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Commons Chamber

Volume 398: debated on Wednesday 29 January 2003

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House Of Commons

Wednesday 29 January 2003

The House met at half-past Eleven o'clock

Prayers

Mr Speaker's Absence

The House being met, the Clerk at the Table informed the House of the absence of MR. SPEAKER from this day's sitting, pursuant to leave given on 28 January.

Whereupon, SIR ALAN HASELHURST, THE CHAIRMAN OF WAYS AND MEANS, proceeded to the Table, and after Prayers, took the Chair as DEPUTY SPEAKER, pursuant to the Standing Order.

Private Business

Transas Group Bill

Order for Second Reading read.

To be read a Second time on Wednesday 5 February.

Oral Answers To Questions

Deputy Prime Minister

The Deputy Prime Minister was asked—

Grant Settlement

1.

When he will announce the Government's response to the consultation on the provisional grant settlement for 2003–04.[93766]

We will be publishing our final proposals on Monday 3 February.

That means that there will be just two days before the debate on those important orders, which is unacceptable and typical of the Government's arrogance. Is the Minister aware exactly how angry the people of Dorset are about the vicious attack on their standard of living in the proposed settlement? Does he realise that pensioners in Dorset will receive an increase of £1.95 a week in their state pension but, because of the Government's policies, will be expected to pay over £4 a week in council tax increases? Is that not—

I am a little surprised that the hon. Gentleman has forgotten the timetable that has applied for many years, and used to apply when his party was in government. He will realise that local authorities need certainty to plan their budgets, so there is a timetable which involves a provisional settlement published in early December, representations in December and January, the publication at the beginning of February of the Government's proposals, a debate in the House, then implementation by local authorities. That timetable has existed for many years, so his anger is entirely synthetic.

As for the figures, Dorset is once again getting a very good settlement. Last year, it had a 6.7 per cent. increase, despite which it raised council tax by 9 per cent. If there is scaremongering about high council taxes, the people that the Opposition should be looking at are the councillors of Dorset county council, not the Government.

Will my right hon. Friend accept thanks from Government Members for his effort to try to regulate local authority expenditure? Does he also accept that the hon. Member for Christchurch (Mr. Chope) belonged to a Government who devastated that expenditure? When looking at the consultation and the response from local government, will he take into consideration concerns about high council taxes in some areas?

I thank my hon. Friend for his kind remarks about our efforts to ensure a fair settlement and consult widely with local government. This year, local authorities throughout the country have got a settlement that gives them an above-inflation increase. Every authority has had such an increase which, we believe, makes it possible for them to set a reasonable level of council tax and maintain council services. We hope that they will do so.

The Minister has just said that each authority has received an above-inflation increase. At the same time as the provisional announcement, the Minister for School Standards, the hon. Member for South Shields (Mr. Miliband) sent out a letter promising 6.6 per cent. for schools.

What advice can the right hon. Gentleman give to those 13 local education authorities where the change in grant is insufficient to meet the demands of the Secretary of State for Education and Skills? Should authorities, the day after the Climbié findings, take money away from vulnerable children or the care of the elderly, or should they take the stealth option and increase council tax on the backs of hard-working low-income families?

First, my advice to all local authorities is that in the six years in which the Government have been in power there has been a 25 per cent. increase in real terms in grants for local authorities, compared with a 7 per cent. cut in real terms in the last four years in which the Opposition were in power. Local government is therefore getting a better settlement and has better prospects. I have met a number of authorities that have difficulty meeting their passporting obligations, as has the Under-Secretary of State, Office of the Deputy Prime Minister, my hon. Friend the Member for Shipley (Mr. Leslie), and we have advised all of them to talk to our colleagues in the Department for Education and Skills, who have indicated willingness to be flexible where there are genuine pressures. However, we want money to be transmitted to schools to improve education, and we want continued improvement in social services. We want to give local authorities the opportunity to develop and improve services on the basis of the real increases in grant that the Government are delivering.

I am grateful to the Department for receiving a deputation from my local authority, Barnet. However, when my right hon. Friend is putting together the final draft, could he bear in mind the special circumstances facing us? The impact of the census and the new scheme has had bizarre consequences, and our education budget will be under considerable pressure as a result.

We have given careful consideration to the representations that we have received from many local authorities, including my hon. Friend's authority. We will make clear our conclusions in the announcement on 3 February. Some areas have experienced difficulties because of census changes relating to previous mid-year estimates, but the floors ensure that every authority is protected against what might otherwise be a sharp change in grant entitlement. The floor ensures that every authority has an increase at least above the level of inflation.

Bed Blocking

2.

What discussions he has had with the Department of Health on the impact of bed-blocking charges on local authorities. [93767]

The Minister for Social Exclusion and Deputy Minister for Women
(Mrs. Barbara Roche)

Ministers and officials in the Office of the Deputy Prime Minister regularly discuss matters of mutual interest with their colleagues in the Department of Health.

I thank the Minister for that response. I am sure that those discussions will have revealed that many local authorities work well with the local NHS trust, as mine does. However, bed blocking happens for complex reasons. Will the Minister confirm that, in Sweden, where bed-blocking charges have been introduced, they have not got rid of bed blocking?

I must tell the hon. Gentleman that we are introducing the system in our own way. He is right that this is a very important matter. In his area, the discharge rate for the Merton and Sutton primary care trust is above the national average. He will know what an issue that is for the 5,000 delayed discharges that we have every day. We are confident that the measures that we have taken, plus the extra resources that we have made available, will deal with the problem.

Does my hon. Friend agree that one cause of bed blocking is that people on discharge from hospital have too few opportunities to benefit from packages that would allow them to be supported at home? Does she agree that most people, faced with the choice after hospital of going home or going to a residential home, would prefer to go home? Will she discuss with her colleagues in local authorities ways to give people increased opportunities to be supported at home rather than go into care?

I absolutely agree with the important points that my hon. Friend makes. From my own experience as a constituency Member, I know that what she says about people's preferences is true. That is why we have made available to local authorities an extra £100 million for each full year that the new scheme is in operation. I shall certainly make sure that the Department have the discussions that my hon. Friend suggests, so that we can ensure that those important opportunities are available for our older people.

Has the Minister had time to read the Hansard report of Monday's Second Reading of the Community Care (Delayed Discharges etc.) Bill in another place? Does she realise that the Bill is virtually friendless there, as it was here? Will she use her influence with the Secretary of State for Health to withdraw this misconceived piece of legislation?

I have not had a chance to read that report, but I shall make sure that I do. Real issues have arisen to do with the different roles and responsibilities of acute hospital trusts and local authorities. We believe that the new arrangements, in addition to the new resources that we have put in, will deal with the matter. Taken together with the better working relationships between local authorities and hospitals, I am confident that they will lead to a great improvement.

Council Tax (Lancashire)

3.

What steps his Department has taken to respond to representations from Lancashire county council on the expected level of council tax in Lancashire in 2003–04. [93768]

The Parliamentary Under-Secretary of State, Office of the Deputy Prime Minister
(Mr. Christopher Leslie)

The level of council tax in Lancashire is a matter for the local authorities concerned.

That was a complacent answer, to say the least. The Minister for Local Government and the Regions said a moment ago that the Government had been generous, but Labour-controlled Lancashire county council says that it does not have enough money and is trying to live within its means. Will the Minister provide my constituents with a cogent explanation of why they face a council tax increase that is three times the rate of inflation? [Interruption.]

Order. Before the Minister responds, I must tell the House that there is far too much conversation going on, and that that is making it very difficult for these exchanges to be heard clearly.

I suspect that the right hon. Gentleman should wait until the county council sets its council tax.

Lancashire county council is expecting to get a 4.8 per cent. increase in grant. Fylde district council in the right hon. Gentleman's area is pencilled in for an increase of 8.8 per cent., and Wyre district council for 12.8 per cent. As far as the Government are concerned, the grant support is there. There can be very few excuses for excessive council tax rises.

Does my hon. Friend accept that Lancashire county council is clearly saying that 4.8 per cent. is not sufficient, and that it has had a raw deal in comparison with other shire county councils? It will have either to cut services or to make an unacceptably high council tax increase.

In the context of the history of local government settlements, 4.8 per cent. for Lancashire is very generous indeed—well above the rate of inflation. I have never known a council say, "Thank you for the wonderful grant increases," but I think that that is a reasonable settlement.

Fire Service

4.

What estimate he has made of changes in the number of firefighters in urban areas up to December 2006. [93769]

The independent review of the fire service, led by Sir George Bain, set a framework for the future of the fire service. Bain said that changes in the number and deployment of firefighters should be for the fire authorities and the chief fire officers to negotiate and consult on locally. The Government's actuarial report has stated that more than 20 per cent. of the existing force could retire in the next six years, and Bain has made it clear that there should therefore be no need for compulsory redundancies. Indeed, over the last 10 years the number of firefighters in England and Wales has been reduced by 5 per cent. without compulsory redundancies, under the normal negotiating procedures.

I thank the Deputy Prime Minister for that reply. He will know that many retained firefighters and retained stations are based in urban areas but are also responsible for providing critical cover in rural areas further afield. Will he join me in congratulating all the retained firefighters who have continued to provide emergency cover when the regulars have been on strike? Moreover, now that the review is under way, can he provide some assurance that retained firefighters and stations will not suffer under the review because of the actions of the regulars?

As the hon. Gentleman attended my statement yesterday, I think that he will remember that I made it clear that we were expressing our appreciation of the armed forces, the police and the retained fire workers who made the choice to continue the service. Some of the retained fire workers are members of the Fire Brigades Union as well; they belong to two different organisations. Questions have been raised about their future role in negotiations. Bain refers to that, and we will cover all these matters in the coming White Paper.

May I ask my right hon. Friend to reconsider any threat to impose a settlement on the present dispute? We all want it resolved through ACAS, but we all still feel that firefighters are undervalued and underpaid.

If my hon. Friend feels that firefighters are justified in asking for a 40 per cent. increase—[Interruption.] Their demand at the moment is for 40 per cent., and I have to say time and time again that, for the reasons that I have given, I do not think that we can afford 40 per cent. The House must make its judgments about these matters—[Interruption.] That is totally untrue; Members did not get 40 per cent. It is a lie that is put on the banner outside a number of fire stations, and I am surprised if my hon. Friend the Member for Blyth Valley (Mr. Campbell) wants to repeat it.

Leaving that aside, however, the question posed to me is whether the actions that I proposed yesterday will have the effect of imposing conditions on firefighters. All that I seek to impose is negotiations. My hon. Friend the Member for Strathkelvin and Bearsden (Mr. Lyons) said that ACAS should be involved in the negotiations, and ACAS has laid down that nothing is ruled in and nothing is ruled out. Both parties should go to those negotiations, but the Fire Brigades Union has said, "No, we're laying down conditions about jobs and fire stations"—assumptions that it has made before negotiations begin. I am saying—and I think that this is the view of the House—that negotiations should start through ACAS, but also that the House may have to take powers to make it clear that the negotiations should continue, but are not unlimited in time, because it has already been 10 months, and longer than that is not required to get a successful conclusion to the negotiations.

Like the Deputy Prime Minister, we believe that fire service modernisation means better fire prevention, not simply job cuts. Given that there are likely to be job losses in some areas, why does he now make a proposal that would remove any legitimate role for a trade union in negotiating the solution, and also remove the independence of fire authorities? Would it not be better for him to call on all sides to commit themselves not just to negotiation at ACAS but to binding arbitration at ACAS, linked to Bain's financial and modernisation framework?

I assume from the hon. Gentleman's last remarks that binding negotiation means that we compel the firefighters to accept those conditions. My proposal does not do that at all. In fact, it would be necessary to take legislation through the House, which, presumably, would be seen as anti-strike legislation. If that is the policy of the Liberals, let them get on with it; it is not our policy.

Yes, of course we would like the unions and the employers to come to an agreement. I am making it clear that they should do in negotiations at ACAS. The difficulty comes if both parties refuse to negotiate. What I am facing is deadlock; I have to find some kind of solution that gets them back to the negotiating table. I believe that those negotiations should take place at ACAS. ACAS has made it clear that no one has to comply with any conditions whatever, and they can go into negotiation. Start negotiations: that is the best way to settle industrial disputes.

Can my right hon. Friend confirm that any changes in the placement and priorities of fire service staff will be the subject of local consultation before being approved?

The Deputy Prime Minister did not answer the question put to him by my hon. Friend the Member for Rayleigh (Mr. Francois) about retained firefighters. The retained firefighters are the lowest-cost part of the fire service so there is the least scope for savings there. This is not just about economics; it is about natural justice. The Deputy Prime Minister has quite properly praised those people who have protected the safety of the country throughout the strikes: the armed forces, the police and the retained firefighters. Will he guarantee today that their public service will not be punished by their losing their jobs at the end of this negotiation?

I am pleased to hear a straight answer from the right hon. Gentleman. It is a novelty. Yesterday, he announced his intention to take powers in order to carry through the changes in job conditions and pay and, of course, the reduction in numbers of personnel in the fire service. In the event that he takes those powers and exercises them and the Fire Brigades Union stays on strike, what will he then do?

I do not accept for a moment that I would come to some decision as to what will be imposed upon them. I do not have the authority of the past to be able to do that, and I would not want the right hon. Gentleman to suggest that that is the solution, as he did in the earlier part of his question. The question is where we get the parties back to negotiations. I reaffirm today what I told the House yesterday: that if negotiations fail and the deadlock continues, I would come to the House and ask for powers for compulsory arbitration. The Liberal spokesman often says, "Let us have compulsory arbitration," as if somehow one could force them to accept a deal. I think that there are real difficulties about that, but I want the negotiations to start through ACAS, and I am giving notice that if they do not I will come to the House to ask for the powers to impose a solution.

In reply to my hon. Friend the Member for Bridgend (Mr. Griffiths), the Deputy Prime Minister said that the existing consultation arrangements for the alteration of fire cover and personnel would be retained. Can we assume from that that no legislative proposals will be brought to the House that will alter the existing statutory arrangements, which do provide for such consultation? Yes or no?

If my hon. Friend had heard the earlier replies he would not be asking yes or no, because I have made it very clear to the House that I am going to repeal section 19 of the Fire Services Act 1947, as Bain recommended, and I intend to do so. That would not take powers away from the local area; I am reinforcing the powers of the local area, taking away my right, as central Government, to have the final decision. I do have other powers in the Bill to use if I want to and it is a serious matter in those areas, but I am decentralising that power down to local areas. I thought that that was what my hon. Friend wanted, and that is what I intend to do.

Grant Settlement (Havering)

5.

If he will make a statement on the grant settlement for Havering.[93770]

The Parliamentary Under-Secretary of State, Office of the Deputy Prime Minister
(Mr. Tony McNulty)

I am afraid that I shall have to disappoint the hon. Lady. There will be no separate statement on the grant settlement for Havering. As the Minister for Local Government and the Regions has already said, the provisional figures were announced on 5 December. The final settlement will be produced on 3 February for debate on 5 February. The Under-Secretary of State, Office of the Deputy Prime Minister, my hon. Friend the Member for Shipley (Mr. Leslie), has met a delegation from Havering and taken their views into account during the consultation process.

The Minister will be aware that Havering is acknowledged to have received a perversely low settlement for many years, which gave rise to a 12.5 per cent. increase in council tax last year. Under the draft settlement, Havering has received the lowest increase, 3.5 per cent., which has sent its finances into crisis. Will he agree to re-examine Havering's financial crisis before the final settlement is announced on 3 February?

As I said, the consultation period has already closed. Over the past four years, Havering has received increases of almost 5 per cent. year on year. Council tax is a matter for the minority Tory administration. In the equivalent last two years of the Tory Government, Havering's rises were, respectively, minus 1.8 per cent. and 1.2 per cent. —at a time when, I believe, inflation was slightly higher.

Local Government Finance

6.

If he will make a statement on the future of floors and ceilings in the proposed new local government funding system. p[93771]

The Parliamentary Under-Secretary of State, Office of the Deputy Prime Minister
(Mr. Christopher Leslie)

The Government expect the mechanism known as floors and ceilings to be part of the local government funding system for the foreseeable future.

Although many Labour Members believe that the new system being introduced is far fairer, we are concerned that the floors and ceilings mechanism will result in Westminster council continuing to receive £30 million more than it should, while deprived local authorities such as St. Helens receive £2 million less than they should. Will the Minister re-examine that aspect of the changes?

I hear what my hon. Friend says, but floors and ceilings provide a necessary degree of stability and security for all councils. They ensure that everyone receives a real-terms grant increase and they are an integral part of the grant distribution system. Last year, we promised to protect against rapid reductions in population and the like, and it is right and fair that we honour that commitment.

Is the Minister aware that as a result of the proposed changes, Essex county council will get one of the three worst settlements, with an increase that is £40 million less than it would be if it received the average percentage increase? Will he reflect on his meeting with the leaders of Essex county council and try, before the final decision is taken, to persuade his right hon. Friend the Deputy Prime Minister to come up with a system that is fairer to Essex and does not mean that Essex has to pay for his party's heartlands in the midlands and the north?[Interruption.]

Order. I say again to the House that there is far too much noise. We should be able to hear both the hon. Member putting the question and the Minister replying.

The hon. Member for West Chelmsford (Mr. Burns) seems to think that there is a north-south divide in this respect. Members from the south think that the north is gaining, and Members from the north think that the south is gaining. In reality, all councils, including Essex, will get a real-terms increase in grant. I have met councillors and officers from Essex, which is to receive a 3.7 per cent. increase in grant, above inflation.

Urban Summit

7.

If he will make a statement on the outcome of the recent urban summit in Birmingham. [93772]

The 1,500 people who attended the summit came from all walks of life at home and abroad in both the public and the private sectors. They emphasised the need to exchange best practice, simplify and clarify policies and programmes, and engage the community more effectively to establish more sustainable communities. I hope to include some of the lessons from the conference in next week's statement on communities.

I thank my right hon. Friend for his answer. Many cities such as my own, Sheffield, are experiencing a building boom in the centre, as people move to live in the city. However, that throws into sharp relief estates on the outskirts of the city, such as Gleadless valley in my constituency, where although quality of life is improving, there is still some way to go. How will the results of the urban summit help such estates?

The urban summit made it clear that there are different problems in different areas. The mayor of Milwaukee in the United States talked about how the decline in urban areas had led to many people moving to live outside such areas, which gave rise to a different range of problems. I hope that next week's statement on sustainable communities will contain some ideas about how we can learn from best practice in other countries to improve our communities.

Although I welcome the Deputy Prime Minister throwing his considerable political weight behind the important issue of urban renaissance, may I ask him to call another summit—a rural summit, perhaps in Devon—to examine the also important issue of the crisis in affordable housing to buy and to rent in many parts of rural Britain?

The hon. Gentleman will be aware that my previous Department produced urban and rural White Papers, and the conference covered both of those aspects. We are thinking about having a separate rural conference to meet some of the demands. In my statement on the right to buy, I announced that I would make it much easier for people in the areas to which he refers to get affordable homes.

Prime Minister

The Prime Minister was asked

Engagements

If he will list his official engagements for Wednesday 29 January.

This morning I had meetings with ministerial colleagues and others. In addition to my duties in the House, I will have further such meetings later today.

With the stock market at half the level it was five years ago and a number of occupational pension funds being closed to new members, does the Prime Minister regret his Chancellor's raid of £25 billion on pension funds, and will he apologise to those who have been so cruelly punished by it?

First, stock markets have fallen across the world, as the hon. Gentleman knows. Secondly, as a result of the Chancellor's management of the economy, we have the lowest inflation and interest rates that we have had for decades. We have the highest employment that this country has ever had and the lowest unemployment of any major country. Compare and contrast that with 3 million unemployed under the Conservatives.

Will the Prime Minister join me in expressing profound sympathies to the family of my constituent, Tasawar Hussain, who was gunned down by armed robbers on Monday as he tried to intervene in a robbery? Tasawar was nothing short of a hero. Does the Prime Minister recall that, early in the new year when young girls were gunned down and killed in Birmingham, he promised to stamp down on gun crime? What progress has been made on that?

I am sure that the whole House would wish to express our deep condolences to the family of my hon. Friend's constituent following the appalling circumstances of the tragic and wicked murder of his constituent. The Criminal Justice Bill will include a measure that will impose a mandatory five-year sentence for the possession of illegal firearms. I hope that the whole House supports that.

May I join the Prime Minister in paying tribute to the constituent of the hon. Member for Bradford, West (Mr. Singh), who was, as the hon. Gentleman said, nothing less than a hero?

On Monday, the Secretary of State for Defence said that the evidence of links between Saddam Hussein and al-Qaeda was "not strong." However, last night, President Bush said that Saddam Hussein aids and protects terrorists, including members of al-Qaeda. This morning, the Prime Minister's official spokesman appeared to agree with the President and disagree with the Secretary of State for Defence. Does the Prime Minister agree that those who believe that the threat from Iraq must be confronted and not ignored must speak with a clear and consistent voice?

First, I answered questions on this in detail at the Liaison Committee. I have explained that we do not know of evidence linking Iraq to al-Qaeda in circumstances concerning the 11 September attack. However, I chose my words very carefully in front of the Liaison Committee: we do know of links between al-Qaeda and Iraq; we cannot be sure of the exact extent of those links. Every member of the Government has adverted to that.

The British people know that Saddam is an evil dictator. They know that he has attacked his neighbours and gassed his own people. They know that he is responsible for countless human rights abuses. Is it not also the case that they want to know more detail about the potential threat that he poses to this country and our citizens? President Bush is, as he said last night, preparing to reveal more of what his intelligence services know about Saddam's weapons programme and his terrorist links. Will the Prime Minister also publish further information? Does he accept that the British people deserve to be given the fullest possible information about the scale and nature of the threat that we clearly now face?

Of course we have to give people the fullest possible information, which is why we published the dossier a few months ago. It is extremely important that people understand exactly what the threat is. If Saddam Hussein is allowed to carry on developing weapons of mass destruction—chemical, biological and, potentially, nuclear weapons—he will be a threat not just to his own region, but to the world. This country's security interests are intimately concerned with that matter. However, there is no point in trying to pose differences between, for example, ourselves and the United States when the purpose of what we are doing at the moment is to unite the international community around the United Nations' position as set out in resolution 1441, and to make sure that that resolution is then implemented.

Leaders of London's Moroccan community have written to me to express their deep regret at the murder of Stephen Oake and at the terrorist threat, and also their concern that all Muslims, Arabs, refugees and members of the north African community risk being tarred with the same brush of illegality and terrorist threat. Will my right hon. Friend take this opportunity to send the strongest message that a reasonable concern for security cannot be an excuse for the hysteria that is leading to racial abuse and attacks, and causing members of that community to say that old and young are beginning to live in fear?

First, we should make it clear that this is a tolerant country, we are proud that it is a tolerant country, and we never want it to be otherwise. Secondly, my hon. Friend is right to point out that the vast majority of people who claim asylum, for example, are not terrorists or even suspected terrorists. There is a problem with asylum. It is important that we deal with it, for the reasons that have been given, but it is also important that we make it clear that the number of people who come through that route and who are terrorists is small. It is precisely in order to deal with those that we introduced the Anti-terrorism, Crime and Security Act 2001 after 11 September, which gives us for the first time the power to detain suspected terrorists without trial. That is the reason for the arrests that have taken place in Manchester, London and elsewhere. We must balance the tough measures necessary to deal with the threat, and at the same time maintain the tolerant society in which we all want to live.

Returning to the issue of Iraq, can the Prime Minister confirm that the British troops deployed in the Gulf will be integrated into the American command and control structure?

The precise command and control structure is still being worked out. Of course we will co-operate very closely with the American troops—it would be bizarre if we did otherwise. That is what we did to such good effect in Afghanistan and also in Kosovo.

Is it not therefore the case that if, in practical terms, British forces are to be under American command and control, the decisions in all this will ultimately be taken by President Bush?

No, that is not right. The decisions whether to commit troops on behalf of this country are taken by our Government, our House of Commons, and our country. [Interruption.] We are trying to put the maximum pressure on Saddam to comply with the UN mandate. We had a report on Monday—[Interruption.] If hon. Members will allow me—we had a report on Monday from Dr. Blix, the head of the UN inspection team, who reported to the Security Council that Saddam was not co-operating fully with the inspectors. I should have thought that the right hon. Gentleman, along with other hon. Members, would study that report and say that it is right that we regard Saddam as a threat for the reasons that Dr. Blix sets out, and it is right that we deal with the threat. Let us be clear: the troops are down there in the case of Saddam refusing to comply with the UN resolution. Rather than trying to make points about what the command and control will be, when we know that our troops will have to work with other countries, it is surely better that we combine now as a House and as a country to put maximum pressure on Saddam, because the one thing that would make conflict inevitable is a signal of weakness in our determination to deal with him.

Ought not the House of Commons to have a specific vote before British troops are committed under American command?

Let me repeat, as we have said consistently: of course we want a vote of the House of Commons on the matter—[HON. MEMBERS: "When?"] —if we get to conflict. The one set of circumstances in which we have said that that would not be the case is if any circumstances arose in which the security of our troops was at risk and action had to be taken quickly. In the absence of that, however, of course the Government want the full support of the House of Commons if action is to be taken. That is precisely what happened in relation to both Kosovo and Afghanistan, so the idea that we have a record of taking such action without the House being consulted is nonsense. What we actually have to do—all of us, with the greatest of respect—is focus not simply on the procedures of the House, which are important and will be carried through, but on the question whether the UN indeed finds that Saddam is in material breach. In that case, I hope that we will have the unified support of the House and, in particular, of the hon. Members who are rightly proclaiming the importance of the UN in taking the necessary action.

Why are GCSE results 14 per cent. better in Northern Ireland than in England? Why does the Prime Minister intend to press ahead with Martin McGuinness's ill-conceived plan to scrap grammar schools there?

It is only right to point out that GCSE results are also a lot better here than they were, for example, a few years ago. On the point about selection and grammar schools, I do not believe in returning to a division of children at the age of 11. As for scrapping grammar schools, I point out to the hon. Gentleman that, since we have been in office, we have not scrapped a single one. [Interruption.] That is a fact. In addition, I do not believe that the right way forward is to focus on what happens to the remaining grammar schools; it is to focus on the secondary schools, the vast majority of which are not grammar schools. They are getting extra investment and rising standards under this Government and would be affected by the 20 per cent. across-the-board cuts of the Conservatives.

The vast majority of young people who get two A-levels go to university. The higher education announcement made last week committed the Government to increasing the number of young people from poorer backgrounds at university. Will the Prime Minister tell me how that will be achieved?

My hon. Friend is absolutely right to make the point that 90 per cent. of children who get two A-levels go to university, whatever their social background. Therefore, the key to increasing the number of people from all social groups who go to university is to improve school standards. That is precisely why we are putting in the extra investment and making the changes that we need in the school system. I am pleased to say that the primary school, GCSE and A-level results are the best that this country has ever had.

Will the Prime Minister reassure my Ryedale constituents that they have nothing to fear from the planned upgrade of the radar at RAF Fylingdales? Notwithstanding the alarmist scaremongering of the opponents of missile defence, will he take time today to study the Select Committee on Defence report published only this morning, which describes the lack of proper consultation with the local community by the Ministry of Defence as "deplorable"?

Of course we will study the report and respond to any of the concerns that it raises. As for the hon. Gentleman's point about the upgrade of Fylingdales, I do not think that his constituents have anything to fear from that. After all, we have played our part in NATO and the transatlantic alliance for many years, and Fylingdales has been part of that. Should we engage with the defensive system of the Americans, I believe that it will continue to play an important role. I also believe that, in that role, there is nothing for the hon. Gentleman's constituents to fear and everything for this country to gain.

In a recent survey, 85 per cent. of Cleethorpes residents said that they feared crime and thought that it was rising. What will the Government do to reassure my residents that they are seriously addressing crime? Those fears about crime are being exploited by fascists such as the British National party—something that every hon. Member in this House should be worried about.

My hon. Friend is right that, although, according to the British crime survey, crime is down over the past few years, not up, the fear of crime is up. That is why it is so important that we take the measures that we are outlining both in the Criminal Justice Bill and the antisocial behaviour Bill that will follow it. I hope that we will get support throughout the House for both those measures. Unless we make fundamental reforms to the criminal justice system, we will not restore the confidence that is necessary for the fear of crime to be reduced.

On Sunday, the Prime Minister said that on asylum policy, he would consider

"fundamentally looking at the obligations we have under the European Convention on Human Rights."
Is the Home Secretary in charge of drawing up those plans, and when will they be announced?

What I said was that if measures that we have introduced do not dramatically reduce the number of asylum applications, we are prepared to go further, including fundamentally looking at our obligations under the European convention on human rights. Of course, it is the Home Office that is in charge of these issues.

Last week, the Home Secretary said that fundamentally looking at our ECHR obligations was impossible. He said:

"I want to make it clear … that no EU country has derogated or withdrawn from article 3, because none could".
He went on to say that those
"who have suggested otherwise are simply wrong." —[Official Report, 20 January 2003; Vol. 398, c. 6.]
Who is right: the Home Secretary or the Prime Minister?

The Home Secretary is absolutely right: no country has—[Interruption.] Perhaps when the right hon. Gentleman gets to his feet, he can tell us which country has derogated from article 3. No country has derogated from article 3—[Interruption.]

Order. The House must listen to the answers to the questions raised.

Let me just explain it to the right hon. Gentleman again: no country has derogated from article 3 of the European convention on human rights, which is why what the Home Secretary said is right. If the right hon. Gentleman has got the information as to which country has derogated, perhaps he would tell us about it.

So the Prime Minister says that he is right on Sunday, and then he says that he is wrong on Wednesday. Everybody knows that Alastair Campbell gave the Prime Minister his new policy as he walked into the television studio on Sunday. The first that the Home Secretary, or anybody else in the Cabinet, knew about it was when they switched on their television sets and heard him. A year ago, we told him that he had to deal with the ECHR, and how to do it. He said then that that "would be a mistake". Why has it taken him a year to change his mind?

What the right hon. Gentleman says is simply factually incorrect. There is no country that has derogated from article 3 of the European convention because derogation is not possible. What we were discussing last year was whether to derogate from article 5 of the European convention. That allows us, if we derogate, to detain without trial people who are suspected terrorists. It was precisely that measure that we introduced in the anti-terrorism measures that came through this House of Commons. However, when we actually introduced the measure, the Conservative party, rather than supporting it—[Interruption.] Oh yes. The shadow Home Secretary told us that it was an affront to civil liberties.

The fact is that we have recently introduced the following measures: there are identity cards for all asylum seekers; extended leave to remain is being phased out; social security support is withdrawn unless the claim is made quickly; and controls are being introduced across France, with British immigration officers in charge. Again, under the new measures that have been taken, we have also introduced out-of-country appeals—not in-country appeals—for countries listed by the Home Secretary. What I have said is that, unless those measures make a substantial impact, we will go further, including fundamentally looking at our obligations under the European convention. I repeat: the particular point that the right hon. Gentleman is making on article 3 simply happens to be factually wrong.

The Prime Minister is waffling and he is in a mess. Government estimates now show that at least 1,000 people in Britain have attended terrorist training camps in Afghanistan and elsewhere. We now know, as the Prime Minister admits, that many of them have used the asylum system to get into this country. In the face of that crisis, all that we have had from the Government is panic on Saturday, headlines on Sunday and climb-down on Monday. Is it not the case that we need the powers to deport those who threaten our country—and we need them now?

First, the powers to detain someone who is a suspected terrorist exist now. That is precisely why the arrests have been happening in Manchester, London and elsewhere, and those people are detained without trial. However, let me just read what those on the Tory Front Bench said when the issue arose and we were debating the legislation, so that we realise who is changing policy and who is not. When it was put to the Front-Bench Conservative spokesman just a few months ago that we should detain all asylum seekers, this is what he said:

"In today's climate"—
detention of all asylum seekers—
"is … wrong in principle and impossible, in practical terms".—[Official Report, 12 June 2002; Vol. 386, c. 874.]
The truth is that we have taken the measures that I have outlined. They are important measures to do with controls in France, identity cards, fingerprinting asylum seekers and making sure that those with manifestly ill-founded cases are taken straight back out of the country, but the power to deal with suspected terrorists is there already, and I repeat that, when we took that power, it was opposed by the Conservative party, which now says that it wants it extended.

In light of Ariel Sharon's well-known views and actions, does my right hon. Friend agree that there is little hope of reaching a two-state peace settlement with the Palestinians unless the Americans change their policy in respect of Israel?

There is no way that we will make progress unless there is a huge amount of activity, politically and diplomatically, on three fronts: the first is in relation to security; the second is in relation to political reform on the Palestinian side, which is why we had the conference here and will take it further in the next few weeks; and the third is in relation to final status negotiations. It is not just the responsibility of America, but I hope that all the international community, irrespective of what else is happening in the middle east, realises that the only way we will get a lasting and just peace in the middle east is to engage in detailed negotiations over a long period of time to resolve those three issues.

Following the likely local government settlement, Devon county council—which is run by all parties, including the Conservatives and Labour—has estimated that the council tax increase will be 15 to 20 per cent. Can the Prime Minister say whether that increase will be the same for pensioners?

I do not know what council tax that council will fix—that is a matter for it—but I can tell the hon. Gentleman that, as a result of the extra settlement, we are putting somewhere in the region of a 6 per cent. real-terms increase into local government. It is therefore very important that he recognises that, whatever the authority, that is infinitely more generous than the settlement in the Conservative years.

Does the Prime Minister recall telling Sir David Frost in January 2002 that a reformed House of Lords must be different from the House of Commons? Does he believe that an elected Chamber would be sufficiently different? Does he agree with those of us who believe that a properly constituted, non-elected Chamber, free from the hereditary system, is the only way to guarantee the kind of deliberative, advisory and balanced second Chamber that would add value to our system of government in the United Kingdom?

My briefing very helpfully starts by saying, "I understand that there are a range of views on this issue." However, everyone agrees that the status quo should not remain. Everyone agrees that the remaining hereditary peers should go and, what is more, that the prime ministerial patronage should also go. However, the issue then is whether we want an elected—[Interruption.] I am asked for my views; I am giving them. Do we want an elected House, or do we want an appointed House? I personally think that a hybrid between the two is wrong and will not work.

I also think that the key question on election is whether we want a revising Chamber or a rival Chamber. My view is that we want a revising Chamber, and I also believe that we should never allow the argument to gain sway that, somehow, the House of Commons is not a democratically elected body. I believe that it is democratic. [HON. MEMBERS: "A free vote?"] It is a free vote; people can vote in whatever way they want, but I think that all Members, before they vote, should recognise that we are trying to reach a constitutional settlement—not for one Parliament, but for the long term. In my view, we should be cognisant not just of our views as Members of Parliament, but of the need to make sure that we do not have gridlock and that our constitution works effectively.

As the Prime Minister is rightly exercised in the fight against international terrorism and the crisis in Iraq, may I urge him not to take his eye off Zimbabwe, where the situation is rapidly deteriorating? May I specifically encourage him to increase the smart sanctions on the regime and resist the behaviour of the French, who have been behaving quite deplorably?

First, I agree entirely with the right hon. Gentleman about the situation in Zimbabwe. The humanitarian situation there is becoming dire. Millions of people are either starving or at risk of starvation in a country that is rich in potential natural resources. That is a tragedy and we are doing whatever we can in every international forum to try to ostracise the Mugabe regime. It cannot be emphasised too often that that regime is a threat most of all to Zimbabwean people: not simply to white Zimbaweans but to black Zimbaweans, too.

Will the Prime Minister tell the House how the proposals in the higher education White Paper could help a single parent in my constituency who aspires to take a degree? Will he take particular note, and encourage our hon. Friends to take particular note, of the successful track record that Plymouth university has in widening participation?

Yes. First, maintenance grants will be reintroduced for those from lower-income families. Secondly, nobody will have to pay any fees upfront. Anything that is paid will only be paid back on a more generous set of terms than previously and paid back interest free. We will only be able to fund universities properly and fairly for the future if we not only put in more public money but come to a point at which students make some contribution by paying it back, but only when they are earning as graduates and in a position to do so.

Very many shift workers, including emergency workers, those who work in security services and those who work in this House, will, with effect from 17 February, pay £1,000 a year in tax for the privilege of using the only viable means of transport to get to work: their cars. The Prime Minister will no doubt try to blame the Mayor of London for that, but, in fact, it is the result of his policy. Given that it is his responsibility, and that the Transport Act 2000 was passed under his Government, is he satisfied with the detail, and is he ready to take the blame for it?

It is a devolved matter, it was devolved to the Mayor, and the Mayor has taken his decision.

In the light of the report on the torture and tragic death of Victoria Climbié, will my right hon. Friend give urgent consideration to the recommendations of the Laming report, and will he appoint a children's commissioner?

In respect of the report of the Laming commission, it made more than 100 recommendations, and we will implement more than 80 of those within six months. Clearly, in relation to the issue of a children's commissioner, we will study the report carefully, and that is one finding among many on which we will deliberate and then come to a decision.

When Army numbers are stubbornly and significantly below establishment, why have 450 basic training places been suspended?

I do not know about the basic training places that the hon. Gentleman mentions. We are, however, engaged in a huge recruitment campaign for our armed forces, as he knows, and people are applying to our armed forces as a result. We have a settlement this year, and for the next few years, which, for the first time in many years, provides a substantial real-terms extra amount of spending for our armed forces.

Even if Saddam Hussein does possess weapons of mass destruction—most people accept that he probably retains some residual capability—can my right hon. Friend explain why he did not use those during the Gulf war when his arsenal was massively greater than it is now? In particular, can he explain why Saddam represents a greater threat today than he did in 1997, 1998, 1999 and all his time as Prime Minister until President's Bush's axis of evil speech, when apparently the situation changed?

First, the one thing about which we can be sure is that his reason for not using his chemical, biological and nuclear weapons back in the early 1990s was not out of the goodness of his heart.

Secondly, my hon. Friend should study the UN inspectors' report. I shall read just one small part of it. Dr. Blix says:
"The nerve agent VX is one of the most toxic ever developed … Iraq has declared that it only produced VX on a pilot scale, just a few tonnes and that the quality was poor … UNMOVIC, however, has information that conflicts with this account … There are indications that the agent was weaponised."
He then goes on to detail similar findings in respect of a lot more weapons.

When my hon. Friend says that we did not regard Saddam as a threat between 1998 and the axis of evil speech, that is wrong. Precisely because he was a threat, thousands of British forces have been down in the Gulf the whole time, flying over the no-fly zones. Precisely because he was a threat, we have had to impose a sanctions regime on Iraq that, because of the way that Saddam implements it, means—I fear—misery and poverty for many, many millions of Iraqis. The fact is that, way before President Bush's speech, at the very first meeting that I held with the President in February 2001, I said that weapons of mass destruction were an issue and that we had to confront them.

In the House on 14 September, I said that, after 11 September, it was even more important to deal with the issue. I simply say this to my hon. Friend: the UN having taken its stand, if we do not deal with Iraq now—

My hon. Friend asks who is next. After we deal with Iraq, we have to—[Interruption.]— yes, through the United Nations. We have to confront North Korea about its weapons programme— [HON. MEMBERS: "Oh."] We have to confront those companies and individuals trading in weapons of mass destruction—

Another question has been shouted at me. We stop when the threat to our security is properly and fully dealt with. I say this to the hon. Gentleman: if he reads Dr. Blix's report, who can doubt that Saddam is in breach of his UN obligations?

We have talked about the UN in this House. Let us, therefore, follow the UN route. Let us implement the resolution and let us make sure that the threat to our security from those weapons is properly dealt with.

Auditing And Accounting

12.32 pm

With permission, Mr. Deputy Speaker, I should like to make a statement about the report of the co-ordinating group on audit and accounting issues and the report of the review of the regulatory regime of the accountancy profession, which my right hon. Friend the Chancellor and I are publishing today. Copies of both reports have been placed in the Library.

Last year, the collapse of Enron, WorldCom and Andersen's in the United States appalled investors all over the world. Millions of people saw their savings and pensions collapse. As I told the House last year:
"Audit and accountancy standards in Britain are different from those in the United States: different and, as is now widely acknowledged, in some respects better."—[Official Report, 24 July 2002; Vol. 389, c. 1003.],
So there was no need for the UK to rush into a Hewitt-Brown version of the Sarbanes-Oxley Bill: but, equally, it would have been folly to sit back and say "It couldn't happen here".

Structures, standards and regulations can never be a complete defence against individuals determined to do wrong, nor can they wholly protect us against a culture of corporate greed and loose ethics, but we owe it to savers, investors and employees, as well as to all the honest business people whose reputations have been tarnished by those scandals, to ensure that our defences are as robust as they sensibly can be.

The reforms that I am announcing today, along with those proposed last week by Derek Higgs and Sir Robert Smith, will raise standards of corporate governance. I emphasise that these reforms, in essence, cover only listed companies. They will strengthen our accountancy and audit professions and provide for a more effective system of regulating the professions. Together, they make up a complete package of reforms that are comprehensive and mutually reinforcing.

First, I shall deal with boardrooms. Following Derek Higgs's proposals, the combined code on corporate governance will be strengthened to provide: that at least half the board, as well as the chairman, should be independent, as should all members of the audit and remuneration committees and a majority of the nomination committee; that the definition of an independent director should be strengthened and clarified; that the separation of the roles of chairman and chief executive should be reinforced; and that new descriptions should be given of the respective roles of the board, the chairman and non-executives.

Mr. Higgs's report showed a startling picture of the way in which top-level appointments are handled, with more than half of directors being appointed through personal contacts and friendships. I welcome his proposals to promote meritocracy through an open, fair and rigorous appointments process. As part of the follow-up to the report, a group led by Professor Laura Tyson of the London Business School will examine ways of bringing candidates, including women, from the non-commercial sector to greater prominence. It will report to me in May.

In revising the combined code, the Financial Reporting Council will implement the recommendations of Sir Robert Smith's group that the audit committee should: consist entirely of independent members, with at least one having relevant financial experience; monitor the auditor's performance, especially on independence and objectivity; and develop and implement policy on the purchase of non-audit services from the auditor, with reference to tough new ethical guidance. Following well-established practice, listed companies will be required either to comply with the provisions or to explain to their shareholders why they are not doing so.

The second aspect of our reforms concerns tougher measures to underpin auditor independence. Following the recommendations of the co-ordinating group, I can announce, in addition to an enhanced role for audit committees and a tightening of the provision of non-audit services by auditors: that the professional bodies have already changed their regulations so that the lead audit partner has to be rotated within five years; that partners and senior employees of audit firms will not be able to take up employment with a company they audit within two years of leaving their audit firm; and that most of the UK's large audit firms have already agreed to publish an annual report, to provide management and financial information; and, in particular, to reveal levels of dependency on single clients, including how the firm handles conflicts of interest and interdependence issues. We think that that will work on a voluntary basis. If not, we will make such disclosures a condition of auditing listed companies.

I am also calling for the standards and ethical guidance for auditors on the provision of non-audit services to be toughened even further.

We will also strengthen the enforcement of accounting standards. At the moment, the financial reporting review panel steps in only if particular concerns are raised with it. However, the co-ordinating group recommends, and we agree, that enforcement of those standards must be proactive. From now on, the Financial Services Authority will help the financial reporting review panel on enforcement—especially by identifying the high-risk cases that most merit investigation. The FSA and the panel will need to agree as soon as possible a memorandum of understanding to clarify their precise roles and responsibilities.

Those measures will be underpinned by the third element of our reforms—more effective regulation of the professions. The Financial Reporting Council will assume the functions of the Accountancy Foundation. That will create a unified, independent UK regulator with three clear roles: setting accounting and audit standards; proactively enforcing and monitoring them; and overseeing the self-regulatory professional bodies. The Financial Reporting Council has, under the chairmanship of Sir Bryan Nicholson, developed an excellent reputation. The Accountancy Foundation, led by Lord Borrie, has also done valuable work. I thank them for that. The new combined body will build on both their achievements.

After wide consultation, the DTI's review team made three recommendations, with which I agree. First, the Auditing Practices Board should take over from the professional bodies the responsibility for setting standards for independence, objectivity and integrity. Oversight of other ethical standards will become the responsibility of a new professional oversight board. The Ethics Standards Board will be wound up in due course. I greatly appreciate the work that its chairman, Christopher Jonas, and his colleagues have done to take forward the ethical agenda and to provide the basis for the new board's work.

Secondly, a new independent inspection unit, located within the FRC, should take over from the professional bodies responsibility for monitoring audits of listed companies, major charities and pension funds.

Thirdly, the long-delayed investigation and discipline board should come into operation quickly to provide a truly independent forum for hearing significant public interest disciplinary cases.

It is vital for the new structure to have clarity of accountability and responsibility together with the appropriate powers to operate effectively in the public interest. There is a strong case for statutory underpinning to make the new body work. We will consider that further and report our conclusions to the House.

The proposals that I have outlined are substantial and mean significant changes to the way in which companies and auditors carry out their work. The package should be implemented as quickly as possible. Changes to the regulatory structure will be made immediately. The Department will lead an implementation steering group, on which Sir Bryan Nicholson, Lord Borrie and Peter Wyman, president of the Institute of Chartered Accountants in England and Wales, have kindly agreed to serve.

An FRC with enhanced responsibilities will need more investment. The Government will pay their share of core running costs, but I also expect companies and the profession to contribute. It is in all our interests to make the changes work and it is fair that we all pay for the improvements.

The changes to the combined code that arise from the Higgs and Smith reports will be made in the early summer once the FRC has consulted on the precise wording. All those measures will be taken forward alongside our long-standing programme of company law reform following last year's White Paper.

The proposals are not a response to short-term market movements. They are about strengthening the foundations of our capital markets for the long term. I want to thank Derek Higgs and Sir Robert and his group for their excellent reports as well as all those who participated in the co-ordinating group under the joint chairmanship of the Under-Secretary of State for Trade and Industry, my hon. Friend the Member for Welwyn Hatfield (Miss Johnson), who is responsible for competition and consumer affairs, and the Financial Secretary. I pay tribute to the officials who so swiftly took forward the review of the regulatory regime.

The overall package is tough when that is needed but measured and proportionate. It will ensure that our corporate governance structures remain among the best in the world for the benefit of millions of pensioners, savers and businesses that depend on them.

I am grateful to the Secretary of State for making a copy of her statement available to me this morning.

I broadly welcome the Government's approach. As I said last July, when the interim report was published, there are significant differences between our approach in Britain and that in the United States. Our principles-based approach is right and should continue to be championed.

I hope that the Secretary of State will agree with me on four broad principles. First, no regulatory system, however stringent, can provide total protection against the consequences of human greed, folly or corruption. In auditing and accountancy, as in all matters of corporate governance, the best safeguard against fraud, abuse and incompetence is the integrity and conscientiousness of the men and women in positions of responsibility.

Secondly, any change to existing practice must be scrutinised for its effect on Britain's competitive position and whether it makes wealth creation easier or harder. The purpose of regulation of auditors and accountants, the role of non-executive directors and so on is to provide some protection for lenders, investors, employees and customers. However, it cannot replace the duty of all those people to carry out their checks and responsibilities. Care must be taken not to increase business costs unnecessarily.

Thirdly, self-regulation should always be the preferred option for professions such as accountancy. The statutory route should be taken only when it is clear beyond doubt that self-regulation is inadequate.

Fourthly, even when we rely on self-regulation, any codes of practice or guidance systems must acknowledge the need for flexibility and understand that requirements that may apply to companies of a specific size or type are wrong for many other businesses. A one-size-fits-all approach is damaging.

I welcome much of Derek Higgs's report. The Secretary of State referred to listed companies. Does she include alternative investment market listed companies, off-exchange market companies and foreign companies that have a listing in London in that category? There are wide variations in the size and nature of the businesses even among the fully listed companies. The Higgs recommendations do not entirely acknowledge those differences.

I am worried that, for example, the recommendation to require a senior, non-executive director to develop an independent relationship with shareholders, separate from that of the chairman, chief executive and other executive directors, may be a recipe for division and conflict. That will not improve standards of corporate governance.

I am also concerned about the requirement for some smaller listed companies that half the board, or, if the chairman is included, a majority of the board, shall be independent. I am concerned that that recommendation is onerous, expensive and unnecessary. Further consideration should be given to both those recommendations before they are incorporated in the combined code.

Since institutional investors already have the power to address many of the concerns that Higgs has focused on, does the Secretary of State have any practical suggestions about how those institutions can be encouraged to take a more active role beyond the lip service that is so frequently paid to that need?

I welcome the recommendations of Sir Robert Smith, and particularly the involvement of an entirely independent audit committee in scrutinising the purchase of non-audit services from an audit firm. That, coupled with a little more transparency, should remove the need for greater restrictions on the freedom of clients to employ their auditors for non-audit work—a freedom that I believe is often in the best interests of shareholders, as when, for example, a client wishes an auditor to help with due diligence work on a proposed acquisition. The Secretary of State says that she would like guidance relating to non-audit services to be toughened still further. Will she explain exactly what she has in mind in that respect?

Looking at the issue of auditor independence, I warmly welcome the steps that the profession has taken on a voluntary basis to meet public concern and maintain confidence.

On the issue of standards, can the Secretary of State clarify exactly what role she expects the Financial Services Authority will play? She says that she is asking the FSA to agree a memorandum of understanding with the financial reporting panel. Will she clarify what issues she thinks that memorandum should cover?

Turning to the regulation of the professions, I welcome the extensive consultation that has taken place and pay tribute to the institute and to its president, Peter Wyman, for his role, and also to the work of the Financial Reporting Council.

Although the Secretary of State referred to a unified, independent regulator with clear roles, it would be helpful if she could explain how she thinks the distinct roles of five different groups will be defined and how their work will interact. I refer to, first, the FRC itself; secondly, the independent inspection unit to be located within the FRC; thirdly, the Auditing Practices Board; fourthly, the professional oversight board; and, fifthly, the investigation and discipline board. Is there any risk of duplication? Will their responsibilities really be clear to outsiders? Is there a danger that what starts to look like a proliferation of bodies may obscure accountability?

There is also the crucial question of cost. At a time when company profits are under pressure, not least because of the extra burden of tax and regulation imposed on them by the Government, there will be concern that audit fees and other charges may rise significantly because of these proposals. What does the Secretary of State expect the effect on profits to be? What will be the Government's contribution to the budget of the FRC?

In addition, when will the Secretary of State be able to say whether legislation is needed to implement the proposals? What timetable is envisaged for their implementation? Does she agree that after a period of consultation there is every advantage in quickly resolving the uncertainty that has inevitably existed in recent months?

Britain has a real chance to lead in the setting of standards for audit and accountancy. We must continue to champion our principles-based approach and the success of much of the self-regulation that has prevailed here. Both the nature of new legislation in the United States and the confusion over key appointments to regulatory bodies there are a warning of what may go wrong when a hasty reaction to a corporate scandal occurs.

I hope that the areas of remaining uncertainty in the Secretary of State's statement will soon be addressed. In the long term, the interests of shareholders and management should be aligned. Since every member of a pension fund and every holder of a life insurance policy has an interest, both in the standards of corporate governance and in the profitability of businesses, today's proposals affect almost every man, woman and child in the country.

In the six months since the issues were last discussed in the House, share prices have fallen and uncertainty in financial markets has increased. It is all the more important, therefore, that moves to rebuild confidence do not add excessively to the burden of cost and regulation. Our response to the problems must continue to be proportionate to the dangers involved. The essence of what is needed is not necessarily more regulation, but better regulation.

I am grateful to the hon. Gentleman for his broad support and welcome for the statement and the proposals. He began by setting out the principles. As I said, there cannot be complete protection against determined wrongdoers. The best defence against wrongdoing is the integrity and incorruptibility of the individuals concerned. That is why we want to strengthen not only professional standards but oversight, monitoring and enforcement of them. The reforms must be designed, and have been designed, to strengthen the competitiveness of our companies. At the outset of the work and report, Derek Higgs said that the reforms are about promoting the greater success of our companies, not least by strengthening the confidence of the people who invest in them. We believe in self-regulation where possible, legislation where necessary. That is what we have practised, and I think that the balance in the package is right.

Let me stress and develop what the hon. Gentleman said about the need to avoid one size fits all. Derek Higgs clearly acknowledges that. Perhaps I can clarify matters by confirming that the Higgs proposals apply to listed companies, pension funds and major charities. They do not apply to alternative investment market listed companies. However, he recognises, as we do, that the circumstances of companies, especially smaller companies, that fall within the scope of the combined code will be different. It is important for the FRC to reflect that in the wording of the revised code and it explains why we rely on comply or explain. There will be circumstances in which it is not sensible or appropriate for a company, especially a smaller firm, to meet every Higgs recommendation or combined code standard. They will be able to explain that to their shareholders. That is the great merit of comply or explain.

The hon. Gentleman asked about the implementation of Sir Robert Smith's recommendations, in particular the role of the FSA. The suggestion is that the FSA will extend its proactive enforcement role by conducting a risk assessment to guide the work of the financial reporting panel. Instead of the FRC simply waiting for problems to be drawn to its attention or worries to be raised, the FSA, having conducted a risk assessment, will draw the panel's attention to those audits on which it thinks the panel should focus.

Let me elaborate on the implications of toughening standards for the purchase and delivery of non-audit services. Sir Robert Smith's recommendations involve stronger policy and standard setting by the audit committees of the companies that purchase the services. Each committee will have to review that and set out company policy on it. On the other side of the fence, where the audit companies themselves are concerned, I am asking the Financial Reporting Council to consider the recommendations by my colleagues in the combined group who have suggested much tighter controls on what audit firms can sell. For instance, a prohibition on the supply of internal audit services by the external auditor might involve checking on management controls. Similarly, a ban on the provision of non-audit services might create a mutuality of financial interest and perverse incentives to distort either the audit or the non-audit services, or both.

The hon. Gentleman asked how all the different groups fit together. I draw his attention to the helpful diagram in the DTI review. By bringing the Accountancy Foundation and the FRC together, we are creating a single unified regulator under which will sit the Auditing Practices Board with its enhanced role, the investigation and discipline board with its strengthened powers, and the professional oversight board, which will include the audit inspection unit. That is a much simpler and more rational system than we have had until now, and because it all fits within the FRC, I think that the hon. Gentleman will find the complementarity of roles that we both want. Finally, he urged on me speedy implementation of the recommendations—that is precisely what we are now doing.

I welcome the Secretary of State's timely statement. She has avoided, as she said, the excesses of Sarbanes-Oxley, but at the same time she has been able to ensure a proportionate response to the drop in confidence in accounting services and the way in which businesses are run. Intriguingly, however, she missed one point that has been a matter of discussion in recent weeks—trying to avoid the practice of giving golden handshakes to failed executives. The issue provokes great bitterness and discontent, and I know that it will be a subject of a private Member's Bill later this week. However, I feel that my right hon. Friend missed the opportunity to address the issue, and wonder whether she could tell us why.

I am grateful to my hon. Friend for his welcome for this package and for giving me the opportunity to comment on an issue about which, as I have said before, I feel extremely strongly. I have often said that big pay-offs for large corporate failures are unacceptable, which is why last year I introduced new company regulations requiring an annual shareholder vote on the directors' remuneration report for quoted companies. Company owners should, above all, take the matter into their own hands and sort it out. Of course, I am aware of the private Member's Bill proposed by the hon. Member for Tunbridge Wells (Mr. Norman), whose aims I entirely support. We have had an opportunity to discuss his Bill, and I told him that I share the concerns, of investors in particular, about the way in which it would work in practice. We are assessing the impact of the changes that we have already made to company law, and I intend to consult on whether further changes are needed to deal with rewards for failure.

May I, too, welcome the Minister's courtesy in giving us early sight of the statement? Like the Conservative spokesman, I agree that its contents are both good and controversial. It is a welcome follow-up to the Higgs report, requiring accounting companies to produce proper accounts, which they often have not done in the past, and the tidying-up of regulation.

Is that enough? There has been a crisis in capitalism and there is a fundamental lack of trust in corporate behaviour, particularly in independent audits. It is striking that on the three big issues that the Government had to confront—audit rotation, competition policy and conflicts of interests—they have not taken the robust action that one might have expected. I shall pose a series of specific questions. First, on corporate governance and Higgs, I welcome the fact that the Government are now taking the initiative to break up the magic circle and break the incestuous links between non-executive directors. As there will be a demand under the reforms for more non-executive directors, what action will be taken to ensure that the existing community does not take on excessive numbers, which is already happening? Why have the Government not responded to advice to set limits on the number of non-executive directorships and chairmanships?

Secondly, on rotation, if it is indeed impractical to rotate audit companies, do the Government not accept that there are great dangers from close personal relationships developing between individuals in audit companies and the companies that they are auditing? Why are the Government not taking steps to encourage or demand that, for example, all audit partners—all signing partners, not just the lead partners—are rotated and that all members of audit teams are rotated, to ensure that those incestuous links are broken?

Thirdly, on conflicts of interest, surely the Government accept that it is inherently unsatisfactory for an audit company simultaneously to carry out an audit role and seek to carry out or carry out big IT consultancy contracts for the same company? The issue is subtle and complex, but surely there should be action beyond the Government's guidance to ensure that the most obvious conflicts of interest are simply stopped? On competition policy, do the Government accept that having four groups auditing the accounts of the top 500 companies is inherently unsatisfactory? The problem is difficult because those companies are global, but do the Government have any plans to pursue with the European or American authorities a combined approach to competition policy to try to break up the groups or introduce more competition in the market?

Finally, why was there no reference whatever in today's statement to the Comptroller and Auditor General and the National Audit Office, as both the private sector and the NAO have suggested that there is a major role for the NAO in auditing private accounts, possibly nominating auditors? That would be an excellent way in which the public and private sectors could collaborate, so why is there no reference to it?

I see that the Liberal party is swinging to the left today.

The hon. Gentleman talked about widening the magic circle of directorships. I entirely agree. As I said both in my statement and when we announced the appointment of Derek Higgs to conduct the review, it is not satisfactory, however good the individuals, to have a limited number of people on the boards of our major companies. The hon. Gentleman asked whether there should be a statutory or regulatory limit on the number of directorships. I draw his attention to Derek Higgs's clear recommendation that a full-time executive director should not take on more than one non-executive directorship and that no individual should chair the board of more than one major company.

However, as I told the Conservative spokesman, one size fits all is not appropriate. To try to set a single figure as a ceiling for the number of directorships and non-executive directorships that one individual may hold would not take account of the fact that some directorships may be in much smaller companies and so on. Some non-executive directors, particularly chairs of audit committees, have a much larger company burden than other independent non-executive directors. So I believe that we have got the balance right.

The hon. Gentleman raised the issue of whether the entire audit team, as well as the lead audit partner, should be rotated. Various review teams have looked at that matter carefully, because it was raised as an obvious solution to the problem. As with the issue about rotation of audit firms, the problem is about getting the right balance, ensuring that cosy incestuous relationships do not develop—that was part of the problem at Enron—while not destroying the expertise built by an audit team in relation to its client firm. There is evidence that some of the worst problems arise in an audit firm's first year, when the team, by definition, is completely new. Again, there is a balance to be struck, and we have approached it sensibly.

The hon. Gentleman wanted me to say more about non-audit services, including IT services. I draw his attention to the recommendation in the co-ordinating group report that the new regulator should further restrict the circumstances in which auditors supply internal audit services, and ensure that there is a strong presumption against supplying any internal audit services other than in exceptional circumstances. The report suggests that the regulator should review the circumstances in which it is permissible to provide valuation services, actuarial services, litigation support services, taxation services, and services involved in the design and supply of IT and financial information technology systems. A strong case is made for much stronger standards being set for audit firms. They will complement the strengthened provisions in the combined code that result from Sir Robert Smith's recommendations.

The hon. Gentleman also asked about competition in the supply of auditing and accountancy services. Of course that is a matter for concern, although the Office of Fair Trading has looked at it already, at our request, and has agreed to keep it under review. The market for such services is increasingly European and, indeed, global. At a regional level, where smaller companies are concerned, the competition for supply is rather greater.

Order. I do not promise to call every hon. Member who is seeking to catch my eye, but I will be encouraged to be well disposed if questions have just one part and receive concise answers.

My right hon. Friend the Secretary of State will be aware of a serious fraud in my constituency, as I have written to her Department about it. It involves some issues to do with accounting practices. In her statement, she referred only to listed companies. The very large multinational company in which some of the fraud to which I refer originated is privately owned. What protection will be given to third parties such as the small company in my constituency that purchased a company that was formerly a supplier to the multinational? That small company's representatives have told me that audit is merely a tax on firms such as theirs. The audit on the company that it purchased was fine, but completely superficial. How will the new recommendations make such audit less superficial?

From what my hon. Friend has said, the company to which she refers would be a suitable candidate for consideration by the financial reporting and review panel. I am aware in outline of the case to which she refers, but it may be sub judice and I therefore do not propose to comment further.

I thank the Secretary of State for her remarks on payments for failure to departing directors, which is the subject of my private Member's Bill, and I welcome her confirmation that the Department will put the matter out to consultation. However, my Bill has widespread support across the House, especially among Labour Members. It is also supported by Sir Adrian Cadbury, who in a sense is the father of the combined code, and by firms of solicitors in the City. One of those companies is McFarlane's, which was instrumental in preparing a practical and robust solution. What form will the consultation take; how long will it last; who will be consulted; who will be responsible; and will the right hon. Lady take this opportunity to say that she will present the conclusions of the consultation in a statement to the House in a few months' time?

I know that many hon. Members of all parties want companies and boards to take action on the matter of big rewards for big failure, and they also want better and proportionate regulation. I do not believe in legislating without sensible consultation and consideration of how proposals would work.

We will publish a consultation document on this issue, I think in March. I certainly want to assess views about the changes that we have made already and which will come into effect for the next round of corporate AGMs. We will put forward the proposal made by the hon. Gentleman and variations on it. We will ask for views about whether further action, over and above what I have taken already, is required. If so, we will ask whether it should be along the lines suggested by him, or whether there are other possible ways forward. Although there is widespread support for the aims of his Bill, there are also widespread doubts about the means that he has chosen—overriding contracts that have been entered into—to achieve those aims. The TUC is one of the bodies concerned about the precedent that would be set.

There are a number of matters that need to be considered. We will have three months of consultation with everyone who has an interest in these matters and who would like to express a view. Of course I shall report the conclusions to the House.

Will my right hon. Friend explain further why she has stopped short of proposing a ban on the provision by auditors of non-audit services such as consultancy services, which may be much more profitable than audit? Following the events at Enron and elsewhere, does she accept that confidence in the integrity of audit is undermined where there is evident conflict of interest? Does she accept that investor confidence is also undermined, with all the damage that that causes?

This is a matter of enormous interest, and one on which I have elaborated already. It has been looked at carefully by the various reviews. Clearly, as the co-ordinating group concluded, there are situations in which a ban would be appropriate. Those circumstances depend on the relationship between the client company and the audit firm, and the particular non-audit services that it is proposed will be bought. In some cases, a company will not be able to buy those non-audit services from its external auditor. In other cases, however, as Sir Robert Smith makes clear, there is no conflict of interest and so no risk of jeopardising the independence of the audit. In those cases, the expertise built up in the external audit may be valuable to the company and therefore help to strengthen its governance and its competitive success. That is why I do not think that the proper way forward is to write into the regulations a blanket ban. Instead, we must ensure—through the role of the audit committee on the company's side, and through the audit standards on the auditor's side—that we have the right balance. We must also ensure that the non-audit services are banned in those cases where that is required.

The pool of people qualified for non-executive positions is relatively small at present. If the role of non-executives is to become more onerous and demanding as a result of these recommendations, that pool could become even smaller. However, Mr. Higgs has also suggested that the boards will have to have more than 50 per cent. non-executive content. That could mean that boards will get larger. How will the Secretary of State tackle the significant concerns being raised by business that those possibly conflicting aims could lead to weaker, if not larger, boards?

There is a real problem with non-executive directors, especially in the larger companies, being drawn from such a small pool. The hon. Gentleman is right to say that the burden on any director of a firm is becoming increasingly difficult. We therefore need to widen the recruitment pool. It is pretty implausible to suggest that only the very small number of already existing non-executives are capable of carrying out that role.

We can widen the pool in two ways. First, a growing number of large and medium-sized companies regard a non-executive directorship as an important contribution to the professional and career development of younger executives. That means that the corporate governance of the smaller firms on which those younger executives cut their teeth will be strengthened, and also that the pool of people with the commercial experience needed by good non-executives of major companies in future will grow.

The other step that we are taking, as I have indicated, is to encourage firms appointing non-executive directors to look to the non-commercial sector. In the public services and the not-for-profit sector, there are large organisations such as NHS trusts that are responsible for very large sums of money. Their non-executive directors tend to be drawn from a rather more diverse community than their counterparts in FTSE 100 companies, and to have built up exactly the sort of expertise need by the boards of large listed companies.

As my right hon. Friend knows, I am interested in the issue of corporate governance and, with 20 or so other colleagues, made a submission on the White Paper. How will the measures that she has announced today fit in with the rest of the agenda for the reform of company law? Is it not a rather piecemeal approach if some reforms are introduced now, while others have to wait for the introduction of a new company law Bill?

I am grateful to my hon. Friend and the other hon. Members for their very detailed submission. I think that my hon. Friend is in part referring to the proposals for the operating and financial report that we made in the company law reform report. It is important that that enormous rewriting of the whole of our company law is all taken forward together, as we intend it will be, so that we can deal with the problem of 150 years' accumulation of company law, both statute and case law—and that is what we are doing, building on last year's White Paper. However, the package that I have announced today can in large part be taken forward by the actions that we have described in reorganising the Financial Reporting Council and the other bodies, and through the combined code and the audit standards that I have mentioned. They will complement and provide a solid foundation for the much larger reform of company law that is also coming.

The Secretary of State says that the provisions to reveal levels of dependency on single clients will at this stage be voluntary, but that she will consider legislation if necessary. Can she tell us more about how that will be reviewed? Obviously, it is important that any problems are revealed at an early stage. It would be a tragedy if we had to wait for another Enron-style debacle before new rules were brought in.

I think that the hon. Gentleman is referring to how we monitor the comply-or-explain provisions. The combined code on corporate governance is, of course, attached to the listing rules, so for large listed companies—that is what we are talking about here—the Financial Services Authority has responsibility in its role as the listing authority.

I congratulate my right hon. Friend on what she has said about the move away from self-regulation, but I want to return to the point about possible conflicts between audit and non-audit services, which is now being raised by hon. Members on both sides of the House. Does she not see that in sending out rather confusing signals about what may or may not be acceptable in future, she has lost the opportunity to make a clear-cut separation between external audit services, internal audit and consultancy? That distinction could help to create more competition, and to prevent the dangerous possibility of regulatory conflict for listed companies in Britain that also list in the United States.

I entirely agree with my hon. Friend about the importance of that point, but I do not think that we are sending out confusing signals. The report from the combined group is absolutely clear about that, and I have no doubt that the FRC will respond positively to the recommendations. I also stress to my hon. Friend the fact that the steps that we propose should be taken to ensure that there is much greater transparency in relation to where the audit firms get their income from.

All the recommendations about an annual report, about the disclosure of the fees received from a client where those exceed 5 per cent. of a firm's total fees, and about audit firms publishing information on how they manage auditor independence within the firm, together with relevant management and reward structures, will shine a bright spotlight on the practices of audit firms. They will also, I think, ensure that the separation of functions and the preservation of the independence and integrity of the audit, which is at the heart of both my hon. Friend's concerns and my own, will be delivered.

Will the Secretary of State monitor the growing practice of the qualification of audit certificates, which is having adverse consequences for small businesses? I learned only this week that the Civil Aviation Authority is refusing to accept for the purposes of ATOL—air travel organisers' licensing—bonding accounts that have had a qualified audit statement. We understand why the auditors are doing that, but what is the small business supposed to do when its own auditor says, "I can only give a qualified statement, because that's what my professional body says I must do"? That is very difficult, and I would like the Secretary of State to look into the problem

The hon. Gentleman raises an important point. There is no doubt that since Enron, auditors have, not surprisingly, been much more cautious, so there is a much greater readiness to qualify accounts. I have not come across the particular problem that the hon. Gentleman raises concerning small firms that need ATOL bonding; of course I will look into that and also draw it to the attention of my right hon. Friend the Secretary of State for Transport.

I congratulate my right hon. Friend on her determination to bring forward quickly these sensible changes in the aftermath of the financial scandals that became apparent in the United States. Will she undertake to keep the new regulatory system under constant review, because ways of getting round regulations often demonstrate much more innovation among the rogues than we would like to see. If my right hon. Friend keeps such matters under constant review, we shall know that we have the best possible protection in this country, and that shareholders and investors can proceed with confidence.

I am grateful to my hon. Friend for her comments. I hope that the new structures that we are putting in place, especially the merger of the Accountancy Foundation and the FRC, will simply be able to settle down and get on with the job. It would be a great pity if we had to change those structures again in just a year or two. Within that framework, however, I agree that we must monitor the impact of the changes that we are making. The new unified regulator and the overarching council that we are establishing will be well placed to ensure that they are constantly monitoring and reporting on the impact of the strengthened ethics and the independent standards that are being put in place, as well as the strengthened and much more proactive enforcement and monitoring system involved.

As a member of the Institute of Chartered Accountants of Scotland, I believe that the Secretary of State's proposals for audit and accountancy deserve strong support. In the current climate, however, does she not agree that public confidence in the reforms, particularly in the capital markets, will depend on their having an early statutory underpinning, and a funding basis independent of the accounting profession that is to be subject to the revised regulations?

I am grateful to the hon. Gentleman, with his expertise in such matters, for the welcome that he gives the proposals. Confidence in the system is crucial, and I think that we will achieve that. There is enormous consensus, especially with the regulators—the independent bodies—about what needs to be done, and that this package is the right one. He makes a strong case, as does the combined group, for a statutory underpinning for the new package, and the combined group has sketched out what that might look like. As he will know, there are very different views about which bits of the system should be underpinned by statute. I am sure that the House will groan if I announce yet another consultation—but we do need to take views on the details of what that statutory underpinning should concentrate on; we do not want to legislate unnecessarily. We will consult on that, and if we decide that it is necessary, we shall make proposals as quickly as we can.

I congratulate my right hon. Friend on the statement, which I think will make a major contribution to securing the integrity of corporate finance. In the light of what happened with Equitable Life, and other difficulties in the insurance industry, will she consider whether the special risks of insurance require special treatment, both in accounting and in auditing?

That, of course, is a matter for the Financial Services Authority and I understand that it is looking at it already.

Given that more than 100 companies with a full listing have a market capitalisation of less than £10 million, how does the right hon. Lady expect those businesses to comply with the Higgs requirements on non-executive directors?

As I said earlier, in some cases those companies will not comply with every aspect of the Higgs recommendations, and Derek Higgs makes it very clear that that is what he expects. His recommendations are drafted with proper regard for the fact that they will not fit those smaller listed companies, and the comply-or-explain provision works very well in enabling companies to say, "This particular recommendation"—on the number of independent directors, perhaps—"does not fit our circumstances, for this reason, and this is what we have done to ensure that we still have very strong corporate governance," which of course is what our shareholders expect.

I very much welcome the package that my right hon. Friend has announced. It is a sensible and measured approach. However, may I press her on the progress of the company law review? Although one always starts with self-regulation and the improvement of professional standards, at the end of the day one needs a modern legal framework to underpin directors' duties and to ensure that auditors' conflicts of interest are properly addressed.

I entirely agree with my hon. and learned Friend about the need for complete reform of our archaic company law, but it is of course a huge undertaking. It is very complicated. I am glad to say that the whole process of drafting the legislation is making very good progress and, as my hon. and learned Friend will be aware, we are consulting on many different aspects of the company law reform package at the moment. I hope that we shall be able to legislate on it just as quickly as possible.

I have a declaration to make in that I am a non-practising chartered accountant. What estimate has the Secretary of State made of the additional costs that companies and auditors will have to bear as a consequence of the proposals? It strikes me that these, in addition to some of the proposals in the company law White Paper, will actually increase the costs of compliance to many businesses, and perhaps the extent to which those costs are disproportionate to the benefit that they bring.

The initial reaction that we have had, particularly from the large companies that are most affected, is that in most cases they are already in compliance with the bulk of, for instance, the Derek Higgs recommendations. I do not believe that the additional compliance costs will be substantial in most cases, if indeed there are additional compliance costs at all, but of course the FRC will be undertaking a proper regulatory impact assessment of the changes that it will be bringing forward.

In the light of her statement, will the Secretary of State explain her Government's policies towards multidisciplinary professional practices, and does she believe that the description of an individual or a firm as an accountant or accountants should be reserved for those who have achieved professional qualifications, are subject to rigorous rules of practice and have adequate insurance?

As I think the hon. Gentleman knows, there is nothing in law at the moment that prescribes the use of the term "accountant" in the way that I think he is suggesting. This is really a matter for the professional bodies to take forward.

Greenbelt Protection

1.18 pm

I beg to move,

That leave be given to bring in a Bill to require local authorities to provide a designated number of permanent sites for the traveller community; to make additional provision in relation to the powers available to local authorities in relation to unauthorised development of greenbelt and greenfield land; and for connected purposes.
In my constituency of Billericay and district, we are very concerned about the various threats to our green belt. One of the growing dangers is that of unauthorised development, especially by the travelling communities, who buy land and then, very quickly, develop it without planning permission.

A recent example at Sadlers Farm roundabout involved travellers digging a 6 ft earth mound around the perimeter of a field on Friday, laying hardcore on the Saturday and then moving caravans in on the Sunday. By the time that the council reacted with enforcement and stop notices, the development was complete. Consequently, we have now entered a lengthy planning and appeals process. Meanwhile, the illegal development continues. Similar situations have occurred in Hovefields in Wickford and Oak road in Crays Hill. Such unauthorised development often occurs on highly visible areas of the green belt, and causes a good deal of resentment among other residents.

When trying to combat the situation, Basildon council—whether Labour or Tory—has found the existing law inadequate. The Bill attempts to put this right, by giving local authorities additional powers to stop unauthorised development of greenbelt land.

Before I describe my suggested measures, may I first make two things absolutely clear? First, no one is looking to discriminate against a minority, but it is only fair that all those who live in a community should abide by its laws and regulations; otherwise, it is the majority who are discriminated against. Partly because of our historic links with the pilgrim fathers and the Mayflower, as a community we recognise more than most that the mark of a civilised society is the extent to which minority interests are respected. We have no problem with the law-abiding traveller. Indeed, latest figures show that there are more than 100 authorised sites for the travelling and gypsy communities in our district, while some neighbouring districts have none at all.

We believe that it was wrong that the statutory duty on local authorities to provide authorised sites was removed in 1994. It is only right that the way of life of the law-abiding traveller be recognised. However, for reasons that I cannot fully explain, there has recently been an increasingly large number of cases of travellers, new to the area, buying land, speedily developing it without planning permission and subsequently not living in harmony with their neighbours. That is causing much concern and anger not only among the settled community but among the more established gypsy communities.

The second point is that this private Member's Bill is the product of a long consultation exercise in which party politics has played no part. It has included numerous discussions, site visits, public hearings, and public meetings with residents, travellers, councillors, the police and Basildon council planning department. Here I should like to pay particular thanks to Councillor David Dadds, Mr. Clive Simpson and Graeme Bloomer of Basildon council. I have consistently stated that the law needs changing, whichever party is in control of the council.

In addition, in an attempt to engage the Government in debate, these suggestions were inserted by way of amendments to the Planning and Compulsory Purchase Bill when it was in Committee.

The Bill has support on both sides of the House and, whatever the outcome, I should like to take the opportunity to thank all sponsors for their support. It is in that spirit that I present the Bill.

Two key problems face local authorities when trying to deal with this issue. The first is that local authorities have difficulty in acting quickly to prevent unauthorised development. If an injunction is granted, it can be difficult to serve on the owner or occupier as they can often be difficult to pin down, particularly if land is being quickly sold on and individuals are being unco-operative.

The second problem is that although local authorities can issue stop and enforcement notices, rights of appeal and retrospective planning applications unnecessarily prolong the issues. The reality is that the planning and appeals process can take many months, if not years. Even when it is exhausted, it is often the case that local authorities have then to resort to the courts to reinstate the land, and that can be a long process that does not necessarily result in the clearance of the land. Some planning departments believe that decisions go against local authorities because there is inadequate provision of sites.

I have three suggestions for the House on specific details. The first is that, to share the responsibility of site provision for the travelling community, the Bill would introduce a requirement for all local authorities to provide authorised sites. The target figure should be identified by central Government in consultation with regional bodies, county councils and local authorities. The allocation would be based on the level of local need, and take into account the generation of new sites, likely immigration, outstanding commitments and the ability of local infrastructure to cope with additional growth. In return, the travellers would pay a fair rent for the time they spend at the sites and use the council's services; otherwise, it would be unfair to local taxpayers.

Secondly, the Bill would introduce powers to enable local authorities more easily to obtain an injunction by allowing it to be served on a landowner whose identity is unknown to the local planning authority. Although a similar power already exists to a lesser extent, it is hardly ever successfully exercised by local authorities because of the heavy burden of proof required. By entirely removing that burden of proof and serving the injunction, in effect, against the land, local authorities will be able to obtain an injunction far more speedily, and so quickly nip in the bud any unauthorised development. The injunction would be registered at the Land Registry as a charge against the land and would give local authorities the power to enforce the injunction against any new owner or occupiers.

Thirdly, local authorities would have a further power to serve a notice to remedy, the aim of which would be to reinstate the land to its original condition. That would be a discretionary power available to local authorities, the guidance being that it should be used only when, in the opinion of the local authority, significant harm is being caused to green belt or greenfield land under its control. The aim of the guidance would be to ensure that, where a minor breach of planning laws had taken place—for example, Mr. Smith accidentally deviated by 3 ft from planning permission when erecting a garage—the normal planning regulations would apply. But where, for example, a whole field was developed without planning permission, local authorities could consider that to constitute significant harm and would then have the option of instigating a notice to remedy.

Should a notice to remedy be exercised, it would stand apart from the normal planning procedure and have to be complied with. Once the land had been reinstated, the owner and occupiers would be allowed to seek planning permission through the normal planning process. If the land were not made good within the specified time frame, the local authority could arrange to put it right, the costs being reclaimed from the perpetrators where possible.

To conclude, it is important to stress that apart from the provision of authorised sites, the additional powers in the Bill are not mandatory. They would be additional options available to local authorities to choose if they so wish. Local councillors, democratically elected, would make the decisions. I do not deny that I have not covered all the details in the past eight or so minutes. There may well be technical issues to address, but I hope that they will not get in the way of what the Bill's sponsors and I believe are common-sense policies that, if sufficient political will exists, would tackle the problems. By ensuring that a sufficient number of authorised sites are provided and giving local authorities additional powers to combat large-scale unauthorised development, whether or not it is by travellers, I believe that the proposals will create fairness for all, and I commend the Bill to the House.

Question put and agreed to.

Bill ordered to be brought in by Mr. John Baron, Mr. Colin Challen, Mr. Jim Cunningham, Mr. Jeff Ennis, Mr. Mark Field, Mr. Chris Mullin, Mr. Kerry Pollard, Hugh Robertson, Mr. Andrew Rosindell, Andrew Selous, Mr. Mark Simmonds and Angela Watkinson.

Greenbelt Protection

accordingly presented a Bill to require local authorities to provide a designated number of permanent sites for the traveller community; to make additional provision in relation to the powers available to local authorities in relation to unauthorised development of greenbelt and greenfield land; and for connected purposes: And the same was read the First time; and ordered to be read a Second time on Friday 21 March, and to be printed [Bill 49].

Public Accounts

1.39 pm

I beg to move,

That this House takes note of the 1st to 63rd Reports of the Committee of Public Accounts of Session 2001–02, and of the Treasury Minutes on these Reports (Cm 5393, 5450, 5470, 5477, 5481, 5487, 5512, 5524, 5549, 5600, 5612, 5636 and 5676; and HC 1261, Session 2001–02).
The motion stands in my name and those of the right hon. Member for Swansea, West (Mr. Williams) and the hon. Member for Newbury (Mr. Rendel).

It has been an extraordinarily busy year for the Public Accounts Committee. In the past 12 months, we have produced almost 70 reports—probably more than in any one year in our 140-year history. If I were to devote only five minutes to each report, I would have to give a speech of Gladstonian length—[HON. MEMBERS: "Excellent—go for it!"] That is the bad news. The good news is that I shall take only a few examples.

Our reports have covered almost every part of Government, from the vast Departments of State such as Health, Education, Defence and Revenue, to smaller but very interesting bodies such as the Victoria and Albert Museum and the Maritime and Coastguard Agency. We have examined major defence spending programmes and high-profile health and education topics, as well as some of the behind-the-scenes operations that contribute much to the quality of public services, such as the roles of various regulatory bodies.

The rich and varied range of topics that we examine each year places the members of the Public Accounts Committee in a unique position in the House. Our remit spans the whole spectrum of government, our perspective is comprehensive and our conclusions and recommendations for improvement are pragmatic and, I believe, well founded. That claim is borne out by the fact that the Government accept more than 90 per cent. of those recommendations, which is a record unmatched by any other Committee—in fact, no other Select Committee comes anywhere close. The National Audit Office calculates that the work of the Public Accounts Committee has led to savings of £1.5 billion in the past few years.

Our role is twofold. We exist to hold to account those who are responsible for spending the hard-earned money of taxpayers, and we are bold and outspoken when we find that the expected standards of financial management have not been met. We are also anxious to ensure that lessons are learned and mistakes not repeated, so we cast a retrospective eye over events, but we adopt, we hope, a forward-looking and positive approach, and we are prepared to commend when it is right to do so.

Some senior officials may regard an appearance before my Committee as little preferable to an audience with the Inquisition, but the purpose of our rigorous questioning, which we try to do politely, is to make a difference and provide an effective check on the actions of the Executive. That is surely what Parliament is about. However, we do not stop there. This year, we showed that we are prepared to take on a major company, Imperial Tobacco, by questioning its chief executive and posing severe questions about an aspect of the company's activities.

I am extremely proud to be Chairman of the Public Accounts Committee, the best and most influential Committee in Parliament. Our work load is staggering, but shouldered with great competence by my colleagues on the Committee. I hope that I am giving nothing away, but when I recently spoke to the Clerk of another Committee who was watching the progress of our work, he said, with some surprise, "But they ask their own questions! In our Committee, we give the Members the questions." In the PAC, we ask the questions and we do the research.

Our success is due to our solid cross-party consensus, which again makes us unique. On my watch, I shall never allow party politics or advantage to influence our work—

It is not a shame at all. It is central to our achievements. As our inquiry into Portcullis House showed, we are prepared to look to our own without fear or favour.

We are well supported by our Clerk and his staff, who also have a vast work load because of not only the number of reports that we issue, but the mountain of correspondence on every aspect of public life that we receive. I pay tribute also to the organisation with which we work so closely, the National Audit Office. I thank Sir John Bourn, the Comptroller and Auditor General, whose reports to Parliament do so much to inform the work of the Committee—indeed, they make the work of the Committee possible.

I shall focus on three themes that have characterised the Committee's work in the past year: improving service delivery to the public; fraud; and improving the quality of public administration. Improving the quality of public services is not a party political issue. The Prime Minister himself has placed great emphasis on the need to make rapid progress in that respect, and the PAC welcomes that initiative. Over the past year, we have looked, from the point of view of service delivery, at a number of different areas. We have found the picture to be mixed; we have found much good practice and staff dedication, but also evidence of major shortcomings and the need for improvement. Let me give some examples.

Perhaps the most visible example of public service delivery is the provision of health services. In our 45th report, we focused on efforts to reduce NHS waiting lists and waiting times. A lot of money is being spent on the problem and we were keen to find out what progress had been made. At the time of our inquiry, over 195,000 people in England and Wales had been waiting for more than 13 weeks for an out-patient appointment, and just over 1 million people were waiting for treatment.

Waiting a long time can be a painful and dispiriting experience, as I found out myself a week ago at the Chelsea and Westminster hospital, where I was kept waiting for more than two hours for a four-minute appointment. It makes people angry that the money that they see being put into the health service is not being used wisely. In addition, over a third of patients stated that their condition worsened while waiting.

The Chairman of the Committee may remember that the following report was about occasions when some parts of the NHS had tried to fudge the waiting lists, and had made people wait inappropriately for that reason. Does he recall the suggestion that the NHS should have told those people if they had been inappropriately put down the waiting list because they might have been due compensation? The NHS did not seem very happy about that. Would he like to take up that point?

I shall deal with that point later, but the hon. Gentleman is right that the NHS could have been more forthcoming about compensating people if their waiting times had been inappropriately adjusted. That is a good point and we shall want to debate it at greater length.

We found some evidence of improvement in waiting lists and waiting times, and we give credit to the efforts of the Government; where credit is due, we give it. But we also found significant variations in waiting lists and times in different parts of the country and in different specialisms. The accuracy of the figures remains uncertain, partly because not all hospitals check their waiting lists often enough. We found that pressure to reduce waiting lists had led to significant numbers of consultants treating less urgent patients before others with higher clinical priority. That was entirely unacceptable and the Department issued clear guidance that clinical priorities must be adhered to. We wanted annual surveys to be carried out to make sure that consultants were observing the guidance that was now being given to them.

The large amount of extra money—there are huge amounts of extra money going into the health service—is to be welcomed, but only if it is spent wisely and effectively. There is no virtue in throwing money around, with no clear idea of whether it reaches desired targets. It will also be necessary to change the culture and working practice of all medical professionals and foster greater co-operation between health and social workers. Ultimately, the public will be convinced that their money is being spent well only when their experience of the NHS improves.

I am grateful to my hon. Friend, whose industry is matched only by his ingenuity. Following through the train of thought that he has been pursuing, and given that the Government spend approximately £400 billion a year—or £700,000 per minute—can he offer the House any indication of the size of the savings potentially available from the 70 reports issued over the last year?

As I said, we reckon that our work in previous years has saved £1.5 billion. The NAO calculates that, for every pound that it spends, it saves £8. I never quite understand that argument. Presumably, the more the NAO spends, the more will be saved; there must be a limit somewhere. We reckon that our activities help the Treasury; indeed I pay tribute to Treasury Ministers. Our agenda is very similar to theirs. We work closely with the Treasury, but when we find it falling down from its own high standards, we will not be slow to criticise it. We work closely with the Treasury to try to achieve some of the savings to which my hon. Friend the Member for Buckingham (Mr. Bercow) refers.

A different aspect of service delivery is the opportunity created by the development of electronic services. I am a bit of a technophobe myself, but I accept that this is a very important part of Government, and certainly a high priority. It is clear from our work that Departments recognise the potential, but in several areas we have found a failure to deliver e-services that people in the real world can, and want to, use. The Government aim to have all their services available electronically by 2005. That is fine, but there is little point in having e-services available if the public do not use them.

For example, Customs and Excise has made it possible to submit value added tax returns electronically, but we found that only 2,500 out of 1.65 million VAT-registered traders signed up to do so.

Another timely example for any of us who have yet to complete our tax returns—I hope that everyone here has done so—comes from our 52nd report, which looked at the Inland Revenue's progress in introducing e-services. The Revenue has a target of 50 per cent. take-up of its services by 2005. However, last year fewer than 100,000 out of a potential 9 million people filled their tax forms online. If we are to bring these e-services online, we must be able to complete the process.

My hon. Friend the Member for Tatton (Mr. Osborne) once tried to access the Passport Agency and went through the whole process, but, at the end of the day, he still had to deliver his application by post. There is not much point in that.

The public will see no point in using e-services when new systems fail or are difficult to use, or where there are concerns about system security. It is important to assure people that e-services are potentially quick, easy and secure. More generally, e-services need to be better thought through. Departments will not reap the rewards if they simply convert existing ways of delivering services to electronic applications. They must fundamentally rethink what they are offering.

That was demonstrated by NHS Direct, the subject of our 40th report. NHS Direct has been a real success story for the Government. It provides easier and faster health advice and information to the public and quickly established itself as the world's largest provider of telephone health care advice, handling some 5.3 million calls in the last financial year. It is popular with the public. We felt that other Departments could learn lessons from how that large new service was introduced.

Our praise was tempered slightly by concerns that many callers were waiting too long to speak to a nurse, as I found myself when I called them after suffering from severe headaches—no doubt caused by chairing overlong meetings of the PAC. There is a risk that NHS Direct could be a victim of its own success. The Department should take stock, set a clear strategic direction for the service and plan what impact it will have on other parts of the NHS.

There are few areas where the need to improve the service to the public is more important than health and education. We looked, in our 58th report, at access to higher education. We found that the Government will surely fail to meet their target—that, by 2010, 50 per cent of 18 to 30-year-olds will go into higher education—unless universities recruit and retain more students from poorer backgrounds. That is highly topical because a major barrier to increasing participation is the system for funding students. Its extreme complexity and the fear of debt are barriers to increasing participation. We called for the Department to simplify the situation and make it more certain. In response, the Department has already developed proposals radically to streamline funding. That will give students greater certainty over their finances.

One public service that we use daily is the postal service, which I take a particular interest in because I once had responsibility for it. It is true that it still retains a high level of customer satisfaction. Not long ago, the service was regarded as one of the best in the world. In recent years, it seems to have lost its way. In examining the topic, we took evidence from the regulator, Postcomm, and from Consignia, now once again known, thankfully, as the Royal Mail. A key element of the service is the early morning delivery, but this may soon be lost to us, inconveniencing people and damaging small businesses.

We found that the Royal Mail was experiencing major problems. Profitability was affected, and job cuts were proposed. Those difficulties had impacted on the quality of the universal postal service—something that we all support in this House and something for which we have all fought, particularly those of us who, like me, represent rural areas. The Royal Mail had consistently failed to meet its own target of delivering 92.5 per cent of first-class mail the next day. Performance also varied substantially over the country.

Our work showed that something had to be done. Postcomm intends to encourage improvement by rapidly opening up the market, way beyond what the European Commission is planning to do to liberalise the mail markets. We were concerned that Postcomm was making critical decisions that could jeopardise the universal service without the right information to judge the consequences. I believe that competition must be the way, but there is a real risk of throwing the baby out with the bath water. Postcomm needs more information about how changes to the levels and types of service that the Royal Mail provides will affect its customers.

In our 28th and 49th reports, we looked at the variety of initiatives designed to promote better policy making. We had a wealth of examples: some were good and some were not. Those who forget the lessons of history are condemned to repeat them. If we are to avoid a repeat of the millennium dome, the benefits payments card or the state earnings-related pension scheme fiasco, Departments must get better at all aspects of the process of making policy. That has nothing to do with Labour or Conservative Governments: we are all as bad as each other. Dare I say that? I suppose that I can get away with that much. In particular, Departments must carry out sound analysis and consult both potential customers and those who deliver the service properly. That might sound rather obvious—it is rather obvious—but it does not always happen in practice, as we found again and again.

I shall conclude the theme of improving service delivery on an up-beat note. Earlier this month, the Committee took evidence on the acquisition of the London Heart hospital. What is striking about this case is the way in which a hospital trust, aware of undercapacity in cardiac treatment, took rapid action to resolve the problem. When the private London Heart hospital came on the market, the University College London Hospitals NHS Trust saw a chance, went for it, slashed through the usual pernicious red tape that can envelope much of Government, broke a few rules in the process and took a risk. The deal to acquire the London Heart hospital was completed in months—a record. The result is a boost to patient treatment, as we saw when we visited the hospital.

The case stands out against the quagmire of bureaucracy that all too often hampers Government bodies. If Departments keep using the same processes, they will achieve the same outcomes, and it is likely that extra funding will exacerbate many of the problems that we encountered. A radical improvement in the standard of service delivery across almost all sectors will require a radically new approach to service delivery. Providing they are managed well, my Committee will welcome innovation and creativity. Although we recognise that they might not always work, we are not trying to create a culture in Whitehall that is averse to risk. We say take a risk, as long as it is a carefully considered risk.

I turn to my second theme—tackling fraud. We are fortunate—we should say it more often—to have very few cases of serious fraud committed by individuals in the public sector. We have a record second to none in the world. That is a tribute to the honesty of our public servants, and the robustness of the systems and controls that are in place. However, fraud against the public purse is a major concern. There is a wide spectrum, from individuals exploiting weak control systems for agricultural subsidies to fraud of epidemic proportions in the benefit payments stream.

One of the most serious individual cases that the Committee considered was described in our 51st report, which examined the activities of a farmer who was found guilty of committing £157,000 worth of fraud against the common agricultural policy. The fraud was perpetrated over a number of years because controls operated by the former Ministry of Agriculture, Fisheries and Food and the former Intervention Board were laughably weak. There was no cross-checking of claims between different subsidies, and the fraudster was able to claim for different crops on the same piece of land. Map references for fields were not always required from the farmer, or checked. His crimes came to light through a chance transfer of a member of staff.

Our hearing on the episode could almost be described as surreal. Notwithstanding the seriousness of the offence, a number of scams were pulled that would make Joe Grundy jealous. It was a case of appallingly lax controls—or perhaps I should say flax controls. The farmer had a particular problem with a series of combustible barns. His losses might have provoked a comment from Lady Bracknell, but they apparently did not evoke any interest in the Ministry. Over a two-year period, three of his barns, together with the crops that he claimed to have harvested, burned down. Indeed, so fond was the farmer of his barns that he even applied to the Ministry for a grant for a barn that had already been built.

In our hearing, my colleague the hon. Member for Glasgow, Pollok (Mr. Davidson) asked the Department
"There had already been inspections made of this property, had there not, and nobody had spotted that the barn was already there?"
To which the reply was:
"At that stage, no, nobody had spotted that."
Our colleague then remarked:
"It is a difficult thing to spot, of course."
The farmer also had an unconventional approach to geography. To disguise the fact that he was claiming to grow different crops on the same fields, he made up the Ordnance Survey map references for them and claimed for fields in Iceland, Greenland and the North sea. In our view, the Ministry and the Intervention Board did not pursue the irregular claims with sufficient vigour and recovered only £1,325. Clearly, there were a large number of lessons to be learned from the case, and I am pleased that controls have now improved.

Did not the hearing demonstrate the value of picking apparently small cases of fraud—in that case, £150,000, which is small relative to overall Government spending? By focusing on the issue and getting a permanent secretary to explain why things had gone wrong in that case, we revealed broader lessons about the failure of controls in that Government Department.

That is an important point. It is sometimes tempting for our hearings and NAO reports to cover a whole aspect of better Government policy making, and often the hearings that we hold, though interesting, are less effective than when we focus on a specific subject, possibly involving a relatively small wastage of money. When we focus the spotlight of the PAC on just one small part of a Department, nobody in Whitehall knows whether our spotlight might hit them next. If we were concerned only with value, we could spend all our time dealing with social security and nothing else. We must range widely.

Does my hon. Friend also recall from that hearing the rather strange fact that the Ministry had had recommendations from our Committee four years ago about ways in which it could reduce fraud, and appeared to have taken no notice of them? Indeed, the permanent secretary was unaware of them. The point made sotto voce by my hon. Friend the Member for Tatton (Mr. Osborne) at the beginning stands: it is not enough for the Government to accept the recommendations of the Committee; they must follow through afterwards.

That is an extremely important point. Sometimes we have a tendency to congratulate ourselves on the fact that 90 per cent. of our recommendations are accepted. It would be surprising if they were not, as we do not get involved in policy. We make sensible suggestions for improved implementation of policy. However, there is no point in the Government accepting 90 per cent. of our recommendations if there is no follow-through mechanism, particularly undertaken by the NAO to keep track of those recommendations. One thing that the Committee could do, which we have not actively pursued in the past, is to keep an eye on Treasury minutes and come back to them in questions to Ministers over the ensuing months and years. It is important that that aspect of our work is done effectively.

I am grateful to my hon. Friend for generously giving way again. Although I do not in any way argue with claims made for the probity of British Government in general, or for the integrity of the bulk of our civil service in particular, does my hon. Friend recall that, in a series of parliamentary answers in the previous Session, many Members were shocked to discover the scale of theft and fraud from Government Departments, including Government buildings? Is he not as concerned as I am about the scale of the heists that have taken place from the Lord Chancellor's Department?

Yes, obviously we are concerned about that. I shall deal briefly with the Royal Mint, where there was a particularly serious example, to illustrate the point. The trouble is that we can only take examples. We are speaking about raising and spending £650 billion, so it is a vast field to cover.

Returning to the case of the farmer, Mr. Bowden, it was suggested that that represented the tip of an iceberg and that there was a systemic problem of fraud. Can the hon. Gentleman confirm that, after our report, the Department looked thoroughly into such activity and found, perhaps as much by good fortune as by judgment, that that was an isolated case, and that the public need not fear that people like Mr. Bowden with lots of fields in the North sea and elsewhere are claiming subsidy?

We must put the matter into perspective. The fact is that farmers are claiming large amounts from the CAP. As I said, the Ministry has now introduced controls, so it is to be hoped that the attempted scam will not be repeated.

Benefit fraud is far more serious. When we examined the level of fraud and error in income support and jobseeker's allowance, we found that welcome progress was being made towards targets to reduce fraud levels. There is still too little information about the scale of fraud across benefits, which is remarkable. Estimates so far suggest that some £2 billion could be lost in fraud and a further £1 billion in customer and official error each year by the Department for Work and Pensions. As some of the Department's fraud estimates were out of date, however, it was impossible to tell what progress was being made across the board.

Large-scale benefit fraud has been around for a long time and will not be solved overnight. The Department's antiquated IT systems are, to some degree, dogging its attempts to improve performance, but it could do more. The Comptroller and Auditor General has qualified his opinion on the Department's accounts for reasons of fraud and error for the past 13 years. In other words, the Comptroller and Auditor General qualifies the Department's accounts every year. A loss of £3 billion each year to fraud and error may not immediately amaze the general public, as like me and others, they are phased by arguments about billions, but when we think that that amount would buy us almost 45 new hospitals each year or, more frivolously, allow us to stage an annual Olympic games, the enormities of the Department's losses come home to us—and this is just one Department of State.

Does my hon. Friend agree that the most extraordinary aspect of the issue was that the then permanent secretary admitted to the Committee that she did not even have a target date for publishing a set of accounts that was not qualified because of fraud?

The matter will be dealt with later this week and I cannot reveal to the House what the result will be, although it may well guess that the problem will be ongoing because of the Department's apparent inability to deal with it. We appreciate the problems that it faces. It is in control of a budget of massive complexity and difficulty, but it must surely concern the House of Commons that the independent auditor has, in layman's language, been unable to approve the accounts of a great Department of State for 12 consecutive years. That must be of great concern to the Treasury, just as it is to the Committee and the House as a whole.

We think that better targets are now in place as a result of our work. We hope that the auditor can work closely with the Department to ensure progress, so that we can reduce the amount that is lost on fraud and error. Unfortunately, the fraud cases that I have outlined were not the only ones to come before the Committee.

Will the hon. Gentleman clarify the situation? I am sure that, like me, he believes that there is no endemic corruption in the British civil service. We are discussing fraud and corruption not among staff, but among members of the public. We are challenging not corruption in the civil service, but competence.

The hon. Gentleman makes his point very well and I agree entirely. I am firmly of the opinion that the problem is not one of fraud or corruption on the part of civil servants, although there will be isolated incidents. Given the complexity of the system, the problem is fraud on the part of those claiming the benefits. Of course, only a small minority is involved, but it is large enough to waste £2 billion a year.

As I mentioned, the other startling case involved the Royal Mint, which one would have thought was a bastion of tight security. Sadly, we found it to be the mint with the hole. Remarkably, for eight months, a safe containing £25,000 in banknotes was left open and unattended during the working day. Unremarkably, somebody—or some people—took advantage of that slapdash security and put their hands in.

My third and final theme is linked to measures to combat fraud, and it concerns improvements in the quality of public administration, in respect of which the Committee makes a significant contribution. We do so on behalf of the taxpayer. I believe that good governance is an essential ingredient of a stable society. Our work provides the public with confidence about the way in which their money is spent. That is why we find it unacceptable when standards are not maintained and insist that lessons are learned.

I have mentioned aspects of our work relating to NHS waiting lists, and I want to deal with the appalling lapse to which the hon. Member for Newbury referred. Fortunately—we must put the matter into context—a very small number of NHS trusts were involved. The Committee found examples of 10 hospitals where managers and staff had fiddled their waiting lists to hide the fact that they were missing Government targets. That was a profoundly irresponsible thing to do and had very serious consequences for patients. In some cases, those actions will have prolonged the suffering of patients and their condition may have worsened.

The arrangements for identifying those involved and taking disciplinary action fell well short of good practice. In some cases, the inquiries were not rigorous or complete and some of those who were allegedly responsible were allowed or encouraged to resign during the process. Some trusts breached NHS guidelines that ruled out confidentiality deals as part of severance packages. The right hon. Member for Swansea, West has repeatedly pointed out that the Committee does not want to see confidentiality deals. We want transparency. The severance packages cost some £260,000 and some did not include clawback arrangements in respect of working elsewhere in the NHS. As some people had confidentiality schemes, they went to work elsewhere in the NHS and got their money.

The Department of Health has promised to address all those issues. NHS trusts took steps to develop action plans for the 6,000 or so patients who suffered as a result of the adjustments. That includes sending patients to other trusts and to the private sector for treatment. However, the Department could not tell the extent to which patients' health suffered as a result of delays in treatment or whether compensation will have to be paid.

Manipulating public information such as waiting list statistics can have an appalling effect on public trust. The Chancellor has made it clear that the NHS is an absolute priority for him and is compassion in action, as he puts it. I repeat that the manipulation of public information affects the public trust in what is going on. The Department must ensure that pressure to meet targets does not lead the NHS to engage in any more statistical sleights of hand or distortions of clinical priorities.

The hon. Gentleman will remember that the manipulation of data was carried out by a small number of people in a small number of trusts. Those people have since left or been thrown out, but is he aware that there is evidence to show that some of them are emerging on the other side in PFI deals? Will he give an undertaking that our Committee will consider that issue so as to chase through the small minority who have been corrupting public statistics and ensure that they do not play any future role in public service?

That is a very important point. We want to consider each PFI deal individually rather than become involved in policy arguments. One is always worried about the problem to which the hon. Gentleman refers and the possibility of gamekeepers who have worked in the public sector turning poachers in the private sector. There is now a far more of a relationship between the private and public sectors, and we and the Treasury must constantly keep that in mind. The issue may not be corruption in the accepted meaning of the word, in which people are taking backhanders, but corruption that involves people using knowledge acquired in the public sector for their own private good when they go into the private sector. I give him my undertaking that the Committee will consider that issue.

Criminal justice is another interesting area. Financial penalties are the most common punishment imposed on offenders by Crown and magistrates courts—a subject in which I am interested, as I used to be a practising barrister. Such penalties account for 70 per cent. of all sentences. In 2001–02, the financial penalties imposed totalled £387 million, but the collections amounted to only £228 million, and some of them related to fines imposed in previous years. The crucial point is that, in practice, slightly more than half of financial penalties are collected. It seems to be up to criminals to decide whether they pay fines, certainly in some parts of the country. The effectiveness of the criminal justice system is being undermined and both victims of crime and the taxpayer are being sold short.

Our 57th report from the last Session should be read by every public servant, and certainly by every accounting officer. It concerned the operation and wind-up of the Teesside development corporation. We found that weak financial management and oversight of the corporation may have cost the taxpayer some £13 million in additional costs, leaving a deficit of £23 million that could rise to £40 million. To put it in context, one has to say that the corporation achieved much of lasting benefit to the Teesside area. It helped to attract private investment of more than £1 billion, created 12,000 new jobs and brought 1,300 acres of derelict land back into use. However, we believe that this could have been done with greater regard to the principles of the proper conduct of public business. It is not sufficient to deliver a good in Teesside or anywhere else, while still breaking all the rules of public corporate finance, or enough of them to cause concern.

Explanations for some of the more unconventional transactions entered into by the corporation were—how shall I put it? —unconvincing. There was evidence of poor risk taking and acting without appropriate authorisation. The Department failed to act when it should have to bring the corporation's regeneration activities into line, despite warning signals from a number of sources, including colleagues in this House.

The hearing on the Teesside development corporation revealed a weakness in our hearings. Often, we get the accounting officer who is currently in post, rather than those who were in post when the problems arose. As I remember it, the accounting officers involved in that particular case were the then permanent secretary at the Treasury and the Cabinet Secretary, neither of whom we were able to call before our Committee.

That is a weakness. Our Committee has the right—as do all Select Committees—to call any official, and naturally, we normally call the current accounting officer. The principle is: the king is dead, long live the king. The fact that the officer was not in post at the time does not mean that he cannot answer questions. Having said that, Whitehall should take note that our Committee has passed a new resolution that makes it absolutely clear that in a case where we believe that we will not get to the bottom of things simply by interrogating the current accounting officer, we will be prepared to summon the former one—in this case, the permanent secretary—even though that person may have moved to another Department or retired. I know that that is controversial in Whitehall: the mandarins do not like it, and I can understand why. However, I am sure that they will appreciate that, if we are to do our work, we cannot simply be presented with someone who has mugged up an argument for that afternoon. There may be long periods when that person was not in control, and we would be unable to question the accounting officer of that time.

Some members of the Committee have been irritated by the principle of collective, almost anonymous responsibility that the civil service seems to apply whenever something goes wrong. As with the private sector, our Committee should emphasise the principle of individual responsibility.

We have to accept that in the modern way of doing business, whether in the public sector or the private sector, people must accept a certain amount of responsibility for their actions, and we shall indeed demand that that happens.

The hon. Gentleman has mentioned Imperial Tobacco, which set a great precedent for the Committee in the summoning of witnesses from the private sector to bring them to account for the loss of public funds. In that case, the smuggling of cigarettes was involved. Will the hon. Gentleman confirm that the Committee will be prepared to summon private sector witnesses when the public purse is being threatened?

Yes, of course. In that case, we were looking at Imperial Tobacco's exporting billions of cigarettes to Kaliningrad, Moldova and Andorra, where they could not possibly all be smoked. For that to be possible, every inhabitant of Kaliningrad would need to have smoked several hundred cigarettes a day. So they can only have been exported to Kaliningrad in order to be re-imported here as smuggled cigarettes, which clearly affected the public revenues available to Customs and Excise. Interestingly, it was the chairman of Customs and Excise who fingered Imperial Tobacco. In fact, he attended our Committee, although we did not know about this issue. He wanted to use the Public Accounts Committee as a lever to put pressure on Imperial Tobacco, and we have indeed caused it considerable embarrassment, which is a fair and proper thing to do.

The key part of improving the quality of public administration is the need to ensure that the lessons learned are spread widely, and that the savings and improvements identified in one area of government are quickly transferred elsewhere. Here, I shall deal briefly with the private finance initiative, about which there is much debate. We believe that each initiative must be judged and assessed on its own terms. However, in 1999, after we examined and reported on some early PFI deals, we issued a report on the experience so far, to help the public sector to get the best possible deal for the taxpayer. We are currently drafting a follow-up report, which will draw on the 15 reports we have published so far. It will tackle recurring themes in our work, such as the quality of contract management skills available in the public sector, and the extent to which risk is really transferred to the private sector. My personal, strongly held belief is that if things go well, the private sector must be allowed to make a good profit, but if they go badly wrong, it must be prepared to lose its shirt.

One area in which our work has already made a difference is in the refinancing of projects. Our work on the refinancing of the Fazakerly prison deal caused the Office of Government Commerce to insist that the taxpayer get a share of refinancing gains. This amounts to a mandatory 50:50 sharing of refinancing gains from new projects, and a 30 per cent. share of refinancing gains on early deals.

So the Committee will look very closely at how robust these new arrangements are. The private sector shoulders the risk of a PFI project, and we do not deny that it is entitled to benefit from refinancing gains, but taxpayers must be able to feel confident that they are also getting the money to which they are entitled. The Government's willingness to accept our views on this again demonstrates the tangible contribution that the Committee can make to the work of the Government.

In summarising the Committee's work, I hope that I have been able to show that we add value in all that we do. We have a distinct role in the House, and we constantly touch on key issues.

Does the hon. Gentleman agree that, of all the Departments we have interviewed—certainly since I have been a member of the Committee—the one in greatest need of better management is the Lord Chancellor's Department?

That is a Department that could perhaps do a little better. [Interruption.] We must not get involved in personalities. In fact, a National Audit Office report published today shows that the Libra project is probably one of the shoddiest PFI deals ever. It has run completely out of control, costs have risen from £135 million to £400 million, and the basic computer system for magistrates courts is still two years away. I acknowledge the point that the hon. Gentleman makes.

We have a distinct role within the House. We focus on implementation rather than policy, and we are able to stay above party politics. I am always impressed by the way in which my colleagues on the Committee respect that discipline. That is essential if we are to continue to be effective, but we would not be effective without the considerable help of the National Audit Office. In turn, the NAO's effectiveness depends on access rights. I should tell the Financial Secretary that I look forward to the imminent implementation of recommendations stemming from the Sharman report. Nearly two years ago, Lord Sharman recommended, and the Government accepted, that the Comptroller and Auditor General should audit all Executive non-departmental public bodies, and that his access rights should be on a statutory basis. Once in place, that provision will represent a significant step forward for Parliament. I very much welcome the Government's response to this, and when the Financial Secretary sums up the debate, she will doubtless be able to tell the House what action she intends to take—hopefully, very shortly.

Before I finish, there are some small gaps to which I must refer. I remain concerned that the BBC is outside the remit of the CAG. I await with interest the Government's response to our recent recommendation that Parliament's ability to scrutinise the BBC would be considerably enhanced were the CAG able to examine its financial management. For just over £2 billion-worth of compulsory licence fees—in essence, a poll tax—to be outside our scrutiny is simply not sustainable, and I urge the Government to act. I am sure that, sooner or later, we will win this battle on behalf of Parliament.

I have a similar concern—here, I may not carry with me everyone on the two Front Benches—about the civil list. I must say, as a monarchist, that the royal family's position is strengthened by greater transparency about their spending. For example, we were able to demonstrate that the cost of royal travel has substantially reduced over time. I therefore repeat, on behalf of the Committee, our long-standing request for the CAG, on behalf of Parliament, to be given access to the civil list.

Is there not a third instance where the CAG could do with further access? When we were talking about tax credits recently, it came to light that the CAG needs to have direct access to the accounts of those private sector firms that are handing out tax credits to ensure that they are doing it properly.

The CAG has asked for access to employers' records, but that is being resisted by the Inland Revenue. I do not know why. The Inland Revenue claims that that would add to the tax burden, but the CAG's staff are skilled in doing their work to ensure that they would not increase burdens on business. In effect, the private sector is a tax collector, so why should there not be such an audit?

Is there not a fourth example? The Financial Services Authority could do with some oversight, judging by its recent performance on split capital investment trusts, when it denied knowing anything about what was going on and later had to admit that it had been informed about what was going on in Guernsey.

That is a bridge too far for the time being, but my hon. Friend makes his point, and we may return to that—perhaps he can do so, when he is Chairman of the PAC in a few years' time.

I am part of a long tradition, established by Gladstone, of Opposition Members chairing the most powerful Select Committee of the House. We are able to consider matters of the utmost political sensitivity, but because we focus on delivery, rather than policy, we sustain the cross-party consensus that is fundamental to our success. Our work reaches into every corner of government and covers every pound of the £650 billion that the Government collect and spend each year. Some may argue that our work skims the surface, but our presence alone focuses minds. Our recommendations—by and large, the Government accept them—make a real difference. In my view, government is only as good as the independent parliamentary scrutiny that it receives. I believe that we play our part in that process, and I commend the motion to the House.

2.27 pm

I congratulate the Chairman of the Public Accounts Committee, the hon. Member for Gainsborough (Mr. Leigh), on the way in which he has taken up his new role. His speech today echoed the enthusiasm that he shows in Committee, and these 70 reports show the effectiveness with which he and the Committee work. The humour that he has brought to the Committee has been very helpful on occasions, and he has demonstrated that again today.

I was pleased to hear the hon. Gentleman say that he would abstain from any political partisanship. Of course the PAC Chairman is always an Opposition Member, and one of the delights of being its Chairman, which is one of the best appointments in Parliament, is that within about two years of a change in government, one is in the happy position of always questioning the other side. We had a long, long spell of questioning the other side.

I joined the Committee just over 12 years ago, and what impressed me then—it still impresses me now—is that, although the Committee reflects what the Chairman has said, it has an ethos of its own and its job is to get at the facts and to produce reports based on the facts, regardless of which party is behind the Administration at the time.

I wish to join the hon. Gentleman in extending our thanks to the National Audit Office and, indeed, its equivalent in Northern Ireland. That is more than ritualistic; it is important that the House of Commons understand the NAO's importance. With national income and expenditure of more than £700 billion, even with 70 reports a year, we would still not get very far, as a bunch of 15 Members of Parliament, unless we had the quality and depth of research contained in the reports that we receive from the NAO. That tribute is not meaningless; it is important because, without the NAO, financial accountability would not exist in the House.

I should also like to thank the NAO in relation to my role on the Liaison Committee. The NAO is now extending the help that it gives to the other Select Committees by seconding people, where appropriate, to help them with studies. Indeed, as the House has asked the other Select Committees to carry out a more detailed examination of estimates, the NAO is preparing to support them in that work.

It is also important to realise that a review is being undertaken into the back-up for the Select Committees. What depressed me when I became Chairman of the Liaison Committee was the inadequacy—not the low quality—of the support given to the Select Committees. A review is now in hand to examine the support that the Committees need, and the NAO is playing a leading role in it. That should reassure hon. Members, because the NAO will be absolutely objective. When I gave evidence to the Modernisation Committee, I recommended that the NAO should be used in that way because I knew that we would get an objective assessment of what is needed.

As the Chairman of the PAC has intimated, we have tried several innovations this year. Once or twice in the past, we have called X permanent secretaries and X accounting officers, but that never became a habit. However, two recent episodes justify our decision to determine who will come before us—not just the current accounting officer, but the previous one or whoever was in office at the time.

One of those instances relates to rail privatisation and goes back a couple of years. We recalled a witness whom we expected to give a very rough time, and we were provided with a good insight, even compared with the NAO report. The man who had sat there dealing with the practical managerial problems of trying to implement the policy, regardless of its rights and wrongs, was able to give us an insight into why some of the decisions had been taken. The hon. Member for Newbury (Mr. Rendel) will remember that occasion.

Although we did not agree with those decisions, we had a better understanding of the motivation and, indeed, the attempts by some of the individuals concerned to do their best. That led to a less abrasive report than we might otherwise have produced, whereas relatively recently—I shall not name the occasion—we had an example where the reverse happened. Very recently, someone who had been made a permanent secretary had to answer on behalf of a predecessor who had been in place for the previous four years. In the end, that person had to say, "I was not there. I don't know." That is our point, and the head of the civil service should understand that, although we know that he is not happy about our decision.

It is an enormous advantage to us if we can have first-hand experience, rather than always having before us a witness who has read the same report as we have read and then been briefed on what the questions might be by civil servants who were previously in that post. There is no substitute for questioning the person who was in post at the time, especially with very important examinations. I know that the head of the civil service and his permanent secretary colleagues are not happy, but they must recognise that accountability to the House comes above their sensitivities and sensibilities.

Our second innovation is in relation to visits—I am not talking about visits to Australia, New Zealand or the United States. We made visits to the Treasury building and the Heart hospital, and a memorable visit to Kensington palace. Because of the sensitivities of one Member who is present today, I shall not go into that in depth, but we can look back on that experience with more than fondness, as the taxpayer had previously been receiving reimbursements of only £69 a week for seven bedrooms and seven living rooms, whereas, in a year and a half, he will be receiving £120,000 a year for that same property. That is a small example, but it demonstrates the advantage of looking at things oneself.

That case—the hon. Gentleman and I may view it from different angles—demonstrated what I found when I first started asking questions. The palace said in its recent statement that the apartment had five bedrooms and five living rooms. In a parliamentary answer, the Department said that that same property had seven bedrooms and seven living rooms. I suspect that the truth is that the other two bedrooms and living rooms were for staff and therefore did not count in the palace's version. When I first started asking about grace and favour accommodation, I pursued a series of questions for about 12 months. As a result of the constant changing of the figures that the Department received from the palace, we discovered 100 grace-and-favour apartments that the Department did not even know existed. There is a value in scrutiny, which we may pursue with varying degrees of enthusiasm.

I want to raise the issue of no-go areas. We have produced about 70 reports, but we have been impeded in some ways by the existence of no-go areas, some of which the Chairman has referred to. The BBC is one of the most outrageous examples. I shall discuss that at some length. The National Audit Office is not allowed to audit the BBC, even though it receives £2.5 billion of statutorily raised money in the form of the fee, which, in Sharman's terms, constitutes public money. It should be monitored by the NAO.

As it happened, Mr. Dyke and the permanent secretary appeared before us to answer questions in relation to collecting the television licence fee. In our discussions, he repeated the old standby argument that if the BBC allowed the NAO and the PAC to investigate and audit its resources, its editorial freedom would be undermined. As we cannot consider policy, I do not see how that could arise. In any case, the BBC appears before the Culture, Media and Sport Committee, which can consider policy, to discuss its work, but it cannot appear before us to discuss money. One is left with a clear impression that they are more worried about money than about editorial freedom, because, of course, we audit the BBC World Service, and have done so for many years. In the more than 12 years that I have been on the Committee, I have never been aware of any complaint from the BBC that our monitoring of the overseas service had in any way impinged on its editorial freedom. I thought that we should confirm that, however, so I asked the permanent secretary if she would check with her Department whether there had been any complaints about the role of the NAO and the PAC in relation to the World Service in the previous six years. A footnote to our report states:
"Note by witness: Neither DCMS nor the Foreign and Commonwealth Office has any record of complaints, in the last six years, about National Audit Office access to the BBC World Service."
Thus the argument does not stand up.

It got worse, however. Mr. Dyke displayed a sheer arrogance, verging on contempt for the Committee, which was revealed in his answers to questions. I pursued the issue with him and, in answer to question 223, he said:
"There were quite strong arguments against when we were established in 1982 and those positions have not changed."
I followed up by asking,
"You know what they are, do you, the strong arguments that were against in 1982".
Mr. Dyke responded:
"I have looked at what the arguments were because I guessed the question might come up."
I responded:
"In that case, you should be well prepared."
Mr. Dyke replied:
"Being prepared and deciding to enter the debate are two different things."
Therefore, according to Mr. Dyke, he had taken the trouble to prepare to answer a question that he was not prepared to answer when he came to the Committee.

I ask my colleagues to cast back their memories: I recollect that from that stage I became somewhat impatient with Mr. Dyke; I called in the Comptroller and Auditor General, and I mentioned the matter of contempt of Parliament. Strangely, there is no mention of that in the minutes. I had the Clerk check the transcripts this morning. I draw that to your attention, too, Madam Deputy Speaker, as responsibility for Hansard rests also with you. In some mysterious way, part of the hearing—it may have been ill-tempered, and I may have been fractious and wrong, in which case I do not deserve to be protected from my wrong-headedness—has not been recorded as it should have been. If my hon. Friends recollect the occasion—

I seems that they do, as does the Clerk. I therefore ask you, Madam Deputy Speaker, to find out what went on.

The fact is that the Sharman Committee, the Select Committee on Culture, Media and Sport and numerous Members on both sides of the House—

Let me finish this point, and then I will do so gladly.

All those people—and Mr. Gavyn Davies when he was carrying out a review of BBC finances prior to becoming chairman of the BBC—favoured National Audit Office monitoring. The only one of us who has changed his mind is Mr. Davies, since he changed his job. It is for him to explain why. Up to now, other than stating that we would prejudice or damage editorial freedom, no one at the BBC has given the PAC any evidence or convincing argument to demonstrate that. As I said earlier, one is bound to conclude that what they are worried about is not editorial freedom but impartial external audit and accountability to the House of Commons.

The second no-go area is the Financial Services Authority, where we are talking about £170 million of public money, in Sharman's definition, raised statutorily in the form of levies and fees, in an area of extreme importance to the public. At a time when pension funds are collapsing and there are scandals about the advice that people have received on investments and savings, the FSA monitors banks, building societies, insurance companies, investment advisers and fund managers, yet as far as I can determine, it is the only regulatory body of the many that come before us that the Committee cannot investigate. Why? Even powers that were formerly exercised by the Treasury and were thus subject to examination have ceased to be subject to examination because they have been transferred to the FSA. We want to know what is to be done about that.

The Treasury will arrange for value-for-money investigations, but in the case of all other regulators, the NAO determines whether there should be such an investigation and carries it out. The NAO should be given the same powers in relation to the FSA.

I again echo a point made by the Committee Chairman, the hon. Member for Gainsborough. The Committee, Sharman and the NAO have all had a go at the third no-go area. We can look into royal travel, which involves a lot of money, and the cost of the palaces, which takes far more money, but the one thing that we cannot look at is the civil list—all because of a Select Committee recommendation made in 1972.

The PAC found that the real-terms costs of the palaces had fallen to about a third of what they were before—after I had produced a mass of information from a series of parliamentary answers—I persuaded the NAO to carry out an investigation and the PAC to hold a hearing. That was beneficial. The palace told us, "What good boys and girls we are, we're saving all this money."

Seventy per cent. of the civil list goes to pay the salaries of people who support the monarch. There is no problem with that; the monarch must have support. We do not vote against the money, but we want to find out whether it is being used effectively, as we do with other grants of public money.

The Committee was frustrated because for many years it had tried to get access to quangos—a point that was also made by the Committee Chairman. We had access to most but not all of them; we could not look at Government companies. We asked successive Chancellors, but the Treasury seemed to close around them and we lost, so during the last Parliament I made some proposals. The hon. Member for Newbury may remember the occasion. The Government Resources and Accounts Act 2000 was being considered by Parliament, so I suggested that the Committee carry out some political terrorist activity and send a volunteer team to the Standing Committee. The then Chairman of the PAC, the right hon. Member for Haltemprice and Howden (David Davis), the hon. Member for Newbury and I attended the Committee to fight the case for the PAC.

We made such confounded nuisances of ourselves—not by being awkward but by winning the arguments—that, in the end, the Treasury set up the Sharman committee to look into accountability to Parliament in relation to public money. The Government had no problem in giving notional acceptance to Sharman's recommendations, apart from those on the BBC and the civil list. I am delighted about that.

For well over a decade, the Committee had hammered its head against the wall of supplication; the moment that we got awkward, we got somewhere. Accountability to Parliament can be made to work if we want to make it work—if we discover where Departments are vulnerable. I am genuinely pleased—as was the whole Committee—that Sharman was almost entirely adopted.

I shall conclude by asking my hon. Friend the Financial Secretary three questions. The first relates to NAO access to bodies receiving public money either from Departments or from non-departmental public bodies, including contractors, subcontractors and so on. I understand that a statutory instrument will be enacted in March. Will my hon. Friend confirm whether it is still on schedule and will be in force by the end of the current financial year?

My second question is about NDPBs that are companies. At the request of the NAO, the PAC took on a case that the NAO strongly believes in and is arguing for in Brussels. It related to how our rights are influenced by European directives. Are the Government giving the NAO full support in those representations and, if so, what form does their support take?

My final question is politically sensitive at present, for obvious reasons. Sharman recommended that the NAO undertake validation of the data systems underlying the public service agreements. Ministers were understandably a bit nervous about that. My understanding is that the NAO is undertaking four trial runs, as it did with resource accounting. It is trying, with four Departments, to devise a system that works effectively. It is hoped that the first reports to the House and to the PAC will go live in 2004. Can my hon. Friend the Financial Secretary tell me whether that is still on target?

I became a Member of the House in 1964. I joined the PAC in 1965 and enjoyed the experience. I then spent 18 years on the Front Bench before returning to my proper position. The first place I headed for was the PAC. I still think that my colleagues and I do some of the most valuable work in the House of Commons. I still find that work rewarding and absorbing, and I hope that all my hon. Friends do, too.

2.54 pm

It is always a pleasure to follow the right hon. Member for Swansea, West (Mr. Williams), who is, as all its members know, one of the Public Accounts Committee's most effective members. It is always a pleasure to see him come in, often at the end of our hearings, to address the witnesses with that delightful smile on his face. It is so disarming as far as the witnesses are concerned, but we all know that it is the smile on the face of the tiger. His bite is always worse than one expects, and it is certainly effective.

I pay tribute to our Chairman, who has proved to be very effective and has done a great job since the last election. I am delighted that we are working closely across all three parties with him.

The Committee has been expanded so that, for the first time, a colleague from the Liberal Democrat party has been appointed to it. Sadly, however, my hon. Friend the Member for Cheltenham (Mr. Jones) has been unable to with us much as he became rather ill shortly after his appointment. I am sure that we would all want to wish him a swift return to the Committee when his health recovers. I pay tribute to Nick Wright, our new Clerk, who has had just over a year in office and has proved to be as effective as his predecessor, Ken Brown. It is a delight to work with him and his staff, and they always give us a very good service, as of course do the staff of the National Audit Office, who are invariably patient with all our demands, however insensitive they may be.

The right hon. Member for Swansea, West was absolutely right to say that this is one of the most powerful, if not the most powerful, and effective Committees of the House. It is a delight to serve on it. I am surprised that some of my fellow Opposition Members and some Government Back Benchers have not yet recognised its effectiveness. It is fun to serve on it and to feel that, once in a while, even as an Opposition Member, one can have real influence over the workings of, if not Parliament, the country as a whole and the way in which civil servants work to make Departments more effective.

I should like to speak about a few of the Committee's reports in order to bring some matters to the attention of the House. One report was on obesity. It was the first time that a collection of senior civil servants from a wide variety of Departments—permanent secretaries, accounting officers and others—had appeared before us. If I remember rightly, there were five witnesses, all of whom held senior office. It was fascinating to see some cross-departmental working—so-called joined-up government—and to have a chance to do some joined-up work in the Committee by asking questions of permanent secretaries and others. It also gave me the chance to get on to one of my hobby-horses—any cling—and to mention that cycling and walking reduce the problems of obesity, which are—dare I say it? —growing.

A report on the Victoria and Albert Museum made it clear that the imposition of charges had been a major reason for the drop in visitor numbers. I am delighted that charges have now been removed, as a result of which the figures have risen very quickly. I like to think that that fact, combined with our report on what went wrong after charging was introduced, means that charging to enter our museums will never be reintroduced.

Another report was on oil pollution at sea. That gave me a chance to use, as members of the Committee often do, some of my experience as someone who worked for a while in the oil industry and therefore knew a little about it. I asked the witnesses whether oil transported by pipeline or oil transported by ship was most likely to lead to pollution. It became apparent that oil companies, which decide whether to construct a pipeline to a new oilfield purely on cost grounds, had done no real research into whether the cheaper solution in terms of their costs of moving oil to and from an oilfield was also cheaper in terms of the long-term costs of pollution. The witnesses agreed that research into which of the two was more likely to lead to pollution would be a good thing. I hope that the Government will try to ensure that it is conducted.

We had an interesting hearing on the Post Office. Some of us with rural constituencies made the important point that rural areas are suffering from a drop in the number of post offices. Small post offices are often the heart and soul of small rural villages; often, when such a post office closes the village dies. The maintenance of those post offices is therefore very important to us. It became clear that the threat to rural post offices and to the Post Office in general is likely to grow as competition is introduced. I like to think that it is partly as a result of that hearing that the extent to which and speed at which competition was introduced was somewhat reduced.

It became clear that what has really gone wrong with the Post Office is that it has made very large profits over a long period, all of which have been siphoned into the general Government coffers and not reinvested in technology and services. If the Post Office had made such investments, it might still be making some of those profits and would not be in its current state.

We had an interesting investigation into income tax and the Inland Revenue. The Chairman of the Committee said that people should be encouraged, as much as possible, to submit their income tax returns online. However, he did not mention the ironic fact that Members of Parliament are among the few employees, wage earners or whatever who are unable so to submit their income tax returns online because the special parliamentary form that we must use is not yet available online. If the Treasury wants to set a good example, perhaps it could ensure that something is done to correct that.

I was able to make a bit of fun of the Inland Revenue on that occasion by pointing out that it sends out bills for £0.00 to those who have been fined for sending in their forms late when they do not in fact owe any tax. In subsequent parliamentary questions, the Treasury replied that it was important to send out those bills to warn people that they were late sending in their forms, even if no payment was implied. That merely brings the Inland Revenue into disrepute. I hope that the Treasury will think again about whether that is really the best way to approach Inland Revenue taxpayers.

We also had a hearing on clinical negligence in the health service. One of the issues that was discussed was whether we should move towards a no fault, no blame compensation system, on which I have been keen for a long time. I should explain, as I often have to in our hearings, that I have a direct interest in the health service in that my wife is a general practitioner. There is no question about the amount of concern and distress in the health service as a result of people worrying about being taken to court for decisions made, often in very good faith, but nevertheless in error. Medicine is not a science but an art, and it is often difficult to make the right decision. The fact that people do not always make the right decision should not necessarily lead to their being taken at great length, often over many years, through the courts, with all the stress that that adds to them in doing their jobs. I am sure that that is one of the reasons for people wishing to take early retirement, which is leading to some of the health service's staffing problems. A great deal of stress arises from the difficulties that people get into when they are taken through the courts. We also discovered that the amount of money that is spent on lawyers in many negligence claims is more than the victim of the negligence ever receives. The whole system is a way of putting a lot of money into the pockets of lawyers rather than into those of victims, which is not a good way of spending public money.

The private finance initiative was a much-discussed subject, often as a result of individual cases that came before us. Several issues have been common to many of our hearings. First, competition is likely to reduce gradually for PFI schemes, not least because of debt refinancing, which the Chairman mentioned. As we get better at demanding back for the public sector some of the savings that are achieved through debt refinancing, PFI schemes will become less attractive for the private sector. There is a danger, which one or two cases have shown, of few companies competing for PFI contracts. When we reach the stage at which the level of competition is so low, the value of PFI is likely to reduce and it will become more difficult to judge whether such a contract is good value for money when compared with the public sector.

On several occasions, some of us have been worried about the way in which the public sector comparator was calculated. We sometimes wondered whether the figures were fudged to show that the private sector contractor offered better value when, had the figures been calculated differently, the result would not have been so clearly in favour of the private sector.

Many of us have been worried about risk transfer. Often, the risk has not been properly transferred in the expected way. Consequently, the value of the PFI contract has been much less than it was believed to be. The public sector has frequently had to bail out a private sector contractor. In practice, the risk has remained with the public sector, which is no great surprise. The major public services that our Government run simply cannot be allowed to go to the wall. One cannot put out a major health service operation to the private sector so that there is nowhere to treat patients if it goes bankrupt. The public sector must keep the facility going. Genuine risk transfer is difficult in major, important public services.

A further point recently came to light. It has not formed part of our hearings so far but I hope that it may do so in future. There is a growing worry that many major contractors who win PFI contracts transfer large parts of the debt to special purpose vehicles, which are subsidiaries of the main contractor. They may be hiding the extent to which they are getting into debt and putting their operations at risk. We may have to take that up in the Committee. It is not direct fraud, but it hides from the public sector the danger that some of our PFI contracts could pose.

The point is worryingly mirrored by the Government's tendency to treat some of their liabilities as off balance book by trying to ensure that genuine Government liabilities in some privatised contracts are hidden off balance sheet and do not count towards the public sector borrowing requirement. Further questions will have to be asked about where the debt lies, especially in relation to, for example, privatisation of the National Air Traffic Services or the tube.

We had some fun with our investigation of pipes and wires. Controlling the number of holes that are dug in our roads is a subject of enormous public interest. Everybody experiences the congestion that roadworks cause. There is a case for telling regulators that they should insist on private utilities ensuring that they use the same hole in the road and do not dig up the road several times in quick succession. That maddens many members of the public.

I want to consider three reports that have particular topical significance. Prisoners and prisoners who reoffend have featured in the press recently. It became clear when we talked to the head of the Prison Service that, if we want to reduce crime, the worst thing that we can do is imprison people for a short time. One of the most likely methods of causing reoffending is to give sentences that are too short to provide the education that prisoners need and could mean that they lead a life free of crime.

The point is difficult to get across to the public, who tend to believe that the best thing to do with prisoners is to lock 'em away for as long as possible and throw away the key. If we want to ensure that a prisoner does not reoffend, and if we are interested not in retribution but in securing the minimum number of victims in future, it is important not to put people in prison for a short time, after which they are more likely to commit more crimes. That happens all too often.

There is a strong case for investing much more money in prison education. When Mr. Narey, director general of the Prison Service, came before us, he said that the return from investment "would be dramatic". He stated:
"I do not believe I am doing much more than playing at the edges".
That makes a strong case for the "spend to save" budget—another subject that we considered recently. Spending a little more on educating our prisoners would give them a chance of leaving prison not for a life of more crime but a useful life in the community.

We could spend a little more on such education now. The report states:
"The Prison Service said that the single action most likely to impact on reoffending was investment in education to enable prisoners to obtain jobs on release."
As I said earlier, that is a difficult view to present to the public. It is easy to follow the tabloid route of claiming that the best thing to do with those who have committed crimes is to shut them away for a long time. However, the worst thing that we can do is to put them away for a short time and leave them to learn more about how to commit crimes in future.

Combat identification is the second especially topical subject that I want to consider. It is topical because of the severe threat of war with Iraq. The war already has comparatively little public support. Many people believe that we should not even consider going to war in Iraq. If many of our troops are killed by friendly fire or many enemy civilians are killed by our fire, public support for a war is likely to reduce. That was apparent in recent conflicts. For example, in Kosovo, the deaths of innocent civilians constituted a major reason for some people's belief that it was not sensible for us to be there.

The National Audit Office report made it clear that friendly fire is not a new occurrence and that it has been part of warfare for a long time. One can understand that, on the ground in close battle, friendly fire causes a high proportion of deaths; it is not a new experience. That does not mean that we do not want to stop it, but the hon. Gentleman might inadvertently have given the wrong impression that it was a recent phenomenon.

I accept the right hon. Gentleman's point that it is by no means a new experience. However, the extent to which civilians are in danger in modern warfare is new. When armies met on a battlefield in Europe in the middle ages, that was different.

Order. I hope that the hon. Gentleman will not continue with that point for long.

I shall not wander into the middle ages any longer, but one of our reports made the specific point that we should consider whether our armed forces need to pay more attention to the possibility of identifying the difference between enemy forces and enemy civilians.

It struck me as rather odd that the witnesses who came before us on that occasion did not seem to recognise that it was an important point. They seemed to think that the only important point was to identify our forces from the enemy forces, and they had not taken into account the important psychological effects of modern warfare—not just on our armed forces, but also on our civilians back here in this country—and how important it is, if we are to fight a modern war, to have the support of the public behind our armed forces, which they could lose if we do not pay proper attention to this question.

I turn now to what is my own specialist subject, in so far as I have one in this House: higher education and widening participation in it. As the Chairman mentioned, that is another matter of important topical interest.

The NAO report confirmed that people from poorer backgrounds are already significantly less likely than others to participate in higher education. The previous Secretary of State and the current Minister for Higher Education have both confirmed over time on different occasions that the fear of debt is one of the main reasons why young people are being put off going to university.

A report from Universities UK, the joint vice-chancellors' body, is, I believe, to come out in a few weeks' time. Baroness Warwick, chief executive of Universities UK, announced some of its findings to a conference that I attended just the other day. She pointed out that about 84 per cent. of the group of young people that it surveyed who were thinking of going to university—they were either in further education colleges or sixth forms—said that they were concerned about the levels of debt, which were among the problems deterring them from possibly going to university. It also found that 15 per cent. of these young people had decided that they would not go to university, and that 50 or 60 per cent. of them had decided not to go because of the fear of debt.

The Government are rightly determined to get more of those young people who can benefit from university education to do so. They are rightly concerned to widen participation in that sense. As we all accept, widening participation means widening participation particularly among the less well-off sections of our population, those who perhaps do not come from families that traditionally have gone to university.

If we are to achieve that wider participation, it is absolutely clear that we must reduce the fear of debt. Indeed, it was the Prime Minister's recognition of that fact that led to his announcement in his famous conference speech immediately after the last election that he would set up the review of higher education financing, and of student financing in particular. The present situation is therefore somewhat ironic. The Prime Minister having decided upon that, because he knew the problems the matter had caused for Labour party candidates on the doorstep in the previous election, as a result of the perception of the debt and the fear of debt at the levels it was then, after the introduction of tuition fees, we now find that as a result of that review the fear of debt will be much greater. Indeed, the debts that students end up with will be much greater.

There is possibly a need for a further National Audit Office investigation of how we have reached this point. The Government knew that they had a major problem over widening participation among less well-to-do families. They set up a review to answer it and ended up with proposals that will make the problem far worse. If that is not some error in the way in which the Government work, I do not know when in the time that I have been on the PAC I have seen a worse case.

3.19 pm

I am grateful for the opportunity to contribute to this debate.

It is always a pleasure to follow the hon. Member for Newbury (Mr. Rendel). Listening to his contribution, particularly what he said about prisoners, one can readily see why he has the reputation for being someone who does not naturally court popularity.

Following the Chairman of the Committee, the hon. Member for Gainsborough (Mr. Leigh), is always difficult. As a member of the Committee, one realises that he always takes the best shots first, and in his extensive, well-presented opening he covered a wide range. If I repeat some of his remarks, it is only because I feel they need repeating.

Being a member of the Public Accounts Committee is one of the most challenging and rewarding positions to hold in the House. The PAC is unique among Select Committees. No other Committee has the same work load or breadth of remit. No subject is left untouched. One of our great strengths is that we can question different Government Departments; we go across government and can therefore judge the degree of joined-up government.

The Committee's aims are unique compared with those of all the other Select Committees. We do not look at policies; we look at the management, at the effective delivery of the civil service. The intricacies of policy analysis are left to the other Select Committees. We interview permanent secretaries rather than Ministers. Our role is to put a unique spotlight on the operation of the civil service and its relationship with the Government.

We have enjoyed some fine verbal exchanges with the witnesses, at times producing from both sides turns of phrase of which Sir Humphrey would be proud.

The PAC's success rate in being listened to also makes it unique. Over 90 per cent. of its recommendations have been accepted by the Government. Is that because they are so easy and are not challenging enough? No. Working with the National Audit Office we have brought about savings of £1.5 billion over the past few years. My colleagues on the team are well supported and are probably the best briefed in the House, having over 700 members of staff in the NAO to draw upon, as well as the excellent professionalism of the Committee staff.

The PAC can highlight the culture of the civil service. It is worth drawing attention to the present culture. As the Chairman pointed out, the present permanent secretaries have a background in policy rather than management. Yet the Government have expectations of delivery that the civil service will work towards, and different types of individual may need to rise to the higher echelons. Good management makes all the difference to the success of a project. Without those skills being prioritised internally in the civil service and, equally important, in external dealings with private sector suppliers, a project can fail to be delivered on time and in its full scope.

Throughout the past year the PAC has risen in prominence, owing in no small part to its excellent chairmanship and support staff. I hope that that trend will continue. With the commitment of staff, Members and the NAO, I am sure that it will.

Our job as parliamentarians is to ensure that we ask the right questions—the questions that the public demand—and obtain publicity, highlighting both successes and failures in our administrative set-up.

A notable moment for me last year was our visit, an away-day, to Kensington palace to view the accommodation. Regardless of the merits of the present living arrangements, the team on the PAC should feel justifiably proud that it was they who gained access and saw the accounts for the first time and brought into the limelight a sector of public expenditure that should be accountable.

I should like to give the House a quick sample of what it is like for some of our witnesses to appear before us. It is not all bad. We had the Radio Communications Agency before us. On the auction of radio spectrum for the third generation of mobile telephones, we thought congratulations were in order. In fact, that auction was a great success and raised a great deal of money—much more than anyone originally anticipated. But when we put the operation under scrutiny we found that £6.1 million had been spent on advisers who were so out of touch with the market that they were looking for £1 billion in the sale. We raised £22 billion. Was the £6.1 million well spent? Many Departments spend a great deal of money on advisers. Is it always well spent? The £22 billion was, indeed, good news.

Another report that the Committee considered last year was "Giving Confidently: the Role of the Charity Commission in Regulating Charities", on the Charity Commission for England and Wales. As a citizenry, we have a right to believe that the charities that collect on our streets are run effectively and efficiently and are above board. We found that in 1999–2000, 38 per cent. of charities had failed to submit annual accounts on time or at all. We decided that the Charity Commission must improve on that. If it does not and the public believe that the money that they donate does not reach its final destination, their contributions will diminish.

The Chairman referred to Joseph Bowden. That is a classic case. Mr. Bowden was a farmer who claimed money off that well-known Department MAFF—I am not sure whether it stands for the Ministry of Agriculture and the Farmers' Friend—for farming flax. Not only did Mr. Bowden develop a new technique and get paid for planting two crops in the same field, he did even better by claiming for planting crops in the Irish sea. Of course he had some difficulty when he had to collect the flax and send the crop off, so he burnt down the barn.

One would have thought that the insurance company that inspected the barn and paid out would have been efficient, but Mr. Bowden burnt down the barn in January 1996 and, lo and behold, again in December 1996. The insurance company paid out £85,400. There was no problem with him pleading guilty to that deception. But if the MAFF investigation was inconsistent, what about the investigative procedures of the insurance company that paid out twice in one year? We could go so far as to say that Mr. Bowden was a serial abuser of benefits.

The Department for Environment, Food and Rural Affairs has since renewed its operations so that fields are logged. Satellite technology allows us to tell when one crop has been planted in a field and it is not possible to claim for another crop in the same field. We know where fields are located, which is amazing, and the Department has come to grips with one of its major problems.

Many farmers complain about red tape because of the number of forms that they have to fill in. I have much sympathy with them. But they must understand that the only reason for that red tape is to stop fraud and the misappropriation of public moneys. Unfortunately, the Department was not quick enough to impose controls on Mr. Bowden or to get back much of the money that he managed to squirrel away.

Appearing before the PAC can give rise to difficulties. I always think of the PAC members as a pack—an apt term, I think. The way in which we follow each other when questioning a witness can be a tortuous experience for the person giving evidence. That was the case with the 57th report "The Operation and Wind-up of Teesside Development Corporation". The corporation left a large debt of £40 million when it was wound up. We put one or two questions to the chief executive that are a good example of the Committee working well.

The chief executive sold land on behalf of the corporation even after the board had been wound up. He received valuations from a team of valuers on selling the land and advice from a team of lawyers on the wind-up. The lawyers had no other client and advised Mr. Hall to shred the documentation. I said to him:
"If there was an inquiry, you would have extreme difficulty proving the decision you made on the day was in strict accordance with the regulations laid down and the notes on valuation provided to the corporation to uphold your story, would you not?"
The witness replied:
"In so far as those cases refer to files, I am not saying there would be a difficulty in responding to them ultimately, if one had all one's advisers around, but the situation appears to be that the National Audit Office did not find all the files it wished to find. All I can do is repeat the organisation and set-up of the disposal of the files of the Corporation."
When asked
"You would have difficulty in proving these deals were open honest and above board, would you not?",
Mr. Hall said:
"I am totally satisfied they are open and above board".
However, I pursued him by saying:
"They are not in existence though",
to which he replied,
"It would appear not."
I had to recite to Mr. Hall one of the things that people in public life believe in. I said:
"In public life the one thing we are terrified of, above all things, is not the fact that we are innocent, in that respect",
but that
"we have to prove we are innocent."
If the media are on our back, we have to prove with documents that we have done things correctly and in accordance with the law. Anyone who is told by legal advisers to shred files has received bad legal advice.

When an accountancy officer appeared before the Committee on that issue, we explained that the Department's guidelines were left in tatters, yet he continued to support the corporation, for reasons best known to himself. I asked
"Do you think the corporation was not better controlled because your Department lacked the power, the will or the ability?"
He replied:
"We are trying to improve the way in which it governed itself. We certainly had the power, we had the ability—what was the third one?"
I said:
"The will, the power or the ability?"
The accountancy officer replied:
"We had the power but it was rather a nuclear option. We had the ability and we chose to do it in a non-nuclear way. We did not have the will to throw the baby out of the bath water, by which I mean we decided it was better to soldier on with the existing management, the existing Chairman, the existing Board than to go for some oth