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Westminster Hall

Volume 451: debated on Tuesday 7 November 2006

Westminster Hall

Tuesday 7 November 2006

[Miss Anne Begg in the Chair]

Farepak

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

Order. Before I call Anne Snelgrove to discuss Farepak and the voucher-hamper industry, may I point out to hon. Members that the bottom line of the digital clock on the wall is jammed? The time it shows is irrelevant, so if Members keep an eye on the top line, they will see the real time.

The number of Members present shows that there is huge interest in the subject.

I applied for this Adjournment debate on behalf of my constituents whose involvement in the hamper company Farepak, which began trading many years ago in Westleigh in my constituency, has had devastating consequences for them. Some were customers and some were employees. I thank Mr. Speaker for giving me the opportunity to ask the Minister what we can do to give our constituents some kind of Christmas this year, what we should do to ensure that they receive justice and understand what happened at Farepak, and what we must do to ensure that it will never happen again.

The issue affects many of Mr. Speaker’s constituents, and it is the same for many Ministers and Whips, including my hon. Friend the Member for Workington (Tony Cunningham), who has done so much for his constituency. Others have done much for their constituencies, but they cannot speak out today.

I shall just make a little progress.

At least 150,000 people are affected by what has happened at Farepak, and many Members, some of whom wished to attend today but could not do so, have written to me in support of the debate. They include my hon. Friends the Members for Eccles (Ian Stewart), for Dumfries and Galloway (Mr. Brown), for Paisley and Renfrewshire, North (Jim Sheridan) and for Birmingham, Hall Green (Steve McCabe). I am pleased to see so many hon. Members present who are ready to speak for their constituents.

In all our constituencies, families were robbed of their Christmas when the hamper firm Farepak collapsed on Friday 13 October. I remember as a child at Christmas competing for attention with 45 cousins—the other grandchildren of my grandparents. My poor grandparents had to find a present for each of us every year, and amazingly, there were always 45 to 50 presents under their tree. It was some achievement, and companies such as Farepak knew it.

Farepak capitalised on the fear that, without some kind of savings system, Christmas would be a failure, and it is galling to look back on its promotional material now. The brochure featured a mum and her family around the Christmas tree, and it said:

“This year give your family the best Christmas ever”.

To those hon. Members who have asked me why people invested in a voucher company and not in a bank, the message on the brochure is a simple but powerful answer. They were trying to avoid debt, and many had no other place to turn to for a savings scheme that paid out at Christmas.

I congratulate my hon. Friend on securing this debate. Does she agree that given the plight of many families, there is every likelihood that people will turn to loan sharks to try to retrieve their desperate situation?

I agree, and I shall provide some details later about how we may be able to help.

My constituent Vicky Turner, who is a mum of three children, was an agent for Farepak. She lost £4,366, including £840 of her own money, which she had collected from seven customers. She has come to London today, sponsored by my local paper, the Swindon Advertiser, on behalf of the hundreds of Farepak victims, and she wants answers as much as I do.

Credit unions would be a good source of short-term loans. Does my hon. Friend agree with the sentiments of early-day motion 2874? The issue ranges wider than Farepak. Indeed, Halifax Bank of Scotland has a responsibility for what has happened, because it allowed Farepak to continue to trade, even though it was in significant difficulties. HBOS must have known the type of families and individuals who were trying to save with Farepak while it raked in £1 million a week to reduce Farepak’s overdraft. Was not it either cupidity or stupidity on the part of HBOS?

I agree, and I shall address that point a little later.

My constituent and others were told by Farepak that there was no problem with the vouchers and not to worry, when everyone knew that it was all going wrong. On 30 June, the company announced that it would run out of money by the autumn unless funds could be borrowed. That followed the collapse of Choice Gift Vouchers, the voucher company that Farepak used, which led retailers to demand that companies such as Farepak pay for their vouchers up front, when before they had been allowed credit. On 23 August, Halifax Bank of Scotland said that it would lend no more money to Farepak, because the company was beyond saving.

Farepak was a subsidiary of European Home Retail, which included Kleeneze and other companies. An investigation by The Sunday Telegraph into Farepak’s accounts revealed that millions of pounds were regularly transferred between Farepak and European Home Retail. It was said that Farepak money was used to pay off the overdraft with HBOS.

I hope that Halifax Bank of Scotland is tuning into my hon. Friend’s debate, because I have rarely seen Westminster Hall so full. When she said that we must consider what we can do, is not there one culprit in the dock—Halifax Bank of Scotland? It was calling in monies for the overdraft, and those monies were coming from our constituents’ savings. I hope that the Minister will be tough when he replies, and say that HBOS ought to put forward the monies to make good the hard-won savings of our constituents.

Many people, including HBOS, need to answer some serious questions. Although I understand that such transfers are not necessarily illegal, they are certainly unethical, and that is why we need better regulation of the sector. People have written to me to say that the European Home Retail group comprises seasonal companies, so if HBOS had not cut off their funds, they might have made it through to Christmas. There is a question mark over the way in which the bank has behaved, and my right hon. Friend is right to look into it. I thank him for his work.

I congratulate my hon. Friend on securing this important debate. Is she aware that this morning, the media announced that Sainsbury’s will accept Farepak vouchers? If that is true, will she join me in paying tribute to the Minister’s work in calling for the large companies to do so, and ask him to go further and call for the other large companies to accept Farepak vouchers, too?

I agree, and I congratulate the Minister on his work on the situation. Sainsbury’s has said that it will accept up to 25 per cent. of the value of the vouchers, and Tesco has also announced a scheme. I challenge other companies such as Asda and Marks and Spencer to do so. Marks and Spencer announced record profits today, which is marvellous.

I congratulate my hon. Friend on securing this debate. Does she share my disappointment that the British Retail Consortium has withdrawn from negotiations? The message from this forum is that the BRC must return to the negotiating table and redouble its efforts. Given that Farepak is the third company in the sector to go bust, in my capacity as the Chairman of the Select Committee on the Treasury, I have written to Sir Callum McCarthy, the chairman of the Financial Services Authority, to say that the sector needs regulating. Before the end of the debate this morning, the Minister must address that point.

I could not agree more. Soon after the issue was raised on the Floor of the House during Trade and Industry questions on 19 October, all our hopes were raised with news of a British Retail Consortium good-will gesture. However, like many other Members, I was disappointed that, at home time last Thursday, just as we were leaving Parliament for our constituencies, so no one could be found to appear on the news, the BRC slipped out the news that it would not put together a rescue package. It is disappointing.

I shall make some progress.

The BRC let Farepak customers down badly by promising something that it could not deliver. However, there are ways forward, as some of our big retailers have shown.

My hon. Friend may not know, but Members debating a statutory instrument on the Big Lottery Fund last week identified that the fund had not allocated some £10 million. It might be useful if the Minister were to approach the fund for that money.

That sounds like a very interesting way forward, and I am sure that the Minister will consider it.

I thank my hon. Friend. I suggest a further source of funding: dormant bank accounts. There are billions of pounds in such accounts, and perhaps that should be tapped into to be fair to the people who have suffered under Farepak.

My hon. Friends are coming up with creative ways to find the money, as I would expect. As long as there are organisations willing to act as distributors, we can achieve something. In my constituency, the radio station GWR FM is distributing gifts collected via various avenues. I shall be going along this Saturday when they distribute them. I will take my gifts from the House of Commons shop—the teddy bears George and Toffee—and I hope that other hon. Members will do the same for the children of their constituents.

Loan sharks are now banging on the door, asking whether my constituents need expensive credit at an annual percentage rate of at least 120 per cent. The Minister might like to help me to endorse credit unions as a way forward. They can provide emergency loans of up to £250 for each saver. Usually those loans are available only to those who have saved for a minimum of 12 weeks, which would cut out the Farepak customers if they were to join now. However, Farepak customers have shown that they can save regularly. I have asked some companies in Swindon to donate £1,000 each to underwrite the loans, thus making it possible for those opening new accounts this week to receive a loan before Christmas at an interest rate of 12.6 per cent. I can announce today that MAN ERF and Nationwide, which have their headquarters in South Swindon, have already pledged £1,000 each. In that way I hope to keep people in Swindon out of the clutches of loan sharks who charge interest rates of between 197 per cent. and 500 per cent. The cash donations will help families to start on the right savings path.

Is my hon. Friend aware that there has been a little good news this morning with the announcement by Park Group, an organisation similar to Farepak, that it has offered £1 million in compensation to be put into any rescue package that can be put together?

Those rescue packages are indeed welcome, but hamper firms must have stringent regulations imposed on them, so that this never happens again.

Will the hon. Lady pay tribute to the work of the citizens advice bureaux? She will no doubt accept that credit unions are unevenly distributed around the country, and even where there are such unions, people will not be able to avail themselves of their services before Christmas. Even though credit unions are part of the solution, the Minister should be aware that they will not help this year. Does the hon. Lady agree that, in the longer term, the Financial Services Authority should control such companies, as it does, for example, holiday companies?

I agree with the hon. Gentleman on the last point. I congratulate the citizens advice bureaux on the work that they are doing, and I also congratulate the churches in my constituency that have been counselling depressed people.

My hon. Friend the Member for Workington has collected £10,000 from the Nuclear Decommissioning Authority to help to expand the credit union scheme in his constituency. I wish to announce, and help to launch, an appeal by the Western Daily Press, which is co-ordinating an effort that I hope will get hundreds, if not thousands, of Christmas gifts to Farepak customers. Congratulations to it.

Does the hon. Lady agree that, if such voluntary measures are not effective, the best way to secure compensation will be for the Department of Trade and Industry’s investigation to recommend who should pay compensation, how much and by when?

There are 47 shopping days until Christmas, and we need to get on with this as quickly as possible. The DTI needs to bring forward a scheme, and I am pressing for that.

I hope that the Minister will join me and other hon. Members in calling on the top retail companies, who do so well at Christmas, to use their corporate social responsibility budgets to help to save our constituents from loan sharks and to give them a good Christmas. My constituents have been adding to the profits of those companies in recent days by buying extra toys for the GWR charity campaign.

One of the most obvious companies to which we should look is Findel plc. On Friday 13 October, when Farepak went to the wall, Kleeneze was bought by Findel plc. It has a database of Farepak’s customers and is in a position to support fundraising schemes. It has issued a press release suggesting that FTSE 100 companies contribute £50,000 into a savings fund, which would be interesting. Does the Minister know how much of Farepak’s customers’ money can be traced to Findel? I doubt whether that is a legal issue, but as a matter of corporate responsibility, Findel should help Farepak customers.

I am grateful to my hon. Friend for her excellent leadership and for introducing the debate. Although I welcome all the initiatives that are intended to help people, my constituents take the view that they want their money or their vouchers, and if under the present law people cannot be held accountable, the law ought to be changed.

My right hon. Friend makes an excellent point, and I am about to turn to that issue. We must provide more than something under the tree or on the table for these folk; we should make every effort to ensure that they get justice. There has been a lot of talk in the House recently, in discussions on the Companies Bill, about corporate social responsibility. We should also be able to talk about corporate social irresponsibility. What Farepak did was immoral, but I am interested in whether it was also illegal.

We do not have the stocks any more, but I wish publicly to name the Farepak directors. [Hon. Members: “Hear, hear.”]. They were the finance director and company secretary Stevan Fowler, the independent non-executive directors Neil Gillis, Paul Munn and Michael Johns, the chief executive William Rollason—I understand that he is soon to appear in an Australian court, possibly on a not unrelated matter involving another company—the executive director Nicholas Gilodi-Johnson, who is set to inherit £70 million, and the chairman Sir Clive Thompson, formerly of Rentokil, who is a modern-day Scrooge. He bemoaned a 30p rise in the minimum wage when he was earning more that £2 million a year, he wound up the pension scheme at Rentokil for all but the executives and then walked off with a £690,000 a year pension. No doubt Sir Clive and the directors will be eating a very big turkey this Christmas and enjoying it.

My hon. Friend might be aware that Sir Clive Thompson is also a director of iSoft, which is attracting news and attention for other reasons at the moment. If she were running a company and looking for a non-executive director, would she be looking in the general direction of Clive Thompson?

Is my hon. Friend aware that Farepak continued receiving money from customers up to 13 October, when it went into administration, even though its shares were suspended in August?

My hon. Friend is right; a cheque from one of my constituents was cashed 15 minutes before the administration.

I understand that the administrator has a statutory duty to report to the Secretary of State for Trade and Industry, and if the administrator considers that the conduct of any director makes him unfit to be the director of a limited company, as the administrator can prevent him from being one. We are discussing very rich men. They are rich off the backs of the hard work of our constituents, who now have nothing at Christmas. That is not justice.

Does my hon. Friend agree that once the matter has been fully investigated, either civil or criminal action should be taken, if possible, against the individuals responsible in the company, considering the level of suffering caused to so many people?

My hon. Friend is absolutely right; that should follow. The Secretary of State has announced that there will be an investigation into the company’s dealings.

Was it fraudulent, after Farepak announced in July that it was running out of money, for it to continue to take Christmas money from families until October? I hope that the Minister can tell us whether the Farepak directors will be investigated for fraud, as my hon. Friend the Member for Livingston (Mr. Devine) asked last week in business questions. The Government have the power to ask for any documents or records and recommend that legal action be taken if the company has been involved in wrongdoing. If the Minister ensures that the administrator has the funds necessary to carry out a full investigation, so that the case does not end up as just another insolvency statistic, that will be a Christmas gift that both the Farepak customers and the Farepak directors really deserve.

My hon. Friend will know that Findel plc is quoted as indicating that the rescue package would be £10 million. Is that not a sign of how much the directors have robbed from our constituents?

It is indeed, but we are talking about even larger sums of up to £45 million. The Minister should look again at who should be regulated. He might come to the conclusion that all companies such as Farepak where people pay up front should be regulated.

My hon. Friend rightly attributes blame where it should be attributed, but does she understand that many of the 25,000 agents throughout the country feel personally guilty? Will she make it absolutely clear that neither she nor any other hon. Member in the Chamber feels that the agents are responsible? Indeed, they are probably the most responsible people in many of the poorest communities in the country.

They are indeed. The agents hold their communities together, and have a strong sense of financial probity and community spirit. Many of them are sitting in the Gallery watching the debate, so I thank my hon. Friend for raising that issue.

On Farepak’s business model, does my hon. Friend agree that companies that take money from the very poorest sections of our society without giving any interest or any products up front should be classed as offering a financial service? It is a case of taking from the very poorest and giving, as she said, to the very richest.

Absolutely—my hon. Friend is quite right.

There is also the issue of the bond. A lot of people wrote to me to say that the company had a bond, but it was laughable. It made customers feel protected, but it was for £100,000, which is peanuts as compared with £45 million. The Hamper Industry Trade Association Ltd called the bond

“a commitment of good intent”.

I hope that the Minister will say that, if a company advertises a bond, it should be sufficient to cover that company’s liabilities.

We are told that the Hamper Industry Trade Association Ltd urged Farepak in August to safeguard its savers’ money, but the firm said that protecting clients was not a legal requirement. I think that it should be and I hope that hon. Members in all parts of the Chamber think so, too.

I thank my hon. Friend for giving way. It is essentially on a technicality that such companies are not covered by the Financial Services Authority—because such payments are regarded as a deposit on goods—even though everybody knows that they are financial services organisations. That is how many of the customers and the collectors viewed Farepak. Does my hon. Friend regard that as a loophole that needs to be closed?

That is indeed a loophole that needs to be closed. If the industry is unable to regulate itself—as it has shown itself to be unable—we should legislate in this place.

I have asked a lot of questions of the Minister, as will other hon. Members after me. We have been very demanding and asked for every avenue to be pursued. The Minister knows why—for my constituents, this is the nightmare before Christmas. The tabloids have compared the Farepak directors to the Grinches that stole Christmas. The Minister has done much good work on the issue so far. Independent parties, such as the unfairpak.co.uk website, have praised my right hon. Friend for his efforts. For every family whom he can help, he will be seen as the man who saved Christmas.

I am not looking forward to a Christmas eve when parents in Swindon are faced with explaining why Father Christmas cannot call this year. I hope that the Minister will do everything that he can to make sure that that never happens again. I realise that we have a long way to go on the issue. Will he tell the Chamber where he intends to start?

Order. I want the summing-up speeches to start at 10.30 am, because I know that the Minister has a great deal to say. That means a bit of discipline from hon. Members. Thirteen have indicated in advance that they want to speak, which means less than three minutes each. It would help if hon. Members kept to that, because many people have a lot to say.

I congratulate the hon. Member for South Swindon (Anne Snelgrove) on securing the debate. It is an indication of the impact that the scandal has had on constituencies throughout the country, and hon. Members from all parties, that we have a record attendance for a Westminster Hall debate.

Various adjectives have been used to describe the situation, including scandalous, incredible, unjust and unfair. It is heartbreaking for those involved, as well as shocking, and probably immoral and illegal to boot. In the words of the hon. Lady, this is indeed the nightmare before Christmas. In my constituency, 19 individuals in one small town alone are affected, while one lady in another town has lost £15,000. As the hon. Lady said, that money has been hard saved by people who do not have alternative means of saving. They have chosen that vehicle because, once the money was there, they could not get their hands on it in times of hardship.

The agents have been mentioned. They are obviously furious, because there has been no communication whatever from the management of Farepak. The agents have been totally abandoned and are feeling incredibly guilty, as the hon. Member for Rhondda (Chris Bryant) said. That is something that we, as parliamentarians, need to address. The agents were taking their friends’ and neighbours’ savings in good faith. One of the key components of the system is that people hand their money over to someone whom they trust. That trust has been entirely undermined and it behoves us to try to do something to rectify that.

I am pleased that the Minister is going to solve the problem—if not today, then fairly soon. He has been described as the new Father Christmas and I cannot think of anyone else in whose hands I would better place such a vexatious problem. I shall obviously be interested to hear what he has to say, as there are questions that he needs to answer.

What can we do immediately for the people who are affected? Several constructive ideas have been proposed and I am sure that more will be forthcoming. We need to send out assurances from Parliament to show that the problem will never arise again. Changes in the law seem vital and overdue. As has been asked, how can we advise and help people to avoid falling into the hands of loan sharks? We need to communicate to people that there are alternatives that they should use, although that will perhaps not solve their immediate problems.

Another question that I hope the Minister will address is whether Halifax Bank of Scotland will be held accountable for its role in the disaster. The bank apparently allowed Farepak to continue trading to recoup its overdraft. Should not HBOS have declared Farepak to be in administration long before that finally came about? The Secretary of State has announced that officers from the company investigations branch have started an investigation under the Companies Act 1985. Will the investigation put the directors of Farepak and its parent company in the dock?

I shall not, as I have only a few minutes.

It is outrageous that peoples’ savings should be stolen in that way. I was delighted that the hon. Member for South Swindon named and shamed some of the individuals involved, but surely any investigation should not stop at Farepak alone. We should be going for the directors of associated and parent companies.

The Government should recognise that the group of consumers affected followed the Government’s agenda: they were saving. They were taking responsible action to save for their future and to avoid personal debt. There is therefore a case for the Government to do all that they can to make funds available to help such families—possibly not directly, but certainly by organising a response from the retail sector.

In the long term, we need new legislation. Adequate provisions should be made to protect consumers’ money prior to the delivery of the goods and services that they buy. That would ensure that consumer moneys paid to Christmas hamper companies are protected should those companies go into liquidation. I would have thought that the Financial Services Authority would be best placed to regulate such companies.

I congratulate my hon. Friend the Member for South Swindon (Anne Snelgrove) on her powerful speech and her advocacy on such an important cause. As has been said, the fact that so many right hon. and hon. Members are here—this is surely the best attended Westminster Hall debate—shows the extent and depth of concern, reflecting that of our constituents, that something must be done. As she said, it is particularly tragic that so many of those affected can least afford to lose that kind of money—least of all at this time of year.

Many of my constituents are affected, as are those of other hon. Members. A lot face the loss of hundreds of pounds. Our local paper, the Oxford Mail, reported the case of a mother of six and her daughter, a mother of one, who had paid in £900 and £450 respectively. It is not hard to imagine what a blow the collapse has been for their Christmas.

A local agent and near neighbour of mine, Debbie Simms, who first alerted me to the scale of loss locally, paid her final instalment of £1,600 into the bank on Friday 13 October, shortly before the administrators were called into Farepak at quarter-past 2 that very day. She and I have been considering whether there is any way of getting the money back from the bank concerned.

The questions to which we must get answers and on which my right hon. Friend the Minister must act, although I know that he is already doing so, fall under three key headings. First, how did the collapse happen and could it have been avoided? As my affected constituents have pointed out, there were signs that something was wrong when shares in the parent company, European Home Retail, were suspended in August. How was Farepak allowed to go on collecting money? How is it that, as The Sunday Telegraph reported, millions of pounds were regularly transferred between Farepak and EHR? How is it that Farepak’s bank, HBOS, continued to take in customers’ money to credit a company that it must have known was in serious difficulty?

The Department of Trade and Industry inquiry must get clear answers on such questions and on the responsibility of Farepak directors. It must also have lessons to learn in respect of my second key question: how can we better protect the hard-earned money of people who save up for Christmas in such a way? After all, as has been pointed out, Christmas hamper schemes such as this one are, to all intents and purposes, savings schemes. They should be regulated as savings schemes and brought within the supervision of the Financial Services Authority. There is a clear need for standards. There should be oversight of the adequacy of such schemes’ financial positions and protection against money being siphoned off to elsewhere within a group. Furthermore, a bond or insurance scheme that protects against financial insolvency should be set up. I hope that my right hon. Friend the Minister can provide positive assurances that action, with legislation when necessary, will be taken as a matter of urgency on all those points.

The third and most pressing question of all is about what can be done now to help those who have lost out. I commend the speed with which my right hon. Friend, as Minister with responsibility for consumer affairs, moved to try to get a goodwill contribution from the British Retail Consortium. It was a bitter disappointment when it decided that as an organisation it could not help. I had written to the chief executives of Tesco, Asda and Sainsbury’s, all of which serve my constituency, asking whether they could donate just some of their profits in that very worthwhile direction.

I am interested to hear about the various rescue packages—the Big Lottery Fund, Sainsbury’s and so on. As someone who is on the record as praising HBOS for its commitment to installing free-to-use ATMs throughout Scotland and the north of England—many Members have signed an early-day motion to that effect—I question its part in this whole sorry state of affairs. Does my right hon. Friend agree that instead of looking at rescue packages, we should be looking at the profits of HBOS and asking it to make good the losses suffered by our constituents?

I have been critical of the role of HBOS in this affair and we can all think of a worthy destination for some of its profits.

Like my hon. Friend the Member for South Swindon, I am pleased that Tesco has decided to make a significant contribution, and I welcome the announcement from Sainsbury’s as well. Let that be a clarion call to other retailers, and to the banks involved, to show some Christmas spirit.

Will the Minister pursue the idea of the London stock exchange dedicating a traders’ day of contributions for Farepak victims? I welcome the response from credit unions, and my own, in Blackbird Leys, has said that it will look sympathetically at the idea of low-interest loans to help those affected. It is important that people do not get deep into debt to doorstep loan sharks to try to buy their children a good Christmas. On a last very important point, I ask that everything is done as quickly as possible to get to the bottom of how many in each area have lost out. I say that because locally a lot of people are interested in helping out. I had an inquiry from a local business organisation at the weekend, and there is enormous good will from the public and in the local media towards the Farepak victims.

If businesses and others are to make a commitment to helping, they quite reasonably want to know the scale of the commitment that they are taking on. We need to take urgent steps to work out how many are affected and to what extent. I have been on to the administrator about that, and I hope my right hon. Friend the Minister can say something about it.

The collapse is a terrible thing. We must send a message that we want the inquiry and the Government to get to the bottom of how it happened and how the families were defrauded. We want action to stop it happening again, and we want to make it as easy as possible for businesses, and the community as a whole, to rally round and help the families enjoy the Christmas for which they saved up.

I join other hon. Members in congratulating the hon. Member for South Swindon (Anne Snelgrove) on securing this debate and on the enormous amount of campaigning work that she has done on the subject. Her opening remarks set a great example for the debate.

Like those of other MPs, my constituents have lost many thousands of pounds. By way of illustration, people in the two communities of Kingussie and Newtonmore, where the total population is a little under 3,000, have lost about £75,000. That illustrates how in many cases the scandal has hit the most close-knit communities hardest, and the people on the lowest incomes most of all. As one of my constituents put it to me:

“The money lost is, for many, the difference between being able to afford to provide the children with the extras that others enjoy over the festive period. The timing is unacceptable. Had this been ceased last March or April, it would have been an inconvenience, but we would all have been able to recover. But to wait until all customers have completed between 90 and 100 per cent. of their payments must rank as fraudulent. Why did they continue to collect money, knowing they would be unable to honour this, and where have these funds gone?”

That is the core of what we must discuss.

I endorse what my hon. Friend says, but does he agree that, particularly among our smaller rural communities, the guilt to which the hon. Member for Rhondda (Chris Bryant) alluded is very real? There is no reason for that guilt; it is the conduct of the company that needs to be held to account. Through no fault of their own, people are feeling very vulnerable in such communities.

I agree. One of my constituents was an agent and said that she intended to take it on herself to repay all the payments to the people with whom she had worked. That is an illustration of the attitude and of the guilt felt—quite unjustifiably, given that the problems are the responsibility of the company directors.

This is an important point. The British Retail Consortium is maintaining that one reason why it cannot put together a scheme is that there is no list of all the Farepak customers. The truth is that there is a list of all the agents, who are some of the most responsible people in this country when it comes to finances. That list could be an important source of getting the problem sorted out.

The hon. Gentleman is absolutely right. The agents are among the most responsible people in this country. I hope that the Minister takes up his point.

I have a couple of brief points to make. They follow on from the questions raised by the hon. Member for South Swindon. It is notable that just before the company went into administration, the non-Farepak parts of the European Home Retail consortium were sold off for £34 million. I trust that the proper use of that money and the propriety of that transaction will form part of the Department of Trade and Industry inquiry.

Given the intervention by the hon. Member for Rhondda (Chris Bryant), will the Minister clarify the position vis-à-vis the British Retail Consortium? I have a letter here from Findel plc which other Members may have received. It says specifically that Findel has the database of Farepak customers. Will the Minister confirm whether the BRC is indeed maintaining that it cannot operate a scheme because of the absence of such a database? That would be helpful. If that is its position, he will presumably be able to go back to it and point out that there is such a database and that Findel is apparently willing to make it available.

I am grateful for that intervention and hope that the Minister answers the question.

What is the role of HBOS in all of this? Surely it must have been aware that savers’ money—they were savers, whatever the technical definition—was being used to pay off outside debts? The bank must have known where the perhaps £1 million a week in repayments was coming from.

HBOS stated that it had accommodated Farepak on many occasions to allow its management every opportunity to find a solution to the financial challenges. HBOS knew that the company had problems. Therefore, should it not acknowledge to the customers, who also no doubt bank with HBOS, its responsibility for dealing with the problem?

Whatever the legalities of HBOS’s role, its activities in this murky scandal have been morally highly dubious.

Is not the response of HBOS staggering? It has taken a legalistic route, but not only are people denied money that is theirs, they are now forced into the loan-shark regime, which will mean taking on debts that they probably cannot hope ever to repay.

I very much agree. As other hon. Members said, HBOS’s vast profits dwarf the losses of the people who are caught in this situation.

Does the hon. Gentleman not find it ironic that probably he along with myself, other Members of the Scottish parliamentary group and all the Members of the Scottish Parliament have been invited by HBOS to a champagne reception at the reopening of its refurbished headquarters on the Mound? Will he come with me and the people who have been ripped off by HBOS and Farepak to protest outside the champagne reception and demand that money is given back to the people from whom it has been taken?

I do not know whether I can accompany the hon. Gentleman, but he is right: the champagne at that event should have a bitter taste.

Will the Minister confirm that the DTI inquiry into the affairs of Farepak will include an investigation into the role played by the bank? It is critical that those issues are fleshed out in the official investigation.

The Minister has already done much good work on the subject, and I join other hon. Members in praising him for it. However, a great deal more needs to be done. I am sure that others will reinforce that statement.

Order. I remind hon. Members that we are very short of time. We may be down to about two minutes each. I am in hon. Members’ hands.

Thank you, Miss Begg. Most of my points have already been covered, but I would like the Minister to comment in his winding up speech on a statement made by Neil Henderson-Begg, who represents the Hamper Industry Trade Association. After the collapse, he stated:

“It seems odd that Farepak declared its financial position untenable at the time of the year when it is holding most cash—when contributions are almost fully paid-up. Customers will want to know where their pre-payments have gone.”

Naturally, they will. He said that customers are concerned about the time that elapsed between the suspension of EHR shares and Farepak’s ceasing trading, and that

“Others want to know whether their money went towards making other firms in the EHR group attractive enough to be immediately snapped up”,

which they were, very shortly after the collapse. He added that customers also need to know why Farepak’s lending banks allowed the situation to go as far as it did. That point has been touched on by several hon. Members.

I also ask that the Minister examine closely whether the Government are one of Farepak’s creditors. Sadly, in the past, the small investor has normally been the last to be compensated. On this occasion, the Government and other large creditors should set an example, step back and allow any assets of the company to be used to form a compensation package for those people who have been so devastated by the loss of all their savings.

I shall speak briefly on that very theme. I congratulate the hon. Member for South Swindon (Anne Snelgrove) on her immensely impressive leadership on the issue.

We know that much of Farepak customers’ money was used for shopping, retail and gift vouchers, on which VAT was payable. VAT used to be payable on face-value vouchers only when they were redeemed, but that changed in 2003, so that VAT is payable when the vouchers are purchased. Unfortunately, the Government are usually at the front of the queue of creditors in such situations. We are talking about millions of pounds of VAT that was paid by Farepak customers. It is only right that that money should be repaid to them, as they did not get the goods on which it was paid.

Hon. Members should talk sense. First, national insurance contributions, if they have been paid—there is no guarantee that they were—are for the pensions and unemployment and other benefits of the people who used to work for the company. We must get this straight: it is not the Government’s money. It is former employees’ money, and it is still to be found in the investigation whether it was paid. On VAT, again, until the investigation is complete, we cannot guarantee that any money was paid to the Government. We would like some sensible contributions, not ones that raise Aunt Sallies to be knocked down in order to get a political headline. That will not help the people we want to help.

I take the Minister’s point, but if VAT has been paid, clearly the Minister will want to consider hon. Members’ comments in that respect.

On what can be done in the future, we look forward to hearing what stage the Minister’s discussions with the Financial Services Authority have reached. Farepak is not the first case of a Christmas hamper voucher company getting into difficulties. There was the case of FHSC in February, and Choice Gift Vouchers went into bankruptcy earlier this year. We need to know what can be done now, given that several companies have had difficulties. We look forward to hearing what the Minister has to say about how quickly secondary legislation can be introduced under the Financial Services and Markets Act 2000 to add such companies to the list of those that are regulated.

Several hon. Members have rightly mentioned HBOS. One of the key questions that we need an answer to is why the offer from Park to buy Farepak was rejected twice. Park is the company that rescued FHSC and that prevented its customers from getting into the same problems as Farepak’s customers. What was the role of HBOS in preventing that rescue offer from being accepted?

My hon. Friend mentions the role of HBOS, and we have heard about the roles that many people played. Is it not the case that the Minister, who has been working hard on the issue, needs to get all those people around the table so that they can all contribute to helping those who have lost out? Does my hon. Friend share my worry that the British Retail Consortium has said that there is no central database of customers? If that is so, it will be difficult to put together a rescue package.

We have heard about the Findel letter. If there is a database, surely the key reason for the BRC’s rejection of any offer is redundant. I am sure that the Minister will agree that the BRC must urgently revisit the offer that was initially made.

I pay tribute to my hon. Friend the Member for South Swindon (Anne Snelgrove) for securing this debate. Let us be very clear what the debate is about: it is about legalised money-laundering, from the poor to the rich. Sir Clive Thompson is, without doubt, the 21st-century equivalent of the sheriff of Nottingham. I hope that later the Minister will play the role of Robin Hood.

This is an absolute scandal involving the organised poor. I do not say that in a patronising manner. Those people did not use loan sharks, bank overdrafts or credit cards; they saved. How many people are involved? Farepak had between 26,000 and 29,000 agents. If each of them had 10 clients, it would mean that Christmas has, in effect, been cancelled for 300,000 people.

Serious questions must be asked about the company. How long had it been in financial difficulty? It left the Direct Selling Association in 2004; if it were a member of the DSA today, it would have to compensate the people who lost their money. That suggests that it has been in difficulties for many years. Staff who worked in its headquarters have said to me that they knew that the company was in trouble last December. Financial newspapers were flagging up problems in June. The share price crashed in August, yet Farepak continued to take money when the vast majority of people had paid over the money. My constituent Carol Gullian has lost £12,500 as an agent. At a public meeting held in Blackburn, West Lothian, last week, more than 100 people turned up who had lost more than £100,000 between them. That is the extent of the scandal. Farepak were still writing letters to my constituents in March telling them that everything was okay, not to worry and that everything would be good this year.

HBOS made £4.8 billion profit last year. I have been told by somebody closely involved in unfairpak.co.uk that a rescue plan was organised in June this year and that £3.5 million was needed from HBOS, but it did not put the money in. If that is the case, HBOS directors need to be brought to the House to give a full explanation of their role in that deal.

I pay compliments to my hon. Friend and neighbour for the work that he has done on Farepak. He is known throughout Scotland as a leader on this problem. Does he agree that no Scottish Member of Parliament, no Member of the Scottish Parliament and no dignitary who represents anyone in Scotland should attend the champagne function that HBOS has invited us to at its headquarters?

I would be grateful for the opportunity to join my hon. Friend at that demonstration outside the company’s headquarters. I agree that the same message should apply to everybody else.

Given the time pressures, let me say, in summary, that I do not believe that the Department of Trade and Industry alone should be investigating the company and its directors. The Serious Fraud Office should be called in to investigate the company. I have written to the forfeiture body to say that Sir Clive Thompson should have his knighthood withdrawn. He got it in 1996 for services to industry, would you believe? We obviously need legislation, and I look forward to hearing what the Minister has to say.

I, like others, have a number of constituents who have been deeply affected by the Farepak escapade and who, as a result, will suffer at Christmas. One of my constituents, who has acted as an agent for Farepak, came to see me recently on behalf of all the friends from whom she had, in good faith, accepted payments. She wanted to know what, if anything, she could do to put things right. She was particularly concerned that she might in some way be to blame. I did my best to reassure her and have written to the administrators, the Minister and Norfolk trading standards to seek their advice.

My constituents and I, in common with those in attendance today and the thousands they represent, seek the Government’s answer to a number of questions. What can be done in the immediate future to facilitate a rescue to help those who have lost significant amounts of money? I am pleased that the Minister for Trade has called for the Financial Services Authority to regulate Christmas savings schemes, but why were they not regulated before? How long will it be before the FSA regulates the schemes? The DTI has launched an inquiry; how long will it take? What steps will be taken to safeguard members of other hamper schemes in the meantime? Most importantly, why was money allowed to be collected after trading in EHR shares was suspended?

I congratulate you on your direction of the debate, Miss Begg. It has been a good debate. I congratulate the hon. Member for South Swindon (Anne Snelgrove) on securing the debate and allowing us the opportunity to discuss this matter.

I shall be brief. To me, the collapse of Farepak is a crisis, but to many people, such as the low-income families in my constituency and adjoining constituencies, it is a tragedy. Some figures have been bandied about. In my area, one lady, Linda Robinson, is out £20,000, £5,000 of which is not recorded. She has receipts for only £15,000 and the receipts for the rest are missing. Donna Lavery has lost £4,000. Sharon Gilmore is a single mother and she and her 90-year-old grandmother are caught up in the business, with a similar amount of money having gone missing through Farepak.

We estimate that some 3,000 people in Northern Ireland are affected by the problem, although we need to establish the exact numbers and how much each has lost. I welcome what some hon. Members have said about agents having more information, but some of the agents’ bookkeeping might not be as good as it should be. I appeal to the Minister to establish a single relief company or agency in each region, so that relief efforts can be co-ordinated and so that people will find Christmas. Perhaps the consumer councils in the regions would be useful. There is a desperate need to establish the exact amount of exposure, because Farepak was neither efficient nor effective in its management. I believe that money handed over in the past two weeks might not be accurately recorded and that the accounts might not be made available to the liquidator.

As I see it, we have three main tasks: to get relief urgently to those who have been robbed; aggressively to pursue criminal charges through the fraud squad or whatever other squad is required to ensure that the poor conduct of the company is punished; and to ensure that such a problem never happens again, perhaps through regulation. As the hon. Member for Wakefield (Mary Creagh) said, stringent financial controls, bonds and whatever else is necessary should be used. We need, too, to work with banks, credit unions and those responsible in the Treasury to ensure that those who have been savagely affected by the problems are not thrown into the arms of loan sharks to get past Christmas.

I will be as brief as I can, Miss Begg.

I have written to two dozen chief executives of high street businesses. A couple have responded already, but I found it almost breathtaking that one said that although they could not help directly, one idea that might be of interest would be if they sought to raise funds through collections or other fundraising activities in their stores. I am pleading with those companies to fork out and to help people, not to ask their customers to put money into a collection. That is not what is required.

In all honesty, I do not know how many people in my constituency have been affected or the sums involved. Before the debate, I spoke to someone connected with the administrators and asked whether they knew the numbers of agents and customers or the sums involved. The answer was simply, “No, we don’t.” Findel may well say that it has a database, but I am not convinced that anyone knows the true figures. I echo the plea that was made earlier: the British Retail Consortium should return to the table. However, above all else, we need to investigate the matter fully and if there has been criminal activity, we should deal with those people through the Proceeds of Crime Act 2002. We need to deal with that once we have tried to recover the situation for the good people of this country who put their faith in the company.

Many people in my constituency have been affected by the collapse. One agent has lost £11,000 and is still waiting for a reply from the administrator. Another has lost £18,500, and I know of individual savers who have lost between £150 and £450 each.

I want to comment briefly on the role of individuals, and of the directors in particular. Although I go along with the administrators’ applauding the Government and the action that they have taken under the Companies Act 1985, we have to be sensible. Disqualification of directors is not what we are talking about. We have heard a lot of things today, and the disqualification of directors is not the end result that we are looking for. I am told that the administrators have realised £2.5 million and I call on the administrators to ensure that that money goes not to the preferred creditors, but to those who were the savers and the backbone of the industry. Clackmannanshire council and the Alloa and District Round Table are each putting in £5,000, and they are calling on industries and businesses in Clackmannanshire to do the same, so that Farepak savers there can have at least some sort of Christmas.

My last comments are to do with the role of the Hamper Industry Trade Association. We know that it has five members, including Farepak, and that it has a voluntary and unenforceable code of practice, with a bond of £100,000. HITA called on its members to give due attention to safeguarding their customers’ money. I wrote to HITA on 25 October and received a reply from the secretary. He wrote that the collapse was extremely unfortunate but that he is on holiday from 2 November until the 12th. On behalf of a number of my constituents, I invited him to meet hon. Members at the House. He refused to do so, but although others have had a part to play, HITA and its member organisations should be called to the House to explain their role, so that Members can explain it to those who have lost their money.

It is incomprehensible to me how a company that takes in money a considerable time before it has to deliver the goods to its customers can get into such a mess. Constituents of mine put it bluntly; they call it theft. I have three questions for the Minister.

First, will my right hon. Friend update us on the latest prospect of immediate help for those who have lost money? Secondly, I understand that the Hamper Industry Trade Association has stressed that the situation is by no means a reflection on the Christmas savings industry as a whole. I am afraid that the public will judge it as such, and that may lead to a considerable future loss of confidence in the trade, even among companies that act honourably.

The Farepak collapse also raises the question of what sort of protection is available to those saving with hamper schemes. Anyone saving with a bank or a credit union is covered by the financial services compensation scheme, which compensates 100 per cent. up to £2,000 loss and 90 per cent. for the next £33,000. The hamper industry, like other industries that collect savings a long time in advance of delivery, clearly needs to have a similar protection scheme to safeguard its customers. We need proper regulation, together with realistic bonds, in order to provide proper protection for savers and to ensure that nothing like this can happen again.

Thirdly, will the Minister give a categorical assurance that the investigation into Farepak will be thorough and that if there has been wrongdoing it will be properly punished?

Order. Everyone has been extremely well-disciplined, and I am sorry to the remaining Back Benchers who wish to speak, but we now come to the Front-Bench speeches. I ask the Opposition Front-Bench spokesmen to be brief in order to allow the Minister the maximum time.

I shall be very brief, Miss Begg. We have had an excellent debate, and I congratulate the hon. Member for South Swindon (Anne Snelgrove) on initiating it. The issue has touched the hearts of hon. Members and of people throughout the United Kingdom.

I shall focus on how the problem arose. The industry is unregulated. It falls within the retail sector, not the savings sector, but in principle it operates in a similar way to credit unions. The hamper industry depends on each company fulfilling its part of the bargain.

In February this year Family Hampers went bust. The system allowed customers to pay in their savings, the company would bank the money and vouchers were issued to customers by a separate voucher company. The company then invoiced the Christmas club, and the shops invoiced the voucher company. When Family Hampers went bust, Choice Gift Vouchers went into administration.

The major store groups decided that they had had enough of that—they were £55 million out of pocket. They decided that there should be no more credit and that vouchers should be purchased up front. That led to a funding crisis at European Home Retail, the parent company, and its shares were suspended in August. However, EHR was using Farepak to fund its own deficit, and each month the customers’ savings were being raided like a piggy bank.

Why was that company not put into administration until October? HBOS was still raking in savers’ money to fund the EHR overdraft. The worst thing, however, is that earlier in October the non-Farepak rump of EHR was sold off for £34 million in cash. Where has that money gone? How is it possible to drain a subsidiary of cash and then sell it, leaving tens of thousands of people being owed money?

Does my hon. Friend agree that our constituents, particularly the vulnerable and those who have behaved responsibly, have suffered through the actions or inaction of those with responsibility; that, first and foremost, we must put together a package to rescue them before Christmas; and that the other actions that need to be taken must then kick in quickly?

I am grateful to my hon. Friend. I agree that we need action now, and many hon. Members have made positive suggestions.

Does the hon. Lady agree that all hon. Members must raise awareness of savings and loans facilities and the security provided by the credit unions in supporting people who are in financial crisis? We are not aware of what the Minister will say, but we can at least direct our constituents toward credit unions.

The hon. Lady makes an extremely important point. the last thing that we want is for people to be driven into the hands of the loan sharks. I know that the Minister is meeting representatives of the Office of Fair Trading and the Financial Services Authority. Will he look into the possibility of making regulations to offer savings hampers customers the same protection as the credit unions’ customers?

Does my hon. Friend agree that, in a sense, this fiasco is in the best interests of the hamper industry, because many people will now be wary of saving in that way?

Yes, my hon. Friend makes an important point. The reputation of the hamper industry has been gravely damaged. Regulation would greatly strengthen its reputation, and its ability to deal properly with the money that people entrust to it.

Will the Minister investigate the actions of HBOS? It continued to accept £1 million a month of savings from Farepak, knowing that the company was insolvent. Will he also look into the claims of organisations such as the Hamper Industry Trade Association, which purport to offer protection through a bond until something goes wrong? The British Retail Consortium initially offered to make a goodwill gesture but it seems that its Christmas good will has run out. Indeed, several hon. Members have alluded to the cruel irony that, having made the offer, it has now withdrawn it.

In conclusion, I nominate three candidates for Christmas Scrooge 2006—the British Retail Consortium, HBOS and whoever pocketed the £34 million for the sale of European Home Retail.

Order. I have to tell the House that the heating cannot be adjusted because of the works outside. Although it is not normally in order for hon. Members to remove their jackets—it is a convention of the Chamber—it will be acceptable on this occasion.

I, too, add my commendations to the hon. Member for South Swindon (Anne Snelgrove). She has been leading on this issue in parliamentary questions, in her constituency, and now here. That is very much to her credit.

Many questions have been asked and issues raised, and I am sure that the Minister will want to respond to them in full. I shall attempt to rattle through them; I shall therefore take no interventions.

One issue that arose in debate was the advice given to Farepak agents holding customer payments not yet paid into the company’s account. My understanding is that they had been advised that the money should be returned to the customers. Will the Minister confirm that the administrator has indeed given that advice? As the hon. Member for South Swindon said, the Hamper Industry Trade Association Ltd is reported to have referred to a bond against deposits for member companies. Does the Minister agree that such an offer is largely meaningless in a case of such scale and calibre?

The collapse of Farepak has left many families facing a bleak Christmas. They tried to do the right thing by saving for the festivities, but now they are completely out of pocket—in some cases, to the tune of hundreds of pounds. We do not know the exact number of customers. Some reports suggest that about 120,000 are affected. Indeed, the total amount lost is not clear. Estimates vary between £27 million and £40 million. What we do know is that those people have been robbed of their Christmas.

The collapse seems to have come without any warning to the customers or to the 25,000 or so agents who acted for Farepak. Marisa Cavarra, who was an agent for Farepak in the vale of Glamorgan, told the BBC:

“We had no indication that anything like this was about to happen. I paid my money last month and there were no warnings that there were problems.”

The lack of forewarning is especially concerning given that the parent company, European Home Retail, had its shares suspended three months previously, back in August. Will the Minister ask why it took so long for administrators to be appointed after the shares were suspended and why, as several hon. Members mentioned, payment reminders were sent out to agents during that period?

The absence of information is not the principal concern, however. When one looks at the accounts, one sees that Farepak’s finances looked good. It received a clean audit, had assets of £3.6 million and last year had a profit of £1.6 million, so what went wrong? Where did the families’ money go?

There have been reports, notably in The Sunday Telegraph, that there were significant cash transfers between the parent company, EHR, and Farepak, with the former using the large cash balances of the latter to pay off its overdraft with the group bank, HBOS. Let us be clear: group-wide money management is fairly routine for many companies and is not, of itself, illegal. However, when that money is the savings of individuals, there is a serious problem if those deposits are not secured appropriately.

In 2000, EHR bought a book and toy firm called DMG for £35 million. Apparently, the purchase proved to be a financial disaster and after several asset write-downs, the firm managed to sell DMG—for just £4m. Several analysts have suggested that that episode in particular is the reason why the firm found itself owing millions to its bank. That is when, the reports suggest, the large cash transfers between Farepak and its parent company began in earnest. Someone decided to raid the piggy-bank.

Given that, can the Minister confirm that his Department’s inquiry will specifically consider that aspect of the case and the actions of those responsible for the financial management of the firm, including the advisers and the bank? Equally, I wonder whether he can comment yet on the advice that he received from the Insolvency Service, which he sought on 19 October.

Farepak was one of many Christmas-club companies, which tend to target those on lower incomes and which bank the money on their behalf, usually in return for vouchers that are redeemed in stores such as Woolies or Argos. The more people save, the more vouchers they get. That savings model has been around a long time and typically means that the retailers are extending a lot of credit to the voucher company while it in turn is cash-rich. To be fair, the activity has been around a long time and has, for many lower-income households, been a good informal way to save. As hon. Members said, there is a personal touch to that form of saving, not least because it is often family members who act as agents for the firm. Perhaps most important, that form of saving has helped people who would otherwise never have saved money to start that vital habit.

Therefore, if there are remedial measures to be taken beyond this one business, we need to be careful not to destroy the whole market and, with it, the opportunity that many families have to save. Amid the understandable clamour for regulation, the Minister must not—I am sure that he will not—lose sight of the facts of the case and who is responsible. Given that, will he confirm that his inquiry will include the whole EHR group of companies, its directors, its managers and its advisers? Can he say whether the inquiry will extend to the pensions of the work force and to how many of them have lost all or part of their entitlement? Can he confirm that it is his intention to make public the full results of the inquiry? The families affected deserve to know exactly what happened and who is responsible.

The sudden demise of Farepak has caused great heartache and financial loss—very often, for people who can ill afford to lose any money. As hon. Members have said, it will mean that for thousands of families Christmas will be bleak. The Minister was very quick in responding to the situation, which is to his credit, but what is important now is that the facts are clearly established about Farepak and EHR and that any proposed actions focus on the specific circumstances. If people have failed in their duties, they must be held to account.

It is far too early to say whether this case shows that there is reason to believe that regulation must be imposed on the industry, but once the inquiry is concluded and, we hope, its results published, we shall be able to judge whether Farepak is an isolated case or whether there are wider lessons to be learned. I am sure that, if there is a case for sensible action beyond the circumstances of this case, the Minister will want to return to that issue. Meanwhile, I am certain that the families will want to hear what progress he has made and what news, if any, he has for them about his Department’s inquiry.

Good morning, Miss Begg. I thank all right hon. and hon. Members for participating in what has been a passionate and sometimes genuinely angry debate. People should be angry about the situation that we are discussing. This is one of those areas in which Members of Parliament can, I hope, make a difference.

First, I shall put on record the basic facts of the case. Then I shall talk about what I have been doing and the proposals for a way forward, and give some information about the administration, the investigation and the regulatory framework.

I want to give a commitment. It would not be prudent to answer all the questions that have been asked here today, and I shall explain why. An investigation is going on, and I want to ensure, as the Minister, that I act appropriately, so that if at any later date there are further investigations, inquiries or, indeed, charges, no one can put up a slick lawyer or barrister in the High Court and use what I have said in the House to allow someone to avoid a proper inquiry. It is important that I give as much information as I can, but I also ask hon. Members to trust me. At each stage, I will come back to the House, in a forum such as this or in other forums, to keep hon. Members fully up to date on the inquiry, the investigation and the appropriate action that will need to be taken later.

Like other hon. Members, I was appalled when I heard about what happened. It took me back 35 years to the time when I was a 20-year-old with two children. We paid for our Christmas by joining a hamper club, a Christmas club. That was what a young family did. My parents and grandparents did it before me. It was part and parcel of the community in which I was brought up and it remains part and parcel of that community. These things are deep in the psychology of the community. This is about self-opportunity in saving and ensuring that every member of the family does as well as they can at Christmas. People save throughout the year. It was passed on from generation to generation that that was what we did. That is why the events involving Farepak are so appalling and why I took the action that I did. I know from personal experience what it would be like to be affected by such events.

I shall recap briefly on the basic facts of the case so that everyone is clear about them. Farepak’s main business was essentially a Christmas club. The company took payments during the year, mostly through a network of agents, and delivered in return either vouchers redeemable in a range of stores, or a hamper. Some 10 to 15 per cent. of the business involved hampers. Some 80 to 85 per cent. was done through vouchers. The vouchers would have been sent out about now, the hampers nearer Christmas, and the rest of the industry is currently doing exactly that—hon. Members may be asking what is happening with other companies.

It appears that this company had some 26,000 agents. We are trying to identify, through the administrator, how many of those are active agents. That work is ongoing. The number of customers is uncertain, because the relationship was always with the agents, not the customer base. The company itself had no direct information, but it appears that there are probably in excess of 100,000 customers. That is an estimate from the administrator. The situation has affected whole families and whole streets in communities up and down the country. The total amount due to those customers is not known, but we have heard that many individuals are owed hundreds of pounds and some, at least, are owed thousands.

I would like to give an assurance. BDO Stoy Hayward made a statement a few days ago, following a meeting with me, that cheques sent to Farepak and received by the joint administrators after the company went into administration on 13 October were never banked, and that some customers will already have received their returned cheques. That process will continue for some time. Because of the volume of correspondence to be processed, there is no set limit on the time that it will take for those cheques to arrive, but the administrator is trying to get it done by the end of November. That money will be returned by the administrator, and not seized and retained.

The company was placed in administration on 13 October on application to the High Court. The administrator has confirmed that the company will not be able to fulfil orders that it has received for either vouchers or hampers, and—I must be straight; there is no point in dressing it up—it is pennies, not pounds, that it will return, at the end of the investigation, to those who lost their money.

I cannot comment on the possible reasons for Farepak’s failure. That is, of course, subject to investigations by the administrator and my Department’s companies investigation branch. I cannot prejudge the outcome of those investigations but I undertake to pass on to the investigators all the points raised by hon. Members this morning, including some points that I have heard for the first time.

This is an appalling state of affairs. The impact on so many family Christmases, in so many parts of Britain, can only be imagined. I fully share the concern that so many hon. Members have expressed about the effect on hard-working people, many of them among the least well-off, who aimed to put by something for Christmas, so that when that happy time of year came round again, they could be sure of participating without getting into debt. Let us be clear that the people affected are not ordinary, but extraordinary, and that they come from extraordinary communities, where they try to do the best they can by their families, friends and workmates. What has happened is not their fault. They have been let down by the so-called top people.

My first priority is to mobilise whatever resources or assistance may be available to help to alleviate the impact of the collapse on the customers and their families, in the limited time available before Christmas. That is why I made it clear in the House, when my hon. Friend the Member for South Swindon (Anne Snelgrove) raised the matter in questions on 19 October—I cannot praise her too highly for what she has done, not only in securing the debate, but behind the scenes, with my hon. Friend the Member for Workington (Tony Cunningham) and other colleagues, in their communities—that I had discussed the way forward with the administrators and contacted the British Retail Consortium. That led to a meeting on 21 October to discuss the potential for a good-will gesture to help the most needy people, who have lost out completely. It readily agreed to the meeting, which was held at the Department of Trade and Industry to assess the level of the problem caused by the company going into administration. We agreed that the aim should be to find a package that would be simple, fraud-free and not derisory, and which would be easy to administer at store level as well as providing as much choice as possible for the customers to shop where they wanted.

The retail sector has no legal obligations in the matter, and the package would not have been a compensation package, but the British Retail Consortium accepted in principle the idea of a good-will gesture, given the exceptional circumstances surrounding Christmas, and agreed a statement setting out the arrangement, to be placed in the public domain. I am sorry that the consortium has come to the view that the practical difficulties are too severe, and has abandoned its efforts to devise a good-will package. I am very grateful to the BRC for its help so far and its continued willingness to support our efforts to find a solution. I know from the individual retailers who have contacted me that they remain willing to consider supporting any alternative proposal that is sufficiently simple and timely.

I have also had initial discussions with the chairman of HBOS, Lord Stevenson, about the possibility of the banking community, including his own bank, making a contribution, and we have agreed to further discussions following today’s debate. I am sure that Lord Stevenson would like me to report further to the House on the discussions that we have had. I want to make it clear to hon. Members that I am not in discussions with him about the role of HBOS, or allegations about that role. That is a matter for the investigations. I am discussing his ability, and the sector’s ability, to make a contribution. He has made it clear that some of the allegations in the press are fallacious, and I am sure that a defence will be set out on that basis. However, he has also said that HBOS will, as a company, work with the investigators and support any work that they want to do to get to the bottom of the issues. The discussions that I am having are fire-walled. The other matter is for the investigators, and hon. Members with allegations to make should make those to the investigators, not to me. I shall report back on my discussions with HBOS.

I make it clear to hon. Members that I am not giving up on this issue. I am as committed to it as they are, and we need to make a difference to hard-working people. I was mindful of what the BRC said and accepted what it said, in good faith. I have no reason to believe otherwise. As a consequence, my office and staff have been working around the clock—we were in the office at half-past 1 this morning—trying to bring together what I shall propose. We have been working closely with the Family Fund, a registered charity based in the city of York, whose chief executive is Marion Rowe. She is well-respected in the government, business and charity sectors. She and her team have, in the past few days, been working tirelessly with the administrators. The fund’s main focus is on providing assistance to families with disabled children, and it was originally prompted by the thalidomide disaster, so we are talking to skilled people.

The fund has 30 years of experience of grant-making and providing assistance to families, including the large-scale distribution of vouchers. In 2006, it distributed £27 million on behalf of the Government to more that 46,000 low-income families with disabled children. I am genuinely pleased to announce to the House today that the Family Fund is setting up a dedicated voucher fund for Farepak customers, called the Farepak response fund. The Government are strongly behind that. The fund will be independent of all agencies and will accept donations from all sectors. In recognition of the need for a good-will gesture this Christmas, may I suggest to hon. Members that we should take the moral high ground today? We received a pay rise this week. I ask hon. Members to donate a day’s pay to the fund, because I shall be going out there and asking a lot of people, who have no legal obligation to make a contribution and about whom many remarks have been made today. I want to do that from the moral high ground.

I shall give way to my hon. Friend in a minute.

I know that Members of all parties donate to charities all the time, privately and selflessly, but I think it important to assist the process by doing as I suggest.

My right hon. Friend the Member for Oxford, East (Mr. Smith) asked about the London stock exchange. By coincidence I have made contact with the chief executive of the London stock exchange, Clara Furse, and I hope to talk to her later today about the possibility of organising a trader’s day, in which some of the proceeds of the day’s trading would be turned through the fund into gifts for children, the elderly and people with disabilities, and other vulnerable people who have suffered from the collapse of Farepak.

Many companies and bodies have contacted me to say that they want to help, and they can now do so with confidence because there is a dedicated fund for them to support. There is no reason not to do that. I believe, and so do members of the BRC, that the fund overcomes practical difficulties that the BRC had previously referred to. For example, Tesco contacted me again this morning and committed itself to putting £250,000 in the fund immediately. Others have in principle agreed to support the fund and I hope that in the next few days they will do so. The fund offers the opportunity, whether to a multinational company or a national or local company, to make a contribution—a gesture—large or small. Uniquely, we now have a fund where individuals with resources can also make contributions to help children or others who have been deeply affected by the Christmas failure.

The fund is about the spirit of Christmas. As some of my hon. Friends have shown, there is good will about. I shall place in the Library for all Members in the next 24 hours a full, detailed statement about issues concerning regulatory affairs, administration and the questions that have been asked today. Obviously I shall write personally to the Opposition spokesman. I shall answer all the questions honestly. There will be a reason given when I cannot answer. Let us pull together. This is a national emergency involving more than 100,000 people. We have a few days to do something. Let us go forward with the fund and resolve the issues affecting it. Let us get the resources to the people who need them, and make sure that the regulatory inquiries take place in an appropriate way. That will enable us to deal with the issue effectively.

If that is the only way forward at this point, so be it, but my constituents are not looking for charity. They are looking for their money. Will the Minister join me in calling for HBOS to donate perhaps £34 million to the fund?

I am not asking for charity, but I am not going to go for a quick headline with a comment like that. We are trying to have detailed discussions with companies. My job is to get those companies to make the payment, and I am trying my best to do that.

I congratulate my right hon. Friend on the work that he and his Department have done, and give heartfelt thanks on behalf of my constituents, and other hon. Members’ constituents.

I thank my colleagues for the debate and the support, and I ask hon. Members to go back to their constituencies and to make contact with the companies to make sure that they contribute to the fund.

Rail Network

One of the most famous old boys at the school I went to, Maidstone Grammar School, was Richard Beeching who was subsequently Lord Beeching. I rush to add that we were not there at the same time and I have no recollection of the gentleman. He is the sworn enemy of railway anoraks and his spirit, to some extent, haunts the Department for Transport to this day.

I want briefly to explain the legacy Lord Beeching left. Classically, he closed a quarter of the rail system, fuelled road expansion and earned himself a hallowed place in the demonology of railway lovers. I will obviously not praise him in that context, but I will say something about the Beeching plan and what he did for our take on railways.

The Beeching plan was based on doubtful statistics that were closed to any kind of public or independent audit. It was spurred on by the vested interests of commerce and the unions—capital and labour combined—and was speculative about the future. In some cases it was also wrong and unbalanced about the present because rail patronage was not actually falling when the plan was conceived. The plan was unimaginative in the solutions it offered—for example, it suggested closure in every case—and it was Stalinist in its implementation, because sometimes with closure came the immediate demand that housing be built over railway land. Yet Beeching was not a fool. There is an anecdote that tells of when he went into a railway station lavatory and came across a slogan that said, “Beeching is a prat.” Apparently, he responded to that—I am not sure if this is parliamentary language, but I am only quoting—by writing in very neat handwriting, “No, I am not.” He was not a fool, but he did throw down a gauntlet to the rail system by challenging it to state an economic case for its existence. That theme was recently taken up by the former Transport Minister, now the Secretary of State for Trade and Industry, when he said that the railways were not there to carry fresh air around the country.

In a sense Beeching set a framework for subsequent debate, although in truth, since the inception of the railways, those involved have always had to make some sort of economic case. The first entrepreneurs who built the railways definitely knew that there was an economic case before they started work. Since Beeching, the argument has raged over whether an economic case should be a necessary condition for a rail service or whether it should simply be a sufficient condition. After all, there are other arguments that can be made for a railway system which are not strictly economic—for example, the tourist benefits it can offer and the environmental benefits such as cleaner air. There is also a public service argument that the railway should be in place because people need railways whether or not the railway companies actually make money.

The thorny question that is often raised is how the economic case will be assessed and whether the economic case is solely made by looking at the bottom line of the operator, by considering a subsidy or whether, more holistically, an evaluation should consider the contribution of a rail system to the economy of a particular area.

Does the hon. Gentleman agree that at the very least every county town in England should have a direct rail service to our capital city?

I warm to that sentiment, but do not know whether it is strategically possible—it is a certainly an entirely worthy ideal.

The question that provokes me most is that if there is an economic case for railway development, particularly relatively modest development, how is it to be progressed in current circumstances? We are not talking about Crossrail—I can see more than a couple of my fellow prisoners from the Crossrail Committee here.

I have spent enough of my life talking about Crossrail so I will forgo the opportunity. We are not talking about high-speed rail links to Glasgow or the £3.5 billion spent on Thameslink, but about reversing some, although not all, of the Beeching cuts. Some clearly cannot be reversed for practical or economic reasons, but I am referring to instances where an economic case can be made.

We must accept that the railways are very different from how they were in Beeching’s day: the power of the unions is significantly reduced, patronage is rising sharply, competition exists and environmental issues are centre stage as they certainly were not before.

In that spirit, does my hon. Friend accept that the Government are making potentially disastrous use of the existing network? The plans for a cross-country rail franchise will result in people who travel from towns north of Crewe to the south and south-west—particularly to stations such as mine in Oxenholme—having to change at Birmingham New Street. Passenger Focus has said that that would cost 2.8 million passenger journeys a year. Does he accept that that would be very damaging for the rail network and also for our environment?

My hon. Friend makes a good point on which I am certainly not qualified or knowledgeable enough to comment in detail. The Minister will surely respond by saying that rail utilisation strategies are what the Department for Transport is focusing on at the moment to obtain better use of the existing network. It appears that that is certainly not happening in my hon. Friend’s neck of the woods.

In my experience, the Treasury is always involved in the railways and actually killed off the investment in rail that was part of the Beeching package. There was supposed to be investment following on from the cuts, but while there were cuts, there was no investment, a move that set back electrification. The Treasury has suffered and groaned, quite understandably, under Railtrack and the events associated with it, and has calculated that it subsidises every rail passenger by about £4 per trip. However, the pressures for expansion exist and have to be admitted. In recent statements, the Government have said that they are aiming for more use and capacity on the railways, which is part and parcel of the new franchising process. Network Rail certainly aims to do that, and it set aside considerable sums of money for that purpose. The rail regulator, to whom I recently spoke, said that in his dealings with the rail companies and Network Rail, he wished to encourage, as far as possible, increased capacity and rail growth—whatever we mean by that.

Groups such as Transport 2000 are mounting a vigorous and effective campaign, arguing for developing the railways. There have been a number of conferences on that, which have been supported by players such as the CBI.

One of the best ways to expand the rail network is to have more direct routes to the capital. Does the hon. Gentleman agree that the recent decision to turn down Grand Central’s bid to operate a rail service from Halifax to London was a mistake and should be rectified as soon as possible?

I do not have the detail on that particular proposition, but knowing the hon. Lady and the extent of her experience of the railways, I am sure she is making a valid and adequate comment.

We cannot obtain increased capacity and a real modal shift, which is what everybody wants, simply through tidying up and investing in stations, smarter ticketing—though that is desirable—or clever rail utilisation strategies.

In terms of the investment needed to get people off the roads and on to rail, will the hon. Gentleman accept that Network Rail must invest in car parking facilities, which are often overlooked because the requirements for them are underestimated? Many landowners around railway stations are willing to give up their land, but Network Rail is incapable of accepting those offers.

We certainly require a degree of joined-up thinking on that. Network Rail owns a considerable amount of land, some of which could be freed up for car parking. Clearly, the easier it is to get out of one’s car and on to a train, the more the train will be used. Better franchising will help. I am sure that the Minister will say something about that. All that is entirely desirable—I do not demur from that one jot—but we need increased productivity, functionality and utility to travellers. In some cases, that will mean infrastructure that has been removed being put back in place. That need not be a nightmare for the Treasury, or mean establishing connectivity without customers. It can be a win all round.

I congratulate the hon. Gentleman on securing the debate. Does he agree that the first priority is to ask the Government to insist that every old railway corridor is protected and not built on?

Absolutely. It would be very short-sighted to allow building in places where we will require transport. I am sure that the hon. Gentleman will agree that there are plenty of quick wins to be had. A classic example of that in my neck of the woods is the Olive Mount curve in Liverpool, which is on the menu to be reinstated quite soon. In that instance, we have the absolute stupidity of freight lines coming out of Liverpool dock and fouling up passenger lines. It is crucial to the economy of the area that that is resolved pretty quickly, and it can be done for a fraction of the cost of some of the projects on the stocks in the capital.

My hon. Friend mentions freight lines. A new freight line has been built, at enormous expense to the taxpayer, from Portishead in Woodspring to the city centre in my constituency in Bristol—ironically, to import cars. It could also be used to reopen the passenger line to Portishead, but First Great Western tells me that under its franchise it is not allowed to argue for an expansion of its existing network. It must simply run existing services. Is not that absurd?

Clearly it is an absurdity, and a petty restriction that the Minister will find difficult to explain.

The problem is not in identifying quick wins, but in getting them on the table. During our debates on the Railways Act 2005, I asked the then Minister of State, Department for Transport, now Minister for Policing, Security and Community Safety, why there were so many clauses on how to close a railway line and none on how to open one. If people consult Hansard, they will find that he replied, with a trace of irony, that there is no need to have clauses on how to open a railway line because it is perfectly obvious and everybody knows how it is done. In my experience, that is not the case; it is more like knitting fog. Happily, in the same debate, he said that the Department for Transport was involved in an exercise to examine disused curves in different parts of the country to see what can be done with them. I have not seen the results of that exercise or heard any more about that suggestion, but if this Minister knows what has gone on, will he enlarge on that?

The small town of Burscough, which is just outside my constituency, has two railway stations that serve two different franchises. They are separated by only half a mile and a disused rail curve. If it were reinstated and the line to Ormskirk electrified, it would join up two spokes of Merseyrail, to its benefit. It would also considerably enhance and boost services to Preston, Wigan, Ormskirk and Southport, and would cost very little—something in the region of £11 million or less. Merseytravel is doing research on that, as the previous research has been completely outdated and overtaken by changes in statistics.

However, getting the project through would mean cutting across the two passenger transport authority boundaries of Lancashire and Merseyside. It is not automatically a candidate for regional transport allocation—a method that one might wish to pursue—first, because it was not clear in the north-west whether rail fell within the regional transport allocation when it was agreed by the regional assembly; secondly, because the project is of relatively low cost; thirdly, because Network Rail needs to be involved in the act in some way; and fourthly, because it crosses a range of boundaries.

I listened with some interest to talk from Network Rail and, to be fair, from the Department for Transport about the funding that is available for growth, but my general experience from one particular project in my area is of bouncing around from body to body, including the DFT, which I have been in and out of from time to time. I went in there as a naive MP, got the maps out and tried to explain to the civil servants exactly what I was talking about. On one occasion, I was asked to go away and construct a business case. I wrote back saying, “I know, generally, what you mean by a business case, but can you give me some samples of business cases already submitted so I can model mine on the most successful of those?”, but I have not received a reply.

Despite the massive, unanimous local support, trying to make progress is like confronting a Kafkaesque environment. I know that we need to get over certain hurdles, but I have never been clear about what those hurdles are or who puts them there. Sadly, I believe that many projects are in a similar, limbo-like situation. There are many quick wins to be had in which progress can be made. Where progress is made, it is often for a series of eclectic reasons, such as a section 106 agreement in the right place, or a local authority being prepared to put up funding. In the run-up to the debate, the Kilbride group drew itself to my attention. It specialises in offering advice to beleaguered MPs such as myself and communities such as mine that are keen to make progress on schemes that do not seem to meet any of the usual parameters.

There is much to be gained from expanding the rail network. A lot of money could be well spent, although we are not talking about huge sums, to bring about economic benefit in the regions, extend capacity and encourage a modal shift. A business case can be made for that, but it is not clear what the path is to bring such schemes to fruition.

Order. Several hon. Members are seeking to catch my eye. If Back-Bench Members keep their speeches to just over five minutes, everyone should be able to speak.

I repeat what I said about the digital clock: the time at the bottom has stuck at 4.27 for some strange reason, but the time above is the real one. Hon. Members will have to watch that to keep to their time. I call Katy Clark to speak next because she sat through all of the last debate but, unfortunately, missed out.

I am grateful for the opportunity to contribute to this important debate, Miss Begg. I congratulate my friend, the hon. Member for Southport (Dr. Pugh) who, like me, is a member of the Select Committee on the Crossrail Bill. I am well aware that he is making a great contribution to expanding the rail network in Britain.

I shall take this opportunity, in the week after the Stern report, to argue the environmental case for an expansion of the railways system. Sadly, because of the huge increase in the use of the car in Britain, all forms of public transport, including buses, railways and trams, are estimated to account for only about 6 per cent. of transport use in Britain. The Government are rightly aware that if we are seriously to tackle carbon emissions in this country, something will have to be done about the increasing use of the car. A huge amount of work is being done on road pricing, but even before the Stern report, the Government were setting themselves challenging targets to reduce carbon emissions by 20 per cent. by 2010 and 60 per cent. by 2050. Those targets are ambitious, particularly when one considers car use and the fact that transport accounts for a quarter of all carbon emissions in Britain, with cars contributing a major part of that.

Clearly, if we are to do something about climate change and reduce carbon emissions, it is necessary to consider transport, and public transport in particular. The railways have an important role to play, but the current system simply does not have the capacity to deal with a large increase in passenger use.

I accept the hon. Lady’s point about people wanting to get off the roads and being keen to use public transport, but does she agree that they are often discouraged from doing so because services are infrequent, unreliable and overcrowded?

Indeed, I do. Another factor that puts people off using public transport is the cost. Many of us are well aware of the cost of using the railways, particularly those of us who live in far-flung parts of Britain and have to travel regularly to London to attend the House.

Does the hon. Lady also agree that the complexity of the fares, which has been raised many times in the House, puts people off because they have to trawl through the whole complicated system to find the cheapest fare?

I do agree, and that complexity has not been reduced by the railways’ complex management and ownership structure. The franchising arrangements do not help to provide the British public with a simple fare structure or the best-quality service. We need to look at a number of issues, including the fragmentation of the railways, which does not help to ensure that the best pricing structures are available for passengers.

There is a strong environmental case for rail, and it is supported by the public. In a recent MORI poll, 64 per cent. of those polled said that they would support increased spending and investment in the railways if that would help to combat climate change. There is also great public support for ensuring that the railway system is not only convenient and available, but priced in a way that makes it an attractive option. Currently, however, even a 3 per cent. increase in the railways’ share of passengers would require about a 50 per cent. increase in demand on the railways. Even a relatively small increase in the railways’ global share of passengers would therefore require quite significant spending and investment in the railways. If the Government’s policy of getting people off the roads and on to the railways and the buses is to be successful, an increase in capacity is needed.

For all those reasons, I ask my hon. Friend the Minister and his colleagues, when they make representations in next year’s comprehensive spending review, to put the strongest possible case for doing everything to ensure that we live up to the ambitions of the Stern report, which so clearly outlined the challenges that we face, and to secure adequate investment and funding.

My hon. Friend is making a powerful speech. When there are capacity issues and investment is needed, for example, in re-signalling, one of the most obvious things to do is to look at the number of trains travelling on the line and at its freight capacity. That is exactly what is happening on the line between Cheltenham and Swindon in my area, where we could double the use of the line and solve a lot of the problems. That is the right approach, but there is often no co-ordination. Does my hon. Friend agree?

I am sure that that is indeed the case. It is important that we look at all such issues, particularly in the wake of the Stern report, which makes it clear that we must take action sooner rather than later. We must look at the organisational and structural issues in the railways industry. The bottom line, however, is that we must make a political decision that the railways are part of our future, and we must put in the investment to ensure that they are the option that people choose.

On the question of investment in the railways, does my hon. Friend agree that there is a lot to be learned from the success of congestion charging in London and the subsequent investment in public transport that it has made possible? Does she agree that making motorists pay a realistic price for using their cars and investing the proceeds in rail is an environmentally friendly alternative for long-distance and community use? We should learn the lessons of congestion charging, which could be a major contributor to investment in rail.

I agree. I suspect that many lessons can be learned from London’s experience with congestion charging and from the attempts to increase the number of buses and to promote the use of Oyster cards and other mechanisms to reduce the cost of public transport. In Scotland, the policy of free bus travel for pensioners has also been very successful in getting pensioners to use buses as their preferred mode of transport. It is clear that price is a major factor when transport users make their choices, but if the trains are not there, people will not be able to use them, no matter what the cost.

To conclude, there is a strong political case—particularly against the backdrop of the Stern report—for making significant investment to ensure that Britain’s railways provide us all with a service. Like me, my hon. Friend the Minister regularly commutes to Scotland, and he will be well aware that the journey is far lengthier for those who commute by rail than it is for those who use alternatives such as air. If we had the high-speed links that exist in many European countries, however, rail would become a far more competitive option. I therefore congratulate my hon. Friend on the work that he has already done since being appointed to his position and encourage him to do all he can to ensure that we get better investment in our railways.

I congratulate the hon. Member for Southport (Dr. Pugh) on securing this important debate.

I believe that Shrewsbury is the only county town—there may be one other—without a direct rail link to London. Dealing with that issue is a priority for me and many of my constituents because we believe that Shrewsbury, as the county town of Shropshire, should have a rail link to our capital city. That is not only because of the opportunities for tourism and business investment, but because of the flexibility that such a link would offer constituents, who would be able to get to London without changing at Wolverhampton.

Let me explain to the Minister what happens to people who live in a county town with no direct link to London. In our case, people have to go to Wolverhampton on Arriva’s trains, which are extremely dirty. Last Monday, I saw one arrive at Shrewsbury station that was so dirty that I could not see anyone inside the carriage. I was amazed that both the inside and the outside of trains could be so dirty. The trains are always late, so people never get their connecting train on time, and desperately overcrowded.

As Shrewsbury’s MP, and being very recognisable at 6 ft 8 in, I always give up my seat.

I recognise some of the points that the hon. Gentleman is making from my own train service. Does he consider that they are at least partly the result of privatisation, because profit, and not passenger service and keeping the trains clean, is the main motive?

I am trying to focus on Shrewsbury, but I disagree with the hon. Gentleman. In the old days, when we had British Rail, there were various problems, and in certain cases the situation was even worse. I believe in privatisation, but the Government have the responsibility to regulate train operators to ensure that services are adequate.

As I was saying, I always give up my place on the train, but every Monday I count at least 30 people standing in the carriage. Many senior citizens stand in the carriage from Shrewsbury to Wolverhampton every Monday. In the summer’s appalling heat, standing was unbearable and one could not get away with transporting animals in those conditions. We arrived at Birmingham station on one Arriva train and a poor lady collapsed on the platform. I stayed with her, as did many other passengers, for about 35 minutes before the paramedics took her away. People travel in such conditions between Shrewsbury, Wolverhampton and Birmingham on Arriva trains, and it is a scandal.

The hon. Gentleman will be aware that the large number of my constituents who travel on the Aberystwyth to Shrewsbury line have to spend large lengths of time stranded in Shrewsbury because of the problems he identified. They largely derive from timetabling difficulties in respect of Birmingham New Street. On that basis, does he agree that an hourly service from Aberystwyth to Shrewsbury would be helpful? As a rail user for the past 20 years, may I reiterate a point made by another hon. Member? Some 15 years ago we had a direct train service from Aberystwyth, through Shrewsbury, to London. It was a good inter-city service before privatisation.

I made the cardinal mistake of referring to the hon. Gentleman as a Plaid Cymru Member the other week, and I apologise for doing so, because he is a Liberal Democrat. He is right that a direct service from Shrewsbury to London would benefit all his constituents and the many people in mid-Wales who go through Shrewsbury.

I was so frustrated with the performance of Arriva Trains Wales that I invited its managing director, Bob Holland, to come to Shrewsbury to have a look for himself. He agreed to come on the service with me and tour the station. Suddenly, miracle of miracles, the train arrived on time, there was no overcrowding because an extra two carriages were put on the train and a service of teas, coffees and cakes was provided, which was lovely. It was the most pleasurable train journey on which I have ever been. The train arrived in Wolverhampton on time, and it was immaculate. I had a tea, a coffee and a cream bun. Mr. Holland said to me, “Well, there you are Daniel. I don’t know what you’re complaining about. It’s lovely isn’t it?” That shows how out of touch the chief executives of these companies are. Every time they inspect the service, it is all laid on for them, so that they get a totally false perception of what is happening.

Luckily, I and many other MPs who represent constituencies in Shropshire and Wales have been banging on about this for a long time. A company called Renaissance Trains wishes to provide a direct service from Shrewsbury to London, which is scheduled to start in late June or early July 2007. Renaissance Trains currently operates a service from the Deputy Prime Minister’s constituency to London, and the company has won national awards for the services that it provides. The trains are good, clean and punctual, and the ticket prices are very reasonable. I am informed that Arriva is trying to make it more difficult for Renaissance Trains to get the franchise because it will take Arriva’s business away. Will the Minister ensure that Renaissance Trains gets every help possible to try to secure the service, so that we do not have to rely on Arriva any more?

Will the Minister explain how railway stations are maintained, because it is important for the railway network? I would like to take him around Shrewsbury station, which is poorly kept and not well maintained; it has graffiti and the buildings are dirty. Shrewsbury takes the Britain in Bloom competition seriously and is a beautiful, historic English town, so it is a great shame that it is blighted by having such a dirty, poorly maintained station. When one goes around the station with representatives from Arriva and Network Rail, they each blame the other and say that things are the other’s responsibility.

Has not the hon. Gentleman simply illustrated the point about the fragmentation of the railway that I was trying to make earlier? Different companies are involved and that allows one to blame the other. Another problem is that of fines. If one company is not performing its task, that will not necessarily affect or matter to it, but it might affect someone else. Does he not agree that the fragmentation of the railways is most unhelpful?

I agree that there is a serious problem of a lack of responsibility for certain maintenance of railway stations, and that is why I am asking the Minister to address it. I shall give her an example. Arriva says to me that anything above 6 ft—I should know about this because I am 6 ft 8 in—is the responsibility of Network Rail but anything under that is its responsibility. The council also owns a bit of the railway station—a bridge going into the town. Both Arriva and Network Rail constantly say to me, “That is not our responsibility. It is their responsibility.” That is appalling, because the customers and the station suffer. I am interested to hear what the Minister has to say on that point.

Some stations in the west midlands are beautifully maintained, for example, Wolverhampton. Network Rail and the train operators seem able to work well together at Wolverhampton, where the facilities are extraordinary: it has bowls on the platform that are specifically for pets; it has flowers; the station is always painted; there is no graffiti. If they can do it in Wolverhampton, why cannot they do it in Shrewsbury? They also do it well in Hereford, which is a similar-sized city to Shrewsbury. We want more common standards on station maintenance.

Finally, I want to discuss ticket prices. I come to London every Monday, returning on Thursday. I am desperate to keep my travel expenses as low as possible, unlike certain colleagues, particularly my predecessor—the former Liberal Democrat, then Labour, then Liberal Democrat Member, or was it the other way round? We will not go into that. I try to buy my tickets for a specific day and time, because that makes them so much cheaper and a fraction of the price of the most expensive ones. Sometimes, if one is delayed, one goes on the train and a huge penalty is imposed. I want to have a go at Virgin Trains for the huge differences in the prices that it charges for tickets from Wolverhampton to London. It is unacceptable and outrageous that, if someone needs a flexible fare to London, the company tries to fleece them for about £188 for a return ticket.

Does the hon. Gentleman agree that it is unacceptable that the average Virgin train, certainly from Liverpool, consists of 50 per cent. first-class carriages, forcing standard-class passengers to suffer cattle-truck conditions? Does it worry him that a subsidy might be issued to Virgin to extend its trains and not convert some of the first-class carriages to standard class?

I agree. The service from Wolverhampton to London provides a huge number of first-class carriages, most of which are empty, and people in standard economy class are wedged into crowded carriages. I am not a great fan of Virgin—I want to put that on the record—and I would like to hear the Minister’s views of its treatment of customers, the overcrowding in standard class and, more importantly, its fleecing with first-class fares.

Order. I ask hon. Members to restrict their comments to five minutes, so that everyone who wants to speak may do so.

It is a pleasure to follow the hon. Member for Shrewsbury and Atcham (Daniel Kawczynski), because I grew up in Shropshire and spent many hours hanging around Shrewsbury railway station waiting for trains. In the days of British Rail, there were direct trains from Shrewsbury to London, but privatisation fragmented the service, which is largely what I shall speak about today.

Everyone now recognises the value of the train system, and everyone knows that the combination of Beeching and Buchanan in the 1960s destroyed much of our huge railway network. Ten thousand miles of track were destroyed by Beeching, and Professor Colin Buchanan persuaded the Government and local authorities of the day to destroy town centre after town centre and build roads through them. We are now paying the price for that, and it is up to us to ensure that the current mood in favour of railways continues and that the necessary investment is made.

Because of privatisation of the railways, there is often a lack of co-ordination in train journey planning. To be frank, the ticket-pricing system is mad. Railway nerds who read Rail magazine, as I do, will know that Barry Doe produces “Fair Dealer” every month in which he goes through the complicated business of how to find the cheapest ticket from London to Aberdeen and so on. He obviously spends a lot of time looking at a computer screen and works it out for himself, but most people, when they want to buy a ticket to travel, do not want to go on a computer first. I look to the Minister to ensure that a simplified ticket system is introduced so that it is not only the people who have hours to spend looking for a ticket who can find a reasonable price. Everyone who wants to travel should be able to find that.

Why are people who buy a ticket on the day of travel always penalised? Some people who have to travel do not always know that the day before and they are heavily penalised. We end up with busy trains in the morning from London and other big cities full of business men who get tax deductible expenses, and the rest of the population must wait and travel later when they can afford to. I hope that the Minister will look into that.

Network Rail has recently published its programme of investment in the railway system for the next few years. It is an impressive document and a vast amount of investment is taking place. I pay tribute to the Government for the welcome amount of money that they have put into capital investment in the railway system.

I strongly support what my hon. Friend is saying, but does he accept that the money might have been better spent if the railways had been in public ownership, given that the cost of track renewal has increased by between four and five times under privatisation?

Indeed. Track renewal costs were high. Setting up Network Rail has ensured that the industry is now led by engineers rather than accountants, which is an improvement. The problem lies with the train operating companies and their relationship with it. When Richard Branson paraded his new Pendolino train to Manchester and said how wonderful the service was, he was praised, but the reality is that millions of pounds of public money went into building the infrastructure for that train to run on and his company can make a lot of money from running it. The train operating companies should be brought back into public ownership so that the public receive the benefits of the improvements, instead of those benefits being siphoned off by shareholders.

As I said, I welcome the impressive rail investment programme, but the Government must address the issues such as the reopening of disused railway lines. I tabled a question for the Secretary of State for Transport in which I asked:

“which railway lines in England and Wales are under consideration for reopening; and what his policy is on the reopening of railways lines.”

The reply I received was:

“In July next year we will publish our High Level Output Specification. This will set out the railway outputs the Government wishes to buy in terms of capacity, safety and reliability and the funding to support this for the next 5 years. It is for the industry to determine what inputs are needed to deliver this.”—[Official Report, 24 July 2006; Vol. 449, c. 749W.]

Private Eye paraphrased that answer with the two-letter word, “No.”

It is not for the industry to determine future outputs; it is for the Government to set the scene of the level of railway operation that they want and the investment that they are prepared to encourage in it. In that way, many of the disused railway lines can be reopened. There are many that I could mention, but I shall quickly mention the need for the east-west line to be developed. In an intervention, my hon. Friend the Member for Luton, North (Kelvin Hopkins) called for the protection of existing railway corridors, which is important. We look to the Government to call in any planning application that proposes building over existing track, even if it is disused, to protect it for the future. The reopening of the Bletchley to Bicester line would be part of that, but many other lines should be reopened—for example, the Wisbech line should be reopened beyond March. I pay tribute to the Scottish Executive for their preparedness to fund the reopening of part of the Waverley line; I hope that that goes all the way through. We need such developments.

I represent a London constituency where there are some interesting developments. There is massive investment in public transport in London and London overground railways are being developed, but why, in the development of London overground lines and the east London line, must a train operating company be called in to run it? Why can it not be run by the public in the same way as Transport for London runs the rest of the system? Can the Minister give me any encouragement on the transfer not just of rail operations to Transport for London, but of some stations?

I understand the point that the hon. Member for Shrewsbury and Atcham made about station management. Finsbury Park station in my constituency is a classic example. The building is owned by Network Rail; Transport for London and London Buses operate there, and the British Transport police have an office there. When everyone finally agrees to come to a meeting, someone cancels the day before so the meeting does not happen and we go round the circuit again. We need better co-ordination.

The Government have done well in their preparedness to invest in the railways system. They also did well in establishing Network Rail in place of the failed Railtrack. However, we want rail operations and the train operating companies to be returned to public ownership, and a real preparedness to go further with investment to ensure that many disused lines are reopened, so that we have the sort of rail network that this country needs and deserves. We have a great opportunity given the current mood, which has shifted away from our congested roads to cheaper and more environmentally sustainable rail transport.

I congratulate the hon. Member for Southport (Dr. Pugh) on securing this important debate. I did not agree with every detail of his speech, but I certainly agreed with the broad thrust of his interesting speech. It is always a pleasure to follow the hon. Member for Islington, North (Jeremy Corbyn), and I echo what he and others have said about protecting the corridors that are currently closed.

Recent Government policy has been to increase the cost of rail travel, which is already far too high, in order to reduce or hold down passenger numbers. That is particularly true of rail services into London, and the policy has pushed people on to the roads, which is mindless. It makes much more environmental and economic sense to increase peak capacity, thereby increasing the number of rail users and reducing the cost by the usual price-volume economic model. It is not rocket science, so I do not know why the Government continue to follow their policy of recent years. Some of my constituents have to travel into and out of London every day to work. Benfleet and Canvey Island in my constituency are part of the London commuter belt. Benfleet has the most used station on the C2C line, and it suffers particularly as a result of that policy.

Although I accept the need for major blue-sky schemes throughout the country, one of the quickest and easiest ways to increase capacity as we must would be to maximise the use of existing infrastructure and rolling stock. I have three examples of how that can be achieved. First, we should extend platforms so that we can run trains with more carriages. Doing so is easy, provided one obtains the various permissions needed, it is quite cheap, it can dramatically increase train capacity and it can enable more people to be transported into and out of London at peak times. Secondly, we must examine the old signalling. The C2C line needs investment in signalling to run more trains during peak hours. A little investment in signalling on the approach to London would enable C2C to run more trains each hour during those key periods.

Thirdly, and slightly more controversially, we should make small but strategic additions to the main lines. We should build spur lines and loops to existing tracks, and new stations to serve large communities. Many communities are without stations, but their people use the rail service. Canvey Island has 44,000 people, and 3,000 of them have to travel off the island to get on a train to travel to London to work each day. Only 600 people a day use the terminal at Shoeburyness on the same line, so we could afford a new station on Canvey Island, with a spur line linking it to Pitsea down Canvey way. It would be quite cheap, it would make a lot of environmental sense, and it would help to regenerate the community of Canvey Island.

It is dangerous and unacceptable that hundreds of people must stand when they travel into work—in my case for 40 minutes each way each day. We would not transport animals in that way, so why do we expect my constituents and those of my hon. Friend the Member for Shrewsbury and Atcham (Daniel Kawczynski) to do so? I ask the Minister to consider ways in which we can positively encourage schemes such as the Canvey Island rail spur and station and enable them to be realised. It is an environmental and economic no-brainer. I also call on Thames Gateway London Partnership, a massive quango that should be improving local infrastructure and the economy for our communities, to shift its focus from yet more building to community regeneration. That would be a jolly good start, too.

It is a pleasure to follow those hon. Members who made fine points and, knowing your interest in railway matters, to see you in the Chair, Mr. Martlew.

I congratulate the hon. Member for Southport (Dr. Pugh) on raising the debate. Some important points have been made. I want to be more specific about the Stern report, about the urgency with which we must address the CO2 problem and about what transport, and rail in particular, can do. Statistics from the Department for Transport show that inter-city rail travel emits one fifth of the CO2 grams per passenger kilometre that car travel emits and one tenth of that of short-haul air travel.

We have not touched on the role of the rail freight sector. The grams per tonne kilometre emitted by rail freight compared with that emitted by heavy goods vehicles on the roads is a factor of 10. Rail freight transport emits one tenth the CO2 of road freight transport. Our rail system lacks capacity for passengers and for freight, so we must have more investment.

My hon. Friend the Minister knows that I want to consider large schemes, and I urge the Government to consider them, too. Some ideas for passenger rail transport are unfeasible. A new greenfield route would be horrendously expensive and it would not be the way forward. Making the best use of existing north-south corridors for passengers is the way to proceed, but to do so we must take freight off those lines and upgrade them so that they can run more and faster passenger trains. To do that, we need a new rail freight route that runs down the backbone of Britain, from Glasgow to the channel tunnel.

The opportunity exists. I am involved in a scheme—I have not a pecuniary interest, but an enthusiasm to drive the idea forward—for a new rail freight line from Glasgow, linking all major industrial areas of Britain to the channel tunnel. It would also link to a burgeoning rail freight system on the continent. The scheme would include a large gauge that was capable of taking not only full-scale 9 ft 6 in lorry containers, which are becoming standard, but double-stacked 9 ft 6 in containers on trains all the way from Glasgow to Dortmund, or wherever, overnight.

We believe that the scheme would take 5 million lorry loads off the roads every year, save the Government vast sums of money in road investment and repairs, transform our environment and make a massive contribution to reducing CO2 emissions. It is the realistic way forward. I shall not go into the details of the scheme, because I want to discuss them in another debate, but I urge the Minister to consider a dedicated rail freight system and route that links our industrial areas with the continent, and within Britain, the south, north and midlands and the west and the north-east.

They key factor is gauge. The problem with the east coast main line, and particularly the west coast main line, is that they do not have sufficient gauge to accommodate even 9 ft 6 in containers. Under Railtrack, one of the new breed of railway managers who knew nothing about railways insisted that a container could go on a particular route, the gauge engineer said that it could not. The manager insisted it was taken on a train, and the container smashed into a bridge because it was 6 in too big. That was just one of Railtrack’s many successes before it was wound up and transformed.

Given that many goods enter this country through our ports, and that much is transferred on to roads, does my hon. Friend agree that we should develop dedicated railway ports where railways take on all freight? It is happening in other European countries, and we must consider it in our long-term strategy.

My hon. Friend is absolutely right. The scheme that I propose would deal with the continent, not with long distance deep-sea transport by ship. However, unloading freight from ships directly on to trains for delivery to terminals throughout the country, and then on to road for immediate delivery to localities, would be a sensible way forward. It would be additional to—not instead of—the scheme that I suggest. My proposal is to link Britain to the continent, where people are investing massively. A 35 km tunnel capable of taking double-stack containers is being built through the Brenner pass. It is being drilled through rock as part of a scheme that, for freight alone, will eventually link Sicily with Berlin.

People on the continent are taking the matter seriously and we must do the same. If we do not, we will lose out economically. Britain is peripheral to the European economy and we need the new artery to ensure not just that we save on CO2 emissions, but that our economy is part of the European economy. That is particularly important in Scotland. My hon. Friend the Minister is a Scottish Member, and it is pleasing that we have a Minister with professional experience in the transport industry. I know that he will appreciate many of the arguments made by transport experts, because he is one himself. Such expertise is not the case with all Ministers. I am pleased that he is in his post and I hope that he will take seriously what is being said.

We can make a massive contribution to Britain’s economy and to reducing CO2 emissions by taking rail freight seriously and investing in a scheme like the one that I have mentioned, going from the central industrial region of Scotland right through to continental Europe, and linking every major industrial area of Britain to the continental economy.

North-east Wales and west Cheshire is one of the fastest growing areas in the UK, and it has historically had a low usage of railways and a high usage of motor cars. The result of the combination of those two factors, growth and the lack of public transport is a serious congestion problem. The potential for growth in the rail services and systems of the area is reflected by three proposals. The first is the Wrexham-Shrewsbury-London line, to which the hon. Member for Shrewsbury and Atcham (Daniel Kawczynski) referred. I fully support his comments, and I am working hard to take the scheme forward.

Secondly, there is a proposal for a new electrified service on the Wrexham-Bidston-Liverpool line, to be run by Merseytravel. That service could be extremely important to the commercial and industrial future of both north-east Wales and west Cheshire. We have industries such as General Motors at Ellesmere Port, Airbus at Broughton and Deeside Industrial Park Ltd, all of which are currently served not by public but by private transport. The result is a severe, developing congestion problem that must be tackled.

The third proposal is for a further development of the Shrewsbury to Chester line, particularly at the north end. Services would be improved between the commercial centres of Wrexham and Chester by the addition of stations at places such as the Chester business park and Rossett. That would facilitate much better commuter travel between the two centres. There is currently serious congestion difficulty on roads in north-east Wales and west Cheshire. I have been commuting in the area for 20 years and I have seen free-flowing traffic grind to a halt.

I was very taken by the speech by the hon. Member for Southport (Dr. Pugh), particularly with his description of trying to work our way through developing the transport system as being like “knitting fog.” That is how I see our approach to transport. The current franchising system is intended to manage the existing service. It is bad at improving the public service, considering the potential for new development and carrying it out. I recognised the hon. Gentleman’s point about the difficulty of taking such projects forward.

I shall not give way. The hon. Gentleman has had his say and I want to be brief.

I hesitate to counsel my hon. Friend the Minister on further structural reform, because I know it is an ongoing sore, but there is a real need to consider how to take new projects forward. Members of Parliament can do so much with their resources and knowledge, but we recognise that there are possible services—I have mentioned three in my constituency alone—that could be carried forward. We wish to do so, and there are strong cases for it environmentally, as we have heard, and economically. If we do not develop the transport services in my area, the local economy will ultimately suffer.

I am pleased that under this Labour Government we are managing success. The economy has expanded, but we need to manage that expansion environmentally. We have a system that looks backwards at keeping existing services going. We need a much more constructive, imaginative and facilitative system that enables us to improve transport services in the communities that we represent.

I congratulate my hon. Friend the Member for Southport (Dr. Pugh) on initiating the debate, and other hon. Members on their contributions. Some excellent points have been made. The debate is timely because of the publication over the weekend of the Select Committee on Transport’s report on rail franchising and because we are promised a transport Bill in the forthcoming Session. I hope that that Bill, as well as doing something about bus re-regulation, will address the issues that hon. Members have raised.

I wish to set out a few things that Liberal Democrats think important and in particular draw attention to four points made by the Select Committee that are pertinent to those made by hon. Members. The Government say that they support competition, yet they appear to consider open access operators—the hon. Member for Shrewsbury and Atcham (Daniel Kawczynski) mentioned one—a threat to stability. They hail the growth in passenger numbers, yet they do not provide a long-term strategy and investment to increase capacity. We are promised a Government report in 2007 in which they will set out their long-term strategy, but I hope that the Minister will explain today the direction in which they are travelling. They want co-ordination, yet they continue to operate a system of fragmentation, as hon. Members have said. Finally, they want the private sector to invest, take risks and innovate, yet they prioritise price above all those factors. There is a role for the private sector in the railway industry, and for companies to continue to expand and develop it they need longer franchises than they currently get.

I pay tribute to the Government’s record of investment in the past few years, and the Minister’s predecessor, the hon. Member for Halton (Derek Twigg), used to say that the investment was £88 million a week, which is not to be sneezed at. We must look forward, however, and consider what needs to be addressed. The hon. Member for Luton, North (Kelvin Hopkins) mentioned freight. I was disappointed at the end of last month that the channel tunnel rail company made it difficult for freight trains to travel through the tunnel. I went up to Trafford Park in Manchester to watch one of the last few freight trains that will be able to operate through the tunnel.

I support the hon. Gentleman’s view on freight and was interested in what the hon. Member for Luton, North said about the channel tunnel rail link, but the Government have the contract with the channel tunnel rail company. It is the Government who are failing to get involved and sort out the contract so that freight can continue to move through the tunnel.

I agree with the hon. Gentleman, and I hope that the Minister will consider the matter. It is clear that companies will not be able to afford the prices that are being set, which will mean not less traffic on the road but more. I agree with the hon. Member for Luton, North that we need investment in a freight line that runs down the centre of the country.

I agree with the hon. Gentleman on rail freight. Does he agree that the matter is even more critical now that the channel tunnel is about to be forced into bankruptcy? Putting fewer trains through it will make it even less viable. We need thousands of tonnes of freight going through it every day.

I agree. It is a serious issue that needs to be addressed, and I hope that the Minister will do so.

I wish to mention something that has not yet been raised: the need for a high-speed rail link between Scotland and the capital. Currently, 97 per cent. of all traffic to the capital from Scotland uses air. It is clear that such a line would be important in getting people to switch and as part of our attempts to address climate change. Speed will be of the essence. If we are talking about a long-term plan, we need to ensure that the line is built, but there are rumours that the Eddington report has gone cold on that. I hope that that is not the case, because if every other developed country that is serious about rail can have a fast rail link, why not this country, which invented rail?

I finish with two points. A number of bottlenecks need to be addressed, such as at Birmingham New Street and platforms 12 and 13 at Manchester Piccadilly. Addressing them would do much to alleviate the concerns that hon. Members have raised. We also need longer trains and longer platforms, but that will not happen unless the train operating companies receive longer franchises. I hope that the Minister will consider the points that I and other hon. Members have made.

I congratulate the hon. Member for Southport (Dr. Pugh) on instigating this debate and, once again, the prisoners of the Crossrail Committee on their good work. It is good to see them here this morning. It is clear that Britain’s transport infrastructure will face almost unprecedented pressures over the next 25 years. Forecasted growth in the number of cars is far greater than what we can possibly provide for by building more roads. That means that we shall need a modern, efficient railway system that can face up to the challenges that will confront the network.

As was mentioned, the rail network now carries more passengers each day than before Beeching, which saw the wholesale closure of half the network. The current figures are an astonishing achievement that would have been thought laughable 15 years ago. On top of that, there has been a reversal—although not great enough—of the trend in freight, with at least some freight moving from road to rail. That has happened since privatisation, but that is not what we are here to discuss, which is the challenge of the future.

The future challenge for the railways, for both passenger and freight, is capacity. It is difficult to see how the next decade can be anything like as successful as the previous one unless the policy is orientated to ease the constraints on capacity. According to Network Rail, the TOCs and industry commentators, passenger numbers are estimated to grow by some 30 per cent. between now and 2014. However, the Office of Rail Regulation says that no growth in the number of passenger train kilometres travelled on the network between now and 2014 is expected, which in layman’s language means no more space for passengers.

With all the new people using rail services, does my hon. Friend agree that it is also important for the Government to ensure better access for disabled passengers at stations? For example, there is no opportunity for disabled people to get on to the platform for the service between Shrewsbury and Chester, which has been mentioned.

I agree with my hon. Friend and congratulate him on getting Shrewsbury mentioned a record number of times in a debate.

We can all do the maths. All that we are seeing adds up to more and more passengers, on more and more overcrowded trains, with a constant upward pressure on fares to try to take the sting out of overcrowding. I am concerned that neither Network Rail nor the Government seem to be prioritising the challenge, and I should like briefly to comment on their roles.

Network Rail seems to want more and more money. Earlier this year it asked the Government for another £7 billion of investment, over and above the cash that it had already received. In total, Network Rail wants nearly £1.5 billion more to run the railways than the independent rail regulator thinks it should have. There are only two places from which that money can come—the taxpayer or the travelling public. The Government are talking of allowing huge fare increases, which seems to be facing the capacity challenge with a policy of pricing people off the railways. It is all very well for Network Rail to ask for more money, but earlier this year it said, both privately and publicly, that its priorities were repair, maintenance and replacement. Not once was there talk of an increase in capacity.

Through this control period and the next one, Network Rail has been given some aggressive targets to drive down costs, which indicates an element of previous profligacy in that organisation. However, it is also interesting to see the start of some change. The route utilisation strategy shows at least a recognition in Network Rail that capacity is the key driver, although there is no time scale for implementation of that. Given the length of lead time and payback time, we need Network Rail to accelerate and to prioritise that programme.

The Government interfere too much in the railway. It makes no sense to have them writing timetables. A comment was made earlier about the privatised railway and Railtrack running trains into a buffer. The first timetable that was written by the Government for the First Great Western franchise had two trains on a single track heading towards each other at the same time until First Group pointed that out. It also makes no sense for the Government to be the key driver of procuring new trains, which is the reason for a number of the problems in the south-west London commuter network.

The hon. Gentleman talks about procuring trains, but is it not a fact that some of the biggest costs are the vast rental costs that are charged by the ROSCOs—the rolling stock leasing companies, which are essentially the banks—to the train operators? The costs sometimes amount to 30 per cent. every year of the value of the trains and stock, which can themselves last for 20 to 30 years.

Some element of the leasing structure is undoubtedly problematic, but as the hon. Gentleman will recognise, part of that is driven by the length of franchise in this country, which fails to allow the TOCs to invest in a way that they might otherwise want to. It is madness for franchises to be so tightly specified that the TOCs have little incentive to invest or to innovate.

Does the hon. Gentleman not consider that very long franchises might prevent the imaginative development of railways?

No, I do not see any evidence for that. Innovation and investment are much more likely. I see no problem with the infrastructure either, because we could operate a full repairing lease, as we have elsewhere, so I am not convinced by the hon. Gentleman’s point.

I am convinced that the status quo is not the answer to confronting the capacity challenge. The current system cannot drive the sort of capacity increases that we are looking for. As imposed by the previous Secretary of State but two, the right hon. Member for North Tyneside (Mr. Byers), it has caused structural rigidities, which neither allow decisions about capacity to be taken fast enough nor provide for clarity in the railways as to who is accountable. The separation of the TOCs and Network Rail has meant institutionalised conflict, which has pushed up cost. The current system cannot and will not confront the challenge of expansion. There is an overwhelming acceptance among the railway lobby groups and the chief executives of the TOCs that we need to reconsider the current structure, as imposed by the right hon. Gentleman. It is time for a reconsideration of vertical integration, which is probably the only way of overcoming the structural rigidities in the system.

The current franchise arrangements make increased investment impossible. They are too tightly specified and there is too much Government interference. Chiltern Railways is the only franchise of a longer length—although on a small scale—but it is driving innovation and investment. We need to learn the lessons and consider the length of franchises. I agree with the hon. Member for Rochdale (Paul Rowen) that, were we to examine those franchise lengths, we could also ensure that we left room for innovative small operators and open-access operators, and protected the interests of the rail freight operators.

A number of potential schemes have been mentioned. Let me touch on a few that seem to be relatively minor improvements. We need the Government to commit to and force on to Network Rail a scheme of small-scale improvements that could drive big capacity increases in the railways. My hon. Friend the Member for Castle Point (Bob Spink) talked of the needs in his constituency. Let me put to the Minister the following issues: the Maindee curve reinstatement, the Halton curve reinstatement, double tracking from Leamington Spa to Coventry and from Salisbury to Exeter, platform lengthening, extra links at termini and freight improvements at a number of the London commuter stations. Birmingham New Street and Manchester Piccadilly have also been mentioned. The expansion of railways also needs a scheme to make underused and disused railway lines more available for innovative light rail schemes.

I look forward to the Minister’s confirmation that none of the above is going to happen and that the Government will continue to define the franchise too tightly. I look forward to him stating that he is not going to instigate a programme of reform within Network Rail. I shall be interested to hear how he thinks that capacity will be driven up unless there are changes.

I congratulate the hon. Member for Southport (Dr. Pugh) on securing the debate, which provides an opportunity for the House to consider the progress made on Britain’s railways, the investment in growth that we are already delivering, and our plans to take that to the next level.

Unfortunately, a couple of hon. Members have now left the Chamber, but it was refreshing to see so many members of the Select Committee on the Crossrail Bill come blinking into the sunlight after their long exile—it would not be quite accurate to say self-imposed exile. However, it is good to see so many members of the Select Committee and other hon. Members here today. I shall try my best to answer as many as possible of the points made, but I am sure that hon. Members will understand that I may not be able to answer every single one in appropriate detail as well as deliver my own prepared remarks.

If someone from another country who knew nothing about the British railway system were listening to this debate, they could be forgiven—particularly given the comments made by the hon. Member for Southport—for assuming that the British railway system was under-resourced, underused and under threat. The opposite is the case. Of course there are major challenges, capacity prime among them, but ours is the first Government in generations to have to deal with the problem of increased rail passenger numbers. Many previous Governments would sorely have wanted such a problem.

The hon. Member for Southport started by saying that Beeching’s spirit haunts the Department for Transport today, but he did not clarify what on earth that meant. I have to challenge that statement. If he is suggesting any resemblance between the Government’s policies and what Beeching did in the 1960s, I challenge him to go back to his sources.

If the hon. Gentleman does not mind, I want to get through my speech.

The hon. Member for Shrewsbury and Atcham (Daniel Kawczynski)—that is another mention for Shrewsbury in Hansard—said that every county town should have a direct rail link to London. Unfortunately, I did not hear that mentioned by the hon. Member for Wimbledon (Stephen Hammond). I wait with interest to see whether that commitment will find its way into the next Conservative party manifesto.

The hon. Member for Southport mentioned that seeking to progress infrastructure developments can be a Kafkaesque experience. I understand the frustration of anyone who wants physical growth in the rail network about how slowly the industry moves, and I sympathise. The hon. Gentleman will understand that there are good reasons for that, but I share his and others’ frustrations.

My hon. Friend the Member for North Ayrshire and Arran (Ms Clark) talked about the comprehensive spending review in the context of the Stern report. She also mentioned a high-speed rail link. She was probably not present when I delivered my first response to an Adjournment debate on that very subject. Through the 2005 Labour party manifesto, the Government are committed to looking at the possibility of a high-speed rail link, but that has to be done in the context of the Eddington report, which is due before the end of this year.

Unfortunately, the hon. Member for South-West Norfolk (Mr. Fraser) has left his seat after describing the rail service as infrequent and unreliable in an intervention. That is far from the truth. I suspect that the hon. Gentleman is not a regular user of the rail service, but as he is not in his position to defend himself, I shall let that stand.

I will be happy to take up the complaints made by the hon. Member for Shrewsbury and Atcham about the state of Shrewsbury station. I understand that the station is operated by Central Trains, not Network Rail, but if there is a problem in getting the station up to specification, I shall look into that for him. If he writes to me, I shall pursue the matter.

My hon. Friend the Member for Islington, North (Jeremy Corbyn) made some powerful points, although he would not expect me to agree with them all. However, I am grateful that he was the first speaker in the debate to pay tribute to the amount of investment that the Government are making in the railways. In the current spending cycle, we invest £88 million every week.

My hon. Friend asked for a simplified ticketing structure. He should realise that the travelling passenger is a sophisticated being and that the internet has made it possible to shop around for the cheapest ticket. I accept that that can be intimidating, particularly for those who are not used to travelling, but the statistics do not bear out the claim that a complex ticketing structure is discouraging people from using the network. The simple fact, as I mentioned earlier, is that there has been exponential growth in rail passenger numbers.

My hon. Friend asked for train operating companies to be nationalised, but I cannot offer him any encouragement in that respect. He said that it was up to the Government to set outputs. Notwithstanding my original answer to his question—I was intrigued to hear him quote it back at me—I should say that through the Railways Act 2005, the Government intended to bring back strategic direction of the railways to themselves and take it away from the strategic rail authority. That move was welcomed by the whole industry. Next year, our high-level output specification will identify the outputs that the Government want to see and want to be able to pay for.

I thank the Minister. Very quickly, is he prepared to do anything to protect disused railway lines that may be subject to reopening procedures in future?

My hon. Friend is very persistent. Network Rail keeps corridors under review. Of course, some railway land was sold years ago and nothing can be done about that. It is rare for Network Rail to sell off land that might be brought back into rail use, and it is up to the local planning authority to decide on planning applications.

I shall be brief. The Minister mentioned investment of £88 million a week, and we are now talking about reinstating railway lines. I have not heard the Minister mention whether he would commit anything to such things as the Burscough curves. A tiny portion of that money would unlock the whole of the network for my constituency.

My hon. Friend makes a valid point. I hope that she will forgive me; I have a number of points to cover in the time left. However, I take her point on board, and if she writes to me we can continue the dialogue.

My hon. Friend the Member for Luton, North (Kelvin Hopkins) made some good points about freight. On EWS International’s problems with the channel tunnel, freight usage charges, already extended once by the Government, cannot legally be extended beyond the end of this month. However, I understand that negotiations are continuing between the company and Eurotunnel. I expect freight to continue to run through the channel tunnel.

I am grateful for the description given by my hon. Friend the Member for Wrexham (Ian Lucas) of the unique circumstances affecting his constituency. He is an enthusiastic campaigner on local transport. If he writes to me, I shall be happy to meet him to discuss the issues. This debate is turning into a great opportunity for me to receive a lot more mail, Mr. Martlew.

The hon. Member for Rochdale (Paul Rowen) talked about the Transport Committee’s report on rail franchises, which was published at the weekend. I am delighted to see my hon. Friend the Member for Crewe and Nantwich (Mrs. Dunwoody), the Chairman of that Committee, in her place. I say to the hon. Gentleman that I am not aware of any major rail issues in the new transport Bill that we are expecting. He said that the Government do not have the strategy or investment to cope with increasing capacity. I strongly disagree. I have already referred to the high-level output specification to be published next year. We certainly intend to continue high levels of investment in the rail industry.

The hon. Member for Wimbledon made some interesting—

British Dairies (European Commission)

I want to discuss the future of the UK dairy industry, which is worth a great deal of money to this country but which has suffered unduly because of the traumatic, seismic changes that have taken place in the past few years.

We in Cheshire, which is a dairy county, are particularly concerned about what happens to those who produce liquid milk. It is also true to say that because of the pressures on milk prices, the hazards of the increasing growth of supermarkets, their economic power to dictate the price of milk, and the direct effect that that has on the incomes of dairy farmers, many people have sought to expand, in line with Government policy, out of the direct provision of milk into cheeses, yoghurts and many other products that are regarded as essential.

We in Cheshire know of the very real problems with income in the dairy industry. It is noticeable that the number of people who are responsible for dairy farms falls every year, but actual output frequently rises. It is said, of course, that that is a response to economic pressures, which is true, but it is also the result of the efficiency that can be introduced by putting constant pressure on the dairy farmer. I have considerable worries about that. Indeed, if we are not careful, we will discover that because so many farmers are leaving, animal welfare problems will arise as people are required to handle large herds without the number of farm workers that they had in the past. The industry has not always suitably rewarded those working in it, but I hope that in future we will not constantly assume that, because people are leaving the land, we are automatically getting a more efficient or productive regime.

I am concerned about the future of the industry, but I raised the debate because of a particular case that has dramatically demonstrated the very real problems that UK producers face when basic decisions about the future of the industry are taken not by the UK Government but by European institutions. I sat on the Agriculture Committee in the European Parliament for four and a half years, having volunteered for the job on the basis of the simple theory that any Committee that spends initially 60 per cent., and finally 80 per cent., of the budget of any institution ought to be the one on which one serves. I found it a highly educational process. During those four and a half years, I learned that many decisions were taken in Brussels on a wholly arbitrary and, in some instances, a wholly uninformed basis. However, few of the effects of those decisions have been as utterly brusque and unacceptable as the effect on Bowland Dairies.

I apologise to my hon. Friend the Member for Pendle (Mr. Prentice), who represents the area in which Bowland is located. I made it obvious to him that I was raising the case in a wider context, but this Parliament should take note of it. We are standing on the site where Parliament was convened because the people of Great Britain would not accept the imposition of unfair and unjust laws. That is why we have a Parliament—that is why we are here—but it is clear that we are subjected in some instances to decisions taken not by elected Members or by a Government of member states, but wholly by representatives of the Commission in Brussels who, frankly, are neither answerable for their deeds nor apparently aware of the unjust and unacceptable way in which they behave.

Bowland Dairies is a small dairy in Lancashire that employs 25 people. It is perhaps not the largest cheese-making organisation in the UK. Indeed, there are three or four cheese makers in my area that are larger and more able to deal with the problems of economic upturn and downturn. During a random check, inspectors from Brussels became concerned about what they saw as breaches of law. They said that there were serious breaches of EU food safety rules, and they challenged the competence of the Food Standards Agency to deal with them. In itself, that would not constitute a great hazard. It would involve an argument between two groups of bureaucrats which, under normal circumstances, presumably would be dealt with in a series of exchanges, and there would be time for conclusions to be reached.

However, what happened in the case of Bowland Dairies was utterly unacceptable. I shall briefly summarise that. Bowland initially faced criticism and gave several detailed replies. It was told that the explanations were not acceptable, even though some of the objections that were raised are not accepted by the scientists at the FSA and, as far as I can see, are still being disputed scientifically. The Commission proceeded, irrespective of the view of the FSA and, presumably, against the recommendations of the UK Government. Bowland, unusually and rather courageously, then took the Commission to the European Court of Justice.

Perhaps because I am old and long in the tooth, I have always been rather cynical about the European Court of Justice which, in my day, was a wholly political organisation. It never found in favour of anyone other than the Commission. Interestingly, on this occasion—uniquely, I suspect—it found for Bowland Dairies.

I draw attention to my entry in the Register of Members’ Interests. It would be helpful if the hon. Lady made it clear that Bowland was not a cheese-making plant like any other cheese-making plant. It dealt, in essence, with residues—with things such as interface milk, which is used to clean milk machines. It performed a special role in the industry, and therefore the argument between the FSA and the European Union was about specific circumstances that affected that plant.

Absolutely, but it is precisely that specific nature that was very much at risk. The extraordinary thing was that British scientists apparently were reasonably content with what was happening and were prepared to argue with the Commission about the scientific basis, but the Commission proceeded with what were, in effect, prohibition methods, irrespective of what was manifestly a technical argument. I know that it will come as a total surprise to you, Mr. Martlew, that my acquaintanceship with interface milk began only this morning, but I am sure that you are fully acquainted with it.

The reality is that Bowland took the Commission to the European Court of Justice, and the Court found in its favour. It said clearly that it was not at all sure that the Commission had the powers to do what it had done, and that it certainly did not have the powers to do it urgently. The import of that is significant, because if we take urgent action against a small business under limited conditions, we will discover that it can be put out of business. Indeed, that is what happened. In fact, the Commission simply persisted, as far as I can see, although I hope that I am not right, because there was a holiday looming and it felt that that was one convenient way in which it could deal with the problem urgently even though there was considerable doubt about the accuracy of the scientific arguments. What is more, it put out notices throughout the European Union that included clear statements which were highly damaging and were not corroborated by those who were there. There is some doubt whether the Commission’s summary of the views of the Foods Standards Agency contained all the information that would have been relevant to the argument. That, after all, is essential.

We have the extraordinary situation whereby the Department for Environment, Food and Rural Affairs, the Food Standards Agency, which is rightly concerned with health, and the Commission are involved in an argument about the hygiene and production methods of this particular dairy. Although the dairy has had the protection of the European Court of Justice, it has nevertheless been put out of business. That is be something with which the House should concern itself very urgently.

To add insult to injury, the Commission then apparently reversed its position and said that it would be prepared to examine in a working party whether the science was acceptable. It seems extraordinary. I would have thought that both Governments and international organisations ought to get the facts right before they take action and not afterwards.

Does the hon. Lady agree that when the Commission issued a letter of infraction to the British Government, it would have been up to them to contest it? In fact, they have chosen not to do so. They appear to have ordered the Food Standards Agency to issue new instructions on the health processes to fall in line with what the Commission asked for. Does she feel that it would have been more reasonable if the Government had had confidence in the agency to argue the case?

I can honestly say that I do not understand the attitude of the Food Standards Agency, the Department or, to be fair, Members of the UK Parliament, where the subject has not received the publicity or support that it should have done. It is too simple merely to blame the Government. I shall be asking the Minister for his interpretation of those matters, but since the Food Standards Agency has, as far as I can see, never said that it agrees with the Commission’s interpretation of the tests that are the basis of the discussion, I do not understand why it did not take a public and strong stand. Instead, it appears that the Commission has issued documents throughout the Community, many of which are totally subjective histories of events.

I want to quote from an attempt by Bowland’s lawyers to persuade the Commission that the recitals, which is the hilarious way in which we talk about such things,

“comprise a subjective history of events which have been superseded, grossly exaggerate any risk to human health, materially misrepresent the current position as well as the law”.

I would have thought that that constituted quite enough for the Department to make public its displeasure at the way in which the British industry was being treated. Let us have no doubt: this might have been one unfortunate dairy hung out to dry between two sets of bureaucrats, but the reality is that the effect goes much wider. It will have an impact on cheese makers, the dairy industry and on the sale of liquid milk. There was

“no concrete or new evidence for the adoption of emergency measures”—

let us remember that the Commission took such measures—

“which for the reasons set out in our letter earlier…would, in our view, be illegal.”

The Court agreed. It was illegal.

I have made curd cheese quite often. I had a grandmother who never wanted to waste milk, and we were brought up to believe that people should make their own curd cheese. I am told that it cannot be made if antibiotics are present in the milk. That directly impinges on the Food Standards Agency’s argument.

We have limited time, and I do not intend to go on for long. We are talking about a cheese industry that has increased by 9.6 per cent. to 409,000 tonnes in 2005. There is an increase in imports from all over the world of high-value and specialised cheeses, so it is clear that we are not impinging on the free movement of goods. Nor are we seeking to protect our industry at the expense of anyone else’s. We should also be aware that the Food Standards Agency wanted to oppose the measures but was not backed by Her Majesty’s Government. The Department ought to be leading the charge, not simply saying that it is a matter for the agency.

I have a series of simple questions to ask the Minister. What role has his Department taken in the discussions with the Commission? What efforts are being made to ensure that the scientific views of the Food Standards Agency are fully debated? Does the Department accept that the British standards not only are acceptable but should be imposed across the board in the UK dairy industry? Were the views of the British Government influenced not only by the fact that the Commission said that it would demand an immediate audit of the whole UK dairy industry, but by the fact that it has already initiated such an audit and intends to go ahead with it as soon as possible?

When this House stands by, for any reason, and allows the small business, the small man or an individual constituent to be treated in an arbitrary, unacceptable and totally illegal manner by anyone, we have reached a dangerous situation. The Government of the United Kingdom should not only oppose what has happened to Bowland, but they should do so publicly and make it clear that they do not accept such arbitrary behaviour. They must certainly make it plain to all the other countries in the European Union that in this country injustice is an unacceptable way of providing some kind of administration.

I am not sure whether I was in short pants when my hon. Friend the Member for Crewe and Nantwich (Mrs. Dunwoody) first spoke on the dairy industry in the UK. I suspect that I might well have been. I feel that I should probably have come to the debate with an egg and two straws—not that I wish to imply that she is my grandmother, but it seems rather like trying to teach one’s grandmother to suck eggs to be talking to her about the dairy industry.

My hon. Friend has focused our attention on what she sees as a tremendous injustice that has been done to one company in the UK dairy industry. I shall try to address my remarks to the points that she has raised. It is clear that there has been considerable concern about the outcome of the European Commission’s Food and Veterinary Office’s inspection of Bowland Dairy and the implications that arise from that for the UK dairy industry.

I want to make it clear at the outset that food safety matters—I know that my hon. Friend does not like the fact that this is the case, but it is—are the responsibility of the Food Standards Agency, so questions on that topic ought more properly to be directed to the agency. I shall outline our understanding of the events to date, what needs to happen next and the implications for the wider industry.

A Food and Veterinary Office mission in June 2006 found a number of practices at Bowland Dairy that caused concern. The FSA and the local authority worked with Bowland in the weeks following the FVO mission. However, the FSA disputed the scientific backing for the Commission’s interpretive guidance on dealing with milk that failed a commercial rapid antibiotic residue screening test. Bowland Dairy allegedly used such milk—milk that had been rejected for processing by other dairies under their own quality standards. That practice, although not at odds with FSA guidance at the time, was not accepted by the Commission.

I do not have the time to go through it, but I am holding a copy of a Belgian protocol that proves that the Commission cheerfully accepts different standards in relation to other dairy industries. If the Minister wishes, I will give him chapter and verse. However, it would take rather more than the 10 minutes that remain.

I would be grateful to receive that from my hon. Friend, perhaps by letter, or we may discuss it afterwards. If I may, I shall return to addressing the points that she raises.

The FVO returned to inspect Bowland in September, but it did not consider that enough had been done to bring the premises up to the required standard. On 6 October, the Commission used emergency powers to ban the sale of curd cheese from Bowland, effectively shutting the business down. On 16 October, the Commission sent a letter of formal notice initiating infraction proceedings against the UK for failure to implement food safety legislation, and announced that an FVO mission would be sent to inspect the UK dairy industry in November.

The Department for Environment, Food and Rural Affairs maintains close contact with the FSA on the matter because it is important that the dairy industry does not suffer as a result. The United Kingdom has a dairy industry to be proud of; it is a matter for congratulation that the processing sector sets itself higher standards than those required by legislation and voluntarily uses rapid screening tests to check for antibiotic residues.

The FVO mission made a number of allegations, some of which are still disputed. I hope, Mr. Martlew, that you will understand that there are certain elements into which I may not go for fear of prejudicing legal proceedings. However, we need to be clear about what is and is not acceptable. None of us would support the use of milk contaminated with substances such as detergents or dyes. None of us could endorse the use of out-of-date milk collected from retail establishments to be reprocessed into dairy products. I am sure that my hon. Friend would not support the use of mouldy and contaminated cheese, including floor waste, being vacuum-packed for sale.

In my view, it is also important to acknowledge that the majority of the UK dairy industry consistently applies much higher standards of food hygiene practices—ones that often exceed the requirements previously set out by the FSA. The industry is to be congratulated on such rigorous self-vetting. However, it is clear that in future the whole industry needs to be certain about what is and is not acceptable, and that must be reinforced by guidance from the FSA.

The Government responded to the infraction letter by agreeing to implement the Commission's interpretive guidance on milk that fails a rapid antibiotic residue screening test. The FSA supported that approach and issued revised guidance to local authorities and the dairy industry on 20 October. At the meeting of the European Standing Committee on Food Chain and Animal Health on 18 October, the Commission agreed to bring together all the parties concerned in order to enable discussion of the outstanding scientific issues on antibiotic testing. That is a welcome development. In the long term, it should resolve the scientific questions at issue.

The FSA, working with local authorities and the dairy industry, needs to ensure that there is no confusion over its revised guidelines and that the UK dairy sector knows exactly what is needed to pass this month's audit with a clean bill of health.

The Minister may like to know that at no point has the Commission carried out any product testing, nor does it have any direct evidence of the risk from Bowland’s products, and it talks about things being “on the floor”, but it was cheese that had fallen from vats. There is considerable doubt about the accuracy of what the Commission says.

As I indicated earlier, Mr. Martlew, I do not wish to get involved in aspects of the case that may lead me into prejudicing further proceedings on the matter. I would not wish to be drawn by my hon. Friend into the specifics of what was or was not found at Bowland.

The FSA, DEFRA and the dairy industry take the matter seriously. Revised guidance has been issued, and the dairy trade body, Dairy UK, has held seminars to prepare the industry for inspection. DEFRA has actively participated with the FSA in explaining the animal by-products regulations that deal with the disposal of milk containing antibiotic residues and the disposal of pre-packaged milk.

Does the Minister agree that the job being done by Bowland has to be done in any country with a significant dairy industry? Does he further agree that, whatever the outcome of the negotiations and discussions, it is important that the rules ultimately agreed run across the whole of the European Community? Will he make it one of the Government’s priorities to ensure that the levels of enforcement are equal and that the rules being enforced are equal?

The right hon. Gentleman is correct to say that there should be equal treatment of the companies and industries across the European Union. I confirm that that is of paramount importance to the Government.

Bowland is not the whole story: a debate has been called on the future of the UK dairy industry, and I want to say something about the future as it appears to the Government. I realise that the immediate future will be challenging for the dairy sector. Pressure on farm-gate prices will remain, and it is important that the sector is realistic about the prospects, as prices are unlikely to return to historic levels. There will be no return to managed markets, with the Government setting the price of milk; those days are over. Prices are a private commercial matter, and the Government cannot and should not become involved.

Given the significant cost pressures on the sector, it would appear that some restructuring of the industry is inevitable at all levels. The good news is that there are signs that the industry is addressing its problems. It is important, for example, that each part of the chain recognises the pressures on other parts. Indeed, my hon. Friend alluded to that in her customary fashion. The industry must continue working together: it must maintain a dialogue.

The dairy supply chain forum, chaired by Lord Rooker, has played an important role in bringing the industry together to discuss issues where collaboration can benefit all. The forum has worked hard to try to drive forward work that could ultimately ensure better rewards for all. That includes work on supply contracts, and ensuring that producers supply an attractive and valuable product—for example, by considering the barriers to innovation in the dairy sector.

DEFRA has provided more than £200,000 over the past three years to help to improve the evidence base for the dairy sector, partly through the dairy supply chain forum. For example, the Department provided funding to analyse the impact of CAP reform on the dairy sector, the prospects for the dairy sector in a more liberalised world market, barriers to innovation and skills and training in the sector. Again, skills and training were raised by my hon. Friend, particularly in relation to animal husbandry and welfare. That analysis has helped to inform the industry’s debate on future prospects, and it has dispelled some myths and challenged and changed people’s thinking. That is where the Government can add value—by bringing all parts of the supply chain together. However, the dairy industry must take ownership of the challenge to find solutions.

Given the impact of price pressures on profitability, it is important for the whole supply chain to consider how to strip out unnecessary costs and to achieve efficiency gains. DEFRA has invested £1.3 million through the agriculture development scheme to help the whole dairy sector to address issues of efficiency.

Is the Minister going to tell us about the audit that has been ordered by the Commission of the entire dairy industry—on extremely spurious grounds? How do the Government intend reacting to that?

My hon. Friend will note that I have already said that the Department is working closely with the industry to enable it to prepare for that audit, and explaining how best to ensure that it passes the audit with flying colours.

It is interesting to note that not everyone is gloomy about the prospects of the dairy farming sector. A survey of farmers at the dairy event in September revealed that of those producing between 350,000 and 1.5 million litres a year, nearly two thirds would raise production.

Transmissible Spongiform Encephalopathy Regulations

The debate has a rather long-winded title on the Order Paper which was necessary to comply with our friends in the Table Office. It is about the future of Harriet the cow. She is a pet cow owned by my constituents Mr. and Mrs. Price, who live near Newent. Harriet is a nine-year-old Jersey cow, who was born on a farm in Oxfordshire and is not kept for diary or meat production, but is actually a family pet. Her future is threatened by the transmissible spongiform encephalopathy regulations and the way that they are being implemented by the Department.

The essential point is rather straightforward. Harriet was born on a farm in Oxfordshire as a winter calf and earlier that year another calf was born on the same farm which later became infected with bovine spongiform encephalopathy. Under European and national regulations, all cohort animals must be slaughtered and, at the moment, the Department is including Harriet within that description. She has been valued at £1,049 and the Department for Environment, Food and Rural Affairs wants to have her slaughtered by the end of the month.

TSE regulations are sensible and appropriate for animals that are intended to enter the food chain. There is no disagreement about that as the link with variant Creutzfeldt-Jakob disease is well established and there is a clear need to ensure that bovine spongiform encephalopathy-infected meat does not enter the food chain for human health reasons and for the sake of our farming industry. I am not arguing that any suspect animal should have the opportunity to enter the food chain. However, the European regulations concerned clearly state:

“These rules should apply to the production and placing on the market of live animals and products of animal origin”.

They go on specifically to state that the regulations should not

“apply to products of animal origin which do not pose a risk to animal or human health since they are intended for purposes other than the production of food, feed or fertiliser”.

As Harriet is a pet cow, it is clearly the case that she is not intended for any of those purposes. Indeed, her owners wish her to live out her natural life on their farm, in a field near Newent. The cohort regulations identify a cohort as

“a group of bovine animals which were either born in the same herd as, and within 12 months preceding or following the birth of, the affected cattle or reared together with the affected animal at any time during the first year of their life and which may have consumed the same feed as that which the affected animal consumed during the first year of its life”.

There are two parts to that definition. Regarding the first part, Harriet has been identified as a cohort animal because she has the same holding number as the cow that was infected with BSE, and that is because they were owned by the same farmer. However, the farmer kept the two herds separately: they were managed in a completely separate way and in different buildings that were a mile apart, although on the same farm. The second part of the cohort definition refers to rearing and feeding regimes, and it relates to whether Harriet has consumed the same feed as that which the infected animal consumed during the first year of its life.

The original breeder of Harriet and the vet have, to be fair to the Department, relatively recently confirmed some details and put together documentary evidence to be supplied to the Department, which I know it has been considering. A letter I have received from Harriet’s breeder confirms that she had “completely different feed” from the animal with BSE, that food was bought in small batches and that as the cows were born a considerable distance apart, they did not share the same feed and, indeed, were separated at either end of the farm by about a mile. The owner confirms that

“these animals would never have been fed from the same silage bales, bought in bagged feed or ruminvite blocks”.

The vet who looked after Harriet and the farm has confirmed that they were managed as completely separate groups with different feeding regimes and in different buildings. He also confirmed that calf food was purchased in small batches, so the batch eaten by the older summer-born calf—the infected calf—would not have been consumed by Harriet the younger winter-born calf. The vet also confirmed the facts stated by the owner.

My contention is that Harriet does not fall within the definition of a cohort as set out by the regulations.

The debate is very specific and I want to offer the hon. Gentleman my full support in his quest to ensure that the Government give way in favour of his constituents and Harriet. Will he acknowledge that there is potentially a further threat to owners of animals such as Harriet and, indeed, farmers of all kinds, in my constituency and his, from the Government’s current consultation on the funding of clean-up and compensation costs after animal disease outbreaks such as BSE or foot and mouth?

Thank you, Mr. Martlew, and I thank the hon. Gentleman for that intervention.

I have explained at some length why I do not think that Harriet falls within the cohort definition required by the European regulations. A further, more general point—it would be helpful for the Minister to respond to this—is that my contention and the contention of the Prices is that Harriet does not pose any threat to human health. For her to do so, she would have to enter the food chain. My contention is that this will never happen. First, her owners have no intention of selling her or doing anything other than keeping her as a pet. Secondly and, from the Department’s point of view, most importantly, DEFRA hold her passport so she cannot legally be moved or slaughtered, and even if that were to occur, she would have to be tested for BSE post-slaughter. My contention is that the risk to human health from Harriet is non-existent.

In the letters I have written to the Minister, I have repeatedly asked him to explain how Harriet poses a threat to human health, and that is one of the key points that has never been satisfactorily answered. I would be grateful if the Minister could explain in his response, without reference to bureaucratic regulations and in plain English, how Harriet continuing to live poses a threat to human health. I cannot work that out.

In the Minister’s reply to me of 13 June, he correctly points out in paragraph 4 that currently

“there is no live test for BSE”.

That is one reason why animals have to be slaughtered and tested post-mortem. There are two examples of companies working on live tests for BSE—one in Canada and one in the United States. They are currently at the final stages of tests before clinical trials within the EU. Those tests are expected to be available before the end of 2007 and will analyse DNA strands in the blood of the animal in question, pick up on any signs of disease and detect the disease well in advance of any symptoms. If the Minister is unable to accept that Harriet is captured by those regulations, and if Harriet’s owners were to agree to further controls over her movements, one possible avenue open to him might be to give Harriet a stay of execution until a live BSE test is available, when she could be tested to check whether she is free of infection.

I know that Ministers and officials are very keen on precedents, so I would like to give two examples of where they were sufficiently flexible to exempt animals in cases such as this. A short time ago in March, it was reported that Larry the lamb, which despite that name was female, entered a slaughter house but was not slaughtered because abattoir workers realised there was a new-born lamb among the sheep and made an exception. However, official rules said that no animal born in a slaughterhouse could leave it alive, and they were ordered to kill the lamb, which they named Larry, and its mother. They had to go as far as employing a barrister to argue their case against DEFRA, the Department represented by the Minister, which made the point that disease control legislation was unequivocal and rules were rules. However, after a day’s intensive lobbying, a high-ranking civil servant in London finally relented and gave permission for a special licence allowing Larry to live on a local farm, showing that officials can be sufficiently flexible if necessary.

Of course, the best known example, which many people, certainly in my constituency, can remember, takes us back to the days when we were suffering because of foot and mouth disease. The famous Phoenix the calf was found on a pile of dead animals and should have been killed under the requirements of the rules at the time, which we know were applied relentlessly throughout the country. However, Phoenix was allowed to live under a “policy refinement”—I think that was the official way it was described at the time.

This is my plea to the Minister. Will he consider the evidence about how Harriet was reared and fed, which shows that she was not part of the cohort and therefore is not required to be slaughtered under the regulations? If he does not find that evidence convincing, I plead with him to allow Harriet a stay of execution at least until a live BSE test is available. I am sure that the Prices would comply with any further restrictions that the Department wanted to invoke, to assure themselves that there was no risk of her being moved or entering the food chain. Finally, I ask the Minister to think about the other examples in which flexibility was shown. If he were able to do that, he would have the gratitude not only of the Prices and the many people in my constituency who are supporting them and Harriet, but of many people who have contacted me from around the world about the case. I look forward to the Minister’s response.

I congratulate the hon. Member for Forest of Dean (Mr. Harper) on securing the debate and I commend him for the diligence that he has shown in getting to grips with what is a quite complex and technical issue. I am grateful to him for accepting the importance of our BSE controls, which I shall come to in a moment. On a personal level, I sympathise strongly with him and his constituents: Harriet is obviously a much loved pet. However, as he himself recognised, it is very important, not only for public health but for our beef industry, that our BSE controls are followed rigorously.

You will recall, Mr. Martlew, that variant CJD is a terrible disease that has already cost the lives of more than 150 people in this country. That is why we have stringent BSE controls and why they must be enforced. The economic effects of BSE were also devastating for our livestock industry, for the beef industry in particular and for the taxpayer. In 1995, we exported £500 million-worth of beef. Until the present Government succeeded in persuading the EU to lift the export ban in May this year, the British beef industry had suffered 10 years of lost exports. Lifting the export ban has been a slow, painstaking process and has been achieved by demonstrating to the European Commission, to other EU member states and to our own independent Food Standards Agency that our BSE controls are effective and are being applied rigorously.

Of course, the economic effects have not been confined to exports. Until last November, we had an over-30-months rule, which kept older cattle out of the food chain. As a result, the Government had to establish in 1996 an over-30-months slaughter scheme to dispose of the many thousands of cattle that could not enter the food chain. Under that scheme, more than 8 million cattle were incinerated at a cost to the taxpayer of £3.9 billion.

Once again, it was the strict application of our BSE controls that enabled us to replace the over-30-months rule with a robust system of BSE testing for cattle born after July 1996. Instead of an expensive OTM scheme, we now have a much cheaper and more limited cohort cull and the older cattle disposal scheme, under which cattle born before August 1996 are destroyed. That is better for farmers and for the taxpayer.

Hon. Members should not have any doubt that cohort cattle are at higher risk of developing BSE. We are not just blindly following rules that make no sense. Cohort cattle are those that might have consumed the same feed as a BSE case during the first year of their lives, and feed contaminated with the BSE agent is the most important source of BSE infection for cattle. Experts believe that the majority of BSE cases were infected during the first year of their lives.

BSE was confirmed in six cohort animals culled last year. That is a confirmation rate of 0.2 per cent. In comparison, the confirmation rate in 2005 for normal healthy cattle born after July 1996 was only 0.0007 per cent. That is why EU legislation requires all member states to kill cohorts as soon as possible.

We began the cohort cull in March 2005 in preparation for the replacement of the over-30-months rule. By carrying out the cull, we removed from the national herd all those cattle known to be at a higher risk of being infected with BSE. That is important. Consumer representatives in this country and on the continent have made it clear to us that they do not want there to be any chance of those cattle entering the food chain. To date, we have culled more than 3,500 cohort cattle, some of which have been pets.

Other than for animals kept for the purposes of bona fide research projects on approved premises, there are only two exceptions to the legal requirement to cull co