I have a brief statement to make to the House. I must inform Members that I have received the following letter from the Clerk of the House:

“Dear Mr Speaker,

As I have previously indicated to you, I would wish to retire on 30th September this year, on the 41st anniversary of my first joining the service of the House.

The procedural and management responsibilities which are now combined in the post of Clerk of the House present a formidable challenge. But I have been able to rely on the high quality and commitment of the staff at every level in the House and on the strengths of my fellow members of the Board of Management, who bring a richly diverse range of skills and experience to their work for Parliament. I have also been greatly assisted by the moral and practical support which I have received from you, from the Deputy Speakers, and from your colleagues on the House of Commons Commission.

The House of Commons is a much criticised institution; and its own Members are often as critical as anyone. But whatever its perceived failings, the House remains at the centre of political and public life and is the envy of most other countries in the world. Its durability and occasional bloody-mindedness have made, and continue to make, a crucial contribution to the country’s stability and prosperity. I have never for a moment regretted making my career in the House, and I am very grateful for having had the opportunity to serve as its Clerk.

Yours sincerely,

Roger Sands”.

Members on both sides of the House who have benefited from the sound and impartial advice of the Clerk, Sir Roger Sands, will be sorry to learn from your announcement, Mr. Speaker, that he is due to retire. As I have no doubt that Members on both sides of the House will wish to express their appreciation of his service to the House, I shall table a motion relating to his retirement before the House rises for the summer recess, to give them an opportunity to pay an appropriate tribute to him.

In the White Paper “Our health, our care, our say: a new direction for community services”, published in January, we outlined our proposals to create a new generation of community hospitals and services. Today I am announcing that we will make available up to £750 million of public capital investment to realise that vision, and I am publishing guidance on how primary care trusts can access the money. A copy of the guidance has been placed in the Library, and copies are available from the Vote Office.

Developments in medical technology and clinical practice are making it possible to provide far more care in local communities, closer to where people live, and even in people’s own homes. During the unprecedented public consultation for “Our health, our care, our say”, people made it clear that, whenever it is safe and effective, they want more convenient, local and personal services, with more consultations, diagnostic tests and treatments in local facilities. Moving more services out of acute hospitals and into communities will help to improve care for patients, and will deliver better value for money for taxpayers.

We are already making a major investment in GPs’ premises and health and care centres, as well as in community hospitals. A billion pounds of capital has been invested through the NHS local improvement finance trusts alone. We will now take the next step by making up to £150 million of capital available in each of the next five years, starting this year—a total of up to £750 million—for the development of a new generation of community hospitals and services.

The investment capital will be available to PCTs for a wide range of community schemes, including the redevelopment of some existing cottage hospitals. Services could include in-patient and out-patient facilities, diagnostic tests, specialist clinics, minor surgery, health and social care services for people with long-term conditions, dentistry, rehabilitation and palliative care and other services. For people who are seriously ill or injured, or people needing complex treatments, care will of course remain in acute hospitals, where patients can be treated by specialist teams using the most advanced technology.

PCTs that want to use the new investment capital will need to engage fully with local people to ensure that services are truly designed for the needs of patients and users. They will also be expected to work closely with other local partners, including general practices and other NHS services, local councils, voluntary organisations and others in the independent sector, to develop effective plans.

I made it clear in the White Paper that decisions on the long-term future of existing community hospitals should not be made solely in response to short-term budgetary pressures that are not related to the viability of the community facility itself. I have asked strategic health authorities to assure themselves that all PCT proposals for changes to community hospitals are consistent with the long-term strategy of the White Paper: to move care closer to patients’ homes, and to ensure that local people have been properly consulted.

Ultimately, however, changes in the configuration of local health care services in a particular area require local decision making. Primary care trusts, with their broad perspective across hospital, community and primary care, are best placed to make those decisions in consultation with local people and their SHAs. The new investment fund will make it easier for PCTs to establish the right services in the right places for the people whom they serve.

PCTs will be able to choose how they use the newly available capital, investing it simply as public capital, extending the scope of their local investment finance trust schemes or adopting a new approach: the community venture, a more flexible joint venture approach that will give a wider range of public, voluntary and private parties an opportunity to pool their skills, or indeed their investment, for the benefit of the local community. It will, however, be for PCTs to decide which model is adopted. Whichever one is chosen, PCTs will of course need to demonstrate that investment proposals are sustainable and can be funded over the longer term. As we said in the White Paper, we expect to see a strategic shift in how the NHS provides care, with a redirection of funding to support the provision of more convenient services in local communities.

PCTs that already have advanced plans for community services, as many have, should submit them to their strategic health authorities by the end of September. For schemes that are ready to start in the next financial year, proposals should reach the health authorities by the end of December. After that, there will be a regular rolling programme managed through the SHAs.

This new programme builds on the unprecedented investment that we have already made in the NHS. It will help to ensure that there are even better services for patients, with better value for money, and I commend it to the House.

I am, of course, grateful for advance sight of the Secretary of State’s statement, although it has all been trailed in the press beforehand, as usual. The Secretary of State once again claims that she is the saviour of community hospitals. [Laughter.] Well, Labour Ministers have been saying that for four years. The right hon. Member for Darlington (Mr. Milburn) said exactly the same thing in 2002. However, within recent months 80 community hospitals have been under threat of closure or partial closure.

In January, the Secretary of State said that community hospitals would be safeguarded by the White Paper. Why has that had so little positive effect? We discovered last week with the abortive notice in the Official Journal of the European Union that the Secretary of State’s policy is not even understood in her own Department. As a result of the White Paper, we also know that her policy is not understood or not listened to across the NHS. Why are they simply ignoring her?

The threat to community hospitals is little diminished since January. For example, in Wiltshire, services have already been lost at Westbury and Bradford-upon-Avon hospitals, and there are threats to Warminster, Melksham and Trowbridge. The Secretary of State talked about the review process, but the strategic health authority in Suffolk did the review process on proposals in the area and said that it would close Walnuttree hospital, St Leonards hospital, the Sage day hospital in Newmarket, Hartismere hospital, the Hayward day hospital in Ipswich and Bartlet hospital, and reduce services at Aldeburgh hospital. That is the result of the review process that that Secretary of State says will happen as a consequence of her White Paper.

The Secretary of State now offers a capital fund. In some circumstances, capital for rebuilding or refurbishment will be useful and I welcome that. However, can the Secretary of State explain what proportion of this fund will go into providing health centres—her so-called polyclinics—for GPs and out-patients, rather than existing community hospitals that continue to provide in-patient services? Last year the NHS had capital that it did not spend. The underspend on capital budgets by the NHS last year was £1,165 million. The NHS has capital: it is overspending on revenue. PCTs are cutting revenue and contracts. Community hospitals are closing because their primary care trusts will not commission services from them, because of the revenue shortfall. Can the Secretary of State explain how a capital fund can be a solution to a revenue problem?

If the Secretary of State wanted to support community hospitals in the way they need it, she would ensure that the plan in the White Paper for unbundling the tariff happened now—not in 2007-08. Will she do that? Will she also ensure that the tariff is split so that part of the payment for patients who are stepped down from the acute sector goes to the community hospitals where they are sent? Will she also confirm that decisions about community hospitals will be reviewed in the way that she describes and will be made specifically in consultation with, and with the agreement of—if they offer it—local GPs? In theory, from the end of this year, practice-based commissioning should mean that GPs decide where they want to commission services, but the PCTs are pre-empting that and closing services so that they will not be available for GPs to send patients to.

The Secretary of State said that the fund would be available to the third sector, including charities. I hope that the whole range of charities and voluntary organisations will be able to bid. She mentioned community organisations and I hope that she will make it clear that local private sector and voluntary partnerships can work with GPs to take over community hospitals. Many such hospitals used to be locally owned, because they were established through public subscription. Will the Secretary of State ensure that the assets can be transferred to the third sector and out of the NHS, at a high discount, so that they can be owned and supported locally? That will be as important as the ability to bid on the fund.

No one can say that health care provision will not change. Care closer to home is a legitimate objective and has been for many years; that is what community hospitals offer. I know from my special interest in strokes that that is precisely what community hospitals can do; that kind of intermediate care bed is exactly what people need to step down at an early stage from an acute hospital. Under this Government, the number of such beds increased between 2002 and 2004-05, but they are now being shut down. There is a complete reversal of approach by the Government.

Why? Because community hospitals are being caught in a financial squeeze between rising costs in the acute sector and the cost of meeting GP contracts. We told the Secretary of State last year—she admitted it in January—that short-term financial pressures are forcing decisions that are contrary to the long-term interests of the NHS. Unfortunately, that is still happening and she needs to take more measures to stop it. She must give community hospitals the chance to prove their worth and GPs the chance to decide where patients are treated, and she must tell the House why the promises made in January have yet to be fulfilled.

The Secretary of State did not have the boldness to tell the House today what she told the Sunday Express last Sunday when she said:

“We want to make it as easy to access NHS treatment as it is to get a pint of milk. You can pick it up on your doorstep or go to a supermarket…All that’s needed is a bit of cash and encouragement.”

Well, back on Planet Earth we know what is really going on. I know what is happening in my own constituency, where services and wards are being shut at Brookfields community hospital in Cambridge; the young people’s mental health service is being shut down and the PCT is refusing to fund the hospice at home service. That is what is happening on Planet Earth. The Secretary of State should come back to Planet Earth and resolve those problems for community hospitals.

I thank the hon. Gentleman for a reply that was somewhat longer than my initial statement—[Hon. Members: “No, it wasn’t.”] Indeed, it was—[Interruption.] The Leader of the House was counting and I shall rely on him in the matter.

The hon. Member for South Cambridgeshire (Mr. Lansley) talked as though no new community hospitals and facilities had been opened under our Government, but thanks to the investment that we have been making, which Opposition Members voted against, new community hospitals have been opening in recent years; for instance, Withington hospital in south Manchester, Prospect Park in Berkshire, which I visited last week and which offers superb intermediate care, the new community hospitals in Edgware and Willesden and many others.

It is absurd of the hon. Gentleman to imply, as I think he is trying to do, that every one of the existing community hospitals is fit for a modern health service. The reality is that many are not. We have many existing cottage and community hospitals where, despite the absolute dedication of the staff, they are struggling with Victorian workhouse facilities that are wholly unsuitable in a modern health service. In some cases—

Name them!

Let me give the hon. Gentleman the example of Norwich, which I visited a couple of weeks ago, where the local director of community services and his staff explained that they had had too many community hospitals and too many community hospital beds. They have reorganised services and closed two community hospitals, taken beds from a third and put the services into a new facility in an existing hospital. They have put more staff into the community, so they are looking after more patients in their own homes, as well as in the community hospital. They are giving patients better care, the staff have greater job satisfaction and they are saving money that can be invested in other services. That is precisely what the NHS in Suffolk, Norfolk, Gloucestershire, Surrey, and many other parts of the country that have been overspending, needs to do to provide better services for patients, with more modern, but quite possibly fewer, community hospital facilities and more services delivered to people in their own communities, all of it fit for patients in the modern world.

The hon. Gentleman asked how a capital fund would help deal with revenue shortfalls or overspending in some parts of the country. Yesterday, I had the opportunity to meet NHS colleagues, my hon. Friend the Member for Selby (Mr. Grogan) and people from the wider Yorkshire area. Their primary care trust has financial problems, but they are clear that, by reorganising services that are currently spread across three or four NHS and local council sites and putting them into one new community hospital, enabled by our new capital fund for which they will bid, they will be able to give patients better services closer to home and save the money that they need to save to live within their very substantially increased means.

The hon. Member for South Cambridgeshire mentioned unbundling the tariff. Let me restate our commitment to unbundling the tariff: we are working on that, and we will introduce a pilot next year. But it is already perfectly possible for PCTs to contract outside the tariff, thereby perhaps getting better value for money for the community services that they need. In any good consultation on new community services and hospitals, GPs will already be involved; they have to be involved, of course, particularly in anticipation of practice-based commissioning.

The full range of partners certainly includes the private sector. For instance, it delivers MRI scans in Withington community hospital in south Manchester, which has brought down the waiting time for such scans from months in some cases to just two weeks for most patients, with the report delivered to the GP 48 hours later. That is a superb service. The future of community hospitals can also certainly include the transfer of assets, where that is appropriate and agreed by the local NHS, to a local community charitable trust. That is precisely what is happening with the Wells-on-Sea community facility, which was proposed for closure, but which will now house community facilities. Through such organisations, the voluntary sector and the local community has an enormously important role to play in modern community hospitals.

The hon. Gentleman ended his speech by scorning the idea of more convenient medical services. The reality is that, with modern medical technology, it is now possible to offer, for instance, some chemotherapy services for cancer patients not only in a community hospital or health and care centre, but in their own home, which is far more convenient and much better for such patients. Renal dialysis provides another good example of that. Thanks to the investment that we are making in the NHS, this capital fund will enable that new generation of services to be provided to our patients.

I welcome my right hon. Friend’s statement, but is she aware of the “breathing space” project, which is being built in Rotherham? It will bring services for COPD—chronic obstructive pulmonary disease—patients in both the acute and primary sectors under one roof, so that we can treat such lung disease a lot better than it has been treated before. Although that means that the local district general hospital will lose beds and some services, as consultants will work in other places, it will lead to a massive improvement in patient care. Will my right hon. Friend make sure that patients—and the work force, as well—are consulted in all areas where we will have such changes to replace the great, big, all-singing, all-dancing district general hospitals of the past, which many patients do not need?

My right hon. Friend is absolutely right. We can move many services, particularly for patients with long-term conditions such as COPD, into the community and into patients’ own homes. As a result, we will give people better care. My hon. Friend the Member for Doncaster, Central (Ms Winterton), who is the Minister responsible for health services, has confirmed that she has visited the site for the new services mentioned.

In many places, decisions are taken to reduce the number of beds in acute hospitals because those services can be better provided for patients within the community. That also represents better value for money, which means more savings, as Norwich—to give just one example—indicated, so that money can be reinvested in better care for other patients, and also in the costs of some of the extraordinary new drugs that are coming on-stream, but many of which are also pretty expensive.

I thank the Secretary of State for her statement. It is always fascinating to step with her into the parallel world that she inhabits, where shiny new hospitals are delivered to a glad and happy local population.

Something puzzles me about the Secretary of State’s statement. When swathes of community hospitals are closed, the Secretary of State does not come before the House, but when they are about to be opened, she does. Can she explain why the closure of community hospitals is somebody else’s fault, but the opening of them is her responsibility?

Does the Secretary of State envisage that at the end of this process—at the end of her vision—there will be more community hospitals than the Government inherited? Can she also clarify whether she will be counting in her total figure former district general hospitals, such as Frenchay hospital, which will be reduced to a community hospital? Will we find that the Secretary of State comes back to the House to tell us that she has opened Frenchay community hospital, while overlooking the fact that she has closed a district general hospital?

The financing of the new community hospitals might be under the local improvement finance trust—LIFT—private finance initiative, or traditional forms of funding, but does the Secretary of State not accept that there has been much criticism of the value for money of LIFT as recently as this week, and of PFI? Is she confident that trusts will not be saddled with long-term financial burdens on over-the-odds terms, compared with more traditional ways of paying?

Is this process not yet another example of the centralism of this Government? Can the Secretary of State confirm that PCTs will need the permission of health authorities, which will need the permission of Whitehall? Where is the local democratic accountability in this process? Why cannot the Secretary of State let go? Why is there a control-freak tendency, so that when she talks the language of localism what she means is, “Whitehall will decide”?

The hon. Gentleman, for whom I have considerable respect, is talking rubbish today. Whether the local NHS decides to close certain community facilities because they are no longer the right ones for local people, or to open new or refurbished facilities because they are the right ones for local people, should be local decisions. What I, as Secretary of State, am doing is ensuring that the support is in place for such local decisions, and in particular that the capital investment is in place, which many parts of the NHS have told us that they need so that they can reorganise their services—sometimes their existing cottage and community hospitals—in order to give better services to patients.

The hon. Gentleman needs to focus on the services that are being delivered to patients, rather than on the number of buildings or beds, because not only in respect of acute hospitals, but also of some community hospitals, it is better for many patients if community services are taken into their own homes. That was precisely the point that the excellent nursing and care team in the Norwich community hospital made to me: by reducing the number of beds and putting half of the staff into the community, they were able to give intermediate and rehabilitation care to more patients, some of them in the community hospital, and others looked after by community staff in their own homes. Moreover, they had reduced emergency admissions to the acute hospital by more than 600 in the past six months, thus enabling savings of money that can then be reinvested in better care. That is what the hon. Gentleman needs to look at.

Of course I will open community facilities, as I did at Prospect Park in Berkshire last week, regardless of whether they replace an old district general hospital—or, possibly, old community hospitals—or they are simply new hospitals. The test in all of this, which I invite the hon. Gentleman to support, is to get the best services for patients with the best value for patients and for public money.

Blyth community hospital in my constituency is a wonderful community facility, but I have been told on the grapevine—not officially—that the minor emergency centre, which deals with minor injuries, is to close to save money. If we want to bring that sort of care nearer to the people, doing that is not the answer. I remind the Secretary of State that at least 35,000 people depend on this emergency facility; otherwise, they have to go five, six or seven miles to the next nearest hospital.

I am not aware of the details of the situation to which my hon. Friend refers, and as he suggested, at this point it is a rumour rather than a firm proposal.

Will the Secretary of State look into that?

I will, and I know that my hon. Friend will, too.

Of course, one question with minor injuries units is exactly how many local people are using them and whether they therefore offer the best services for the best value for money. I know that my hon. Friend will be closely involved in any consultation on a local proposal, and I will of course examine it and write to him about it.

Does the right hon. Lady realise that last week my constituents received the devastating blow of being told by the United Lincolnshire Hospitals NHS Trust that it proposes to withdraw all acute surgery, the consultant-led accident and emergency department and critical care from Grantham hospital? That news has caused consternation in my constituency, and I hope that I may shortly have the opportunity to speak to the right hon. Lady about it. Does she appreciate that today’s announcement that a capital fund is available for setting up community hospitals will be regarded as incomprehensible—and, indeed, hurtful—by my constituents, who have been told that they are about to lose their first-class district general hospital, even though no other such hospital is nearer than three quarters of an hour away?

There is, of course, an extremely difficult situation in the hon. Gentleman’s constituency in the wider health community. Unfortunately, there are serious deficits resulting from overspending, and the local NHS is having to consider some difficult options, to see how it can continue to offer the best possible services to people within the substantially increased budgets that we have given it. Indeed, other parts of the region are having to hold back on their own spending to compensate for that overspending while the problems there are sorted out. I understand completely the concern expressed by the hon. Gentleman’s constituents and other local people—I have received such correspondence myself—and I will of course meet him to discuss it. But I hope that he will work very closely with the local PCT to make certain that the best decisions are taken to ensure that the NHS in his community lives within its means and, within that very substantial budget, goes on offering the best possible care to his constituents.

Today’s statement will be welcomed by my constituents because it offers the best possibility of further development at Broadgreen hospital and, potentially, a much better future for the hospital in the constituency of my hon. Friend, and neighbour, the Member for Liverpool, Garston (Maria Eagle). Does my right hon. Friend agree, however, that the success of this project, which is very welcome, will depend on good quality commissioning locally? Will she therefore undertake to look at the GP contract? As GPs take on greater responsibility for commissioning locally, we will require them to be transparent and accountable in undertaking such commissioning, so that they can continually demonstrate that they are acting in the best interests of the patients whom they are there to serve.

My right hon. Friend makes an extremely important point, and I hope that her local PCT will come forward with a proposal to use some of the new capital investment. She is absolutely right about the accountability of GP practices for decisions made under practice-based commissioning. We have already made it clear that it is the PCT’s responsibility to ensure proper transparency and accountability to local people—and, ultimately, to this House—in respect of decisions taken by GPs and the PCT on how the money is spent, and from where services are commissioned.

Is the Secretary of State aware that at a public meeting last September in my constituency, which I chaired, her local NHS officials told us that Red House hospital—that is, Harpenden memorial hospital—was safe, but that eight months later they announced that it was to close all beds in order to save £1 million a year? Can she confirm that her fund will not in any way help to avert that, and that when the East and North Hertfordshire NHS Trust, in pursuit of its obligation to cut spending by a quarter over the next three years—from £260 million to £200 million—downgrades the district hospital, she will not claim that that is somehow creating a new community hospital? And will she come to our constituencies and try to convince us of the value of that move?

Far from cutting the budget for the East and North Hertfordshire NHS Trust, we are asking it to live within the very substantially increased budget that it has received over the years—thanks to the investment that we have made, which the right hon. Gentleman voted against. We have put more money than ever before into the NHS, in his area and everywhere else, but we do expect the NHS in Hertfordshire to live within its means. It should not expect the NHS in other parts of the country to bail out its overspending at the expense of patients in the rest of the country, where the NHS is balancing or even underspending on its budgets. This issue has to be sorted out and difficult decisions will have to be made across Bedfordshire and Hertfordshire to ensure that the local health community has the right services in the right facilities, giving the best possible value for money. I am sure that the right hon. Gentleman will continue to take part in the consultation that the local PCTs are having to undertake, in order to ensure that the best decisions are made, but that will be done within the framework of the increased budget that we have made available.

I warmly welcome the Secretary of State’s statement about extra funding for small hospitals, but what advice has she got for the health trusts in east Kent that propose to strip away even basic services from Buckland hospital in Dover? That will almost certainly result in its closure, before it has an opportunity to look at the alternatives that such extra funding could provide.

As I pointed out earlier, I have been saying for some months to PCTs that they need to look at the longer-term strategy. In many cases, the local NHS is finding that by reorganising services—by putting more services into people’s homes, for example, and sometimes by bringing together provision from several different sites—it can provide a better quality of care, but with better value for money as well. I know that my hon. Friend, who is very concerned about this issue, will ensure that his constituents’ voices are heard in the consultation that has to take place whenever any such reconfiguration of services is proposed.

On the question of making an early bid for some of the investment fund in order to rebuild Surbiton hospital, is the Secretary of State aware that Whitehall’s capital rules on the use of NHS moneys generated from the sale of surplus land and buildings in the local community prevent PCTs from taking up some of the best options to fund, or part-fund, the rebuilding of community hospitals? Will she look again at those rules, so that PCTs such as Kingston’s can use their own capital more efficiently, as well as gaining from her fund?

The hon. Gentleman raises a very important point, and some PCTs have made representations to me about the difficulties associated with the current rules on disposal of assets. We need to look at that issue, and, as the hon. Gentleman will probably remember, I have already asked Sir Michael Lyons and the Audit Commission to look independently at the financial framework within which the NHS operates. I am waiting for their report and the recommendations that I hope they will make to ensure that we have the best possible framework, giving PCTs the real flexibility that they need to reorganise services and to use their assets in the best possible way for the benefit of patients.

North Cheshire Hospitals NHS Trust, in my constituency, is considering reconfiguring services between Halton and Warrington, and the Mid Cheshire Hospitals NHS Trust is looking at reconfiguring services between the Victoria infirmary, in Northwich, and Leighton. Much of what is proposed is very welcome, but the real concern locally—in both towns—is that Halton could lose in-patient activity to Warrington, and that the Victoria infirmary could lose it to Leighton. The proposal affects Leighton because Victoria infirmary needs capital investment of some £2 million to bring its services up to standard. Will this fund help in that regard?

As I have said, the fund is for community hospital provision—and I think that my hon. Friend is referring to the need for upgrading an acute hospital facility. [Interruption.] Where the aim is to upgrade facilities in an existing hospital to provide better community health services and to meet the strategy set out in the White Paper, the fund will be available. The details—the criteria that we will use—are all set out in the guidance to which I referred.

Is the Secretary of State not alarmed at the huge gap that there obviously is between the profession of a commitment to community hospitals that she makes here, and the near universal impression out in the country that community hospitals are under almost permanent threat? Is that impression surprising, given that the Craven, Harrogate and Rural District Primary Care Trust, the chief executive of which she saw yesterday, has halved, literally overnight, the number of beds at Castleberg and Ripon community hospitals, reducing them to below the historical level of demand? Will the right hon. Lady please accelerate the review of the perverse funding system whereby PCTs buy a package of care at the acute hospital and a certain number of days’ stay, and if a patient is then transferred to the community hospital the funds do not follow that patient within the tariff, and the PCT has to find additional funds? That is the lifeblood that is being cut off from community hospitals, and that process is responsible for the halving of capacity at my community hospital.

I think that if the right hon. Gentleman looks at the figures, he will find that large numbers of community and cottage hospitals closed in the years when his party was in government. He will also find that at least as many new community hospitals have been opened as have closed in the years of our Government. As for funding, he is right to say that the tariffs that we pay hospitals for acute services do, depending on the operation concerned, include an element of rehabilitation, although often not the full costs of rehabilitation. That is one of the reasons we are working on unbundling the budget, but even within the current system primary care trusts have considerable flexibility. A large part of NHS funding is not spent on acute services to which the tariff applies, and can be used outside the tariff with all the flexibility that primary care trusts need to deliver services within community hospitals and other community settings.

I welcome my right hon. Friend’s statement, which provides the possibility of exciting developments in local services in Hastings and Rye, but may I put it to her that one of the problems with that yet further increased choice is that hospital trusts are saying that they are losing the critical mass of providing services in the hospitals? Proposals such as closing maternity units and accident and emergency departments are a result of that. What can she do to ensure that the critical mass is not lost in district hospitals?

What we will ensure is that patients have more choice and control over their health services. That is very much what the public want, and what a modern health service ought to deliver. We will also make sure that services are available in the best possible way, with the best value for money. This is not about saying, “Let’s keep everything as it is,” in particular district general hospitals. It is about looking at which services can be better delivered—better for patients, that is—within the community closer to home, and which services, because of their medical complexity, need to be delivered in a regional or even national specialist centre. Where the issue about critical mass relates to the provision of an essential service—particularly accident and emergency—it is the responsibility of the primary care trust and the strategic health authority to make sure that the essential service is not threatened and that the right relationship continues between the accident and emergency service and, particularly, orthopaedics and trauma services.

The Secretary of State mentioned the age of some community hospitals. Is she aware of the case of Potters Bar community hospital? It is a modern, purpose-built facility that is barely 10 years old, yet it is due to lose 15 of its 45 beds when a significant part of the hospital is put to other uses as a result of revenue shortfalls suffered by the primary care trust. Is there anything in the statement to help Potters Bar hospital, or to help the primary care trust with its financial problems? Does the Secretary of State have any other plans to help Potters Bar hospital, or are we to have the ludicrous situation of an excellent modern facility closing for the very type of short-term reasons that the Secretary of State says she wants to avoid?

The hon. Gentleman has just referred to the fact that there is an excellent modern facility at Potters Bar, so it does not sound as though it will need the capital investment fund that I have just announced. He said that it was proposed to remove 15 out of the 45 beds. I am not aware of the detailed situation, but I know that in many parts of the country, community nursing and therapy teams have found that by reducing the number of in-patient beds, staff can support more patients who need, for instance, rehabilitation support within their own home. That model is already working well in Berkshire, Norwich, Dudley and many other places. That may well be precisely the logic that the local NHS is applying in Potters Bar. I think that I also heard the hon. Gentleman say that although those beds are closing, other services will be provided in that part of the building. On the face of it, without knowing the details, that sounds exactly like the flexible use of community facilities, responding to changing patient needs and changing medical technology, that the local NHS should be engaging in as it continues to get the best possible services with the best value for money.

In the Secretary of State’s letter to strategic health authorities of 16 February, which looked at how community hospitals would fit within the White Paper “Our health, our care, our say”, mention is made of specific criteria for judging the future of community hospitals. Obviously that relates both to the capital spending that we are hearing about today and to the problems in a place such as Gloucestershire, where we are having a huge review on the back of deficits largely run up elsewhere. Are the criteria now published, and if not, when will they be published? May we have them as soon as possible?

My hon. Friend raises an important point, and he and I have met to discuss some of the local issues in his constituency. The guidance that I have published today includes the criteria for access to the capital investment fund. The broader issues of how community services should be reconfigured, and the strategic direction, were set out in the White Paper itself. Obviously I am happy to look in more detail at the points that he has raised and to write to him.

Is the Secretary of State aware that her references to consultation and local decision making will be treated with anger and contempt by many people who have been embittered by an empty consultation procedure of which the Government take no notice whatever? I chaired a meeting in Alverstoke in my constituency, at which 800 people unanimously demanded the retention of the hospital at Haslar, which has excellent facilities. Those are not stupid, uninformed people. In many cases, they are former patients who know that the facilities are outstandingly good. Will the Secretary of State, even at this stage, order an investigation by the independent reconfiguration panel into the future of medical services in south Hampshire?

It is simply untrue to say that the NHS or the Government ignore local consultation. I refer to the recent consultations that we had on the reconfiguration of primary care trusts, where a number of options went out for consultation and decisions were made in the light of that local consultation. The overview and scrutiny committees of local councils have an increasingly important role to play in ensuring that local consultations held by the NHS on reconfiguring services are genuine, and that the outcome is satisfactory for local people. If an overview and scrutiny committee is dissatisfied with the way in which the NHS has conducted the consultation, it has the power to refer the matter to me. Obviously, I look at each of those cases extremely carefully, and where I think it right to do so, I refer them to the independent review panel for its advice. However, I stress again that those decisions are best made locally wherever possible. I hope that in the hon. Gentleman’s constituency, in relation to the situation to which he refers, the local primary care trust, local GPs, local people and the council will continue to work together to try to get the best outcome as they reorganise services.

Will my right hon. Friend say a further word about the community venture model of community hospitals that she referred to? That will be particularly welcomed by the strong partnership being formed to plan the rebuilding of Selby war memorial hospital, given the strong belief locally that that hospital is likely to be more sustainable in the long run if there is strong co-operation between GPs, the local council, the local health service and the voluntary sector.

I am grateful to my hon. Friend for coming to see me yesterday to discuss that, and bringing NHS colleagues who described the possibilities for a new community hospital in Selby. The thinking behind the community venture model is that it would allow not simply a public-private partnership on the LIFT—local improvement finance trust—model, but a much more flexible partnership between the NHS, other public service partners, such as, for instance, the local council, and the voluntary sector, as well as, potentially, the private sector. That would focus not just on a building, which is really what the LIFT partnership is about, but on the services that need to be provided both in a community hospital building and in other settings such as GP practices, health centres and patients’ own homes.

Is the Secretary of State aware that in the eastern part of my constituency, it is not so much hospital closures that are taking place, as the downgrading of the services in those hospitals? For example, Epsom hospital is losing its general hospital status quite rapidly, and three community hospitals are being starved of revenue because the primary care trust is encouraging patients to move out of a general hospital straight home, which has led one local GP to say that there were unsafe discharges. There are serious revenue problems, so how will the Secretary of State’s announcement about her capital plan help my constituents?

The proposals for Epsom involve the development of a smaller critical care hospital surrounded by—I think—nine community hospitals or health care centre settings. More care will thus be delivered closer to patients’ homes, which will be much more convenient for them, but critical care and complex acute cases will be located in one specialist hospital facility. There has been wide consultation on that model of care, and it got widespread public support. The issue is not cuts in funding—I think that the hon. Gentleman suggested something of that kind—but the way in which the unprecedented sums that we are investing in the NHS, which will continue to grow by 9 per cent. this year and next year, are used to best effect for the local population, and how we ensure that when there is overspending, the NHS in the area comes back into financial balance and does not expect other parts of the country to go on bailing it out.

A little girl born this morning in the middle of the most deprived ward in my constituency will live 14 years less than a little girl born this morning in Wollaton, the prosperous ward next door. It will not surprise the Secretary of State to know which ward has a mega regional hospital, and which has no community hospital or facilities whatever. In that context, will she consider entertaining bids not merely from the local PCT, but from the collective local strategic partnership—such partnerships exist in each of the major cities in the UK—so that we can move forward a lot more quickly? One of the most difficult points that was raised with me this morning when I tested the idea locally was anxiety about having private finance initiative-related schemes, or LIFT-related schemes, because of their long-term expense. Will she consider bids and offers from organisations other than PCTs, with a broader financial base?

Yes, we certainly would consider such bids. My hon. Friend is doing outstanding work as chair of his local strategic partnership, so I thank him for that. The community venture model to which I referred earlier is precisely suited to a bid from a partnership of the kind that he describes. Capital investment could come from a variety of places, thus reducing the revenue implications for the NHS in future years. The model is good and it will help to address some of the shocking health inequalities that persist in our country, which are why we are determined to insist on fair funding for different parts of the country with different health care needs.

Two in-bed units at Doddington community hospital in my constituency have already closed recently, in the teeth of opposition from GPs and the total opposition of local people. What price the much-vaunted boast of listening to local opinion, I ask myself. Does the Secretary of State agree that if GP practice-based commissioning is to mean anything at all, GPs should have a crucial say in what services are provided in their local community hospitals?

As I said earlier, it is absolutely essential that local people are consulted. In many parts of the country, those consultations, which often take place on very difficult issues, have been extremely well led and conducted by primary care trusts, and they often lead to a solution being found that is better than the original options put forward. It is important that that happens and that GPs are closely involved. GPs who are closest to their patients are superbly qualified to act as not only advocates for those patients, but experts on redesigning services and bringing them closer to home. If services are redesigned they will change, so, for example, there might be fewer beds in some places and more in others. The reconfiguration of services, difficult and unpopular though it sometimes is, is part and parcel of creating the best possible modern health care service, so I would hope that the hon. Gentleman would support that.

I warmly welcome the additional money that the Secretary of State has announced and congratulate her on her victory over the Treasury in securing it. How will it affect the pathway project in Leicester? As she knows, that project will be downsized by £200 million and the downsizing will fall primarily on the hospital in my constituency, Leicester general. Will the reorganised PCT be able to apply for money from this fund to deal with any of the facilities and services that it will not be able to provide because of the reduction in funds for pathway?

My hon. Friend raises an important point. The pathway project in our city is a PFI project. At the moment, there is no reason at all why it should not continue under the private finance initiative. As he and I heard recently from a hospital chief executive, the aim is to provide far better services for patients from Leicester and Leicestershire with all the facilities in the original proposal, but with better value for money, so that the local NHS does not find itself in financial difficulties in future years. It will certainly be possible for the PCT to examine whether the new fund would also assist in improving community facilities, but whether it uses the new capital fund or PFI, one test, of course, is that the services and buildings must be financially sustainable for many years to come.

May I return to the central question of the capital nature of the funding? How precisely will the availability of capital funding help Brookfields hospital, for example—I have to say to the hon. Member for South Cambridgeshire (Mr. Lansley) that that hospital is in my constituency, not his, although his constituents use it? It has three wards that are threatened with closure because of a PCT revenue deficit that amounts to some £45 million. Surely the two policies do not fit together, and on a day when closures are being announced, the new policy makes no difference.

As the hon. Gentleman knows, there is, unfortunately, overspending in the NHS in Cambridge and Cambridgeshire. That must be dealt with because it is taking place despite the fact that there is more money than ever before and more growth money is coming in future years. Of course the NHS in his constituency is examining how it can reorganise services. I described earlier the situation in Norwich, where by reducing beds in some facilities and closing two of the older community hospitals, better services are being provided for patients and financial savings are being made that can be reinvested in other services. It seems to me that that is precisely what the hon. Gentleman should be supporting and expecting from his local NHS. The capital will help when what is needed is a reorganisation of services, perhaps across different facilities, the modernisation of existing old buildings, or the creation of a completely new facility that would, for example, allow services to be taken out of the acute hospital and provided more effectively, with better value for money, in the new facility. Although the capital cannot be used simply to cover overspending on the revenue account, it can certainly be used to support a reorganisation of services that will be more cost-efficient and thus help to deal with financial problems.

Given the turmoil being caused in south-west Kent by the threat to services at Sevenoaks hospital, Edenbridge hospital and Tonbridge hospital, and the fact that the Secretary of State is now allowing a year for primary care trusts to submit bids for the new capital, would it not have been more sensible to have announced a moratorium on any further closures until all the bids had been received and evaluated and the tariffs had been sorted out?

No, I do not accept that at all. There are circumstances where it is clear that the local NHS has too many community hospitals or that some such hospitals are based in outdated buildings that no amount of capital can sensibly be expected to modernise. There may be too many beds in some community hospitals, or perhaps more staff could be working to support more patients in their own homes. Those are judgments that the local NHS needs to make—particularly, but not only, in view of current financial difficulties. The White Paper at the beginning of January set out a very clear strategic direction, which we have reinforced with PCTs and strategic health authorities. The new capital fund will meet many of the requests for capital support that PCTs have put to us. Contrary to the repeated assertions of Opposition Members that we have had nothing but closures of community hospitals, the Community Hospitals Association has confirmed that for every closure in recent years, a new hospital has been opened.

On a point of order, Mr. Speaker. May I draw a matter to your attention and seek your advice? On 4 July, I received a written answer from the Home Office in response to a question that I had tabled on 30 March. My first point is that that is lamentably slow. Secondly, if one looks at the content of the answer, there are good grounds for concern. My question was:

“To ask the Secretary of State for the Home Department how many inmates were being held in open conditions who had previously been Category A or Category B prisoners on 31 December of each of the last 10 years.”

The answer from the Under-Secretary of State for the Home Department, the hon. Member for Bradford, South (Mr. Sutcliffe), was:

“This information is not held centrally and could only be obtained by examination of individual records at disproportionate cost.”

It seems to me that that is precisely the sort of information that should be held centrally and that should be retrievable by the Home Office if it is to run a proper Prison Service. Furthermore, what on earth does the expression “disproportionate cost”—it keeps being thrown back at us—mean? It is entirely subjective. I appreciate that you, Mr. Speaker, are as frustrated as we are in having to deal with these issues, but surely the Government should at least occasionally condescend to become accountable to the House.

The hon. and learned Gentleman is seeking to debate some aspects of the answer, which I cannot do. However, on the question of the length of time Ministers take to answer parliamentary questions, I answered the hon. Member for Hemel Hempstead (Mike Penning) on a similar point of order yesterday. The Leader of the House and I are seeking to ensure that Ministers get replies to the House timeously. I have had the full co-operation of the Leader of the House on that matter.

Further to that point of order, Mr. Speaker. I am most grateful for your answer, which I find extremely helpful. In your discussions with the Leader of the House, could you ask him to ask his ministerial colleagues to explain the basis on which they use the expression “disproportionate cost”? Unless that is explained and unless there is some factual basis for using the expression, it has no meaning.

I have a background in the trade union movement and I recall that there was always a rule that the electrician did not do the plumber’s job. Similarly, the Speaker does not do the Back Bencher’s job. It is for the hon. and learned Gentleman to pursue the matter in parliamentary questions and it would be a good idea if he did so. Otherwise, I am doing his job, which would go against my trade union principles.

On a point of order, Mr. Speaker. I hope that I can raise my point of order without appearing to challenge your authority, as I am conscious of the consequences of trying to do so. During Prime Minister’s Question Time today, you stopped my hon. Friend the Member for Blaby (Mr. Robathan) from finishing his question. I do not wish to question your ruling in any respect, Mr. Speaker, or to seek in any way to open up the subject matter of that question. However, as I thought about what happened, I saw something that seemed to me to be new, as I had not encountered it during my 19 years in the House. I sensed two separate issues: one was the code of conduct for MPs; the other was the ministerial code. While I entirely accept your ruling, Mr. Speaker, it raised an approach that I have not come across, as I said, in my 19 years. Would you be willing to reflect on my points and decide whether it would be appropriate to provide some general guidance on how we should or should not approach Question Time in the light of what happened today?

In a sense, I am grateful to the hon. Gentleman for raising that point of order, which helps me to explain the position. He mentioned how long he has been in the House and he will know that I have been a Member for 27 years and it is important to note that we have not always had a Parliamentary Commissioner, who is a new officer. We must recognise that every hon. Member is entitled to natural justice, which means that when Members put a matter before the Parliamentary Commissioner, they should leave it with him. Until such time as the commissioner reports back, it is inappropriate to raise the matter with the Prime Minister or any other Minister. We should bear it in mind that the question put to the Prime Minister was about a specific Minister—the Deputy Prime Minister—and that there is nothing to stop any Member raising with the Prime Minister general matters relating to ministerial conduct or the conduct of an hon. Member. I say again that when it comes to specific cases, if any Member has a complaint before the Parliamentary Commissioner, it is only fair—and the House would expect me to say this—to leave the matter to the commissioner.

Further to that point of order, Mr. Speaker. May I say that I find what you have just said very helpful indeed and I hope that my colleagues will also find it to be useful guidance?

Further to that point of order, Mr. Speaker. Are you effectively saying that in respect of complaints that are before the commissioner, you will treat the matters that they deal with as though they were sub judice?

Yes, that is exactly what I am saying. As far as I am concerned, the matters are sub judice, so in specific cases they should not be put before a Minister of the Crown while the Parliamentary Commissioner is looking into them.

On a point of order, Mr. Speaker. Further to the issues raised by my hon. and learned Friend the Member for Harborough (Mr. Garnier) about the delays in answers to Home Office questions, I know that you are well aware of our concerns. Indeed, I have experienced considerable delays in getting my own questions answered. I tabled a question on 25 May asking the Home Secretary how many written questions tabled before 5 May remained unanswered. I received a holding response on 15 June, but I have still not received a substantive response a month later. That highlights the fact that it is impossible to evaluate how many questions have not been answered. I wanted to bring the matter to your attention, Mr. Speaker, and to underline our concerns about delays, particularly in the Home Office, in responding to parliamentary questions.

I will look into that matter and reply to the hon. Gentleman.

I beg to move,

That leave be given to bring in a Bill to make provision about the reduction of greenhouse gases; to promote energy efficiency and the consumption of renewable and low carbon energy in the commercial and public services sectors; to provide for the Secretary of State to report to Parliament on energy usage in the commercial and public services sectors; and for connected purposes.

The Bill is, in essence, a simple measure. It requires the Secretary of State to take reasonable steps to ensure that, by 2010, the amount of energy usage in commercial and public sector undertakings reduces by at least 10 per cent. compared with 2005, and by a further 10 per cent. by 2020. It also requires the Secretary of State to take reasonable steps to ensure that such reductions in energy usage are not at the expense of higher carbon intensity in the resulting energy use.

The measure requires the Secretary of State to produce a report on targets to be achieved for the production of heat and electricity for use in the commercial and public sectors from renewable sources, combined heat and power and microgeneration. It also requires the production of an annual report to set out progress towards those targets and state whether they are, in the Secretary of State’s opinion, likely to be met, and if not, what additional steps he or she proposes to take to ensure that they are reached. We are all aware of the pressing need to take action on climate change. The most effective way to reduce emissions from energy use that contribute to climate change is to use less energy, and to use what we do more efficiently. We know that the prime users of energy are in the domestic sector and in the commercial and industrial sector in heating and powering the daily life of business and industry.

We also know that we need to redouble our efforts to tackle climate change. That is now acknowledged with vigour in all parts of the political spectrum. Against that backdrop, it is worrying that the latest predictions about UK CO₂ emissions are far from encouraging. The UK will reach and exceed its Kyoto commitments and I was proud that the UK Government aimed to go beyond that by introducing their domestic commitments on CO₂ emissions.

In February, the Department of Trade and Industry published its updated projections to 2010 about UK energy use and CO₂ emissions. According to those, the UK was, at that time, on course to undershoot by 9.4 per cent. its domestic target to reduce CO₂ emissions by 20 per cent. below 1990 levels by 2010.

In the following month, the Government published their revised climate change programme, the purpose of which was to put us back on track to achieve that 20 per cent. CO₂ reduction. That was acknowledged to be a challenging aim and the document that was produced included a comprehensive series of proposals about how to get back on track. However, the long-awaited document did not appear, at the time of its publication, to be able to achieve that. It was estimated that the new package of measures announced in the programme was sufficient to deliver emissions reductions of only between 15 to 18 per cent., leaving the UK still 2 to 5 per cent. adrift of its target.

More recently, Cambridge Econometrics added to what might be termed the gloom with the publication of the latest edition of “UK Energy and the Environment”, which contained its updated forecasts of energy demand and CO₂ emissions. The forecast was extended for the first time to 2020. Its conclusion was that, even taking into account the additional measures announced in the updated climate change programme, UK CO₂ emissions would reduce by only 14 per cent., compared with 1990 levels, by 2010. In other words, unless more is done urgently, we will undershoot our domestic CO₂ target by 6 per cent.

Beyond 2010, Cambridge Econometrics predicts that carbon emissions are set to rise slightly in 2010-15, but to level off thereafter to 2020. The expected levelling-off between 2015 and 2020 is due to a decline in power generation emissions, but that is offset by the continuing growth in carbon emissions from the commercial sector and transport.

The Government already accept the primacy of the aim of ensuring that we use less energy. I hope that, when the energy review is published, measures to introduce energy management arrangements for consumers of electricity and gas will feature strongly. In 2003, the energy White Paper described energy efficiency as the

“cheapest, cleanest and safest way”

of addressing all the UK’s energy policy objectives. Subsequent Government pronouncements have continued to highlight the critical role that energy efficiency must play in reducing our carbon emissions.

Furthermore, in the energy efficiency implementation plan, which was published a year after the White Paper, DEFRA explicitly acknowledged that action on energy efficiency measures in the commercial sector had been “intermittent and restricted” and

“not achieving its full potential”.

It also acknowledged that the commercial sector had the fastest growing energy use apart from aviation, principally from space heating and lighting, ventilation and air-conditioning. Other drivers include the energy services associated with the use of information and communications technology. In addition, that sector is highly electricity intensive—electricity has an especially high carbon footprint. According to February’s Department of Trade and Industry projections, if no new policy measures are introduced to tackle energy demand in the commercial and public services sector, its use of electricity is projected to soar by a staggering 45 per cent. from 1990 to 2020.

In the light of the above, the Bill is clearly long overdue. I hope that it will be welcomed by all parties. Indeed, it has received support across the House. Early-day motion 2378 in support of the Bill was tabled only on 15 June, but has already attracted the support of 200 Members of Parliament. The Bill simply requires the Government to take reasonable steps to achieve the reductions in energy usage in the commercial and public services sector that they have already described as cost-effective and practicable. For 2010, that means a reduction in energy usage of at least 10 per cent. compared with 2005, and a further reduction in energy usage of 10 per cent. below 2010 levels.

The Government have already explicitly acknowledged the need for binding energy efficiency targets by introducing in the Housing Act 2004 a target to achieve a 20 per cent. increase in energy efficiency in the residential sector by 2010. The Bill simply completes the policy picture by introducing similar binding targets not only for the domestic and residential sector, but for the commercial and public services sector.

Question put and agreed to.

Bill ordered to be brought in by Dr. Alan Whitehead, Mr. Elliot Morley, Mr. Michael Meacher, Mr. Tim Yeo, Chris Huhne, Colin Challen, Helen Goodman, David Howarth, Mr. Nick Hurd, Bob Spink, Kitty Ussher and Mr. Edward Vaizey.

I beg to move Government amendment No. 18, page 22, line 6, at beginning insert

‘An order under this subsection may confer power on the Commissioners to make regulations or exercise any other function,’.

With this it will be convenient to discuss the following: Government amendments Nos. 19 and 20.

Amendment No. 121, page 23, line 3, at end insert—

‘But no order may be made under this subsection on or after 22nd March 2009.’.

Clause 19 provides for a change in the VAT accounting provisions for sales of specific goods to tackle missing trader intra-community fraud. That fraud is an organised criminal attack on the VAT system, which, in 2004-05, is estimated to have cost up to £1.9 billion in stolen VAT.

This change of accounting provision, known as the reverse charge, will be introduced once the necessary derogations from the sixth VAT directive have been agreed. It will apply to sales of certain specified goods between VAT-registered businesses. When the reverse charge applies, it is no longer the seller’s responsibility to account for and pay the VAT on the sale to Her Majesty’s Revenue and Customs, but that of the customer. Subsection (13) of new section 55A, which clause 19 introduces, of the VAT Act 1994 provides for amendments to be made to that Act by Treasury order where it is necessary and expedient for the reverse charge.

Amendment No. 18 allows a Treasury order under this provision to amend the VAT Act to confer power on the Commissioners of Revenue and Customs to make regulations or exercise any other function. The amendment is necessary to ensure that the power can be tailored to introduce any change in the manner most appropriate to the circumstances. By that, I mean the evolving fraud being perpetrated. I appreciate that this is a wide power, but it is a necessary one, and of course it will receive proper scrutiny by this House.

Amendments Nos. 19 and 20 reflect concerns highlighted following discussions with the European Commission about the need to ensure that the reverse charge mechanism does not create opportunities for further revenue loss—a matter that I am sure will also be of concern to Members of the House. The amendments allow HMRC to introduce secondary legislation, first, to require VAT-registered persons trading in the specified goods to which the reverse charge will apply to submit reports of those transactions and notify HMRC when they first make supplies of those goods; and, secondly, to apply the existing penalties for similar statements in respect of intra-Community sales for inaccurate statements or non-submission of statements, as well as existing penalties for a failure to make any required notification.

As the Paymaster General rightly says, the amendment is widely drawn, and that might be entirely justified. She indicates that the power would be subject to proper scrutiny. Can she tell the House whether the provision would be subject to the negative procedure of the House or its affirmative counterpart?

The affirmative procedure will be necessary. I know that Members, including the hon. Gentleman, fully appreciate the importance and urgency of tackling this fraud and of the Department having the necessary powers. None the less, the House should still scrutinise how the powers are intended to be used and how they are used.

I will go further and say that the details of the reporting requirement and how it will affect business means that there needs to be discussions with business as well. We have to make sure that there is the minimum impact, particularly regulatory impact, on businesses generally. The reporting requirement should be kept to an absolute minimum. The provisions will need to take into account consultation on those elements. Thus far businesses have been totally supportive of the Government’s actions—they have been consulted—because they are well aware of the dangers that such fraud poses not only to the Revenue, but to their activities as legitimate businesses that can be undermined by fraud.

I am extremely grateful to the right hon. Lady for giving way again and for her helpful earlier reply. It is a matter of concern to me that when regulations of this sort are introduced they should as far as possible be subject to widespread advance consultation, and I have asked the Leader of the House if we could be sure on these occasions that, wherever possible, draft regulations are issued before the passage of the Bill. Might that happen in this instance?

The regulations are not available at this point. It would be foolish to reveal to the fraudsters, in advance of receiving agreement on the reverse charge, exactly how it will operate. However, it will be necessary for the regulations to come before a Committee through the affirmative procedure, and it stands to reason that they will have to be available for the Committee to read, with an explanatory memorandum. As I have said before—I know that the hon. Member for Rayleigh (Mr. Francois) appreciates this—I am doing my best to make as much information as possible available to the House without prejudicing the Department’s position in dealing with this important matter.

I come finally to amendment No. 121. A similar amendment was tabled in Standing Committee, although it was not moved. Recognising the importance that the Opposition placed on the matter, I indicated to them that had they moved it I would have accepted it, and here it is again, so I repeat my assurance. The amendment seeks to insert a sunset provision, namely, that if the orders have not been made by 22 March 2009 the powers cannot be used. I do not think that it is necessary, but I see no problem with it, and if it reassures the Opposition that this matter will be dealt with in a timely fashion I am, as I indicated, prepared to accept it. We need to sort out the matter a lot earlier than 2009.

I am tempted to say thank you and sit down quickly, but there are a few points that need to be made.

I rise to move amendment No. 121 in my name and those of my hon. Friends. It seeks to insert an additional sunset provision into clause 19.

Order. The hon. Gentleman does not have to move the amendment at this stage; we are debating the group of amendments. If the question is eventually to be put, I will ask him to move the amendment formally at the appropriate time.

I am very grateful for your procedural advice, Mr. Deputy Speaker. As the Paymaster General said that she was going to accept it the amendment, I wanted to take no chances whatsoever.

As we heard, the right hon. Lady said in the Standing Committee that she was minded to accept the amendment. We have brought it back to the Floor of the House on Report to test her commitment to that, and I am pleased to say that she has honoured her pledge, for which I am grateful.

I want also to comment briefly on Government amendments Nos. 18 to 20, particularly No. 18, which appears to confer on Ministers a wide-ranging regulation-making power. It is therefore right that we should focus on that at least briefly before we allow the measure to be included in the Bill.

Clause 19 refers to missing trader intra-community fraud, or MTIC fraud, as it is more popularly known, which is now a multi-billion-pound problem across the European Union. We debated the issue at some length in the Standing Committee on 11 May, and I do not intend to reprise the whole debate on the Floor of the House, but there are a few points that need to be reiterated in debating these amendments.

The problem of MTIC fraud has become so widespread that the Office for National Statistics now adjusts UK trade figures to take into account estimates of MTIC fraud. As the ONS points out, by definition the extent of such fraud is difficult to measure accurately. However, HMRC, in a press release dated 26 January 2006, estimated UK VAT losses from MTIC fraud to be between £1.1 billion and £1.9 billion for 2004-05. It is interesting that the Paymaster General used the £1.9 billion figure a few moments ago. In April 2006 the Government announced the first annual fall in VAT revenues since the UK started collecting the tax in 1973, largely because of a significant rise in estimated carousel fraud, which is a particular breed of MTIC fraud.

I am happy to correct the record: there was a substantial fall in VAT receipts in the 1990s under a Conservative Government.

I am not questioning that that occurred; I am saying that in this instance VAT receipts have fallen and the Government’s explanation for that is fraud. I want to press the Paymaster General on the exact extent of the fraud in a moment.

On 30 May The Guardian estimated that the cost to the UK alone of MTIC fraud is now running at about £5 billion a year. Nicholas Watt wrote the following:

“The Guardian recently reported that carousel fraud jumped by 50 per cent. in the first quarter of the year—and has swollen by more than 500 per cent. in the past 12 months. Tax losses in Britain alone are more than £5bn this year.”

On 11 June, in an article in The Sunday Telegraph, Jasper Copping and Robert Watts, under the headline “Carousel gangs cheat UK out of billions”, said:

“The alarming scale of carousel fraud indicates that the scam is spiralling and this year will far exceed the Government’s estimate that it cost £1.9 billion in 2004-05.”

This seems a suitable opportunity to ask the Paymaster General to update the record. Given that her figures relate to 2004-05, and we are now in 2005-06, and in the financial year 2006-07, can the right hon. Lady provide an official updated estimate of the scale of the fraud as the Treasury now understands it to be? All the signs are that the scale of the fraud is rising, so we would believe it to be in excess of £1.9 billion a year. The Guardian is talking about £5 billion and The Sunday Telegraph is talking about some billions of pounds. To clear up the confusion, will the Paymaster General tell the House the latest Government estimate of the scale of MTIC fraud and its cost to the Exchequer? Part of their argument for the powers that are being sought, and the amendments, is that they are needed to combat the fraud. Therefore, the House will want to know how bad the Government think that the problem is and what the trend-line is.

The Government update the position on MTIC fraud in every pre-Budget report. The hon. Gentleman’s observations about the Office for National Statistics and the trade statistics do not relate directly to either VAT that is claimed or paid out. The correct figures will be available in the PBR, as they are every year following the application of the strategy for reducing MTIC fraud.

I thank the right hon. Lady for that reply. She may recall that when we debated this matter in Standing Committee on 11 May, I pressed her for some clarification based on last year’s PBR figures. If I recall correctly, we did not get an updated figure at that time. If the right hon. Lady is saying, having read yesterday’s debate, that we will definitely get an updated figure in the PBR this autumn, that is to be welcomed. It would have been more helpful if we could have had an updated estimate for the House today, bearing in mind the importance of the powers that we are about to agree to. However, we look forward to seeing the updated figure in the PBR.

The Government’s solution to the problem, as set out in clause 19, is essentially to introduce a so-called reverse charge procedure for certain categories of goods that can be specified by secondary legislation. This is intended to combat fraud by passing the duty to account to the Government for the VAT further down the chain to legitimate businesses. As the HMRC press release of 26 January 2006, which outlines the process, explained:

“Under the reverse charge procedure the suppliers of the goods do not account for VAT on their sales when selling to other VAT-registered businesses. Instead, it is the responsibility of the purchaser of the goods to account for the VAT, although they can recover this VAT in the normal way.”

This means that HMRC is not put into a position where it may have to make repayments of VAT where the corresponding tax on the purchase has not been paid to HMRC.

A similar procedure was adopted some years ago to combat missing trader fraud in the gold bullion market, apparently with some success, and the intention is essentially to apply the same solution here. However, the Government’s solution, including that which is set out in the amendments, depends on the Government obtaining a derogation from the sixth VAT directive in order to apply the reverse charge in situations where it was not originally envisaged.

On 1 June, a little while after our debate on these matters in Standing Committee, the Financial Times reported that the EU tax commissioner, Mr. Lazlo Kovacs, was saying that the UK would most probably receive a positive response to the derogation request. On 7 June, there was an ECOFIN meeting in Brussels, which was rather famously attended by the Chancellor of the Exchequer at short notice. Was the matter discussed there? As we return to the subject on Report, which I welcome, I take the opportunity to ask the Paymaster General to update the House on progress in seeking the derogation that is necessary for the procedure to come into effect. In essence, what is the latest state of play in our negotiations with the Commission on this matter?

Similarly, when do Ministers anticipate that they will be in a position to issue the orders to implement this element of the strategy? I repeat the question that I put to the Paymaster General in Standing Committee on this issue, which she really did not address at that time. Given the history of our negotiations with our EU partners in recent years, what is our plan B if, for any reason, the derogation is not granted? Given the scale of the problem, what do the Government intend to do then?

I come now to Government amendments Nos. 18 to 20. As I understand it, the essence of amendment No. 20 is to confer a regulation-making power on Ministers to set out reporting requirements on suppliers in relation to the operation of the reverse charge. Amendment No. 19 appears to be essentially contingent on amendment No. 20, in that it allows for a penalty regime if reporting requirements are not complied with correctly as specified by Ministers in the regulations. This seems reasonable, but why was the provision not included in the Bill?

Conversely, amendment No. 18 confers on Ministers a relatively wide-ranging regulation-making power in the context of the operation of the reverse charge procedure as a whole. As this is potentially quite a broad power—certainly compared with the other two Government amendments—can the Government give us any examples of how the power is likely to be used in practice without tipping off the fraudsters? For instance, will the power be used only to specify the types of goods to which the reverse charge procedure will apply, or is it intended to be used more widely than that?

Given the scale of the power, I had intended to ask the Paymaster General whether it would be subject to the affirmative resolution procedure. However, my hon. Friend the Member for Buckingham (John Bercow), in his usual perspicacious manner, has already elicited that information in an intervention. I am pleased that the Paymaster General has, quite rightly, told the House that the process would go through in practice after the affirmative resolution procedure has been adopted. We thank the right hon. Lady for that assurance, which we welcome.

I move on briefly to amendment No. 121. The powers to introduce the reverse charge procedure are potentially quite powerful. They are therefore subject to the sunset provision contained elsewhere in the clause. The purpose behind the amendment is to introduce an additional sunset provision with regard to the adjustment of output tax. This seems a relatively non-controversial additional safeguard provision, and one that we hope might be accepted.

The Paymaster General rightly recalled that she said in Standing Committee that she would have been minded to grant us the amendment had it been pressed at the time. For the information of the House, the Hansard record stated:

“his amendment No. 3 touched on an issue that would not have been in dispute between us.”—[Official Report, Standing Committee A, 11 May 2006; c. 120.]

The right hon. Lady’s more direct reaction, which unfortunately was not captured by Hansard but which I clearly recall, was, “Oh, I was going to give you that one.” Perhaps she will be kind enough, as she has indicated, to grant us that amendment and to allow what is now amendment No. 121 to be incorporated in the Bill.

I have only a few brief remarks. We dealt with the matter in some detail in Standing Committee. We are dealing with what is clearly a significant problem and real efforts have been made in various clauses to overcome it. The Government’s amendments are an exposition of that. Amendments Nos. 19 and 20 seek to overcome openings where there could continue to be fraud, and amendment No. 18 confers extra powers, so essentially we are talking about regulation and reporting requirements.

The Paymaster General referred to why it was not possible to reveal the draft regulations in advance. If fraudsters are trying to get around the regulations, what difference does it make if they see them in draft form? Surely their desire to get around them will be exactly the same. [Interruption.] The Paymaster General is saying “Time”, but presumably once they are on the statute book, the fraudsters will still have time to avoid the regulations.

If draft regulations are available before the House has given the authority for the powers to be used, those who study them have time to get round the regulations before the authorities can use the powers that are conferred in them. That is the difficulty. That is why there has not been a long exposure of what the powers may look like. This is straightforward, really.

I thank the Paymaster General for that clarification. There is a development beyond the regulations and reporting requirements that are set out in the amendments. If the requirements are to be enforced, they need to be supported by resources. I refer to an article in The Times of 13 June, in which it is said that there are believed to be 9,000 people involved in spearheading the crime that is known as missing trader intra-community fraud, but Revenue and Customs has only 500 officers to tackle it. The article points to a lack of resources making very difficult the enforcement of whatever regulations are in place to overcome this fraud. In fact, the article goes on to say:

“There is even a suggestion that fraudsters believe the risk of detection is so low that they no longer trade actual goods but engage in a ‘virtual’ fraud where the trade exists only in the bogus documents used to support fraudulent VAT reclaims.”

What efforts have the Treasury made to ensure that it has sufficient resources to enforce the regulations?

I should like to touch on three issues relating to MTIC fraud.

First, in Committee, the Paymaster General said that the German Government advocated applying the reverse charge generally, but she rightly said that that would create great difficulties for small and medium-sized companies, and was thus unattractive. It has been said, too, that there would be substantial fiscal consequences if we went down that route. Can the Paymaster General confirm whether that is correct? More significantly, I seek reassurance that the reverse charge approach will be neither generally applied nor negotiated away, although one member state is keen to go down that route.

Secondly, I am concerned about the effectiveness of an approach that requires a reverse charge on certain goods. In Committee, the Paymaster General said at column 135 on 11 May that

“90 per cent. of…losses from MTIC fraud arise from goods that would be targeted specifically under the reverse charge mechanism”.

She went on to say that

“it tends to be small, high-value goods that can be circulated easily—but, of course, they are not circulated.”—[Official Report, Standing Committee A, 11 May 2006; c. 135.]

I should be grateful if the Paymaster General, drawing on the expertise of Her Majesty’s Revenue and Customs, clarified that response. Is MTIC fraud a matter of small, high-value goods being circulated—there is, however, a missing trader, so there is VAT fraud—or is it a matter, as the hon. Member for Falmouth and Camborne (Julia Goldsworthy) suggested, of virtual transactions in which goods are not circulated at all? If it is the latter, it would be easy for fraudsters to move from the small, high-value goods to which the measures apply to other goods and services, so the Bill’s provisions would not be as effective as we would all like.

Thirdly, the Government have attempted to reduce MTIC fraud by toughening the VAT registration process—the Paymaster General will recall that I asked a question about that in Committee. Since then, I have tabled written questions on the issue, and I understand that, in the spring months, only 65 per cent. of VAT registration applications were completed within the target 21 days. Can steps be taken to improve and speed up the VAT registration, because it is worrying that it takes a substantial period to register? Complaints about registration come not just from applicants in the high-risk sector of small, high-value goods such as computer equipment and so on but from other sectors. Again, I would be grateful for the Paymaster General’s comments.

I shall deal quickly with the points made by hon. Members. May I tell the hon. Member for Rayleigh (Mr. Francois) that the Government are confident that the European Commission will introduce a proposal in response to our request for a reverse charge? Discussion is under way—hence the amendments—but the proposal will be submitted to ECOFIN for a unanimous decision by the 25 member states. The Commission will not submit it before it is satisfied that there is a sensible working arrangement.

I thank the right hon. Lady for her explanation of the timings. She said that the figures cover a range, and that we will be given an updated estimate in the autumn 2006 PBR. Given her knowledge of HMRC, does she think that by that stage the figure will rise above £1.9 billion, or will it fall below it?

I am not in a position to make such a forecast, but the hon. Gentleman will accept that the purpose of the reverse charge is to disrupt the fraudsters. VAT registration and repayment are subject to challenge by HMRC. It will be difficult to assess the strategy that is running in parallel—plan B, as the hon. Gentleman put it—because we hope that HMRC will not need to make those challenges in the first place. People may try to defraud, but our intention is that they should not be successful.

The hon. Member for Falmouth and Camborne asked about resources. I refer her to column 1090W of the Official Report of 17 May, where I gave the full list to her hon. Friend the Member for Kingston and Surbiton (Mr. Davey), showing the extra resources and the work that is being undertaken by HMRC. I also gave the figures in Committee. Hon. Members should be cautious about believing what is written in the newspapers.

On the question about VAT registration—whether the transaction is fictitious or real and how the Government are dealing with it—the answer is that it can be fictitious, as is increasingly the case, or real. The real is dealt with in the Bill by the stamping of goods, tracking and record keeping, which is the subject of other clauses. That will be effective where there is fraud in the chain, as opposed to the whole chain being fraudulent.

There is the fictitious as well, and I shall give two examples. In August 2005 four people were found guilty of carousel fraud resulting in an estimated loss of £40 million in VAT. They used fictitious companies and false invoices, with the proceeds being sent to a Hong Kong bank account. They received sentences of 22 years. In December 2005 jail sentences totalling eight years were handed down to two men involved in a £58 million fraud. The fraud involved mobile phones purchased from fictitious companies and sold to other mobile phone brokers. The phones never found their way into the legitimate market. It was a perpetual fraud, and the reverse charge is specifically directed at that aspect of carousel fraud. The hon. Member for South-West Hertfordshire is right that we need to look carefully at whether that might mutate into other high value goods.

Part of the discussion with the Commission is about what measures will be available to member states to counter such fraud. We need a careful balance so that there is not a reverse charge on all goods. Intelligence and an understanding of how MTIC frauds are perpetrated are needed. There will not be a general tightening of VAT registration. The Department is undertaking rigorous checks at the point of registration where it seems that something is not quite as it should be—missing information or a company that has been dormant for a long time suddenly submitting a high claim on VAT or seeking to become active again. Bogus businesses must be prevented from entering the VAT system, so the Department is doing its best to target those checks. If there was a general holding up of VAT registration, the numbers that I gave would have been considerably higher.

The Department is approaching, sensibly and proportionately, a serious problem in the tax system not just for the UK, but for other member states where this type of fraud can be committed. I hope the House will agree the amendments today and that I can report soon on the progress of negotiations on the reverse charge and the start date of its operation.

Amendment agreed to.

Amendments made: No. 19, page 22, line 40, at end insert—

‘(2A) In section 65 of VATA 1994 (inaccuracies in EC sales statements)—

(a) at the end insert—

“(7) This section applies in relation to a statement which is required to be submitted to the Commissioners in accordance with regulations under paragraph 2(3A) of Schedule 11 as it applies in relation to an EC sales statement.”, and

(b) in consequence of the amendment made by paragraph (a) the heading becomes “Inaccuracies in EC sales statements or in statements relating to section 55A”.

(2B) In section 66 of VATA 1994 (failure to submit EC sales statements)—

(a) at the end insert—

“(10) This section applies in relation to a statement which is required to be submitted to the Commissioners in accordance with regulations under paragraph 2(3A) of Schedule 11 as it applies in relation to an EC sales statement.”, and

(b) in consequence of the amendment made by paragraph (a) the heading becomes “Failure to submit EC sales statement or statement relating to section 55A”.

(2C) In section 69 of VATA 1994 (breaches of regulatory provisions), in subsection (1) (failure to comply with a requirement imposed under provisions mentioned in the paragraphs in that subsection), after paragraph (b) insert—

“(ba) paragraph 2(3B) of Schedule 11; or”.’.

No. 20, page 22, line 44, at end insert—

‘(3A) In Schedule 11 to VATA 1994 (administration, collection and enforcement), in paragraph 2 (accounting for VAT and payment of VAT), after sub-paragraph (3) insert—

“(3A) Regulations under this paragraph may require the submission to the Commissioners by taxable persons, at such times and intervals, in such cases and in such form and manner as may be—

(a) specified in the regulations, or

(b) determined by the Commissioners in accordance with powers conferred by the regulations,

of statements containing such particulars of supplies to which section 55A(6) applies in which the taxable persons are concerned, and of the persons concerned in those supplies, as may be prescribed.

(3B) Regulations under this paragraph may make provision, in relation to the first occasion on which a person makes a supply of goods to which section 55A(6) applies, for requiring the person to give to the Commissioners such notification of the supply at such time and in such form and manner as may be specified in the regulations.”.’—[Dawn Primarolo.]

No. 121, page 23, line 3, at end insert—

‘But no order may be made under this subsection on or after 22nd March 2009.’.—[Mr. Francois.]

Schedule 1

Group relief where surrendering company not resident in UK

I beg to move amendment No. 122, page 155, line 21, leave out from second ‘the’ to end of line 22 and insert ‘earlier of—

(a) two years after the end of the accounting period; or

(b) the deadline for filing corporate tax returns in the EEA territory concerned.’.

With this it will be convenient to discuss amendment No. 15, page 155, line 21, leave out

‘immediately after the end of the current period’

and insert

‘when the claim for group relief was made’.

Both amendments seek to amend the deadline by which group relief claims can be made in regard to losses made in other European economic area countries where the group relief payments are to offset profits incurred in the UK.

The background to schedule 1 is a case involving Marks and Spencer, which sought to use various provisions of European treaties to enable losses incurred in other EEA territories to be offset against profits in the UK. The European Court of Justice found in favour of Marks and Spencer, albeit with strict limitations on the circumstances in which that relief could be claimed. There were several issues on which further guidance was needed, including the timing of making a claim, which is the subject of both amendments.

When we discussed these matters in Committee, the Government approached the task of implementing the ECJ’s judgment and a subsequent judgment by Mr. Justice Park, who was asked to rule on specific elements of the ECJ’s judgment, including the timing of the claim, as restrictively as possible. They sought to narrow the circumstances in which claims could be made, whereas one of the arguments that I made on behalf of the Opposition concerned effectiveness.

In Mr. Justice Park’s later judgment on the case, he commented:

“A principle that runs through the whole of community law and has been enunciated by the ECJ in numerous cases is the principle of effectiveness: procedures in Member States must not render practically impossible or excessively difficult the exercise of rights conferred by Community Law”.

That is the principle of effectiveness, which I want to explore.

The ECJ conferred upon UK companies the right to claim group relief in certain circumstances on losses incurred by subsidiaries in other EEA states. That is enshrined in schedule 1, but we need to consider whether the procedures set out there meet the terms of Mr. Justice Park’s judgment—whether they

“render practically impossible or excessively difficult the exercise of rights conferred by Community Law”.

I would argue that the time of the claim does make it practically impossible or excessively difficult to exercise the rights.

We should remember that UK companies claiming group relief on UK losses have up until two years after the end of the accounting period in which those losses are incurred to make a claim. One might ask why they need two years. I suspect that there is no scientific reason for that, but it enables groups to go through the necessary steps. It enables them to draw up the accounts of subsidiaries and determine the scale of any losses incurred. It enables them to revise accounting estimates, and to assess the write-down in the value of assets, such as stock and debtors; and it allows the parent company to calculate the extent to which losses can be carried back against profits made in earlier years. The auditors can audit the accounts, and any adjustments between accounting and taxable profits or losses can be made. Companies need to go through a drawn-out process to assess such profits, to ensure that the auditors have signed off such profits and to calculate taxes and profits properly.