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Westminster Hall

Volume 406: debated on Wednesday 11 June 2003

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Westminster Hall

Wednesday 11 June 2003

[MR. JOHN MCWILLIAM in the Chair]

Council Houses

Motion made, and Question proposed, That the sitting be now adjourned.— [Gillian Merron.]

9.30 am

When social historians write the history of the 20th century, they will contrast the huge advances made in the living standards of the British people between 1900 and 1999. Even allowing for two bloody world wars and the years of economic depression, by the end of the century the quality of life had improved dramatically for the mass of the population, beyond the wildest dreams of those doughty pioneers of social change who sowed the seeds in Victorian Britain for better health, higher standards of education, longer life expectancy, improved working conditions, wider opportunities and vastly superior housing conditions for most people.

While the improvements in the overall quality of life spanned the 100 years, for millions of people it was in the middle 50 years or so of the 20th century—the second and third quarters—when the greatest advances were made in housing. Council housing did it—not the private sector, not quango housing associations or arm's-length management operations, but the democratically accountable local authority council housing departments that were funded by central Government. In those days, one-nation Conservative Governments who championed municipal enterprise and civic pride would compete with real Labour Governments for who was the best when it came to building council houses for the general population.

As a consequence, by the time that the final quarter of the 20th century arrived, the concept of homelessness was in effect a thing of the past. Cardboard city was unheard of. Not only had the curse of homelessness been tackled and beaten, but the relatively few families at any one time living in sub-standard accommodation or in housing that was inadequate for their needs were certain that it would be only a few months in most cases before the promise of a family home would become a reality—oh, happy days.

Where has it all gone wrong? We are told that this country has the world's fourth richest economy, but why does Britain now have a housing crisis the like of which I have not witnessed before in my more than 30 years of elected public office? It is most certainly not the fault of the councils. I pay tribute to the excellent work of local authority housing staff in difficult, challenging and, in some respects, hopeless circumstances in trying to help the homeless and families living in substandard accommodation to be better housed. The front-line staff deserve praise for trying to achieve the near impossible. I pay particular tribute to the housing staff at Colchester borough council who assist the homeless and who recently achieved beacon status for the council—staff who help the victims of the Government's failed housing policies.

Until the Thatcher years, families in need of decent housing would have been housed, but not now. What Thatcher started, the Major and Blair Governments have continued. Indeed, it could be argued that new Labour is more hostile to the concept of council housing than even the measures put forward during 18 years of right-wing Tory Governments.

I cannot agree with the hon. Gentleman. In the past five years, precisely 100 large-scale voluntary transfers have taken place to move council housing stock into a position where housing can be replaced and new investment can be brought in. Surely that provides better housing in a more sustainable way, so that that stock can be replaced.

I hear what the hon. Gentleman says, but if he checks with the House of Commons Library, he may find that the statistics do not bear out his argument.

Order. It is a rule in the House that, if hon. Members refer to other hon. Members, they refer to them either by their constituencies or by their title. It is also the practice in the House that if an hon. Member refers to members of the upper House, he refers to them by their title.

Thank you, Mr. Deputy Speaker.

I do not criticise the principle of people buying their council home. Indeed, it was my refusal to oppose council house sales that the Labour party in Colchester used against me and which played a part in forcing me out of the party in 1981. Now Labour is more enthused about getting rid of council houses than the Conservatives ever were. It is a funny old world.

According to the House of Commons Library to which I am grateful for statistical information, in the final five years of the Conservative Government, 190,418 council dwellings were sold. In the first five years of this Labour Government, sales totalled 240,200.

While I am not opposed to the principle of the right to buy, the mass disposal of public assets at hugely discounted prices was not something that had any economic justification. That Thatcherite policy failed because of the Government's refusal to allow councils to reinvest the money from those sales in building new homes. Had that happened, we would not have a nationwide housing crisis today.

In Colchester, more than 3,250 council homes have been sold since the right to buy was introduced. That represents about 30 per cent. of the original stock, but a high proportion of the sales have been family houses, and houses—not flats, or dwellings for the elderly—are in desperately short supply for homeless families. One person has managed to acquire a dozen houses, which he rents out for more than a council rent. He has become a millionaire.

I apologise for having to leave the debate to attend the Select Committee on Defence as I would have liked to have been here. Is there any statistical evidence to show why both Labour and Conservative Governments failed to deal with the problem of the replacement of the houses that were sold? Is there any evidence to suggest that, when housing stock is passed on to the private sector, it leads to an increase in the provision of houses within those authorities?

All the evidence suggests that the problem deteriorates. According to the statistics provided by the House of Commons Library, nothing shows that the sale proceeds are invested in new housing stock.

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

The hon. Gentleman has just cited evidence that suggests that large-scale voluntary transfer deteriorates housing stock. Can he cite the evidence that he is using?

I will give the Minister the benefit of the doubt that he misunderstood what I said. I refer to the need to build new houses—to have additional houses—and I have not yet been provided with the evidence that that has been done. I would welcome the hon. Gentleman giving us the good news of the breakthroughs and progress made by the Government to solve the housing crisis in his reply.

With respect to the hon. Gentleman, I suggest that he uses language more carefully. The hon. Member for Portsmouth, South (Mr. Hancock) asked whether there was any evidence that stock transfer has improved stock. The answer was, "No, it has not. If anything, it has deteriorated." That is not an accurate assessment.

I refer to new dwellings. As I have no first-hand evidence of stock transfer leading to the improvement cited by the Minister, I have to throw open the question for consideration. Why cannot that investment be given to local authorities to improve their stock? Why does it have to take either a privatisation, a semi-privatised or a quango route? Why are the Government so hostile to local councils that they would not even trust them with the money to invest in and modernise council housing stock?

The present Government inherited a mess created by the two previous Conservative Governments, but they have not tackled the housing crisis. That would have been done under the real Labour Governments, such as the Attlee Administration in the years immediately after the war and those of Wilson and Callaghan in the 1960s and 1970s, while one-nation Conservative Governments such as those led by Macmillan and Heath would not have allowed it to happen in the first place. New Labour has allowed the situation to deteriorate to an appalling level at which homelessness is increasing all the time and families living in inadequate accommodation know that their chances of being offered somewhere better to live are becoming more remote.

The contrast between 1979 and today is stark. In 1979, more than 75,000 local authority dwellings were built. In 1999, just 171 were built throughout the country. In the 15 years after the second world war, more public sector than private sector housing was built. I am not arguing for a return to that split. However, if the Government want to be true to the principles and ideals of their party's founders, they should make it a policy to return to the days when the Government funded local authorities to build more council houses to meet the needs of their communities.

I am sure that my hon. Friend and the whole House would be interested to know that in the city of Portsmouth the housing crisis today is worse than it was at the end of the second world war. More people are waiting for houses than there were in 1946, when the rebuilding programme really got under way. There is less opportunity for the sort of people who need council housing to get into a proper home of their own. Is not that an indictment of the Government's policies, which do not sensibly consider how local authorities can help?

My hon. Friend makes that point strongly and I am sure that it is recognised by his constituents.

If the Government are going to claim that housing associations and the private sector are making up the shortfall in council housing, I am bound to observe that figures from the House of Commons Library say the opposite. In 1979, in addition to 75,000 local authority dwellings, registered social landlords and housing associations built 17,835. By 1997, there were 27,502; but in 2001–02 that figure had fallen to 20,692, by which time virtually no local authority dwellings were being built. There were 140,481 private enterprise dwellings in 1979, 152,530 in 1997 and 141,125 in 2001–02. However one looks at it, whether in terms of councils, housing association or private enterprise, the figures for all sectors building new dwellings have fallen under new Labour. No wonder we have a housing crisis.

Housing associations would love to build more homes, but they rely on funds from the Housing Corporation, which in turn is funded by the Government. One aspect of housing association developments causes me considerable concern—what I call "Heineken housing", or building on sites that private developers do not want to reach. Land that the private sector knows would not be suitable for houses for sale is deemed okay for social housing tenants.

There must not be double standards, but there are. That is proved by three examples from my constituency. First, family houses were built on top of a 100-year-old slag heap of foundry waste. Secondly, planning permission was given just two weeks ago for social housing to be built on a greensward and car park behind a block of shops next to a mobile phone mast and under overhead electricity supply cables. Thirdly, there is a site for which the developer had failed for years to get permission because of planning objections, but all those mysteriously disappeared when a social housing element was included.

Double standards should not be permitted. I should like to see a return to the Parker Morris standards, which used to apply to council houses. However, if the Government are looking to housing associations to build houses for rent—by the way, what does the term affordable rent mean?— I am told that the bids to the Housing Corporation are three times greater than the available finance. Will someone please tell the Chancellor? In his euro speech on Monday, he said:
"Britain has experienced difficulty in balancing supply and demand in housing."—[Official Report, 9 June 2003; Vol. 406, c. 411]
He promised that there would be an increase in the supply of new housing, but can anyone recall him mentioning the need to provide housing for rent? There is no room at Gordon's inn for the homeless.

Tomorrow, the Minister for Housing and Planning is due to give what is billed as a keynote address at the Millennium grandstand at Newmarket race course at the launch of the regional housing strategy for the east of England. Will that include building new council houses? If not, why not? The Chancellor said that there was a risk of a cycle of boom and bust in Britain's volatile housing market. We are told that he is considering massive increases in stamp duty and capital gains tax as a way of damping down any house price boom. He said specifically that
"further housing reforms will be put in place in the coming year…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."—[Official Report, 9 June 2003; Vol. 406, c. 411]
How the homeless and those in inadequate housing may have reacted to the Chancellor's comments is something to ponder. Young mothers and children living in a hostel for the homeless in Colchester, which is "not fit for dogs" according to reports in the town's Essex County Standard and Evening Gazette last Friday, would welcome the Government funding new council houses. That would, at a stroke, reduce the demand for people being forced to buy and it would, as a consequence, have a stabilising effect on house prices. That would be a return to the balance that happily coexisted prior to 1979.

How many people are in a position to buy? A large percentage are not, according to a survey carried out by Professor Steve Wilcox at the university of York for the Joseph Rowntree Foundation. A report in the East Anglian Daily Times on 2 June said:
"People aged in their 20s and 30s and key workers such as nurses, teachers and police officers are among those finding it hardest to buy their first home."
Statistics showed that 35.5 per cent. of families in Suffolk with two working adults could not afford to buy a home. In Essex it is even worse, as 39.2 per cent. cannot reach the asking price of the cheaper properties. In Chelmsford, that figure rose to 52.3 per cent., while Colchester is slightly more fortunate at 37.1 per cent. In south Cambridgeshire, the figure is 57.3 per cent.

Aspirations of home ownership for those people cannot be fulfilled. The resumption of council house building would have the twin outcome of a supply of good quality houses for families to rent and less demand in the house buying market. There is another bonus—a boost for jobs in the building industry.

When I was leader of Colchester borough council, between 1987 and 1991, at a meeting of the Essex branch of the Association of District Councils, I told the then Member for South Colchester and Maldon—now Lord Wakeham—that a combination of large-scale sales of council houses and a failure to build replacement houses would result in thousands of people being forced into the property-owning market when they would not otherwise have done so, that the demand for lower priced houses would be greater than the availability, and that that would lead to an increase in house prices throughout the entire housing market. I suggested that that did not make economic sense and that it was not fair on those who would be deprived of a decent home in which to live. I have been proved right. Tragically, the problem is considerably worse than I ever thought it would be. For the homeless and those in accommodation that is less than ideal for their needs, there is no such thing as the dream of being part of the property-owning democracy, but rather the 24-hour nightmare of housing despair. Whether we are talking about big cities, towns or villages, all have residents suffering because of the lack of council homes. In rural areas, young people are being forced to leave the villages in which they were born, where their families may have lived for generations, because there is no housing for them, or which they can afford.

Two weeks ago, BBC television in the east of England, over two rights, reported on council housing. Its survey revealed that waiting lists are rising sharply across the region. Some local authorities reported numbers up by as much as 50 per cent. in a year. When reporters asked viewers for their stories, they were swamped with calls. A representative from BBC East told me last night:
"In Ipswich, a couple were told there was a 30-year waiting list for council houses. In Milton Keynes, a nine-week-old baby sleeps in a pram because there is no room for a cot in the house. And in Norwich, a family of five are living in a cramped one-bedroomed bungalow."
Those are just three examples of Labour's housing failure. Last year in Colchester, the council received 1,456 homelessness applications. However, only 426 were accepted. I am told that that figure is the highest in the region, but more than 1,000 applications were rejected. There are 2,354 applicant households on the housing register. The council's head of housing, Mr. Andrew Murray, tells me that Colchester needs 500 affordable homes a year. The number delivered last year was 40—further evidence of Labour's housing failure.

In this morning's debate, I am concentrating on the need to build new council houses, not other aspects such as stock transfers or creation of arm's-length management operations. However, I ask why the Labour Government are so hostile to local authorities? Why does Labour not trust local councils? Why will the Government not fund authorities to build, maintain and manage council houses, which was the case for the greater part of the 20th century, and which had a track record of delivery because homelessness was beaten? We need a regime change in Government thinking towards council houses—back to that which proved so successful over the larger part of the last century. Tried and tested ways are often better than new ones. Tinkering with the system, such as last month's launch of the consultation paper with the long-winded title "Improving standards of accommodation for homeless households placed in temporary accommodation by housing authorities—England" does not produce a single new house, and it is houses that the homeless want, not temporary accommodation, or bed and breakfast.

I suggest that better solutions come from Shelter, which is arguably the most knowledgeable organisation dealing with the national housing crisis. Its proposals in response to the Government's published strategy, "Sustainable communities: building for the future" are ones that I hope will be adopted. As Shelter so graphically put it in evidence given to me:
"Poor housing and homelessness has a negative impact on all aspects of a child's life. Temporary accommodation inevitably means frequent moves, forcing children to change schools and friendship circles. And due to damp, cramped conditions, badly housed children are also more susceptible to diseases."
Is the Prime Minister aware of the housing crisis? If his friends have not told him, I have. It was the subject of my last question to him, when I challenged him in the House:
"When will his Government do something to provide decent housing for homeless people, particularly for the underclass that has developed under new Labour?"—[Official Report, 4 December 2002; Vol. 395, c. 907.]
That was six months ago. Sadly, I see no evidence that new Labour is giving the housing crisis the attention that it deserves. In the past, real Labour would have made a priority of providing decent homes for homeless families.

I am not sure how the Minister will respond. Perhaps he will use the charm offensive, or perhaps he will not bother with the charm. I do not hold him responsible for the housing crisis. He is the person who has been landed with it. What he tells us—I am sure that we all have nice homes—is not important. It is the message that he gives to those without a decent home that is important. The best way to tackle the twin problems of rapidly rising house prices, which put buying a home beyond the reach of more and more young people, and the increasing number of homeless people and others who are housed inadequately is the restoration of the council house building programme that brought about such a huge advance in living standards for millions of people in the 20th century. There is a housing crisis, and it is worse now than it was in May 1997.

9.50 am

I congratulate my near neighbour, the hon. Member for Colchester (Bob Russell), on having brought this matter before the House. I agree with the thrust of his argument, minus the invective, and I hope that some common ground can be found on how we might restore a decent housing situation.

Last Saturday, I went, as I do each year, to the Braintree and Bocking carnival. Not everybody is familiar with those twin towns, but in the Bocking part there is a 1950s council housing development. The carnival wends its way and eventually reaches a field called Meadowside. That is the central part of the development of sturdy, three-bedroom houses with adequate gardens that overlook the meadow. The development is on a hillside, and from many points one can still look out across open countryside. The verges to the roads are broad, ancient oaks have been preserved along them, and the whole effect is exactly the kind of housing that was envisaged in the 1940s, 1950s and 1960s.

In those times, the two main political parties competed avidly with each other over who built more council houses. My party said that it had built 1 million between 1945 and 1951, and the Conservatives promised to build more—and they did. The argument then turned on whether Labour's houses were better; they probably were. The debate over standards—more and better, better and more—went on until the 1970s. During that period, almost any working family could anticipate decent housing, through either rental in the council sector or the ability to buy with a mortgage from a building society or local authority.

The hon. Member for Colchester gave some figures. From memory, I believe that in 1953, 200,000 council houses were built—more than the total number of houses built in 2000. By 2000, only 20,000 units of what is now called, rather condescendingly, social housing—we should think of a better term—were built. At one time, Braintree district council had 14,000 council properties for a much smaller population. Now it has only 9,000 and falling.

We should also look at the cost ratio. What would it take a working family to buy a house? Some time ago, I was fortunate in securing an Adjournment debate, which the hon. Member for Colchester was good enough to support. Shortly before that, I met a man in my advice surgery who had bought a house in Witham, under the build for sale scheme run by Witham urban district council, when he was a recently-married factory worker earning £1,500 per annum. He bought a house for £4,250 with a 100 per cent. mortgage. His wife was not working at the time. The cost of the house was less than three times his sole salary. It was a three-bedroom house, with gardens at front and rear, and a garage. It is still there now; it is a delightful house, and I suspect that it will sell for £170,000 or £180,000, which is way beyond the reach of people in a similar position to his today.

The Rowntree study that the hon. Gentleman mentioned makes fairly complicated arithmetic equations, but I shall try to break the matter down in my simple mind and compare the position now to the situation I described in Witham in 1968. I believe that a police officer's salary is about £23,000 a year. The cost of even a modest house now is six times that salary. It is also six times a teacher's salary; for a nurse, it is more than seven times. In many ways, those people are rather higher up the scale than the factory worker that I mentioned earlier. Those people are in a far worse position than they would have been 35 years ago.

Is there an answer? The hon. Member for Colchester wishes to return to a mass council house building programme. I see the merit in that, but of course there is the question of the right to buy. The issue reminds me a little of the recitation of "Albert and the Lion" by Stanley Holloway. I cannot remember the exact words, and other Members may have better accents for quoting from it than I do, but the point of it was, why go on producing children to feed them to lions? We want more houses, but we want them to be contained as far as possible in a situation that repeats itself for further generations.

There will always be a case for the rented market, but I want to think again about the build for sale scheme. Usually, with such schemes, no one has to worry about the right to buy problem because there is no right to buy, as the houses have already been bought. Build for sale operates on the basis that local authorities build houses on land that they acquire. They then sell the house to an approved purchaser, who is a member of a family in need, and they grant a 100 per cent. mortgage. That mortgage should be constructed so that the repayment is similar to an affordable rent. When the family move on, they sell the property and keep the profit, as they would in the private housing market, and the mortgage goes back to the council to be recycled on another property.

Such a scheme certainly needs a large infusion of Government money to pump-prime it and boost it in the first instance, but once it is moving along, it will start to provide affordable housing, owned by the people, in repeating patterns over a wide area of this country.

This is the right debate to have today. I congratulate the hon. Gentleman on his positive approach. I apologise for having to leave for a 10 o'clock meeting, but I encourage him to continue along the lines that he is taking. He should continue to consider the problem seriously, and should put the dogma of who owns the housing behind him and concentrate on three issues: providing more houses for those who need them; the replacement of houses once people have bought them; and the quality of the environment in which those houses exist. Those are the issues that really cause our constituents concern.

I am grateful for that intervention, but I shall not be seduced into going down an entirely free-market path. It has been shown in the past 20 years that that approach has failed to solve the problem; indeed, it has exacerbated it. We need some state intervention, as I hope I have suggested in my remarks. The councils should build and lend, and the Government should pump-prime the system to start the financial process. Only with that sort of grip or control will it be possible to build enough houses of the style and kind required for working people.

One is always tempted to think of the past as a golden age. I certainly thought that on Saturday when I was at the Braintree and Bocking carnival; when I saw the houses there, I thought what a shame it is that the chances of young people being able to afford houses of that kind are now almost nil. The past was not always as golden as we remember, but sometimes we had the vision to see a problem and ask what we could do about it. I believe that a dynamic state still has a strong role to play by intervening for the good and betterment of those who are less well off.

Following on from the question of whether it is dogma, I recollect reading a book as a student—I believe it was written by the father of the right hon. and learned Member for Sleaford and North Hykeham (Mr. Hogg)—which said that the Conservatives have never been afraid of using strong government. I invite Conservative Members to spend some time reflecting on their party's history, and the fact that within the past 50 years it was prepared to build houses for working people of a type and on a scale that were fit for the purpose.

I urge my own party to recall the words of Hugh Dalton, "Call Back Yesterday"—we should ask what we can do to recreate a society, with genuine hope of a decent life and a decent house, for those who are now denied that opportunity.

10.1 am

I am pleased to follow my hon. Friend the Member for Braintree (Mr. Hurst). I congratulate my friend, the hon. Member for Colchester (Bob Russell); we shared many times together. Like my hon. Friend, I shall not go with the invective but with the message, which was powerful.

Today's debate is the third in recent times on council housing. The first was opened by my hon. Friend the Member for Great Grimsby (Mr. Mitchell), who spoke at length about the problems of cross-subsidisation caused by the housing benefit regulations, which effectively meant that some council tenants were paying for others, which caused much angst.

More recently, the debate that was led by my hon. Friend the Member for Hammersmith and Fulham (Mr. Coleman) was answered by the Minister who is to respond to this debate. That was interesting because, although I would not draw many parallels between the Hammersmith and Fulham area and my authority of Stroud, both have tried to be proactive in their approach to their housing stock.

I make no apology for wanting to talk about some of the local implications, because my authority is pursuing the large-scale voluntary transfer scheme. My party is not in charge of the district council, which I think is wrong to go down that route, but it has done it for honourable reasons. I want to look at some of the implications, but I first pay tribute to a group who, through voluntary empowerment, have done an awful lot to question some of the national trends by defending council housing. That grass-roots group has become a national organisation because of the current scale of transfers.

I was directly involved in evaluating the future of housing stock as a councillor in the late 1980s. Stroud district council was looking to the future and it offered tenants what I thought was a fair and objective opportunity. It wanted to know if people saw merit in some form of transfer. Because it was done in a fair, equitable and open manner, the tenants' response was overwhelming: they wanted to stay with their existing landlord. From all the messages that I receive, I understand that that is still what they want to do. Unfortunately, that is not being offered to them. Stroud's application is going through a process, and we have made a start. The document is glossy and comprehensive and the officers of Stroud have done well in preparing it.

Stroud already has a good housing authority. We have been at the forefront of trying to work within the local authority framework for housing, and have performed that role as well as possible. In all the evidence—and this is acknowledged in the work of the district auditor—Stroud is in the top half of south-west authorities; it is probably near the top. South-west authorities seem not to have some of the problems found elsewhere in the country.

The authority deserves congratulations on two counts. First, it has kept rents at realistic levels. There was the odd argument in certain years in the 1990s when rents rose, but in the main rents have been affordable. Secondly, and more importantly, locally we are proud of our reinvestment programme for housing stock. It is easy to generalise, and I always tread gently in this area, but I cannot recall going into people's houses in my area and feeling in any way ashamed by the quality of council housing. Houses next door, which have often been bought, reveal the stark difference between the way in which council houses are maintained as part of the housing stock, and the way in which bought houses are maintained by their owners, who are understandably struggling because of the money that they have paid, even with a discount, to buy their house.

My argument is that we should consider the options that face the council. I am critical of the housing terrain through which we are walking. There are two fundamental questions about how housing in this country is currently performing. There is the macro question of where the funding stream sits in relation to wider economic policies. There are those who say that there will always be higher priorities—for example, education, health and social services—because many people can afford their own houses.

I think that early on the Government made a mistake. There were strong arguments for considering alternatives to the public sector borrowing requirement in terms of the general Government financial deficit, and taking housing out of the equation would have given us greater flexibility. Part of the problem is that there are macro constraints that relate to private sector housing. The Chancellor's statement was interesting, because regardless of whether people think that the euro is a good or bad thing—some Labour Members do not think that it is a good thing—it showed that so much of the debate is tied up with housing. That was fascinating. On the back of that are clear implications for the public sector, such as for housing associations—I term that as part of the public sector, although some people prefer to call it the voluntary sector—and the true public sector: local authorities. That sector is constrained by macro-economic policies.

The Government are absolutely right to address the fact that too much of the stock, in particular in urban Britain, is substandard. That must be brought up to 21st-century standards. Why should people who pay good rents and live in places in which they have chosen to live have to suffer because they happen to live in an authority that does not have the money to bring stock up to date? The Government are right to address that as a fundamental issue. The problem in doing that is that they are either ignoring what is going on outside or making things much more difficult.

My problem with the process is that we are being driven towards large-scale voluntary transfer. I have talked to councillors from across the political divide who perceive that they are being driven towards LSVT. I admit that there is a slight difference of opinion between us in that I think they have more choice than they sometimes pretend. None the less, I think that we have reached the wrong conclusion, because we have not given people what I want them to have: real choice. Of course, one could parade the different opportunities that exist, such as an arm's-length management organisation or, possibly, the private finance initiative. However, the cards seem to be stacked very much in favour of LSVT.

Does the hon. Gentleman accept that the question of who manages or owns the houses will be almost academic if there are not enough houses for those in housing need? Given that no one has come forward to fill the gap, does he agree that the necessary houses can be built only by local councils funded by central Government, as used to happen all those years ago?

Yes, I very much agree. The crux of the problem is the asset value of the stock, and one difficulty with the whole basis of LSVT is that we devalue the stock so that someone will buy it. That has an enormous impact on what happens in the future. If we put a realistic value on the stock, however, we could use creative measures—I will not say creative accounting, although we are talking to an extent about creatively using the asset value of the stock—to come up with the means to replenish the stock that we have sold.

Stroud is left with 5,500 units. I have never opposed the right to buy in principle, although I have always opposed it for the reasons suggested by the hon. Member for Colchester. I have always believed that we should have replenished the stock for every house that we sold. It is absolutely crazy that we did not do that. We should have built more houses, because it is a matter of giving people choice.

In the remaining minutes, I shall concentrate on the problems with the conclusion that we are being forced to adopt, which runs very much against tenants' better judgment. More than anything, however, I shall concentrate on the problems with the process under which we must adopt that conclusion. Although the procedure is notionally democratic, it is incredibly expensive, and Stroud will probably spend upwards of £500,000. For £500,000, we could do something to alleviate our problems with the affordability index. In that respect, Stroud is much like Braintree.

I am sorry that the hon. Gentleman is so hostile to large-scale voluntary transfer, because it addresses many of the issues that want addressing, such as the discounted value of the houses and the flexibility of management. Cotswold district council is next door to the hon. Gentleman's area. Five years ago, it carried out the large-scale voluntary transfer of 500 houses. With the interest on the proceeds, it has been able to build a further 450 houses. Should not the tenants and Stroud district council, which we both represent, be looking at that sort of model?

I do not want to take issue at great length with the hon. Gentleman, who is my neighbour. I have a slightly different perspective on Fosse Way, although it is a model housing association in many respects and has done some interesting things. It has recently faced the same problems as local authorities in that it has not had the necessary land and has not built a sufficient number of houses of late. It has inevitably put rents up, and the tenants to whom I talked were not as happy as the hon. Gentleman would contend. That may be because many decisions are outside their control. In that respect, I worry that as things become more difficult in the housing sector—I do not say that that is inevitable—someone else may take over Fosse Way and run it on the basis of economies of scale. If that happens, local accountability will be divorced from the management of the stock. The loss of local autonomy is a real worry, but people sometimes skate over the issue. We are looking not at now, but at five or 10 years down the road. I accept what he says, but I do not necessarily agree.

Tenants are being forced to face up to the process of seeking LSVT, and that is unfair. A working party report by Beha Williams Norman Ltd., a reputable housing consultancy, looked at the different options. I read it, and it was very clear what it was going to tell us: I do not know whether that was the brief that it was given or whether it came to that genuinely. However, it is interesting that it came up with only the one option.

I turn to the difficulties with the processes. For a start, we are talking about an 18-month period. For tenants to engage over 18 months demands a big commitment: I am not belittling them or being pejorative, but it is difficult to get tenants involved in that, because the vote will be later this year or early next year, and it has already been going on for a long period.

Costs have already been touched on. On the complications, for those who oppose the transfer, we will try to make it fairly simple for them to say that they wish to stay with the existing landlord. However, all of this is progressing in the context of quite a complicated argument over stock value, what benefits there will be in terms of new build, and the ways in which the stock might be further improved.

Does the hon. Gentleman accept that at the end of that process, when the tenants have had all the information and are able to digest it, they ultimately have a veto because they can vote against the proposal? Therefore, at the end of the day, it is their decision.

It is, but the balance is heavily weighted in favour of taking the decision, because the alternatives are not being fairly presented. I am disappointed at the amount of money that is being spent on one side. In another guise, the hon. Gentleman may be talking about the euro referendum, and I am quite sympathetic about that: one of the arguments on fairness is about where the money is being spent in relation to the ability to influence the debate.

I have worked with these people over decades, and I am not saying in any way that they are dishonourable, but I have worries. I have heard evidence about the independent tenant adviser who has been appointed, and it seems that tenants are more or less being told, "Well, this is going to happen, so how can we make it happen for the best?" That is wrong: it is leading the tenants to believe that they have to vote in a certain way. The process will involve every tenant being visited, but they will be visited by council officials and are those officials going to say, "On the one hand there is this set of arguments and on the other hand there is another?" I would love to hear that that is going to happen.

Until recently, it has been difficult for those who are opposed to the process even to get hold of the names and addresses of the tenants, because of provisions such as the Data Protection Act 1998. That is understandable, but in order to engage and have a debate one has to have equal and balanced access to the people who are going to make the decision. That has been quite a stumbling block in Stroud, and I do not believe that Stroud is unique in that.

We have just set up the shadow boards. That is happening, but the way in which it is being taken forward is not easy. For tenants to engage on those boards, they need a lot of empowerment. With regard to the district auditor, Bath and North East Somerset council, for example, has looked at some of the issues about how the consultation has been run, and that debate will grow.

There are councils that are voting no—Birmingham is the biggest one so far, and Nuneaton is another that is always cited. What happens when a council votes no to what is being proposed is interesting. At the least, there is a difficult period. I want the Minister to assure me that such councils will not be in any way further penalised. The argument that has largely been advanced in the case of Stroud is that we have to go down the proposed route owing to the decline in subsidies through the housing revenue account support. I do not want that to be made in any way worse, because council tenants have come to a different conclusion from their council and perhaps even from the Government. I want there to be a future under local authorities. There may be a different way to proceed, and if the option were really available, I would even find it acceptable for those tenants to go down a different route. I have looked carefully at the community ownership route, which is the idea that as a co-operator one can consider conversion into a housing co-operative. That has many attractions, but it often gets lost through LSVT pressure to opt out and go down a certain route.

In conclusion, I leave the my hon. Friend the Minister with the point that none of us really knows what will happen in the future as we increase the housing association stock at the cost of the local authority stock. That will have macro implications, but we need some assurances that the result will not be takeovers by massive new housing associations on the basis of economies of scale. I should also like greater guarantees about rents and an assurance that the bargain that has been proposed will be kept to in terms of the number and type of houses that should be built. There are an awful lot of questions. I am—

Order. I remind the hon. Gentleman that the purpose of these sittings is for the Member who secures the debate to get a reply from the Minister. If the hon. Gentleman continues much longer, the Member who secured the debate will not get an adequate reply.

I shall conclude on that point. If the answers to my questions are forthcoming, I can go back to the tenants in Stroud district council and talk to them in a way that will assure them that the process that they have been asked to undertake is fair and honest, and that it will yield the right results, rather than the wrong ones.

10.22 am

I congratulate my hon. Friend the Member for Colchester (Bob Russell) on securing this debate on such an important issue. We have heard some good contributions from the hon. Members for Braintree (Mr. Hurst) and for Stroud (Mr. Drew), although the last contribution was very long.

Those who have spoken have done well to identify some of the problems associated with the shortage of housing. To put a figure on the problem, Shelter says that 85,000 homeless families are now in temporary accommodation, which is the highest figure ever in the United Kingdom. However, that is not really surprising because since 1999 the amount of social housing built—either the tiny amount that councils build or that built through registered social landlords—has been lower than sales through right to buy. Since 1999, there has therefore been a year-on-year decline in the amount of social housing stock.

There are problems not only at London and the south-east but in rural areas such as Cornwall and Shropshire, where there is a lack of affordable housing for key workers. That is also symptomatic of the lack of social housing—there is neither social housing for people to move into nor houses to buy that they might be able to afford. The most dramatic effect has been in London and the south-east, but there is also a problem in rural areas, where people retire or buy holiday homes, thereby pricing local families out of the housing market. Many young people and families are forced to move out of the areas in which they grew up as a result of the shortage in social housing.

To consider some figures, the right to buy council houses has accelerated—in the last three years right-to-buy sales have been in excess of 50,000 a year, which is as high as the figure has been for a decade. That is leading to a decline in social housing stock that not even building by social landlords is replacing. Large-scale voluntary transfers, which seem to work in some circumstances, but have not been so successful in others, have also accelerated since 1997. There have been larger transfers since then than there were under the Conservative Government that introduced LSVT.

A problem with the right to buy is that it is the more desirable homes that have been bought. When the scheme was introduced, one of its good intentions was to break up the monolithic council housing estates, which were in decline because they did not enjoy mixed ownership. The feeling was that if people owned their own homes that would lead to regeneration. The reality is that the homes that have been bought are in the more desirable, particularly rural, areas. The four or five homes in a village have been snapped up, whereas the big estates have barely been touched. In that sense, right to buy has failed. There is also a decline in the number of houses built by councils. In 1992, councils built 2,500 homes—a tiny number. That dropped to 105 last year and the figure is declining year on year.

Even if we consider registered social landlords—in many ways, the Government's preferred option—we still find a year-on-year decline in the number of houses built, from 51,000 in 1996 to 29,800 last year. That is no surprise because the amount of money going into the housing corporations is lower than it was in 1992. Then it was £1.8 million, now it is half of that.

Yes, £1.8 billion. I appreciate the Minister's correction. It is now just £900 million. There has been a slight rise in recent years, but the big drop was just after the 1997 election. The Chancellor's sticking to Tory spending plans probably did more to reduce social housing build than anything else in recent years.

That is the problem. How do we deal with it? There should not be a one-approach-fits-all response. Hon. Members have been right to say that councils feel that they are pushed down certain routes and that they should have more freedom. They should be able, if they choose, to build homes themselves, using whatever funds they have. That is extremely difficult for them to do under present arrangements. I would appreciate it if the Minister sounded sympathetic to that.

We should not return to building monolithic, large-scale housing estates but should aim for mixed use. Most councils understand that and would build mixed developments. I do not think that they would build 700 council houses in one development; we shall not go back to those days. The removal of the local authority social housing grant has denied us one of the routes through which extra social housing was built. South Shropshire, in my constituency, did LSVT in the early 1990s, and put all the money into local authority social housing grant, which led to an increase in social housing available in the constituency. That route has been removed. In the absence of local authority social housing grant, councils have to go cap in hand to housing corporations to ask for money instead of being able to use their own money. That does not help in the short and medium term.

The Government have introduced some welcome changes to the right to buy, but they have not gone far enough. They need to make the changes available to all councils that want them. In Cornwall and Shropshire, councils, and housing associations, because of the preserved right that transfers to them, suffer a continuing decline in their council housing stocks through right to buy. They would very much like those powers to be extended to them, not restricted to a ring of councils in London and the south-east. There are problems elsewhere. Why not let the councils themselves decide whether they want changes to the right-to-buy discount. That is the correct approach—trust the councils.

Another area that needs to be examined is something that the Conservatives introduced in the early 1980s and then dropped, partly because they had introduced the right to buy. I refer to the right to invest. One of the safest ways of keeping housing stock in councils' or registered social landlords' hands is to give people the right to invest by buying a proportion of the equity. They would then have a mortgage—and a means to build up funds—rather than having to buy the house outright. That approach keeps the property in the affordable housing sector and keeps it in the hands of registered social landlords, but allows individuals to build up capital for themselves, and perhaps eventually get into the conventional housing market. The right to invest needs to be examined and encouraged, particularly if we are—rightly—reducing the use of the right to buy.

We must also examine whether we can use section 106 agreements, as is the case in many parts of the country—not least in south Shropshire —to create a middle tier of affordable housing. That would, artificially, keep prices down on a local needs basis, rather in the way the old agricultural workers dwelling scheme worked, but extended to other areas. Some councils are looking at that and it seems to be a way forward.

I wish to press the Minister on a point that was raised by my hon. Friend the Member for Colchester. Why not trust the councils? Let us give them the power to decide the appropriate route in their area. One of the great failures of the Conservative Government was to take powers away from councils. They forced them down particular routes, and although this Government have made some modest steps in returning power to local authorities, they are just that—modest. Trust the councils; give them the powers to build new council houses, to recycle capital funds through schemes such as the local authority social housing grant, and to help registered social landlords. Give them the power to decide whether they need to make changes to the right to buy. Introduce the right to invest. I hope that the Minister will deal with some of those issues. Once again, I congratulate my hon. Friend the Member for Colchester on securing this important debate.

10.32 am

I, too, congratulate the hon. Member for Colchester (Bob Russell) on securing this important debate. How we deal with the present stock of 3.1 million public sector houses is of critical importance to a large percentage of the population. I congratulate the hon. Members for Braintree (Mr. Hurst), for Stroud (Mr. Drew), and for Ludlow (Matthew Green) on their speeches. The mnemonic that the hon. Member for Braintree used—a decent life and a decent home for those who are denied that opportunity—is a very good aspiration that we should all support.

The Prime Minister aspired to a decent standard of housing for all. He said that that would be achieved by the next election; I now see that the public service agreement target is 2010. Nevertheless, even to meet that target, the Government will have to go some way because for six years they have done little to tackle the problem. If one wants subsidised housing, one has to subsidise it. The resources that the Government are putting into subsidised housing are only now matching in real terms what we were putting in when we left office in 1997. I am pleased that the Government are now beginning to repent, but a real problem remains.

The hon. Member for Colchester was kind enough to provide figures for the building of council houses in 1979—a total of 92,000 houses. In 2001–02, only 240 council houses were built throughout the country. To a small degree, that figure is offset by the number of registered social landlord houses, but even that totals only around 20,000. Add the two figures together and we have a total of just 20,240 houses being built. When we left office in 1997, those two figures together amounted to 39,000 public sector houses. Now, only two thirds of that number of houses are being built in the public sector compared to when we left office.

In 1979, 75,500 local authority houses and 17,835 social registered landlord houses were built, so the total is 93,000. The situation was dramatically better therefore under the Conservatives in 1979 than it is now.

I am grateful to the hon. Gentleman for clarifying that. I may have got the figure wrong in my opening remarks. In fact in 1953, about 300,000 council houses were built under the Conservative Government so, progressively, all Governments have been building fewer public sector houses. That is regrettable because the number of people on the list for that housing is, as the hon. Member for Ludlow suggested, growing at an alarming rate. The number of families who are homeless is officially 85,000, and according to Government figures the number of homeless people has risen alarmingly and now stands at 115,000. Unofficially, Shelter believes that the hidden homeless may push the figure of those who do not have a proper home of their own up to 400,000.

Those figures are shocking and the Government need to address them. How will they do so? The argument about who owns and who runs public sector housing is somewhat sterile. The important thing is that it is run properly and with reasonable rents. Will the Minister comment on the Government's progress in restructuring their proposals in this respect? It is important that housing is run so that it can be re-let quickly. I am glad to say that the old days of local authorities having vast banks of houses empty for months, if not years, are changing and improving. The audit requirements on local authorities have brought about some improvement in the management of council stock. Nevertheless, we can do better in re-letting our houses quickly.

What is the Minister doing to ensure that rent restructuring does not inhibit large-scale voluntary transfer? Housing specialists fear that keeping rent artificially low in the public sector makes it more difficult for LSVTs to get funding from the private sector. Indeed, the private sector has expressed considerable worries about existing funding of LSVT, which is based on a rental stream that now proves to be inadequate. That is a real problem. Does the Minister feel that artificially clawing back some of the money from LSVTs—for example, in Stroud—and redistributing it around the country is proving a disincentive for LSVTs? What does he think about the redistribution of housing revenue accounts? Could those two important subjects covered in the Local Government Bill be dealt with more transparently?

Mention has been made of the difference in management between registered social landlords and that that might be the reason why some registered social landlords are successful while others are not. The Government need to address that. For example, there is a stark contrast between the registered social landlord doing a superb job in Coventry and the failure of the Birmingham bid. The Birmingham bid failed because it was badly presented and too large; it covered about 75,000 houses, which is too big for one bid. The tenants were not being given a reasonable choice of landlord: they were being asked to swap one monolithic landlord for another.

The hon. Member for Stroud argued for more innovative methods of financing public sector housing. That is exactly what alternative vehicles such as LSVTs do. They release the discount inherent in the public sector housing stock. The LSVT enables registered social landlords to have much greater flexibility to borrow and to build new houses than councils have. Unless we change public expenditure rules, councils will not have that flexibility and the playing field will inevitably be skewed. The Conservative Government recognised that, which was why we invented alternative ownership vehicles for public sector housing.

The hon. Member for Stroud mentioned other public sector ownership vehicles, for example, ALMOs, which are growing in popularity. The Government are giving subsidies to them and perhaps the Minister will say something about that. There are other vehicles, such as private finance initiatives, and councils have the opportunity to lever in finance from the private sector through PFIs. Those are welcome initiatives because we all want to lever more resources into public sector housing from both the private and the public sector. By imaginative management of our housing stock, we can do all those things.

Much mention has been made this morning of the right to buy. The next Conservative Government will extend the right to buy to the registered landlord sector, but the critical difference is that we will insist that all resources are reinvested in building more houses. That is what ought to be happening in the council house sector, too. We should change the rules to insist that all moneys from right to buy are reinvested in building more social housing. That would go a long way to restoring the balance. I gather that at least one council has asked to be exempted from the Government's reduction in discounts for right to buy; perhaps the Minister will say whether that is so, and whether it is only one council or whether there are more, and whether any such councils will be granted exemption from the reduction in right to buy that the Deputy Prime Minister announced recently.

We have somehow to create more funds and we reckon that by extending the right to buy to the registered social landlord sector we can sell off up to a further 30,000 houses per year and build an additional 15,000 a year with the proceeds. When one considers that the number of social houses being built is only 20,000, it is clear that our policy would almost double the number at a stroke—and at no cost to the taxpayer. That seems a useful policy.

When one wants a house, it is not how many houses there are that matters, it is the availability. Most people are so pleased to be in a subsidised public house, because the rents are lower than the private sector, that the average tenancy varies between 10 and 20 years. In London, the average tenancy is 20 years. There are very few houses available in the public sector. If we build the extra numbers, availability will improve. It is all very well talking about those tenants that have subsidised public sector housing, but it is those who are not fortunate enough to have a house, those on a waiting list, who are among the most vulnerable in society, that we also need to consider. It is a shocking statistic that there is a record level of homelessness at the moment, and this and future Governments need to address that.

This has been an interesting debate. At times, it has revolved around a rather sterile argument about whether there should be council houses or not. Those who have subsidised housing in one form or another are not too worried about who owns it. They simply want it to be properly managed, so that when they have a complaint or a problem with their house, whether it is the responsibility of the registered social landlord or the council, the problem is dealt with properly. They want to live in a house that is well maintained, with rents at a reasonable level. As to all those who, in the 21st century, do not have houses, let us get on and build a few more for goodness' sake, particularly in the public sector, so that we can start to do something for those on waiting lists and can do something about the shocking matter of the record number of homeless people.

10.43 am

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

I fear that I will not have time to dwell on many of the issues raised and there were some very thoughtful and personal contributions. I happily congratulate the hon. Member for Colchester (Bob Russell) on securing the debate, but I deprecate totally the invective and absolute drivel that he came out with in most of the rest of his speech, which was not worthy of a serious issue that needs serious answers. How many answers did the hon. Gentleman give? Absolutely none, and I happily deprecate that. He certainly has rose-tinted glasses; everything was fine pre-Thatcher and everything went wrong as soon as she came to power. Again, that is absolute nonsense. If he had seen some of the scourges of the malfunctioning and dysfunctional private rented sector throughout the 1960s, he would not say that everything was fine prior to 1979.

The cruel fact is that since the war and certainly since the mid-1960s onwards, successive Governments have, through broad housing policy, let the nation down. My right hon. Friend the Deputy Prime Minister said that candidly and honestly and it is as true now as when he said it. The situation is not helped by minor third party invective that offers nothing.

The hon. Member for Colchester suggests that somehow stock transfer leads to deterioration in the condition of housing, but it achieves exactly the opposite. He rattled on and said nothing about something that many other colleagues happily dealt with—the state of the existing stock. If one believed the shallow invective of the hon. Gentleman, one would think that every council estate throughout the land is like the 1950s estate to which my hon. Friend the Member for Braintree (Mr. Hurst) referred. Would that they were.

I deal with housing regeneration and planning, for my sins, and I see the less than decent housing estates throughout the country, which are scars on the land. Not all that is the fault of the councils. I do not blame councils at all. To suggest that we have done nothing to redress the balance of that stock and nothing on homelessness is wrong. To suggest that the world of housing and investment has stood still for six years is wrong.

So, what were the hon. Gentleman's solutions? Solutions came there none, except this one: build more houses. Is not that radical? The hon. Gentleman offered nothing on the state of the current stock. By the way, there is nothing—not a jot—in the last Liberal Democrat shadow Budget about housing or how the resources would be provided for what the hon. Gentleman wants. I read such documents, however boring, in some detail. The hon. Gentleman offered nothing about the intricacies of and the interactions between the right to buy and new build that is only social sector; there was nothing about the availability of land, infrastructure or building skills capacity, nothing about how the one-club policy fits in with a national housing policy. Barely 20 per cent. of the entire stock in this country is in what might broadly be called the public or social sector; that must operate in the context of the other 80 per cent, but there was nothing on that. The hon. Gentleman suggested further that the private sector had nothing to offer.

I, like everyone else, know that the level of homelessness has increased. It has increased for various reasons, and I shall explain why. One of the first things that I did as a Minister was to take through a priority needs order on the back of the Homelessness Act 2002. That should have been secured earlier, but it was killed off by the Tories in the sweep up before the 2001 election. One of the first things that the Government did was get on the statute book a proper wide definition of what homelessness entailed and who the homeless were. We said candidly that that would mean significant rises in homelessness.

I am, in a sense, pleased that the figures went up; we can now identify whom the homeless are and do something about homelessness. Little brickbats saying homelessness has gone through the roof—it has in the official figures—are cheap political stunts. The resources are going in to deal with a real level of homelessness, rather than having to deal with an imaginary level, under which all kinds of people who should have been in that base of homelessness are eradicated by officialese. Their problems and those of their families do not go away, but if they are not recognised as homeless, some think they will somehow go away.

The hon. Gentleman says that the Labour Government have done nothing—on some other planet, not this one. In its first term this Government released £5.5 billion of capital receipts to local councils to start to redress the worst of the £19 billion backlog on social stock left by the Conservative Government. Some £12.1 billion of additional money has been spent on the social housing sector as a result of stock transfer. I agree with those hon. Members, including my hon. Friend the Member for Braintree, who made a thoughtful contribution, that it is a matter not of dogmatically asking who owns what but of creatively exploring new ideas.

What matters is that 760,000 dwellings will be brought up to a decent standard because of the transfer programme. If the next round is successful, 125,000 more will be brought up to scratch. That might not matter in the context of a silly little letter to the East Anglian Daily Times, but it does matter in the context of the proper development of a national housing policy for the country and the private sector. It matters that 360,000 dwellings will be brought up to a decent standard in the current round of the arm's-length management organisation programme, and 200,000 more will be once the new application round is implemented. Once decisions are made on the new round, nearly 1.5 million homes in the social sector will be brought up to a decent standard. According to the rose-tinted picture that some have painted, there are not 1.5 million homes of sub-decent standard in the social sector. Sadly, however, there are.

Both the processes that we are discussing, but particularly the ALMO programme, have led to far greater tenant empowerment, far greater tenant participation and far greater numbers of tenants determining their own futures, rather than having them determined by politicians. In that respect, it was a great pleasure to meet representatives of the National Federation of Arm's-length Management Organisations recently to discuss how we can push the envelope for that model further.

My hon. Friend the Member for Braintree mentioned in passing the suggestion of an interlocking housing policy for the whole housing sector. We have not been helped by the failure and dysfunction of the private rented sector, which was starkly evident in the 1960s and evident, too, in the 1980s and 1990s. That should be seen in the context of the right to buy—the one-club social model for moving from the social sector to home ownership—under which the social dwelling went with the tenant. That has proved entirely inappropriate and inefficient.

Let me give a stark illustration of the problem. Last year or the year before, 14,000 dwellings were built in London. About 3,000 were in the social sector, which is clearly not enough. However, in the same year, 11,000 were sold under the right to buy. The Reaganomics or voodoo economics behind the Tory proposals to extend the housing association will not work. It is a Conservative policy—with the emphasis on the "con".

If a registered social landlord has two houses in an area, at least half, if not all, the equity that is locked up in one of the houses will sustain the revenue stream that is used to pay the bank for both houses. If the landlord sells the houses, the bank will not say, "We know you sold them, but don't tell anyone, because the revenue stream and the debt repayments depend on it. Keep quiet, and we'll let you build another two houses."

The Tories are spending money three or four times over under a policy that was introduced as a gimmick for the right hon. Member for Haltemprice and Howden (David Davis). It allowed him to jump up at the Conservative party conference and say, "You might have sacked me as Tory party chairman, but I'm still alive." That worked in terms of the coverage that he got, but as a substantive housing policy it is as bankrupt as the empty policy of the—

I shall not, because I have too little time. If I have any time left at the end, however, I shall give way.

As I was saying, the Tory policy is as bankrupt as the empty policy of the hon. Member for Colchester, who made no suggestions as to what we might do.

I would love to go down the same road as my hon. Friend the Member for Braintree. As he so eloquently said—he happily admitted that this was not his phrase, although it still brought back happy memories—we cannot call back yesterday. I would love to do that, but we must think in substantive terms about how to deal with the real problems that exist now. I fully accept that they exist not only in London and the south-east, although those areas have particular problems. My hon. Friend is right that we must think of other models, and together with the Housing Corporation we have set up the low-cost home ownership task force under Brenda Dean to explore such models. We want to get to the stage where we can assist people and build on what we have done with the starter home initiative and other key worker initiatives. We want to assist people—key workers and others—into an affordability model for home ownership, without them taking the public or social sector unit with them.

I am keen to explore further the build-for-sale model that my hon. Friend the Member for Braintree described. My hon. Friend the Member for Stroud (Mr. Drew) made a thoughtful contribution. It would be inappropriate for me to talk in detail about the live large-scale voluntary transfer process that is unfolding in Stroud, but I do not fully share h s characterisation of many aspects of the LSVT process Although he pulled back from the comment a tad and I partly know what he meant by it, it was patronising and unbecoming of him to suggest—or even to imply—that 18 months was a long time for the lovely people in council houses to endure and engage with such a process. When tenants get engaged and empowered through this process or ALMOs, and finally get some notion of having control over the future of their homes and communities, it is an enlivening experience.

I assure my hon. Friend that the LSVT process is now fair and honest and I do not endorse what he says about Defend Council Housing: like the hon. Member for Colchester, it is,
"full of sound and fury,
Signifying nothing"
and offers no hope to council tenants.

May I put the record straight and declare my interest as a fellow of the Royal Institution of Chartered Surveyors?

One of the crucial aspects of LSVTs is the Government's rent restructuring policy. Would the Minister say something about that? Are we going to get rents in the public sector of retail price index plus a half or plus one? What will that figure be, and what will be the effect of it on transfers?

With the greatest respect, I will save any detailed comments on that. In three Minutes, I am not going to do a little ditty and seminar on rent restructuring and the implications of that for the LSVT programme. If the hon. Gentleman writes to me about that or secures a debate, I will happily respond.

My hon. Friend the Member for Stroud was starting to think outside the more traditional boxes and trying to contemplate matters for his constituents, for which I am grateful because that is what we need. We do not need a sterile debate. Some people say, "Build more," and offer nothing in terms of an integrated ho using or economic policy within which that policy can operate. It might be suggested that I was naïve to expect a more detailed exposition of Liberal Democrat policy—we have never had that on anything much in the past 20 years so why should we get it this morning? Knockabout, and sterile suggestions that go nowhere, are inappropriate for what is a serious issue.

This is where we return to the hon. Member for Cotswold (Mr. Clifton-Brown). As ever, he offers nothing apart from a voodoo economics right to buy extension. His party opposes the sustainable communities plan, which, with £22 million over three years, offers a significant difference in terms of step change. He opposes the right-to-buy changes, but every expert who is asked will say that, certainly in the London context, there are serious abuses of the right to buy and it has a seriously dysfunctional impact on the market.

I thought that I answered the hon. Gentleman's question about three months ago, but never mind. Two local authorities—Christchurch and Spelthorne—asked to be reviewed and excluded from the list and they were subsequently excluded because they had a case that stood up. A further 14 wanted to come in rather than leave, and they are being reviewed.

The hon. Gentleman opposed Labour's Budget and wants to extend our right to buy, which will not achieve anything and cut public expenditure. Just when, through the plan, we are trying to offer a way out—not least in Colchester and other areas of London and the south-east—we get facile and fatuous responses to the communities plan from the hon. Gentleman and his party, who run around like nimbys offering no alternative, and saying, "All we want to do is concrete over the south-east." What a wonderfully intellectual, substantive contribution to the housing debate that this county sorely needs that is. In truth, it offers absolutely nothing. The hon. Member for Wycombe (Mr. Goodman) even suggested yesterday that we were concreting over the south-east as part of a conspiracy to get conditions right to enter the euro.

There we are—the hon. Gentleman says it himself, thereby showing clearly through his strangulated sedentary comments that he has as much to offer as the hon. Member for Colchester.

Order. Time is up. Hon. Members who do not wish to stay for the next debate should leave quickly and quietly please.

Employers Liability Insurance

11 am

Over the past six months I have become increasingly aware of the current insurance crisis that is affecting small and medium-sized businesses and consumers in my constituency. The businesses that are most directly affected are those that operate in the construction industry—in particular, specialist contractors of the type that consumers and other small businesses use regularly, such as roofing contractors, who mend, repair and replace our roofs, window fitters, scaffolders and painters and decorators.

Back in June 2002, business men in my constituency brought to my attention the fact that their insurance premiums were increasing substantially, and to such an extent that on a number of occasions the businesses concerned wondered whether they could continue to trade. At the time, the National Specialist Contractors Council undertook a survey of contractors from its 25 specialist trade associations to identify the extent and impact of the increase in premiums. The results were astounding. More than 600 contractors who belonged to NSCC trade associations responded to the survey. They were mainly from the high-risk trades, such as roofing, steeplejacking and scaffolding. In the case of roofers, 48.8 per cent. of the members of the National Federation of Roofing Contractors responded, demonstrating that not just a problem but a crisis was looming.

In my constituency, S. J. Wilson (Roofing Contractors), a domestic contractor, paid an insurance premium of £3,800 in 2001. In 2002, that rose to £15,000, and this year, S. J. Wilson was quoted £78,000, plus 5 per cent. insurance premium tax. After spending two weeks negotiating, the company managed to reduce the premium to £40,000. That meant that the premium had increased by almost 1,250 per cent., which was a cost that could not have been foreseen and therefore anticipated, and which could not be incorporated within the cost or price of any jobs already committed to. Another company in my constituency is a one-man band that turns over £50,000 a year. This year that man is paying £7,000 for his insurance cover, so his insurance premium is 14 per cent. of his turnover.

In the short term, the effect on such companies can be quite dramatic. Insurers are informing such contractors that in order to reduce their premium they must reduce their payroll. That ultimately means laying off skilled workers, which is something that no MP wishes to see in their constituency and which is surely not a good solution to problems of improving the efficiency of a local business or, in the case of the domestic sector, continuing to offer a good service to the general public.

Also in my constituency is L & M Roofing Company. Not only has the company's premium been increased by £10,000, but the policy now includes exclusions that restrict it from doing certain types of activity. For instance, roofing contractors have been required to carry out their work without using a naked flame. Such a restriction is impossible for many flat roofing contractors and mastic asphalters and therefore not a practical solution at all.

During the early stages of the crisis, those suffering were mainly small businesses of the type that I have mentioned, but it is now the turn of consumers to realise what the effects of the increase in premiums are. Initially, the consumer who required a roof to be retiled, a garage to be re-waterproofed, the external face of their house to be painted or new windows to be fitted found that reputable contractors had to increase costs to account for the rise in insurance premiums. That in turn has increased the likelihood that the consumer will turn to the black economy.

However, we all know the problems of using contractors who operate in the black economy. Not only do they have the advantage of evading VAT, but they now operate without insurance, or with inappropriate insurance, which reduces their premiums and therefore their costs. That leaves the consumer or householder in a vulnerable position. By using an uninsured or inappropriately insured contractor, the householder himself may become liable in the event of an accident, which could result in a personal disaster. I worry that that fact is not sufficiently well known among the general public.

The workmanship carried out by contractors who operate in the black economy is notoriously of a poorer standard and quality than that carried out by a reputable contractor. Unfortunately, with the insurance crisis encouraging or even forcing people in my constituency to use contractors that they would not otherwise use, their homes—the most important material assets of all families—are now more at risk.

On learning of the situation, I was most disappointed to find that insurers often do not differentiate between good and bad contractors. A good contractor who looks after his employees, runs an efficient business, implements good health and safety practices and does his best to trade as an honest and reputable business finds that his efforts are not recognised. Often, insurers reward the good contractor by offering a similar premium to the contractor who cares little for his work force and his clients, has no interest in health and safety and makes no attempt to run a sound business.

What can be done about this crisis now? In the past few days, the Department for Work and Pensions has published the main Government review of employers liability insurance, described on page 4 as an interim report. It sets out key findings and the steps that the Government are planning to take. Likewise, the Office of Fair Trading has published its parallel review of the UK's liability insurance market.

The Department for Work and Pensions review has a ministerial foreword, signed by Ministers from the Lord Chancellor's Department, the Treasury, the Department for Work and Pensions and the Department of Trade and Industry. It is a declaration for swift progress in developing a programme for tackling the long-term issues identified in the review. A further report is promised in the autumn to show progress and any further steps that the Government intend to take.

We can all appreciate the reasons for the Government's cautious approach to the crisis and the need for not aggravating an already serious situation through ill-thought-out changes to legislation and attempts to alter the market's operations. However, some of the options for change mentioned in the Department for Work and Pensions review can be progressed quickly; they include, for example, the Government's undertaking to reform enforcement arrangements on contractors to hold employers liability insurance.

Present reliance on the Health and Safety Executive's inspectors whenever they visit a site to check that all contractors and subcontractors on that site hold valid employers liability insurance cover is clearly inadequate. The proposal made in the Department for Work and Pensions review for an active enforcement system based on an annual notification of policies cross-checked against an enforcement database may only work for contractors already trading legally.

It is that percentage operating in the black economy, which is so hard to quantify and affects the domestic market, that worries me. Can we use some simple system of recognition to inform domestic users whom they are dealing with when they call for reliable help when repairing or renovating their homes? I suggest to the Minister that this issue and the holding of employers liability insurance by all contractors, whatever their size, go hand in hand.

I gladly note the recognition in the Department for Work and Pensions review that the most suitable way to tackle employers liability costs is to reduce the number of workplace accidents and injuries and to link that to the forthcoming strategic plan of the Health and Safety Commission. I also note the support given by the Association of British Insurers in its press release of 3 June for businesses to be given credit for good health and safety practice leading to affordable premiums.

I trust that the Minister will confirm today the Government's support for the ABI's declared policy, because the issue of lower premiums in return for sound health, safety and risk management is something that can be achieved now, given sufficient determination by insurers and insured alike to address the issue.

There are two issues in the Department for Work and Pensions review that seem to be either inadequately covered or plainly misleading and on which I ask the Minister to comment. The first concerns the point that, until 1999, employers liability insurance premiums were low. That is factually true. However, it was also the preferred policy of insurers to secure from businesses other forms of insurance business and to invest the proceedings in the stock market to cover against losses. That policy was a disaster in the making and was in no way the fault or responsibility of the insured.

The second point concerns the advice given on page 11 of the Department for Work and Pensions review:
"Businesses…should be more ready and more prepared to shop around for the most effective broker and the best insurer."
That comment is laughable in the opinion of many reputable contractors within the trade associations of the National Specialist Contractors Council. How could they be expected to take such action while service standards on the part of the insurers have been less than satisfactory? I refer to numerous reports by businesses of short renewal periods given by insurers for employers liability insurance policies. Shopping around was neither possible nor practical in such circumstances.

I therefore trust that due attention will be given in the long term by the Department for Work and Pensions and the OFT to my first point about the market's future operation and that the Government and the ABI will follow through to quickly establish minimum standards of service to provide proper notice of renewal terms—a point acknowledged in the ABI's press release of 3 June.

Furthermore, I ask the Minister to examine insurance premium tax. I am not asking for insurance premium tax to be abolished but the Chancellor has had a windfall through the rise in insurance premiums. If the Minister looks at the figures from the National Federation of Roofing Contractors, he will see that the insurance premium tax on £7 million of premiums is £350,000. That has increased now to £1 million for the members of the NFRC alone.

Contractors ask that the windfall be used effectively to help those small businesses, whose insurance premiums have risen. They suggest that, if it were invested in a fund to compensate those who suffer work-related diseases, and invested wisely, that would bring some stability to the insurance market, which would not be required to anticipate work-related diseases and ill health 10, 20 and 30 years ahead. I ask that my point is related to the Ministers' undertaking in the foreword to the Department for Work and Pensions review to further evaluate the evidence for separating long-term occupational disease risks from accident risks.

I and many other hon. Members are aware of the work of the Department of Trade and Industry and the appointment of Mr. Paul Haywood by the Minister of State for Energy and Construction to help contractors in liaison matters and negotiation with the insurance industry. Furthermore, it is pleasing to note the work of the National Specialist Contractors Council, the National Federation of Roofing Contractors, the Flat Roofing Alliance, the Mastic Asphalt Council and the National Access and Scaffolding Confederation to provide more insurance capacity through new insurance schemes.

In conclusion, can the Minister assure the House that speedy progress will be made on matters pertaining to enforcement, lower premiums for good health and safety practice, and improved service standards on the part of the insurance industry? I accept that long-term issues require a more cautious and thorough approach, but I ask that such issues receive continued, coordinated attention from all Departments involved, working with relevant agencies outside the Government. I welcome the further report that has been promised by the Minister in the autumn and I look forward to his reply today.

11.13 am

I congratulate the hon. Member for Broxbourne (Mrs. Roe) on securing this debate on such an important issue. It gives me a chance to explain to hon. Members the current situation in respect of employers liability insurance and to set out the steps that the Government are taking in partnership with employers, insurers and other stakeholders to improve the outlook for everyone.

I can give the hon. Lady the assurances that she sought in the last part of her remarks, but I need first to set out in detail how the Government intend to resolve the problems. The aim of the employers liability insurance system is to ensure that workers who are injured through the fault of their employer can obtain suitable redress. We are fully committed to the principle, which is not a party matter; previous Governments have been committed too. It is right for employers to be held to account for any harm that they do. Equally, we are committed to ensuring that the system is fair for employers, and that includes doing what we can to keep costs down.

Many companies are concerned about recent rises in insurance prices, from motor insurance to property insurance. The reasons for this general increase are complex. Insurance markets are typically cyclical: the last peak was in about 1993, and the bottom of the cycle seems to have been in 1999 or 2000. Since then, prices have risen. The rise might have been exacerbated by the effects on global reinsurance markets of 11 September 2001. The price of reinsurance rose and so, therefore, did that of insurance. Certainly, it seems to have been rapid. Concerns about increases in the price of liability insurance, and particularly employers liability insurance, must be seen against that background.

The Office of Fair Trading attributes cost increases in liability insurance to factors including
"An expansion of liability, 'loss shocks' such as those arising from the World Trade Centre, increases in legal costs and damages awards for personal injury, and reductions in the investment returns insurers set against underwriting losses."
However, changes to costs have not been the only source of increases. The OFT also says:
"While changes to costs clearly have had an upward impact on premiums, they cannot alone account for the large increases experienced over the last year. Changes in the competitive environment such as major insolvencies and a reduction in capacity—leading to short-term upward pressure on premiums—appear to be contributory factors."
In response to the specific concerns about employers liability insurance, the Government committed themselves in the pre-Budget report last November to review the employers liability insurance system and to report on options for change. We also discussed the issues with the OFT, which undertook a fact-finding study into the liability insurance market, including employers liability insurance. Both those studies have now reported; the OFT review's conclusions were published on 3 June, as was the Government's first stage report. The OFT study did not find evidence of a misfunctioning market or a widespread lack of availability of liability insurance cover, but it concluded that the price of employers liability insurance increased by some 50 per cent. in 2002, following a six-year period during which liability insurance premiums fell in real terms by about 14 per cent.

I welcome the fact that the OFT will continue to monitor developments in the market and its announcement that it intends to revisit the issues next year. I also share its concern about the costs associated with resolving liability insurance claims, of which legal costs are a large part. The OFT is considering whether to investigate that further. I would welcome that, alongside our work to reduce costs and improve outcomes for all parties.

The Government's report on employers liability insurance reaches similar conclusions to that of the OFT. The market seems to be operating and cover is almost universally available. We found a handful of examples in which it was not available, and the Federation of Small Businesses was particularly helpful in that respect. However, there does not appear to be any basis for reports that there is a widespread inability to obtain cover. Similarly, there have been suggestions that large numbers of firms were trading illegally, without employers liability insurance. On the basis of the evidence that we have, it seems that compliance levels remain high.

Our review lays out an agenda for action to provide both short and long-term help to businesses. That was widely lauded by the CBI, the TUC and others. Our report, the first of a two-stage process, examines the factors driving recent premium increases and considers the case for potential reforms to the employers liability insurance system. The Government are committed to improving the outlook in difficult market conditions. The standards of the insurance industry will be put firmly under the spotlight as we go forward to ensure the fairest deal for all concerned.

The programme of action that we announced on 3 June will work on two fronts by aiming to make the market work better and improving the overall system. In the short term, we support current initiatives in the market while working towards a fairer system by developing a basis for more risk-related premiums. We will move swiftly with business, the insurance industry and employee representatives to develop a programme to address issues raised in our report. Matters of legal costs, rehabilitation, long-term occupational disease risks and enforcement action lie at the heart of our agenda. In the autumn, we will report on progress made and on any further steps that we intend to take.

In the short term, the Government will scrutinise the market to seek raised service standards, including minimum notice periods for policy renewals so that businesses can shop around for employers' liability cover—an important point that the hon. Lady raised. We will work with the insurance industry towards fairer risk-related premiums to reward companies with a strong health and safety record—in particular, small and medium-sized businesses—and we will reform enforcement to ensure that cowboy companies dodging insurance cover cannot gain advantage over law-abiding businesses. We will also develop with insurers self-assessment packages to enable firms to provide insurers with better information on how they manage health and safety risks.

In the longer term, the Government will focus on legal costs, maximising the benefit of existing initiatives and considering faster and more cost-effective dispute resolution arrangements. We will make rehabilitation play a more central role in the UK compensation system and engage with business, insurers and other stakeholders to further evaluate the evidence for separating long-term occupational disease risks from accident risks. More evidence would be needed to assess whether a radical separation is justified, but that is nevertheless under active consideration.

Some insurers have excellent service standards, releasing renewal terms at least 30 days before the date of renewal. However, many businesses have reported much shorter notice periods, leaving them little time to shop around for a better deal or find a specialist broker to help them do it. We are keen to ensure that businesses receive renewal terms early enough to enable them to explore alternative sources of cover if they are unhappy with the quote. We will therefore be working with the insurance industry to review renewals performance and encourage improved standards. The ABI is an important player in that game.

There are other improvements to be made to the existing system. For example, one major concern for businesses is that premiums do not reflect how good their health and safety practices are. That situation can be resolved only if insurers are prepared to reduce premiums on the basis of good evidence of health and safety, and if employers can and do provide that information. Initiatives to improve the process are under way, including trade associations working with insurers to negotiate favourable rates for members, based on their collective health and safety record; and the development of health and safety assessment packages for businesses that enable them to give better information to insurers leading to lower premiums. We will assist in supporting and further development of those initiatives. In particular, we will work to join up the risk assessments of the Health and Safety Executive and insurers to help provide a common basis for advice to business.

The majority of businesses are responsible employers and ensure that their workers are protected from accidents and from the consequences of accidents, but there are still some firms that are not. To tackle the unfairness of competition from such cowboy firms, we will be reforming the arrangements for enforcement of employers liability insurance. Many people are concerned about the impact of legal costs on the price of employers liability insurance. An estimate prepared for the insurance industry put the increase in claimants' costs—legal fees and medical assessment of injuries—at approximately 50 per cent. over three years.

We are currently doing some work on the costs of smaller employers liability insurance claims of less than£15,000 in value, because they typically involve a higher percentage of legal costs. We are considering other options that could reduce costs. An existing scheme that structures costs for low-value motor accident claims might also be appropriate for employers liability insurance, for example. We would like to see whether alternative dispute resolution processes could lead to quicker, better resolution of cases.

I apologise for arriving late. Have the Government given any consideration to the radical change of replacing our litigious environment with an arbitration system? That has been tried successfully in other countries. The Government could add to that some kind of limited liability, underwritten by them.

Yes, we are considering that, and we are aware of the examples of other countries that we might follow.

On rehabilitation, it is right that workers harmed through the negligence of their employers should have a right of redress. However, the current system views that issue largely in terms of financial compensation, rather than concentrating on trying to help the injured person return to health and, we hope, to work. Rehabilitation needs to play a more central role in the employers liability insurance system in order to improve the outcomes for injured employees and employers alike. That is a long-term goal, but we are determined to make real progress towards it.

The hon. Lady mentioned insurance premium tax. We are not convinced of the case for cutting IPT. At 5 per cent., the UK's basic rate of IPT is one of the lowest in Europe, and businesses can offset IPT costs against taxable profits, reducing their corporation tax. As IPT has only a marginal effect on insurance costs for UK businesses, reducing it would not prevent the difficulties that some firms face if their insurance premiums rise. Furthermore, such a change would add administrative costs to insurers. We are not convinced of that argument, although she will have realised that other Departments have a say in the matter, too.

The recent significant increases in the price of employers liability insurance have been a problem for many firms, which is why the hon. Lady is right to raise the issue. There are things that businesses can do for themselves; early communication with insurance brokers can help to establish the information that is needed to make a strong case for lower premiums and in obtaining information about the likely size of any increases. Contacting a good, specialist broker through the British Insurance Brokers Association can help, and trade associations may have specialist schemes or advice for businesses.

I have tried to outline the steps that we are planning to take to improve the function of the market for employers liability insurance and to improve the outcomes of the system, but we will also continue to monitor closely developments in the market and we will consider any new information that becomes available. We will report in the autumn on the progress that has been made and any further steps that we intend to take. However, we cannot do that alone. Insurers will be key to improving the operation of the employers liability insurance system. It is the insurers that set prices and set standards for customer service, and it is their standards that are undoubtedly under the spotlight now. There is pressure on insurers to do their bit to resolve and tackle the problems.

Similarly, business bodies and trade unions have a lot to offer in developing workable proposals for rehabilitation, and in developing with insurers ways for firms to provide better and more pertinent information about their risk-management practices. Ongoing work by the Health and Safety Commission and Health and Safety Executive to cut the number of injuries at work will play a part, as will further work on the insurance market by the Office of Fair Trading and the Financial Services Authority. There are no quick and easy solutions to the problem, as I know the hon. Lady recognises, but we are committed to playing our part in helping businesses to resolve the problems, which have undoubtedly become an obstacle to business competitiveness in the past year or so.

11.30 am

Sitting suspended until Two o'clock.

London Olympic Bid

2 pm

Mr. McWilliam, I am delighted to be able to discuss the London Olympic bid.

Order. Personally, I do not mind references to Mr. McWilliam, but in this Chair, I am Mr. Deputy Speaker.

My apologies, Mr. Deputy Speaker. I am delighted to have the opportunity to discuss the London Olympic bid in the context of what it means not only for regional policy, but for national economic policy. There is an assumption that being successful in the bid for the Olympics is both good for the country and good for the regions. That is a sister assumption to the expression that is often used that what is good for London is good for the country. As I develop my speech, I hope to show that while sometimes that is true, it is not necessarily always so.

We live in a country with huge regional disparities. I shall not rehearse all the statistics that show them, but the gross domestic product per head in London and the south-east is between 50 and 80 per cent. higher than elsewhere in the country. London and the south-east is the richest region in Europe, and every other region in England is below the European average. That is not a happy state of affairs. Life expectancy is longer in London and the south-east. Mortality and morbidity rates are higher in the regions than they are in London and the south-east. That is not something that has happened in the past two or three years. It has been a problem for a century or more.

In the north-east, the north-west and Yorkshire and Humberside, levels of unemployment have been running for a considerable period at twice the level that they are in London and the south-east. I do not believe that that is unrelated to some of the figures on public expenditure, or to the fact that 80 per cent. of public expenditure on transport is spent in the south-east of England.

I refer to a startling statistic; the overspend—not the cost—on the Jubilee line was more than the total expenditure on transport elsewhere in the country. Trying to disaggregate the figures for public expenditure is a difficult task. It is not straightforward, because that is not how the Treasury keeps the books. However, on average, a third more is spent on public services in London and the south-east than in the regions.

That is bad enough, but if we take the latest statistics—I am assured by the Library that they are to be found in the White Paper, "Your Region, Your Choice"—it is clear that the gap is not getting narrower, but growing, on all those figures. That is leading to an unhealthy vicious circle, whereby there is larger and faster growth in the south-east and higher unemployment in the regions, so there is migration into the south-east, which is leading to problems such as houses being built on greenfield sites where people do not want them. That is leading to a crisis in, and—in some cases—a collapse of public services.

Will the hon. Gentleman acknowledge that the higher public spending of which he speaks does not necessarily translate into better quality public services in London and the south-east" Certainly, my constituents, and those of many of my hon. Friends with constituencies in the south-east, would argue that the services delivered there are inferior to those in many other parts of the country, where costs are lower.

I would accept that there is no simple and straightforward equation. What the hon. Gentleman says is right in some respects, but in some cases there are better services as a result of the higher levels of expenditure in the south-east. We are getting into a vicious circle; because of the increase in expenditure in the south-east, pressure is growing on those public services on which more money is spent, and as a result even more is spent on them. They get not better, but worse. I partly, but not completely, accept the hon. Gentleman's point.

Of course, overall, the issue is not simple, and I am not saying that if we evened out the public spending we would even out the regional disparities. There is no getting away from where London is, physically. It is closer to the major markets of Europe and has the City of London—one of the greatest generators of wealth in Europe, if not the world—at its centre. It has a marvellous heritage and is one of two, three or four great world cities depending on how we define that. Even if we evened out the spending issues, London would do well.

Government policy should be directed at ameliorating, not exacerbating, the problem of regional disparities. In the White Paper, "Your Region, Your Choice", there are some fascinating tables. Many of us who live and represent constituencies outside London believe that there are too many civil servants working in London and the south-east who could easily be relocated in the regions. The White Paper shows that although in the first couple of years of the Labour Government the number of public servants dropped in all regions, including London and the south-east, in the last year for which figures are quoted, there were more civil servants in London and the south-east than there were in 1997, and fewer in the regions. That is fascinating.

It is extraordinary that numbers of civil servants are increasing at a faster rate in London than elsewhere in the country. I do not necessarily think that lower-paid public servants and their jobs should be moved out of London, but we would probably have different policies if some members of the First Division and some policymakers saw what life was like for those living in Newcastle, Manchester, Leeds, Liverpool and other parts of the regions. Government policy should be focused on trying to deal with that unfairness.

I have listened to the hon. Gentleman's remarks on the civil service and the possibility of it moving some of its jobs out of London and the south-east. Does he not think that devolution to the English regional assemblies will have that effect? I have sometimes heard him speak against that sort of model. Would he be in favour of that, or does he want to move the civil service out in other ways?

The hon. Gentleman will have me shooting into his open goal. It was interesting that the first impact of setting up the regional development agencies—two of the regions were not getting assistance—was to redistribute money to London and the south-east, because no extra money was put in. If I genuinely believed that regional assemblies could reverse some of the effects that I am concerned about, I would agree with the hon. Gentleman and his party. The evidence is that they could not, and that that argument camouflages the problems that we are talking about.

I want to use the London Olympic bid, and how it was arrived at, to examine how major national projects have ended up not doing very well because of the way in which decisions were taken. Let us consider Picketts Lock. Some of us in this Room, and my hon. Friend the Member for Islington, North (Jeremy Corbyn), had meetings with my right hon. Friend the Secretary of State for Culture, Media and Sport, and there is no doubt that if the Government had not been obsessed with having a stadium in an unsuitable place, we could have held the world athletics championships in a slightly larger stadium than that in which we held the Commonwealth games. Manchester City would have had a slightly larger stadium—I am not sure that I approve of that, as I am not a Manchester City supporter. For some reason, however, officials and members of the Government insisted on taking that decision.

I do not know whether there are Members present who represent Birmingham constituencies, but there is no doubt that Birmingham's bid for the dome was sound and would probably have led to a better and more accessible project for most people in the country than the one in Greenwich on the other side of the river. As a country, we were saddled with a project, the contents of which nobody was clear about, in a difficult-to-reach part of London. That resulted in overspend on the Jubilee line, which was greater than transport expenditure elsewhere.

We could have a debate on the national stadium. Manchester was cheated out of it when the Football Association turned from judge to competitor; Birmingham, too, was fiddled out of it. We now have a project that has trebled in cost and has not yet delivered. I could continue listing large projects, the decision-making processes for which seem to demand holding things in London, which exacerbates the problems of the region.

Today's debate is about the bid to host the Olympic games in 2012. It is an excellent example of my thesis because it reveals a flawed process that has led to a flawed bid. There will be repercussions for us all. Let us think what process should have taken place in a rational world. We are engaged in the toughest international competition in the world: hosting the Olympic games. Many cities want to do it, and it is as tough a competition as one gets. It is not always clean, and some cities might bribe and cheat.

A rational process that examined the benefits for the economy and the region would have questioned why we wanted the Olympics. Is it because we want a great festival of sporting activity? If it is, bidding for the Olympics is an extraordinarily expensive way of going about it. It amount to billions of pounds worth of expenditure and resources. More money could be put into sport by not holding the Olympics. That debate should have been heard, but it was not.

If the real reason for bidding was regeneration, a serious case needs to be made for that, because there are some sad stories of relatively good Olympic and other multi-sport games that have not brought the regeneration that was expected. Sydney has a stadium that is not used; the investment and regeneration that was expected to follow did not happen. Kuala Lumpur, which hosted the Commonwealth games in 1998, has a host of empty facilities. Atlanta got little regeneration benefit; it has failed to provide basic facilities. There are two multi-sport events that led to real regeneration. First, the Barcelona games in 1992 turned the city around, opened up the sea front, regenerated the area, improved transport and brought genuine benefits to the people of Barcelona. Secondly, the Manchester Commonwealth games was integrated into a process, with an after-use for both the sporting facilities and everything else. Thus it has started to regenerate east Manchester.

I congratulate my hon. Friend on his good fortune in securing the debate. Will he acknowledge that the newly emerging entente cordiale between Manchester and Liverpool, which started with the Commonwealth games, and which has appeared more recently with the capital of culture bid, for which Liverpool was successful, does not mean that our position on the Olympic bid is anti-London and the south-east? Will he also accept that he has made a cogent, closely argued case for the appropriateness of the site, or the location, rather than making a point that is anti-London and the south-east? It is simply a matter of where is the most appropriate place and where the most benefits could be located.

I would be delighted to support an Olympic bid from any city in this country that was capable of hosting it, whether that was London, Liverpool, Leeds, Birmingham or Glasgow, that had gone through a proper, fair process of evaluation and competition. I was pleased to support Liverpool's bid for city of culture. People laughed when I said that, but it was true. Of course, Manchester was not bidding. Although I represent a Manchester constituency, I was delighted to support that bid, as I would support other cities. Sometimes cities compete, but if they are not competing, it is sensible if they co-operate. That is what happened between Manchester and Liverpool.

The hon. Gentleman has argued that bidding for the Olympics is not an efficient way of spending money to generate improvements in the quality of British sport, or even to generate improvements in regeneration activity. Why did his early-day motion 134 call on the Government not to support the bid until a competition between all cities in the UK had been held? That suggests that the hon. Gentleman's position is based a little bit on the fact that the bid is coming from London, rather than Manchester. Can he allay that concern?

I am sorry if I am not being clear enough. I am saying that a competitive process would enable the country to determine the reasons for the bid. If they were for sport, a cost could be put against that; if they were for regeneration, one could work through whether or not the arguments for that were sound. I shall come to that later. Perhaps the hon. Gentleman will bear with me.

I have mentioned two cases in which real regeneration has happened after major multi-sport events. However, in a larger number of cases, local people have been disappointed, because regeneration has not taken place and they have been saddled with a large bill. Getting such things right is complex and difficult, otherwise more cities would have done it. A competition should have determined the relevant issues; an evaluation would then have taken place.

What actually happened was different. In 1995, about 18 months after Manchester failed to win the bid to host the 2000 games, the British Olympic Association said that in future it would only support London. That is the association's own business. However, about seven years later it came to the Government and said, "That is our position: it is based on a survey of members of the International Olympic Committee that we took at the end of 1994. Will you support us?" Eventually, the war in Iraq intervened. After a Select Committee report, the Government said yes. That is a flawed process, because we have not been able to examine the issues in an open competition, and that has consequences.

I remind hon. Members that London tried and failed twice to be the Great Britain and Northern Ireland nominee to host the Olympic games—once against Birmingham, the other time against Manchester. It tried to be the host city for the Commonwealth games in the Queen's jubilee year of 2002, and it failed against Manchester. It is not a virgin in such competitions—it has tried and failed.

That reminds me of the Arsene Wenger philosophy of life: it does not matter what the results are on the park because we are still the best team. That is the approach that the Government and the British Olympic Association have taken to the bid: it is rather like if an organisation—a development corporation or a housing association—had said, "We want to build these houses, and we have got a mate who is a builder who will build them all, so we will not bother with a tendering process." What would the Government have said about that? That organisation would have been in administration or taken control of very quickly if it were a public body, and if it were a private body, the shareholders would swiftly have had something to say about that.

Does my hon. Friend not think that the process that he outlined earlier of the concentration of many civil servants and national authorities in London is itself part of that vicious spiral that leads to a failure to assess the potential of other cities—in the midlands, the north or anywhere else in the country—for major projects because of lack of knowledge of what those areas have to offer?

My hon. Friend is right: there are civil servants who came to Manchester during the Commonwealth games to see the facilities that were provided whose jaws are still dropped. They often said, "We did not realise anything like this was happening", which was slightly surprising, as their responsibilities covered sport.

It is wrong not to have a competitive process. Nobody—no member of the IOC or journalist—has ever been able to predict what members of the IOC will do when it comes to vote, because they lie—obscure is the politer term. They do not tell the truth about which way they are going to vote. It is part of their business not to tell people what they are going to do, so the outcome is nearly always a surprise. Nobody predicted that the 1998 winter Olympics would be in Nagano: everybody assumed that it would be in Salt Lake City. Everybody was wrong, including members of the IOC.

Something else has not been taken into account that is revealed in the Select Committee report. Craig Reedie, IOC member and chair of the BOA, told the Select Committee that the current policy of the IOC is to go for smaller cities rather than large cities. About half the cities chosen over the past 50 or 60 years are capital cities. However, it is now the IOC's policy to go for smaller cities, I assume that is why Germany has chosen Leipzig over Berlin. All these factors could have been taken into account.

If our Olympic bid is successful, South Dorset is lined up to host the sailing events in Portland harbour, and that is regardless of whether the bid comes from London, Manchester or anywhere else. I try to approach this matter objectively, because we have the best sailing waters in the country.

Given that the decision has been made to go for London, and given how difficult it is to persuade the International Olympic Committee to back a bid, should we not take the opportunity, after letting off steam, to unify behind the bid' We should try to make the most of it for the regions, through training camps, staging football events and by making the most of the chance that it gives us, as a unified Parliament and a unified country, rather than trying to knock it down—a rather British disease—as a result of which none of us gets anything.

Mr. Stringer rose—

I hope that my hon. Friend will follow my arguments in the last 10 minutes or so of my speech. I suspect that the bid will not be successful because of the way it was put together. Had there been a competition, London would not necessarily have beaten Manchester or Birmingham—they and other cities have enormous strengths, which should have been tested—but it would have brought Londoners together.

As a close participant, my view of the bids for the 1996 Olympic games was that the best bid by far was Toronto's. Toronto lost because of a local campaign called Bread not Circuses—a good slogan. The organisation wrote to every IOC member saying, "Don't come here." The fact that London did not compete meant that the bid did not involve the whole community. From the appendices of the Select Committee report, one can see incipient bread-not-circuses groups. The environmental forum was one such group. Without competing, we do not get that support.

My hon. Friend noted that the regions are alienated. It is difficult enough representing seats in the regions, with all their problems and successes, without a process being unfair. However, I was in Newcastle last week talking to business people, local government leaders and academics, and I sensed their anger at the way in which national decisions are taken on major public spending projects.

Would my hon. Friend agree not only that the process causes alienation, but that it will cost regions such as the north-east money? I refer to a question that I asked my right hon. Friend the Secretary of State for Culture, Media and Sport about predictions that an initial 4 per cent. of lottery funding, possibly rising to 11 per cent., will be diverted to the Olympic bid. That is bound to have a direct effect on regions such as the north-east and northwest, as they will not be able to get lottery funding for sporting activities.

My hon. Friend makes precisely the same point. The bid has split support within the sports world and within London. I was about to say that funds will be diverted not only from other regional lottery projects but from grass-root sport. 'The problem applies mainly to athletics, but it also affects other sports; it is the lack of support for athletes between their leaving school at the ages of 16, 17 or 18 and becoming elite athletes, and doing well in international competition.

The way in which the decision was taken means that such people are less likely to get support. It is a bit like the London community: splitting the regions splits the sporting community. It is not a good way to bid; it is not the way to be successful. It should be about uniting people. It is therefore unlikely that we will win. Even if we lose, however, as we lost the World cup bid, we can still do well both for our country and our city—and for our sports.

I understand that the bidding process will not help the regions, but we should consider the benefits had London been successful. One of the weakest comments in the Ove Arup report—at least in those parts that we were allowed to see; I understand that it was doctored because officials realised how silly it was—was that London's image would be improved by hosting the Olympics. London is a great world city. Wherever in the world one goes, people know what London has to offer. London is the one place in the United Kingdom that does not need to have its image improved.

We are likely to end up—this will annoy everybody and therefore unite the country—having had an odd competition for a national stadium that resulted in something that was not to the original specification, with two stadiums, one of them in east London, where it will be difficult to find a use for it. West Ham has been mentioned, although I understand that it has not been approached. London will have two stadiums, although the rest of the country will think that it should not have had one.

It is said that benefits will come from tourism. Those who say that tourism will increase during the Olympic games have only to study what happened in Los Angeles. The easiest time in the past 20 years to get a hotel bed in Los Angeles, other than after an earthquake, was during the 1984 Olympics. During any Olympic games, nobody who is not on Olympic business goes near them. One does not take the children to Disneyworld if one expects to get caught up in Olympic traffic. The chances are that tourism to both London and the regions, London being the gateway to the regions, will drop during the Olympics. The hon. Member for Runnymede and Weybridge (Mr. Hammond) is smiling. I ask him to consider whether the evidence of what happened nearly 20 years ago in Los Angeles bears out what I have said.

I was smiling because I wondered whether the hon. Gentleman was going to suggest a Government initiative to encourage Londoners to go out during the Olympic games and sample the delights of Manchester and other parts of the English regions.

The hon. Gentleman makes a good point, although I am not sure whether he intended to. They are always welcome.

The hon. Gentleman might like to examine the situation and example of Australia. During the last Olympic games there were great complaints from the rest of the states that Sydney got all the business and there was no tourist traffic outwith the metropolis.

I know less about Sydney, because I did not go there, but the hon. Gentleman makes a very good point. Because much of the Ove Arup report has remained secret, it is difficult to work out whether this is a regeneration project. I have heard estimates—it does not matter if we divide them by 10, they are such extraordinary figures—that the cost per job created is 6 million. I am not making that figure up; there are people involved in the Olympic decision who say that a small number of permanent jobs will be created. If we divide them into the billions of pounds that will be spent, that is what each job created will cost.

I am not sure which hon. Member represents the lower Lea Valley. It is not an area that I have been fortunate enough to visit. However, going by the reports that I have read, it might well be that the uncertainties caused by an Olympic bid—plans are changed and land values go up with hope—will delay the development of the Lea Valley rather than helping it. I can see that that is probable if the plans are not integrated and thought out. I understand that the area needs more houses and better infrastructure, which would help the housing situation in London. However, it is likely to get delay and uncertainty and a stadium that could be of no use—except for a fortnight or so—because nobody is sure what it is for.

We shall be left with a situation in which the southeast overheats again. I shall not repeat the arguments that I advanced earlier. There will be a drag to the southeast that will add to the vicious cycle. Many amazing claims have been made for the bid. It is said that the games will improve everybody's health and will increase tourism and bring regeneration. If one examines the situation, as it should have been examined in a competition, most of those claims fall apart.

When we debated the matter on the Floor of the House, I said that if London was the answer to the question, it was a very strange question. I believe that it will go some way to worsening the regional disparities that we are so concerned about. When one reads what is sometimes said in the nastier parts of the south-east press about cities that have been through difficult times—such as Liverpool, Newcastle and Manchester—it is said that those cities have a handout culture. What could represent more of a handout culture than saying a city can have the Olympics without any competition, or saying that a city can have two stadiums, while the rest of the country goes without? A city that could not deliver on Picketts Lock is told that it should have had the World Athletics Championships, and will get it next time, even though Birmingham is more accessible. What could be more of a handout culture than that?

I do not believe that we have regional disparity solely because of public expenditure. Public expenditure should be part of the solution. Nor do I believe that it is because people in the regions are feckless and are not working. It is because we do not have a level playing field, and there will not be one until London stops receiving benefits that it does not need. The bid will not be beneficial to the country, or to the regions.

Order. Before I call the next hon. Member, I remind everyone that the purpose of the debate is to enable the hon. Member who secured the debate to hear a reply from the Minister. I will be calling for the winding-up speeches no later than 3.25 pm. Members' contributions should be very brief.

2.36 pm

I am delighted to be taking part in the debate and I congratulate my hon. Friend the Member for Manchester, Blackley (Mr. Stringer) on securing it. I take the opportunity to pay tribute to him and his fellow hon. Members for Manchester for their success in securing the Commonwealth games.

Order. I do not wish to interrupt the hon. Gentleman, but it seems I cannot count. My eyesight has let me down. I shall be calling for the winding-up speeches at 2.55 pm.

Thank you for telling me that, Mr. Deputy Speaker. I was paying tribute to hon. Members who represent Manchester for their success in securing the Commonwealth games. I also congratulate them on the way those games were organised, which facilitated the redevelopment of the east Manchester area. The games were particularly successful in achieving that core objective.

I do not believe that the Government are wrong in their approach to regional strategy. The policy of implementing regional development agencies, and of examining the concept of regional assemblies—where they are wanted—is the right way to tackle many of the disparities to which my hon. Friend the Member for Manchester, Blackley alluded. He will not be surprised to learn that I do not share his views on public expenditure, although I congratulate him on his continuing advocacy for the north-west. He will not be upset to learn that he is notorious among hon. Members who represent London for his advocacy of his region.

The Government were right to back a London bid for the Olympics. My hon. Friend alluded to the decision of the British Olympic Association, taken after consultations with members of the International Olympic Committee. That came after three non-London bids from the UK in 1992, 1996 and 2000 had failed. Many of the issues that hindered past bids were areas around transport and governance. It is fair to say that the governance issue has been resolved and that the transport issue is on the way to being resolved. It will certainly be resolved by the time of a 2012 Olympics.

One of the keys to the 2012 Olympics, should we be successful, must be to ensure that they are a people's games. My hon. Friend alluded to the success of the Bread Not Circuses group in preventing Toronto from winning its bid and that sends a powerful message to those involved in preparing London's bid. We must have a people's games—one that pulls in volunteers from not only communities in London but the regions of the UK. It must be a people's games in terms of the ticket pricing and in the sense that people in London and the regions can participate in designing its legacy. We must use the next two years, as we work out the bid's design, to ensure that we maximise the benefits of a successful Olympic games for the whole United Kingdom, not just for London.

We must recognise that the bid would be for the whole UK, even though the games would be based in London. Most events would be held there, although some would have to be staged outside London. My hon. Friend the Member for South Dorset (Jim Knight) alluded to the fact that the sailing events would be held outside London. Many matches in the football tournament would be held elsewhere in the country, although the final would clearly have to be at a rebuilt Wembley stadium. Clearly, Manchester and Liverpool, with their excellent stadiums, would play a key role in staging parts of the games.

It is also worth bearing in mind that more than 190 nations take part in the games. They need training camps in the run-up to the games to allow their athletes to acclimatise. There would, therefore, be considerable opportunities for cities and towns throughout the UK to prepare bids to host teams.

Obviously, Loughborough would be a prime consideration. We already have excellent facilities and we would look to host one of the major teams. In that respect, the legacy of the games is not just a matter of the excitement caused by having a major team in the town. It is clear from the experience of the British Olympic Association on the gold coast, in Australia, that the Olympics have a lasting legacy, which is about more than the people involved for the short period of the games. Does my hon. Friend agree?

I do. The British Olympic Association is highlighting the revenue that it is generating for the economy of Cyprus. where the British team for next year's games in Athens will prepare. Clearly, Loughborough, with its excellent sports facilities, will be able to make a powerful case for hosting one of the leading teams in the run-up to the games.

There would therefore be a regional dimension to the football tournament, the training camps and one or two other events, which would have to be held outside London. A further reason why a London Olympic bid would be a bid for the whole UK is that London is a vital gateway to the rest of the country. It remains true that when London prospers, the UK as a whole prospers. Estimates show that London makes a net contribution of £20 billion a year to the UK economy and London's GDP represents about 20 per cent. of the UK's total output. We are also a key gateway in terms of tourism, and 75 per cent. of all international visitors arrive in London. A conservative estimate s suggests that the UK tourism industry would get a £500,000 million boost from hosting the Olympics. Furthermore, more than 4 million jobs in the rest of the UK depend on London's demand for goods and services. Jobs and revenues that were delivered into London in the context of the Olympic games would, therefore, have a direct benefit by creating jobs and revenue streams in the rest of the UK.

London is the best chance that we have of winning an Olympic bid. That is the view of the British Olympic Association, which is the body that determines whether we bid. London also has the benefit of history. It is therefore important that we continue to invest in the infrastructure, such as transport and housing, that London will need for its bid to be successful.

On the area of London that has been earmarked for the games, other hon. Members will no doubt stress how prosperous London is and point out that its economy is growing fast, but it is also worth mentioning the fact that London is a city with some stark inequalities. London is home to some of the most deprived areas in the country: some 20 of the 88 most deprived local authority districts in England are in London. The boroughs in which the games would be staged—Hackney, Tower Hamlets and Newham—are not famed for their tenants' reputation for prosperity. That subregion of east London is in need of both investment and resources, and the cultural and sporting boost that the games bring.

Just as the Commonwealth games delivered significant regeneration for east Manchester, those of us in London, although not necessarily those representing the part of London affected, hope that the Olympic games would help to drive and facilitate the regeneration of east London. I do not share the view that an Olympic bid would damage the regeneration of the Thames gateway area and neither do the London Development Agency, which is responsible for much of the preparation of that strategy, or any of the local authorities in that area.

Our Olympic bid offers opportunities not only to regenerate east London, which is a part of the country that has been crying out for investment for some time, but to spread the benefits of such a great sporting festival around the country. On Monday, an all-party group was established to consider such issues and I hope that the hon. Members who take part in this debate will also participate in the work of that group, so that we can maximise the benefits that a successful Olympic bid would bring to the whole of the United Kingdom, not just to London.

2.47 pm

I congratulate the hon. Member for Manchester, Blackley (Mr. Stringer) on a thoughtful yet at times pessimistic speech about the prospects for the bid. I also congratulate him on giving an opportunity to Members who represent constituencies outside London to debate the effect that the Olympic bid could have on their constituencies.

Scotland could and should play an important and integral part not only in the bid but, if it is successful, in the event itself. I am not a lone Scot in that regard: the chief executive of the Scottish Football Association has got behind the idea that Scotland should play a part in the Olympics. Furthermore, a recent ICM opinion poll showed that 82 per cent. of people in the United Kingdom support the principle of a bid, whereas 89 per cent. of Scots support the idea of a bid and the same proportion recognise the economic benefits that the Olympic games could bring. A successful Olympic bid would give us the opportunity to showcase to the entire world the whole of the UK, not just London, where the focus of the games would be.

Much has been made of the increase in the number of visitors to the country that the Olympics would bring. Important though that is, the argument is not only about bringing tourists and their money for the duration of the games, but about showing the world when its eyes are upon us what we have to offer visitors to our country. Anyone who is involved in tourism will say that some of the most effective methods of advertising the country are through television and simple word of mouth. Boosting the numbers visiting Scotland and the UK during the Olympics would give us the opportunity to send millions of visitors away with a positive experience, eager to tell their friends and families about it. As one who represents a constituency in a city that is heavily dependent on tourism, I believe that that is very desirable indeed. We in Edinburgh share the experience of the hon. Member for Manchester, Blackley of helping to host the Commonwealth games some years ago. However, I realise that games can have their ups and downs—like the Sheffield student games, the games in Edinburgh had one or two problems at the time.

Improving the profile of the country is one important aspect, but there are other issues worth raising. The distance between Scotland and London might be thought a problem, but during the Sydney games, which received credit as one of the most successful ever, the football tournament was held in several cities and spread between Brisbane, Adelaide, Melbourne and Canberra. The players taking part in the tournament and the spectators in Brisbane were more than 400 miles from Sydney, and in Adelaide they were more than 700 miles away from the main Olympic village. Edinburgh is only 320 miles by air and 400 miles by road from London.

Transport infrastructure would have to be seriously considered. I am sure that the Minister will discuss it with the Secretary of State for Transport, who represents the Edinburgh constituency in which the excellent Murrayfield stadium, the home of Scottish rugby, is located. I hope that will be given priority in any successful bid and that other Scottish Members who are Ministers—the Under-Secretary of State for Trade and Industry, the hon. Member for Edinburgh, South (Nigel Griffiths), who has responsibility for small businesses, and the Advocate-General for Scotland (Dr. Clark)—will both promote the interests of the city they represent and pursue wider Scottish interests in the Olympic bid. Edinburgh, Glasgow and the rest of Scotland have much to offer the Olympics.

I am keen to hear what discussions the Minister has had with representatives of the Scottish Executive about Scotland's role in the Olympic bid. Before the recent elections, the then Scottish sports Minister, Elaine Murray, spoke positively about Scotland's role not only in football but possibly basketball and even rowing, although we cannot guarantee good weather. As she said, there are excellent facilities in Scotland and we should try to maximise the benefits for the Scottish economy and encourage the dispersal of a number of events throughout the UK.

I understand the concerns that some hon. Members have raised. They rightly do not want money allocated for regeneration projects and poverty reduction in their area to be pushed aside to make way for the bid. When meat is added to the bones of the bid, the Minister would do well to take note of those concerns and give their views proper consideration.

I am a realistic optimist and I believe that there is enormous potential for the Scottish and UK tourism industry and the economy to benefit from the bid if we play things right. The prizes are there to be won and all parts of the country can and should gain from them, but we need the Minister and the Government to ensure that it is a genuine UK bid and not a London bid, so that the whole country can benefit from it.

2.52 pm

I am grateful to my hon. Friend the Member for Manchester, Blackley (Mr. Stringer) for securing this important debate, which affects all the regions in Britain.

Time is short, and I shall be brief. I am not anti-sport, anti-Olympics or anti-London, but although the northwest and other regions are not anti-London, it is clear that London is anti-regions. When it was announced that Liverpool would be the city of culture, the London Evening Standard attacked the people, the buildings and the cultural base of Merseyside. People from the northwest and Merseyside are not anti-London—it is the other way round—but we do want to know why major events always have to be staged in London.

The dome and the national stadium could have been outside the capital, yet they ended up in London—as has the Olympic bid. They have something else in common, too: they have been a financial disaster and a disaster for regional policy. For 18 years under the Conservative Government, there was no regional policy; the strange thing is that now we have such a policy, the funding is not following it. Although the Government continue to make the case for a stronger regional policy, the funding streams—as shown in recent announcements on housing and transport—shift more resources from the north-west and other regions to the south-east and London.

It is not surprising that the gap in GDP between the north-west and other regions and London is growing wider. Unless the Government starts to address the issues, the economy will continue to diverge. That divergence damages the south-east and London and the rest of the country: it means massive house price inflation, shortages of skills and major congestion problems in the south-east, and unemployment, lower GDP than the European average and under-investment in the regions. London and the south-east therefore need real funding streams to follow the policy.

It is useless for the Government to keep restating that they are in favour of regional policy and of bridging the GDP gap between the north and the south unless they put their money where their mouth is. The bid was another opportunity for them to invest in other parts of the country and make a real difference. However, we know from the announcement that even more resources will be taken away from the north-west and given to the lottery.

The national lottery did not expand its budget when it introduced its last game. There was less money for sport and culture, not more. If we introduce a new game and ring-fence the funding for the Olympic bid, there will be a reduction in funding for my area and, I suspect, for most parts of the country. My area has already been refused two lottery grants because there is now less money available for good causes. The decision and the way in which it will be financed means that there will be even fewer resources for sport.

My hon. Friend the Member for Manchester, Blackley made several arguments in favour of the scheme being introduced elsewhere. It is crucial that the decisions that we take are open and even-handed. We must know what the rules are and how we can compare one bid against another. I do not see any of those factors in this Olympic bid. As I said, I am not against the Olympic bid, but I do not believe that people can be moved around London unless there is major investment in public transport. Hon. Members who represent London constituencies have said that they expect the Government to follow their announcement with a major investment in public transport. There will be less money for the regions if that major investment is made.

The imbalance must be addressed. The Government need to back up their regional policy by ensuring that funding streams follow. Will the Minister assure me that regions such as the north-west will not lose out because of the Government's decision? Will he confirm that the current level of funding given to the regions will be ring-fenced and that the Government will make up for any reduction in sports funding because of the lottery? It is crucial for the whole country that those assurances are given today and that the Government's response is positive.

Order. The hon. Member for Tyne Bridge (Mr. Clelland) has risen, but I shall call him if he promises to take only five minutes. Otherwise, I shall not.

2.58 pm

Thank you, Mr. Deputy Speaker.

The north-east has the disadvantage of having Scotland to the north, with its financial, political and democratic advantages. It also suffers from the north-south divide, to which my hon. Friend the Member for Manchester, Blackley (Mr. Stringer) referred at the start of the debate. The Olympic bid may well exacerbate that divide. That fear motivated me to table early-day motion 1254, which now has the signatures of 74 hon. Members. The Minister may try to assure us today that the Olympic bid will not have a detrimental effect on the regions, but some of us in the north-cast believe that the bid is already having such an effect.

The Minister will be aware that the previous Conservative Government introduced the concept of a sports academy, which was to be based in Sheffield with satellites spread around the region. Gateshead was to be the north-east regional satellite. The Labour Government modified the concept to the institute of sport, but it remained as it was and Gateshead remained the north-east hub. The original plan was for £150 million of capital expenditure to be distributed around the 10 hubs. Some hub sites have developed. Sheffield, Loughborough, Bath and Manchester are hubs as a result of the spin-off from the Commonwealth games.

Gateshead has done some serious planning, and was about to enter a detailed study and design stage when Sport England announced a moratorium on projects funded by lottery money. Gateshead could not take the financial risk, and immediately had to put its plans on hold. Sport England announced that it was to undertake a stocktake of all lottery-funded projects, and told Gateshead that there was a distinct possibility that Sport England would de-commit—an interesting word—from some projects, including the sports academy hub site plan. The decision on that was expected on 14 April. It was then deferred to May, and deferred yet again on 3 June. We believe that the Olympic bid is already making Sport England rethink its distribution of funds throughout the country. The Olympic-sized pool that Newcastle city council was hoping to develop now seems to be in jeopardy, and Sport England is unwilling to commit itself to funding.

We are concerned that the Olympic bid will further exacerbate the situation, and we cannot stand idly by and watch that happen. If the Olympic bid is being pursued on the basis of prestige for London and the development of east London—which I accept is much needed—but at the expense of developments in other regions, it will not be in the interests of the country as a whole. Will the Minister reassure us that that will not be the case?

3 pm

I shall begin by congratulating the hon. Member for Manchester, Blackley (Mr. Stringer) on securing today's debate. I shall surprise him by saying that I agree with him on at least one or two points.

First, the hon. Gentleman's savage attack on his own Government's handling of the choice is fair comment. It was valid to point out that the Government delayed the process for so long that it could not be competitive. He drew out some of the disadvantages of the lack of competitiveness in the process. I agree that the Government will take the blame if the bid fails.

Secondly, he was right to highlight the need to tackle regional disparities, and to refer to the various tables in "Your Region, Your Choice", which showed those disparities clearly. The Government have not addressed that problem. I criticised the Deputy Prime Minister when he announced the sustainable communities plan, because it put four times as much money for housing investment into one region as it put into the five northern regions together. The Office of the Deputy Prime Minister and the Government as a whole are failing to tackle those issues.

Many London Members want to share London's prosperity with the rest of the country, because our problems of overheating would be helped if there were greater regional balance. I hope that in supporting the bid, the Government will ensure that the rest of the country will benefit as well if London is successful. Investment in regional airports is one example.

The Liberal Democrats strongly support regional devolution and, unlike the hon. Gentleman, we believe that it is the surest way to remove the anti-regions bias that some people feel exists in Whitehall. I want some Departments to be broken up and merged, with civil servants and their power pushed down to the regions to provide long-term dynamic energy for tackling regional disparities. That is an ambitious agenda, and I know that the hon. Gentleman shares some of our views. However, he made a false link between the issues and London's Olympic bid, and failed to address some key questions.

The most important question that would have faced the Cabinet when it eventually got round to discussing the bid was the question of which city could win. The hon. Gentleman skirted over that by saying that London lost in competitive bids against Birmingham and twice against Manchester, and he seemed to assume that if there had been a competitive bid this time, it would have lost again. He is wrong. The Birmingham and both Manchester bids lost badly in the final round, with the second Manchester bid getting just as many votes from the International Olympic Committee as the first. [Interruption.] Well, the briefing that I had was that Manchester received 11 votes on both occasions. I regret that and wish that Manchester and Birmingham had won, but unfortunately the experience of bidding by those cities is not a happy one.

The Government were also faced with the fact that the British Olympic Association said that, from talking to the people who would make the decision, the only city that they should back was London. Faced with that message and the experience of previous bids, the Government had no choice but to back London. I hope that the hon. Gentleman and other hon. Members will work to ensure that London's bid is successful and—I am more than happy to work with them on this—that other parts of the country share in London's success if it wins.

As the hon. Member for Harrow, West (Mr. Thomas) said, London is much better placed to win. Now, compared with the three previous times, when it was up against Birmingham and Manchester, the governance issue is settled in London. I am delighted that we have a Greater London Authority that is in a position to lead the bid successfully. Obviously, I hope that my hon. Friend the Member for Southwark, North and Bermondsey (Simon Hughes) will be leading that GLA bid in due course.

I think that the rest of the country will get behind the bid. The ICM poll mentioned by my hon. Friend the Member for Edinburgh, West (John Barrett) showed huge support in all the regions when people were asked, "Do you think that a bid should be made for London to host the 2012 Olympics?" Interestingly, in the northwest region, 84 per cent. felt that London should make the bid.

Often the result depends on the question asked. Does the hon. Gentleman think that, if the same people had been asked whether they were happy for their sports funding and the public expenditure on their transport system to be reduced to pay for an Olympic bid, they would have given a different answer?

I am sure that the hon. Gentleman is right. The Department for Culture, Media and Sport published that finding, so no doubt he will take it up with a colleague in that Department. However, I understand that London council tax payers, quite rightly, will be asked to bear some of the cost. Much of the rest of the money will come from the IOC or the lottery, so it is not helpful for people to suggest that money will be taken out of the mouths of babes in Liverpool or wherever else. However, it is important that we ask the Government tough questions on how that money is to be found. It should not come from the education budgets in the north-west, but that is not an argument against the whole process.

I shall conclude my remarks shortly, because I want to give the Minister plenty of time to answer the criticisms from his own side. However, before doing so I remind hon. Members that London is not homogenous. My constituency is not homogenous. I represent a relatively prosperous constituency, but one or two wards have a great deal of poverty. In 1991, one ward was the poorest ward of any outer London borough, although the situation has changed slightly, with the different indices. Poverty can be found in many places. London is the home of real poverty. The hon. Member for Harrow, West was right to say that the proposal to site the games in the poorest part of London—indeed, the poorest wards in the country—has some logic in terms of regeneration. Whether the Government decide that the process is about regeneration or sport, the decision on where to site the games seems sensible.

I remind hon. Members from other parts of the country that the poorest in London are the poorest in the country. Why? Their benefits have no regional top-ups or London weightings. Income support is the same in Hackney, where people face the cost of living in London, as it is in Manchester. Pensioners in London do not receive a London top-up, but they face much higher costs and prices. We should remember that when we talk about regional expenditure and poverty.

We need to know about Crossrail. People who support either the London Olympic bid or the Crossrail scheme do not want to make the tie-together too strong, but Crossrail is crucial to this capital city. It is crucial to the sustainable communities plan—which the Deputy Prime Minister introduced—to the long-term economic well-being of the capital and to securing all the development in the Thames gateway. I think that Crossrail would be a crucial factor in winning the bid.

When I asked the Secretary of State for Transport about how he was progressing Crossrail at Transport questions two weeks ago, his answer was bizarre. He seemed to suggest that he and his colleagues had never been shown a proper proposal for Crossrail—that it had not been properly planned or the finance had not been properly put together. If that is the case, what are the Government doing about it? They have been in power long enough and they talked enough about Crossrail in opposition. Why have they not been pushing for that vital plan to be drawn up, properly costed and properly put together? It is essential as much for the regions of the UK as for London. I hope that the Minister will tell us that his Department will put pressure on the Department for Transport and the Treasury and will talk to the Prime Minister to ensure that the Crossrail project happens, which will help to ensure that the London Olympic bid succeeds.

3.10 pm

I, too, congratulate the hon. Member for Manchester, Blackley (Mr. Stringer) on securing this debate. He is a diligent advocate of the interests of his city and region as he sees them, although I am not sure that in this case his analysis of what would be good for Manchester is correct.

It is interesting that the fault lines in the debate this afternoon appear to be regional rather than political, and run deeper than some of our more superficial political divisions. Yes, the grass is always greener, but I suggest to the hon. Member for Manchester, Blackley that although the statistics that he reeled off gave a superficial impression of a rather lop-sided Britain, the reality is slightly more balanced. I have lived in his region, and in the east midlands region, and my perception is that the gap in quality of life that people experience is not as great as the crude statistics suggest, because of the horrendous pressures, problems and costs that my constituents, and those of the hon. Member for Kingston and Surbiton (Mr. Davey), suffer in London and the south-east.

The essential premise of the argument put forward by the hon. Member for Manchester, Blackley is that the Government should somehow alleviate the unfairness that the Olympics coming to London would represent. I suggest to him that the Government do not have the power to deliver that. However, my hon. Friends and I recognise that it is incumbent on all of us to ensure that, if the Olympic bid is successful, it is a success for the UK as a whole, and that the benefits are dispersed as far as possible throughout the country.

We support the bid. Indeed, we supported it before the Government did—they are latecomers to the process. Some of what the spokespeople for the Government have said in the past has not been helpful. The hon. Member for Kingston and Surbiton said that it was not helpful to suggest that money spent on the London Olympics was money taken out of the mouths of babes and orphans in the north-east. However, that is more or less what the Secretary of State for Culture, Media and Sport suggested on 14 January. She said that
"every pound spent on developing Olympic facilities in London is a pound that will not be spent on schools, hospitals or grassroots sporting facilities in other parts of the country."—[Official Report, 14 January 2003; Vol. 397, c. 609.]
If the Secretary of State says that in the House of Commons, I can understand the concern of the hon. Gentleman and his colleagues. It will be incumbent on the Minister to show that matters are being so organised that that will not be the case.

The hon. Gentleman rightly says that the decision has all-party support. May I remind him that the last major scheme that had all-party support was the dome, which had many supporters at first, but became a financial disaster, and had no friends in the end?

If the politically correct had not got hold of the content, the story of the dome might have been very different.

In its dreams, every city would like to believe that it could host the Olympics, but, as other hon. Members have said, the reality is that if the UK is to stand a chance of winning the bid, it must be London. Several of the colleagues of the hon. Member for Manchester, Blackley, who represent northern constituencies, freely recognise that, although I will not detain the House by reading out their quotes.

It is tempting for people in the regions to assume that there is always a choice between London and somewhere else but, as is often the case with inward investment, that choice is not really available. Expert opinion suggests that that would also be the case with the Olympic bid. Inward investment that is directed away from London and the south-east will not go to the north-west or the north-east, but to the Pas de Calais, the Brussels region or the area around Stuttgart. With the Olympic bid, we shall be competing on a pan-European scale. We must recognise that fact, and that London has unique attractions on the international market.

The hon. Member for Manchester, Blackley called for a competition between British cities for the privilege of bidding to host the Olympic games. That is interesting in theory, but it would be a pyrrhic victory if the winning city were to have a significantly lower chance of securing the Olympic games for Britain than a London bid. All expert opinion suggests that that is so. However, the issue is more complicated than merely a choice between London or another place. London can carry the bid with its headline international status and its world city characteristics, which the hon. Member for Manchester, Blackley recognised, yet the benefits can be secured for the whole of the United Kingdom.

Whether the hon. Gentleman or those of us who represent the area like it or not, London and the southeast is an economic powerhouse for the whole of the United Kingdom. We heard some comments earlier about transport expenditure in London. I assure hon. Members from all regions that, if London's transport infrastructure snarls up and London becomes an impossible place in which to do business, the whole of the United Kingdom economy will suffer. London is the locomotive that helps to pull the whole UK economy. I am glad that the Government, after a shaky start, seem to have recognised that fact.

If the Olympic games were held in London, it would have a general beneficial effect. Furthermore, the Government could take specific action to ensure that, if they were held in London, it would not have a negative effect on the rest of the country, which is what the Secretary of State suggested in January and what other hon. Members have suggested today. In fact, it could have a positive effect.

One of the problems of speaking at the end of such a debate is that most of the points that need to be made have already been made. However, I shall quickly summarise my remarks. Will the Minister confirm that, if a London bid were successful, the Government would encourage and support the holding of some events outside London? Do the Government have specific policies on the dispersal of events, such as equestrian events, shooting, water-based sport and football? Have they measured how much of the total economic impact can be diverted to other parts of the country simply by ensuring that those events are staged outside London?

We will have the right to stage the Paralympics if we win the bid for the games. Are those games held in the same city as the Olympics, or could they be staged in another city, such as in the Commonwealth games facilities in Manchester? Will the Minister confirm that the Government have had discussions with the British Olympic Committee about ensuring that training facilities are dispersed properly throughout the country? My hon. Friend the Member for Ryedale (Mr. Greenway) noted in the debate on 14 January 2003 that
"a lasting legacy of coaching and sports infrastructure"
could be created, with 100 training camps located throughout the UK, in
"refurbished school gyms, leisure centres and community facilities".—[Official Report, 14 January 2003; Vol. 397, c. 615.]
That is a real opportunity to ensure that some of the money is recycled back into genuine, lasting community facilities.

If London were successful, there would be real regeneration opportunities in one of the most deprived areas of our capital city. I suggest to the hon. Gentleman that the combination of London's status as an international city and the proximity of areas in the east of the capital that are in desperate need of regeneration and investment presents a real opportunity for the bid to succeed. Only if it succeeds, can it benefit any part of the United Kingdom.

3.19 pm

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

It will be a pleasure to answer a debate in which there has clearly been so much harmony and camaraderie between the many regions and nations of our country. I congratulate my hon. Friend the Member for Manchester, Blackley (Mr. Stringer) on securing the debate. It has been illuminating and lively. In the short time that remains, I shall try to answer as many points as I can, but I hope that hon. Members will forgive me if I have to speed through some of them.

My hon. Friend focused on some of the economic disparities that have existed over a long time between the different regions of England, in particular. I shall talk about them in some detail later in my speech. I can assure him and other hon. Members that, as the only hon. Member from Yorkshire present in this Chamber today, I have no axe to grind on behalf of the capital or anywhere else. I feel strongly about some of the points that have been raised, from the point of view of my own constituency.

At the outset, it is important that we do not neglect the obvious. If Britain is to succeed as a whole in an economic sense, we must make sure that every part of the country and every corner of the United Kingdom can secure its fullest potential and not only share in the success, but drive it as well.

The hon. Member for Edinburgh, West (John Barrett) raised some specific points about the role of Scotland in the Olympics. He was right to highlight the potential benefits of this country hosting the Olympic games. It is a genuine UK bid and he was right to point that out. He asked about the dialogue that there had been between the Scottish Executive and the Department for Culture, Media and Sport. The dialogue is ongoing. High-level dialogue is taking place at a sports Cabinet Committee, which brings together Ministers with responsibility for sport from the devolved Administrations. I assure the hon. Gentleman that those discussions are under way.

My hon. Friend the Member for Tyne Bridge (Mr. Clelland) referred to the role of Gateshead in the sports academy hub plan and the fact that the town is still awaiting a decision from Sport England's funding review. I shall convey to the Department for Culture, Media and Sport the comments and concerns of my hon. Friend. However, I am assured by officials that the review is not driven by or directly connected with the Olympic bid and that Gateshead will not be at a disadvantage.

Loughborough, my constituency, is one of those areas that has benefited from the UK Sports Institute. It has received some £30 million pounds worth of facilities. I assure hon. Members that the decision by Sport England to reduce its funding at this stage or to stop funding is not related to the Olympics, but to an over-commitment to the existing sports budget, which has reduced considerably over the past four to five years.

My hon. Friend obviously knows a great deal about the matter and his comments will go on the record. I am grateful for his attendance at the debate today. Given Loughborough's sporting history and involvement in sports policy in general, some of the issues that have been debated today will be relevant to his constituents.

Can I be clear that the Minister is saying that if the scheme will be funded from the lottery and the introduction of the new game leads to a reduction in overall amounts of money available for sport outside the Olympic games, the Government will ring-fence them and put in more money to make sure that areas such as the constituency of my hon. Friend the Member for Manchester, Blackley and my own are not disadvantaged by the Olympic bid?

My hon. Friend should know that it is not the intention of any Government to see a bid for the Olympic games or any sporting occasion disadvantage any part of the country in any way. A great deal of attention has been paid to the package of funding put together for the Olympic bid. When my right hon. Friend the Secretary of State for Culture, Media and Sport announced that the bid was backed by the UK Government on 15 May, she put in context the history of the UK's position. She mentioned the bid for Birmingham for 1992, for Manchester for 1996 and 2000 and why London was backed. That was because of people's drive and decision, with the support of the British Olympic Association. My hon. Friend the Member for Harrow, West (Mr. Thomas), who had to leave early, said that the International Olympic Committee's views and the feedback received from it was a crucial factor in the decision. That is one of the reasons why the Government decided to back the BOA's position.

The area covered by the bid is around Stratford and the Lea Valley—the heart of east London. The public funding will come from a specific hypothecated Olympic lottery game, as agreed by the Mayor of London, and will be shared by council tax payers. The Government will provide a guarantee for a degree of underwriting for some of the bid finance.

The cost of the bid will be relatively lean—between £15 million to £30 million—and the Department for Culture, Media and Sport will lead for the Government on all related matters. A bid company will be established and a high-calibre chair, supported by an Olympic team in Government, will lead off on some of those matters.

Can the Minister give any clue about when the high-calibre chair, to whom he referred, is likely to be appointed? I understood that it was going to be last Friday, but so far I have not heard about it.

My understanding is that that appointment is due some time over the early summer. I do not have a specific date to hand, but I shall pass on the hon. Gentleman's concern that that should be undertaken as swiftly as possible.

I must make some progress on transport. Transport for London and the bid company will consider a transport plan. By 2012, the modernised tube—the Jubilee line—and the completed channel tunnel rail link will be in place, along with the international station at Stratford and the docklands light railway extension to City airport.

The hon. Member for Kingston and Surbiton (Mr. Davey) spoke about Crossrail. Although that is not in my portfolio, I understand that the Department for Transport is supportive of the scheme in principle. However, it needs confirmation that the business case and the finances stack up. That process is being undertaken as swiftly as possible.

There are major benefits for London—that is clear. There are also benefits for the whole country, not just in terms of raising the nation's profile or boosting UK tourism, but also in leaving the nation a rich sporting legacy. My hon. Friends the Members for Harrow, West, for Loughborough (Mr. Reed), for Manchester, Blackley, for Birmingham, Selly Oak (Lynne Jones), for South Dorset (Jim Knight), for North Durham (Mr. Jones), for St. Helens, North (Mr. Watts) and the hon. Members for Runnymede and Weybridge (Mr. Hammond), for Edinburgh, West, for North Tayside (Pete Wishart) and for Kingston and Surbiton mentioned other events taking place outside the capital. For example, some of the football tournaments will tour the UK, and there is talk of the regions hosting specialist events, such as sailing off the Dorset coast, which my hon. Friend the Member for South Dorset mentioned. Other regions are playing host to athletes, training camps, and so forth.

There is a massive need to regenerate parts of east London. We should not neglect that. My hon. Friend the Member for Harrow, West and the hon. Member for Kingston and Surbiton raised that point. The index of multiple deprivation in 2000 suggested that Tower Hamlets and Newham were ranked the third worst. Those boroughs have specific needs, but that is not to say that other parts of the country are not also in need of regeneration.

Much is going on in the north-west. Many hon. Members from that region spoke today. The Northwest Development Agency is setting up the urban regeneration company in east Manchester and it is working on the £39 million Ashton canal corridor. We have heard about Liverpool's city of culture bid and the project in Manchester that is looking at derelict buildings, and so forth. There was also the experience of the Commonwealth games, which was a significant event in east Manchester that directly reclaimed 146 hectares for the site. Some £127 million of investment in sporting facilities is now going into community uses. There is no reason why the same thing should not take place in an Olympic bid in a general sense.

In wider Government policies there is much going on in terms of trying to reduce the economic disparities between the different regions of the UK. There is a public service agreement target for that, regional development agencies are investing a great deal and other policies across Government, whether they are to do with housing or neighbourhood renewal, and the new deal for communities, contribute a great deal to that.

I come back to the ultimate point about today's debate. London's Olympic bid is the UK's Olympic bid, and all regions of the country must get behind it, so that it succeeds. Yes, each region has specific needs, but much work is being done by all Departments to make sure that regional prosperity is enhanced as fully as possible.

Brayton Road Post Office, Selby

3.30 pm

I am delighted to have secured this debate on the future of Brayton Road post office, which, to some of the pensioners and other users of the post office, is every bit as important as the Olympic bid that we have just been discussing. I have sympathy for my hon. Friend the Minister, because replying to such debates in this Chamber is becoming a bit of a habit for him. Newcraighall post office and Birkenhead post office have already been discussed, and there are probably many more such debates to come.

In fact, when I reviewed the list of the post offices that have already closed under the urban reinvention programme, with names such as Primrose Hill, Bluebell Hill, Digswell, Polbarn Lane, and Wimbledon Chase, I was rather reminded of the Flanders and Swann song, "Slow Train", which celebrated similar names after the Beeching axe on railway stations. I will not sing from that song, but part of it went:
"From Selby to Goole, from St. Erth to St. Ives.
They've all passed out of our lives
On the slow train
On the slow train."

Of course, we cannot approach the subject of Brayton Road post office just from the point of view of romance: we have to use hard-headed economics. After all, like many of my hon. Friends, I voted for the urban reinvention programme, of which the closure is part. However, I thought it was well worth bringing my experiences of the past month concerning the closure to hon. Members' attention, and I shall try to draw some general lessons from those experiences. After all, the Minister has been robust in saying, in the House and elsewhere, that he thinks that the consultation under the urban reinvention programme is going well, and that Postwatch is playing a valuable role.

I want to comment on the distinction between rural and urban post offices, which is crucial to the process. Brayton Road post office is in my constituency. The Post Office kindly faxed me its latest list this morning, and it mentions 46 post offices in my constituency. Six were classified as urban, but I remember writing to appeal one of those classifications nine months ago, and it was reclassified as rural, so there are now five that can be considered urban. In the past six years, on my watch as Member of Parliament for Selby, only two post offices have closed permanently: Appleton Roebuck, which we still have hopes of reopening, and Stillingfleet.

In previous years, Burn, Hirst Courtney, South Duffield, Thorganby, Womersley, Barkston Ash, Kelfield and Stutton post offices closed. It is worth noting that, in a rural area such as Selby, the efforts that the Government have made on rural post offices are working. There is now an entrepreneurial spirit, and people are going out trying to save rural post offices.' shall not go into great detail about Drax post office, but it was saved by the Post Office, who worked to do so with the Countryside Agency, the council, me and others. It was closed for nigh on a year, but it was reopened in much better form than it was in when it closed. That side of things is working well.

The definition of post offices as urban or rural is important to the urban reinvention programme, so when the latest list from the Post Office was faxed through this morning, I was surprised to see that Brayton Road post office—which, as I understand it, was closed under the urban reinvention programme—is classified on the list. which is in the Library, as rural. The Post Office said in a note that it would update the list in the Library at the end of the month; however, the latest information in the Library is that it is a rural post office. When did it change? The list dates from last year, but the Post Office says that it is the latest available—and it knew that I was introducing a debate on the subject this afternoon.

Did the Post Office decide to close the Brayton Road post office, and then reclassify it from rural to urban? What was the sequence of events? It does not give anyone much confidence in the integrity of the process when, on the day of the debate, the Post Offices faxes me to say that a post office that it is closing under the urban reinvention programme is rural according to its latest list. At the very least, it would be an improvement if, every time the Post Office proposes a change, it sent a courtesy note to the local MP, who takes an interest in these matters, and to the local council to say that it is reclassifying and to state the reasons why. It should do so, because there is a human story behind all post office closures, and although some may be necessary where post offices are unviable, it is important that the consultation process has rigour and is conducted properly.

The Selby Times has been covering the case of the Brayton Road post office in some detail. It quoted Queenie Ward of Doncaster road, who stressed that closure would make life difficult for her—crippled by arthritis in her back and hip, she also suffers from angina, asthma and thyroid problems. She said:
"The little bit of independence I have will go if I depend on others to go for my pension, even though my neighbours are very good".
Florence Gloag is 88 and lives near the post office. She says it is handy for her because she can get her groceries there, but she is worried about how she will do that if she is ill and the post office closes. She is not the only one. Mr. Henley is worried about what will happen in the winter when he has to go into Selby town to the nearest post office. Mr. Beavis and his wife are in good health, but they worry for people who are not in such good health, as walking into town could be a problem. They say that when a person gets to 80, they do not want to go traipsing around. There is clearly a human story here.

I listened carefully to the debate on 15 October 2002 when the Minister said:
"At the start of the programme, all the closures will be in response to requests from postmasters who have said that they wish their businesses to close."
That is very specific. Selby has a convenience store in which the post office is located. It is run by Mr. and Mrs. Mander and, for operational reasons, Post Office staff from headquarters are staffing that post office at the moment. It is hard to see why any postmaster would request their business to be closed in those circumstances.

I note that in the same debate the Minister said that he wanted a planned, orderly and managed process for closures. He said:
"The consultation will be conducted by Post Office Ltd., closely involving Postwatch, and it will include writing on day one to the local Member of Parliament."—[Official Report, 15 October 2002; Vol. 390, c. 233.]
Since that debate, something called the pre-consultation period has been instituted. That means that for two weeks prior to a post office's closure Postwatch exclusively knows certain information. It is given lots of information—far more than an MP ever gets—about footfall in the post office and the model that the Post Office has developed on where customers of a closing post office will go. All that information is provided to Postwatch on day minus 14—that is, 14 days before the Member of Parliament gets to hear about it. Postwatch must cover the whole of the north of England, but it cannot possibly have the knowledge that an MP or a councillor would have about a local community. If we really wanted a planned and managed process, could not an MP be trusted with the commercially confidential information with which the 14 or 15 people on Postwatch are trusted? I would be happy to sign a form. Are we so untrustworthy that we cannot be given the same information as Postwatch?

I won the Derby on Saturday. After watching it on television, I wanted to watch something else. I turned over to the BBC Parliament channel to calm down, and I saw debates from the Trade and Industry Committee last week. My hon. Friend the Minister put on his usual suave, successful performance before the Committee. Allan Leighton also attended—the Committee lasted three hours, and the pubs were nearly closing by the time it finished. Allan Leighton said that he thought that the process had been ad hoc until now, and that closures had been made on a one-off basis. He said that he wanted to see a more planned approach to things in future. He even invited the hon. Member for South Cambridgeshire (Mr. Lansley) to come and see the model for his area. I rang the Post Office to find out whether that was a general invitation to MPs, but the staff did not seem sure and said that the man who knew was on holiday. However, it would be good if we could do that.

The critique from the Government of letting closures happen by market forces is that if that happens it will do so in an unplanned way. The danger of leaving that entirely to people who rejoice in names such as network reinvention manager and customer stakeholder liaison officer—some of whom have written to me—is that it may still be done in an unplanned and ad hoc way. It would be good in an area such as Selby for me and the council to sit down and have a look at what the post office model is for the area: otherwise, at the end of this process, postmasters and postmistresses from relatively viable businesses but approaching 60 or 65 might come forward wanting retirement, whereas younger postmasters and postmistresses with entrepreneurial flair in smaller post offices that might be less viable than those that are closing might not come forward. This process does not seem planned and managed at present. If MPs and councils could be trusted, and if Allan Leighton got his way, it would improve.

I share the Minister's confidence in some of the new management in the Post Office, but it will take a while for its writ to get down to the regional level. It was about six months after Allan Leighton said that the name Consignia was no good and he was going back to the Post Office name that his managers thought, "Well, we'll have to do this," and they finally did it. We could make some changes there.

It is also important that the code of conduct is rigorously enforced. There is this phrase in that code:
"The ability of other branches to absorb the work without detriment to service."
It is not at all clear to me that that was followed in the notice that closed Brayton Road post office. The Postwatch North chairman wrote to me:
"I agree that the wording of the letter does not specifically say they have considered this point."
The implication is that they unspecifically considered it.

The main post office in Selby, which is one of the alternative post offices that was mentioned for users of Brayton Road post office, Doncaster, is cutting staff. Half a member of staff has gone in the past two weeks. The information should have been clearly put on the notice, as it was meant to have been, according to the code of conduct. I understand that although the Post Office is not legally admitting that it got it wrong, it is going to change its standard letters as a result of the experience in Brayton Road post office to show that it is explicitly considering the capacity of other offices to take the slack.

When in doubt, loyal Labour MPs obviously look to the words that come from Downing street, and particularly those of the much-admired performance and innovation unit, which was the inspiration behind this whole urban reinvention programme. The House of Commons Library note informs us that the PIU recommended:
"By taking urgent action to modernise and re-invent the network in urban areas—in particular, by re-locating post offices with convenience stores—the Post Office should be able to provide a better quality service for many of its existing customers. Post offices which are well presented, open longer hours and are co-located with shops which sell a wide range of products will also attract a broader range of customers."
Hey presto! Bingo! Brayton Road post office fits that bill exactly: it is a convenience store par excellence. In fact, even though it is now set to lose the post office, it is fighting back, and I can exclusively reveal to hon. Members that Mr. and Mrs M ander, who run the shop, are, as of tomorrow, opening a pay point facility that will allow the payment of TV licences, electricity bills, and British Gas and British Telecom bills—BT is going to promote the facility in the area around the shop when it sends out its next set of bills. Alliance and Leicester has put a bank machine in the shop, which is doing well. Pensioners can have no charge when they withdraw their money and have their money paid directly into their bank accounts.

I have got the Countryside Agency adviser to come down on Thursday to advise on other measures to help the shop be viable. It is likely that the convenience store will survive, much to the delight of many of my constituents. It is a bit of an irony that Government agencies and I are making such efforts and the net result will be that little business transfers to other areas.

Let me say a little about Postwatch. When the Postal Services Act 2000—legislation that changed consumer representation—was going through Parliament, a gentleman from York haunted all my public meetings. He asked whether I was absolutely sure that abolishing the post office users council and the local bodies that were affiliated to it, which formed the consultative body, was the right thing to do. I looked at Ministers' words and said that it was a voluntary body with a part-time chairman, 16 voluntary council members and few staff, whereas the new, super Postwatch, instead of having a budget of less than £1 million would have nearly £9 million and 60 full-time staff, three or four in the region, so that would be far better.

I have a great deal of time for Hilary Putnam, who is on the Postwatch committee and lives in my constituency, and for the chairman of Yorkshire Postwatch committee. However, the new body does not have grit or spice, passion or commitment, although it might gain them. I ask the Minister, in an idle moment to check: does anybody on the Yorkshire regional committee, or the national Postwatch committee, not have a car? There are many people with business backgrounds. Last year, they allied with the regulator in trying to open up the market, largely in favour of business. Ordinary post office users were much more cautious about the proposals. It seems a bit cosy. I was invited by the Post Office to meet Postwatch at a regional CBI dinner. I could not go anyway, but that was not the right environment. Postwatch was represented at a meeting that I organised. Its representatives sat through the meeting, yet subsequently did not oppose the closure. Although I have a lot of time for many Postwatch people, somebody should have had the courtesy to say, "We have heard what you say, but we cannot oppose the closure for these reasons." It was a pity that they did not.

Under the urban reinvention programme, 200 post offices have been closed so far. Four appeals have been successful—none of them in the north of England. One has more chance now of appealing successfully against a murder one death penalty conviction in Texas before a governor who is facing re-election next week than of overturning a post office urban reinvention closure proposal in the north of England once the consultation has started.

The consultation concerning Brayton Road post office was not wholly good. Even today, there is confusion about whether it is a rural post office or an urban one. That might be grounds for starting the whole process again. It seems to be going completely against the performance and innovation unit report in terms of linking post offices with convenience stores, and there is no postmaster or postmistress who is getting redundancy terms.

I leave one challenge to Postwatch to establish its credibility among post office users. The Post Office subscribes to a target of 3,000 post office closures. I do not think that the Minister has ever subscribed to that target, but I should be interested to know whether he has. Postwatch says privately that 3,000 is too many; it should say that publicly. At least it should say that it will review the matter after the first year of the programme, and judge whether 3,000 is about right or too many. It needs to justify its £8 million or £9 million and £20,000 for a two-day week for chairmen of the various committees by coming to a judgment: is 3,000 right or not?

3.48 pm

I congratulate my hon. Friend the Member for Selby (Mr. Grogan) on having secured the debate, on his energy in the campaign on behalf of Brayton Road post office and its customers and on his record in stopping the trend of decline in the post office network in his own constituency—supported, of course, by the framework that the Government have put in place. I note that coverage in his local newspapers and in The Sunday Times refers to his great commitment in addressing the issue in recent weeks.

I want to assure him again, as I have assured the House, that we are committed to maintaining a viable nationwide network of post offices. We fully recognise their importance as a focal point for local communities, particularly for elderly and less mobile people. The network of post offices serves about 24 million people each week. There are more than 17,000 outlets, which is half as many branches as all the banks and building societies in the country. It is the biggest retail network in Europe.

My hon. Friend referred to the recommendations of the performance and innovation unit, or PIU. Those recommendations form the basis of Government policy for the post office network. He will recall that a key recommendation was that if the Post Office decided that fewer offices were needed in some urban areas, the Government should consider providing funding to ensure that sub-postmasters affected could be adequately compensated for the loss of their business. That is not an issue in the case of Brayton Road post office. We accepted all the recommendations of the PIU. My hon. Friend has already referred to the debate that led to parliamentary approval of the funding, and the programme that is now in place.

My hon. Friend raised the question of the classification of the Brayton Road office. I understand that in the April 2002 list—a copy of which is in the Library—Post Office Ltd. incorrectly classified the office at Brayton road as rural. I assume that that is the list that was faxed to him. I have been told that that was a clerical error that was quickly noticed in May of last year and rectified. The error arose because there was some confusion with the nearby Brayton office, which is in a rural area.

I think that the sequence of dates may be a little awry. The list that I received, which was described as the latest one, is dated June 2002.

I stand corrected. It was my understanding that the Post Office corrected that error in May. However, if one reads the definition that the Post Office uses—which concerns whether an office is in a community of more than 10,000 people—it is clear that the Brayton Road office should be classified as urban. Confusion with the Brayton office led to the incorrect classification.

Post Office Ltd. is ensuring in a properly managed way that the post office network meets the current needs of the communities that it serves, and fits the level of business that the network has going through it. There have been reduction, in post office usage for all sorts of reasons. The great danger would be a process of unmanaged decline in which individual sub-postmasters simply decided to shut down and leave. Such an unmanaged process would be much more damaging to the interests of constituents in urban areas than the one that we are going through.

In the case of my hon. Friend's constituency, I understand that Post Office Ltd. is looking into an application for refurbishment of the Flaxley Road post office, the nearest alternative post office for customers of Brayton Road. I am sure that he will welcome that news and agree that it is important that sub-postmasters be given encouragement to improve and develop their offices in line with the slogan in the PIU report concerning "bigger, better, brighter" urban sub-post offices. That requires the process that we are going through.

Proposals that the Post Office makes for closures under the programme are determined by how many offices are close to each other in an area, the current and projected business volumes and whether individual sub-postmasters have already indicated that they wish to leave the network. Those are by no means the only criteria. The factors that matter to customers are the key; they include the convenience of the other branches, the public transport links, the facilities provided at the alternative branches, access for disabled people at those alternatives and the ability of other branches to absorb the work without damaging the service that they provide.

Post Office officials visit each area where proposals are made. They walk around the area, not drive through it, and they study the configuration of the offices and of local factors before submitting a proposal. The aim is to ensure that it is as easy and convenient as possible for customers to use the alternative post offices. After all, the Post Office wants to maximise the number of customers who continue to use the network, thereby maximising the amount of business from a closing office that is captured by other offices in the network. The interests of the Post Office, which wants to keep as many of its customers as it can, coincide with the interests of my hon. Friend and other hon. Members who want to maximise the convenience for their constituents.

My hon. Friend made a number of points about Postwatch. I do not have details of the car ownership of the members of the regional committee serving his area, or of Postwatch as a whole, but I believe that Postwatch is proving a to be doughty defender of the interests of those to whom he referred—those who do not use cars, those with mobility problems and those who are disabled. I do not agree that Postwatch is solely a business-focused organisation. I shall provide him with more information in order to substantiate my claim.

Postwatch was set up as a consumer watchdog for postal services in order to ensure that post offices, Parcelforce, Royal Mail and any competing postal providers give the best possible service. It is not true to say that there is a cosy relationship between Postwatch and Postcomm. Indeed, those organisations have had some sharp exchanges over the past few months.

Postwatch has a key role in representing the needs of users in the reinvention programme. It has to be consulted on all Post Office proposals; it examines each one and monitors the programme. It is right that it should have the opportunity to consider proposals before they go into the public domain. On day one of the public consultation process, information is provided to the local Member of Parliament. It would not be right to send information to the local Member and ask him to keep it secret for a while—that would put him in a rather invidious position—but it is appropriate that Postwatch should have the chance to consider those proposals on behalf of customers and, if they are not appropriate, to say so immediately, before unnecessary alarm and concern are caused in the area.

At the start of the process, Postwatch set out for me the funding that it would require in order to do that job well. That required the appointment of a number of field advisers. It has appointed field advisers throughout my hon. Friend's region to look in detail at each proposal, and that includes local visits. The field advisers have the resources necessary to do the job. The Postwatch budget for the current year includes the additional funding in full, and staff have been recruited accordingly.

We made that commitment because we recognised that the Postwatch contribution is essential for the programme to be successful. I have frequent contact with Postwatch, and I have been to its headquarters to see it in action. I assure my hon. Friend that it demonstrated the capability and the commitment to being effective in its role of ensuring that Post Office decisions are in the best long-term interests of customers.

Postwatch has accepted the findings of the PIU report—it states that changes to the urban network are needed to achieve economic viability—but, although it does not oppose the principles behind the programme, it needs to set the aims of Post Office Ltd. against the needs of customers in order to ensure that the latter are paramount; and it will monitor carefully the implementation of the process.

I understand the point that my hon. Friend made about the code of practice on post office closures and relocations. Postwatch has worked with the Post Office to ensure that all the publicity material on urban reinvention proposals has been written in plain English, is as accessible as possible and contains the information that people will need in order to evaluate the proposals.

I understand the strength of feeling that has been expressed on the matter and we shall watch closely as the programme goes—

Petrol Prices (Rural Areas)

4 pm

I am grateful for this opportunity to highlight the ongoing and increasingly heavy burden borne by those living in remote rural areas in respect of the differential cost of petrol and diesel, and to suggest to the Minister some solutions that the Government might profitably explore. My remarks will of necessity draw on my experience in my constituency in the far north of the highlands, but I believe that much of what I have to say is equally relevant to remote rural areas in parts of England and Wales.

My hon. Friend the Member for Orkney and Shetland (Mr. Carmichael) has intimated to me that he might like to intervene at some point, and I understand that he has also let the Minister know that that is a possibility. I welcome his support—his constituents share the problems that my constituents face, and he has had similar experiences.

Although I wish to draw attention to the differential in price between urban and suburban areas and remote rural areas, I do not make any point at all in respect of the overall cost of fuel in this country, which is a quite separate debate that I do not want to get into. In broad terms, the differential over the past few years has ranged between 8p per litre and 15p per litre, but seems to average out at around 10p per litre. I had my office ring round a selection of garages in my constituency today, which has shown that, for example, there is a 9p differential between all the garages in Wick and Thurso and those in Inverness. There is a further 2p or 3p differential between Inverness and central belt garages. When one moves to even more rural sites in Caithness and, in particular, Sutherland and the north coast, the differential today rises to between 12p and 13p.

Very similar figures were shown by a study that my predecessor carried out in October 2000, and a further study by EKOS Ltd. in January 2000, which Highlands and Islands Enterprise and the Highland council commissioned, also showed similar results. There is not really any argument about what the differential is roughly, and it has been there for some time.

To put across the effect of the differential, I quote the EKOS report, which says:
"The total additional expenditures per annum on motoring by Highlands and Islands households, due to higher motoring costs as a whole, are approximately £88 million. This equates to approaching 3 per cent. of the region's Gross Domestic Product. Of this, £17.8 million per annum is attributable to higher fuel prices, of which approximately £2.7 million is in the form of additional VAT paid because of the higher fuel prices in the region.
This level of expenditure is significant. If the £17.8 million was diverted to general expenditures, it would create 592 FTEs"—
full-time equivalent jobs—
"within the Highlands and Islands economy."
The same report estimates both that the average income in the highland area is much lower than in the rest of Scotland and that prices are higher. In consequence, highland residents have 76p to spend on goods and services for every £1 that the average Scottish resident has. In other words, highland residents are 24 per cent. worse off. However, those very people must now pay some 10 to 15 per cent. more for their fuel.

It is of course a perfectly acceptable policy to pursue higher prices in order to persuade people to use their cars less and to move to public transport. In urban and suburban areas there are regular trains, buses and tubes. However, there arc many areas in the far north where there is no public transport and where it is unlikely that the introduction of meaningful public transport will either be economic or make environmental sense. A car is therefore a necessity for residents in remote areas. They have no alternative, yet those people on the lowest incomes, who have no choice, have to bear the heaviest burden. The Minister is sympathetic to my point of view, as he said in a Finance Bill Committee:
"We have always recognised that for many people, especially in rural areas, car ownership is a necessity rather than a luxury."—[Official Report, Standing Committee H, 9 May 2000; c. 57.]
I hope that I might elicit some similar sympathy from him today.

The problem is not with the forecourt operators. As the two Office of Fair Trading reports into the highland area show, a higher margin is required in remote areas to give sufficient cash profit to cover fixed costs due to lower volumes in those areas. There is a double whammy, as the densely populated areas benefit from cut-throat competition between oil companies and superstores. It is a case of market failure, which necessitates a Government solution.

The Government have put in a place a scheme for lower vehicle excise duty. However, it is not specifically targeted at rural areas and is based on smaller, more fuel-efficient cars, irrespective of where people live. Yet as I have shown, people in remote areas have the least buying power and are the least likely to be able to afford to buy the new, fuel-efficient cars to which the lower VED applies. Furthermore, crofters and farmers are more likely to require larger vehicles to tow their produce to market. Even if the VED for rural areas were to be zero, the cost differential would still leave people worst off, as the average differential paid annually is estimated to be at least more than double current vehicle excise duty. Offering a rebate on VED will not solve the problem. Pump prices have to come down.

I suggest three possibilities to the Minister: first, a simple reduction in value added tax. Because of higher pump prices, residents of remote rural areas pay on average about 2p to 3p a litre more of the VAT element. If VAT on fuel in remote areas were reduced to about 5 per cent., it would put pump prices at the same level as in urban and suburban areas. I am certain that the Treasury response will, as always, be a resounding no, and probably Ministers will cite European Union rules. However, my brief research into the matter revealed some sound precedents in the EU to allow such a reduction, although I shall not cite them, as time is short.

My second solution is of a similar nature: a reduction in excise duty, which is clearly possible under EU rules. The preamble and article 8, paragraphs 4 and 5, of directive 92/81/EEC, and directive 92/82/EEC, specifically permit derogations for remote and rural areas. I put that to the Treasury in a letter, which was answered by the then Chief Secretary on 1 October 2001. His response, not surprisingly, was that the EU would not allow it. My subsequent research shows that although it may be difficult, it is perfectly possible, and I ask the Government at least to explore the matter and not rest with a "non" from the Treasury.

An argument against both schemes might be the difficulty in defining areas, but in my constituency an examination of postcodes shows that they could be used to devise a reasonably coherent scheme. Of course, there will always be anomalies on the margin but they should not spoil the scheme's potential for greater good.

The third alternative does not apply specifically to the remote rural areas as it covers the retailing of petrol in the whole country: it is to review upstream competition. In Australia, oil companies are not allowed to own forecourts and in America the number that they may own is severely limited. A previous Government recognised that the vertical integration of producer and retailer leads to poor competition practices. The obvious example is that of the pubs and brewers, the latter of which from 1989 onwards were forced to divest themselves of their tied houses. The Government should consider a similar divorce between the oil companies and forecourts, thereby producing price transparency between the refining point and wholesale point—an area that is currently decidedly obscure.

My requests to the Minister are straightforward. First, will he accept the severity of the problem on remote rural areas, where public transport is not an option, people need a car to go about their daily business and they suffer social exclusion by being unable to use their car as often as they would like? Will he understand that vehicle excise duty rebates do not, and will not, offer a solution, and that that is not a fault of the retailers but an exceptional market failure?

Secondly, will the Minister agree to examine the solutions that I have proposed? Will the Government at least explore with the EU the possibility of either VAT or excise duty cuts and not simply rest, as we often do, on a no from the Treasury? Thirdly, will the Government look at what could be done on the upstream market?

Since a noteworthy Labour Government in the 1960s adopted Jo Grimond's idea and created the Highlands and Islands development board, which has been succeeded by Highlands and Islands Enterprise, billions have been spent, rightly, in trying to ensure sustainable populations and viable economies in our remote areas. I can think of no measure that would aid that objective as effectively and cost-efficiently as eliminating the cruel and unnecessary burden of fuel cost differentials in remote areas. I ask the Minister to consider those points seriously.

4.12 pm

I congratulate my hon. Friend the Member for Caithness, Sutherland and Easter Ross (John Thurso) not only on securing this debate, but on the thoroughgoing and exceptionally well-researched way in which he presented his case to the Chamber. It was a tour de force of the subject.

I want to bring a more northerly perspective to bear on the debate, because the fuel prices are viewed with great frustration by my constituents. In September 2000, when the country was almost brought to its knees by fuel protesters, my constituents were delighted to see the price of fuel on the national agenda and at the top of the 6 o'clock news every night. However, they would still have loved to pay the prices that those people were complaining about. That remains the feeling today, when the spotlight is off and the glare of publicity is away from the issue. It remains a pressing problem in my constituency, as it is for people in all the remotest communities in this country.

The price of fuel is an issue of social inclusion. Sadly, the people who live in the remotest parts of my constituency often have only one part-time job or a series of part-time jobs, survive on a crofting income, which is low by definition, or are on a fixed income such as a state pension. Those people are hit hardest by the absence of public transport, and their reliance in turn on the private car as their only means of getting to and from their home means that they are excluded from the benefits of supermarkets that might be in the nearest town some 15 or 20 miles away.

My hon. Friend referred to the Minister having sympathy; I hope that he still feels the sympathy that he exhibited in the past, and that he will now add to it the vital ingredient, which is the political will to see this issue, and solutions along the lines suggested by my hon. Friend, taken seriously once and for all.

4.14 pm

I listened with great interest to the case that was ably made by the hon. Member for Caithness, Sutherland and Easter Ross (John Thurso). I can reaffirm the sympathy that I have expressed on these issues on previous occasions, and the Government's view that a car is essential for many people in rural areas and certainly not a luxury. As a Department of Trade and Industry Minister, I cannot answer questions on the taxation issues that he raised. When I made my previous comments, I was a Treasury Minister. However, I can say that the hon. Gentleman should not underestimate the significant barriers that there would be to introducing a differential scheme of the type that he proposes. I shall leave it to my colleagues who are responsible for those matters to deal with the points that he raised.

It is worth considering how the price of fuel is made up. The largest element in the cost of a litre of fuel is excise duty. Then there is value added tax and the wholesale price—the Rotterdam or Platts price—which accounts for 12p to 15p. The cost of transportation is between 1p and 1.5p per litre, depending on location.

Sometimes people think that the problem that we are debating results from transport costs, but that is not the case. The real source was identified by the hon. Gentleman: the typically very different volumes of sales in urban and rural locations. The largest urban sites sell up to 20 million litres a year, whereas a rural site may well sell less than 1 million litres a year. Often, it will be significantly less than that. As the hon. Gentleman said, a comparable level of overheads has to be recovered from a lower volume of sales. That is essentially where the differential arises.

The UK retail petrol and diesel prices were relatively flat for most of 2002, with fluctuations in retail margins typically absorbing changes in wholesale prices. However, as wholesale prices increased during the latter part of 2002 and early this year, margins were squeezed and retail prices rose by more than 5p a litre as a result. The end of winter, lower world crude oil prices and greater stability in the middle east have helped to reduce pressure on wholesale petrol and diesel prices since late March. That has allowed UK retail margins to recover and retail prices to fall back to levels slightly above those of this time last year.

The hon. Gentleman asked an interesting question about competition issues and whether a competition problem was part of the background to the phenomenon of higher fuel prices in rural areas. The main legislation governing competition issues is the Competition Act 1998. Under that, the Office of Fair Trading has responsibilities for those issues. In the past decade or so, the OFT has investigated the retail oil industry on a number of occasions and specifically considered the questions that have featured in this debate. However, its investigations did not find malpractice on any of those occasions.

Under the Act, the OFT does not have powers to rule on price as such, because that is for the market to determine, but it has powers to act against dominant businesses that abuse their position, which can include using unfairly low pricing to force competition out of the market. If there is a competition problem, there is a mechanism in legislation to address that. The OFT has the necessary tools and has used them in the instances to which the hon. Gentleman referred in which there has been action in other industries. The OFT concluded, however, that it was not necessary to use those tools in this case. On the third of the remedies that the hon. Gentleman suggested, the OFT conclusion was that there is no problem of competition.

I specifically referred to those reports because it is not the retail end that concerns me. I obviously did not make it clear that I am concerned about the pre-retail price—the wholesale price—from the refiner to the wholesaler. Why can the oil companies always compete with a superstore at a vastly lower price when they have to, but cannot compete when they have to go to a remote area? I contend that the opaqueness in price, if it exists, exists at an earlier level in the chain.

The hon. Gentleman identified the answer: the typically lower volume of sales in outlets in rural areas. I believe that that is the reason for the differential. There is no competition problem.

My Department has been doing several things to deal with the problem. We recognise that this is an issue for rural areas. My hon. Friend the Minister for Energy and Construction instigated the Downstream Oil Industry Forum, which met in July and November last year and is due to meet again in September. The forum was set up to examine several important industry issues, one of which was the service to the rural motorist. It is made up of all parts of the downstream industry from the oil refinery to the fuel pump. It includes the Petrol Retailers Association, the UK Petroleum Industry Association, the Association of UK Oil Independents, the Tank Storage Association, and GarageWatch—the trade association for smaller operators. All the major oil refiners and companies active in the UK also attend, as do representatives from the Scottish Executive, the Welsh Assembly, the Department for Environment, Food and Rural Affairs and the Countryside Agency.

At the second forum meeting, it was decided that there should be a rural taskforce to consider how best to support the rural motorist and petrol retailer by investigating methods and approaches that would help to reduce the overhead costs to this part of the sector. That follows work pioneered by the Scottish Executive, with which I am sure hon. Members who have spoken are familiar.

The taskforce comprises a sub-group from the main forum. It has now met twice and another meeting is due at the end of September. It has been investigating several issues that all parts of the industry believe to be important. Its work is aimed especially at reducing the capital expenditure required to operate a rural petrol station, to reduce the risk of the site closing and possibly to reduce the price of petrol to the rural motorist, given that I believe that we have agreed today that overheads are the root of the difficulty.

If the taskforce can identify less expensive ways of running rural petrol stations, surely that same benefit could be applied in some way to the city? It does not absolve the Government from answering whether they are willing in principle to consider using their tax-varying powers to create a level playing field if the taskforce can find no other way to achieve that.

Let me explain how the measures that we are considering address the challenges of rural petrol stations. First, them is the issue of vapour recovery at petrol stations during the delivery of petrol to the underground tanks. A European Union directive covers the collection of vapour from distribution terminals and petrol stations. That has been phased in over several years. The last implementation date covers the very low throughput sites typically found in rural areas.

This Monday, my officials met to discuss the issue in detail to obtain an exemption for these very low volume throughput sites: that is, sites with sales of fewer than 500,000 litres a year. The technical justification for that would be the negligible impact on air quality, due to the low quantity of vapour and the rural location. The directive recognised that possibility and gave member states the option of a derogation. An environmental impact assessment is being conducted on the possibility of such a derogation, and a final decision on that will be taken in the autumn, which will give sufficient time, if the decision is taken to proceed, to save the rural sites from the necessity of investing in the collection technology that would need to be put in place.

The second issue is the maintenance and repair of underground tanks. Replacing corroded underground tanks is expensive and is a serious issue for many rural sites. Most such sites were opened 40 or more years ago and there have been problems with corrosion, which is beginning to cause contamination of the soil and groundwater. There is a cheaper alternative to replacement, which involves lining the tank with a plastic coating. That is a tried and tested technology, but many local authorities are hesitant about accepting lining and feel more confident about requiring owners to replace the underground tanks, which incurs a substantial capital cost. That requirement frequently means that the petrol station has to close down, or has to increase its petrol prices to cover the tank replacement cost.

My officials are discussing the issue with the Health and Safety Executive. It is a complex subject requiring detailed technical knowledge of soil types and groundwater flows. There is also the issue of identifying suitable competent contractors capable of carrying out the tank lining in a safe way that provides reassurance on environmental concerns. The Health and Safety Executive is working to support local authorities in making assessments in line with the guidance, which is its responsibility, and the Scottish Environment Protection Agency is fulfilling that role in Scotland.

I did not anticipate that I would intervene, but this is a subject on which I have campaigned for a Long while and I am pleased to hear what the Minister is saying about it. Is he saying that there will be financial assistance for those hard-pressed rural garages, similar to the package made available by the Scottish Parliament?

No, I am not saying that. I am describing a range of matters that are being examined by the rural forum that has been set up. The forum is examining issues that are particularly difficult for rural petrol stations, and the two issues that I halve cited fall into that category. We are also looking at how to address those issues and tackle what is undoubtedly a serious problem in rural areas. The problem is not just the high price of petrol, but the fact that petrol stations are closing down when action could be taken to enable them to continue to operate.

Those technical issues are good examples of my Department working with other Departments and with the Scottish Executive to reduce the legislative burden on small, rural petrol stations. Without those two initiatives, the price of petrol on rural sites could increase further. We are not talking about a huge increase—perhaps 0.5p a litre—but that might have a significant effect, which we would be keen to avoid, if possible.

We have also been working with the Countryside Agency to establish a definition of a "rural petrol station". Such a definition exists in Scotland and is applied by the Scottish Executive for the purposes to which the hon. Gentleman referred. However, the difficulty is that few petrol stations in England would fit the definition as applied in Scotland. We want to carry out benchmarking in England and need to collect data on the number of petrol stations concerned, so we are working on what the appropriate definition would be.

Does the Minister mean Wales as well, because surely the issues are the same?

Yes. My understanding is that that work will cover Wales—undoubtedly there are pressing issues of that sort in Wales.

Another issue that has been raised in the rural taskforce concerns how to develop the skills of people working in rural petrol stations. The Petrol Retailers Association and GarageWatch have worked with Cogent, the new sector skills council, to determine the skill sets required by rural petrol retailers. If we can encourage the development of skills, retailers may be able to diversify their businesses, increase profits and maintain lower petrol prices. That work is continuing.

The rural taskforce also recognises that small businesses often require guidance on how to approach appropriate organisations for financial support and, based on what has been happening in Scotland, DEFRA and the Countryside Agency have worked together to provide clear guidance on the types of projects that could be supported under the vital villages initiative.

It being half-past Four o'clock, the motion for the Adjournment of the sitting lapsed, without Question put.