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Commons Chamber

Volume 404: debated on Tuesday 6 May 2003

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House Of Commons

Tuesday 6 May 2003

The House met at half-past Two o'clock

Prayers

[MR. SPEAKER in the Chair]

Private Business

MERSEY TUNNELS BILL (By Order)

Order for consideration, as amended, read.

To be considered on Tuesday 13 May.

Oral Answers To Questions

Foreign And Commonwealth Affairs

The Secretary of State was asked

Ukraine

1.

If he will make a statement on the effect of EU tariffs on Ukraine. [111594]

Tariffs on Ukrainian exports to the European Union benefit from most favoured nation treatment. That means that Ukraine is treated as though it were already a member of the World Trade Organisation.

I thank the Minister for his reply. There are serious concerns about possible arms exports from Ukraine to Iraq, allegations of money laundering and the murder of prominent journalists. If Ukraine is to be led along a path towards internationally accepted norms, does he agree that nothing should be done to make it more difficult for it to trade with its neighbours following the accession of the Baltic states to the European Union?

The hon. Gentleman is right, and I raised those points in a recent meeting with State Secretary Chalyi of Kiev, who is responsible for European affairs. Enlargement will be a big opportunity for Ukraine, giving it access to an expanded single market, and, overall, Ukraine's trade with its new EU neighbours should increase as enlargement generates greater wealth in those countries. We have what is called an active new neighbours policy, working constructively with the Kiev Government to try to bring Ukraine closer to the European Union.

I was very interested in that reply. The Minister in turn may be interested to hear that only last week I returned from a trip to Ukraine organised by Peterborough city council—my Peterborough constituency is twinned with the city of Vinnitsa. Members of our delegation were left in no doubt that Ukraine is extremely eager to become a member of the European Union. Will the Minister tell us how the UK Government may assist with that, especially in relation to developing trade links?

I congratulate my hon. Friend and, indeed, the city of Peterborough on those links. It is important that we look beyond the current enlargement of 10 new EU member states to the new neighbours who were all present, including President Kuchma of Ukraine, in Athens for the European conference—an idea initiated by Her Majesty's Government. We will work constructively with the Ukrainian Government to try to bring them closer to their ultimate ambition of membership of the European Union.

Mr. Speaker, you will remember the welcome visit that you kindly hosted only last week of the President of the Rada and other distinguished parliamentary colleagues. Will Her Majesty's Government follow up that excellent initiative with an intensification of the already good relations with Ukraine, an expression of thanks for Ukraine's participation in the coalition of the willing in the recent Iraq crisis—a courageous initiative on its part—and a determination to help Ukrainian agriculture, which has always been the backbone of Ukraine's economy?

We noted Ukraine's deployment of a nuclear, biological and chemical clean-up battalion to Kuwait earlier this month. The hon. Gentleman is correct to draw attention to the welcome commitment of the Ukrainian Government to the conflict to get rid of Saddam Hussein. We are now in discussion with Ukraine about how it might further assist the coalition. The question of Ukrainian agriculture, like the broad problem of agriculture in the whole of Europe, must be set in the context of the need to reform the common agricultural policy.

Iraq

2.

If he will make a statement on the role of Iraqi opposition leaders in the Iraq crisis. [111595]

The Parliamentary Under-Secretary of State for Foreign and Commonwealth Affairs
(Mr. Mike O'Brien)

I attended the conference of Iraqis in Baghdad last week. That gave me an opportunity to meet internal leaders as well as members of the diaspora opposition. A wide range of local leaders, academics, clerics and secularists were represented. We aim to create a broad-based Iraqi interim administration in a few weeks' time that can lead Iraq towards democracy. It should reflect the Shi'a, Sunni, Chaldean, Kurdish and Turkoman people but also women as well as men.

I am sure that the Minister shares my delight at seeing Iraqi opposition leaders elected to Mosul city council last weekend, but does he agree that the Iraq crisis will not be over until the weapons of mass destruction, about which the war was fought, are found and secured? Does he further agree that, should the intelligence that the Government received before the war be shown to be wanting in that respect, a fundamental review of our intelligence service will be required?

The coalition forces are actively pursuing sites, documentation and individuals connected with Iraq's WMD programmes. Both the United Kingdom and the United States have deployed specialist personnel and will send more in the near future. This investigation will not be a quick process. Saddam had ample opportunity to conceal his WMD programmes and he had considerable experience in concealment, dating back to the early 1990s. The process itself will be painstaking in detail. We want to establish the truth beyond any doubt. We cannot expect the coalition to conduct a proper forensic examination merely in a matter of weeks, so I ask hon. Members to bear with us while we conduct the investigation in what is still in some areas quite a dangerous environment.

Almost every week, I am telephoned by someone in Iraq who is concerned about the preservation of evidence. It is a matter that I have raised here time after time, but I still do not know what our Government are doing on this point. The point that I want to make now is that the mass graves are being uncovered not by forensic scientists or people who can assess the evidence that they are uncovering, but by people who are looking for their sons, daughters and relatives, which one can quite understand. But at the same time, we as the coalition, have a responsibility to preserve that evidence so that it can be used in the trials that will undoubtedly take place.

I agree with my hon. Friend that there is a responsibility to seek to preserve evidence, but in some circumstances it is still a dangerous environment and, within that context, we need to seek to preserve not only some of the sites but some of the documentation, some of which has obviously been disturbed—in some cases deliberately removed and in others ransacked by looters. There is therefore quite a large task to be undertaken, but as soon as we can establish effective security, I agree that our objective needs to be to seek to protect the evidence on which those who have committed such appalling atrocities under Saddam Hussein can be brought to justice.

Is there any reason other than security why the UN inspectors should not return to Iraq to fulfil the mandates given to them by the Security Council under resolutions 1284 and 1441? When does the Minister think that it will be safe for the inspectors to return to Iraq, and is there not now an overwhelming urgency about their return in view of the International Atomic Energy Agency's request today for access to sensitive sites?

Hans Blix himself has said that he believes that the circumstances are dangerous, and it would have been unsuitable to date for the inspectors to seek to return to Iraq and complete their task. My right hon. Friend the Secretary of State has said that it is the Government's hope that inspectors will be able to return to Iraq in due course and that they will be able to give independent oversight of the process of the finding of WMD. However, their objectives will be different. The objective will no longer be detection, more a validation of findings, and our objective is to see if we can ensure that there is some independent oversight of those findings.

The right hon. and learned Gentleman asked what the other restrictions are. Obviously, we will need to ensure that the United Nations Security Council is satisfied that that is the way to proceed, and we hope that we shall be able to obtain not only further resolutions from the Security Council, but agreement on how inspection and a range of other matters will proceed in relation to Iraq.

In light of my hon. Friend's previous reply, is he saying that validation of weapons of mass destruction, should they be discovered, will be the preserve of UN weapons inspectors, and will they also be responsible for the oversight of the destruction of any such weapons should they be found?

Certainly, it is our view that there should be some independent validation. We hope that the UN Security Council will decide that it can undertake that task through the inspectors, but, to some extent, we have to discuss not only with the United States but with the UN Security Council and with others how we can take this forward. We hope that the inspectors will be able to have a role, but there are still some steps to be taken to ensure that they do.

The vast majority of the people whom I met last week in Baghdad were deeply grateful to the coalition forces for liberating them from the regime of Saddam Hussein. I am afraid that a great many of them were also alarmed about the possibility of being shot, because there has been a huge increase in shootings. What steps does the coalition envisage taking to restore policing to Baghdad, as I believe is our obligation under the terms of the Geneva convention?

As the hon. Gentleman says, it is certainly our obligation to ensure that we establish law and order in Iraq, and we intend to do that. We have already begun the process in Basra, which we took before Baghdad was taken. We already have about 600 Iraqi police officers on the streets to patrol together with our British forces, so steps have been taken there. The Americans took Baghdad later and have begun to get a number of police officers to return to duty. They have begun making some patrols together with Iraqi police officers, so law and order is starting to come under some element of control. However, the situation is much more difficult in Baghdad in many ways. We still think that large numbers of foreign fighters remain in Baghdad and are taking potshots at people. Indeed, while the hon. Gentleman and I were in Iraq, we saw each other in Baghdad, and while I was doing an interview and he was watching, shots were fired in the background. There is still firing and it is still a dangerous place, but we are seeking to establish order.

Middle East

3.

If he will make a statement on progress with the road map for peace between Israel and Palestine. [111596]

5.

What progress has been achieved with the road map for the middle east; and if he will make a statement. [111598]

11.

If he will make a statement on progress on the middle east road map. [111604]

The publication of the Quartet's road map on 30 April is a major opportunity for both sides to work with international support to achieve a just and lasting settlement to this terrible conflict. All in the international community have worked hard over recent months to reach this point. We expect both sides to respond positively and to start implementation without delay. We shall continue to do all we can to help the parties to reach a settlement.

For the convenience of the House, I should like to announce here the appointment of our outgoing ambassador to Cairo, John Sawers, as the British Government special representative to Iraq. Mr. Sawers will work alongside Chris Segar, head of the newly opened British office in Baghdad, particularly in relation to the political process and our work in the Office of Reconstruction and Humanitarian Assistance.

I thank my right hon. Friend for that answer, but will he outline to the House what role, if any, Yasser Arafat has to play in this process? Secondly, is he convinced that President Bush and Ariel Sharon are genuine in seeking some sort of settlement with the Palestinians?

Yasser Arafat remains Chairman of the Palestinian Authority, but under reforms that we were happy to support, encourage and indeed facilitate in two sets of meetings in London earlier this year, there have been constitutional changes under which a Prime Minister has been chosen, his appointment endorsed by the representative Palestinian Legislative Council and a Cabinet appointed. Abu Mazen and his Cabinet will undertake most of the detailed work on the implementation of the road map, and we welcome that development.

We believe that the Israeli Government are indeed committed to the process. As for President Bush, I am in no doubt personally of his profound commitment to implement the road map and to see implementation of resolutions 242 and 338, as well as resolution 1397, which for the first time laid down the commitment of the Security Council, with full United States backing, to a two-state solution—a secure state of Israel alongside a viable state of Palestine.

Does my right hon. Friend agree that the only basis for a lasting settlement in the middle east will involve a secure state of Israel alongside a viable Palestinian state? Does he agree that that requires the Quartet to deliver commitment, courage and determination to make that vision a reality: and, if so, will he encourage it to do so?

Yes, I would. The process requires courage and determination on all sides—not only from the Palestinians and the Israelis, but from the Arab states, which have clear responsibilities to end their support and financing of terrorism and, in due course, fully to recognise the state of Israel.

Will my right hon. Friend make clear the Government's position on Israel's continued activity and settlement in the occupied territories, and does he agree that it is illegal under international law and an absolute obstacle to peace?

It is a matter of legal fact that the settlements are unlawful under international law. Under the road map, we look first to an end to further settlement activity, then, as part of the progress that is mapped out in that document, to a progressive withdrawal by Israel from those settlements.

Do our Government take the position that our US allies are right to continue to include Syria in their list of states that are sponsors of terrorism?

Syria is one of the states in the region that supports rejectionist terrorist organisations operating in Israel and the occupied territories, and we look to Syria to recognise the new realities on the ground and to end such support.

We all welcome the road map. I particularly welcome the Foreign Secretary's reference to the neighbouring states. Does he agree that they could act as a road block, causing detours, if they do not recognise Israel's right to exist in the area?

Let me make it clear that I agree with the hon. Gentleman, but that some of the neighbouring states have played a profoundly constructive role in getting to this point. I would particularly mention—this is not an exclusive list—the work of Jordan, the work of Saudi Arabia and the initiative of Crown Prince Abdullah, and the work of Egypt, especially that of President Mubarak and Omar Suleiman, the head of intelligence, in sponsoring and facilitating the process. The hon. Gentleman is of course right that every Arab and Islamic state has a responsibility to support the process, which will lead to what they say they want—namely, peace in the middle east.

Does the Secretary of State agree that the information that the British-born terrorists who last week committed the Tel Aviv nightclub outrage received support from Damascus reinforces the need for Syria to remove itself from supporting terrorism? What specific actions are the Government taking to ensure that that end is achieved in order to give the road map to peace a chance?

I refer my hon. Friend to my answer to the hon. Member for New Forest, East (Dr. Lewis). The President of Syria and his colleagues have recently had many conversations on the matter, including with my hon. Friend the Member for North Warwickshire (Mr. O'Brien), who is the Foreign Office Minister responsible, and with Secretary of State Colin Powell, who visited Damascus last week and delivered, as did my hon. Friend, very firm messages to the Syrian Government about their need to take fully into account the changed circumstances in the region.

I welcome the appointment of John Sawers as the special representative in Iraq. I am sure that he will be a great asset in bringing the process to a sensible resolution.

Does the Foreign Secretary agree that we must be wary not to vest in the road map an element of magic, and that it will ultimately depend on the political will of the Israeli Government and the Palestinians to march along it and successfully to negotiate the details within it? Does he agree that the key is reciprocity—the confidence on each side that the steps laid out are being matched on the other side? What mechanisms will ensure that the reciprocal steps that are made are publicised, thus helping to build and sustain that confidence? Is it not essential that the Quartet, whatever their previous views, are now seen to he completely even-handed in their approach?

I thank the right hon. Gentleman for his agreement and acceptance regarding the importance of the appointment of John Sawers. I should explain that Mr. Sawers will come to work for me as the new political director of the Foreign Office in the summer, and that his leaving Cairo provides a useful opportunity to make use of his talents in the intervening period.

The right hon. Gentleman is also correct that the road map is no magic solution. Its steps have been well set out in the past in a series of documents, including the Tenet and Mitchell reports. The difference now is that there appears to be an international consensus on those steps, especially full backing for the process from President Bush.

The right hon. Gentleman is right that the arrangement is reciprocal, but each side has a responsibility to take steps immediately and not wait for the other because unless there is good will and an initiative towards it, we will not get the final status settlement that we want in 2005. I accept the right hon. Gentleman's comments about the need for the Quartet to monitor progress, publicise that monitoring or its failure and act together.

From the experiences of other peace processes, is not it, sadly, odds on that extreme interests on both sides will try to undermine the progress in the road map through terrorist attacks in Israel and provocation against Palestinians in the occupied territories? What measures can the Quartet and neighbouring Arab states introduce to ensure that such incidents are prevented as far as possible and not allowed to destroy confidence, without which the initiative cannot succeed? In particular, what assurances has the Foreign Secretary been able to give his Israeli counterpart about potential terrorist attacks from this country?

It is an appalling truth that the extremist rejectionist terrorist organisations will try to prevent any democratic progress towards peace by both sides by resorting to bombing, shootings and especially the facility of suicide terrorism. That was apparent in a suicide bombing that was by no means accidentally timed as the Quartet's road map was being published. It is a matter of great regret that the two suicide bombers were British citizens.

Last week, I spoke to Foreign Minister Shalom to express the British Government's—and, I believe, the British people's—condolences on the death of the Israeli citizens. I also said that we would do everything that we could to ensure that the suicide bombers' backgrounds were fully investigated and that such incidents were prevented in future.

I welcome all that my right hon. Friend said, but may I remind him that, if the road map is to succeed, much responsibility will fall on the elected Government in Israel? They have the power to make changes in the area. If they do not allow Abu Mazen and his new Cabinet and Administration the room to exercise power, and simply demand that something happen but simultaneously frustrate it by continuing the occupations, road closures, targeted killing and house demolitions, it will be impossible for any new Administration to gain credence. It will also make it appear that the Palestinians do not want peace. Israel says that it is the only democracy in the area, so surely a greater responsibility falls on the elected Israeli Government to make a bigger gesture, even in the face of adversity.

I am grateful to my hon. Friend for his remarks. However, I believe that the responsibilities lie evenly on the Government of Israel, the Palestinian Authority and the states in the region. Israel is indeed a vibrant democracy; that is one of its great strengths. However, we must all acknowledge that the peace party has been undermined in Israel as a direct result of the suicide bombers who have operated so viciously in the months since the intifada was declared.

Am I right that phase 1, which seeks to end terrorism, is designed to be accomplished by this month? More important, will the Foreign Secretary confirm that phase 2—the creation of an independent Palestine—depends on the achievement of phase 1?

I am afraid that I do not know the answer to the hon. Gentleman's first question. I think that he is right, but in any event I shall make that clear in due course. I read the whole of the road map over the weekend, but this just goes to show how other things can crowd it out. The answer is certainly very shortly.

I thank the hon. Gentleman, who tells me that it will be by the end of May. The time scales for the initial steps to be taken are certainly very swift. What we need to see is an indication of good will from both sides.

Hong Kong

4.

What representations he has made to the Hong Kong Government about article 23 of the Basic Law. [111597]

The Parliamentary Under-Secretary of State for Foreign and Commonwealth Affairs
(Mr. Bill Rammell)

I have discussed article 23 with senior members of the special administrative region Government in Hong Kong and in London. In those discussions, and in the statement that I issued on 27 March about the draft article 23 legislation, I made clear our concerns about certain aspects of their proposals.

I thank my hon. Friend for that reply. It might be too early for him to make an assessment of the impact, if any, that severe acute respiratory syndrome will have on the progress of the Bill, but may I put to him this crucial point? The institutions that have made Hong Kong so successful—freedom of speech, press freedom, the independence of the judiciary, and the rule of law—must not be compromised by the implementing of the legislation.

I thank my hon. and learned Friend far making that point. I very much agree that those key ingredients that have made Hong Kong such a success story need to be preserved through the passage of this legislation. I certainly welcome the fact that the special administrative region Government have made several changes in the draft legislation, compared with their original proposals. I also welcome their assurance that the basic rights and freedoms in Hong Kong will not be eroded. The devil will be in the detail, however, and that is why we shall follow this issue very closely indeed.

Will the Minister tell us which of the concerns to which he referred in his first answer has met with the least positive response from those with whom he has been talking?

There has been some movement on all the issues. There are a number of concerns, but the key remaining issue is that of the proscription of organisations in Hong Kong that are subordinate to organisations that are banned in mainland China. Part of the success of Hong Kong since the handover is the autonomy of the legal system, and the concern is that a move in this direction would blur the distinction between Hong Kong and the mainland. That is the key point that we are continuing to make.

Zimbabwe

6.

If he will make a statement on the implications for security in Africa of UK policy towards the regime in Zimbabwe. [111599]

The United Kingdom wants the restoration of a stable, prosperous and democratic Zimbabwe. Poor governance in Zimbabwe has reduced foreign investment there, precipitated economic decline and exacerbated political instability. The crisis there has also damaged neighbouring economies. Zimbabwe's inability to pay neighbouring countries for power supplies, and the spread of foot and mouth disease, for example, clearly have major implications for the prosperity of southern Africa generally.

Does the right hon. Gentleman recognise that the economy of Zimbabwe is in a state of anarchy and that millions are starving? Is he aware that Opposition MPs have been imprisoned and tortured, and that the leader of the Opposition is on trumped-up charges of treason? Furthermore, the Mbeki mission has ended in farce, yet the United Kingdom Government are sanctioning a cricket tour that can only bolster the Mugabe regime. Surely the time has come for them to start to take Zimbabwe more seriously.

The hon. Gentleman is right to talk about the state of the economy. Gross domestic product is reckoned to decline by 12 per cent. this year, and to have declined by a quarter over the last four years. The official rate of exchange of the Zimbabwean dollar, which was until recently valued at 50 to the US dollar, is now 800 to the US dollar. The unofficial, black market rate of exchange is 1,500 to the US dollar. That is an indication of the wreckage that President Mugabe has produced from that once extremely prosperous and potentially very prosperous country.

So far as the cricket tour is concerned, I would say to the hon. Gentleman that we are of course as committed as he is, and feel as strongly as he does, about the need to bring pressure to bear on the Zimbabwe regime. However, I have always taken the view that, even if we had the power to stop sportspeople from Zimbabwe visiting, we would be punishing ordinary Zimbabweans rather than punishing the regime.

The hon. Gentleman talks about chaps who wear black armbands. Henry Olonga—

Henry Olonga is a great man. He told theDaily Mail just the other day:

"It is right for the cricketers of my country to be here"
in the United Kingdom.

There is perhaps a glimmer of hope that the leaders of the African union are beginning to realise the adverse effect of what is happening in Zimbabwe on the perception of Africa generally. How important does my right hon. Friend consider the current initiative by the Presidents of South Africa, Malawi and Nigeria? I refer to their visit to Zimbabwe, which I think was scheduled for yesterday.

I have yet to receive a full report of the visit, but I have no doubt that those three Heads of Government, and indeed virtually all Heads of Government across the continent of Africa, are fully aware of the damage that the Mugabe regime has caused to Zimbabwe, to the South African region and to the reputation of Africa generally. The issue between us often relates to tactics and how best to put pressure on the Mugabe regime, but I think everyone can see that whatever "consent" the regime may once have had is rapidly dissolving before our eyes.

Does the Foreign Secretary share the regret felt by many that President Mugabe has been unwilling to step aside? Is not the cruel truth that the failures of Mugabe's Government are a blight on the whole of southern Africa, and inevitably affect the levels of support and investment that the developed world gives the region—which in turn undermines NEPAD, the New Partnership for Africa's Development? Is it not outrageous that some of the poorest people in Africa must pay for the excesses of the Mugabe Government?

The right hon. and learned Gentleman is entirely right. James Morris, director of the World Food Programme—who briefed the United Nations Security Council on 7 April—described the humanitarian crisis in Zimbabwe as "almost beyond comprehension".

We are determined that the Zimbabwe crisis should not undermine NEPAD, although it has certainly not made NEPAD's implementation any easier.

Yesterday's visit to Zimbabwe by the three African Presidents was a belated but nevertheless welcome initiative, although the outcome was predictably disappointing. Is not the key element of any solution, quite simply, the restoration of the democracy and rule of law destroyed by Mugabe, and is it not true that progress will not be made until Government-sponsored rape, torture, ethnic cleansing and starvation are ended?

Is it not the case that this is no longer just a domestic problem, but a matter of regional security and a humanitarian crisis? Is there not a role for the United Nations Security Council to play in coming to grips with it? Will the Foreign Secretary, even at this late date, shake off his self-confessed post-colonial guilt, take the initiative of the Security Council, and stop passing by on the other side?

I thought that the right hon. Gentleman was doing quite well until he reached the last bit, which was rather predictable.

Ask him what he would do! He has not told us what he would do.

My hon. Friend points out—from a sedentary position, but I think everyone could hear because he is a good Essex boy—that the right hon. Gentleman never says what he would do. He mentioned the Security Council. I would be the first to have the matter taken before the Security Council if I felt that there could be a successful outcome, but there is no evidence for that at present, which I greatly regret. If we tried and failed, Mugabe would clearly regard it as a victory for him.

The circumstances are very different from those in Iraq. We are working to put the maximum pressure on Mugabe. Notwithstanding the predictions of Conservative Members, we managed to obtain sanctions supported by the Commonwealth and sanctions supported by the European Union, and to have those sanctions tightened. It is obvious that the pressure is working, and is destabilising the Mugabe regime.

Is it not a tragic fact that what my right hon. Friend has said is an understatement of the current problem of decline in Zimbabwe? Following the recent visit by leaders of other African countries, is it not perhaps time to say to all those in ZANU-PF who recognise that Mugabe's time is up that if they want to save their country, they should tell him that now is the time for him to go if he wants to do likewise, and to stop the appalling decline that we have witnessed in the past few years?

Iraq

7.

If he will make a statement on the coalition's plans for elections in Iraq. [111600]

The Parliamentary Under-Secretary of State for Foreign and Commonwealth Affairs
(Mr. Mike O'Brien)

At the conference of Iraqis in Baghdad last week, there was a call for a conference in four weeks' time to agree a broad-based independent Iraqi government. It is envisaged that such a government will then call a constitutional assembly; this will agree a constitution, to be put to a referendum. An electoral roll will need to be drawn up; then, we hope that elections will take place to select a representative Iraqi government. It is difficult to be precise about the timetable, as requested, but an estimate would be 18 to 24 months in all.

May I welcome the Minister's commitment to the free and fair elections that his answer seemed to imply? Can he explain the status of important political groups such as the Ba'ath party, the Communist party and the Islamic fundamentalists? Will they be allowed to compete freely and democratically in those elections, and if they won would they be allowed to win?

Yes, we hope that there will he free and fair elections. Whether they are through proportional representation remains to be seen, but I would imagine that the Iraqis would have more sense. We hope that the 13a'ath party will not be able to involve itself in that election, and certainly not in the form that it took under Saddam Hussein. It is not envisaged, therefore, that it would be allowed to operate. However, other parties would have to form and to put themselves in the normal way before the electorate. So it is a decision for the Iraqi people themselves as to exactly how they want to develop their political culture and go about creating a new and representative Iraqi government. Any birth is a difficult process, and the birth of a new democracy is going to be difficult; but it can also be a wonderful process.

When Donald Rumsfeld says that America will not tolerate any outside influence in the affairs of Iraq, is the irony intentional, and by what authority does America—or, indeed, Britain—determine which countries should have any influence in the elections in Iraq?

As my hon. Friend will know, under the Hague convention and the Geneva convention the coalition forces have a responsibility to ensure law and order and basic security in Iraq, and that is what we are seeking to establish in a difficult environment. Therefore, there is legitimacy in Donald Rumsfeld's saying that, and in warning others who may seek to disrupt law and order in Iraq not to do so. There are obviously one or two other regional players, and other organisations that are not governments themselves— Hamas, Hezbollah and various other groups—that might seek to play a role. We are simply flagging up that they should not seek to disrupt what we hope will be an orderly progress towards a democratic Iraq.

When it comes to elections in Iraq, what philosophical differences does the Minister think might divide potential political parties there? This is a crucial moment for shaping Iraq's permanent institutions of justice, taxation, human rights and local government, and, indeed, for the whole scope of government itself. In terms of structure, does the Minister think that the Swiss model might be a good one to emulate, and do the Government think that it would be good for Iraq's longterm economy—and, indeed, for the well-being of its citizens—for Iraqis to have a health service that is free in respect of all health needs at the point of delivery, including even foundation hospitals, or are we to conclude that when it comes to Iraq, this Government have a two-tier set of principles?

That was laboured—very laboured—but the philosophical differences between Iraqi parties are for the Iraqis themselves to resolve. Whether a Swiss or any other model—even a proportional representation model—is established will be for the Iraqis to decide. The same applies to foundation hospitals. They would be wise to listen to the arguments, but, in the end, it is entirely for the Iraqis to decide.

South Africa

8.

If he will make a statement concerning the United Kingdom's bilateral relations with South Africa. [111601]

I know that the House will join me in mourning the death last night of Walter Sisulu, one of the founders of the African National Congress and of modern South Africa. We share with all the people of South Africa their grief at that loss.

On the question itself, our relations with South Africa are good. I will visit South Africa shortly, for the UK-South Africa bilateral forum, when a wide range of bilateral and regional issues will be discussed. I pay tribute to President Mbeki for the role that he has played in promoting the New Partnership for Africa's Development and in the drive for peace in the Democratic Republic of the Congo and Burundi.

Given the inconclusive meeting of the three presidents of South Africa, Nigeria and Malawi in Harare yesterday, will my right hon. Friend do all that he can to use Britain's good relations with President Mbeki of South Africa to ensure that he continues to put pressure on the Mugabe regime and finds a swift solution to the appalling situation in Zimbabwe?

I look forward to discussions with my opposite numbers in South Africa and elsewhere about bilateral and regional issues. Zimbabwe will feature high on the list of regional issues. As I have already told the House, I am in no doubt about the South African Government's concern about Zimbabwe.

While I agree with the question asked by the hon. Member for Stevenage (Barbara Follett), how does the Foreign Secretary feel that our bilateral relations with South Africa have been influenced by the tragedy in Zimbabwe? Does he agree that the security of the whole of central southern Africa might well be influenced by the tremendous damage that events in Zimbabwe are doing to other countries in southern Africa? Does he believe that we, as a country with influence in southern Africa and South Africa itself, can do anything else to bring about a change of leadership in Zimbabwe?

The hon. Gentleman speaks with great knowledge of the region. What has happened in Mugabe's regime in Zimbabwe has plainly damaged the wider region as well as that country. However, I believe that our relationship with South Africa is too important to be defined by Zimbabwe and, as it were, by the gross inadequacies of President Mugabe. South Africa is by far the most important country in southern Africa and it has a leading role to play in the economic development of the whole of Africa. We have very good bilateral relations with the country and the subject forms an important part of my agenda for discussion at my forthcoming visit.

We have set a clear agenda for putting pressure on the Mugabe regime, including sanctions and the opprobrium of the international community. We have to work with our partners in southern Africa to achieve an acceleration of that pressure, which is already working, as can be seen on the streets of towns and cities across Zimbabwe. From a depressing position late last year, the opposition parties are winning by-elections and the Mugabe regime is becoming highly destabilised. It is my belief—it may be optimistic—that if we maintain that pressure, sensible people inside the ZANU-PF regime will realise that, for their country's future as well as their own, they have to detach themselves from President Mugabe.

During the Secretary of State's forthcoming visit to South Africa, will he raise with his opposite number the contents of the written statement by Baroness Amos a few weeks ago about the appalling situation whereby, in London and South Africa, the so-called Northbridge group—a bunch of mercenaries—is actively recruiting Brits and South Africans to destabilise the region, particularly the Ivory Coast? Is it not about time that this Government and the South African Government took legislative powers to control and regulate those bandits who are doing great harm throughout the continent?

:My hon. Friend is right to raise this issue. We are taking a number of actions in respect of this company but, as he knows, the Foreign Affairs Committee—of which he is a member—has made important recommendations to the Government on legislating in this area and we have already offered a positive response.

The Foreign Secretary will recall the pivotal and direct role that the previous South African Government played in bringing to an end the illegal regime of Ian Smith. When he meets President Mbeki, will he remind him that, under the terms of NEPAD, African leaders have an obligation to speak out clearly and act against abuses of democracy by Governments in the region?

I shall be happy to spell out to President Mbeki and other Ministers the nature of the Harare principles and the Southern African Development Community's parliamentary principles, and the importance of these being implemented right across southern Africa.

Rwanda

9.

If he will make a statement on the political situation in Rwanda. [111602]

The Parliamentary Under-Secretary of State for Foreign and Commonwealth Affairs
(Mr. Bill Rammell)

:Progress is being made on rebuilding Rwanda and the lives of the people, but there is still a long way to go. The political situation is encouraging, with a constitutional referendum scheduled for 26 May and presidential and parliamentary elections later this year. We stand ready to help Rwanda with its election process. The Foreign Secretary is meeting President Kagami in London later this week.

:My hon. Friend will agree that the post-genocide transition period as defined in the Arusha accords is coming to an end and that it is a critical time for Rwanda. My hon. Friend will be aware also of the recent crackdown on the political opposition parties in Rwanda, particularly the largest opposition group, the MDR. Does he share my concern that, in the run-up to a referendum and constitutional elections, there is no serious opposition to the ruling RPF? As the biggest bilateral donor to Rwanda, should not the UK play a critical part in ensuring that fair elections are held? Will he impress that upon President Kagami at the talks later this week?

I certainly agree that this is a critical time for Rwanda. With regard to the MDR, we will be urging the Rwandan Government to follow full due process and to demonstrate their commitment to an inclusive and democratic state. I am not sure that I would go so far as to say that there was no opposition; there are some 80 opposition parties in existence. Undoubtedly, we will be taking the opportunity this week to discuss with the Rwandan Government how they intend to manifest their commitment to establishing a democratic and inclusive state. I am sure that will be on the agenda for the talks with my right hon. Friend the Foreign Secretary.

Middle East

12.

What plans he has to meet the new Palestinian Prime Minister to discuss the middle east peace process; and if he will make a statement. [111605]

The Parliamentary Under-Secretary of State for Foreign and Commonwealth Affairs
(Mr. Mike O'Brien)

:Both my right hon. Friend the Foreign Secretary and I regularly discuss the road map with our Arab colleagues. It was one of the subjects raised during our recent, separate visits to the region. I regularly brief Arab ambassadors in London on UK policy towards the middle east, including the peace process. My right hon. Friend the Prime Minister has invited the Palestinian Prime Minister, Mahmoud Abbas, to visit London.

:Does the Minister understand that what seems to be lacking from his reply and that of the Foreign Secretary is a sense of urgency? The new conditions that pertain in the world post-Iraq, with the President of the United States fully supporting the new process, demand a new sense of urgency from the world. When he next meets representatives of Arab Governments or the Israeli Government, will he remember the word of Brutus in "Julius Caesar"?

"There is a tide in the affairs of men,
Which, taken at the flood, leads on to fortune;
Omitted, all the voyage of their life.
Is bound in shallows and in miseries.
On such a full sea are we now afloat,
And we must take the current when it serves,
Or lose our ventures."
Does he agree that we are on such a full sea, that we must take that current, which is flowing strongly in the direction of peace, and that, if we fail, future generations of Palestinians and Israelis will never forgive us?

Et tu, Brute. I can tell the hon. Gentleman that my right hon. Friend the Prime Minister has been discussing this matter with the American President over a number of months, with more than a little success. The Government have shown throughout that we are aware of the urgency of creating an Israel that is free from terrorism, and a Palestinian state that is viable. In that way, there will be an end to the injustice that has been done to the Palestinian people. The Government are committed to supporting that peace process, and we are working with the Americans and others to ensure that there is full backing for the quartet's road map.

May I add my welcome to the road map? I should also like to echo the comments made earlier by my right hon. Friend the Foreign Secretary, who said that the obligations on the parties were immediate and simultaneous, and not sequential, as some members of the Israeli Government have suggested. However, I want to ask my hon. Friend the Minister about a related issue—the fact that a number of foreign nationals were shot recently as they attempted either to report what is going on over there, or to promote peace. What representations are being made to the Israeli Government, especially about the case of Tom Hurndall, who was recently shot, and is now in a coma? Yesterday, Israeli forces fired shots over a convoy carrying Mr. Hurndall, even though the convoy bore diplomatic flags and was accompanied by British embassy staff.

:My hon. Friend is right to say that we have serious concerns about the incident to which he refers. I spoke to the Israeli ambassador on Saturday and expressed our deep concerns about the matter. I also asked for a full report to be made after a proper inquiry into the incidents has been held. My right hon. Friend the Foreign Secretary has also spoken to some of the families concerned. We will pursue these matters with the utmost vigour. They are very serious, and my hon. Friend need be in no doubt that the Government will treat them seriously, as consular matters. We will give as much support as we can to the families concerned, and we will make sure also that the Israeli Government are in no doubt about a problem that seems to occur all too often—the lack of discipline among Israeli defence force soldiers. That issue of discipline needs to be dealt with by the Israeli Government.

Even if the Minister cannot aspire to a Shakespearean vocabulary, will he at least use a jargon-free vocabulary? Can we discard "road maps" and "quartets" and talk about the peace process instead, and then get on with the job?

Nigeria

14.

What steps the Government are taking to press the Nigerian Government to prevent the stoning to death of Amina Lawal for adultery. [111607]

The Parliamentary Under-Secretary of State for Foreign and Commonwealth Affairs
(Mr. Bill Rammell)

:First, I congratulate my hon. Friend on the work that she has done to raise this appalling case. The Government and our EU partners regularly raise our concerns about this case with the appropriate authorities in Nigeria. Indeed, my noble Friend the Minister for Africa, Baroness Amos, expressed to President Obasanjo our concern about the harsh sentences imposed under the sharia penal codes, and emphasised the strength of feeling against them in the UK.

:The Nigerian state court will hear Amina's case on 3 June. Both Muslims and non-Muslims in my constituency have told me how appalled they are at Nigeria's interpretation of sharia law, which is in flagrant violation of the UN torture convention. They are also concerned about the other Nigerian women facing death by stoning who have not received the same international publicity and who do not have legal representation. Are the Government making equal efforts to raise those cases too? Human rights need to be protected, wherever people are.

I wholeheartedly agree with my hon. Friend. We take every opportunity to raise all cases in which this extreme interpretation of sharia law is used, and we will continue to do so. I reassure my hon. Friend that, through our high commission, we also maintain close contact with the national human rights commission in Nigeria, and the non-governmental organisations. In that way, we will get advance warning in cases such as this, and that will allow us to do everything in our power to apply the maximum pressure.

The integrity and good intentions of the Minister are not in dispute, but what indication has he had that the representations that he and his noble Friend Baroness Amos have made about the proposed barbaric penalty will, in practice, be heeded?

:I take comfort from the fact that the Nigerian Attorney-General has made clear his view that the cases will ultimately be ruled unconstitutional in the federal court. We should none the less continue to apply pressure on an issue that is of serious concern across the House.

North Cheshire Hospitals Nhs Trust

3.30 pm

I beg to ask leave to move the Adjournment of the House, under Standing Order No. 24, to debate an important matter that requires specific and urgent consideration, namely,

the financial problems at North Cheshire Hospitals NHS trust and the action which needs to be taken to resolve them.
It was recently revealed that North Cheshire Hospitals NHS trust ended the last financial year with a deficit of £5.8 million. The director of finance has left—to take up another post, I understand—and the chief executive has tendered his resignation. The trust is therefore left to face its problems without two key officers. Rumours are rife in my constituency about what may happen at Warrington hospital, and the staff are seriously concerned.

We urgently need answers from our strategic health authority about how the deficit arose and what action it intends to take to deal with it. Unfortunately, it has proved difficult to obtain answers from the authority. I have written to it, and I know that hon. Friends have written too. The chief executive has arranged two meetings with me, but has cancelled them. She does not return phone calls. It is easier to get an audience with the Pope than with the chief executive of our strategic health authority. I have also raised the matter with the authority's chairman, who has declined to use her good offices to facilitate a meeting.

This is scandalous at a time when the health care of my constituents is at risk. My constituents deserve to know that future funding for their local hospital will be secured and that the improvements that the Government have made at Warrington hospital—and there have been considerable improvements—will be maintained and built on. My constituents are entitled to know exactly why the hospital is in this position when the health authority in north Cheshire has received a 48 per cent. increase in funding from the Government since 1997.

The current situation cannot be allowed to continue. It is causing great distress to my constituents and is undermining the morale of the hard-working staff at the hospital. I hope, therefore, Mr. Speaker that you will be able to grant my application so that we may know how future health funding for North Cheshire Hospitals NHS trust is to be secured, and so that my constituents may be assured that improvements in their health care will be maintained in future.

I have listened carefully to what the hon. Member for Warrington, North (Helen Jones) has said. I must give my decision, without stating any reasons. I am afraid that I do not consider that the matter that she has raised is appropriate for discussion under Standing Order No. 24, and I cannot therefore submit the application to the House.

Children's Television (Advertising)

3.33 pm

beg to move,

That leave be given to bring in a Bill to prevent food and drink advertising during pre-school children's television programmes and related scheduling.
Our children increasingly suffer from obesity and diabetes. These are potentially killer diseases, and they are of great concern to the Department of Health, which recognises that children eat too much fat, sugar and salt. In a written answer to me, my hon. Friend the Parliamentary Secretary, Lord Chancellor's Department—then a Health Minister—said that
"average intakes of salt are up to twice the recommended amount."—[Official Report,26 April 2002; Vol. 384, c. 512W.]
She went on to say that 85 per cent. of children failed to meet recommendations on the consumption of added sugars, and that a huge 92 per cent. failed to meet recommendations on the consumption of saturated fats.

The Department of Health is tackling that appalling situation with an excellent national school fruit scheme, providing free fruit each day to thousands of pupils.

The Minister also claims to have in place
"major cross-Government programmes of work to improve healthy eating"[Official Report,15 April 2002; Vol. 383, c. 782W.]
Unfortunately, these programmes do not seem to have reached the Department for Culture, Media and Sport, which is responsible for the regulation of advertising during children's TV. It has failed to take action to prevent high fat, high salt and high sugar content food and drink advertising being targeted at pre-school children—two, three and four-year-olds.

Little children watching independent television channels are daily being bombarded with images of happy little boys and girls eating high fat, high sugar and high salt content food and drink. They repeatedly hear catch-phrases and jingles designed to appeal to them. They repeatedly see pictures designed to attract their attention and remain in their young memories.

Sustain, an alliance of more than 100 groups concerned about food issues, has recently campaigned to protect children from the marketing of food targeted specifically at children that gives an unbalanced nutritional message. Its campaign won support from the Royal College of Physicians and the Royal College of General Practitioners. Sustain supports of my Bill. The National Heart Forum has given its backing too. Its chief executive, Paul Lincoln, stated:

"The harm starts early in life. We are very concerned about the targeting of children and young people as a market for foods high in fat, sugar and salt. The marketing consists of a saturation diet of advertising around children's TV programmes."
He added:
"The marketing of these foods undermines the Department of Health's efforts to promote healthy eating from an early age."
My Bill calls for a ban on all food and drink advertising during toddler TV scheduling. The multinational, multi-billion pound food and drink and advertising industries oppose it. Obviously, their vested interest is not the health of our children. These industries say that children who suffer from diabetes and obesity are nothing to do with them. They say that children should exercise more. I agree; they should exercise more, but they should also eat less fat, sugar and salt.

The obesity taskforce is pleased to see these issues raised by my Bill—so too is Diabetes UK. Diabetes UK believes that the aggressive marketing strategies of food companies, exposing children to high fat foods, have been partly responsible for increasing obesity and diabetes in children. Moreover, it is costing the national health service approximately £5 billion a year. That is an expense met by the taxpayer, not the multi-billion pound food and drink industry.

Spokespeople from the advertising industry claim that if my Bill is successful, less children's television will be broadcast. That seems to me rather threatening and also undermines the claims by the television companies that children's TV is a form of public service broadcasting.

My Bill simply calls for a period each day when children's television is free from food and drink advertising—free from marketing strategies that are becoming increasingly sophisticated. We are currently witnessing a step change in investment and direct targeting of an ever-younger cohort of children. My Bill would offer some brief respite and protection. I commend it to the House.

Question put and agreed to.

Bill ordered to be brought in by Ms Shipley, Dr. Howard Stoate, Margaret Moran, Linda Perham, Vera Baird, Ann Clwyd, Ms Karen Buck, Dr. Brian Iddon, Glenda Jackson, Brian White, Mr. Jim Cunningham, Andrew Mackinlay.

CHILDREN'S TELEVISION (ADVERTISING)

Ms Shipley accordingly presented a Bill to prevent food and drink advertising during pre-school children's television programmes and related scheduling: And the same was read the First time; and ordered to be read a. Second time on Friday 11 July, and to be printed [Bill 101].

Orders Of The Day

Finance Bill

Order for Second Reading read.

[Relevant Document: Minutes of Evidence from the Treasury Committee, Session 2002–03, on the 2003 Budget, HC 652-i to -iii.]

I inform the House that I have selected the amendment in the name of the Leader of the Opposition.

3.39 pm

I beg to move, That the Bill be now read a Second time.

The Finance Bill is about enterprise and fairness—meeting our responsibilities to business, taxpayers, the environment, the international community and the most vulnerable members of our society. The context of this Bill is one of continued economic uncertainty around the globe. In the past two years, many of our strongest competitors—notably, the United States, Germany and Japan—have experienced recession. We have recognised that the global slow-down has brought challenging times for businesses. It is a sign of the strength of the economic framework that the Government have put in place over the past six years that the economy has remained stable and has continued to grow, unlike those of our major competitors and in contrast to the recessions of the past.

Despite the economic uncertainty around the world, we are able to meet our military responsibilities, and we have met the requirements of the golden rule and the sustainable investment rule year on year, with the public finances strongly in surplus over the current economic cycle. We do not intend to be diverted from our priorities of record investment in public services, achieving full employment and tackling child and pensioner poverty—building a Britain of economic strength and social justice.

In the past, in less severe world downturns, as a consequence of the short-termism and economic mismanagement that, I fear, characterised the economic stewardship of the Conservative party—[HoN. MEMBERS: "Oh no."] Ah, yes—Britain was first into recession, last to come out and suffered a deeper depression than other countries.[Interruption.]Conservative Members do not like hearing that.

Does not the Minister accept that these 448 pages are designed to sandbag the British people with more taxes than have ever been imposed in the past? This is bumper, record taxation to smash enterprise in this economy.

I recognise no such thing, and I well remember when the right hon. Gentleman himself wielded the cosh, and taxation represented a burden on the ordinary taxpayer that it has not represented under this Government.

Today, when 20 other countries have been in recession, Britain has had a record 43 consecutive quarters of growth—a record not achieved by the Opposition—and the longest period of continued growth for half a century. We are predicted to outpace our European competitors in growth next year.

Perhaps the Chief Secretary can explain why the British stock market has been outperformed by the American and French stock markets?

Taken from its peak, that, as the hon. Gentleman knows, is simply not the case. He knows that global equity markets have suffered in the current downturn. and he would not expect the United Kingdom to be immune from that. However, the fact is that, in the early 1990s, when the hon. Gentleman peddled his wares as a researcher and Conservative party activist—we have got a note of his record on that matter, and it should be made more widely known—inflation reached almost 10 per cent. He well remembers the time. Today, we have inflation at its lowest level for 30 years—averaging just 2.3 per cent. since 1997. Under the Conservatives, interest rates hit 15 per cent. [HoN. MEMBERS: "Oh no."] Oh yes, and none of them is getting up now to defend a 15 per cent. interest rate. Today, at 3.75 per cent., the interest rate is at its lowest level for 50 years.

In the past, under the Conservatives, unemployment was rising above 3 million, and Opposition Members will remember that. Today, Britain has more people in work than ever before. Almost 250,000 jobs have been created this year and, for the first time in 50 years, unemployment is lower than in Europe, Japan and America simultaneously.

The Chief Secretary is painting a rosy picture of the economy. Can he tell my constituents and others who are very concerned about their pension deficits why, if everything is so wonderful, many pension schemes are in such serious trouble?

The hon. Gentleman knows well why pensions inevitably cannot be immune from downturns in equities. He also knows, however, that in the long term, equities represent an important part of any pension portfolio, as he will be the first person to recognise.

May I remind my right hon. Friend to tell Conservative Members that more than 3,000 pensioners in my constituency will welcome the extra £100 a year that they will all receive? In addition, many miners who were retired and pensioned off as a result of political malice by the Conservative party will very much welcome the new pension credit—as they have so far had to pay tax on their well earned income—and other things that the Government have done for pensioners.

I am grateful to my hon. Friend for mentioning the pension credit, nor least because all Members will want to play their part in ensuring maximum take-up. I know that my right hon. Friend the Paymaster General, working with the Inland Revenue, has made sure that a range of material is available to ensure that that is the case. Right hon. and hon. Members on both sides of the House will want to make sure that they take up the cause of the pension credit, as that can only benefit pensioners in all our constituencies.

I agree with the need to encourage take-up, as I did in relation to the minimum income guarantee campaign. Will the right hon. Gentleman assure the House, however, that if we encourage people to take up tax credits, this time, the computer system will be able to cope with the influx of applications that may be generated from such a campaign, and that people will not be left waiting for the payments should they decide to take them up?

My right hon. Friend the Paymaster General has that situation well in hand, and the computer systems are currently coping with the demand. To be fair, the hon. Gentleman will recall his party's predictions of doom and gloom in terms of take-up, and I welcome his commitment to increasing it. I hope that he will have the grace to admit, however, that the predictions of the Liberal Democrats that take-up for these credits would be low have proved to be lamentably wrong.

Before we leave the subject of pensions, will the Chief Secretary accept that the imposition by this Government of a £5 billion a year tax on pensions, coupled with the increased regulations that have surrounded pensions, the introduction of disincentives to pension saving, and the failure to deal with all those disincentives, means that pensions in this country are now thoroughly discredited in the view of most of the population?

I accept no such thing. The hon. Gentleman has sufficient experience of the House and more than sufficient experience of this subject to know that his party first put up advance corporation tax. He knows as well as I do that the pension system in this country bears examination and comparison with that of the rest of Europe, where the pension system is putting those countries' economies into some considerable difficulty. I hope that he will give us credit for that, and for the measures that we have taken to preserve it.

Before my right hon. Friend moves off the issue of pensions altogether, will he assure me that, should the Government change pensions regulations, they will inform people of the effects of the changes, unlike what happened under the previous Conservative Government when a change was made to inherited SERPS but they did not tell the people who would suffer from it? That was another mess that this Government had to sort out on coming to power.

My hon. Friend is absolutely right to point that out, and he is charitable in not pointing out, too, the mis-selling that occurred when the Conservative party had stewardship of these matters.

The fact is that, with additional jobs, we now have lower unemployment than Europe, Japan and America simultaneously, and our hard-won economic stability has been the key to sustainable growth and to promoting employment and opportunity for all. Since early 1997, 1.5 million more jobs have been created, over half of which are in the private sector and almost 70 per cent. of which are full-time. In the past year alone, as I have indicated, 250,000 more jobs were created, almost half of which were in the private sector. It is important to get the balance between public and private sectors right.

I am grateful to the right hon. Gentleman for giving way on that point, because he said earlier that we had experienced 43 quarters without recession—virtually 11 years. Does he accept that Governments do not add to recession and do not bring us out of it, and that we should pay tribute to the manufacturing sector and the workers of our country?

:The hon. Gentleman is absolutely right to point out the importance of both manufacturing and wealth creation. From my frequent visits to Northern Ireland, I know of people's concerns to ensure that they retain their competitiveness and that jobs are created there, too. Northern Ireland Members of all parties play an active part in ensuring that that is the case.

The Chief Secretary is quite right to talk about wealth creation and manufacturing, and I am grateful for the support that he has given to small businesses over the years. Will he give the House the cost of the small business package in the Budget? Does he know the global total of the cost to small businesses—companies employing fewer than 50 people—of the national insurance increases that kicked in on 1April?

I shall certainly write to the hon. Gentleman about the cost because I do not want to give him figures that might be misleading. He will know that tens of thousands of firms have been taken outside the scope of value added tax as a result of measures in the Budget. Many more firms will pay less tax and will benefit from our measures to reduce the burden of regulation on small businesses. He is right to point out that there is never any room for complacency about regulation and its impact on small businesses—that applies to successive Governments. The right hon. and learned Member for Rushcliffe (Mr. Clarke) pointed out the problems faced by the past Conservative Administration as a result of that, which is why we are determined that the Better Regulation Task Force and the measures announced by my right hon. Friend the Chancellor in the Budget should maintain our momentum to reduce the burden on business.

Does my right hon. Friend accept that investment in health from national insurance contributions is reducing the average time that a small business must wait before employees come back to work? At the same time, the tax credit system means that the average salary paid by many small businesses is a lot lower. In a sense, the working families tax credit was a subsidy for small businesses, and if the measures are taken together they provide one explanation for the rapid growth of the success of small businesses throughout Britain.

My hon. Friend makes an important point about the cost incurred by business due to sickness, and I shall talk about that in some detail later in my speech.

My right hon. Friend will know that seaside communities such as Scarborough and Whitby have probably experienced the most dramatic improvement to their employment potential since 1997. More than 40 per cent. more of my constituents—1,400 people—are now in work than was the case before. What further help will he give to encourage small businesses, especially in areas such as mine and around the coast, to ensure that we build on the solid foundations laid during the past six years?

The consultation document on equity finance that we published should assist small businesses in my hon. Friend's constituency, as should the development of enterprise areas and the advantages accrued by small businesses that start up and purchase commercial properties in such areas. It is important to recognise and understand clearly the problems faced in seaside and coastal towns. My hon. Friend has been a champion of that cause. It is largely as a result of work carried out by him and other Labour Members who represent seaside constituencies—

I hear the hon. Gentleman. There is no doubt that his constituency has a coast, but I do not think of it as a seaside town constituency—

Not at all. I have crossed swords with the hon. Member for Buckingham (Mr. Bercow) for many years, since he was in short trousers—although that was, of course, quite recently. No discourtesy is intended. I hope that all hon. Members who represent seaside constituencies will accept the Treasury's invitation to attend a seminar on the issues that affect such constituencies.

I look forward to that. We need a clearer understanding of what we can do to improve seaside constituencies.

As someone who also represents a seaside constituency, I am pleased to hear the Minister's comments. This is the second Budget in a row in which the Government have changed corporation tax and trumpeted that as a help for small businesses, but does he recognise that many small businesses, which are the backbone of economies in constituencies such as mine, are self-employed partnerships that pay income tax rather than corporation tax? They are receiving no help. Will the Government stop their thrust towards corporations and incorporation and help the self-employed in partnerships?

That is not a fair or accurate analysis. Allowances are available to the self-employed in partnerships, and those are of assistance. The package of reforms to improve small business access to finance, the consultation on the scope for introducing small business investment companies in the UK, the improvement to the research and development tax credits and the package of deregulatory reform for small businesses have all benefited small businesses. Although there is no room for complacency, small businesses have probably been helped more than anything by low interest rates and the stability that has resulted from the policies adopted by my right hon. Friend the Chancellor. All that would be put at stake were some of the wilder fantasies of the nationalists given their head. However, the signs from recent elections are that that will not happen.

At a conference in west Yorkshire on Friday attended by representatives of the regional development agency and employers' confederations, employers made it clear that, although stability is key to their development, and notwithstanding the low interest rates, they still encounter the problem of unco-operative banks, especially when it comes to small businesses. I direct my right hon. Friend to the Select Committee report that highlighted that banking problem. Will he look again at what can be done to make it easier for small businesses to access finance?

I well remember that report and my hon. Friend's contribution to it as a Committee member. I am sure that her contribution is missed by her colleagues on the Committee, as it is by everyone. As a result of the Committee's work and a robust dialogue between business and the Treasury, the good news is that the banks are increasingly aware of their responsibilities to small business and of the opportunities for good business that arise from meeting their needs. That is why we have introduced a package of reforms to increase and improve access to finance for small business, and why the work of the Phoenix fund, the role of venture capital in this area and the consultation on the scope for introducing small business investment companies is important.

For business, it is not just about delivering, as we have done, the monetary and fiscal frameworks that have kept the economy stable and growing in the good times, and indeed in difficult times. Reforms to the competition authorities, corporation tax, investment, innovation and skills are the prior conditions for the creation of a dynamic, enterprising and productive Britain.

I should like to make a little headway, but I look forward very much to the right hon. Gentleman's speech, as he always makes interesting contributions to these debates.

International comparisons show that we have a law-tax environment that is friendly to entrepreneurship—the UN's trade and development commission ranked the UK second in the world in attracting inward investment in a report published only last September. The Organisation for Economic Co-operation and Development has said that the UK is the best place to start out and succeed in business, and its latest figures show that our corporate income taxes plus employer social security contributions as a percentage of gross domestic product in 2000 were the third lowest in the EU, lower than those of France, Germany and Italy. That is a record that the right hon. Gentleman should give us credit for, and I hope that he will now do so.

I am always delighted when the Government follow the trend set by the previous Conservative Government in lowering marginal tax rates both at the personal and business level—it is nice that a good idea has been recognised. However, in the context of the Government's continuing consultation on reforms to corporation tax, will the Chief Secretary explain to the House what benefit will accrue to British business from the abolition of tax relief for allowances under the present arrangements for corporation tax and its replacement with allowances against the rate at which assets depreciate?

The right hon. Gentleman knows that the Government have a continuing programme of reform and rationalisation of corporation tax, which has enabled us to reduce the burden of taxation on companies and is widely welcomed. One is always concerned about anything that increases complexity, but I have not heard it being seriously suggested that on balance we have not got it right and that our record does not compare favourably with the stewardship of corporate taxation when he was Financial Secretary. He is not one to blow his own trumpet—well, not much—but he should give us some credit for the reforms that we have introduced in this field. No doubt, during the consideration of the Bill in Committee—I hope that he will again grace us with his presence this year, as that Committee would not be the same without him—we will have an opportunity to explore these matters in a little more depth.

We are not complacent. We are working to make the process easier still, and have identified more than 500 regulations introduced by previous Governments for reform or abolition. Our changes have already helped small businesses to employ almost 400,000 more people than they did in 1997, which tells us something about whether the Government are getting it right in relation to small businesses. I would argue that we are, and that the Opposition did not.

This Budget and Finance Bill mark the next stage of reform to give greater flexibility in capital markets, product markets, housing and planning, and the labour market. Clause 136 provides support for people who regularly work at home under flexible working arrangements. Employers will be able to meet some or all of the incidental household costs incurred by employees who work at home without giving rise to a tax charge. The Bill provides necessary recognition of changing patterns of business, making sure that the tax system does not bear down unfairly as an inhibitor on people who choose flexible working.

Perhaps I may be permitted briefly to return to the subject of macro-economics. Given the interdependence of fiscal and monetary policy and the favourable intra-European comparisons that the right hon. Gentleman made a few moments ago, what assessment has he made as Chief Secretary to the Treasury of the merits or demerits of the proposed changes to the voting procedures of the European Central Bank?

I am interested in the subject, but it would be quite untrue to say that I have made an assessment of it. One watches the development of the European Central Bank with interest, as all hon. Members would expect. I celebrate the fact that it was this Government who had the good sense to make the Bank of England independent, which the Opposition opposed and would never have had the guts to do. One would hope that at least one of them would have the good grace to stand up and congratulate us on the steps that we have taken.

No, the hon. Gentleman has much too much form for us to believe that he is about to stand up to congratulate us on allowing our central bank the independence that was its due and that has so benefited the economy.

I am delighted to hear the hon. Gentleman congratulate us, albeit from a sedentary position, on the measures that we have taken.

Not at the moment. I want to make some progress.

Clauses 132 to 134 freeze corporation tax rates. At 30 per cent., the main rate is lower than in any other major industrialised country, and the 0 per cent. starting rate means that 150,000 companies pay no corporation tax whatever.

Clause 164 extends the 100 per cent. first-year allowance available to small businesses for spending on information and communications technology for a further year to March 2004.

Clauses 158 to 161 contain a package of measures to simplify the capital gains tax system, including an extension of business assets taper relief to improve access to let property for unincorporated traders. I hope that the hon. Member for Angus (Mr. Weir), who understandably expresses concern for unincorporated traders, recognises the step that that represents.

Clauses 138 to 140 simplify employee share schemes to make them easier for companies to administer, give employees in such schemes more flexibility, remove anomalies and provide a statutory corporation tax deduction for contributions to those schemes.

Following feedback from businesses, the Finance Bill improves the way in which the research and development tax credit works, allowing more businesses, particularly small and medium-sized enterprises, and more types of expenditure to qualify, and helping to take us toward the American spend on research and development of around 2.8 per cent. of GDP. Any comparison between ourselves and the United States in the area of productivity—we still have a way to go to catch up with its success—recognises the need for us to address the issue of spend on research and development, and we shall continue to consult.

I am grateful to my right hon. Friend for saying that, and for the action that the Government are taking, but does he share my concern that in the frontier technologies, in biotech and software development—a growth market—with its high-value, high-paid and high-skilled jobs, Europe still lags well behind the United States? With specific reference to the electronics sector, what message can I take back to my constituents, many of whom are employed in that sector, to show that the Government are aware of the issue and are addressing the need for research and development in the frontier technologies?

One of the reasons why we have been considering the definition of research and development is precisely to ensure that the tax system recognises the very fast pace of development in the area to which my hon. Friend refers. A few months ago, I visited a company in Scotland that was looking at lasers and crystal technology. One of the messages that it gave to me—I have received the same message from others working in the area, not least in technologies that have been developed as a result of space research—was that continuing dialogue is vital. I know that my right hon. Friend the Paymaster General is anxious about developing dialogue between the Inland Revenue and industry, as well as with academia, to ensure that we get the definition right. My message to my hon. Friend's constituents is that we are absolutely determined to do just that.

The Bill seeks to build on the steps that we have already taken and on the messages delivered to us by business, which said that it wanted the minimum spending requirement to be reduced from £25,000 to £10,000 to help small firms to qualify. Business also wanted us to simplify the rules for apportioning staff costs to ensure that staff doing small amounts of R and D are not excluded, and to extend coverage to agency staff, as smaller companies may need to buy in expertise to take them to the next stage. We wanted to ensure that that issue was recognised in the tax credits that are available, as it is very important for projects of limited duration.

The right hon. Gentleman has been most generous in giving way. By way of recompense for his giving way to me now and on another occasion, may I congratulate him on the extension of taper relief to unincorporated traders? The anomaly was long overdue for correction and that move is very welcome. However, will he say something about the justification for excluding the same level of taper relief in respect of quoted companies, many of which are smaller than some relatively large unquoted companies and some unincorporated traders?

One of the greatest challenges facing any Chancellor in coming to a judgment on such issues is considering the balance across the whole tax system. As those of us who have form in respect of the Finance Bill—I am afraid that I do, as has the hon. Gentleman in his time—know, getting that balance right is important; indeed, my right hon. Friend the Paymaster General is constantly extolling its virtues. The judgment has to be made and my right hon. Friend the Chancellor has made it. I have no doubt that, given the opportunity, others would arrive at a different judgment, but on balance I think that he has got it right, and hon. Members would not expect me to say anything else.

All the reforms have been designed for business and with business. We have listened to businesses of all sizes and in all sectors, and to the CBI, the Institute of Directors, the British Chambers of Commerce and the TUC, which has been at the forefront in calling for improvements to the R and D system. All those organisations have made their voice known and have had an important contribution to make—a contribution that has been reflected in the Budget.

I should like to say a few words about public services. Economic dynamism goes hand in hand with social justice. The Budget and the Finance Bill take forward our policies for enterprise and innovation, but not at the price of fairness. They take forward the agenda that we are promulgating, but underwrite it with fairness. To reduce the cost to business of locating and investing in disadvantaged areas, and to support the regeneration of brownfield sites, we announced in the Budget the removal of stamp duty from all non-residential property transactions in the 2,000 enterprise areas. That measure, which is covered by clause 57, is part of a package of measures to encourage business investment in our most disadvantaged communities—measures to encourage enterprise that complement, not conflict with, our priorities of full employment, tackling child and pensioner poverty and delivering high-quality public services through investment and reform. The 2002 spending review set out our plans for an extra £61 billion of spending on public services by 2005–06, with three quarters of the additional spending going towards health, education, transport, housing and the fight against crime.

The hon. Member for Arundel and South Downs (Mr. Flight), who is in his place, urged us to cut that investment by 20 per cent.—a call that was never denied and that was confirmed by the Leader of the Opposition.

Is my right hon. Friend aware that in the Budget debate the right hon. Member for Wokingham (Mr. Redwood) called not only for a 20 per cent. cut, but for a cut of up to 100 per cent.?

That is a very alarming prospect, but nothing surprises me in relation to the right hon. Member for Wokingham.

The hon. Member for Edmonton (Mr. Love) might have said that I was talking about cutting 100 per cent. of waste and unnecessary expenditure in order to spend more on teachers, nurses and doctors.

My right hon. Friend was talking about the fact that there are more hospital administrators than beds.

I have here a quote from the Leader of the Opposition, which makes it clear that Conservative Members were not talking about cutting hospital administrators, but about cutting costs across the board, rejecting extra NHS staff who do not deliver and so-called wasted expenditure on consultants. We look forward to hearing about more areas where they are going to make those 20 per cent. cuts.

Does my right hon. Friend agree that the 20 per cent. cut in public expenditure would not only be a mean and misguided policy, but would bring about the demise of public services? Just as 200 years ago doctors thought that they had to bleed all the blood out of people to make them well, cutting that amount of money from the health service would bring about the death of the whole system. We must absolutely reject that ridiculous option offered by the Conservatives.

My hon. Friend is absolutely right. The cuts would mean losing £13.6 billion from the NHS budget.

Can the right hon. Gentleman confirm that since 1997, when his party came to office, the cost of running central Government has increased by £3.5 billion; and can he tell us what percentage increase that represents?

The hon. Gentleman would not expect me to accept his figures. He knows that it is grossly irresponsible for Conservative Members to call for cuts of 20 per cent. and maintain that no doctors, nurses or police officers would consequently lose their jobs. That would be the effect of the Flight plan.

Has my right hon. Friend noticed that although many Conservative Members have leaped to their feet to change the subject, the hon. Member for Arundel and South Downs (Mr. Flight) has not been tempted from his seat? Should he not defend himself against the accusation of proposing cuts of 20 per cent. instead of simply sitting there?

I suspect that he will defend himself at some length, not only here but Upstairs in Committee. However, he will not deny his words:

"I am digging through current spending, finding opportunities for cuts. It's too early to say how much but it could be up to 20 per cent."
It was later confirmed that that would apply across the board. The hon. Gentleman went further and became more specific about the NHS. He said:
"The reforms, which we will be proposing, will end the NHS monopoly and will entail those who can afford it making some payment for healthcare services."
Charges and cuts are Conservative Members' prescriptions. They cannot deny that because I have their words in black and white, and such a policy would be implemented it they were ever given stewardship of the economy again.

I point out that I was a civil servant when civil service jobs were perceived as throwaway items and unemployment rose to 3 million. I also want to endorse my right hon. Friend's point about investing in areas of social exclusion. At Moor End high school in my constituency, only 28 per cent. of pupils achieved five GCSEs at grades A to C. The figure has now increased to 58 per cent. Does not that show the true price of investing in public services? It makes things better for people.

:My hon. Friend is right. That should be celebrated by hon. Members of all parties.

:No. I have given way many times and the hon. Gentleman will have his chance. I shall come back to him.

A healthy, skilled work force in strong communities are essential to maintaining economic stability and building the foundations of future innovation and prosperity on which we depend. The Budget confirmed that that would continue to be our policy. The 1 per cent. increase in national insurance that was announced last year and will be paid from April will go entirely and directly to the NHS. Consequently, by 2008, there will be 80,000 more nurses and 25,000 more doctors than in 1997.

The shadow Chancellor described the increase in national insurance contributions as a tax on jobs. [HON. MEMBERS: "Hear, hear."] They say, "Hear, hear", but he used the same argument against another policy that was abhorrent to the Conservative party: the national minimum wage. The right hon. and learned Gentleman described that as an axe on jobs. He is well known for his play on words, but however one plays on the words the policy was no such thing. We created 1.5 million more jobs. That was the measure of our success, which the Opposition could not hope to replicate.

Everyone benefits from a national health service that is free at the point of need, so everyone who can contribute to its long-term financial future should do that. The Opposition claim that the rise in national insurance is a burden on business, but it means that employers will pay approximately £10.50 a week for an employee on average earnings compared with £30 in Germany and £60 in France. The hon. Member for Arundel and South Downs said in his infamous memo that the Conservative party should consider France and Germany. Yet employers pay £30 a week in Germany and £60 in France. Does anyone seriously suggest that that is a better way to fund the NHS than the measures that we have introduced? The answer to that can only be no.

Will the Chief Secretary now answer the question that he ducked 22 days ago at the conclusion of the Budget debate? Given that the increased expenditure on the national health service has not been matched by a commensurate increase in clinical activity, and that the Government say that they favour reforms, will he name three that will make a difference?

It simply is not true to say that there has not been an increase in clinical activity.

Well, it depends what the hon. Gentleman means by "commensurate". I suspect that he and I will have different definitions of the word. There are now more operations, and more treatments being given outside in the community, closer to people's homes. There are better treatments for cancer, and better dispensation of drugs. All those things are happening, as well as there being additional nurses, doctors and people working in radiography and on the front line to improve people's health. By any count, on any indices, the NHS has improved, and to say otherwise is, quite frankly, an absolute travesty of the truth.

It is unfair when the burden of tax falls on businesses or individuals who play by the rules and who pay their fair share, while tax cheats distort competition and push up the tax rates that the rest of us have to pay to make up the difference. That is not fair, and taxpayers rightly expect the Government to close tax loopholes and to tackle tax fraud so that the burden is not unfairly placed on normal taxpayers because a minority abuse the system. I suspect that we shall spend much time in our deliberations on these clauses Upstairs. Of course we need to get it right, but I hope that it will be possible for Members on both sides of the House to welcome the measures to close tax loopholes that my right hon. Friend the Paymaster General will be taking us through in detail.

This year's Budget announced a compliance and enforcement package to enable the Inland Revenue to counter direct tax avoidance and to contribute an additional £1.6 billion of revenue over three years. The Finance Bill includes a wider package of measures to ensure a level playing field for taxpayers who fulfil their obligations.

In respect of tax avoidance, and of the loopholes that the Chief Secretary says that he is now closing, what action have he and the Chancellor taken since the Treasury Committee looked into the issue of tax avoidance by the Inland Revenue and Customs and Excise in respect of the Mapeley STEPS—strategic transfer of the estate to the private sector—transaction?

We replied to the Treasury Committee on Friday, and it will want to consider carefully what is outlined in that memorandum. The hon. Gentleman might wish to return to that issue when the Committee has had an opportunity to reflect on it.

We are introducing measures to tackle VAT fraud and avoidance—in particular missing trader fraud, which costs us billions and makes billions in profit for organised crime—and measures to close down other schemes that a minority of businesses and individuals had been using to avoid paying their fair share of tax. All those important measures are contained in the Bill and I think that they will all be welcomed. We are also taking action to prevent tax avoidance through manipulating share schemes, coupled with giving support to companies that want to implement employee share schemes in line with the legislation. We have also included clarifications because we have listened to business; it has said that it wants greater clarity in this area so that it can implement such schemes to give people a sense of ownership and a stake in the success of their company.

There is action to counter capital gains tax avoidance through offshore trusts and second-hand life insurance policies, and action to close a loophole in the controlled foreign company rules allowing some companies to escape UK tax on profits from extended warranties and credit protection insurance. Those measures follow the Budget announcement of a compliance and enforcement package to enable the Inland Revenue to counter direct tax avoidance and thus contribute an additional £1.6 billion over three years. There is also a comprehensive modernisation of stamp duty to counter widespread tax avoidance, which distorts the commercial property market and business decision making, and has given rise to contracts and artificial vehicles for the transfer of property.

I do not think that any of the activities I have described could be justified by any reasonable person.

The Chief Secretary said that consultation with business is extremely important, which indeed it is. He has now mentioned the new land tax—or, at any rate, what he describes as a modernisation. Can he explain why Ministers instructed the Revenue on 21 January to end all consultations? Elements of the Bill have not been mentioned, were not consulted on, and do not have the support of business.

No such instruction was made known to me, or to my right hon. Friend the Paymaster General. In modernising stamp duty we want to ensure that it is better targeted. We are taking comprehensive powers to address widespread tax avoidance. We are reducing the burden on smaller businesses, and reforming and modernising the framework of tax, bringing it into line with other modern taxes. The modernised charge will be mandatory, and there will be new enforcement and compliance powers. We are levelling the playing field across different types of transaction, which can only increase fairness. We are clamping down on the avoidance of stamp duty, while removing duty on property other than land, interests in partnerships and shares, and securities. All those measures emanate from consultation and listening, and I believe that they will be widely welcomed by business.

Do not the proposals relating to VAT fraud and Customs and Excise come too late? As is shown by recent cases, the Government have failed to crack down adequately on fraud, which has led to the loss of hundreds of millions of pounds in VAT, and have failed to control Customs and Excise as well.

That is not true. Over the years, Customs and Excise has learned from what some of those cases have brought to light. I believe that Customs and Excise in this country is widely recognised as a world leader in the field. When I went abroad as Financial Secretary I encountered nothing but admiration for it, not least in the Customs community, and I know that the current Economic Secretary is finding the same. We should be very careful before doing down the hard-working men and women involved in law enforcement in Customs and Excise, who take great risks on behalf of the Revenue. They should be congratulated on their vigilance and determination.

Not at this point.

We want to create that level playing field, and to end the highly complex artificial arrangements into which some people enter to avoid paying. In the long term, the modernisation of stamp duty will facilitate electronic commerce and electronic conveyancing. It will allow fairer treatment of house purchases funded by certain types of alternative mortgage product. The double charge on so-called Islamic mortgages, for instance, will be removed.

Not at this point.

By raising a fair share of tax from large commercial deals, we shall further the interests of small businesses and give them more protection. The proposed £150,000 threshold for commercial transactions will eliminate the charge on about—

The hon. Gentleman shouts that out, but he really ought to reflect on his own Government's record in this area. The fact is that when the Conservatives had the opportunity, they did absolutely nothing at all to ensure modernisation and reform of stamp duty.[Interruption] It is no use their wittering on about this being a new tax; the fact is that they ought to have seen the need for reform. Simply to dismiss this as a new tax or a new burden does no service at all to the impulse for reform that existed for many years before this Government took office, but to which the Conservatives singularly failed to respond. This new proposed threshold, which will exempt 35,000 small business transactions a year from tax, certainly does not constitute peanuts; it is something to be welcomed. The removal altogether of stamp duty on non-residential properties in 2,000 enterprise areas will be widely welcomed by small businesses throughout the country, including in the constituencies of many of my right hon. and hon. Friends.

We are meeting our responsibilities to the environment in terms of the sustainable use of resources. This Finance Bill contains carefully calibrated tax and economic incentives that will encourage this, while not undermining the competitiveness of British business. There are new duty differentials for sulphur-free fuels and bioethanol, and a new, low-carbon band of vehicle excise duty for the lowest CO2 emission cars, which will allow motorists to save up to £110 per year by choosing such vehicles. We are listening to the calls for an increase in the landfill tax rate of £1 per tonne for this year and next, to provide business certainty.[Interruption] Conservative Members mock the notion that we have listened, but the fact is that right hon. and hon. Members on both sides of the House have been calling—not least through the good offices of the Environmental Audit Select Committee—for such an increase for many years. We have listened, and now we have it.

We are demonstrating through this Budget a commitment to fairness, a commitment to flexibility, a commitment to public services and a commitment to ensuring that we meet the needs of these times, whereby we deliver where successive Conservative Governments have failed to deliver, recognise and meet the needs of small and medium-sized enterprises, and move forward with investment in public services, tackling poverty and social exclusion despite the global slow-down. As such, I commend this Bill to the House.

4.38 pm

I beg to move, To leave out from "That" to the end of the Question, and to add instead thereof:

"That this House declines to give a Second Reading to the Finance Bill because the provisions contained in its two volumes of 447 pages increase the burden of taxation on the economy, fail to take account of the effects of inflation and will lead to a further decline in the competitiveness and relative attractiveness of the UK as a location for investment."
Notwithstanding the Chancellor's absence today, may I add my personal congratulations to him and his wife on their recent announcement? I am sure that the whole House wishes that all goes well for them. I also hope that the experience of the costs of raising a family will in due course convert the right hon. Gentleman to the merits of a lower-tax economy. I should also like to draw attention to my declaration in the Register of Members' Interests.

I want briefly to mention the programme motion, which we will reach later. It provides a guillotine for the Committee stage to finish on 12 June, leaving only seven sitting days to debate a complex, if not very constructive, Finance Bill. I suspect that that will not allow sufficient time for a full discussion in territory that is, candidly, not particularly party political, so we will oppose the programme motion.

After the Chief Secretary's interesting speech this afternoon, I am sure that the whole House will feel relieved to have been spared a repeat of the rant in his winding-up speech to the Budget debate. The Chief Secretary will be disappointed by the local election results, particularly by the fact that his and his party's attempt to misrepresent and smear what I said about the scope for reducing waste and cutting non-productive bureaucratic costs failed to affect the outcome. It was a pathetic attempt by the Labour party to divert attention from the Chancellor's economic failures.

I remind the Chief Secretary of Labour's 1997 general election promise to root out
"waste and inefficiency in public spending"
and to
"conduct a central spending review and departmental reviews to assess how to use resources better".
Rather than misrepresenting what I said, the Chief Secretary would do better to get on with precisely that. I also remind him of the debate earlier this year on the Public Accounts Committee reports, which had identified more than £20 billion of waste in public spending in the period that was assessed.

The hon. Gentleman knows that action against the waste identified by the Public Accounts Committee has, along with 90 per cent. of its recommendations, already been implemented. He is calling for a further 20 per cent. reduction in overall public expenditure. Where specifically will those cuts be made—out of thin air, or is he talking rubbish?

I get rather fed up with Labour Members misquoting what I said. Some items in the Public Accounts Committee recommendations, particularly VAT fraud, are beginning to be dealt with, but it is pathetic that the Government have been in power for seven years and done so little to address waste and fraud. They have enormously increased the costs of bureaucracy—by £3.5 billion on central Government. They have wasted more than £1 billion a year on information technology systems that have gone wrong. They have failed to address effective procurement in the public sector, wasting approximately £4 billion a year. In short, they have been completely hopeless at securing good value for taxpayers' money. If the hon. Member for Croydon, Central (Geraint Davies) bothered to read the interview, he would find that I was not talking about reducing expenditure on health or education. Indeed, I was talking about realising resources to increase effective online delivery. It is time that the hon. Gentleman ceased to misrepresent what I said.

Will the hon. Gentleman confirm that, in a memo dated 12 November 2001—predating his interview by some time—he said to the shadow Chancellor:

"The reforms, which we will be proposing, will end the NHS monopoly and will entail those who can afford it making some payment for healthcare services"?
Does not that amount to charges, or does he deny those words?

The Chief Secretary refers to a confidential memo that the Labour party intercepted improperly, which had nothing to do with the interview about cutting waste. Had the Chief Secretary been party to the entire discussion, he would know that we were talking about how to make the best use of the French system in this country. We were not talking about any programme—for which it would not be my responsibility—to levy charges in the health service. If the Labour party plays dirty by intercepting electronic mail, as in this case, it may find that it gets only half the story. The issue is this: why have the Government not addressed the reduction in waste much more effectively?

I am afraid that the Chief Secretary has had more than sufficient time to lie and to misrepresent what I have said.

Order. I must invite the hon. Gentleman to withdraw one of the allegations that he has just made.

I withdraw with pleasure anything improper that I have said, but my right hon. and learned Friend the shadow Chancellor pointed out in this Chamber that Labour party suggestions that the Conservatives had a programme to cut expenditure on health and education were lies. It was that to which I referred.

Order. I am sure that the hon. Gentleman would contribute beneficially to the progress of the debate if he specifically withdrew the allegations that a right hon. Member lied.

I am happy to withdraw an allegation that the right hon. Gentleman lied and say that I wish he would cease playing the game of misrepresentation.

The Bill—likely to be the Chancellor's last Finance Bill is a rather poor and lop—sided effort.

Has not my hon. Friend nailed the ridiculous and absurd idea peddled by the Labour party that the shadow Treasury team wants to cut 20 per cent. across the board? Should not the Government desist from making such accusations?

My right hon. and learned Friend the shadow Chancellor made the position clear, and the electorate were not in any way impressed by the Chief Secretary or the Labour party's misrepresentations. In fact, they gave Labour a thoroughly negative vote, with the Conservatives gaining more than 550 seats. Even the BBC—the Government's propaganda organ—expressed surprise that the Conservatives had done better than expected.

Did my hon. Friend, like me, experience many doorstep conversations in which people asked where all the money had gone? They have not seen it go to teachers, nurses or doctors, or for more operations. They are as upset as my hon. Friend about the waste and the nonsense from the Government, who rip us off but do not provide the service.

That is precisely the point. The public want to know where the 50 per cent. increase in taxes raised has gone, because it has certainly not gone on improved delivery of public services.

Let us focus on the Bill; 447 pages, 214 clauses and 43 schedules. Strangely, more than 50 per cent.—51.5 per cent. by volume, or 230 pages—deals with just two territories. The first is the new stamp duty tax and the introduction of the lease duty, and comprises 139 pages. The second is the issue of employee share schemes and the major changes to the law on employee share acquisition, and amounts to 91 pages. Both of those are massively complex proposals and reflect similar problems. The Government have endeavoured to increase tax takes substantially but have failed to draft effective legislation. On stamp duty, there is the issue of the favoured enterprise areas, where stamp duty does not apply. The Government are surprised that businesses react to that by endeavouring to minimise their stamp duty liabilities elsewhere. Similarly, in the area of employee share arrangements, the attractions of the business taper, with capital gains tax coming down to 10 per cent., have, not surprisingly, served as a motivation to others to construct share schemes that reduce their tax liabilities.

The proposals on lease duty were not included in the draft legislation on the reform of stamp duty. They amount to a major new stealth tax, and not the promised reform of stamp duty. The new tax should be called the land transfer tax. We believe that the Chancellor should have referred to it as a new tax in the Budget.

The hon. Gentleman knows that the Government raise tax so that the money can be spent on public services such as health, hospitals and new schools. The hon. Gentleman criticises individual tax rises in the Bill. What other elements in the Bill would allow us to raise the money for that expenditure in a different way, or is he simply looking for ways to finance his cuts to public services?

I would not want to prejudge what the Standing Committee will do, but we have objected to taxes being raised that are not being spent effectively. The hon. Gentleman seems to miss the point that no benefit is achieved if taxation is raised yet public services are not improved. That is our criticism of the Government's return to Labour's old tax-and-spend policies. It is the same old failure that has been evident throughout most of my lifetime.

In a moment. I want to make some points about the new tax.

Ministers promised reform, but then broke off consultations arbitrarily and without warning last February. That has been regarded as a breach of faith, and the Government have not explained their actions. The Government have missed the opportunity to reform stamp duty for home owners, and also to remove some of the iniquities in the market and the high rates of marginal taxation. Indeed, the new tax has some of the same iniquities as the old stamp duty. It retains some of the arbitrary price bands, and the new stamp duty lease tax applied to value added tax is a double tax—a tax upon a tax.

Because it includes leases, the new tax will hit many more people, especially many small and medium-sized businesses, and charities. Their tax burden could be between four and 10 times higher than at present. The new tax will serve to shorten leases, and thus could often reduce capital investment, which would not be economic on a shorter lease. All of that comes at the wrong time, in the wake of the national insurance contribution increases and with business rates and liability insurance costs rising dramatically.

What estimates have the Government made in respect of small business? Will the Chief Secretary say how many firms and jobs will be affected?

The hon. Gentleman has criticised the Government's fiscal stance, and denied what was said earlier about his proposals for Government spending. Will he therefore say what he considers to be the appropriate proportion of gross domestic product that the Government should devote to public expenditure?

It is interesting that the hon. Gentleman should ask that. He will know that the Treasury Committee spent a considerable amount of time asking the Chancellor the same question, and he refused to give any answer. If the Chancellor refuses to answer that question, I do not see why I should answer it.

No Labour Member can possibly be satisfied with the extent to which the Government have raised taxes. Taxes have gone up 50 per cent. since the Government came to power, yet there has been a complete failure to deliver improvements in services. The electorate gave the Government the benefit of the doubt at the last general election, but I suggest that the local election results made it clear that the population is fed up with more and more tax and no delivery. The new stamp duty tax occupies about one third of the Bill, and the compliance costs are likely to be high and to add to already high UK property costs, reducing our international competitiveness. How will that help inward investment? In our view, the proposals are the wrong way to tackle tax avoidance. What is needed is genuine reform and a collaborative approach to business.

The Chartered Institute of Taxation is dismayed by the abrupt termination of the consultation process without effective explanation at a time when several major issues require further consultation. The institute believes that any decision to go ahead without further discussions and to implement in December could produce unworkable legislation that might adversely affect the property market. The particular worry is the impact on smaller and middle-sized companies. The tenants of pubs may find themselves facing up-front bills for £6,000. A modest London-based service business leasing 4,000 sq ft in the Victoria area would be likely to face an increase from £3,000 to more than £12,000 under the new tax proposals. The measure will have damaging effects, particularly on small and medium-sized service businesses.

If what the hon. Gentleman has just said is true, why did Bill Moyes, director general of the British Retail Consortium, describe the measures as especially good news for small retail businesses? Why did he also say:

"It is good to know that the Treasury have listened to the retail sector."?

I suggest that the Chief Secretary to the Treasury awaits further evidence at the Committee stage. He will find that there has been some major misunderstanding about what the Government propose.

Perhaps the Chief Secretary is unaware of the comments made by the director general of the CBI, who said:

"It is clear that these proposals will seriously increase the cost of leased business properties for many companies … could be devastating for high street businesses."

I gently advise the Chief Secretary, who is commenting from a sedentary position, not to indulge in such complacency. The arithmetic, as he knows, is such that tax applies on the present value of leases above the figure of £150,000, and not on the value per annum. When the Chancellor first made his announcement, in language that was not entirely clear, a number of people misunderstood what he was saying. Most reaction since has been similar to the example that I quoted a moment ago, to the effect that the tax will bear hard on smaller and medium-sized businesses.

May I assist my hon. Friend in answering the comments made by Mr. Moyes by saying that many members of the British Retail Consortium, of which Mr. Moyes is chairman, are deeply unhappy and dissatisfied with those comments?

1 thank my hon. Friend for that.

My final quotation on the proposals comes from the head of stamp tax at Deloitte and Touche:

"I wonder if the Chancellor is using the new lease duty to recapture the revenue he is going to be losing in enterprise areas."
Schedule 22, made effective by clause 139, is the second major lump of this lop-sided Bill, with 72 pages that completely rewrite the law on employee share acquisition. We welcome attempts to stem avoidance, but the Government should examine why avoidance is happening. In this case, it is because national insurance contributions have been increased and capital gains tax reduced to a level where the incentive to arbitrage has been rendered that much greater. Like other schemes that the Labour Government have introduced, the 10 per cent. business asset capital gains tax rate is welcomed by those who benefit, but it inevitably risks incentivising distortions in behaviour.

It is not sufficient for the Minister to say that the Government wish to stem avoidance; a clear statement of policy is needed. When is a share gain capital and when is it to be taxed as income? What about equity incentives, which are given in management buy-outs or venture capital transactions and which typically feature performance-related enhancement to management's share rights? We have, in aggregate, 82 pages of legislation, published a week after some of it has come into effect, without any warning or consultation, which is widely regarded as unacceptable unless, first, there is a major revenue loss, and secondly, legislation can deal with the problem unambiguously. Neither of those two tests has been passed.

The rushed and unsatisfactory nature of the Bill is illustrated by the fact that I have spotted yet another mistake in the Treasury's advice. In at least one instance, the explanatory notes contain a contradiction. On page 281, new section 446L(6) refers to non-commercial increases; the explanatory notes refer to noncommercial reductions.

I asked the leading lawyer on employee share schemes to comment on schedule 22. He said it is massively complicated and impossible to explain, even to a highly sophisticated person. He said that it is scandalous that schedule 22, in all its Technicolor complexity, is being introduced without any consultation or draft legislation. He also said that it imposes many new charges and burdens, some of which are retrospective. Those two lumps of legislation make up over half of this unsatisfactory Finance Bill.

There are, of course, some welcome items in the Bill. We welcome the fact that, at last, the Government are making some attempts to crack down on VAT fraud and missing trader fraud. We welcome the anti-avoidance VAT measures dealing with property, although we understand that the loophole of which the Labour party made use in respect of its party headquarters has not yet been addressed, but perhaps there will be an opportunity to tackle that in Committee.

We welcome the reduction in the minimum expenditure threshold for research and development tax credits to £10,000, but this country is fast becoming uncompetitive in the area of R and D incentives. The UK regime is already materially less favourable than those of Spain, Portugal, Australia and Canada.

We welcome the increase in the qualifying threshold ceiling for capital allowances for small and medium enterprises up to £20 million, and we welcome the increase in the VAT exemption ceiling on turnover up to £56,000, although, as others have pointed out, the Government persist in their unwise anomaly of having a nil corporation tax rate for small businesses that are incorporated but no matching or evened-out arrangements for unincorporated businesses. The Government are then surprised when that leads to a massive and unnecessary incorporation of small traders trying to benefit from that anomaly.

We welcome the abolition of petroleum revenue tax on new business contracts involving third-party use of pipelines in the North sea, which will apply from next January, but we remain of the view, as expressed in debates on the previous Finance Bill, that petroleum revenue tax will have a net negative effect in terms of overall revenues and costs and will severely damage the continuing exploitation of North sea reserves.

We welcome the clarification of tax relief for adopters and foster parents and we welcome the climate change levy exemptions. Finally, we welcome the fact that National Savings is about to introduce cards to facilitate withdrawals and deposits—arrangements for savers who have lost their passbooks have hitherto been highly unsatisfactory.

What has happened to the child trust fund—one of the stars of the Chancellor's announcement? There is nothing about it in the Finance Bill and no announcement has been made about when legislation will be introduced. There has been a statement to the effect that something will be said in the summer, but will the Paymaster General kindly let the House know when such legislation is likely to be introduced and when citizens will be able to avail themselves of the child trust fund? I understand that the fund may not now go live until early 2005, so precisely what has happened?

The reality is that the Finance Bill adds as much additional stealth tax as the Chancellor dares without risking pushing the economy into recession. The Chancellor's growth forecasts have been branded as wildly optimistic by the much-revered ITEM Club think-tank, which uses the Treasury's model. This year, ITEM forecasts 1.9 per cent. growth, whereas the Chancellor forecasts growth of 2 to 2.5 per cent. ITEM forecasts 2.6 per cent. growth next year, whereas the Chancellor forecasts growth of 3 to 3.5 per cent., and it expects the Chancellor to be forced to raise £10 billion a year more in tax until 2006.

This is the first year for 20 years in which real household disposable incomes will fall. Indeed, the UK's growth potential and the UK's productivity growth potential are both declining, with the transfer of resources to the public sector, where productivity growth is now negative.

Extra public sector spending is not delivering extra output. At least the Office for National Statistics now measures real output, not just increases in public sector employees. The 2002 ONS figures showed inflation in the public sector rising to more than 5 per cent., and on a rising trend. The ONS figures for the last quarter of last year—the latest available—showed public spending up 9.2 per cent., but net public sector output up only 0.2 per cent. Last year, a 22 per cent. increase in health spending produced only a 1.6 per cent. increase in hospital cases treated. Indeed, public sector inflation is running at nearly twice the Government's targeted figure.

The Government's spin on the Finance Bill and the Budget was that they would build a stronger and more flexible enterprise economy. Ernst and Young's 2003 survey revealed that entrepreneurs' view of the Government and Whitehall is at rock bottom. Since 1997, there has been a continuing run-down—a managed decline—in the UK economy's growth and productivity growth.

Once again, my hon. Friend pertinently highlights the disparity between increased investment in public services and the failure to achieve a commensurate rise in activity. Given that the responsibility for public service delivery ultimately rests with the Treasury, does he agree that it is a matter of very considerable concern that the Chief Secretary, when challenged to identify the structural reforms that will improve service delivery, was singularly unable, for the second time in succession, to do so?

I thank my hon. Friend for his comments. I am not sure whether the Chief Secretary even understood his question, but the Chief Secretary seems also to be remarkably complacent, as I commented earlier, about his commitment to reduce waste in public spending. All he can do is laugh about that, so it seems.