexing was the question about more doctors and nurses. The Minister gave me a figure for 1997, but he told me that the data for following years were not available because they had not been published and that data for 1999 had not yet even been collected. Again, I am puzzled about how the Prime Minister could tell me that there were more doctors and nurses; again, I look forward to his reply.

Part of the problem—I do not blame the Government—is the way in which Mid Essex and North Essex were funded under the old resource allocation working party system, with a disproportionate amount going to the east end of London at the expense of mid-Essex. That was unravelled in the early 1990s when my right hon. Friend the Member for South-West Surrey (Mrs. Bottomley) changed the funding system, and both the previous Government and the current Government in their first year recognised the problem by giving North Essex and, in particular, Mid Essex larger increases in funding.

The trouble is that the area never caught up with what it would have received if we had never had RAWP. Unfortunately, the previous Minister of State fine-tuned the funding formula for this and the previous financial year in a way that cost Mid Essex money. I know that the Minister wants to alleviate my constituents' problems. North Essex and Mid Essex urgently need more money to deal with what is clearly a problem of significant proportions that is causing undue suffering and distorting the service. I urge her to reconsider the changes in the funding formula and find ways of providing extra resources to an area that has historically had problems with financing because of its proximity to London.

Those problems are bad enough, but, just over a week ago, it emerged that the health trust is £2.4 million, and the authority just over £10 million, in deficit. One way in which they are trying to overcome that problem is by closing three wards at Broomfield hospital, saving £1.75 million; the rest is to be saved by improving management and bureaucracy. They are seeking to make those savings partly by removing about 80 bed blockers from Broomfield hospital. I fully endorse such action, as it is ludicrous for people to remain in hospital when there is no clinical or medical reason for them to do so. Not only is keeping people in hospital expensive but their quality of life deteriorates.

I had assumed, however, that those people would either be going home, with a care package, or into residential care. I was therefore surprised to hear that those options have not been chosen, but that most of those people will be going to St. Peter's hospital and to St. Michael's hospital—thereby incurring costs to the health authority and the health trust, so that the savings may not be as great as anticipated. Moreover, as social services do not have enough money to deal with the problem, I fear that closing the wards will prove to be a one-off and short-term solution, and that, perhaps in 12 months' time, we shall be confronted with another problem of bed blocking, when we shall not again have the option of closing wards to overcome a short-term financial deficit.

Similarly, when there are so many problems with people waiting for treatment, it is crazy that three wards—84 beds—should be taken out of the hospital system and left empty and redundant so that they cannot be used to help overcome the problems facing my constituents and those of other hon. Members in the area.

I therefore urge the Minister—who is a perfectly reasonable person—to recognise that there is a specific problem in mid-Essex. I ask her to recognise, too, that my constituents do not deserve the delays, heartache and problems that they are suffering as a result of having to wait ever longer for hospital and out-patient treatment, or the misery and shock of operations cancelled at the last minute—sometimes after they have already gone to hospital psychologically prepared for their operation.

I urge the Minister yet again to persuade the NHS executive to re-examine the problem in mid-Essex; to seek to direct more money into North Essex and Mid Essex to bring down waiting lists; and to ask the hospital to justify fully why it is closing the wards, whether there is a better alternative for achieving the same aim, and what will happen to staff working in those wards, who must be extremely concerned and worried about the consequences of the actions on their role in the health service.

I thank my hon. Friend the Member for West Chelmsford (Mr. Burns) for allowing me to contribute very briefly to the debate. My constituency of Maldon and East Chelmsford is covered by the Mid Essex Hospital Services NHS trust, and, therefore, my constituents are experiencing the same problems and difficulties as those suffered by my hon. Friend's constituents.

I also congratulate my hon. Friend on securing this debate, and pay tribute to him for the assiduous way in which he has pursued the matter in recent months. He and I both know, from our postbags and surgeries, the distress being caused to an increasing number of our constituents because of the lengthening time they have to wait for operations. His efforts, however, have forced the Government and the hospital trust to publish the real figures, showing the huge increase in the number of people in mid-Essex who have to wait for an operation.

As my hon. Friend said, to be fair, there has long been a problem of underfunding and long waiting times in the North Essex health authority area. Nevertheless, the problem was being dealt with by the previous Government, who, in successive years, awarded North Essex an above average real-terms increase. Consequently, waiting lists fell to historically low levels. However, the progress has been reversed, and the figures quoted by my hon. Friend graphically demonstrated the huge deterioration in the situation in the past two years.

Both my hon. Friend and I have many cases of individual constituents who had been given operation dates, which were months in the future, but who—at the last minute, when the date had finally arrived, and sometimes after they had gone to the hospital—discovered that the operation had been cancelled. Subsequently, they were told that they would have to wait still more months before the operation could be rescheduled.

The Government were elected on a pledge that waiting lists would fall, but the fact is that, in mid-Essex, they have got steadily worse.

In December 1998, one of my constituents, who lives in Great Baddow, wrote to me, saying that her husband was house-bound and facing a 12-month wait for a quadruple bypass operation. She wrote:

"I know we don't count for much in the system of things but we are as important to our families as you are to yours … Please keep the promises that are made. I don't want my husband to die waiting."

For that one constituent, I could name another 100 who have written to me to describe similar cases.

Our constituents in the mid-Essex area deserve more from the Government. I ask the Minister now to spell out exactly what action the Government are planning to take to ensure that the situation is not allowed to continue.

I congratulate the hon. Member for West Chelmsford (Mr. Burns) on securing this debate, on a matter in which he has taken an active interest. I am sure that his constituents appreciate his concern.

I should begin with the figures, as they were one of the issues central to the hon. Gentleman's concern. At the time of the general election, a total of 8,391 people were waiting for in-patient treatment at the Mid Essex Hospital Services NHS trust. Mid Essex was not immune from what my right hon. Friend the Secretary of State for Health has referred to as the supertanker effect, and, in the following year, the number rose to 8,360. Since then, the number has dropped, and, at the latest count, stood at 9,961.

I think that the Minister has given the wrong figure. When the previous Government left office, the figure was 8,381; in the following 18 months, it rose to just over 11,500, but then dropped to 9,967.

I apologise to the hon. Gentleman; I misread the figure. To be absolutely clear, at the previous general election, the figure was 8,391. Subsequently, it rose to 11,360. At the last count, it had fallen to 9,961.

As the hon. Member for West Chelmsford will be aware, waiting lists have shrunk across the country. However, the situation in Mid Essex differs from the picture nationally in that it has more people waiting than it did when the Government took office—which is a matter for concern. The case cited by the hon. Member for Maldon and East Chelmsford (Mr. Whittingdale) provided a clear illustration of why reducing both waiting lists and the suffering that they cause is our No. 1 priority.

Neither the trust's local management nor the NHS executive are willing to tolerate the situation. However, as the hon. Member for West Chelmsford made it clear, the trust has financial problems. At the end of the previous financial year, its deficit was £1.8 million. The trust has now identified savings of £1.7 million, and, this year, is planning for a deficit of £1.6 million. The trust has robust plans for next year, including further savings of £700,000 in management costs, and it expects to achieve financial balance.

The eastern region of the NHS executive has been deep in discussion with the trust about implementation of its recovery plan. Today, the regional office, the health authority and the local trust are meeting to agree the plans. There is a total commitment to achieving those plans without adversely affecting services to future patients. To that end, a group—comprising local primary care groups and social services, as well as the health authority and trust—has been formed to contribute to the plans.

That brings us to the question of ward closures. As the hon. Member for West Chelmsford knows, part of the savings central to the trust's plans arise from its proposed switch of services from St. John's hospital to Broomfield hospital and the accompanying closure of three wards at the Broomfield site. We recognise that waiting lists, budgets and ward closures are obviously interdependent.

The trust's proposals entail a complete relocation of services from St John's to Broomfield by 2002, and the sale of the St John's site. The trust believes that providing all its acute services from a single site will deliver better and safer care to all its patients, and achieve significant savings.

Is the Minister aware that one of the wards being closed was refurbished last year so that it could accommodate some of the services transferred from St. John's?

Clearly, the trust is making these proposals because it judges that they constitute the best use of available resources, and that they will protect standards of patient care. I expect that the trust took the hon. Gentleman's point into consideration when it made the proposals.

The first stage is the transfer of 86 patients from Broomfield to settings that are deemed to be more appropriate to their needs. Some patients will go home and will be cared for in the community: others, as the hon. Member for West Chelmsford said, will go into alternative community hospital care. That will allow three wards to be closed, saving £900,000 this year and twice that amount in a full year, thereby freeing up resources for investment in other, locally based services.

Perhaps naturally, the hon. Member for West Chelmsford jumps to the conclusion that fewer wards and beds will mean longer waiting lists. That is not what the trust expects. It believes that, because the beds are blocked now, their removal will not have an impact on the number of people that the hospital can treat. However, the onus is on the trust to make that case in the consultation that will follow as the strategic plan develops.

No reundancies are planned as a consequence of the closure, although the trust should be able to cut back its use of agency staff, so nurses on those wards could instead treat patients who need to be in hospital. The trust also expects to move its cardiac services to better facilities, to expand renal services so that fewer patients have to travel to London for treatment, and to increase its capacity to treat patients on a day-care basis. The trust treats fewer patients on that basis than other comparable trusts, and we hope that the number so treated will be increased.

The trust believes that, even after the proposed reduction, it will be better placed to meet the needs of the local population and it intends to refurbish the wards as part of its longer-term strategy.

I believe that I have given an accurate summary of the trust's plans, which I understand have the support of Essex social services, the health authority, other local trusts and primary care groups. As the hon. Member for West Chelmsford may know, the community health council is reserving its judgment on the immediate ward closures until it is convinced that the plans are achievable. In the interim, it has agreed with the health authority to hold a public meeting in Chelmsford on 21 July, when all the agencies will explain their plans to the public. In addition, the health authority is planning a full public consultation on the whole strategy later this year.

With that in mind, I hope that the hon. Member will understand if I do not give the plan the ministerial seal of approval—or disapproval—here and now. What I can promise him and his constituents is that, if called on to arbitrate, my right hon. Friend the Secretary of State will be guided by the one principle that always guides him in these matters—the best interests of the patients, and their care.

I mentioned the financial problems facing the trust. It might be relevant for me to say something briefly about the financial support that this Government have made available to the North Essex health authority, which largely funds the trust.

Two years ago, North Essex health authority was 3.7 per cent, or £13.8 million, below its capitation target. Today it is only 0.7 per cent, or £3.4 million, below target. This year alone, it received a cash increase of £31 million, and a real-terms increase of £18.7 million. The Mid Essex trust has also benefited directly from an £845,000 share of the accident and emergency modernisation fund. I assume that the hon. Member for West Chelmsford will welcome all that. That funding and the trust's own recovery plans are freeing resources for practical action to help patients and drive down waiting lists.

The trust is now putting together a scheme for the new day-care centre to which I have referred. It expects the centre to make a real contribution to reducing the number of people waiting for elective surgery without the need for additional beds. I wish to make it clear that neither I nor any of my colleagues underestimate for a moment the sheer misery caused by cancelled operations.

Meanwhile, the local primary care groups have been studying the patterns of referral by general practitioners. They have produced guidance for GPs that is being piloted by the local primary care group and acute hospitals to help improve the consistency and appropriateness of referrals.

The regional office of the NHS executive will continue to monitor the trust's waiting list performance, and it has been helping to identify where bottlenecks may cause delays in getting patients treated. The local waiting list task force has also been actively working with the trust.

This debate is about one NHS trust, but my response would not be complete without some reference to the national picture and what the Government are doing to cut waiting lists in the Mid Essex trust area and the rest of the country. I do not want the hon. Member for West Chelmsford or anyone else to be in any doubt about the priority that the Government and the NHS give to beating waiting lists.

Through a stupendous effort, the NHS, supported every inch of the way by the Government, has delivered a record reduction in waiting lists to below the level inherited from the previous Government. That is the action that has been taken to deliver our pledge to bring lists down by 100,000 from the level that we inherited. We have made it clear that no patient should have to wait more than 18 months for hospital treatment once on a waiting list, and I am glad to say that the Mid Essex trust has consistently delivered on that.

We have often been told that it was wrong to concentrate on the length of lists, and that we should care only about waiting times. We always believed that both could be shortened: now, average waiting times are down to below three months and are below the average that we inherited. The hon. Member for West Chelmsford must accept that, nationally, waiting times for patients waiting 12 months or more are down by one third.

I mentioned that one of the fundamental problems facing the Mid Essex trust is the number of patients ready to be discharged but waiting to be given social services support. We are taking big steps in improving joint working between health and social services, and taking action to get rid of the constraints in the existing system to providing the right services in the community.

Finally, I repeat my earlier assurances to the hon. Member for West Chelmsford and to the people in the Mid Essex trust area. The trust is expected to bring waiting lists down further, and will get the advice and support that it needs. We are determined that the hon. Gentleman's constituents and people throughout the country will enjoy the benefits of a new, modern and dependable NHS.