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Commons Chamber

Volume 406: debated on Monday 9 June 2003

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House Of Commons

Monday 9 June 2003

The House met at half-past Two o'clock

Prayers

[MR. SPEAKER in the Chair]

Oral Answers To Questions

Work And Pensions

The Secretary of State was asked

Benefits Payment

1.

What steps he has taken to ensure that all pensioners have been fully informed about the changes in the methods of paying benefits. [117282]

10.

What steps the Government have taken to inform pensioners of changes regarding direct payment of benefits. [117292]

The Department is writing to all affected pensioners. That started in January and will continue for two years. The letters are backed up by a national advertising campaign, an information phone line and advice through the Pension Service so that people can choose the account that suits them best. No one needs to take any action until contacted. We are honouring the pledge to enable people who want to collect their money in cash at the post office to do that. So far, around half of the pensioners who have responded asked for the Post Office card account. All high street banks are offering basic bank accounts, which are, of course, accessible at the post office. Some main accounts will also be accessible.

The Post Office card account was to be the salvation of many sub-pos0t offices. Why are sub-post offices not allowed to promote it to their customers? I am delighted that half of them have taken up the offer, but it is a pathetic shadow of what it should have been. I have in my constituency a 91-year-old Royal Mail pensioner who cannot pay her pension into a Post Office card account. Perhaps the Post Office is not allowed to promote it because it is so inadequate.

Many sub-postmasters and postmistresses have been energetic in promoting the Post Office card accounts. [Interruption.] As I said, if the hon. Gentleman will listen, in my initial answer, around half of the pensioners who have responded requested the Post Office card account. That hardly points to failure to promote it. All the material that we issue draws the account's availability to pensioners' attention. The hon. Gentleman should recognise that it is not our job to tell pensioners or other benefit claimants what form of account they should have. That is up to them. Instead of harking back to the days when people were forced to use the post office, I hope that Conservative Members will embrace modern options that offer more choice, convenience and flexibility, and less fraud.

My constituents are doubly interested in the matter. The headquarters of the National Federation of Sub-Postmasters is based in my constituency, which also has many pensioners. For many years they have been forced to use post offices, but are happy with that system. They are greatly concerned by proposals to introduce key pads, which, as we warned for many months, are not suitable, especially for those with disabilities and those who rely on the help of sub-postmasters.

Will the Secretary of State confirm that key pads that are deemed not to be disabled-friendly are being ripped out? Will he also state when that will happen, the cost of doing it and the reason for the time it has taken to get around to it? Will he confirm that sub-postmasters and mistresses can continue to help people who need guidance to get the benefits that his ridiculous red tape and bureaucratic nonsense prevent them from obtaining?

I will not let the hon. Gentleman's rhetoric get in the way of a sensible answer, because I can reassure him about several points. Like other hon. Members, he knows that 68 per cent. of new pensioners have money paid in to their bank account and that 90 per cent. of pensioners have access to a bank account. That is why the choice that we are making available is so important.

The hon. Gentleman is right that the Post Office is reviewing the PIN pad's adequacy. It is developing a key guard, which will help to guide users who might otherwise have difficulty in using the PIN pad. I assure him that the Post Office will be able to help disabled customers. Moreover, it has put in place specific training programmes to ensure that staff can assist disabled customers.

I assure hon. Members that no one requires those who cannot use the PIN pad to give up their order books. The Post Office is developing alternative technology to ensure that all customers can access cash in the post office in a modern and secure way when the order book is no longer available. We should remember that every week, 100 pensioners have their pension payment books stolen. Modern methods of payment put that theft and fraud behind us.

Is it not the case that, on retiring, many people chose a bank account into which their pension would be paid before direct credit was introduced? Is not it important for the viability of small post offices that they capture the market in banking services?

My hon. Friend makes a good point. I have already cited the statistic that 68 per cent. of new pensioners opt to have their pensions paid into bank accounts. My hon. Friend is right to say that there is an opportunity for the Post Office to build on the £2 billion that we are making available for investment, including £450 million to sustain rural networks. This is a major opportunity for the Post Office to expand its banking opportunities and to maximise its footfall, thereby guaranteeing a commercially viable future for a service that every hon. Member values enormously.

This is a complex issue, and it requires a great deal of expenditure of time, effort and money to get across the complexity of the message. Is my right hon. Friend aware that, in discussions that my colleagues on the Trade and Industry Committee and I had with Post Office Counters representatives, we were informed that, based on their experience in private banking, those representatives believed that a move of this radical character would need an expenditure of about £100 million on advertising? I understand that the Department for Work and Pensions has made available barely a third of that amount.

I greatly welcome the contribution that my hon. Friend and his colleagues on the Select Committee are making to the examination of this important issue. It is rare for a Minister at the Dispatch Box to be urged to spend more money on advertising than he is currently doing. However, before we compare our expenditure on the promotion of the Post Office card account and direct payment with what would be spent in the commercial world, we must remember that we are in a position to write to all our customers, as we shall be doing over the next couple of years. I am satisfied that the £25 million that we have allocated to publicity, including national advertising, is a reasonable allocation. Of course we shall be reviewing progress, and I am sure that my hon. Friend's Select Committee will be keeping the matter closely under review as well. Should it be necessary to vary the advertising budget, or the way in which that is organised in the future, I stand ready to do so.

The Secretary of State will know that many people—some of whom are among the most vulnerable in our society—are concerned about this change to direct payment, not least because of the fiasco of the PIN pads. Many pensioners are simply unable or unwilling to make the change that the right hon. Gentleman is asking them to make. Ministers have claimed that those people's interests are to be safeguarded by an exceptions service, but I have asked numerous questions about this and Ministers have given no further details about either the timetable or the nature of the service. Will the Secretary of State now give the House an assurance from the Dispatch Box that the exceptions service will be fully up and running throughout the country by 2005? Will he also, at last, reveal what criteria will determine whether someone will qualify for the service? Will it be restricted to those who are medically unable to open or manage an account, or will those with other genuine concerns about direct payment also be included? The Government must now give answers to these questions. If they do not, they will be providing yet more confirmation that the only exceptional thing about this whole mess is the exceptional incompetence of the Department for Work and Pensions.

The exceptional thing is that such a huge undertaking as the introduction of a universal banking service has got up and running properly and on time. Whatever other criticisms the hon. Gentleman might have, he ought to be congratulating the Post Office and the staff at the Department for Work and Pensions on achieving that. In answer to his questions: yes, we shall have the exceptions service up and running by the time that it is needed, when order books are no longer available. On the criteria, we shall consult closely—as we have done already—with representative groups of older people, disabled people and others to ensure that those criteria are sensible and meet people's needs, so that all those who want to do so can access their cash at the post office, as well as using the other options available to them through bank accounts, building society pass books and cheques.

Private Pension Funds

2.

If he will make a statement on the current value of private pension funds. [117283]

At the end of 2001, the most recent year for which Office for National Statistics figures are available, it was estimated that the total assets of self-administered pension funds were about £712 billion.

One of the concerns that my constituents express when faced with the decline in value of their pension funds relates to how they could live off the annuity that the funds would purchase. What thought have the Government given to relaxing the ways in which such funds can be used, so that pensioners could maximise their income and thus reduce their dependency on means-tested benefits?

The hon. Gentleman will have seen the Green Paper that was published recently. My right hon. Friend the Secretary of State will publish further proposals soon. As the hon. Gentleman will know, there are suggestions in the Green Paper.

The news that the Minister has given today will be welcomed by about half the population, who have a stake in occupational pensions. But will she give us some idea of what the Government plan to do for those who, having thought that they had a stake, find that their schemes have been wound-up and their claims have either disappeared or largely disappeared? Are the Government thinking of using some of the £13,000 million of unclaimed assets that lie idle in the balances of banks and building societies as an endowment, to ensure that the loss of funds that people thought they had for their retirement can be made good?

As ever, my right hon. Friend has advanced interesting ideas about this in his Pensions (Winding Up) Bill. I know that over the weekend he spoke to the ASW pensioners, who organised a march to draw attention to their circumstances. Such cases bring into sharp focus the need for action to reduce the risk of such developments. There is no doubt that those who lose their pensions—and their families and friends—will be less likely to save for the future. It behoves us all to come up with arrangements that will protect pensions better, otherwise people simply will not save.

The right hon. Gentleman mentioned unclaimed assets. "Unclaimed" does not necessarily mean that the assets do not belong to someone. The right hon. Gentleman knows as well as I do that these issues are fraught and difficult, especially for those currently affected, but we are willing to consider any suggestions that he or anyone else may have. That has been the aim of our consultation. The response to the Green Paper will enable us to change the arrangements so that similar problems do not occur in the future.

As was pointed out by the right hon. Member for Birkenhead (Mr. Field), the value of a pension fund to a worker whose employer goes bankrupt is often a tiny fraction of what the worker expected. The Government have let it be known through the media that they are considering an insurance-based solution. Does the Minister agree that any insurance scheme must be underwritten by the Government? Otherwise there could be yet another fraud, and people could not just lose the pensions they had expected but find that the insurance schemes have gone bankrupt as well.

The hon. Gentleman refers to speculation in the press about what might be in the response to the Green Paper. It is for my right hon. Friend the Secretary of State to present that response to Parliament; I cannot speculate on suggestions in the newspapers.

Does the Minister understand—I am sure she does—that when a company goes into administration with the pension fund in tow, as has happened at Chart Industries, Incorporated in my constituency, it takes years for workers to become aware of their pension entitlements? That is a very anxious time for people. Would the Minister consider telling her friends in the Treasury that it might not be a bad idea for those with company pensions to be preferential creditors pari passu with Government demands, rather than ordinary creditors not knowing, at the end of the day, what is left with which to pay the pensions?

That is one of the most distressing aspects of the winding up of pensions—apart from the fact that it occasionally takes far too long. Suggestions in the Green Paper about the time it takes have been welcomed throughout the House, and outside. People are often left not knowing what percentage of their original pensions they will be left with.

This is a crucial challenge. Proposals in the Green Paper for assets to be shared more fairly when schemes are wound up have been widely welcomed, but we need to ensure that action is taken. We also need to speed up the winding up of schemes, and try to ensure that most of the assets of what may be small funds are not swallowed up in fees. We want savers to feel confident that it is sensible to put their money into pensions.

These are serious issues, raised by Members in all parts of the House. I know that the Minister recognises that. Is it not a shame that the Prime Minister appears not to recognise the seriousness of the issues, having failed to appoint a replacement for the Minister for Pensions in the last 60 days?

May I say to the hon. Gentleman and others who have raised this matter in the House that the absence of my right hon. Friend the Member for Makerfield (Mr. McCartney) makes me the smallest Pensions Minister on the Government Front Bench? I can also assure the House that his absence has not delayed the work that is being done by the Department to deal with the Green Paper and the arrangements that need to be made. I can assure the hon. Gentleman that it has not delayed the date at which we shall produce our response to the Green Paper.

Hebburn Offices

3.

If he will make a statement on the future of his Department's offices in Hebburn. [117284]

The Hebburn offices accommodate 607 officials from the Department for Work and Pensions and the Inland Revenue. The lease on the building, which is held by the Inland Revenue, is due to expire on 23 June 2006. The Department for Work and Pensions is working with the Inland Revenue to identify suitable alternative accommodation in the Tyneside area. Alternative accommodation has already been found in Tyneside for more than 500 staff that are based at the Hebburn site. My hon. Friend will also be pleased to learn that the new Jobcentre Plus service in Jarrow will be rolled out by the end of this year. In addition, Gateshead and south Tyneside have been successful in gaining one of the new incapacity benefit pilot areas. That will be welcome news to local people, not least because it will give those who thought they had left the traditional shipbuilding and engineering industries for ever a chance to return to some of the jobs that are coming to the river.

I am aware that more than one Government agency is situated in that building. However, as the Minister stressed, many hundreds of south Tynesiders' jobs are in that building, and the closure will have a massive, adverse economic impact on the local Hebburn shopping centre. Will he get together with his fellow Ministers to review the position and ensure that the offices do not close?

I can give my hon. Friend two assurances. He knows that I want to do everything I can to help. First, I assure him that the jobs will not be lost: they are being relocated on Tyneside. Secondly, I realise the impact that this move is bound to have in the Hebburn area, and if he would like a meeting with me and officials from the Inland Revenue to discuss what can be done to redevelop the site once the lease runs out, I would be happy to arrange a meeting with him to see whether we can find a constructive way forward for the people of Hebburn.

Child Support Agency

4.

How many people have been prosecuted for making false statements to the Child Support Agency. [117285]

5.

If he will make a statement on the Child Support Agency. [117286]

Twelve people have been prosecuted under section 14A of the Child Support Act 1991. The Secretary of State's targets for the Child Support Agency for 2003–04 were published on 29 April in the agency's business plan. Those targets require a further improvement in performance, building on the progress made in recent years. I should add that the agency has more than doubled the amount of maintenance delivered from £300 million in 1995–96 to £770 million in 2001–02.

Is the Minister seriously suggesting that there are only 12 dishonest, lying fathers who, when filling in the forms, try to deprive their children of the maintenance that they should receive? Surely there is a case to be made for some serious prosecutions against fathers who cheat their children, so that they are made to pay. I am talking not about the fathers who go out of their way to provide maintenance for their children, but about those who lie and cheat. The Child Support Agency must know who they are.

Certainly, we must be tough with those who lie and cheat, but the whole purpose of our powers is to ensure that people give the necessary information in the first place. We have tough powers, and we work closely with the Inland Revenue. When we think that the non-resident parent's lifestyle is not compatible with the income they tell us they receive, we can vary the order to make them pay up and pay more maintenance.

When will the new formula for calculating the maintenance be introduced for existing as well as new cases, so that there is equality of treatment for my constituents? Will the new formula in any way reduce the number of successful claims for maladministration, which have soared from 1,389 in 1997–98 to 12,007 in 2001–02?

Where there is maladministration, and we try to cut that, it is right and proper that people have redress. I understand the question. As soon as we can bring all cases on to the new system, the better, but it is a massive operation. The new scheme only started in March. We will publish data on the first quarter in July this year, but the House will have to be patient. Time will pass before we can make a decision on bringing on board the old cases.

Would it be right to say that not all absent parents are fathers—there are mothers who are absent parents? Will my hon. Friend give some idea as to what progress is being made in ensuring that the third of children who are not receiving maintenance receive maintenance through Child Support Agency procedures? Given that the first eight weeks of payment are disregarded, will the absent parent now be responsible for making maintenance payments for the whole period from when the application is made by the parent with care?

The purpose of our child support reforms, which, as we have noted, are currently for new cases only, is to shift the burden of emphasis from assessment, which will be much easier and based on a simple formula, towards enforcement. However, as I said, more maintenance is now going to parents with care—usually the mother but, as my hon. Friend says, sometimes it is the father. We have new powers and we are absolutely determined in all sorts of ways that parents, whatever their family situation, recognise their responsibility to bring up and to fund their own children.

Can the Minister comment on how much cross-checking is achieved between statements to the Child Support Agency and statements to, for example, the Inland Revenue and housing benefit, working tax credit and immigration entry clearance departments?

Increasingly, we have powers and we have the authority of Parliament to cross-check data. Perhaps I will write to my hon. Friend about some of the details. We all know that while the great majority of self-employed people are honest, there can be a problem in compliance with maintenance. Since 1999, the agency has asked self-employed non-resident parents to provide copies of their tax return. That shows that we are moving in the direction that my hon. Friend is, I think, suggesting.

Pension Service

6.

What plans he has to improve the operation of the Pension Service. [117288]

The Pension Service is working well. It is geared to providing a high-quality personal service that puts the needs of pensioners first. Both its call centres and local service have been well received by pensioners. A key task is the delivery of pension credit from this October, for which preparations are well in hand. I will be publishing quarterly updates on overall progress during the run-up, the first in July and the second in October. The figures for October will be published in November and there will be regular monthly reports thereafter.

I thank the Secretary of State for his answer, but has not centralisation of services led to difficulties for pensioners such as those in my constituency, who have had to travel far greater distances to obtain comprehensive advice? Taking into account the imminent implementation of the pension credit, can he today give an assurance that we will not see a repeat of the recent tax credit fiasco?

One of the things I sensibly did, anticipating the question, was to check whether the Dundee call centre, which serves the hon. Lady's constituents, had had any problems with its telephony. I was assured that it had not. Indeed, the system was working very well and at least 94 per cent. of calls got through first time, which is a good record for any call centre, whether in the public or private sector. On personal access, I know that there are surgeries every Thursday at the A.K. Bell library in Perth, on the first Tuesday of the month at the Kinloch Rannoch medical practice, and on the last Wednesday of every month in Crieff library, as well as at Kinross-shire day centre in Kinross on the last Tuesday of every month. If the hon. Lady or indeed other hon. Members have suggestions as to how the surgery arrangements for constituents offered by the Pension Service can be improved, I and the Pension Service will be very pleased to consider them.

I have heard a couple of anecdotal stories about some pensioners who are having to wait up to three months to get their first pension payment once they reach the age of 60 or 65. I have written to the Department, and am awaiting a reply, on whether that happens only occasionally or is more widespread. Will my right hon. Friend assure me that he speaks to people from the Inland Revenue to make sure that lessons are learned from the implementation of the child tax credit—particularly with regard to the scanning-in of documents, which sometimes leads to the misreading of information—so that such hiccups do not happen when the pension credit comes in?

On my hon. Friend's first question, after the statement, I shall go back to the Department to find an answer concerning her correspondence. I do not believe that such delays should be in any way typical and I should be disturbed if they were. I shall look into the specific case that she raises.

On the lessons for the roll-out of the pension credit, and our telephony, scanning-in and other services, I assure my hon. Friend that we are learning from other tax credits. That is one of the reasons why, in introducing the pension credit, we have been careful to phase the publicity and the projected take-up, so as to align them with the capacity that the system must have in place to meet demand. It is early days, but I have had positive reports of pensioners' experience in applying for the pension credit using the telephone system.

Retirement (Financial Independence)

8.

What steps the Government are taking to promote financial independence in retirement. [117290]

We must renew the pensions partnership between Government, employers, employees and the industry to ensure that individuals feel that saving for their retirement is worth while and safe. The recent Green Paper sets out our proposals for greater security, simplicity and better information to promote pensions saving.

The Government have presided over a crisis in pensions provision. The savings ratio has halved and 40 per cent. of final salary schemes are closed to new members. Some schemes have collapsed completely, resulting in millions of 30 to 40-year-olds no longer looking forward to independence in retirement. Those are matters of fact. My question is this: is this the result of incompetence on an epic scale, or does it suit the Chancellor's tendencies towards socialism to have a rising two thirds of all pensioners on means-tested benefits?

The hon. Gentleman's original comments gave too bleak an assessment. What he calls "means-testing", we call giving current pensioners some decency in retirement. The pension credit will end the weekly means test, while giving an extra £400 a year on average to half of all pensioner households, tackling pensioner poverty. His party is committed to keeping means-testing by abolishing the pension credit. He is committed to a weekly means test, pound-for-pound withdrawal of benefit and impoverishing today's pensioners as some kind of incentive to today's working-age people to save. After all, that was the policy of his party when it was in government.

May I tell my hon. Friend about a 57-year-old constituent who, along with all the other employees of the company mentioned earlier by my hon. Friend the Member for Wolverhampton, North-East (Mr. Purchase), Chart Heat Exchangers, lost his job, after 23 years, and his pension? Can my hon. Friend understand the feelings of my constituent, who faces a retirement of absolute poverty because the company did not defend or pay into the pension scheme, as it promised? How would we as Members of Parliament like it if we were treated with such contempt when it came to our retirement?

My hon. Friend is right to reflect the feelings of his constituents, and I should be happy to meet him and other right hon. and hon. Members with constituents affected by this closure. If we are unable to renew our pensions partnership in order to have simpler pensions, to balance simplification and clarity, to help employers to deliver their pensions promises, to improve security and to ensure that members receive the benefits they have paid in for, our system of voluntary provision will not survive. That is why the Green Paper outlines our proposals. If we are not able to do that, we will have to be more radical and, as many hon. Members think, look to compulsion. The Pensions Commission is there to look at that if necessary.

May I explain to the Minister that our policy is that pensioners should be less dependent on means-tested benefits and should enjoy greater financial independence through more funded savings? That is very simple and it is what pensioners want. On the statement that we will hear from the Chancellor later today, 11 million pensioners who care about their independence will be worried that he is going to change the index used for uprating their benefits from the retail prices index to the new index: the harmonised index of consumer prices, known as HICP. Will the Minister give us and those millions of pensioners an assurance that there will be no reduction in the value of the uprating of their benefits if the index for measuring price inflation is changed?

Pensions and benefits are linked to the retail prices index, which is a slightly different measure from the one that the Chancellor is considering changing in respect of these other matters. We have already committed ourselves to increasing pensions by more than the RPI for the rest of this Parliament, as the hon. Gentleman knows. There is no question of any of the changes that my right hon. Friend the Chancellor might deal with later, to which the hon. Gentleman refers, having an impact on that.

Can my hon. Friend give any help or succour to Mr. Humphrey, a constituent of mine whom The Guardian named on Saturday, and who was part of a delegation that marched to Downing street yesterday? Having worked for a company called Dexion in my constituency, he was looking forward, at the age of 58, to a pension of £150 a week. That pension has been slashed by 80 per cent. to £30 a week. Does my hon. Friend accept that, if she cannot give any comfort to people in that position, surely those who are responsible for such dreadful administration of a pension scheme should be brought to book somehow?

Cases such as this, which Members have come across in various situations in their own constituencies, have ensured that we have had to look at how to renew the pensions partnership. Unless we can have better safety and security, people simply will not save into pensions products in future. Of course, in such a situation everybody would be worse off. The Green Paper will introduce our proposals shortly, in response to the question of how to renew that partnership. If we do not do so, there will be problems in the future in respect of everybody.

Since the Government's assumed take-up of the pension credit for next year is 67 per cent.—an assumption that they themselves describe as ambitious—does it not follow that they expect non-take-up to be 33 per cent.? In other words, more than a third of our vulnerable pensioners will gain nothing at all next year from the pension credit.

We want everybody who is entitled to pension credit to take it up as soon as they can get on the telephone and put in their applications. It is simply not the case that we want to place some form of ceiling or cap on those who are entitled to claim. Of course, we have working assumptions about what we want to get done within a certain time, but those are targets, not ceilings. We hope to outstrip them, and we want everybody who is eligible for the pension credit to claim it. If hon. Members would get behind the Government, stop calling the provision means testing and urge their constituents to claim their entitlement, perhaps more might claim rather sooner.

Housing Benefit (Midlands)

9.

What progress has been made on housing benefit pathfinders in the midlands. [117291]

We are testing a new standard local housing allowance in 10 pathfinder local authority areas, starting from this October; one such area is Coventry. Public consultation by the Social Security Advisory Committee on draft regulations for the scheme ends today, and officials are working very closely with the 10 authorities to help set up the pathfinders.

As is traditional for Back Benchers in pre-reshuffle fortnight, I warmly congratulate the Government on the housing benefit pathfinder initiative for private sector tenants, which will undoubtedly drive down fraud and widen choice and personal responsibility. Can I point out, however, that three-quarters of housing benefit cases are tenants of local authorities or registered social landlords? When do the Government expect to roll out the new approach to embrace those millions of cases? Will they reflect on authorities such as my own, North-West Leicestershire, which has one of the best track records in the midlands for processing housing benefit? How can we learn from such authorities?

It is right to embark on a radical reform of housing benefit, so that we can empower tenants and give them greater choice in their local communities. There are some difficulties and questions, which is why we are running a pilot for the private rented sector in 10 areas and evaluating it carefully. Yes, we do want it to apply in the social rented sector, and I hope that, before too long, where conditions allow, we will pilot the scheme in a social rented sector area as well.

Incapacity Benefit Claimants

11.

What the impact is on an incapacity benefit claimant of the receipt of an armed forces pension. [117293]

Armed forces pensions paid on cessation of service, rather than because of disablement in service, are treated in the same way as other occupational pensions, whereby the first £85 of income is totally disregarded and only 50 per cent. of the excess is taken into account. However, basic war pensions, paid because of disablement in service, are completely disregarded and do not affect incapacity benefit. Incapacity benefit is intended to provide a source of income for sick and disabled people of working age. We believe that it is therefore right to take some account of income from their occupational pensions.

Does the Minister agree that for this particular category of person, that particular means-testing is the most mean-spirited of them all and should be got rid of?

We are in danger of repeating the exchange that took place during the Department for Work and Pensions questions in February. The fact remains that we disagree on the matter, but I re-emphasise the point that basic war pensions, paid because of disablement in service, are completely disregarded.

Having heard the hon. Member for Liverpool, Garston (Maria Eagle) trying to say that means tests do not really take money away, is this not yet another example of a nasty little means test invented by the Government? The only redeeming features are that in this particular case it hits a relatively small number of people, albeit people who have served the Crown, and that it appears not to be characterised—a rather greater redeeming feature—by the same administrative shambles that has already hit the Chancellor's child tax credit and is doubtless about to hit the Minister's own Department's pension credit in the autumn.

I do not accept the hon. Gentleman's analysis. Those who have served the armed forces and have occupational pensions are being treated no differently from anyone else. It is more likely nowadays that people leave the armed forces early and move into some other walk of life. It is right to treat them the same way as anyone else. If the hon. Gentleman is committing the Conservative party to repealing the measure, will he clarify how extensively the party intends to act and how much money it intends to spend?

Antisocial Behaviour

12.

What plans his Department has to tackle antisocial behaviour through Housing Benefit sanctions. [117294]

We are determined to tackle the antisocial behaviour that brings misery and disruption to so many of our constituencies. We are interested in the idea that was first floated by my right hon. Friend the Member for Birkenhead (Mr. Field). People have rights, but they also have responsibilities. On 20 May my right hon. Friend the Secretary of State wrote to a range of organisations seeking their views on the introduction of a housing benefit sanction against antisocial behaviour. We will consult communities on housing estates and the victims of antisocial behaviour. I hope that all hon. Members will also consult their communities. We await the responses to the consultation before setting out our specific proposals.

How can a scheme be devised that does not punish people in the household who are not the perpetrators and have no control over the perpetrator? The Minister will be aware of the probable links between antisocial behaviour by adult males and domestic violence. Secondly, is the Minister going to devise equally intrusive punishments for those who are not on benefits?

Of course, we have the Anti-Social Behaviour Bill before the House at present, which will introduce several powers, and that will be another weapon in that armoury. We are consulting on that, because any measure has to be practical and we must have regard to human rights, including in those situations that my hon. Friend describes. However, when a victim has to become homeless—I know of such a situation in my constituency of Croydon, North—to get away from the bullies, I am interested in the rights of the victims, not only the rights of the perpetrators.

Is the Minister aware of the extreme frustration felt by many of my constituents, who daily suffer antisocial behaviour and who—to make their lives tolerable again—want their local authority housing department and other social landlords to have more powers at their disposal?

Yes, I am aware of that and of the hon. Gentleman's support for the measure. I am also aware that we would have had a private Member's Bill on the subject on the statute book now, if it had not been blocked by the Liberal Democrats, who are more on the side of the thugs than of the victims. We want to introduce enforceable powers that have regard to the rights of those members of the problem household who are innocent, but address the problems of those people who are sick and tired of the neighbour from hell making their lives a misery.

Is not one of the problems caused when local authority tenants live cheek by jowl with private tenants, perhaps of those people who have bought former council houses? There is no sanction on the landlord of a former council house to control what sort of tenant he takes and how they are treated. As long as the landlord gets the housing benefit, he does not care a damn about the people who live next door.

We have to be aware that just as there is a small minority—albeit an important number—of rogue tenants, there are also rogue landlords, who do nothing to control the behaviour of tenants or to repair property and simply claim the housing benefit—

Well, some of us take the subject seriously, as do our constituents. The Office of the Deputy Prime Minister has introduced new powers to bear down on abuse in the privately rented sector.

I suspect that every hon. Member, like the Minister and myself, has constituents who have had to flee their homes because of such dreadful behaviour. It is more than a year since the Prime Minister said at Prime Minister's questions that he approved of action to address that. He said that the vast majority of people in this country will support the idea that people who get benefits from the state owe some responsibility in return. Why is it that the Government refused to give time to the Bill introduced by the right hon. Member for Birkenhead (Mr. Field)? The Minister said that a Bill on the issue is before the House, so why have the Government not put such powers in it? Above all, why are they only just starting a process of consultation, 14 months on?

The hon. Gentleman is being unfair for once, which is unlike him. We did our best to amend my right hon. Friend's private Member's Bill. We spent many hours in Committee trying to get it right, with the help of Conservative colleagues. However, despite broad support, it was talked out by the Liberal Democrats on a Friday morning. We need to turn principle into proper practice, and it is right to consult on that, including with the victims.

Employers' Liability Insurance

13.

If he will make a statement on the future of employers' liability insurance. [117295]

The first stage report of the Department's review of employers' liability compulsory insurance was published on 3 June. The report sets out a series of actions including the scrutiny of industry service standards, especially renewal periods; a move towards fairer risk-related premiums to reward those with strong health and safety records; and the development of self-assessment packages to enable businesses to better manage risks. In the longer term, the Government will further evaluate the evidence for separating long-term occupational disease from accident risks, focus on legal costs and give rehabilitation a more central role in the UK compensation system.

It is worth making progress on all of those issues and Ministers will report on progress that has been made and any further steps we intend to take in the autumn.

I am sure that my right hon. Friend would agree that the best way to reduce premiums is to stop people getting unnecessarily injured at work in the first place. However, I am pleased that he has indicated a commitment to rehabilitation, because if people can return to work more quickly that is a good way of cutting the cost of employers' liability premiums. Will he discuss with the Secretary of State for Health what can be done to improve rehabilitation services and will he respond positively to the suggestion from both the TUC and the Association of British Insurers for a national rehabilitation leadership council to take that proposal forward?

I strongly agree with my hon. Friend on both points. Discussions are under way with the Department of Health on what more can be done on rehabilitation. Following our Green Paper, rehabilitation pilots are under way and the location of all seven pilots has been announced to the House. The report itself has been welcomed by the CBI, the TUC and the ABI, and there is a real prospect of making constructive progress in that area.

The report will be profoundly disappointing to many small businesses as it does little more than acknowledge the existence of a crisis of which they were painfully aware six months ago. Specifically, what were the results of the Minister's discussions with the Lord Chancellor about cutting legal costs? They account for 40 per cent. of all compensation and that is what has been driving up many of the insurance premiums.

The hon. Gentleman is not being entirely fair. I urge him to look both at the analysis in our report and the complementary analysis in the report of the Office of Fair Trading, which was put into the public domain on the same day. There are no easy solutions. The hon. Gentleman is right to stand up for small businesses and to voice their concerns about rising premiums. Far and away the best means of getting premiums down is to relate premiums to risk—if the risk comes down, the premiums should come down—and to make the market work better. That is what the proposals in our report are designed to do.

My right hon. Friend knows, because I have discussed it with him, that a cluster of roofing contractors in Bishop Auckland employs about 1,000 people. They have complained bitterly to me about the increasing employers' liability premiums. I do not think that they will regard the Government's report as radical enough to deal with the situation. If we do not take the matter more seriously, I am afraid that many small businesses will go out of business.

My right hon. Friend is right to stand up for small businesses in his constituency. We want the premiums to be stabilised and for there not to be undue burdens on small businesses. The way to do that is to reduce the risk and thereby reduce the premiums. The Health and Safety Executive is working on a self-assessment tool, which is designed to help small and medium-sized businesses in that situation. Some longer term work needs to be taken forward and it is the Government's intention to bring the discussions with the industry to a conclusion in the autumn. I very much hope that we shall be able to produce something that is of practical assistance to my right hon. Friend's constituents.

Is the right hon. Gentleman aware that not only small, or even medium-sized businesses but local authorities, too, are in a dire situation? The Local Government Association tells us that only three underwriters are now prepared to underwrite this type of business. That situation has largely come about because of no win, no fee and the chasing after business by unscrupulous solicitors. There may be a need not just for adequate risk assessment, but also to cap liability, as has been done in some other sectors, so that those engaged in proper risk management will not incur an unlimited amount of liability. [Interruption.]

Order. There is far too much noise in the Chamber. It is unfair to Members who are here for Question Time.

Partly for the reasons that the hon. Gentleman sets out, we are continuing our discussions with the industry on the vexed question of long-term risks and reasonably carrying the burdens that arise from them, but this is quite a complex issue and the analysis in both reports shows that there is no general failing in the marketplace and that the increase in premiums has not been universal across the board. The analyses also show that, by and large, insurance is available, although at a price, and the further work is intended to try to stabilise the price.

Jobcentre Plus

14.

What the role will be of child care partnership managers in Jobcentre Plus districts. [117296]

We have appointed child care partnership managers in every Jobcentre Plus district. They work with local authorities, child care providers and employers to ensure that Jobcentre Plus staff can give parents the child care information that they need to enable them to take up work.

I am delighted that Derbyshire's child care partnership manager has just taken up his post. What guidance and help is my right hon. Friend giving to ensure that the necessary information is exchanged, working with the early years partnerships, to fill the gaps in provision for parents who seek to take up employment? Will he undertake to consider how Jobcentre clients themselves can gain access to some of the new opportunities to enter child care as a profession?

Yes. My hon. Friend has very succinctly summarised the new Jobcentre Plus child care partnership managers' remit, which is specifically to work with the early years development partnerships in the way that she suggests to ensure a good flow of information between all the parties necessary, so that there is improved child care provision, as well as improved rates of movement into jobs. Yes, they will specifically work to ensure that a greater proportion of Jobcentre Plus clients can fill the expanding number of vacancies in the child care sector.

Pension Credit

15.

What progress his Department has made towards the introduction of the pension credit. [117297]

Good progress. The Pension Service has already written to those in about 1.8 million pensioner households who currently receive the minimum income guarantee to tell them that they will automatically transfer to pension credit. This month, 45,000 mail packs a week are being set out, inviting pensioners to apply before October and advance applications are now being taken on a freephone application line.

I thank my hon. Friend for her reply. I welcome the introduction of the new pension credits, which will benefit many constituents in my area, but, as she will be aware, a significant number of elderly people are unable to look after their financial affairs, so what discussions has she had with the Convention of Scottish Local Authorities and the Scottish Executive to ensure the maximum take-up of that very valuable benefit?

I have had no such discussions, but the Pension Service is involved in discussions about take-up throughout the country with local partners, local government and the Scottish Parliament. We are anxious that as many people as possible take up their entitlement to pension credit, not least because, for the first time, it will provide a reward for saving instead of penalising it, and those pensioner households who are entitled will receive an extra £400 a year on average.

With the greatest respect to the Minister, can I tell her and perhaps the Prime Minister how much we have missed the ebullient presence of the former Minister for Pensions during Question Time today? Does she think that not having a Minister for Pensions has had any significant effect on the performance of her Department?

Well, of course, we are all working hard, as one might expect, to make up for the work load of my right hon. Friend the former Minister for Pensions, who was well known in the Department for working from noon—[Interruption]—from morning till noon, till night, day in, day out, so I can assure the hon. Gentleman that things have not been easy, but I hope that no one will have noticed my right hon. Friend's departure; that has certainly been the aim of those of us seeking to cover his efforts.

Does my hon. Friend have any plan to run take-up campaigns for pensioners generally? What assessment has she made of Age Concern's recent survey, which shows that pensioners in Liverpool are among the poorest in the country?

My hon. Friend is right. We have plans with all our local partners, including Age Concern, to maximise the take-up of pension credit entitlements. We want to ensure that all those who are entitled take up pension credit. To the extent that our local partners, such as Age Concern in Liverpool, can help us to achieve that, we will work very closely with them to ensure that people do so.

Income Support Fraud

17.

What effect the human resource initiatives outlined in the Government's response to the Public Accounts Committee's 55th report of Session 2001–02 on fraud and error in income support had in reducing the variations in performance between local offices. [117299]

We are continually striving to improve our performance in tackling fraud and error. As the latest results cover only the period up to March 2002, it is too early to gauge the impact of training and other measures on reducing performance variation across regions. Overall, we are making excellent progress in tackling fraud, having reduced it by 24 per cent. against income support and jobseeker's allowance since 1998—a saving of £230 million.

Is the Minister proud of the fact that year after year the Comptroller and Auditor General qualifies the accounts of his Department because of gross inaccuracies in them? We are in the 13th year of its accounts being qualified. One of the reasons for these inaccuracies is the level of experience and high turnover of staff, particularly in London and the major cities, where inaccuracies are twice the national level. What is he doing to rectify this situation?

We are not proud of that, we are working hard with the National Audit Office to move away from it, and I recognise the seriousness of the hon. Gentleman's point. On the main question, however, I am proud that we are winning the war against the fraudster and saving the public's money: money that the public want spent on education and hospitals and not on crooks and criminals.

Economic And Monetary Union

3.31 pm

With permission, Mr. Speaker, I should like to make a statement. For many decades, Governments formed from parties on both sides of the House have made the case for Britain's engagement in the European Union. It is right that at every point we show that every decision that we make on Europe is made in the British national economic interest.

Today, therefore, I will set out the following: first, the economic context for the euro decision; secondly, the case in principle, in the national economic interest, for membership of the euro; thirdly, the detailed conclusions of our assessment; and finally, the policy changes that our country must now make.

Let me start with the economic context. Since 1997, every economic decision of this Government has been designed to build and then entrench stability in order to achieve for Britain high and stable levels of employment and growth. That commitment to put stability first led us to adopt a new fiscal and monetary regime, to make the Bank of England independent, and to cut debt substantially, and it has given us low inflation, low interest rates and low unemployment. That commitment to long-term stability, growth and employment is the foundation of our decisions today.

Central to the pursuit of stability, growth and employment by Governments of both parties has been our membership of the European Union. Our assessment shows that Britain's trade with the European Union has grown from just over 40 per cent. of our total trade when we joined to 55 per cent. today.

Membership of the European Union is central to stability, growth and employment for another reason. Just as Britain benefits from being part of Europe, so, too, Britain stands to benefit from an enlarged Europe that is more integrated in the global economy—globalisation increasingly moving Europe away from an exclusive trade bloc to a Europe that must look outwards, not least to the USA, and a Europe that, to meet global competition, must liberalise and reform.

Therefore, in addition to our decisions that I will announce on the euro today, we will also make proposals that, by reducing tariffs, regulatory and competition barriers to European Union-USA trade, will fulfil our objective of a fully effective transatlantic economic partnership between Europe and the USA. Following the joint declaration of all EU Finance Ministers placing, for the first time, labour market flexibility and structural economic reform at the heart of the new economic policy guidelines for Europe, the Government will later this week publish our further proposals for economic reform in Europe.

I have no doubt that an enlarged Europe pursuing, like Britain, economic reform, and, like Britain, modernising fiscal and monetary policies, will be conducive to British stability, growth and employment. I believe that, around that, a modern pro-European consensus can be built in Britain.

It is in this context—with stability the foundation and our membership of the European Union central to our economy—that we must decide whether joining the euro now is in the national economic interest. It is a decision of far-reaching consequence. Indeed—because it is irreversible—it is one of the most momentous economic decisions our country has to take, and it is one that must contribute to the attainment of stability, growth and employment.

When, in 1997, I set out the Government's position, I listed the potential benefits for Britain of a successful single currency in transparency of costs, currency stability and in trade and long-term interest rates. The detailed work set out in the background papers published this morning allows us to set out these benefits with even greater precision.

The first benefit is lower transaction costs for business and consumers. We estimate these as worth around 0.1 to 0.2 per cent. of GDP—£1 billion a year—with the gains greater for small companies and the gains permanent. The second is diminished exchange rate volatility, with gains for both large and small companies especially in the manufacturing sector with, again, potentially the greatest gains for the smallest companies. The third benefit is greater cross-border trade and thus the potential for increased commerce and growth.

Our assessment makes it clear that, with the advent of the single currency, trade within the euro area has already expanded and that, with Britain inside the euro, British trade could increase substantially with the euro area—perhaps to the extent of 50 per cent. over 30 years.

I come next to interest rates. For 30 or 40 years, continental Europe has been able to combine stability with consistently lower interest rates than in Britain, to the benefit of both business and, of course, homeowners. Indeed, over the last 30 years, interest rates in Britain have had to be, on average, 3 per cent. higher than in Germany.

With Britain in the euro, business could benefit through greater access to a more integrated European capital market. And if, on the basis of sustained and durable convergence, we could lock in stability for the long term, business could see a cut in the cost of borrowing on a sustainable basis with a long-term boost to cross-border investment flows and to foreign direct investment in the UK.

So I can today confirm the principled case: our view that membership in a successful single currency would be of benefit to the British people as well as to Europe is strengthened by the results of our assessment.

While we argue the case in principle for joining, there are those who would rule out joining the euro for ever as a matter of dogma. They would rule out joining the euro even if it was in the best economic interests of our country. And that cannot be right for the future of Britain.

The Government's view is that, if the economic case is clear and unambiguous, then the constitutional issue, while a factor in the decision, should not be a bar to entry. And my conclusion is that if, on the basis of the five economic tests, membership of the euro is shown as good for sustaining British jobs, British business and British future prosperity, then it is economically right and in the national interest to join.

Indeed, our assessment on trade and output is that, inside the euro, UK national income could grow by a quarter of a percent a year, boosting, subject to convergence, potential output and national wealth. That is worth up to £3 billion extra a year, delivering higher living standards and lower prices for consumers and households.

Just as there are risks of joining before a clear and unambiguous case has been demonstrated, so too there are risks in delaying these potential benefits once sustainable and durable convergence has been achieved. So from the assessment we have done, I have also no doubt about, first, the potential benefits to Britain and the British people of joining; secondly, the potential risks of delaying the benefits of joining; and, thirdly, the advantages within the euro area of greater influence over policy towards the euro and thus Europe.

Provided the crucial tests are met concerning the British economy, it is our intention to join. If on the basis of the tests we can make a clear and unambiguous case, this Government's view is that it is in the national interest to recommend to the British people to vote yes in a referendum to join the single currency. In short, if the economics are right for Britain, we should join.

So let me turn to the conditions that have to be met if we are to secure the potential benefits of the euro. We must be sure that there is cyclical and structural convergence between Britain and the euro area and be sure that there is flexibility to withstand stresses and strains. Indeed the more flexibility in the economy, the easier it is to tackle problems that arise from the divergence of business cycles.

Sustainable convergence means that the British economy can live on a permanent basis with euro area interest rates, able to advance our objectives of high and stable levels of growth and employment and sustained and stable funding of our schools, hospitals and other public services. The flexibility required is, as I said in 1997, sufficient flexibility to be able to adjust our economy quickly to any shocks that arise so that we do not put at risk these objectives.

So it is my duty to demonstrate in detail whether we have secured for Britain convergence, which is compatibility with our European partners that is sustainable—the first test—sufficient flexibility, the second test, and whether we can affirm conclusively and confidently to the British people that the potential benefits for investment, financial services and employment, growth and trade—the other three tests—are indeed realised.

The five tests are our stability guarantee: to meet them would ensure that we would not put at risk our economy or our public services. With the tests met, Britain in the euro can enjoy the benefits that I have outlined: greater trade, investment and employment. If we entered with the tests not met, at the wrong exchange rate, then just as with the exchange rate mechanism, we could see unemployment rise, public service investment fall and growth stall. The discipline of the five tests is to ensure that there will be no repeat of the experience when Britain joined at the wrong rate and at the wrong time, without either convergence or flexibility, and the potential benefits could not be realised.

In our 1997 assessment, we took the view that a period of stability was required to ensure that business cycles and structures converged sustainably and durably. We concluded that UK interest rates were higher than in the euro area and remained higher because of structural differences, particularly in the housing market.

The new assessment that we publish today also shows that because of a lack of convergence with the euro area, joining in 1999—as some in this House advocated—would not have secured the stability inside the single currency that we have enjoyed outside it.

Cutting interest rates substantially to join the euro below the level that would have been right for Britain, and joining at an exchange rate that was too high for the long term, could have locked us into another cycle of stop/go economics. But I can tell the House that the consistent polices that we have pursued since 1997—an independent bank, new fiscal rules, lower debt, housing market reform and greater flexibility in labour, capital and product markets, including an independent competition commission—have contributed to meeting, quite comfortably, the Maastricht criteria for nominal convergence in a better position than some members were in 1997 and even are now, and are also leading toward the sustainable convergence and greater flexibility required by the five tests.

We can report that since 1997 there has been significant progress in achieving cyclical convergence. The short-term interest rate divergence between Britain and the euro area has fallen from 4 percentage points to 1.75 percentage points. Long-term interest rates have virtually converged at around 4 per cent. Over the last six years, there has been a weaker euro and a stronger pound. And the inflation rate has been on average 1.1 per cent. below the eurozone average for the last three years.

Over recent months, the euro exchange rate has strengthened against sterling and the dollar, and we are today publishing an independent study examining the sustainable level for sterling reflecting economic fundamentals.

The issue at the present time, however, is being sure that there is structural convergence that is sustainable for the long term; and we also have to be sure that, if real interest rates or business cycles diverge, Britain will have the necessary flexibility to sustain growth and employment.

We do not know whether or how shocks will occur, but there are risks for the UK, and let me give the House two specific examples—one from housing, one of inflation generally—of how in the new circumstances we would need to respond.

Take the challenge of an inflation rise particular to Britain from, say, the housing market. For a 1 per cent. rise in British inflation, the British interest rate would, other things being equal, tend to rise by 1.5 per cent. The real interest rate—that is, the interest rate after taking account of inflation—would therefore rise by 0.5 per cent. as we brought inflation under control and back to its target.

Inside EMU, Britain's economy would be one fifth of the euro area economy. A 1 per cent. inflation rise specific to the UK which would today lead to a British interest rate rise of around 1.5 per cent. would lead to a euro area interest rate rise of about a third of a per cent.—a real interest rate fall for the UK of around two thirds of a percent. As a result, real interest rates for Britain which ought to increase could actually decline. And it is for this reason that, inside the euro, Governments need other forms of flexibility. If inside the euro Britain's inflation rose faster than that of the euro area, Britain would suffer a loss of competitiveness. So to restore lost competitiveness, a period of higher inflation than the euro area would have to be followed by a period of inflation lower than the rest of the euro area.

These two examples show why it is important to learn the lessons not just from the experience of the euro area but also from how states and regions adjust flexibly in the United States monetary union. In other words, we must be sure of sustainable convergence and that if business cycles do diverge or shocks arise, Britain has the price and wage flexibility—and the fiscal flexibility—to ensure stability.

Our assessment finds that obstacles to convergence do not lie in the provision of small business finance or large company finance, where, in fact, overall on business finance, the UK economy is found to be not more interest-rate sensitive than others.

The issue in housing, where we are more interest-rate sensitive, is not the attainment of identical market structures for housing with other countries—all countries have unique features of their market—but the fact that to deliver stability in Britain, the combination of house price inflation and volatility, and the impact of both on consumption, has generally led to interest rates higher than in other countries.

Indeed, most stop/go problems that Britain has suffered in the last 50 years under Governments of all parties have been led or influenced by the housing market. The volatility of the housing market and its potential for higher inflation is a problem for stability that we are determined to do more to address to produce greater stability and reduce the risks of inflation irrespective of the decision on the euro.

Because Britain has experienced difficulty in balancing supply and demand in housing, we propose to build on and extend the reforms already announced in respect of planning and supply. That includes simpler planning guidance, the speeding up of decisions, reserve powers to call in applications and the case for binding local plans—and, having asked Kate Barker to conduct a review of issues underlying the lack of supply and responsiveness of housing in the UK, we will bring forward further proposals in the pre-Budget report and Budget on how we can produce greater stability in the British housing market. And because Britain has had a different system of housing finance—just 7 per cent. of mortgages in the UK are at long-term fixed rates—we are learning the lessons from other countries where, for example in America, they securitise long-term fixed rate mortgages, and an independent review is now examining the structure of mortgage finance including the case for, and how we can help the development of, the long-term fixed rate mortgage market in the UK.

So further housing reforms will be put in place in the coming year—reforms right in any event for the British economy—that will help to ensure that by having a reduced propensity to house price inflation, which is in everyone's interest, stability can be further entrenched.

It is also right to consider a further change that is right in itself and will foster convergence—that is, a new target for domestic inflation. The advantage of the current indicator of inflation—RPIX—is that it is known, well understood and has served us well. The advantage, however, of the internationally recognised index of consumer prices is that it is a better measure, it will improve the quality of our target, it is in line with best international practice, and it is used by every other G7 nation except Japan and by all our neighbours in Europe.

I turn from issues of convergence to issues of flexibility. To strike the right balance between fairness and flexibility in the pursuit of full employment, we have introduced a minimum wage and a tax credit system, which guarantees a national minimum income for single persons and couples over 25 and for families. So no one should fear that when they move areas or move jobs, they will lose those national income guarantees.

With this national framework for fairness in place, it makes sense to recognise that a more considered approach to local and regional conditions in pay offers the best modern route to full employment in our country. In addition, in the south-east, where professionals have benefited from London weighting and other arrangements, many low-paid workers have missed out. So in future we plan to publish data on regional prices and inflation; remits for pay review bodies and for the public sector, including the civil service, will, within their nationally determined frameworks, include a stronger local and regional dimension; and the reform of housing benefit will remove disincentives to work or to move. These measures—which will be put in place over the coming year—can make Britain, with already the lowest unemployment of all the main industrialised countries and 1.5 million more jobs since 1997, the most employment friendly country in the world.

The other form of flexibility is fiscal flexibility. Because of our history of stop/go, prudence dictates a cautious approach. Some countries have proposed new domestic procedures for faster and more effective adjustment of their fiscal policies inside the euro area. In the principles that we have applied to British monetary policy—to ensure stability and flexibility—we have insisted on clear symmetrical rules, well understood procedures, and enhanced transparency. Central to that is the open letter system, which is a means for dealing with potential pressures. To promote stability and flexibility in future, the same principles should be applied to any new arrangements for British fiscal policy inside EMU.

To ensure stability inside the euro area we will consult on the case for an open letter system on fiscal policy and a new and additional fiscal rule. We propose a regular fiscal stability report published on a pre-announced timetable to Parliament, ensuring that fiscal decisions are fully transparent and accountable and that they are made by Parliament; an assessment in the report of the gap between actual and trend output in the economy; and when actual output materially diverges from its trend, an open letter sent by the Treasury to Parliament setting out the Government's response. In that way, inside EMU, the principles underlying our monetary policy regime, which has been successful in delivering stability, would be mirrored in a similar fiscal policy regime.

Let me give the conclusions on each of the five tests, the full details of which, the benefits and the challenges, are set out in the Treasury's assessment published this afternoon and in the 18 documents published this morning, which cover in an open and full way all aspects of British economic policy, all of which are now available for open public debate.

With regard to convergence, on long-term interest rates we have made significant progress in lowering inflation expectations and establishing a platform of stability. There are grounds too for optimism about increasing compatibility of business cycles and market structures. Today, interest rates, which were 4 per cent. above those of the euro area, are 1.7 per cent. higher. Structural differences remain that could pose a risk to stability unless addressed, which they are by the proposals I will put forward today.

On flexibility, the assessment shows that considerable progress has been made to reform markets in the UK and euro area. Flexibility—right in itself for every economy—has improved in the British and European economies. The more flexibility in the economy, the easier it is to deal with problems when cycles diverge, and the better it is for our competitiveness. Yet as the persistence of volatility in inflation rates within the euro area demonstrates, we cannot be certain that there is as yet sufficient flexibility to deal with the potential stresses. It is for these reasons that we are making structural reforms that will bring increased flexibility to our economy.

On investment, the assessment shows that inside the euro there will be new opportunities for investment, particularly for foreign direct investment. At all times, by continuing to maintain macroeconomic stability and encouraging flexibility, the Government will continue to ensure that the UK retains our position as a magnet for foreign direct investment. We have taken particular account of the views, indeed the qualitative evidence, from Japanese, and other Asian, American and European investors, many of whom have said that membership would be beneficial and is important to them. There can be confidence that on the basis of sustainable and durable convergence, a successfully operating EMU and UK membership of it on the right terms would boost investment and foreign direct investment over the longer term.

On financial services, the assessment shows that in or out of the euro, UK financial services, wholesale and retail, are and will remain competitive. Future integration of financial markets inside the euro could promote the kind of diversity, flexibility and risk diversification seen in the capital markets of the United States of America, therefore making it easier for a more flexible Britain to win business throughout the euro area.

On employment, stability and growth, the fifth test, the potential benefits in increased trade and competition, and then in higher long-term levels of output and employment, are significant. Without sustainable convergence and sufficient flexibility, we would not realise the potential benefits for stability, jobs and investment.

It is because we will never put stability at risk that the tests we set were, and indeed are, high ones: namely, to show a clear and unambiguous case for British membership. So we conclude that the financial services test is met. We have still to meet the two tests of sustainable convergence and flexibility. Subject to the achievement of sustainable convergence and sufficient flexibility, the tests for investment and employment would be met.

So I am today announcing major reforms, right for the British economy: reforms that will be implemented over the next year and will greatly assist the process of achieving sustainable and durable convergence and the flexibility necessary for Britain to succeed sustainably within the euro zone and realise the potential for trade and investment.

Under Bank of England legislation, it is my duty to set the inflation target. I have written to the Governor of the Bank of England today stating that, subject to confirmation at the time of the pre-Budget report, I intend to change the inflation target at that time. The inflation target for Britain will be set on the consumer prices definition. I can confirm that pensions and benefits and index-linked gilts will be calculated on exactly the same basis as now. We have said throughout that we do not believe it necessary or right to rejoin the exchange rate mechanism.

I am asking by the time of the pre-Budget report for interim reports on the step changes we need in the planning and supply of housing and on the market for long-term fixed rate mortgages. I am today publishing for consultation our proposals for a new system within EMU of fiscal reporting to Parliament.

As part of radical reforms at a national, regional and local level, I propose that by next year almost all pay remits for public sector bodies will include a regional or local pay dimension. We will publish six-monthly reports on trends and progress in flexibility in labour, product and capital markets.

At this particularly uncertain time for the world economy—with adjustments only recently in the exchange rate—and when we do not know the future path of growth and inflation rates in Britain and Europe, it is right, prior to the point of transition and in the light of progress, to consider both the exchange rate and the balance of monetary and fiscal policy.

We will also continue to pursue our objective of a stability and growth pact that takes into account the economic cycle, debt sustainability and public investment, and we will seek reform of the European Central Bank. It is important that we resolve the uncertainties over the European Convention, and we will continue to pursue successfully our objective of tax competition and reject tax harmonisation in Europe. We will report back on progress in all these areas of reform in the Budget next year.

It is this resolve to implement far-reaching reforms in our economy that is the practical and best expression of our intent. It is a reform agenda that is right for Britain's economic interest and right to help meet the five tests: a reform agenda on which I believe there is a realistic prospect of making significant progress over the next year.

The Government believe that the implementation of these reforms, right in themselves, would help towards sustainable and durable convergence and flexibility, so that we can, within the euro area, achieve high and stable levels of growth and employment and deliver our objectives for public services.

We will report on progress in the Budget next year. We can then consider the extent of progress and determine whether on the basis of it, we make a further Treasury assessment of the five tests, which, if positive next year, would allow us at that time to put the issue before the British people in a referendum.

I can announce the publication of the draft referendum Bill this autumn; the introduction of further paving legislation for additional departmental allocations for preparations, and the publication today of the full and complete version of the British national changeover plan, which sets out the possible timetable for a changeover, its management, and the impact on consumers, business, financial services, the voluntary sector and the public sector.

I propose Scottish, Welsh and Northern Irish preparation committees, which will examine local, regional and sectoral preparations. I am also asking representatives from consumer organisations, local authorities, the voluntary sector and the regional development agencies to join the standing committee on euro preparations.

I will publish a detailed report on euro preparations in government, the public sector and across the economy this autumn. I will shortly issue guidance to local authorities on preparation. The publication of the changeover plan will lead to a period of information and discussion in each region and nation of the country, Including in each constituency.

So, in this statement, we strengthen our commitment to and support for the principle of joining the euro and show that the gains to the country and to our businesses are greater than anticipated.

We have shown how financial services would benefit from membership of the euro. We have shown how, with sustainable convergence and flexibility, investment can benefit from membership of the euro. We have shown how, with convergence and flexibility, employment can benefit from membership of the euro. We have also shown the critical importance of achieving sustainable and durable convergence, and I have announced major reforms to be implemented in the next year.

At all times, we have and will put stability and the national economic interest first. We have set out the real benefits to Britain of membership of the single currency; we have shown that, with the achievement of sustainable convergence and flexibility, all five tests could and can be met. We have also laid down the concrete and practical steps that we will follow.

Those radical steps set out a new direction for reform and the clear path ahead for Britain. With a programme of economic reform benefiting Britain, I believe that a modern, long-term and deep-seated pro-European consensus in Britain about Britain's role in Europe and Europe's role in the world can and will be built in our country.

I commend the statement to the House.

I draw attention to my declaration in the Register of Members' Interests, and acknowledge that the 1,738 pages of background papers—not the Chancellor's statement or assessment—were made available at 9 am this morning. The Chancellor generously gave us six and a half hours to read them, in sharp contrast to the 480 hours that he gave his Cabinet colleagues. I am not sure whether that reflects the Chancellor's contempt for the intelligence of his Cabinet colleagues or his admiration for the intellectual abilities of the rest of the House.

The
"time of indecision is over."—[Official Report, 27 October 1997; Vol. 299, c. 588.]
The Chancellor said that about the euro six years ago. He said that it was time to "establish clear national purpose", to show "economic leadership" and to "make … hard choices". He said that divisions led to "indecision" and "inconsistent and unclear" policy. How refreshing it must be for the British people, after hearing those words, to see the Chancellor and his colleagues producing such decisiveness, clarity and leadership.

To be fair, Ministers are speaking with one voice today. They are united in common purpose, with only one objective: to paper over the cracks that have riven them in the past few weeks. Is it not clear from any objective reading of the evidence, including the 18 volumes that we have been given today, that joining the euro would damage our prosperity, destroy jobs and lead to an irreversible—the Chancellor's word—loss of control over our economic policy? That is certainly our view; it is also the view of the clear majority of the people of this country.

Today's statement is not the result of any real assessment of Britain's national economic interest. It is a result of the frantic efforts by the Chancellor and the Prime Minister to cover up their differences. After all, that is why the five tests were thought up in the first place. We all know that they were written on the back of an envelope in the back of a taxi to fix the damage done by the Chancellor's spin doctor in the back of the Red Lion pub. It was a four-pint briefing, which led to a five-point plan that has just given us a six-year runaround. And what a runaround it has been.

Ministers could not even agree on what question they had to answer. The Leader of the House—that rogue element in the Cabinet—said that the five tests were to determine when we should join the euro; three days later, the Foreign Secretary said that they were to determine whether Britain should join. The Secretary of State for Scotland has said that there should be a sixth test. The Chancellor said that the economic assessment would be decisive. The Prime Minister's spokesman said that an assessment was not a decision. Indeed, the Prime Minister was so determined that the Treasury view would not prevail that he thought the unthinkable: he suddenly saw the merits of Cabinet decision making. There is a first time for everything.

The Prime Minister will pay any price to do down his Chancellor. There they sit, united in rivalry, each determined to frustrate the other, to scheme against the other and to do the other down. So there is no clarity in policy and no consistency of purpose, and each of them is the loser. The Chancellor is losing, the Prime Minister is losing and, much more importantly, the British people are losing. The Government's ability to deliver has broken down on health, on education and now on the euro. Blair goes one way, Brown goes the other way, and bang goes the third way, lost in conflict, compromise and confusion. No wonder so little ever gets done under this Government. That is the price that we are paying for the fault line at the heart of this Government.

What a humiliation today's announcement is for the Chancellor of the Exchequer. Was it not he who said that there was no reason to keep the question open or to look at it again in this Parliament, that there was no need for another assessment and that we certainly should not have a referendum in this Parliament? He told us again today, as he did in 1997, that the results of the tests would have to be clear and unambiguous before we could join, but the permanent secretary to the Treasury has told us that the economics can never be clear and unambiguous, and the incoming Governor of the Bank of England has said that we would need 200 or 300 years of data to find out whether business cycles have converged.

What would have happened if the 18 volumes of data that we have been given today had shown that the tests had indeed been passed? How on earth are we to know whether a similar assessment next year, or in five or 10 years' time, would reach a similar conclusion? If the data change in one direction, how can anyone know that they will not change back again? If, at any particular moment in time, our growth rate, inflation rate or interest rates are at similar levels to those in the eurozone, how do we know whether that convergence is permanent? Might it not be because our economies were like ships that pass in the night, coming together for a moment before moving off in different directions?

The Chancellor predicted that trade with the European Union could grow by as much as 50 per cent. over 30 years. Will he confirm that his own Department's reports conclude that improved levels of trade are totally dependent on sustained convergence, which has not been achieved? Will he confirm that other economists have challenged his conclusion in the academic studies published today by the Treasury? Will he confirm that the author of one report that supports his assertion points out:

"any extrapolation of my results to EMU may be inappropriate since most currency union observations are for countries unlike those inside euroland"?
Will he confirm that that expert's assumptions, on which the Chancellor relies, are based on studies of currency unions involving Angola and Mozambique, Burkina Faso and Chad, Vatican City and San Marino, and Tuvalu and Tonga? The Prime Minister is obviously surprised by that. It is one of the reports that he had not got around to reading.

In 1997, the Chancellor said that the most critical test was convergence, and today he was forced to admit that it had been failed. One of the Chancellor's documents is succinctly entitled "Analysis of European and UK business cycles and shocks". Its conclusion in paragraph 9.2 is clear: the UK cycle is more strongly correlated with that in the United States than with those in Europe. Indeed, not a single UK region is strongly associated with the European cycle. Astonishingly, there was no mention of that in the Chancellor's statement.

That is just one example of the gloss that the Chancellor has tried to put—the gloss that he has been obliged to put—on the studies that he has published today. He has given us his solutions, which are the solutions that we always get from this Government when the evidence does not suit their case: change the evidence, fiddle the evidence, distort the evidence. If the mortgage market in this country differs from that in the eurozone, change it, whether or not that is in the interests of British home buyers. If the inflation index in this country differs from that in the eurozone, change it, whether or not that is in the interests of British monetary policy. Perhaps the Chancellor will tell us what independent advice he has taken about the abandonment of the retail prices index. He has a Retail Prices Index Advisory Committee; perhaps he will tell us whether he took its advice before abandoning the RPI.

How would either of those changes affect the conclusions of the Treasury's assessment, "Housing, consumption and EMU"? Paragraph 8.10, on page 86, states:
"deviations in UK interest rates from their appropriate level could lead to particularly large swings in the housing market … and hence in the wider economy in the UK".
It is true that the document on fiscal stabilisation suggests, in paragraphs 6.89 and 6.92, that fluctuations in the housing market might be damped, and sets out how they might be damped by an increase in stamp duty or by charging capital gains tax on residential property. Perhaps the Chancellor will tell us whether that is what he had in mind. Is he suggesting that the choice for this country, in the euro, would be between even higher taxes and even more boom and bust? [Interruption.] Yes—more boom and bust.

The Chancellor has been forced to admit that the flexibility test has been failed as well. Indeed, according to his own assessment of the flexibility test, inflation volatility is very likely to increase inside the euro. Perhaps he will tell us whether that is why he is going to such lengths to make our economy less flexible. Perhaps he will also tell us what grounds he has for thinking that the test is more likely to be met by the time of next year's Budget, or in a year's time.

What of investment? Only last week Ernst and Young said that Britain's share of inward investment projects for the EU rose last year. It described euro membership as a
"bit of a damp squib as far as inward investors into Europe are concerned".
It is not surprising that the Chancellor has been forced to admit that that test too has been failed; but what grounds has he for supposing that it is likely to be passed by the time of the next Budget, or next year?

What of financial services in the City? Far from the City having been hit by Britain keeping the pound, the Bank of England says:
"The evidence indicates that, since the launch of the euro, the City has maintained its market share."
Why? As the Bank of England says:
"The City is a global financial centre, and not just a European centre."
That conclusion is reinforced by paragraph 7.8 of the Treasury study, "The location of financial activity and the euro." Why, in the face of all the evidence, does the Chancellor insist that this test has been passed? Will he reassess it this time next year, or are the test results allowed to change only in one direction?

It is no surprise that the final test on jobs has been failed. At the moment, we can choose to have the same interest rates as the eurozone when that suits our needs. Why on earth should we be forced to do so when it does not? Why on earth should we accept the straitjacket of a one-size-fits-all interest rate when it is not the right rate for our economy? Competitiveness would be lost, growth would be hampered, jobs would be put at risk, and that will be just as true at the time of the next Budget and in a year's time as it is today.

Other countries have discovered these truths the hard way. As a former director of the Bundesbank said yesterday:
"The present Eurozone structure is devastating for Germany. And I am convinced the UK would be crazy to join—you should stay out for as long as I can foresee."
Is that not what we found with membership of the exchange rate mechanism? The Conservative party has learned its lesson from the experience of fixed exchange rates, but the Government have not, despite the fact that the present Chancellor of the Exchequer was calling for early entry to the ERM almost a year before we joined.

Today, the national economic interest took a back seat. As the Government dither, uncertainty is maximised. What does the Chancellor say to business leaders, such as the director general of the CBI, who said:
"The last thing we want is an annual reassessment."
David Frost, the director general of the British Chambers of Commerce, said:
"once the Euro verdict is announced, business would expect a period of stability on this matter for at least three years."
Ruth Lea of the Institute of Directors said:
"We need to know where we stand."
This is the Government who in opposition promised not to be "de-railed by … internal bickering" on Europe. This is the Government whose election manifesto in 1997 pledged that Labour would make a hard-headed assessment of Britain's economic interests rather than be "riven by faction". This is the Government who promised to "prepare and decide", but now it is not prepare and decide, it is not wait and see, it is just hope and pray. Today, they have not put off a referendum because they are against joining the euro, or because they think it will damage the national economic interest. They have not put off a referendum out of conviction. The only reason we are not having a referendum now is that they know they cannot win it.

Today's statement comes from a divided Government—a Government on the run. This whole exercise has been an exercise in deceit: the deceit that they had the national economic interest at heart; the deceit that they wanted an objective assessment of what this country needs; the deceit that they were united. It is time for an end to the deceit. It is time for an end to the duplicity. This is not the end of the beginning for this Government. It is the beginning of the end. The sooner it ends the better it will be for the national economic interest and for the British people.

When, by his own admission this afternoon, the shadow Chancellor was in the ERM Cabinet and was the Secretary of State for Employment who lost 1 million jobs, how can he come to the House to lecture us about economic stability and putting the national economic interest first? The Conservatives joined the ERM with no assessment of investment, no assessment of jobs, no assessment of financial services and no assessment of home owners. Interest rates were at 15 per cent., inflation was at 10 per cent., 1 million jobs were lost, 1 million were in negative equity. Set that against our record, which is the lowest interest rates for 40 years, the lowest inflation for 30 years and economic stability, which they failed to achieve.

When the shadow Chancellor tries to give us his balanced account of the studies that were produced this morning, he fails to mention the benefits in transaction costs. He fails to mention that 55 per cent. of our trade is with the European Union. He fails to mention that we have 3 million jobs dependent on the European Union. He fails to mention the estimates of an increase in output as a result of membership of the euro. He fails to give a balanced account of the national economic interest. The reason for that is that he is against the euro on grounds of dogma, even if it is in the national economic interest to join. Even if it were good for jobs, he would refuse to join. Even if it were good for investment, he would refuse to join. [Interruption.] Oh, yes. He said in 1997 that he was against the euro in principle. When he was asked for his dispassionate judgment using the non-prejudiced mind of a lawyer, he said that it would be crazy to join. Far from being open to argument and debate, far from being prepared to look at the studies dispassionately, all he wishes to show is that, to his prejudiced mind, we should not join the euro at any time, ever.

I heard the shadow Chancellor on television yesterday morning. He called for a referendum on the euro immediately. When he was asked whether he would abide by the result of the euro referendum, he could not give a straight answer, so we know what the agenda of the Conservatives is. When the Leader of the Opposition was on the Frost programme yesterday morning and was asked whether he would be staying in the European Union, he could not give a straight answer either. They do not want just to stay out of the euro. They want to get out of the European Union. It is time that we fought the prejudices and the myths of the anti-Europeans on the Conservative Benches and built a pro-European consensus in this country.

On housing and taxation, I do not think that we on the Labour Benches can take any lectures from the party that put up VAT on repairs from 8 to 17.5 per cent. Nor can we take a lecture from the party that put VAT at 17.5 per cent. on house extensions. Nor can we take a lecture about the use of a regulator from the party that when in government used a stamp duty regulator in the early 1990s. If the shadow Chancellor does not believe that volatility and instability in the housing market is not a cause for concern that should be dealt with, again, he is failing the national economic interest.

The shadow Chancellor asked whether all the five tests would be reassessed next year. As I said in my statement, if he had heard me properly, the answer is yes, if the review in the Budget says that we should have an assessment. It will be an assessment of all the five tests. As regards the figures for investment, the shadow Chancellor, again to make his point that he is against the euro in principle, quotes selectively from one set of figures about projects, when the published figures for last year show that there are issues to be dealt with in terms of inward investment, and that is what we are doing.

What the shadow Chancellor and the whole of the Conservative party have revealed by their failure to take these issues seriously today is that, when it comes to the question of stability and instability, we are the Government of stability, they have no policy to avoid instability. When it comes to a positive attitude to Europe, we are the party of Europe, they have shown themselves to be wholly against Europe. When it comes to issues of the future, we are the party of the future, they are the party of the past. They spent 18 years in government. They will spend 18 years now in opposition.

It was nice to see the Chancellor return to form in responding to the Conservatives, and it was noticeable how confident he was in doing that. He was rather less confident in presenting his own policies, perhaps because there may have been a return to form there; saying no but dressing it up as a warm "almost yes", as if we were poised at any moment to join.

Two assessments, three national changeover plans, 18 studies, 2,000 pages, endless spin; but still we have indecision. The Chancellor said that it was prepare and decide. Actually, for the Prime Minister, it was wait and see, and the Prime Minister still has to wait and see. I take it that the Chancellor remains the guardian of the tests. Yet he says that he is in favour of the principle of joining, and today's studies show why.

Joining the euro means more growth and better-paid jobs, on every range of assumptions. It could save an average mortgage payer £15,000 over a 25-year mortgage—£50 a month. It would mean lower prices and the end of rip-off Britain: televisions, computers, mobile phones, perfumes, shampoos, toothpaste and even chips are cheaper in France and Germany. That is why three out of the five tests clearly have been passed—jobs, investment and the City.

As for convergence and flexibility, there are now three positions on the euro. "Never join" is the Conservatives' position, which would make the economic assessments irrelevant. There would be a long response, but no point to it; the assessment would not matter, as we would know the Conservative's answer: "We will not join the euro ever, no matter the economic consequences for this country."

The second option is "wait and see", the old Conservative position and the policy of the last Conservative Prime Minister. In truth, it has been the position of the Chancellor over the last six long years, too. However, that left the Government taking no action for six long years while our share of investment fell, manufacturing collapsed and rip-off Britain continued to rip off Britons.

The third position is, "Yes, in principle". That means taking the action necessary to steer the economy towards joining. The last of those has long been the Liberal Democrat position, and, it seems, the Prime Minister's position: to take the action necessary to meet the conditions for joining the euro to give us lower prices, higher growth and the increased jobs and incomes that the euro can bring. We want the Chancellor to take the action to get us there. That is the real test for the Chancellor; it is time for his indecision to be over.

Having heard all that the Chancellor had to say today, I must ask whether, if he wants the convergence and flexibility that he talks about, he will take the action to get it. Today, the Chancellor's warm words suggest that he will, and we welcome that. But staying out of the euro for so long has already had a cost, in higher prices, lower investment and lower exports. He set out some proposals for action today, but he did the same six years ago and nothing happened. He dressed up no as almost yes and nothing happened.

Will he clarify the timetable for proposing legislation for a referendum? Will the draft lead to a Bill before the next assessment, or before the Budget? When will we debate and legislate to allow the British people to decide at last? Will he set a target date for a referendum if progress is made by the next Budget? If his assessment at the Budget is to have another assessment—as he announced today—how long will it take for the assessment after the assessment after the assessment? There could be four assessments.

Will he enter negotiations with our EU partners on terms of entry—particularly the key issue of the exchange rate—before a final assessment and a referendum for the British people, or will they be asked to vote in the dark? Will he take action to end the boom and bust in housing beyond today's announcements, which are no more than a rehash of announcements made in the Budget? Such action is needed to help people in this country afford a home, whether or not we join the euro.

Just as in 1997, in truth the decision today was no, even if the words were warm. For six years, support in principle from the Chancellor has been all talk and no trousers. The time for indecision is over; warm words are not enough. On the question of whether the Chancellor is going to make progress on the decision—on whether this is really about action—the jury remains out. No wonder that throughout the Chancellor's statement, the Prime Minister looked so gloomy; he clearly has no better idea today than the rest of us about whether the British people will get the chance of a referendum on the euro this year, next year, the year after that, or at any date in the future. Beg my pardon—we do know one thing: the date. It is simply the year that is now missing from the Chancellor's assessment.

I am glad that the shadow Chancellor from Truro read more of the background documents than did the shadow Chancellor from Folkestone, although I do not believe that we referred in them to the cost of chips across Europe.

I agree with the hon. Gentleman that housing reforms are absolutely necessary, whatever decisions are made about the euro, and I hope that his party and others will support us in the reforms that we are introducing.

The draft Bill on the referendum will be published in the autumn, and there will be paving legislation on expenditures that are to be incurred by Departments for euro compatibility systems.

On the hon. Gentleman's general point about wishing to join immediately, rather than waiting for the review and the further assessments of the tests, just as the Conservatives never want to join, there has never been a time in the past six years when the Liberals have not wanted to join, whatever the exchange rate, whatever the interest rate and whatever else is happening. Indeed, the leader of the Liberal party, who is missing this afternoon, said that we should have joined on the first date in 1999. If members of his party look at our assessment, they will see that the divergence in interest rates and in the exchange rate from a sustainable level was such that it would not have been right to join in 1999; indeed, it would have ignited the very stop-go problems that we have tried to get away from, and which occurred under the previous Government.

I hope that the hon. Gentleman will now accept that the five tests and our examination of them are a serious effort to look at all the economic challenges, as well as the benefits ahead. I hope that he will join us in attempting to address the challenges over the next year, and that when we introduce legislation to deal with the problems he will support us.

My right hon. Friend will know that in the Treasury Select Committee report that was published in April we highlighted several criticisms of the workings of the monetary policy arrangements in the European Central Bank. I was interested to see that six of those criticisms were reiterated in the policy framework document that was published this morning, so how will my right hon. Friend seek to secure maximum UK influence on ECB reform while we are outside the euro, and does he see convergence on monetary policy management as a precondition of eventual entry?

The Government are taking on board and examining very carefully all the points that my hon. Friend makes about the Treasury Committee's report. I applaud the work that he and other members of the Committee have done in identifying the challenges, as well as the benefits, of membership of the euro.

I define sustainable convergence as the ability to converge with the European area—in other words, that we can permanently live with euro interest rates at the same time as being able to advance our objectives of high and stable levels of employment and growth and the funding of our public services. That is why we are looking at putting in place reforms to the housing market, but we are not trying to seek structures in the British housing market that are identical to those in other countries' housing markets. What we are trying to do is to lessen the inflationary pressures that arise from the housing market. So, on convergence, I believe that we can make significant progress during the next period.

We will make proposals to the House on how we can create the flexible economy that is necessary to adjust to whatever stresses and shocks anise, so that we can get what I know my hon. Friend wants to emphasise: the potential benefits of the euro in terms of trade, in investment in the financial services industry as a whole, and, of course, in growth and output.

I welcome the Chancellor's reassurance that he still fully shares my views on the single currency—that it is in Britain's interest to join as soon as the economic conditions are right. I did not advocate joining over the past five years because I believed that sterling was, until recently, overvalued.

The Chancellor urges us to wait. Am I right that his principal concern over convergence is the housing market, and can he assure us that his studies will not take too long, given that we have the same proportion of owner-occupiers in this country as the average across Europe? We are not the only country with flexible interest rates, and the mortgage market will respond when financial services markets are made universal across the European Union, so we should not wait too long on that account.

As to flexibility, I have already welcomed what the Chancellor said about the end of national pay bargaining in the public sector, but I trust that he is not going to make us wait until he has achieved that, in the teeth of resistance from his own Back Benchers, before taking a final decision. Surely we are already one of the most flexible economies in the European Union, and, unless he is going to erode our tax and regulatory advantages further than he already has, we should be able to withstand shocks of the sort that he described.

How near are we to satisfying the tests? Surely we must be very near. I look forward to Budget day next year, when he and I might at last begin to campaign together in support of the views that we hold in common, but that requires some courage of conviction and some exercise of judgment on his part.

I am grateful to the former Chancellor for what he said about the benefits of studies of the housing market and issues of flexibility. I believe that he is a late convert to the importance of the five tests. I welcome the fact that we can reach common ground on the problems that need to be dealt with if we are to secure sustainable convergence and flexibility.

On the housing market, the percentage of owner-occupation is not the issue. As the right hon. and learned Gentleman knows from his own experience—and, let us be honest, as the Conservative party knows to its detriment, from what happened in the late 1980s—the real problem is the inflationary pressures that arise, partly because of the wealth effect of housing and partly because of short-term interest rates, in the housing market and their effect on the whole economy. Those are the matters that we will examine.

I said in my statement that there was a realistic prospect of making significant progress during the next year. When we introduce proposals in October, we will deal with the inflationary problems that arise—and have arisen under all Governments—in the housing market. I would correct the right hon. and learned Gentleman: I talked about a national framework in pay bargaining. As London weighting and other issues relating to London and the south-east have shown recently, there must be a degree of flexibility in view of the different inflationary pressures, particularly from housing, in different parts of the country. I believe that there is currently a willingness to examine those issues, particularly when we have a framework for fairness in the economy built around the tax credits. We can establish common ground and make significant progress over the next year.

Does the Chancellor agree that the logic of a single market is a single currency? What is the meaning of a single market without a single currency? Let us imagine the largest single market in the world competing with us—the United States' single market—and what would happen if one of the states had a different currency. The logic of a single currency for a single market is powerful. Does the Chancellor agree that, since entering the euro, Germany's trade within Europe has increased by 18 per cent., whereas this country's has decreased by 6 per cent.?

Northern Ireland is the one region in the United Kingdom that has a border relationship with the eurozone, and people who live there know the difference that it is making to trade on our side of the border. About 88,000 employees in Northern Ireland are dependent on membership of the European Union, and 155,000 workers in Wales are dependent on it. I am quoting an in-depth study carried out by independent people. All the arguments show that we must join the euro as soon as possible for the benefit of all sections of our people.

I am glad to see my hon. Friend back in the House; I hope that his health is recovering. It is always a privilege to listen to him. He raises an important question about Northern Ireland's cross-border issues, which arise because the Republic of Ireland is in the eurozone. We have discussed those issues and tried to deal with the some of the problems, as well as the opportunities, that arise from that. He is right also to draw attention to the jobs that are dependent on our membership of the European Union; one of the failings of the Conservative party is not to recognise that 3 million jobs depend on the trade—imports and exports—that we have with the European Union.

On the individual issues that my hon. Friend raises, we learn from the experience of the United States as both a single market and a single currency. The US has much mobility between the states—more so than in the European Union—but the same issues of flexibility arise, and we will have to deal with them.

I agree with my hon. Friend about the importance of the single market and the benefits and principle of the single currency. The assessment that we have done shows that there are risks as well as benefits, and it is the responsibility of Government to continue to consider how we can solve the structural and cyclical problems. We will report back to the House in the Budget next year.

Last week, the Prime Minister told me that he did not know what the right rate of exchange was for entry to the euro, because he did not know what the circumstances would be. Since entry into the euro would be for ever, the circumstances surely do not matter. The Chancellor said today that he knows what the wrong rate is: what is the right rate?

The hon. Gentleman can see the studies that we have produced today. One of them is a study by Professor Wren-Lewis, in which he gave his view of what the equilibrium exchange rate is at this point in time. It is the Government's view, as I said in my statement—to which I refer the hon. Gentleman—that it is right to consider the issue just before the point of transition. Governments outside a fixed exchange rate system have never predicted or announced the exchange rates that they favour. The issue will be dealt with just before the point of transition and it would be wholly irresponsible to announce an exchange rate today. Indeed, the hon. Gentleman would not expect me to do so, although I sometimes wonder why he asks all these questions about the detail of joining the single currency, given that he has made it clear that he is against it in principle.

As a former Treasury Minister in a Labour Government who, after a rigorous analysis, decided that it was not in the national economic interest to join the ERM, may I congratulate my right hon. Friend on his rigorous assessment of the five tests and the sensible conclusion that he has reached? However, he will remember that in addition to the five tests there was also a question about whether the euro was a successful currency. Given the problems of most of the euro area since the Maastricht treaty was signed, is it his view that the euro is a successful currency?

The euro has been a successful currency. It was introduced successfully when everybody said that it would not work. They said that it would not happen in 1999 and they said that it would not, technically, work, and it did. They then said that the euro was too weak against the dollar, but that position has reversed in the past few months. We now have a far stronger euro against a weaker dollar. The question for us, however, is not the value of the currency at a particular point in time, but whether we have the convergence and flexibility necessary to gain all the benefits of trade and investment that would come from being part of the single currency area. I agree with my right hon. Friend that the rigour of the assessment is a sign of whether we take the issues seriously. I am disappointed that the Conservative party seems to have no interest in taking seriously the rigorous assessment that we have made.

Do not the 18 documents, 1,700 pages and tens of thousands of words amount to the longest "don't know" in political history? May I caution the Chancellor against the mental gymnastics he was performing in his statement? I have seen the House cheer him and I have seen it howl at him, but I have never seen it laugh at him, as it did for parts of his statement this afternoon.

As far as the lack of analysis of the benefits to the economy of Scotland, Wales, the English regions and Northern Ireland is concerned, with the clear pointers to the benefits of output and employment through joining the euro, is there not a fair case for saying that the economies of those areas of the country are being sacrificed on the altar of problems in the south-east England property market?

Finally, will the Chancellor tell us why he has suddenly made reducing pay for nurses, firefighters and policemen in Scotland, Wales and the English regions a condition of entering the euro? Does he really think that that will mobilise support for the single currency, or has he not bothered to tell the Prime Minister?

I thought that the Scottish National party spent all its time arguing for special Scottish rates and not for national and UK rates for wages. The idea that the hon. Gentleman now supports British rates and that there should be no separate Scottish rates seems to be a reverse for the Scottish National party from its previous position. The hon. Gentleman has spent most of his career arguing for a Scottish pound and for breaking away from the British pound, yet now he seems to be arguing that he wants the euro introduced and he has forgotten his policy for a Scottish pound. The Scottish National party has adopted a remarkable set of contradictory positions.

On labour market flexibility, there is a national framework of fairness that the hon. Gentleman and other Members should support. Not only is the minimum wage agreed at a United Kingdom level, irrespective of the costs of living in different parts of the United Kingdom, but the tax credit system means that people who move between jobs, especially those in low-paid jobs, have additional funds whether they are single, part of a couple, or part of a family. The hon. Gentleman should support that framework of fairness for the whole of the United Kingdom.

As someone who has discussed the issue with the Chancellor on several occasions over recent years, I applaud the positive tone that he struck this afternoon. Does he accept that although it is clearly right to delay a referendum until it is in the national economic interest to join a single currency, that does not prevent the Government from consistently setting out the benefits of joining the single currency in terms of more jobs, increased trade and higher investment? Given that that is the case, will the Government begin to go out and campaign, and convince the British people of the benefits of joining the single currency? Will they move away from the present position of prepare and decide to a more positive one of campaign and convince, and will the Chancellor, alongside the Prime Minister, lead that campaign?

When my right hon. Friend was Secretary of State for Trade and Industry, as well as when he was Chief Secretary to the Treasury, he was active in promoting the case both for Britain in Europe and for a single currency. He agrees with me that the economic conditions must be right—that has always been his position—and that the five tests must be observed. He would agree with me that the rigour that we have brought to the analysis of the five tests is not only important but necessary if we are to get the right decision.

I agree that it must be shown to the British people that there are benefits to joining in terms of trade, investment, the importance to the financial services and, as a result, jobs. I also agree that, in the campaigns that he mentioned, we should tell the British people that the benefits are real and available to them, and that we have to solve the problems of structural convergence and flexibility to make the benefits possible. We will consider all those difficult issues over the course of the next year and report back to the House.

In the interests of clearing up uncertainty in the markets, will the Chancellor tell us in which month next year he will re-run his assessment of the five economic tests?

If the hon. Gentleman had followed my statement, he would know that we will report back and review the situation in the Budget. If the review shows that there is progress, we will decide whether to have a further Treasury assessment of the five tests. That will be contingent on the announcements that I make in the Budget next year.

In the evidence that the Treasury Select Committee took on the issue, we came across a significant worry, particularly among trade unions, that the stability and growth pact would put at risk the historic and very welcome investment that we are currently experiencing in our public sector. Will the Chancellor reassure them on that point?

The Government's position throughout has been that we would like to see a stability and growth pact that takes account of the three issues, and I believe that the previous Government took the same view. We have to take account of the level of debt. Countries with low levels of debt, such as ours, ought to be able to borrow more, particularly in difficult circumstances or in making public investment. Investment should be taken into account, and it should be realised that there is a distinction between investment for the future and current consumption. The economic cycle should be taken into account as well. In my view, other countries are gradually recognising that those issues are necessary for a successful stability and growth pact. There is considerable debate in the European Union, and I believe that, intellectually, we are winning that debate: the stability and growth pact must take into account those conditions. Of course, that is one of the issues on which I said I would report back to the House next year.

If we were in the euro and found ourselves with a manifestly inappropriate interest rate, as do, for example, Germany and Ireland at the moment—in one case, it is too high, preventing economic recovery, and, in the other it is too low, failing to control inflation—what action would be available to the Chancellor to offset that? If he says, "Adjustments to fiscal policy", will he explain exactly how they affect monetary conditions, except in the medium to long term?

On convergence, the aim is to be able to live comfortably with the euro area interest rate—that is what sustainable convergence is about, and it is what we have looked at and are looking at in the five tests, and we have reported to the House on that—but we do not believe at this stage that that is the position. We believe, however, that reforms are important, first, in the flexibility of the labour market, so that there is sufficient flexibility to respond if business cycles start to diverge. We believe that, as a back-stop, the monetary policy regime that we introduced, which is based on the open letter system, should be introduced for fiscal policy, so that we have a modern form of fiscal policy that can back up the stability and growth pact in the monetary union. At the end of the day, four flexibilities are available to the Government: exchange rates, interest rates, fiscal policy and flexibility in wages and prices markets. We are looking to greater flexibility in wages and prices and to greater flexibility in fiscal policy.

Does the Chancellor understand that, when he talks about breaking national pay bargaining, he is also talking about breaking national wages and conditions for the lowest-paid people in this country? I for one would oppose such a move. Does he understand that national pay bargaining is there for the weakest in our country and, indeed, that it is protected? The danger of moving down such a road would be that the minimum wage would become the maximum wage in many areas, especially in deprived areas?

I must correct my hon. Friend: he has been misled by Opposition Members. In my statement, I referred to the maintenance of the national bargaining framework, not to its abolition, but I said that, within the national bargaining framework, we now have to recognise, for example, conditions in London and the south-east, where, because of high inflation or high house prices, the cost of living for workers must be recognised in the wage bargaining formulae that are agreed. That has happened in many cases for professional workers, but not for low-paid workers, and it is very difficult for low-paid workers in some parts of London and the south-east to afford the housing that they need. I believe that recognising such problems is a progressive cause that he and other hon. Friends should support.

It is true to say that the minimum wage itself is not the only component of the national framework for fairness that I am talking about. The people who benefit most from our national framework for fairness are, for example, single parents who are on relatively low hourly rates, but whose incomes are boosted very considerably by the operation of the tax credit system. The working families tax credit, which went to 1.3 million people, was a framework for fairness that allowed single parents and others returning to work, part-time or full-time, virtually to double the amount of earnings that they would have had under the national minimum wage.

In April, thanks to the decisions of my right hon. Friend the Secretary of State for Work and Pensions, single people and couples are now also able to benefit from tax credits. So people who move between jobs or between regions can rely on there being in Britain—one of the few countries where this happens—a national framework for fairness, where the tax credits system ensures that the tax system will pay them money, rather than take money from them, if their wages are below a certain level.

I hope that my hon. Friend will agree that the national framework for pay bargaining is in place, that there is a need to accept that local and regional differences have to be recognised and that the national framework for fairness guarantees that, wherever people are—in the north-east, Yorkshire, Scotland, Wales or Northern Ireland—they are treated equally in the provision of tax credits, which is a fair way to tackle poverty in our country and to remunerate properly people who otherwise, under previous Governments, would have been pushed into poverty.

I welcome the Chancellor's reference to seeking reform of the European Central Bank. I would appreciate it if he could give us a little more detail about what reforms he is seeking and what are the prospects for success. I welcome that because it points to where the attention should have been: not so much on the UK economy, which is performing well, but on the euroland economy, which is not. Many of the problems in euroland stern from the ECB and the stability and growth pact, and from the way in which the European Union operates. Is not that where change is needed? Until that change occurs, it does not matter so much what is done in terms of the adjustments that the Chancellor has mentioned today.

I also welcome the reference to globalisation and promoting or removing barriers to EU and US trade. Does not that point to the future? The institutions that we have at the moment in Europe were designed in the 1950s, and may have been appropriate for the Rhineland economies then, but are not appropriate for the 21st century. The future lies in economic globalisation, which is what we should pursue vigorously.

I am grateful to the right hon. Gentleman. First, he raised the issue of Europe's future. The European Union was the first trading block and is now one of many trading blocks. It is recognising, however, that the only way to succeed in the global economy is to have far more outward-looking trading relationships, particularly with America. Whereas American investment in Europe has been very high since 1945, a feature of many of the last 10 years was that European investment in American companies was higher than American investment in Europe. An interrelationship therefore exists between the two economies on which we should build, and the proposals we have made today would add to the strong relationships that should exist between the two continents.

On the right hon. Gentleman's point about the European Central Bank, I believe that there is a possibility of reform. In the last few weeks, he may have seen proposals that, while not removing the old two-pillars approach to monetary policy, would lead to a greater emphasis on the inflation target, and suggesting that the inflation target should be 2 per cent. on the harmonised index of consumer prices target, or less. That is a change from the position of the European Central Bank at the beginning, and we look forward to further progress on these issues. That is one of the issues on which I hope to report back next year.

Most people will welcome my right hon. Friend's commitment to a balanced and fair public debate, which is long overdue on these matters. Does he therefore share my concern at the increasingly hysterical and scaremongering tone of many of those in the anti-euro camp? Does he accept that the longer that we delay the referendum, the more that hysteria will seek to fill the void, which makes it all the more important that the Government should promote that public debate, treating the British people with respect as adults who are capable of making clear and rational decisions in the interests of Britain?

I am grateful to my hon. Friend for his comments, as I am for his work in promoting the car industry and manufacturing in his constituency and right across his region. He is absolutely right that the public debate is necessary and should be informed by the documentation that is being published today, which is most comprehensive on British economic policy and covers a range of issues from exchange rates to fiscal policy and monetary policy. Therefore, a degree of information is now available to the public that has not been available in the past. Equally, he would agree about the importance of convincing the British people that the five tests that we have set must be met. I was looking earlier at a speech that he made in the House saying that we must be clear that the five tests are met, which the measures that I have proposed today would help us achieve.

The Chancellor's enthusiasm for the euro today was positively infectious, and I congratulate him on the change: no longer are the five tests mere obstacles but benchmarks against which he can make a judgment that we should join as soon as possible. Therefore, would he accept that to those Conservative Members who believe that it is in the national interest to join the euro his reforms are welcome and positive? What evaluation has he made of the costs of our not yet having made the decision? He may be delaying it for only a year, but those costs are tangible in terms of investment, uncertainty and often on the effect of influencing changes in the European Central Bank and the stability and growth pact, which will not await our joining.

As the hon. Gentleman knows, I have always been positive about the principle of the single currency, and I have said that the five tests that we set down are an important guarantee of stability. We have looked at what might have happened if we had joined in 1999. I repeat what I said to the Liberal Democrats a few minutes ago: we looked at both the costs of not joining and the benefits of joining, and we found that to have joined in 1999 at the interest and exchange rates that existed would not have been in the national economic interest and would have led to a recurrence of the stop-go problems that we had in the past.

I hope that the hon. Gentleman will agree that, although it is right and necessary for this debate to take place in the country and we can join together in supporting the principle of the single currency, it is also important that we are absolutely sure that convergence and flexibility are at the right levels so that the five tests can be met.

While I welcome my right hon. Friend's commitment to the achievement of the convergence and flexibility objectives, will he share with us how he proposes to secure changes in the growth and stability pact and the European Central Bank? The example that he gave about the change in the ECB is both fairly modest and one in which we cannot participate because we are not part of the eurozone. Is that not a major obstacle to our securing the changes in the ECB that he achieved with such style and élan in the Bank of England?

I am grateful to my hon. Friend. His work as Chairman of the Select Committee on Trade and Industry has led him to look at the issues in some detail, and I appreciate what he is saying. As for the European Central Bank, I would not underestimate the importance of what is being considered. From a monetary policy that has essentially been about the examination of monetary aggregates, we now have a far greater interest than ever before in inflation targeting, and it is a debate that will continue.

As for the stability and growth pact, just as on the issue of tax harmonisation where we are now winning the intellectual argument that tax competition and not tax harmonisation is the way forward, I believe that we are winning the argument about debt, investment, the economic cycle and the stability and growth pact. People now see that some of the elements that we have been putting forward should be built into the pact. The lessons from British monetary and fiscal policy are lessons that we will continue to put forward, and I believe that there is a great deal of interest in Europe in the British experience.

As the Chancellor is so fond of raising the bogey of the exchange rate mechanism, may I remind him that, in total contrast to him and to the Labour Front-Bench spokesmen of the day, I argued strongly against joining the exchange rate mechanism? After we had joined it, on the Floor of the House I urged the then Chancellor to leave the exchange rate mechanism well before Black Wednesday. In that context, may I ask the Chancellor whether he has seen the famously macabre French play, set in a lunatic asylum, in which some of the cast try to slash their throats in the first act and then spend the rest of the play discussing whether to mount a further suicide bid before the final curtain? Is it really necessary for him to ask the British people, even in principle, to slash their throats a second time?

I thought that the hon. Gentleman was describing events at a Conservative party conference.

As far as the exchange rate mechanism is concerned, this has all become a bit much: a Conservative Government took Britain into the exchange rate mechanism. They took the country in at the wrong—[Interruption.] One or two Conservative Members want to disown the process. They took us in at the wrong rate and the wrong time, and their only defence is now to try to blame the Labour party for decisions of a Conservative Government. We will make the right decisions for Britain in the national economic interest, and I believe that our record over the past six years in achieving stability contrasts entirely with the record of a Conservative Government who gave us two recessions and boom and bust.

Does my right hon. Friend accept that although manufacturing businesses in my constituency and elsewhere, especially those that are heavily dependent on trade in Europe, will be disappointed by today's announcement at first glance, when they think about it, they will realise that he has taken a balanced approach? As he considers these matters further in the coming months, will he ponder on whether it might be sensible for future assessments to include the Bank of England Monetary Policy Committee fairly prominently?

My hon. Friend has been active in pursuing the case for manufacturing industry in the north-west for many years since coming to the House. I believe that industry will welcome the way in which we are going about this. Industry wants stability most of all. We have provided stability over six years and we are saying today that we will do nothing that would put stability at risk.

If the hon. Gentleman wishes to compare the record of the Conservative Government with that of the Labour Government on stability or certainty, he will find that he has very little to say to the House.

My hon. Friend the Member for Knowsley, North and Sefton, East (Mr. Howarth) asked about the Monetary Policy Committee. Of course we are in regular consultation with the Bank of England on various matters and several people from the Bank worked on the studies that we produced today.

Stripped of its rather desperate camouflage, the Chancellor's statement boiled down to saying that if Britain joined a low-growth and high-unemployment rigid monetary system, it would not be a very good idea. Will the Chancellor be a little clearer about the referendum on which all this will eventually depend? He re-announced that there will eventually be a referendum on the issue, so why is it the Government's simultaneous policy to rule out in advance a referendum on the constitution of Europe, whatever the constitutional implications might be? What is the logic or sense behind those two positions?

The first is that the euro is a specific proposal that would change fundamentally the operation of monetary policy in this country. All parties in the House agree that it is a matter for a referendum. Secondly, the Government are not convinced that the proposals that will arise from the European Convention will be as bad as the right hon. Gentleman thinks but believe that they will be in line with the British Government's policies and will not raise fundamental issues of sovereignty, as he suggests.

When the euro was launched in our partners, all those countries, especially Germany and France, and more so Ireland, experienced a steep rise of prices on their high streets. Why should the British people vote for something that will cost them more money?

The issues of transition that occur when a currency is replaced with another currency, which caused problems in some European Union countries, are something on which we would keep a very close eye, if we reached that point. We would continue to report to the House on such matters. My hon. Friend rightly raises that subject but it is not an issue for the moment but at the point of transition to a single currency.

I sometimes wonder whether the Chancellor draws a distinction between the national economic interest and the national interest. As far as the national interest is concerned, there is a great deal of talk about the new Europe that enlargement will bring into existence and the United Kingdom's opportunity to play a leadership role in that wider Europe. Given that there will be a natural gravitational pull toward countries that have espoused the policies that are considered to be central to the European Union, is it not important that the Chancellor bears those facts in mind and gets on with his further assessment at the earliest sensible opportunity?

I agree with the right hon. Gentleman on one point: the changes to the European Union, especially the addition of 10 countries, mean that we will have a European Union that will look outwards rather than inwards. The idea of fortress Europe will become a thing of the past and the concept of a trade bloc that exists on its own and is obsessed by its internal rule will change partly because of enlargement and partly because we must meet the needs of competition in the global economy. However, I would not jump from that to saying that irrespective of achieving convergence and flexibility, we should jump into membership of the European single currency. It is necessary to ensure that we have convergence and flexibility that will enable us to live with euro interest rates permanently while advancing our goals of high and stable levels of employment and the proper funding of public services.

When considering those matters, I hope that the right hon. Gentleman will agree with his colleague the right hon. and learned Member for Rushcliffe (Mr. Clarke), the former Chancellor, that the five tests have a great deal to say for them and that it is necessary to meet them to ensure that potential benefits for trade, investment and co-operation with other EU countries are fully realised.

May I congratulate the Chancellor on ensuring that the decision, which as I understand it is clear and unambiguous, that it is not in Britain's interests to join at the moment is based on economic grounds, not on dogma? Can he assure us that any future review will be taken on similar grounds? Can he tell me how I can expect to inform people in my constituency that in order to get ready to join the euro we need to see an increase in postcode pay—in differentials—according to where people live? Does he not believe that if we want to become truly European on labour matters, we need to accept the information and consultation directive as soon as possible?

I think that the rest of Europe is warming to the tax and benefit integration that we propose. It recognises that social cohesion depends on a proper system of remuneration for people who might otherwise be the lowest paid workers in a community. That is why the tax credit system is important. I disagree with the conclusions that my hon. Friend draws about flexibility in the labour market. If we are to achieve full employment in every region of the country, we have to determine what other barriers to employment opportunity exist in those regions. The Secretary of State for Work and Pensions is examining how the Employment Service can do far more. Many people are unemployed in my hon. Friend's city who could be brought back to work quickly.

However, we have to get the right balance between the fairness on which we insist—and on which the Conservatives would not insist—and the flexibility that is necessary in a modern economy to get the benefit of all the opportunities available. I hope that on reflection my hon. Friend will agree that the best strategy to get full employment in his city and his country is to combine the tax credit system with the reform of the Employment Service, to ensure that the new deal works effectively for the long-term unemployed or youth unemployed, and to get the flexibility needed to ensure that we have policies that adjust to the circumstances faced in different regions.

This statement was drafted somewhere in a corridor between No. 10 and No. 11 and, frankly, it sounded like it. For the past six years, the Chancellor has told us that he is firmly in control of the decision. Indeed, he made that absolutely clear when he recently came before the Treasury Committee on which I serve. After the extraordinary events of the past few weeks, with the titanic struggle over the drafting of the statement between No. 10 and No. 11, can he assure the House that he is still in control of the decision?

The hon. Gentleman heard me speak at the Treasury Committee and he has heard me speak today. The policy that we are pursuing is the policy of the Government. It is the right policy. It would be better from his point of view, as someone who has supported many of the changes that I am bringing about, if he directed his attention to the policy rather than the personality issues.

Is my right hon. Friend aware that there will continue to be widespread support on the Labour Benches for his continued adherence to the five tests and, indeed, for the economic reform agenda that he announced today? I am sure he can reaffirm that the adoption of the consumer price index in no way implies the shadowing of any decision that might be taken by the Central Bank and that he would not, as he made clear in his statement, allow decisions in Europe to affect the sustained public investment programme, which is so necessary not just for the reconstruction of our public services, but for avoiding deflation that might otherwise occur.

I am grateful to my hon. Friend for raising that and for his work on promoting our country's industries, especially in the west midlands.

On the inflation target, we are moving to the internationally accepted definition of consumer prices. It is a far better definition with a greater quality of information provided to influence the announcements of price indices. I believe that if the rest of the G7, excluding Japan, operate to that system, it is better to have an internationally valid system of comparison if at all possible. That is why it is right in itself as well as something that brings about greater convergence with the European Union.

On the ERM, let me repeat what I said about monetary policy: we do not propose to rejoin the exchange rate mechanism. As for public investment, my definition of sustainable convergence is that we can live permanently with the euro interest rate while maintaining our programmes for the funding of public services and for high and stable levels of growth and employment. I believe that that is the best way forward for our country.

Points Of Order

5.14 pm

On a point of order, Mr. Speaker. I would appreciate your help with a situation that I believe is unprecedented since you and I entered the House 24 years ago. As you know, we have an Opposition day on Wednesday, two days from now, but the House has still not been informed of the subject for debate on that day. That means that it is entirely impossible for Back Benchers to seek your permission to speak in that debate or to prepare for it, and Ministers, and indeed shadow Ministers, do not know whether to be present on that day. That is outrageous. Just because the Opposition cannot get their act together, cannot decide on the subject, and appear to be in total disarray is no reason why the House should be disadvantaged. Would you, Mr. Speaker, as the protector of the interests of the House, particularly those of Back Benchers, take action to remedy this situation immediately?

I think that this is something that I should keep well out of. It is nothing to do with the Chair.

Further to that point of order, Mr. Speaker. On the last few Opposition day debates the Opposition have received well and truly bloodied noses. Can you assure me that this is not an attempt on their part to ensure that Government Members cannot prepare for Opposition day debates in the future?

Mr. Barry Gardiner (Brent, North) rose—

Orders Of The Day

Courts Bill Lords

Order for Second Reading read.

5.16 pm

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

This is the Second Reading of the Courts Bill, which has already been well debated and discussed in another place. It forms an important part of a much wider, long-term programme to improve and modernise the criminal justice system, as set out in the White Paper "Justice for All". But more than that, the Bill aims to improve the entire justice system. It supports improvements in the civil and family courts as well as having particular measures to improve areas of the criminal courts where specific issues need to be addressed.

Given the other business of the day, it is perhaps unsurprising that attendance in the Chamber is thinning out. I applaud the hon. Member for Stone (Mr. Cash) for his restraint in awaiting the debate. I recognise that it will have been difficult for him to resist the temptation to join in the debate on Europe and matters euro, but I welcome his presence for discussions on the Courts Bill.

I cannot resist the temptation to reply to that. I simply say that I think that I have said a lot of it before.

That is almost certainly true. I do not think that any of us will be in any doubt about his views on that issue.

Nevertheless, the House overlooks the smooth running of the courts at its peril. Ultimately, the courts are a fundamental pillar of our democracy. They enable the delivery of justice and they underpin the rule of law. The running of the courts matters too because, ultimately, those members of the public who pass through the courts are those whose lives are troubled in some way or other. Be they distressed victims of crime, witnesses doing their civic duty, defendants at risk of losing their liberty, families battling over the custody of their children, claimants unable to resolve their dispute in any other way, those who end up in court need to be sure that justice will be done.

Such people depend on courts to deliver fair and effective justice, and they depend on courts that are free from unnecessary and avoidable delay, that are in touch with the communities that they serve and more responsive to the needs of their users. The Bill's purpose is to establish a modern, efficient court system, one fit for the 21st century.

The Bill sets out a key purpose of effectiveness and efficiency. It does not talk about accessibility. Is there a core necessity for courts to be accessible to the people who use them, without financial or geographical barriers? That is a question that many of us need to have answered during today's debate.

In fact, an amendment to clause 30 concerning accessibility was tabled in the House of Lords. If the hon. Gentleman will allow me, I shall come to that later.

I am not rushing to my hon. Friend's rescue, because she is well able to defend the measure herself, and will do so with great enthusiasm. On accessibility, however, I was convinced of the correctness of doing away with the magistrates courts committees—which is in clause 6—partly by my painful experience in Thurrock, where people who were accountable to no one in my community decided to remove the local court to Basildon. I want to place on record my people's gratitude to the Minister, who intervened on our behalf and today confirmed that Thurrock's magistrates courts will endure. We appreciate that very much. It is a question of accessibility. The guys and women who run the magistrates courts committee—

Order. The hon. Gentleman has made his point.

My hon. Friend is right. As a result of the appeal to Ministers, we overturned the decision of the Essex magistrates courts committee to close Grays magistrates court. It is important for hon. Members to recognise that although decisions always need to be taken about the court estate, including its modernisation—as was the case under previous Administrations—it is important that there should be a local voice in those decisions. My hon. Friend is not the only Member to have raised concerns with me about the system of magistrates courts committees, where decisions are taken entirely by magistrates, not by those who speak for the local community involved. That is one of the issues that we address in the Bill.

I am most grateful to the Minister for giving way again so early on. On that point, surely the existing system ensures that the administration of justice remains local, whereas the new proposals in the Bill, which effectively bring magistrates into the same structure as the Crown and civil courts, remove the locality of justice, to all intents and purposes greatly increasing the centralised power over that justice from the centre.

That is simply not true. I shall cover the matter in a bit more detail later, but, to give an example, a statement issued by the Magistrates Association's criminal justice system committee on 6 May says:

"The proposed Unified Administration is not a threat to local justice".
We had a series of discussions with stakeholders as the Bill passed through the Lords to ensure that we set out a new organisation with a very decentralised structure. That is precisely the reason for setting up courts boards. Hon. Members should bear in mind that the hon. Member for Canterbury (Mr. Brazier) and many of his hon. Friends have complained that some of the decisions that are taken under the current system do not reflect the wishes of the local community. They cannot have it both ways.

I want to put on record my thanks to the Select Committee on the Lord Chancellor's Department for its report on the Bill, which is published today. This is the first time that the Department has had a Select Committee to scrutinise our legislation, and it is an extremely helpful and welcome development. I shall try to address some of the points that it raised today, although we will obviously need to consider them. I am sure that we will have further discussions in Committee.

Let me begin with the measures to introduce a unified administration for the courts, which I believe to be the most important and significant in the Bill. Sir Robin Auld recommended in his independent "Review of the Criminal Courts of England and Wales" that the administration of all courts below the House of Lords—the civil, family and criminal courts—should be integrated into a new single organisation. The unification of the management of the courts has widespread support from the judiciary, the Bar, the Law Society, the Justices' Clerks Society and the Magistrates Association, among others. It will end the division between the 42 magistrates courts committees and the Court Service and address the duplication and inefficiency involved in having 43 separate organisations running the courts. Sir Robin described the current position as "unnecessary, inefficient and wasteful".

The Parliamentary Secretary kindly referred to the Select Committee. She described the Auld process, which involved widespread consultation during the inquiry and subsequently. However, when the Select Committee discussed the way in which the Lord Chancellor might exercise his powers under the Bill, we did not know that his replacement with a justice Minister in the Commons was under consideration. That has not been subject to the same consultation. Apart from all the other issues and the merits of such an action, the sort of consultation with the judiciary that the Parliamentary Secretary described appears not to have been undertaken.

The right hon. Gentleman is interested in reading the papers and in the gossip and rumours that circulate. Clearly, such matters are for the Prime Minister, not me.

The proposals will allow a more flexible use of resources and accommodation, thus encouraging parts of the system to work together more effectively to respond to local needs. A unified court estate would, for example, allow the heavy work load of one courthouse to be shared with another, underused courthouse, thereby perhaps saving one from closure while reducing delays at the other. It would also ensure that decisions about the location of magistrates courts were taken with the location of Crown courts, the Crown Prosecution Service and the police in mind. It would allow more flexible operation, especially in areas on the boundaries between existing magistrates courts committees.

Unification in a single organisation will allow us to set a proper framework of national standards and to tackle poor performance in the courts. The latter is currently difficult in magistrates courts. For example, there are wide and unacceptable variations in fine enforcement between the independent magistrates courts committees, ranging from more than 80 per cent. in some areas to less than 40 per cent. in others. Government, Parliament or the local community can do little about poor performance in some areas under the current system.

Is not the problem exacerbated by the fact that compensation to victims of crime is levied under the same system as fines, but paid first? That means that, if instalments are not paid, many people bear the cost of the crimes of which they have been victims.

My hon. and learned Friend is right that failure to enforce fines and compensation orders can have a significant impact on the victims of crime and on wider society because the credibility of the courts depends on enforcing decisions. We are considering methods of separating the ways in which the data are gathered. I shall happily discuss those issues further with my hon. and learned Friend, if she is interested.

The Bill also allows us to improve performance in the courts that the Court Service currently runs. The introduction of the courts boards will support more substantial decentralisation than exists in the Court Service. That will encourage local innovation and flexibility. It will also extend independent inspection, which currently applies only to magistrates courts, to other courts for the first time.

The Bill will give local communities a much greater voice in running their courts and should improve the focus of the courts' management on fulfilling court users' needs. There is currently no role for local people in decisions about their county court or their Crown court, and there is little role for them in magistrates courts. Magistrates courts committees consist predominantly of magistrates, and their make-up does not even reflect local magistrates, let alone the community as a whole. For example, half the population and 49 per cent. of magistrates are women, yet they comprise only 25 per cent. of magistrates courts committee members. It is right for the new courts boards to reflect the community more broadly.

Does the Bill make any effort to explain the work of magistrates courts to the ordinary, law-abiding person, perhaps through an annual report to every elector? If so, could we also consider giving courts names that reflect their functions? "County court" and "Crown court" do not mean anything to most ordinary people. Could not we use names such as "regional court" and "local court" and thus let the public into the secret instead of confining the information to lawyers?

The Bill includes some changes of name to make certain things more comprehensible. For example, instead of petty sessions areas, we shall have local justice areas, which is far more transparent to those of us who might have been slightly baffled the first time we heard of a petty sessions area. The Bill also modernises certain titles in the judiciary. It does not set out some of the proposals that my hon. Friend has made. I know that he has raised these issues before, and I shall be happy to consider them further, although I think it unlikely that such measures would be included in the legislation. However, we certainly need to look further at the way in which each of the courts boards relates to the local community that it needs to reflect, and to ensure that the courts as a whole respond to the needs of the community and communicate with it. Some of the measures relating to magistrates' recruitment that are being considered might be an area in which some of the issues raised by my hon. Friend could be picked up.

I thank my h on. Friend for her generosity in giving way a second time. Individual taxpayers probably pay several thousand pounds each to maintain the criminal justice system. Would my hon. Friend be open to either letters or amendments that would make it clear that those people were entitled to receive a report on something that they were paying for and that was being done in their name?

I would certainly consider any letter that my hon. Friend chooses to send, or any further discussions on this issue that he wants to have.

The Bill establishes a new Executive agency, different from both the Court Service and the magistrates courts committees, to be headed by a chief executive; local areas will be managed by chief officers. The chief officers will work in co-operation and partnership with the local courts boards established by clause 4. The establishment of the local courts boards within an Executive agency is an unusual approach. It will provide an important way of balancing the need for a national framework and standards and the need to prevent duplication with the need for local, decentralised decision making and accountability. The Select Committee's report asked for clarification of the role of the boards, and we have already placed a statement of the principles that will form the basis of the agency's framework document in the Libraries of both Houses. That sets out some of the details of the partnership between the agency and the courts boards and how we expect that partnership to work.

Schedule 1 provides further details of the constitution and procedure of the courts boards. We are also still engaged in detailed discussions with many of those working in the magistrates courts service and the Court Service, as well as court users, to try to get right the exact nature of the work that the courts boards will do. I can tell my hon. Friend that I will set out an outline of some of the measures involved.

Mrs. Gwyneth Dunwoody (Crewe and Nantwich) rose—

May I ask my hon. Friend why it is necessary to set up an entire stand-alone agency? The history of agencies in this country is that not only are they very large but they grow consistently and are rarely tremendously responsible. Indeed, their whole structure is not usually responsible to the House of Commons.

We already have an agency that runs the Crown courts, the county courts and the higher courts. In addition, we have 42 separate organisations that run the magistrates courts across the country. The Auld review concluded that that fragmentation into so many different organisations created all kinds of duplication and difficulty. Clearly, the new agency will be accountable to the House, via Ministers. Indeed, I think that there will be greater accountability to the House than under the current arrangements, under which, as hon. Members have said, when magistrates courts committees take decisions that the local community does not like or when they perform unacceptably, there is very little that the House can do to hold them to account. That is why it is right to bring the magistrates courts committees into a new agency that will incorporate both the Court Service and the separate magistrates courts committees. Equally, we need the local courts boards to have a voice in the local community and to allow the community to hold them to account for the local decisions that they make.

I am grateful to the Minister for giving way, especially as I could not be present for the beginning of her speech.

Perhaps the Minister's new arrangements would help us in Bromley. We have a brand new magistrates court which is half empty most of the time, while across the road the Crown court is packed out. Ours is a practical problem. Would the Minister's proposals solve it?

I do not know the details, but that sounds like exactly the sort of problem that a new single agency ought to be able to solve. It is crazy that one court can be bursting at the seams while another nearby is half empty. In other circumstances there might be two underused courthouses. Neither the county court nor the magistrates court might be viable on its own, but the sharing of accommodation might allow both courts to be retained in the community. Such arrangements have already been made informally, for instance in Bolton and Salford. We have recently upheld several appeals against the closure of magistrates courts, one of the grounds being that the MCCs had not fully explored other possible options with the Court Service, and had not thought enough about the implications for the various courts. What the hon. Gentleman suggests would allow better use of resources.

My hon. Friend the Member for Crewe and Nantwich (Mrs. Dunwoody) mentioned answerability to the House. Under clause 1(4), the Lord Chancellor will have to lay before the House an annual report about the work of the new agency.

That is true, and I think it will make the work of the courts and the new agency more transparent than it would otherwise be.

The courts boards will consist of magistrates, judges, court users and representatives of the local community. We intend them to have a vital and continuing role in the strategic management of courts in their areas. They will be involved in the development of business plans at the start of the year, and will receive regular performance reports so that they can propose remedial action where necessary. The plans will set out how resources will be used to deliver services locally, and will include any proposals to open or close courthouses. We expect the boards to have a say in decisions about the court estate, including decisions about closures. That is, I think, a more involved role than the role envisaged by the Select Committee.

Can the Minister confirm that it is not an executive role, and that the most that a board can do is express its views?

The boards will not have executive powers. Some have argued that they should have such powers in their own right, but that would mean establishing separate statutory bodies to run the courts. We would have a version of the current framework for the MCCs, covering all the courts rather than just the magistrates courts. That would not allow us to address the problems identified by Sir Robin Auld, or the unacceptable variations in performance, without complex legislation that would probably cause further problems in terms of inflexibility. I think it would also be strongly opposed by those currently involved in work on the civil and family side and in the Crown courts.

The courts boards will provide statutory backing for the non-executive role that will be played by their members, in partnership with the executives. We expect them to work very closely on proposals with local managers. The Bill specifically requires them to look at such matters as the business plan.

I thank the Minister for her generosity in giving way again. She will have heard the remarks of our noble Friend Lord Falconer, the Minister of State, Home Office, in the other place, who said that we must place victims at the centre of the criminal justice system. Will victims' organisations have a place on the board, or will that be left open? I am thinking particularly of an example in my own area, where the youth court has converted a créche into a waiting room. The alleged offenders and the victims sit in more intimate proximity than I am to the Front Bench, which obviously leads to intimidation of many witnesses. A victims' organisation would be the first to pick up on such problems.

My hon. Friend makes an important point. We have discussed that problem in detail during regional consultations across the country, including with court users. We have not specified at this stage exactly who the members of the courts boards will be, but the Bill allows for at least two representatives of the wider community and two people who have knowledge of the courts. We put that wording in so as to include representatives of victims' groups or those who work with witnesses. That representation is possible under the current framework, and it is one of the issues that we thought through in drafting the legislation, but it is not one on which we have taken a final decision.

I want the Minister to consider what the magistrates said to us in the Select Committee on the Lord Chancellor's Department. The Magistrates Association said of the boards that

"they are neither one thing nor the other; they are trying to be both consultative, representative and, partly, management. What we are seeking are proper management boards".
However, other witnesses came to us horrified at the possibility that these boards would have anything other than an advisory role, because they involve members of the judiciary. It seems impossible to reconcile those positions, so the Government will have to come down one way or the other: either the boards can make executive decisions or they cannot.

The right hon. Gentleman is right that there are disagreements about that. Different stakeholders take different views. Although there is broad support for the overall process of unification, as a result of the debates that took place in the House of Lords, there is growing consensus behind the arrangements that the Government have set out. The alternatives to that were either to establish a single Executive agency or to set up separate bodies that would each have boards that have executive powers. If the boards had executive powers, that would result in the creation of separate organisations and would replicate many of the problems with the existing magistrates courts committees. We were keen not to have a traditional Executive agency.

I concede that we are doing something new: this is not the model of the traditional Executive agency on which many public services are run. We thought it important to have a voice for the local community, but not one that was set apart and detached from the courts—not a separate committee that had no direct close links with the management of the courts—rather one that would involve non-executive members working in close partnership with the local managers of the courts.

There was some discussion about whether we could do that without putting such a provision in the Bill, instead including in the framework document the requirement that every local manager would need to work in partnership with a local committee or a local board. We thought it was important to give them statutory backing, permanence and a stronger voice. That is why the courts boards are being established.

We will establish an Executive agency, and it will ultimately be accountable to Parliament, and the buck will stop with Ministers and with the Lord Chancellor. We need to ensure that the views of local courts boards are taken seriously throughout the organisation to ensure that there is local decentralised decision making and that the local community is properly involved in those decisions.

Much of the work involving different stakeholders is about how to make the system work in practice. It already has growing support as people have become more involved in the nature of the arrangements that are being put together. For example, the Magistrates Association said in May that
"the new courts boards, despite their non-executive status, do appear to have an effective role and the ability to make genuine decisions".
Some argued that we should not have the courts boards or anything like that, and that we should just have a traditional centralised executive agency. Others argued that we should have local boards with executive powers on the model of magistrates courts committees. We rejected both those views, and are building a different organisation. It will take some work and considerable further development, but it is the right thing to do and the right balance to strike.

Hon. Members have raised many issues about the structure. That was discussed in detail in the House of Lords. Interestingly, one of the other things that was raised in the debates in the other place was the concern of the Magistrates Association that even under the current system of magistrates courts committees, magistrates do not feel sufficiently consulted and involved in decisions. That is why, after representations from the Magistrates Association, we agreed in the other place to an amendment that provides statutory hacking to consultation directly with the magistracy, not simply via courts boards and via the management structure of the organisation.

The Government strongly support the lay magistracy. They are extremely grateful for the tireless contribution that magistrates make to the unique system of lay justice. Our 28,000 lay magistrates represent one of the greatest commitments to volunteering in Britain. Although the Court Service has what I think is regarded as a very good relationship with the judiciary, we felt it important to recognise that the magistracy, not being professionals and not being in the courts at the same time, needed further statutory reassurance that their views would be properly taken on board in the new organisation.

On that point, as the numbers of the magistracy decline, the House loads more and more new legislation on to magistrates to judge upon. Does the Bill in any sense address the shortfall in magistrates and the Composition of the magistracy in terms of age and gender?

The gender profile of the magistracy reflects relatively closely the gender profile of the population: 49 per cent. of magistrates are women. A lot of work has been under way for some time to increase the number of people from different minority ethnic communities in the magistracy. We are looking at possible recruitment expansion for the magistracy. Interestingly, the measures in the Criminal Justice Bill to extend magistrates' sentencing powers are a huge vote of confidence in the magistracy.

Most of the detail about how the new organisation will work is not in the Bill, nor should it be. It is not our function as legislators to design the detail of a new organisation. We have said from the start that the new organisation needs to be built by those who are most closely involved in all the different courts at the moment. That is why an immense number of consultations have taken place. A report on the discussion groups that have taken place throughout the country is available in the Libraries of both Houses for hon. Members who wish to look further into that.

As I have said, different stakeholders have different views on some of the detail. We will not satisfy everyone but I think that we have made important progress and are building a new organisation that has the confidence of the judiciary, the Magistrates Association, the Justices' Clerks Society and other organisations, stakeholders and trade unions that are closely involved in the running of the courts.

Schedule 2, which is about the abolition of magistrates courts committees, sets out that the Transfer of Undertakings (Protection of Employment) Regulations 1981 I will apply. Will the Parliamentary Secretary assure the House, and people who work in the Court Service, that although TUPE does not cover pensions—because the acquired rights directive does not—the pension rights of those staff will be preserved upon transfer?

I certainly can assure my hon. Friend that we have had considerable discussions with the unions about the pension arrangements. I understand that the unions are currently happy with the arrangements and I am happy to have further discussions with them if further concerns are raised. Those discussions have covered the details of pensions arrangements, as well as the rest of the TUPE measures.

The Bill contains other measures to improve the efficiency and effectiveness of the courts, particularly the criminal courts. Part 2 supports the closer integration of the jurisdiction of the magistrates courts and the Crown courts. It will remove unnecessary restrictions and geographical boundaries, allowing cases to be heard at the most convenient location and helping to speed up the delivery of justice. Magistrates will have national jurisdiction, allowing them to be reassigned quickly if they change address, to sit at a court near their place of work, or to provide for circumstances in which it is inappropriate for a local bench to hear a case.

Clause 19 underpins a much greater role for the Judicial Studies Board in the training, appraisal and development of magistrates. Part 7 of the Bill introduces a new statutory criminal procedure rule committee, following the recommendation of Sir Robin Auld that a single authoritative body to make rules for the Court of Appeal, the Crown court and the magistrates courts should be created.

At present, there is no single forum for discussing improvements in the criminal trial process, and rules tend to develop in a piecemeal fashion. The new committee will be given a modernising and streamlining agenda to try to achieve greater integration in and consistency across the criminal justice system, and this has been welcomed strongly by the Lord Chief Justice.

Fine enforcement accounts for a major section of the Bill. Bluntly, fine enforcement by the independent magistrates courts committees is too low, and there are unacceptable variations in the level of enforcement across the country.

As a footnote to the issue of the administration of the new service, as two consultations on the reorganisation of magistrates courts are going on in Staffordshire—one about a unified administration and another about reducing six petty sessional divisions to three—may I ask whether there is any point in continuing with such consultations and plans, in the light of the law that is about to be introduced?

I do not know the details of the consultations to which my hon. Friend refers, but there is probably a need to carry on with sensible changes, whether at local or regional level. We cannot freeze the entire work of the courts simply because of the process of unifying the administration. Clearly, where decisions are to be taken on where the unified administration is relevant, or when links with other courts are relevant, those matters need to be taken into account. There will be problems if those facilities operate in a vacuum. However, it would be a mistake for all of those consultations and debates to be held up as a result.

Effective fine enforcement is essential for upholding the authority of the courts, sustaining confidence in the fine as a sanction and ensuring that victims and prosecutors receive their compensation or costs. Currently, the percentage of fines and other payments collected by the courts stands at below 60 per cent. In some areas the payment rate is over 80 per cent.; in others it is under 40 per cent. That simply does not provide the necessary assurance to sentencers and the public that the fines imposed will be paid in practice. The Bill already sets out a series of measures to improve fine enforcement, and we are considering going further.

Could the variation in the recovery of fines be anything to do with the ability and willingness of the persons fined in the areas concerned to pay?

A series of factors may affect the level of enforcement in particular areas. Some research suggests that income levels in particular areas have an impact on payment rates; in areas with lower incomes, there are also lower payment rates. Some of those concerned genuinely cannot pay the fines that have been imposed; some simply will not pay—but variations in income are not sufficient to explain the variations in the level of enforcement.

Other factors also affect fine enforcement. In areas where payment points were closed, there was an impact on the level of fines collected—which was hardly surprising, really. In some areas, fine enforcement courts were not held for a period; that too had an impact on enforcement rates. Magistrates courts committees can carry out some administrative functions that have an impact on the level of fine enforcement.