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Commons Chamber

Volume 453: debated on Tuesday 28 November 2006

House of Commons

Tuesday 28 November 2006

The House met at half-past Two o’clock


[Mr. Speaker in the Chair]

Oral Answers to Questions


The Secretary of State was asked—

Healthy Start Scheme

The new healthy start scheme, which was launched nationwide yesterday, promotes good nutrition for certain low-income pregnant women and all pregnant under-18-year-olds by providing vouchers to spend on a range of healthy foods. All Members of Parliament were sent details of the scheme last week.

I am most grateful to the Minister for her response. In October, I spent a week trying to live on income support and to eat a healthy diet fit for a pregnant mother. I could not afford to eat five portions of fruit and vegetables every day, so I know that this announcement will be very welcome. For it to be really effective, it has to be available throughout the country. How many retailers have signed up to the scheme, and what is my hon. Friend doing to ensure that it is available in all communities?

My hon. Friend is right. The scheme widens the range of choice beyond the traditional milk offered under the welfare food scheme to include fruit and vegetables. Retailers large and small will be given the opportunity to back the scheme. We are working on a recruitment target of 35,000 retailers with more than 40,000 outlets, which will double the amount in England by about 30,000. The pilot in Devon and Cornwall has enabled small retailers to think about how they can get on board with the scheme—that is welcome.

Advice to pregnant women is lacking in many respects, not only on healthy eating. Thankfully, when a pregnant woman seeks an abortion she is seen and counselled by two professional doctors—

I will do my very best, Mr. Speaker.

While I entirely applaud the Minister’s sentiments, does she accept that for many of us this is a step too far? It is not the job of Government to tell people what to eat and how to conduct their lives. This is elevating the Secretary of State to the nanny of the state, and we do not want that.

Healthy start is a revamp of the welfare food scheme, which has been around for about 60 years, so the hon. Gentleman and his party had the opportunity to get rid of it or revamp it during their 18 years in power. The scheme is not only about providing the vouchers and the extension to fruit and vegetables—parents said they wanted that flexibility—but about giving midwives and health visitors the opportunity to play an important part in supporting families, particularly in the early days of babies arriving, by giving them the best advice, which they can choose whether to take, on the best possible healthy and nutritional start for their children. Importantly, the scheme is also about pregnant mums and the benefits that they derive from a good diet.

How will women in my constituency and elsewhere find out about the scheme, and how can we, as Members, encourage them to access it?

All families who are currently part of the welfare food scheme will be transferred automatically on to the healthy start scheme. For pregnant women, that should be discussed when they check in for their ante-natal care with their midwives. We are providing a pack to every health professional, health visitor and midwife throughout the country; we are doing work with Sure Start; and we are providing my right hon. and hon. Friends, and hon. Members across Parliament, with information so that you, too, can spread the word across communities—[Interruption.] I meant colleagues, not you, Mr. Speaker, although you could do so as well. We will monitor take-up because we want get the widest possible reach into as many communities as possible, particularly for those on low incomes.

NHS Trusts (Budgets)

2. What changes in the budgets for 2006-07 for NHS trusts serving Lambeth and Southwark have been agreed since her meeting with me, the right hon. and learned Member for Camberwell and Peckham (Ms Harman), the right hon. Members for Dulwich and West Norwood (Tessa Jowell) and for Streatham (Keith Hill), and the hon. Member for Vauxhall (Kate Hoey). (103768)

Following the meeting to which the hon. Gentleman refers, I asked NHS London to look again at budgets in Lambeth and Southwark. It has confirmed that after other factors have been taken into account, Lambeth and Southwark primary care trusts were asked to contribute less to the London-wide risk reserves for this year than most other London PCTs.

Does the Secretary of State accept that although Lambeth and Southwark are among the two most deprived boroughs in the country and have the most health service needs, that although we have cuts totalling an estimated £23 million to the Guys and St. Thomas’, King’s College Hospital and South London and Maudsley Trusts, that although there was no dispute that that will affect community services, mental health services, preventive health services and others, and that although she agreed at our meeting that it was unfair, there has been no change—there will be just the same cuts, and this year the two local communities will suffer exactly the same reduction in their services as before the meeting, which we left thinking that she was likely to be able to influence the result and produce a fairer outcome?

As I explained to the hon. Gentleman when we met, the NHS in London and in other regions was asked to take into account the impact of the technical adjustment that was made through what is called the purchaser parity adjustment. It has done that, and it is because of that that Southwark and Lambeth have been asked to contribute less to the London-wide reserve than most other PCTs. Of course this is difficult, particularly in Southwark and Lambeth, which are very deprived communities, but the speed with which they will get back the money that they have contributed this year will depend on the speed with which other, overspending organisations in London get themselves back on track and cease to rely on organisations that are in balance to compensate for their overspending.

As one of the other Members at that meeting, I share the concerns expressed by the hon. Member for North Southwark and Bermondsey (Simon Hughes), because we left the meeting thinking that there would be some changes. The new planning framework shows a further 3.6 per cent. cut next year in Lambeth and Southwark. These are the most deprived areas in London, and the cuts will affect projects such as the healthy living centre in Stockwell, which will have to close, and all sorts of provisions that affect ordinary people in their daily lives. Why is the Secretary of State not considering the poorer PCTs that have stayed in budget yet have to suffer because of the overspending of others?

It is precisely for that reason that we are insisting that overspending organisations, of which there are far too many in London, get their finances back under control so that we do not have to go on asking the communities in areas such as Lambeth and Southwark, which have been in balance, to make these difficult decisions. As I explained in the letter that I sent to my hon. Friends and other hon. Members after the meeting, it is simply not possible for the NHS in London to reopen the allocations, and the decisions that were made with all the London PCTs, to deal with the situation this year. We will continue to ensure, through the allocations formula, that the areas with the biggest needs get the biggest growth. That will be fair to Southwark and Lambeth. It is, of course, opposed by the Conservatives.

Patient Satisfaction

Forgive me, Mr. Speaker. I thought that another hon. Member was seeking to ask a supplementary on Question 2.

Yesterday, we announced our plans to survey 5 million patients to measure how easy it is for them to see their general practitioner. This the first time that the Government have asked patients directly about their experience of the GP appointments system.

I am very grateful for that answer. Has my right hon. Friend seen the recent survey by the Healthcare Commission, which shows that 92 per cent. of patients rate their experience of the NHS “good” to “excellent”? In the light of that, what can she do about closing the gap in perception between those who use the NHS and those who merely read about it?

That was a supplementary question well worth waiting for. My hon. Friend is absolutely right about what patients say about their experience of the NHS, and I am sure that all of us would want to pay a real tribute to NHS staff. There is a big gap between patients’ experience and public perception, however. I hope that Conservative Members and the media all around the country will continue to pay at least as much attention to all the improvements taking place in the NHS as they pay to the sometimes difficult decisions that have to be made in some areas.

Will the Secretary of State also assess the impact on public satisfaction with the NHS reconfiguration process of, for example, the announcement last week by the hospitals trust in my constituency that it will definitely close one of the maternity units in the trust, despite the fact that the public consultation on that option is not due to start until the middle of January?

No decisions are made on significant changes to services of the sort that the hon. Gentleman describes without full public consultation and the involvement of local councillors through the overview and scrutiny committee. I very much regret that, on occasions, when local primary care trusts and hospitals are considering changes—which are generally driven by the need to keep up with changes in medicine and clinical practice and to give patients even better care—people leap to the conclusion that there are to be cuts or reductions in services and protest before any decision has been made.

In the context of patient satisfaction, is my right hon. Friend aware of the deep vein thrombosis diagnostic service at Leek Moorlands hospital, which last month won the Community Hospitals Association award for innovation in clinical practice? Not only have almost 200 patients been saved a difficult journey to the acute hospital, but emergency capacity has been freed up, saving the local PCT £100,000 a year. The service will now be rolled out across the boundaries of the new reconfigured primary care trusts. Will she congratulate the team on their excellent work in that area?

I am aware of that service, which is absolutely excellent—[Interruption.] Unlike Conservative Members, I want to congratulate all the staff involved in providing an excellent service, which shows how the modern NHS can both improve care for patients and save money, especially on services previously provided in an acute hospital, thus freeing up resources to spend, for instance, on new drugs and other service improvements that patients also need.

Is the Secretary of State aware that 83 per cent. of patients surveyed in a recent breast cancer forum were unaware of the hospital travel costs scheme? Will she consider again whether trusts can be persuaded better to advertise that scheme and to make claiming under it easier?

Of course I will consider the issue raised by the hon. Gentleman. As he indicates, however, it is very much the responsibility of local hospitals to ensure that patients, particularly those such as cancer patients who must have repeated treatment, are aware of the help with travel costs that is available.

Research confirms the high level of public and patient satisfaction with Alder Hey, the Royal Liverpool children’s hospital in my constituency. Will my right hon. Friend ensure that the national burns review takes into account the high level of public satisfaction with the burns treatment available at Alder Hey and at Whiston? Will she also ensure that, alongside other options, the national review seriously considers encouraging burns centres across the north of England to network together to improve burns treatments and therefore support even higher levels of public satisfaction?

My right hon. Friend is absolutely right about the high levels of public satisfaction, which reflect in part that waiting times, for instance, are shorter than ever before. We will consider carefully the review of specialist burns units and its recommendations, but she is right that a network of specialist centres is needed to ensure that those patients with the most serious burns receive the necessary specialist attention, which only a limited number of specialist centres can provide.

A Healthcare Commission survey of patients this year found that more than one in five had had to stay in a mixed-sex room or bay. Given that the 1997 Labour manifesto said that the Government would work towards getting rid of mixed-sex wards, the 2001 manifesto said that they would abolish them, and the 2005 manifesto did not mention the subject at all, when will the promise be kept?

The Healthcare Commission survey to which the hon. Gentleman refers includes patients who had recently been cared for in accident and emergency or medical admissions units. When we set the target for single-sex sleeping accommodation, we asked trusts to report on the wards used for regular admissions, not A and E or medical admissions units, which, as Sir George Alberti, the national clinical director for emergency care, has pointed out, cannot always provide single-sex accommodation, because to do so would mean turning away patients who were critically ill and needed short-term observation. We have achieved 95 per cent., which was the target that we set back in 2004, and 99 per cent. of hospital trusts say that they now provide single-sex accommodation in their general wards along with single-sex bathrooms and toilets.

A couple of the consequences of the massive talking-down of the NHS by the Opposition are massive demoralisation among staff and patients being scared to receive treatment. Will my right hon. Friend please ensure that some of the research and surveys that she has mentioned are widely disseminated to bust the urban myths put out by the Opposition?

I entirely agree with my hon. Friend. We try all the time to put across the good news about what NHS staff are now achieving, backed by record investment that the Conservatives oppose. With waiting times at their shortest and cancer treatment in particular having been transformed over the past 12 months, there are many reasons for patients and the public to be enormously proud of what the NHS is achieving, although there is still more to be done.

In her first answer, the Secretary of State referred to the survey assessing satisfaction with GPs’ services. The Department of Health has added two more questions, about the opening hours of general practices.

It is the Government’s own GP contract that has led to the closure of practices on Saturday mornings. Does the Secretary of State seriously intend to ask patients whether they want surgeries to be open on Saturday mornings—although their surgeries are not commissioned to be open— and subsequently withhold payments from GPs?

The hon. Gentleman must decide whether patients should be asked whether they are satisfied with the arrangements that their local GPs are making. He must also decide whether he thinks GPs should have been given the choice—which we gave them—of whether to provide out-of-hours services. [Interruption.] That was the choice that we gave them in the survey.

The result of the new contract is that GPs are providing better services for patients according to the quality and outcomes framework, and doing much more work on prevention and long-term care. They are also receiving big increases in payments. I think it right for us to ask patients for their views on their local practices, and to adjust payments to general practices accordingly.

It is always rather depressing when it clear that the Secretary of State does not understand. If GPs are not commissioned to open their surgeries on Saturday mornings, there is no basis on which they can do so, and it is therefore difficult to assess them on that ground.

The satisfaction survey ought surely to extend to out-of-hours services, but the Government do not seem to intend that to happen. Will the Secretary of State undertake to extend the survey to those services? Then, perhaps, she will be able to explain why patients have an out-of-hours GP service that is much less satisfactory to them than it used to be, and why the Government are spending not the £105 million that they thought it would cost last year, but £346 million—a quarter of a billion more than they expected.

It is the hon. Gentleman who simply does not understand the new GP contract. The new contract, which has led to primary care services being rated as better in our country than in almost any other advanced country—as is shown in a recent survey by the Commonwealth Fund—allowed GPs to choose whether to provide out-of-hours services, in which case they would receive higher payments, or to hand the responsibility back to the primary care trusts. PCTs commission out-of-hours services where local GPs have decided not to provide them themselves. If all PCTs commissioned those services as efficiently as the best, they would save money on the allocation that we made, rather than overspend.

We do indeed survey patients about their satisfaction with out-of-hours services, and more than 80 per cent. are satisfied or very satisfied with the services that they are receiving.

Choice has also been a major factor in patient satisfaction. Patients in parts of my constituency now have access to their medical records online, which is proving hugely beneficial. Has my right hon. Friend any plans to roll that out so that all my constituents can benefit from it?

My hon. Friend is absolutely right. By extending choice and the control that patients have over their own services, we are in increasing the responsiveness of the NHS to what patients want and contributing to that increased satisfaction. Through the NHS IT programme, we are trying to ensure that patients everywhere will have access to the online services about which some of my hon. Friend’s constituents are already so pleased.

Mid Essex Hospital Services NHS Trust

4. How many compulsory redundancies have been made in the Mid Essex Hospital Services NHS Trust area in the past six months. (103770)

The Mid Essex Hospital Services NHS Trust has announced that 24 members of staff have been made redundant. The trust is making every effort to protect front-line services.

I am staggered by the Minister’s response because a written answer from his Department of only two weeks ago informed me that the figure was 42, rather than the number that he has given. Also, as the Minister should know but might not, on the same day a further 203 jobs were cut in the hospital trust. I am therefore staggered by the Minister’s response. I want him to explain something to me and my constituents. Since those 245 job cuts were announced, the Government have changed the regime for redundancy pay. Given that those job cuts are being made to reduce the deficit in the trust, how do the Government reconcile changing the redundancy arrangements for trusts seeking to cut their deficits?

I will check whether there is that discrepancy between the figures that the hon. Gentleman has brought to my attention, and if there is I will correct it. However, yet again he and other Conservative Members are seeking to spread anxiety by quoting figures that do not reflect the reality. [Interruption.] They seek to create an impression that P45s are being handed out to nurses up and down the country; in reality, that is not the case. [Interruption.] If he or his party continue to try to spread anxiety in that way, that will not reflect well on them.

The hon. Gentleman and his colleagues have been lobbying me about a new hospital for the trust—he goes quiet and listens now that I mention that. If that trust is to get that new hospital, it must of course be financially viable. Although the decisions that have been made are difficult for the staff concerned, I hope that the hon. Gentleman will support my party in helping the trust make the difficult decisions that will get it into a financially stable position, as that will enable it to have the new hospital that he keeps on asking us to provide.

Does the Minister agree that compulsory redundancies are likely to be only part of the cause of staff reductions in that trust and throughout the rest of the NHS? As an example for the rest of the NHS, will he consider breaking down staff reduction figures into compulsory redundancies, voluntary redundancies, retirements and the vacancy factor effect in respect of the 10 per cent. of staff that are turned over every year?

I thank the hon. Gentleman for that constructive question, because he is absolutely right. We want to put correct information into the public domain. There are some who seek to use figures to scare, and spread anxiety in, the national health service, so we fully recognise the need to put accurate figures into the public domain so that people can make their own judgments about the state of work force planning within the system.

The hon. Gentleman is right that there is a need to put out more information, and we have put information into the public domain about voluntary redundancies. On a trust-by-trust basis, trusts are making statements about reducing their use of agency staff. I will constructively take on board the point that the hon. Gentleman has made, and we will of course seek to put accurate information into the public domain as and when we can.

PCTs (Local Services)

5. What steps she is taking to safeguard the provision of small local services affected by the changes to primary care trust boundaries. (103771)

It is for primary care trusts, in consultation with local people, to decide what small, localised services are needed in their areas.

I thank my hon. Friend for that answer. In particular, I want to raise the issue of toenail-cutting services for elderly people. It is an important service and it should be raised. Because of the redrawing of the boundaries of the primary care trusts, I am seriously worried that small local services that are vital for elderly people—such as those who cannot reach their feet—are not being safeguarded. I would very much like the Minister to give an answer that reassures me that such small, vital services are being safeguarded in PCT funding.

My hon. Friend raises an important issue: toenail-cutting services are important for older people, particularly those with diabetes or vascular problems. In such circumstances there is a commitment to maintain those services. However, I must also say to my hon. Friend that one of the reasons why a review is taking place is that some people have been receiving those services for more than 10 years, and although that might be entirely appropriate for some older people, it might not be necessary for others. The objective is to make sure that those services are protected where there is clinical need, because they are an important lifeline for many older people, but we must also make sure that resources are used appropriately.

Is the Minister aware that among the worst affected small local services are the integrated health care services of chiropractic, homeopathy and herbal medicine? Is he also aware that his right hon. Friend the Secretary of State for Health, when she was presenting the Acorn award for integrated health care at the NHS Alliance conference last week, said that they are what patients want? Why, therefore, are there cuts across the board in primary care trusts, and why are the Tunbridge Wells and Royal London homeopathic hospitals under threat? Will he and the right hon. Lady—

I know that the hon. Gentleman has a long-standing interest in, and commitment to, complementary medicine, as Members in all parts of the House will acknowledge, but the fact is that more than 50 per cent. of GPs do use complementary medicine and make sure that it is available to their patients in some circumstances. The hon. Gentleman asks me to intervene in local PCT decision making, but I should point out that his own Front Benchers are suggesting that we have complete operational independence for the health service, where local decision making will be the norm.

Has my hon. Friend heard from the Minister, my hon. Friend the Member for Don Valley (Caroline Flint), about the interest that she has taken in Trevi house, which is a unique drug rehabilitation centre in my constituency for young mothers and children? Indeed, I thank her for the help that she has recently offered to them. However, will he and his colleagues give serious consideration to issuing guidance to PCTs about the position of such small services? Two or three places are provided for the Plymouth PCT area, but a regional and a national service is also provided.

My hon. Friend the Minister has made me aware of the excellent work that Trevi house does. I believe that my hon. Friend the Member for Plymouth, Sutton (Linda Gilroy) has visited the service, and she makes a really important point. An holistic approach is taken there, and the rehabilitation services that are available not only for women who have had drug-related problems, but for their children and other family members, are incredibly important. In issuing commissioning guidance to PCTs, one of the things that we are most concerned about is rehabilitation outcomes and the needs of those women and children and the families as a whole. Where such quality services are being provided in the voluntary sector or perhaps by social enterprises, we will try to ensure that commissioners understand that we expect them to commission such services against the outcomes that we specify.

One way to conserve and perhaps develop local services is to realise redundant assets. Will the Minister therefore look at the situation of the Queen Camel doctors’ surgery, which has lain empty for several years since the new surgery was built? It is situated right in the middle of a village, is vandalised regularly and is an eyesore, yet my repeated approaches to the South Somerset primary care trust, and now to the Somerset PCT, have failed to lead to its being sold. Will the Minister look into this issue, find out why probably £500,000 of NHS assets is being wasted, and write to me?

I am more than willing to ask the PCT to have a look at this issue, which is exactly the sort with which the Member of Parliament concerned, the local authority, the PCT and, indeed, the local voluntary sector should engage, in order to come up with a solution that meets the needs of the local population. However, this is not necessarily a job for me, sitting in an office in Westminster or Whitehall, but I am willing to contact the PCT and to ask it to engage properly with the hon. Gentleman in an effort to resolve the issue.

Ill Health Retirement

6. What assessment she has made of the potential impact of retirement through ill health of NHS staff on funding available for service provision; and if she will make a statement. (103772)

There has been a major decrease in the number of awards of ill health retirement in the NHS—from 9,520 per year in 1993-94 to 2,673 per year in 2005-06. It was estimated in November 2001 that each ill health retirement involving a pension cost the pension fund up to an extra £60,000, and cost the trust the same again in indirect costs.

I thank my hon. Friend for that answer. Will he reassure the House that staff are not being coerced or forced into applying for early retirement in order to mask the numbers facing compulsory redundancy?

I certainly can give my hon. Friend that assurance, and I also wish to pay tribute to him and other colleagues in the trade union movement who have played a part in bringing down the number of ill health retirements in the NHS. The NHS as an employer has been in the spotlight this year, and today in the House, but sometimes the good things that it does—including the way in which it looks after its staff—do not get the appropriate praise. We should give the NHS that praise. My hon. Friend will know that the NHS, in consultation with the unions, has looked at managing ill health retirement and, by making earlier use of occupational health services and redeploying staff from onerous duties, it has managed to bring down the figures. More work remains to be done, but I would never countenance the manipulation of the figures that my hon. Friend suggests.

Those figures, which are welcome, suggest abuse in the past, and that people have retired on health grounds without justification. At a time when we are reorganising the NHS, will my hon. Friend and his colleagues ensure that any applications for retirement on grounds of ill health or redundancy are rigorously examined, bearing in mind the fact that there is a duty on the trade union and the employer to explore all opportunities for redeployment, to avoid those bogus and costly charges on the public purse?

My hon. Friend makes an important point. Of course, the peak of 9,500 in the early 1990s was for a much smaller work force. The figure for the last financial year—2,673—is for a much larger work force, with some 300,000 extra staff. That shows a much better performance. My hon. Friend is right about redeployment, and we will continue to work with NHS employers to look at every possibility for keeping staff in the service and retaining their skills and knowledge, by helping them to work elsewhere if they are struggling in their existing job. I will reflect more on the important point that my hon. Friend makes.

Northamptonshire Heartlands PCT

7. What the weighted capitation allocation for Northamptonshire Heartlands primary care trust was for 2003-04 to 2005-06; and how much was available to be drawn down by the PCT over the same period in relation to the capitation allocation. (103773)

Northamptonshire Heartlands PCT received revenue allocations of £222 million in 2003-04, £244 million in 2004-05 and £267 million in 2005-06. Over the three years covered by this allocation, Northamptonshire Heartlands PCT received an increase of £63.6 million. By the end of 2005-06, the PCT was 4.4 per cent. below its target allocation.

In August 2005, Sir Richard Tilt, the then chairman of Leicestershire, Northamptonshire and Rutland strategic health authority, said:

“We are however the worst funded SHA relative to the national capitation formula…Indeed North Northamptonshire is our most pressurised health community. Northamptonshire Heartlands PCT which covers this population…is £32 million (9.9 per cent.) below capitation.”

Does the Minister agree with Sir Richard, and is it not true that we do not have a national health service any more, but a postcode lottery health service? The people of Northamptonshire have drawn very bad numbers.

I do not agree with that statement. The hon. Gentleman should cast his mind back to the NHS of the early 1990s before making such comments. Let us get the matter straight. The funding increase that his party voted against—[Interruption.] Instead of rolling his eyes, the hon. Gentleman should listen to the facts. His PCT received an increase over the two years of this funding allocation of 29.4 per cent. The national average increase for PCTs was 19.5 per cent. and—

The hon. Gentleman cannot keep saying that. The resources that this Government have put into his local PCT are on a scale never seen before, and they have been adjusted to account for the population increase in his area. Overall, they constitute an extremely generous package for the health service in his area. If he wants more resources for the health service, he should try voting for them next time.

Does the Minister agree that the principle of fair funding, which the Government say that they espouse, should mean that resources within the growing budget of the NHS, which we all welcome, should be targeted at health need? Does the Minister understand that there is a growing perception throughout the NHS, including in Northamptonshire, that resources in the health service are no longer allocated in a way that reflects the health needs of the population, but are increasingly distributed in a way that reflects the political needs of the Government? Is there not an urgent need—

The right hon. Gentleman is straying into territory that is slightly dangerous for his party. His colleague the hon. Member for Wellingborough (Mr. Bone) said that health funding was inadequate because his PCT was under target, but the formula balances a range of factors, including deprivation, age, rurality and market forces, in producing notional target allocations for all PCTs in the country. Recently, the Opposition have suggested that health resources should be distributed according to what they called the “burden of disease”. The result of such a policy would be that the constituencies of every Minister on the Front Bench today would get significant extra resources, at the expense of the areas represented by the people who are pointing their fingers at me right now. The Tory party needs to decide—

Perhaps the Minister can help me, because my constituents, who used to be in the former West Lancashire PCT, are a little confused. The money from last year’s budget top-slicing will be used to finance NHS facilities in Lancashire, but that excludes the Southport and Ormskirk hospital, which serves my constituents. Moreover, South Sefton PCT—

Order. That is where a brief question should end, so we shall stop there and let the Minister answer.

My hon. Friend raises an important point. Overspending by any part of the NHS means that another part of the system has to underspend to make up for that poor use of resources. I represent a constituency very close to hers, and areas such as ours are having to help the NHS collectively and put money into the system to help other areas where there are financial pressures. She is right to say that the system should ensure that the money goes to the areas that need it most, and I shall look very carefully at the problem involving the Southport and Ormskirk hospital.

Let us try again, after the travesty of an answer that the Minister gave to my right hon. Friend the Member for Charnwood (Mr. Dorrell), a former Secretary of State for Health. The Government calculate the need for health care according to the weighted capitation allocation derived from deprivation indices, but the Minister must know that that need is determined largely by morbidity, and hence age. Northamptonshire Heartlands PCT has a projected deficit of £4 million, and it is being condemned to the regime of cash freeze and cuts experienced by most PCTs that serve older populations. Non-existent public health provision has failed socially deprived areas. Will the Minister concede that his funding formula discriminates against elderly people?

No, I most certainly will not. Our health formula gets funding into the areas that need it most, but it is time the hon. Gentleman made his mind up. I think that I heard him correctly: he has just said, at the Dispatch Box, that funding should be distributed according to age. However, less than two months ago the Opposition issued a policy document that stated that funds should be distributed according to the “burden of disease”. That is entirely different. The burden of disease—that is, the incidence of diseases such as cancer or coronary heart disease per 100,000 of the population—is larger in my constituency of Leigh than it is in his constituency of Eddisbury. If the Opposition want funding to be distributed according to age, they need to change their policy.

Purley Hospital

Although this is a matter for the local NHS, I am advised that NHS London’s timetable is currently dependent on the developers finalising their own plans for the site.

The key point in that reply is that the matter is in the hands of the developers. The Government made a pledge about the hospital nine years ago, which was repeated at the Dispatch Box five years ago, yet we still do not have a firm date, because the project is in the hands of the developers, who are now in some difficulty. Does the Minister agree that this is a classic example of how not to run a public-private partnership for building a new hospital?

I can certainly understand the hon. Gentleman’s frustration about the considerable time it has taken to get the project started, particularly as it will bring in £9 million-worth of new investment and bring together acute and community care services, as well as mental health services and a minor injuries unit. I understand his frustration. In February a contract was signed with the developer, and the detail was signed off earlier this month. I know that the hon. Gentleman met the new chief executive of the trust, Helen Walley—on Friday, I think—and I hope that gave him some confidence that the project is now moving forward. I met Helen Walley yesterday, and she is very keen to take it forward. She assured me that she would keep in touch with the hon. Gentleman about his concerns to reassure him that the project is moving forward.

NHS Trusts (Deficits)

In the minority of organisations that do have deficits, the targets we have set—for example, on waiting times and faster access to cancer treatment— are being met. The overall quality of services to patients continues to improve, but I do not underestimate the very difficult decisions needed in some organisations to restore financial balance.

Since the Secretary of State’s visit to Milton Keynes in the summer, we have seen the closure of the Fraser day hospital and the surgical assessment unit, cuts to mental health services, cuts to language therapy, cuts to oral health services, cuts to podiatry, cuts in ambulance call-out availability, cuts to counselling services and cuts in payments to the hospital of £2.8 million. Despite all those cuts, the primary care trust still needs to find cuts of another £18 million before March, which the chairman says he has

“not a cat in hell’s chance of achieving”.

As well as promising never to come to Milton Keynes again, will the Secretary of State suggest what the PCT should do to make more cuts in Milton Keynes?

I and my hon. Friends will promise to continue voting for record investment in the NHS—in Milton Keynes and every other part of the country. The PCT in Milton Keynes is getting more money than ever before and there will be more fast growth in its funding next year. Yes, people have to make some difficult decisions to ensure that they give patients the best care within available resources. As spending for those of the hon. Gentleman’s constituents who have cancer is below average, while spending on urgent care is above average, I hope that he will support his local PCT in ensuring that it rebalances that spending, puts more services into the community, and increases investment, for instance, for patients with cancer.

Even at this time of record investment in the NHS, everyone involved in providing its services, including in my right hon. Friend’s Department, has to understand that resources are finite, so local services require careful planning. Does my right hon. Friend agree that introducing independent treatment centres in local health economies needs careful planning, as their effect could be to undermine health care trusts that are trying to recover their budgets and go into balance? Does she agree that where independent treatment centres may have such an impact, they need to be reviewed?

I entirely agree. We have written a big cheque for the NHS, but it is not a blank cheque; it never has been and it never will be. Of course, we need to look at the introduction of independent sector treatment centres and we are doing so with the strategic health authorities and others, in each region, to ensure that the centres are properly integrated in the local NHS and continue to give NHS patients better care, but also faster care.

On Saturday, more than 2,500 people marched in the rain to protest against closures and cuts at St. Helier hospital. What assurance can the Secretary of State give me and my constituents that the decision to close 200 beds and cut 500 staff at the Epsom and St. Helier trust will not result in more mixed wards, more premature discharge of patients who are not well enough to go home and a rise in levels of infection at the hospital?

The decisions at that hospital are taken first and foremost, as I hope the hon. Gentleman would expect, on the basis of patient safety and quality of care. Difficult decisions have to made in his part of London in order to ensure that the local NHS gives patients the best possible care within the available resources and does not ask other parts and services of the NHS to bail out its overspending. As demonstrated by the quality and value indicators recently published by the NHS Institute, there is ample opportunity, for example, for hospitals to do more day case surgery, providing better care for patients, with better value for money as well. Those decisions are difficult for the staff, as we all recognise, but it is all about getting better care for patients within budgets that are bigger than ever before.

I fully accept the need for our PCT to deal with its own deficit and get into balance by the end of the year, but it is hard when the strategic health authority comes along in mid-year, takes the money away and tells it to get into balance—and even harder when, with four months to go, the SHA comes back and takes more. Will my right hon. Friend ask the SHA to give us a bit of leeway and assure me that we will get our money back quite quickly in future?

I know that my hon. Friend recognises the difficult decisions that have to be made in order to be fair to trusts that have not overspent, and to ensure that those who have overspent get enough time to take good decisions to get themselves back on track. The NHS is committed to repaying money that has contributed to regional reserves as quickly as possible, usually within the three-year allocation period, and those with the worst health problems will get their money back first. That, I believe, is fair, but the speed with which it can be done depends on the speed with which difficult decisions by overspending organisations can be made so that they get back on track and do not keep asking other people to bail them out.

Does the Secretary of State share my concern that the present financial crisis in the NHS may be leading hospitals into inequitable ways to balance the books? In Basingstoke, hospital car park charges were raised by 25 per cent. this year and the money was used—and needed—to fund medical services in the hospital. Does the right hon. Lady feel that that is right?

I would have to refer the hon. Lady to what the right hon. Member for Witney (Mr. Cameron) has recently said. He is not prepared to wipe out overspending any more than I am. If the hon. Lady believes, as does her right hon. Friend, that decisions should be in the hands of NHS professionals, I wish that she and other Conservative Members would support local NHS professionals when they make proposals and decisions to give better care to patients, with better value for money. As her party voted against increased investment in the NHS, I am not prepared to take lectures from the hon. Lady on how that money should be spent.

My near parliamentary neighbour the Secretary of State is right to say that record investment has transformed performance at the three acute hospitals in the city of Leicester that serve our constituencies. The award of an excellent rating a few weeks ago, followed by an award for being the joint best teaching trust, was no great surprise. Was my right hon. Friend disappointed that, almost in the next post, the strategic health authority wrote requiring the University Hospitals of Leicester NHS trust, which covers the three hospitals, to make further in-year savings of £15 million, which led to operational delays, frozen posts and a range of other changes, including reduced training? Can she reassure the House, our constituents and the million people in Leicestershire, Leicester and Rutland that this bitter pill to swallow will—

My hon. Friend is right to congratulate those at University Hospitals of Leicester on the excellent quality of care that they give to their patients, as confirmed by the Healthcare Commission, but he may not have noticed that, for instance, on day-care surgery those hospitals are well below the national average. On length of stay, for instance for hip fractures, they are well above the national average. Certainly, when I recently met the chair and chief executive of the hospital trust, they confirmed that there is ample scope for them to become even more effective in their use of resources and to continue to give excellent care to patients as a result.

May I turn the Secretary of State’s attention to deficits in mental health trusts? She knows that in May, Rethink produced the report “A Cut Too Far”, which identified at least £30 million-worth of cuts to mental health services, in response to which the Minister of State, Department of Health, the right hon. Member for Doncaster, Central (Ms Winterton), who has responsibility for mental health, said:

“There is no evidence to suggest that mental health services were being disproportionately targeted compared to other health trusts.”

Last week, Rethink came up with another £37 million-worth of cuts to mental health services, and the Secretary of State’s mental health tsar had to admit that

“some acute trusts should be ashamed that they have had to be helped out by services that have been historically underfunded”

—that is, mental health services. Who is more in touch with the disproportionate impact of deficits on mental health services—her Minister or her tsar?

Both our tsar and the Minister of State are absolutely right. There is no evidence that mental health trusts are being asked to take any disproportionate burden while the financial problems are sorted out, but the problem that this underlines is that all too often in the past mental health trusts have bailed out acute hospitals. There is a need to make acute hospitals more efficient, and that means more day-case surgery and reduced lengths of stay so that patients do not spend unnecessary days and weeks in hospitals when they would be better cared for at home. It is high time that the hon. Gentleman supported difficult decisions to make acute hospitals more efficient, to give better value for the money contributed by taxpayers and patients, and in that way, we will ensure that we can go on increasing the already unprecedented funding for mental health services as well.

Bed Closures

A constituent of the hon. Member for Morecambe and Lunesdale (Geraldine Smith) suffered a suspected heart attack earlier this month, but instead of being rushed to his nearest heart unit in Lancaster, he was redirected to the heart unit at Westmorland general hospital in Kendal in my constituency, because there were not enough beds at the Royal Lancaster infirmary. Does the Minister therefore share my horror that the trust is planning to close Westmorland general hospital’s excellent heart unit? Will he intervene to save it?

I understand the concern that the hon. Gentleman expresses, but the Liberal Democrats seem continually to advocate devolution, and decisions being taken as locally as possible. To then suggest that a Minister ought to intervene in local decision making is nonsense. Decisions on patient safety and quality of care must be made locally. Those must be the guiding principles that determine such decisions. I urge the hon. Gentleman to make representations on behalf of his constituents, but to accept that those decisions are responsibly made, and best made, locally.

At a cost of only £250,000 a year, my primary care trust is treating 400 drug addicts, thus reducing accident and emergency hospital admissions and the use of beds by drug addicts by more than 400 per cent. Should we not be looking throughout the NHS to see where else we can remove the unnecessary use of NHS beds by drug addicts and others?

I entirely agree with my hon. Friend. We want exactly that kind of best practice to become mainstream. The difficulty is that when there is local advocacy to shift resources, quite rightly, from acute services to community-based and preventive services, the Opposition parties irresponsibly proclaim that that means cuts, when those changes will in fact lead to better services for patients and more rehabilitation, thus preventing such conditions from deteriorating. Surely that is the responsible way to develop a modern national health service.

Those of us with community hospitals and other health care assets that are being shut down on the back of sham, tick-box consultations will agree with the new NHS chief executive, who wrote to MPs last week in the following terms:

“The NHS certainly needs to improve how we listen, engage and respond to the genuine concerns of the public, patients, clinicians and other stakeholders.”

Developing that statement of the glaringly obvious, will the Minister say specifically what shortcomings Mr. Nicholson has identified during his short tenure, and what improvements in listening, engaging and responding our long-suffering constituents can look forward to?

The Opposition really must think that the British people are stupid. This is the first Government to announce a £750 million programme over five years to develop a new generation of community hospitals, which will shift resources from acute health care to preventive and community-based solutions. It is not true to say that we are going backwards in terms of community hospitals. This is the first Government to say that we need to modernise and improve community hospitals. As for consultation, when we proposed the reconfiguration of primary care trusts, the consultation process took note of what local people said, and as a consequence, many of the proposed reconfigurations were changed. We will take no lectures on consultation from the Opposition.

Diabetes (Stoke-on-Trent)

11. What the increase has been in the number of people with diabetes in Stoke-on-Trent over the last five years. (103777)

We do not hold the information in the format requested. Our latest figures show that there has been an overall increase in the prevalence rate of diabetes in Stoke-on-Trent of 11.3 per cent. since 2004.

I thank the Minister for that reply, but in Stoke-on-Trent the rate is 4.2 per cent., compared with the national average of 3.6 per cent. My constituents are distressed about the fact that the PCT and GPs are taking away blood glucose test strips. Does she agree that it is really important to have a structured education and support system in place, and will she work with the national Diabetes UK association and the all-party group on diabetes to try to find a way of making sure that we do not have health inequalities of that kind in areas such as Stoke-on-Trent?

My hon. Friend is right to say that that kind of supported education programme is extremely important. The work done by Diabetes UK, together with some of the regional teams that we have set up through the Department’s diabetes national service framework, is making a real difference in many areas of the country. I know that, particularly in her area, diabetes clinics, patient information and the work of the diabetes networks have been effective in putting in place some of the education to which she refers.

Local Government Finance Settlement

With permission, I should like to make a statement about local authority revenue finance for England in 2007-08. Sensible planning for service delivery needs a stable and predictable funding environment. The quality of councils’ forward budgets, their relations with stakeholders whose budgets they support, and their ability to set low and sustainable council taxes, will all be promoted by predictable funding.

As I told the House last January, we were then setting out firm proposals for forward financial allocations on a two-year basis—including the use of projected data for population and council tax base. As 2007-08 is the second year of a multi-year settlement, the policy is not to change the settlement, including the data used in the grant calculations, from that previously announced, other than in exceptional circumstances.

This year’s announcement therefore contains no surprises for local authorities. I make a virtue of that, because I am convinced of the advantages of multi-year financial planning, and most of what I hear from councils and their delivery partners, such as those in the third sector, supports that view. Today’s announcement launches a period of statutory consultation, and I will fully consider any representations made during the consultation period in the light of the policy in relation to multi-year settlements.

Within the framework of stability, I am able to provide adjustments to grant allocations for the voluntary merger of the fire services of Devon and Somerset under a new single combined authority, should that go ahead for 2007-08. Today, I am also updating details of individual specific grant allocations to local authorities for 2007-08.

With the next spending review period, we will move to give three years of grant allocations to local government: for 2008-09, 2009-10 and 2010-11. The stability provided by multi-year settlements will allow local government to publish three-year council tax figures, and we would expect it to take up that opportunity. More widely, such security on funding will enable councils to move forward on providing more flexible, efficient and responsive services to their communities, as was set out in our October 2006 White Paper, “Strong and prosperous communities”. It will facilitate the move towards new, more inclusive local area agreements that are tailored to meet the needs of individual areas and the drawing together of different stakeholders to provide better, more cost-effective services that seamlessly meet the needs of clients.

Total revenue grants to English local authorities will be £65.7 billion in 2007-08, an increase over 2006-07 of £3.1 billion, or 4.9 per cent. Part of that increase is in specific grants, and it includes dedicated funding for schools and a further £525 million in neighbourhood renewal fund, allocating extra help to the 86 most deprived local authority areas in England. Within that total, formula grant will total £25.6 billion in 2007-08, an increase of 3.7 per cent. That means that by 2007-08, the increase in Government grant for local services since taking office will be 39 per cent. in real terms. The provisional standard multiplier for national non-domestic rates in 2007-08 will be 44.4p in the pound, and the small business non-domestic rating multiplier will be 44.1p. That means that, once again, businesses and other non-domestic users can look forward to predictable and stable rates.

Grant floors—minimum guaranteed increases from one year to the next—are a permanent part of the system. I need to strike a balance between funding stability and the cost of the floor. This year, I am able to improve floor protection for fire and rescue authorities, while easing the impact of floors on upper-tier and shire district authorities. I can thus today confirm my proposal that, for 2007-08, the floors will be: for authorities with education and social services responsibilities, 2.7 per cent.; for police authorities, 3.6 per cent.; for fire and rescue authorities, 2.7 per cent.; and for shire district authorities, 2.7 per cent. Within each group of authorities, those above the floor will have their grant increase scaled back to pay for that floor.

We have provided a stable and predictable funding basis for local services. We expect local government to respond positively as far as council tax is concerned. We thus expect to see an average council tax increase in England in 2007-08 of less than 5 per cent. We will not allow excessive council tax increases. We have used our reserve capping powers in previous years to deal with excessive increases and we will not hesitate to do so again if that proves necessary.

I am also announcing consultation on alternative notional amounts for Devon and Somerset fire and rescue authority and Somerset county council. That will enable like-for-like comparisons to be made between 2006-07 and 2007-08 budget requirements for capping purposes. This is being issued today for consultation to ensure that, should the proposed merger go ahead for 2007-08, the relevant authorities will know, in advance of setting their budgets, the budget requirement figure for 2006-07 that the Government will use when considering using their capping powers.

The supporting people programme has proved to be a highly successful one that has provided support to more than 1 million vulnerable people each year. In July, I announced almost £1.7 billion of investment in supporting people and I am pleased now to confirm the grant allocations for 2007-08. Additionally, I can announce a further £40 million of administration grant for authorities in 2007-08 to help them to manage that important programme. I am pleased to announce that if authorities generate savings under the programme through their careful management, they will be able to roll forward those savings from 2006-07 to 2007-08, in order to reinvest in the programme.

The Government have provided another significant boost for local authorities, setting out a financial package that is stable, predictable and adequate to meet the pressures that local authorities face, but keeping council tax increases down to acceptable levels. I have placed copies of the tables showing grant allocations and copies of the supporting documentation in the Vote Office and the Library, and full details are being made available to local authorities on our website. I look forward to receiving consultation responses, and I commend the proposals to the House.

I thank the Minister for early sight of his statement and for the supporting documents. I have always considered the Minister for Local Government to be someone who respects the Chamber, so I am sorry that he chose to release the details of the settlement in a press release yesterday. Clearly, the spirit of Jo Moore lives on in his Department.

Since 1997, council tax bills have rocketed. They have gone through the roof, rising by 84 per cent., and that takes the average bill for a band D property to £1,268 this year. A 5 per cent. rise this year will mean an extra £63 on the bill of a typical pensioner couple or a family, and that is equivalent to paying £111 every month of the year. What is the Minister’s estimate of the extra burden on the vulnerable? I remember the deep shock felt by households when the average band D bill breached £1,000. It took seven years of this Labour Government for us to reach that oppressive figure. From the figures before us, we can calculate—I suppose that that is the advantage of multi-year financial planning—what bills will be by the end of Labour’s third term, if there is a 5 per cent. annual increase. The average council tax bill will be £1,500.

The Minister’s last major adventure in capping resulted in nearly half the savings going on the cost of rebilling. Will he at least spare himself the embarrassment of capping authorities in cases in which the savings are trivial? Will he confirm that his capping powers will not be applied to the Olympic levy on council tax, and if costs continue to soar, as they did in Montreal, will Londoners be paying the Olympic tax for the next 30 years?

We have long been promised the publication of Sir Michael Lyons’s recommendations on local government finance, but a spokesman in the Department is reported in last week’s Municipal Journal as saying:

“we have never made a commitment to publish the report at all”.

Will the Minister give a clear undertaking that the Government will publish Sir Michael’s recommendations well in advance of the debate on this year’s settlement? One of the key drivers for soaring council tax is the failure of the Government to finance fully the burdens that they impose on local councils from Whitehall. Will the Minister confirm that, on top of the figures given today, the Chancellor will look to meet a target of 3 per cent. cuts from local authority budgets?

The finances of local authorities, particularly those with social services departments, are closely linked with the NHS. Across the country, local hospitals are cutting staff recruitment, abolishing posts and cancelling operations because their budgets are in the red. In July, the Local Government Association and the NHS Confederation published research revealing that seven out of 10 local authorities have been hit by cost-cutting pressures from the NHS. Are there any measures in the settlement to address that problem, or do the Government have their head in the sand, with regard to Labour’s NHS cuts?

The Chancellor has set in place a landfill tax escalator, and is making municipal waste collection ever more expensive. The costs should be funded under the “new burdens” principle, but the Department for Environment, Food and Rural Affairs argues that it does not apply, because of the “polluter pays” principle. What representations has the Minister made to remedy that injustice? In conclusion, no wonder the Minister thought that this was a good day to bary—bury—bad news. The bad news is that an ordinary family in an ordinary house face the prospect of paying a crippling £1,500 in council tax by the end of Labour’s third term—truly, a shocking and crippling legacy.

I am grateful to my hon. Friend the Member for Bolsover (Mr. Skinner).

I thank the hon. Member for Brentwood and Ongar (Mr. Pickles) for his comments about my attitude to the House, but I can assure him that the details of the statement were largely announced to the House last year, so there has not been a breach of privilege in the House. If there had been, I would take it very seriously. I thank the hon. Gentleman for his opening remarks but, in response to the questions that he asked, I specifically announced that the Government would not tolerate average tax increases above 5 per cent.—that is the same policy that I pursued last year. Last year, he attempted to portray that as an actual increase in everyone’s council tax of 5 per cent. Of course, that was not the case this year, and it will not be the case next year. I accept his point that an advantage of multi-year statements is that we can predict council tax increases in future, but a disadvantage of that sensible policy from the Government’s point of view is that the propaganda and spin that he put on the figures is made worse. Such a practice does nothing other than unnecessarily frighten particularly vulnerable people, so I urge him not to indulge in it. [Interruption.] What was wrong about it was that the accusation was made last year. It was not true then, and it will not be true this year.

The hon. Gentleman asked about the Olympics. The £20 levy for the Olympics, which has been agreed between the Government and the Mayor, cannot be changed without the agreement of the Mayor and the Greater London authority. The hon. Gentleman’s party was supportive at the time of the bid, and the Prime Minister graciously said so. I accept that it is the job of Her Majesty’s Opposition to oppose, but sometimes I think Her Majesty should ask for her money back because they have not provided value for money. The hon. Gentleman’s worry about the Olympics is therefore not borne out. He asked an important question about the Lyons review, which is due to report to the Chancellor and the Secretary of State by the end of the year, and decisions will be made at that time. The hon. Gentleman described the 3 per cent. efficiency target as a cut—I assume that he was referring to the Gershon figure. Local government has a good record on efficiencies, both cashable and non-cashable, and I am pleased to report that our all-party work with the Local Government Association has resulted in improved efficiencies and services.

The hon. Gentleman said that the NHS budgets are in the red, but the NHS budget has not been cut. NHS trusts and hospitals are required to balance their books, and it is amazing that the Opposition should fail to support the concept that public services should balance their books. Councils must do so—that is quite right—and most of them take a responsible attitude towards the requirement. The increasing work that they do through local partnerships, particularly the new financial arrangements of local area agreements, means that the aligning of financial budgets by the partners is important. The hon. Gentleman therefore made a significant point. As for his point about waste, my Department, the Department for Environment, Food and Rural Affairs and the LGA have important work streams on waste issues, which receive substantial attention in the White Paper that we published on 26 October. In giving a reaffirmation of the new burdens principle, I should point out to the House that those new burdens can only be calculated on a net basis, even though they are sometimes presented on a gross basis.

I welcome my hon. Friend’s statement. May I draw his attention to an anomaly that affects the city of Newcastle upon Tyne? The population figures that the Government use to calculate the city’s entitlement to rate support grant seriously understate the real population of the city. This has been the case for a number of years, and the gap between the two figures is widening. Will my hon. Friend meet me and the other Members of Parliament for the city, and also perhaps the leader of the Liberal-controlled local authority and a representative from the opposition party in order to discuss the anomaly and see what can be done to rectify it?

Of course I would be delighted to meet my right hon. Friend, the leader of his council and any other representatives who wish to participate in a discussion of the issue. In the formula announcement that I made last December and confirmed in January, I changed the formula calculation to take into account population projections as well as historical trends, so there was a change in that direction. I am aware that his council and some others are raising the important matter of the population figures. The Government rely on the best data available, which are provided to us by the Office for National Statistics. The ONS constantly reviews the data and has a work stream through the population statistics working group to examine the matter. One can go only so far in future projections to be consistent with the overriding policy of financial stability and predictability.

I commend the Minister for making the statement available much earlier than is usually the case. I congratulate the Government on moving to a three-year settlement, which will allow local authorities to plan much more effectively. However, it will not have escaped Members’ attention that the Labour manifesto pledge back in 1997 to abolish universal and crude capping has still not been delivered. We do not have crude and universal capping. What we have is a benevolent Minister who reluctantly uses his reserve capping powers but achieves the same end, and our strong and prosperous communities still have to dance to his tune.

The Minister neatly side-stepped the question from the hon. Member for Brentwood and Ongar (Mr. Pickles) about whether and when Sir Michael Lyons’ report would be published. I hope he will answer that question on the record. In relation to the three-year settlements and picking up a point that has just been made, can the Minister confirm that those will be sufficiently flexible so that if a local authority experiences a swift change, such as inward migration, or if the census data prove to be inaccurate, it will be possible during that three-year period to adjust the settlement?

On the 2007-08 announcement, does the Minister not accept that it is his settlement of 2.7 per cent. for many authorities, combined with public sector inflation and the financial impact on local authorities of the cuts in many primary care trusts and many acute trusts, that make inevitable an increase in council tax of double the rate of inflation, hitting the poorest—often our senior citizens—the hardest? Is it not time he stopped punishing local authorities? Instead, he should congratulate them on moving forward with the Gershon savings at a rate that central Government cannot match. He should introduce a local tax based on ability to pay, give local councils control of business rates, allow fair votes for local elections and scrap the hundreds of targets that are imposed on local authorities by his Government.

The 2.7 per cent. floor that the hon. Gentleman mentions benefits his own authority, which is a floor authority. Without the floor, there would be a significant shortfall, and the hon. Gentleman and his colleagues would no doubt lobby me for the floor. I therefore expect a letter of thanks for it, although I doubt whether that will be in the Christmas box for the Woolas office this Christmas.

The Lyons report will be complete by the end of the year. [Hon. Members: “Will it be published?”] Of course it will be published. [Hon. Members: “When?”] The hon. Members for Brentwood and Ongar (Mr. Pickles) and for Carshalton and Wallington (Tom Brake) will have to be patient. That approach was used in the past with the Layfield review and other independent reports.

The answer to the question about three-year settlements is yes, because the settlement takes into account the updated data.

On council tax increases of twice the level of inflation, I repeat that the 5 per cent. figure to which I referred last year and this year is the national average, so it does not mean that council tax will rise by 5 per cent. in every authority. Council tax is set by individual local authorities, which has been the case since its introduction.

On hitting the poorest hardest, the poorest benefit most from the council tax benefit system, which contributes just under 15 per cent. of total council tax revenues. That point is often missed out from the debate for what I assume are entirely honourable reasons.

On the Gershon review, this morning I congratulated local authorities at the conference of the Chartered Institute of Public Finance and Accountancy on their success in reaching their Gershon targets a year early, and I am happy to repeat those congratulations.

If the new formula supporting social services had been fully implemented in this settlement, how much extra taxpayers’ money would Wirral receive?

I am very grateful to my right hon. Friend for asking that important question. The funding blocks for children’s social services and for young adult’s social services come with floors, while the funding block for elderly social services does not. All the formula grant is covered by floors, and the floor for my right hon. Friend’s authority is 2.7 per cent this year. Without that floor, I estimate that the loss to Wirral would be around £4 million. It is not possible to say—I am more than happy to clarify this matter in writing—what effect the removal of the floor would have on children’s social services and on young adult’s social services.

The Minister is a reasonable guy, and I like him. Will he give me an honest answer to this question? Cheshire is under-resourced in respect of education—it is one of the worst funded authorities in the country—and the same is true of social services. If the Government limit the money that they give to Cheshire, and if Cheshire cannot raise the level of local tax above 5 per cent. in order to provide the services that it requires, how can the local authority provide facilities for, in particular, the elderly and children, when it is under-resourced and limited on what it can raise itself?

I thank the hon. Gentleman for his comments, which I sincerely reciprocate—I genuinely thank him for what he has said. He has raised a difficult issue. Councils led by all political parties have identified that they face pressures, particularly in social care. We work with councils and their representatives to identify the causes of those pressures, and we work out with them, often successfully, what we can do together to address them. The plain fact of the matter is that the public—I am sure that the hon. Gentleman will back me on this point—will not tolerate excessive increases in taxes and particularly in council tax. The Government do not have a solution to the issue set out by the hon. Gentleman. We must square the circle through efficiencies, the improvement of services and better joint working with other public service agencies, which has resulted in significant improvements in Cheshire and elsewhere.

How can the Minister describe as a significant boost a settlement that gives a council such as Gateshead, which is often held up by Ministers as an example of good local government, 2.7 per cent.—some 30 per cent. below the English average—and that gives the north-east a settlement below the English average even though it is widely acknowledged that its needs are higher than that? Under this settlement, what prospect does Tyne and Wear passenger transport authority have of clawing back some of the £7.2 million that it cost us to introduce the Government’s free travel scheme; and how on earth is it supposed to finance that scheme next year, given the inadequate system of local government finance?

I congratulate my hon. Friend on continuing his important campaign on behalf of bus users in Tyne and Wear. As he knows, the Government provided £350 million last year, and £367 million this year, for the concessionary fare scheme. In addition, there has been an uplift across the board in grants provided to local authorities. Having looked particularly at regional distribution, I can confirm to my hon. Friend that over the past 10 years the north-east has not been at the bottom of the league on a regional basis as regards the allocation of grant funding. We are in discussions with him about this important matter.

The issue of social services is fundamental. The Minister will know that the Prime Minister and the Chancellor have just put together a document about the challenges facing the Government which highlights the problems that arise in a society in which the numbers of elderly people and young people are growing in proportion to the total population. Those are precisely the groups that make the most demands on social services, and where significantly higher statutory demands are laid upon local authorities and the most pressure from budgetary provision is felt. What forecast has the Minister made for the evolution of demand in that sector, and what plans does he have to meet it?

The right hon. Gentleman speaks with great authority and knowledge on these matters, and I believe that he understands the Government’s argument, which is that we have provided extra revenue and capital support for social services—I could read out the substantial figures. The answer to his question is that the Government are proposing, through the White Paper, a partnership approach whereby local authorities are freed up to work more effectively with other partners, especially the health service. Spending on social services has increased year on year above inflation. That is not to say that there are not significant demographic and other pressures on councils and on central Government; that is why it is right and wise of my right hon. Friends the Chancellor and the Prime Minister to deal with that in their reviews.

What assessment has my hon. Friend made of the impact on local government finance of implementing the single status and equal pay Acts? I have gained the impression that his Department has been in denial about this for some time. Has he now woken up to the size of the problem, and what are his plans?

I can assure my hon. Friend that I am not in denial, and neither is my Department, about the importance of equal pay for equal value, not only in achieving equality and fairness for women workers, especially low-paid workers in local government, but in ensuring the balancing of the books on which we place such importance. Equal pay is very high on our agenda; indeed, this morning I held yet another substantive meeting with the Local Government Association to consider some of the potential solutions.

Will the Minister meet council leaders and Members of Parliament from the London borough of Sutton to discuss two matters: first, the effects of cost shunting from the local NHS on to local social services as a result of bed closures and cuts in staffing in the local NHS and tens of millions of pounds of cuts in primary care services; and secondly, the double disadvantage that the poorest of my constituents suffer as a result of not counting within the formula allocation and not benefiting from targeted grants because we are regarded as being a leafy suburb but in fact have pockets of deprivation that are not properly met by the grant system?

I shall be more than happy to look at the situation in the hon. Gentleman’s borough, but I must point out again that our policy is a fair one. I acknowledge, as do the Government, that the point about pockets of poverty in relatively well-off areas is an important one. That is one reason why we apply the floors within the formula, of which his authority is a beneficiary.

While I welcome the stability of the two-year settlement and the fact that population projections will now be included, may I draw the Minister’s attention to the problems faced by authorities such as Milton Keynes council, which has a rapidly increasing rate of population growth but is limited by the damping effect introduced to protect authorities affected by the floor? Will he allow representatives of the council to come with me to make representations to him on its specific problems as a housing growth area, and on the way in which that should be reflected in the formula?

I congratulate my hon. Friend on her persistent campaign to raise the issues affecting Milton Keynes, which she has acknowledged as being problems of success. This is a new issue that we have to deal with. I can assure her that the specific issues facing Milton Keynes are being considered, and that discussions are taking place on possible ways forward, not only for her area but for areas in a similar situation. I do not believe that this settlement specifically addresses the issue that she has raised, but I can give her the assurance that it is high on our agenda.

As a councillor on Kettering borough council, may I draw the Minister’s attention to the acute pressure on the planning departments in small district authorities, particularly in growth areas? Will he consider lifting the cap on the planning fees that developers have to pay? If a developer makes an application for 5,000 houses, that can occupy all the planning department’s time, yet the recompense that it receives is totally inadequate.

I congratulate the hon. Gentleman on raising this issue, which we have debated before. He has made an important point in a non-partisan way on behalf of his constituency, and the Department is indeed looking into the matter.

My constituency is benefiting from £1.6 million of neighbourhood renewal funding. This is because super-output areas, rather than borough-wide statistics, have been used to target those resources. My constituency is in the relatively wealthy metropolitan borough of Stockport, as my hon. Friend the Minister knows. Will he increase the use of super-output areas to ensure that resources go to all deprived areas, irrespective of the council area in which they are located?

My hon. Friend makes an important point about super-output areas, which are the sub-ward areas of highest deprivation. I have announced today the allocation of neighbourhood renewal funding, and it is for the local authorities and their partners to allocate that funding to try to meet the floor targets on deprivation that we have set for them. The review of the neighbourhood renewal fund will take place in tandem with the comprehensive spending review, and the issue that my hon. Friend has raised is one of the subjects under consideration in that review.

I want to return to the issue of population change, and to refer the Minister back to the Westminster Hall debate that he and I attended on 1 November. He said that he would write to me after that debate, but will he instead tell me today whether he will look again at the situation in local authorities such as my own, as well as in other London boroughs and places such as Peterborough and Slough? Apart from the change in the trend in population increase in such places, they have faced huge and sudden increases in population since the accession of the 10 new EU member states. Will he look again at the possibility of giving a gateway grant to such local authorities to deal with the one-off effects of those circumstances?

The hon. Gentleman referred to our fruitful debate on this issue in Westminster Hall. I cannot give him the commitment that he is looking for, however. The best data available to the Government are those produced by the Office for National Statistics, and I am obliged—as any Government would be—to use the best data. The work stream that is examining those data is ongoing, as his local authority and the others that he mentioned have requested.

My hon. Friend said in his statement that there would be no surprises for local authorities. Does he agree that his intervention last week in the negotiations on the local government pension scheme was a big surprise for local authority workers? He must have surprised not only the workers, probably scuppering the genuine negotiations, but the Prime Minister, who had said at the Dispatch Box 24 hours earlier that he would do all that he could to help to reach a successful outcome.

I am grateful to my hon. Friend for giving me the opportunity to put it on record that the statement issued last Thursday on the future of the local government pension scheme was influenced by discussions involving trade unions and employers, and that it refers to a consultation on the best way forward. On behalf of members of the scheme, and with regard to the viability of the scheme, I have an obligation to move forward in accordance with the timetable outlined to participants in the tripartite committee for some months and, indeed, years.

In town halls up and down the country, the Minister’s statement today will have disappointed many people, not least because it represents a thoroughly bad deal for local government, which is struggling to provide the services that all our communities need and deserve. It seems to me that the Government are effectively asking councils—

Order. When a statement is made, it is the practice in the House to put a question. The hon. Gentleman has so far not put a specific question. If he does so, I will allow him to continue.

As ever, Mr. Speaker, I am grateful for your guidance. I was just coming to the question. Given that the Government are asking local councils to do more and more with less and less, which services that local councils currently provide does the Minister think they no longer need to provide? Will he give us an answer, instead of giving councils more and more responsibilities to discharge with existing funds?

With respect, if the hon. Gentleman will give the House an undertaking not to distribute a Focus leaflet attacking tax or council tax increases, I will give a straight answer to his question. The fact is that neither Her Majesty’s Treasury nor the council tax payers in his constituency or mine are aware of the mystical tree on which he thinks money grows. Stockport borough council has had an average increase for 10 years of 4.5 per cent. in real terms. Admittedly, that includes the schools budget, but a real terms increase has been provided for other council services. Politics is about making those hard choices, for which he does not seem to think he should take responsibility.

The need for a successful conclusion on the local government pension scheme has already been mentioned. Will my hon. Friend give a commitment that he will call in the employers and trade unions to see him, so that he can stress the need for further discussion and compromises on the way forward?

I am grateful to my hon. Friend, who plays a positive role on behalf of his constituents, particularly low-paid workers. I can give him that commitment. As I said a moment ago, the statement to the House refers to a consultation on the future of the local government pension scheme, and meetings are already in the diary to continue discussions on the future of that pension scheme, so that we can move forward with a strong final salary pension fund that is fair to scheme members now and in the future.

The Minister will know of the problems faced by Northamptonshire county council, as he met an all-party delegation last year. He will know that we cut 600 full-time equivalent jobs, and that we cut deeply into services. This year, we have a £45 million shortfall on a balanced budget because of the support grant that he has announced, which we knew about last year. We can shave the employment structure to the bone, but we are still left with an £18 million shortfall that can only be dealt with by service reductions. How can the Minister reconcile that scenario with his claim that his party is improving local government services?

I am not the only one who says that local government services are improving. The independent Audit Commission and the Local Government Association say the same, backed up by independent research and evidence from respected market research companies and opinion pollsters. I am sorry that the hon. Gentleman chooses not to join me in congratulating local government, but I really cannot accept the argument that a shortfall on projected desirable expenditure is a cut. It is not, it never has been, and it never will be.

I welcome the extra £525 million that has gone into the neighbourhood renewal fund. That money is extremely useful and, as I am sure my hon. Friend knows, the excellent Labour-led Wigan city council uses it very well.

In his statement my hon. Friend made no mention of double damping, which was raised by my right hon. Friend the Member for Birkenhead (Mr. Field). I think most people would welcome damping, or at least understand the need for it; what we cannot understand is why there should be additional damping before the final damping in the formula.

Replying to my right hon. Friend the Member for Birkenhead, my hon. Friend said that he could not assess how much the amount would be. The Wigan treasurer estimates that, for Wigan, it will be £8 million, as against the extra £4 million that we have. Will my hon. Friend give careful thought to the issue of double damping and try to resolve it, so that local authorities can address the needs of their social services departments?

My hon. Friend makes an important point. I will of course look at the specific figures relating to his authority and similar authorities that have presented the argument about double damping in a responsible way. As I tried to explain to my right hon. Friend the Member for Birkenhead (Mr. Field)—I am grateful to my hon. Friend for acknowledging this—the social services budget for the elderly is not damped, whereas the budget for children and young adults is. I have been able to make progress on the overall damping. Wigan city council, owing partly to a success on which I am happy to commend it, received a 3.9 per cent. increase this year.

As the Minister turns his mind to the new three-year settlement, will he consider the position in Croydon? Comparisons with Ealing, which has similar social indicators, show Croydon’s budget to be £40 million adrift of where it should be. What consideration can the Minister give to a fair deal for Croydon in future years?

I hoped that the hon. Gentleman would thank the Government for the local enterprise growth initiative funds that Croydon received this year. That excellent scheme, for which I commend the council, is working very well, but I do not accept the hon. Gentleman’s premise. All local authorities can and do argue that they are special cases. We have to balance the demands on central Government funds. I believe that overall I have distributed the money fairly, and in a way that is perhaps more transparent than has been the case in recent years.

When my hon. Friend decided that Liverpool city council should receive a 2.7 per cent. floor uplift, did he take into account a recent report by KPMG which suggests 43 ways in which the council could save money on the external contracts negotiated by its former chief executive Sir David Henshaw? One of them commits the council to a service charge of £11,000 a year per councillor, to be paid to a company called Liverpool Direct for computers supplied to councillors.

Clearly more savings can be made in Liverpool. Will my hon. Friend examine the report to ensure that he and his officials know the background, and to ensure that Liverpool council tax payers receive the best services that can be provided from the significant resources that the council receives?

I, like my right hon. Friend, want the best for the council tax payers of Liverpool. I am grateful to her for raising the important point about the KPMG survey. Of course, in terms of the allocation of revenue support grant one cannot take into account such specific reports, but Liverpool is subject to the Gershon requirements, as are other authorities, and I would have thought that a consideration of that important report would be a contribution to that agenda in Liverpool.

Does the Minister recall that he met with a delegation from the London borough of Bromley in June of this year, and does he accept that during that meeting he appeared to agree with its point that formula grant is only part of the picture and that we would not be able to come to a fair assessment of the treatment of Bromley or any other authority until a comprehensive list of all grant, including specific grant, is published for each local authority? Will the Minister undertake to do that, and what comfort will his settlement give to my constituents in Bromley, as it appears that their formula grant will be nailed to the floor for a fourth successive year?

I hope I am not being churlish or disrespectful, but I say again that it would be nice to get a thank you for the floor, especially as Bromley council is part of the London Councils Association which argued for the floor in the first place. But notwithstanding that, the point that the delegation made was on the pockets of poverty, which a Member has raised. What I have done is to make available all the specific grants that are within the remit of my Department and portfolio today. The Department for Education and Skills today also publishes the dedicated school budget for schools. Surety and predictability of funding are an important part of our policy, and next year I will be able to announce three years of funding.

Today’s East Riding Mail reports that the new East Riding of Yorkshire Primary Care Trust wishes to close the bedded units in Beverley, Driffield, Hornsea and Withernsea. Does the Minister accept that such financially driven cuts must be stopped, or else the consequences will be dire not only for patient’s but for local authority budgets?

It is only proper for me to respond by saying that our public services have to balance the books. I do not think that the good people of east Yorkshire—of the beautiful market towns and other places that the hon. Gentleman mentioned—misunderstand the point that the Government are making when we say that there has been a real-terms increase in health expenditure in this country of 90 per cent. so far. I disagree with the idea that a trust or hospital that is balancing its books can be fairly described as making cuts; it is not doing that. The hon. Gentleman does his campaign no good by pretending otherwise. The public simply will not believe him when he says on the one hand that there are cuts, and on the other hand criticises the Government in other forums for allegedly overspending on public expenditure.

Bills Presented

Greater London Authority

Secretary Ruth Kelly, supported by the Prime Minister, Mr. Secretary Prescott, Mr. Chancellor of the Exchequer, Ms Secretary Hewitt, Secretary Tessa Jowell, Secretary David Miliband, Mr. Secretary Alexander, Yvette Cooper and Jim Fitzpatrick, presented a Bill to make further provision with respect to the Greater London Authority; to amend the Greater London Authority Act 1999; to make further provision with respect to the functional bodies, within the meaning of that Act, and the Museum of London; and for connected purposes: And the same was read the First time; and ordered to be read a Second time tomorrow, and to be printed. Explanatory notes to be printed [Bill 11].


Mr. Secretary Hutton, supported by the Prime Minister, Mr. Secretary Prescott, Mr. Chancellor of the Exchequer, Mr. Jack Straw, Hilary Armstrong, Mr. Secretary Hain, Secretary Ruth Kelly, Mr. Secretary Alexander, James Purnell and Mr. James Plaskitt, presented a Bill to make provision about pensions and other benefits payable to persons in connection with bereavement or by reference to pensionable age; to make provision about the establishment and functions of the Personal Accounts Delivery Authority; and for connected purposes: And the same was read the First time; and ordered to be read a Second time tomorrow, and to be printed. Explanatory notes to be printed [Bill 12].



That the following provisions shall apply to the proceedings on the Investment Exchanges and Clearing Houses Bill—


1. Proceedings on Second Reading, in Committee, on consideration and on Third Reading shall be completed at this day’s sitting and shall (so far as not previously concluded) be brought to a conclusion at the moment of interruption or six hours after the commencement of proceedings on the Motion for this Order, whichever is the later.

Timing of proceedings and Questions to be put

2. When the Bill has been read a second time—

(a) it shall, notwithstanding Standing Order No. 63 (Committal of bills not subject to a programme order), stand committed to a Committee of the whole House without any question being put;

(b) the Speaker shall leave the Chair whether or not notice of an Instruction has been given.

3. On the conclusion of proceedings in Committee, the Chairman shall report the Bill to the House without putting any Question; and if the Bill is reported with amendments the House shall proceed to consider the Bill as amended without any Question being put.

4. For the purpose of bringing any proceedings to a conclusion in accordance with paragraph 1, the Speaker or Chairman shall forthwith put the following Questions (but no others)—

(a) any Question already proposed from the Chair;

(b) any Question necessary to bring to a decision a Question so proposed;

(c) the Question on any amendment moved or Motion made by a Minister of the Crown;

(d) any other Question necessary for the disposal of the business to be concluded.

5. On a Motion so made for a new Clause or a new Schedule, the Speaker or Chairman shall put only the Question that the Clause or Schedule be added to the Bill.

Consideration of Lords Amendments

6. (1) Any Lords Amendments to the Bill shall be considered forthwith without any Question being put.

(2) Proceedings on consideration of Lords Amendments shall (so far as not previously concluded) be brought to a conclusion one hour after their commencement.

7. (1) This paragraph applies for the purpose of bringing any proceedings to a conclusion in accordance with paragraph 6.

(2) The Speaker shall first put forthwith any Question already proposed from the Chair and not yet decided.

(3) If that Question is for the amendment of a Lords Amendment the Speaker shall then put forthwith–

(a) a single Question on any further Amendments to the Lords Amendment moved by a Minister of the Crown, and

(b) the Question on any Motion made by a Minister of the Crown, That this House agrees or disagrees to the Lords Amendment or (as the case may be) the Lords Amendment as amended.

(4) The Speaker shall then put forthwith–

(a) a single Question on any Amendments moved by a Minister of the Crown to a Lords Amendment, and

(b) the Question on any Motion made by a Minister of the Crown, That this House agrees or disagrees to the Lords Amendment or (as the case may be) to the Lords Amendment as amended.

(5) The Speaker shall then put forthwith the Question on any Motion made by a Minister of the Crown, That this House disagrees to a Lords Amendment.

(6) The Speaker shall then put forthwith the Question, That this House agrees to all the remaining Lords Amendments.

(7) As soon as the House has agreed or disagreed to a Lords Amendment, or disposed of an Amendment relevant to a Lords Amendment which has been disagreed to, the Speaker shall put forthwith a single Question on any Amendments moved by a Minister of the Crown and relevant to the Lords Amendment.

Subsequent stages

8. (1) Any further Message from the Lords on the Bill shall be considered forthwith without any Question being put.

(2) Proceedings on any further Message from the Lords shall (so far as not previously concluded) be brought to a conclusion one hour after their commencement.

9. (1) This paragraph applies for the purpose of bringing proceedings to a conclusion in accordance with paragraph 8.

(2) The Speaker shall first put forthwith any Question which has been proposed from the Chair and not yet decided.

(3) The Speaker shall then put forthwith the Question on any Motion made by a Minister of the Crown which is related to the Question already proposed from the Chair.

(4) The Speaker shall then put forthwith the Question on any Motion made by a Minister of the Crown on or relevant to any of the remaining items in the Lords Message.

(5) The Speaker shall then put forthwith the Question, That this House agrees with the Lords in all the remaining Lords Proposals.

Reasons Committee

10. (1) The Speaker shall put forthwith the Question on any Motion made by a Minister of the Crown for the appointment, nomination and quorum of a Committee to draw up Reasons in relation to the Bill and the appointment of its Chairman.

(2) A Committee appointed to draw up Reasons shall report before the conclusion of the sitting at which it is appointed.

(3) Proceedings in the Committee shall, (so far as not previously concluded) be brought to a conclusion 30 minutes after their commencement.

(4) For the purpose of bringing any proceedings to a conclusion in accordance with sub-paragraph (3) the Chairman shall–

(a) first put forthwith any Question which has been proposed from the Chair but not yet decided, and

(b) then put forthwith successively Questions on motions which may be made by a Minister of the Crown for assigning a Reason for disagreeing with the Lords in any of their Amendments.

(5) The proceedings of the Committee shall be reported without any further Question being put.


11. Paragraph (1) of Standing Order No. 15 (Exempted business) shall apply so far as necessary for the purposes of this Order.

12. The proceedings on any Motion made by a Minister of the Crown for varying or supplementing the provisions of this Order shall, if not previously concluded, be brought to a conclusion one hour after commencement and paragraph (1) of Standing Order No. 15 shall apply to those proceedings.

13. Standing Order No. 82 (Business Committee) shall not apply in relation to any proceedings to which this Order applies.

14. No Motion shall be made, except by a Minister of the Crown, to alter the order in which any proceedings on the Bill are taken or to re-commit the Bill; and the Question on any such Motion shall be put forthwith.

15. No dilatory Motion shall be made in relation to proceedings to which this Order applies except by a Minister of the Crown; and the Question on any such Motion shall be put forthwith.

16. (1) This paragraph applies if–

(a) a Motion for the Adjournment of the House under Standing Order No. 24 (Adjournment on specific and important matter that should have urgent consideration) has been stood over to seven o’clock, four o’clock or three o’clock (as the case may be), but

(b) proceedings to which this Order applies have begun before then.

(2) Proceedings on that Motion shall stand postponed until the conclusion of those proceedings.

17. (1) This paragraph applies if a day on which the Bill has been set down to be taken as an Order of the Day is one to which a Motion for the Adjournment of the House under Standing Order No. 24 stands over from an earlier day.

(2) The bringing to a conclusion of any proceedings on the Bill which, in accordance with this Order, are to be brought to a conclusion on that day shall be postponed for a period equal to the duration of the proceedings on that Motion.

18. If the House is adjourned, or the sitting is suspended, before the conclusion of any proceedings to which this Order applies, no notice shall be required of a Motion made at the next sitting by a Minister of the Crown for varying or supplementing the provisions of this Order.

19. Proceedings to which this Order applies shall not be interrupted under any Standing Order relating to the sittings of the House.

20. (1) Any private business which has been set down for consideration at seven o’clock, four o’clock or three o’clock (as the case may be) on a day on which the Bill has been set down to be taken as an Order of the Day shall, instead of being considered as provided by Standing Orders, be considered at the conclusion of the proceedings on the Bill on that day.

(2) Paragraph (1) of Standing Order No. 15 (Exempted business) shall apply to the private business for a period of three hours from the conclusion of the proceedings on the Bill, or, if those proceedings are concluded before the moment of interruption for a period equal to the time elapsing between seven o’clock, four o’clock or three o’clock (as the case may be) and the conclusion of those proceedings.—[Ed Balls]

Orders of the Day

Investment Exchanges and Clearing Houses Bill

Order for Second Reading read.

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

I start by expressing my gratitude for the close co-operation that we have enjoyed in preparing today’s Bill—from the shadow Minister, the hon. Member for Fareham (Mr. Hoban), from the hon. Member for Twickenham (Dr. Cable), from their spokesperson colleagues in the other place, and from other interested stakeholders across the City of London, particularly the recognised exchanges themselves, with whom we have been able to discuss the Bill in recent weeks. I hope that we can demonstrate today to the outside world that—perhaps unusually for this place—we have been able to reach a consensus in the national interest on the way forward on this important issue: both inside this House with Opposition Members, and outside it among practitioners in the City. I am also grateful for Members’ co-operation in allowing us to move the Bill quickly through its Commons stages and detailed scrutiny this afternoon, in what are unusual circumstances.

As Opposition and other Members will know, the Bill fulfils the commitment that I gave in a written statement to the House on 13 September to enhance the power of the Financial Services Authority to veto changes to the rules of UK-recognised investment exchanges and clearing houses where they are deemed disproportionate.

Why do we need a guillotine? This is about the first piece of Labour legislation that some of us actually want. It is sensible and there is agreement in all parts of the House—why can we not have an open debate, given that we want to get it through as much as the Minister does?

I am grateful to the right hon. Gentleman for his intervention; hopefully, he will make a more substantive contribution in due course. I expect that there will be plenty of time in this debate for various points to be made by Members in all parts of the House. I very much look forward to the right hon. Gentleman’s contribution; I hope that it will be as revealing and interesting as yesterday’s was.

My statement of 13 September was prompted by concerns about the potential implications of a possible takeover bid for the London stock exchange. At that time, a bid by NASDAQ, the US stock market, for the LSE was still only a possibility. As Members will know, NASDAQ has now announced an offer for the LSE, so with a bid on the table it is important that we move swiftly. Our aim, with the co-operation of both Houses, is for the Bill to gain Royal Assent as soon as possible, consistent with proper parliamentary scrutiny. With support from all parts of the House, it should be possible to achieve that before the NASDAQ bid reaches its important point.

Before I turn to the Bill’s detail, I want to set out the wider context. London today is widely seen as one of only two truly global financial centres in the world. It is the location for 70 per cent. of the global secondary bond market, for more than 40 per cent. of global derivatives, and for more than 40 per cent. of cross-border equities trading. London today has more foreign banks than any other financial centre, and it is the location for the headquarters of six of the world’s 10 largest international law firms. Based on its global reach and its reputation for free, fair and open global markets, London has in recent years been attracting business and listings from around the world. We are determined to keep it that way.

I believe that international businesses have located in the City because of four great strengths: our commitment to the rule of law and the highest professional standards; the skills and flexibility of the work force and our ability to attract talent from around the world; our long-standing tradition of openness and internationalism—a global approach to competition and ownership that has allowed the City to innovate and to respond to new challenges; and the FSA’s highly respected principles-based and risk-based approach to regulation, which has been put in place over the past decade. I know that the whole House will join me today in paying tribute to the many men and women from across our country and abroad who work hard in the City and in our other UK financial services to build the City’s reputation and to contribute to its strengths.

However, we are not complacent. Back in May, when I first became the Minister responsible for such matters, concerns were expressed to me about the effects of a possible takeover of the London stock exchange by a company based outside the UK, and the threat that that might pose to London’s attractiveness as a place for international listing and wider business. Some Members will know that the UK has for some years been open to overseas investment in UK exchanges. The London international financial futures and options exchange, ICE Futures and virt-x are all owned by overseas companies. Such overseas interest in UK exchanges in part reflects our principles-based approach to regulation, which has been flexible enough to accommodate the desire of exchanges to innovate in recent years, but rigorous enough to ensure the probity and integrity of our markets.

However, following NASDAQ’s interest in acquiring the LSE, I have discussed the implications of such a change in ownership widely in recent months, including with all the interested parties. I have made two points absolutely clear. First, the Government are neutral with respect to the nationality of the ownership of the LSE. It has been put to me that the right approach is Government intervention to protect the LSE from foreign ownership. I reject that argument. Such intervention would fly in the face of the traditions that have underpinned the City’s success over the past 20 years. A policy of protecting “national champions” would damage, not bolster, the interests of London and the UK. So the Government do not have and will not express any views about the commercial merits of the proposed NASDAQ takeover. It is for the current owners of the shares to decide whether to accept or reject the offer. But secondly, our interest in the ownership of the LSE is that it should not affect the existing regulatory regime under which the exchange and its members and issuers operate. We are determined to act to protect our domestic regulatory environment, founded in both UK law and EC directives, that has made the City a magnet for international business. If a company operates in London, it should be regulated in London.

Following those discussions, in which a range of possible approaches were put to the Government, we concluded that the only way to provide the assurance to London and the UK was through primary legislation, by making changes to part 18 of the Financial Services and Markets Act 2000, which provides for the recognition of investment exchanges and clearing houses.

Let me turn to the detail of the Bill. The provisions will confer a new and specific power on the Financial Services Authority to veto rule changes proposed by UK- recognised investment exchanges and clearing houses that would have an excessive regulatory impact. By excessive we mean that the proposed rules would impose a regulatory burden on a user of the exchange or clearing house, or the wider community, that could not be justified by any regulatory benefits, or whose effect on those users or the wider community would be disproportionate—and obviously that would not include anything already required by UK or EU law.

The new powers will not put the existing provisions for regulation of the investment exchanges and clearing houses into question. They will apply only to future changes. But they will apply to all UK-recognised investment exchanges and clearing houses from the outset, not just after there has been a change of control. They will apply to all recognised exchanges and clearing houses, not just those that are in foreign hands.

The Bill also provides for necessary processes and safeguards. The exchanges and clearing houses will be required to notify proposed changes to their rules and other regulatory provision—by which I mean any guidance, policy, practice or arrangement made by an exchange or clearing house—to the FSA. The FSA will have up to 30 days to decide whether to call in a proposal for further examination. If it calls in the proposal, the FSA will have to set a period in which it will consult publicly about the proposed rule change. The FSA will then have a further 30 days after that consultation period has ended to decide whether to veto the proposed rule change.

What happens if the FSA decides that a proposed change is not burdensome and therefore takes no action, but many other people think that it is? Is there any right to take legal action against the FSA to try to get it to take action?

Of course there is. In this area, as in others under the Financial Services and Markets Act 2000, the appropriate course would be to apply for judicial review of the FSA’s decision. Given that that would probably be an exceptional event, an application for judicial review would be the best approach.

May I suggest a different set of circumstances. Let us say that the FSA decides to intervene in a change proposed by the LSE, and it decides to apply for judicial review of that decision. The FSA’s regulatory objectives include the protection of consumers, but do not include the desirability of maintaining the competitive position of the UK—it merely has to have regard to that. The FSA could be vulnerable to having its decision overturned on those grounds.

I am sure that we will deal with such matters in detail in Committee. Clause 1 writes into the Financial Services and Markets Act 2000 the power to block any regulatory decision by an exchange judged to be excessive and disproportionate and going beyond what is required for the proper functioning of that exchange. The Bill gives the FSA the power to block changes that would damage both its ability to regulate properly and proportionately and the competitiveness of the City of London. We have looked at the matter in detail, and we have judged that there is no need to include that clear intention in the Bill. Any attempt to do so would have given the impression that we were trying to narrow the FSA’s powers unnecessarily.

As I have said, we believe that the problem that the hon. Member for South-West Hertfordshire (Mr. Gauke) described will not arise, but it is important that any decision by the FSA is open to scrutiny. An exchange or clearing house will not be able to introduce the proposed change in regulatory provision until the initial 30-day period has expired without the FSA calling in the proposal, or until the FSA has confirmed that it will not be calling the proposal in, or until the FSA has stated that it will not be vetoing the proposal, or until the further 30-day period has expired without the FSA issuing a veto. If the FSA does then act, it will be open to the exchange to appeal to judicial review, as I have just made clear.

In drawing up these clauses, we have been anxious to ensure that the procedures are not burdensome and disruptive for the investment exchanges and clearing houses. We have consulted all the main exchanges, and the trade association. We are aware of the concern that any unnecessary regulation could stifle innovation and impose extra costs for both the exchanges and the FSA. The exchanges and clearing houses have put to us their concerns that the procedures, if applied in a heavy-handed way, could damage their competitive position by reducing their flexibility to make and change their rules.

We are determined that the new processes will not impose an unnecessary burden. The new power has always been intended to be a backstop; it was never intended to be a day-to-day supervisory tool for the FSA. We believe that the vast majority of changes to the exchanges’ regulatory provisions and rules will not raise the sort of concern that the new power is intended to address. The fact is that many rule changes are routine and do not need to be subject to the type of scrutiny and processes that I have just outlined. The FSA will not be micro-managing the rule books of the exchanges and clearing houses.

To make that clear, and following detailed consultation with the exchanges and the FSA, the Bill gives a power to the FSA to specify in its rules which types of change to regulatory provision need to be notified and which do not. That approach is consistent with the wider approach adopted in the Financial Services and Markets Act 2000, where more detailed working out is left to secondary legislation—that is, Treasury regulations or FSA rules.

The exchanges accept that it will take time for the FSA to plan, discuss, devise and draft rules, to consult on those draft rules as it is required to, and then enact them.

Proposed new subsection 300D(2)(c), at lines 19 and 20 on page 3 of the Bill, makes it clear that the FSA will specify a period in which representations can be made. No amendment is proposed to the provision, but the Bill does not specify a long-stop period in which the FSA must act. It has the initial 30-day period, and the 30 days at the end of the process, but the Bill does not limit the length of time that the FSA can devote to looking into a particular matter. Does my hon. Friend share my concern that matters could go into a sort of limbo as a result, and that the slowness of the FSA might be a burden on business?

My hon. Friend helpfully, as always, raises exactly my point: it is important that the FSA takes the time to plan and discuss the precise details of the rule making, and I am sure that that is the approach it will take. I am keen to discuss my hon. Friend’s particular point in detail. However, I am sure that Mr. Deputy Speaker agrees that it will probably be more appropriate to do that in Committee, so I look forward to my hon. Friend making the point again at that stage, if he can fit it into his busy schedule this afternoon, so that we can discuss it further.

It is exactly to make sure that we get such things clarified that the FSA will consult on the rule book. That will take some months, so as we need to act with some urgency, and because it will take considerably more time for the FSA to hold those consultations on the detailed rules than we hope will be available before Royal Assent, the Bill gives the FSA the power in the meantime to grant waivers from the notification obligation to exchanges and clearing houses for the first 12 months after Royal Assent. That will enable the FSA to offer some comfort and flexibility to exchanges while it gets the detail of the rules in place—to respond to the point made by my hon. Friend.

The provisions of the Bill are intended to come into force on the day after Royal Assent, so that once Parliament has decided that the new regime is to have effect, the policy intention of the Bill cannot be undermined by precipitate rule changes between Royal Assent and commencement. I am sure that the House will be pleased to hear that the FSA has already started to work with exchanges and clearing houses on the formulation of the waivers. Indeed, the FSA has written to me today—copies of the letter have been deposited in the Library and passed to Opposition Members—to confirm its intention to use that power only if it is justified as proportionate and if the benefits of doing so exceed the costs, and only after consultation.

I appreciate that the FSA regime is somewhat different from that which applies, for example, in Wall street or Tokyo, but does the Minister have any evidence that in other major international exchanges where similar issues might arise a similar regime has been adopted to try to give protection from disproportionate actions elsewhere?

The hon. Gentleman makes an important observation. The answer is no, not in our experience. I do not think that any other financial centre has such an open and global market for ownership and exchanges, as well as a regulatory regime that its authorities are so keen to protect. There is something particular about not only our open approach, but our regulatory regime, which means that we are keen simultaneously to allow ownership changes if shareholders desire them and to retain that back-stop power.

As I said, in the recent consultations, we considered the type of thing we could do; for example, issues arise in the case of the proposed, or rumoured, New York stock exchange takeover of Euronext, which would have implications for London, owing to Euronext’s ownership of LIFFE—the London International Financial Futures and Options Exchange—although regulatory issues do not arise in quite the same way. We looked at the corporate governance changes that were being proposed and discussed with authorities in other European capitals and concluded that those arrangements would not give us sufficient comfort. As we looked around the world, and at past experience, we concluded that as no model would give us comfort, other than taking power directly in law, that was the appropriate thing to do. However, it is my understanding that there is no precedent for what we are proposing.

After the detailed scrutiny of the Bill on which we are about to embark, I hope that Members will conclude that the guiding principles I set out earlier are being fully respected in the legislation. First, the principle that we should be blind to ownership of exchanges is being protected; we are entrenching London’s reputation as a global financial centre determined to attract talent and ownership from around the world. Nothing in the legislation has any consequence for the nationality of the ownership of UK exchanges. It will make overseas ownership neither easier nor more difficult and I am confident that any potential foreign investor who wants to come to the UK will not be deterred. We are also upholding the principle that it is right for the Government to act to protect and enhance the UK’s proportionate and risk-based regulatory regime.

I believe that the Bill will deliver that objective and can do so without imposing unnecessary regulatory burdens on the exchanges. Yes, we are intervening. However, we are intervening and legislating not to impose regulation, but to avoid excessive regulation being imported into the UK. By outlawing the imposition of any rules that might endanger the proportionate and risk-based regulatory regime that underpins the City’s success, I believe that we will help to ensure that London continues to be a magnet for international business and new listings from around the world. The Bill will therefore continue to bring new investment and new jobs to the UK, so I commend it to the House.

First, let me make it clear that we support the Bill. Indeed, there is widespread support for it across the financial services sector and few measures on financial regulation have gained the support of so many interested parties. We have sought to co-operate with the Government to ensure that the Bill receives a swift passage through the House today. We recognise the importance of the timing and want to place on the record our acknowledgement of the spirit of co-operation between the Government and Opposition Front Benchers in a rare outbreak of consensus and working together. It could be said that a similar spirit of consensus was not the hallmark of yesterday’s debate.

We welcome the powers given to the Financial Services Authority to veto changes to the rule books of exchanges, particularly where they are seen to be excessive. As the Economic Secretary said, the Bill is before us because of widespread concern that acquisition of the London stock exchange could lead to changes in its rule books that could damage the competitiveness of UK capital markets. If a US exchange were to acquire the London stock exchange, US regulations—especially Sarbanes-Oxley—would be imposed on UK-listed companies.

Does the hon. Gentleman accept that there is concern about regulation not only in London but in the US? Although that concern may not have reached up to Congress, it is actively discussed in New York and in markets throughout the US.

The hon. Gentleman is right about concern in the US, which is widespread. Hank Paulson, the US Treasury Secretary, has made a number of speeches on the theme, so although the issue may not yet have reached Congress, it is certainly important in the higher ranks of the US Treasury. In some of my discussions with UK institutions, I have found that the most vociferous opposition to extraterritoriality has come from some of the US banks, which recognise themselves in discussions of the problems caused by disproportionate regulation.

The Bill deals with one aspect of extraterritoriality in the regulation of financial services. In recent years, there have been other instances of regulators seeking to impose their rules on businesses operating outside their jurisdictions, thus eroding the competitive advantage that one market has by doing things differently and countering any such benefit. The consequence has been to impose additional costs on businesses and try to erode the advantages of the light-touch, principles-based, risk-driven approach, which has been the cornerstone of the success of the UK financial services sector.

I understand where the hon. Gentleman is going, but may I suggest the other side of the coin? Shareholders in a recognised body might be concerned if they could not tighten their own rules to protect the solvency of their organisation because such tightening would fall foul of the legislation. The Bill might deem it excessive, because it would not be required under UK or Community law. Thus, if an organisation wanted to take action internally to protect itself and its shareholders, it might not be allowed to do so.

The hon. Gentleman raises a quite complex point. We need to establish what constitutes the right balance of protection and I believe that the Bill makes important moves in seeking to ensure that we protect one of this country’s vital assets: the regulatory environment of the UK financial services sector.

A recent report by the City of London corporation highlighted that the strength of the regulatory environment in the UK was one of the most important success factors in determining the strength of the City. We should also make it clear that such strength comes from getting the level of regulation right too. There is a balance to be struck between over-regulation that imposes additional costs on businesses and under-regulation that damages confidence in the market. Moving one way or the other can harm the financial services sector.

The current strength of the UK capital markets is partly a result of the regulatory arbitrage between the UK and the US, as a consequence of the Sarbanes-Oxley legislation. Reflecting on the point made by the hon. Member for Edmonton (Mr. Love), I suspect that the existence of regulatory arbitrage will come under threat as the US wakes up to the consequences of the Sarbanes-Oxley legislation. We cannot rely for ever on the existence of such regulatory arbitrage to promote and allow UK financial markets to grow. We need to ensure in that aspect, as in every other, that we keep the regulatory structure under review, so that we continue to achieve the right balance.

The historical examples may not bear out the point that the hon. Gentleman is making. I agree that it would be sensible for the US authorities to adopt such an approach, but looking back to the Eurobond fiasco of some time ago, the US took so long to wake up that it lost the business.

Indeed, the hon. Gentleman makes a fair point, but I hope that regulators and legislators learn those lessons. Effective light-touch, risk-based and principles-based regulation is in the interests of the sector globally, and the Government need to send that message more strongly to the US Administration and Congress, so that we ensure that the arguments in favour of the UK regulatory regime are put and understood in Washington.

I shall give some examples of how extraterritoriality imposes additional burdens on businesses. Under the Sarbanes-Oxley legislation, the US Public Company Accounting Oversight Board is required to report on foreign auditors with US-listed clients. It has recently exercised those powers by reviewing audits undertaken by Ernst and Young in the UK. Of course, UK auditors are already subject to audit inspection arrangements, so in a sense the additional review by the board imposes an additional cost on UK auditors. In effect, those costs will be borne by their clients in one form or another.

The regulatory overlap that arises from extraterritoriality is a problem, but it is not the only one: the situation has arisen with hedge funds when their management is based in the UK. The Securities and Exchange Commission has sought to regulate hedge funds by reference to the location of the hedge fund investor. The SEC has gone to some lengths to try to draw UK-based hedge fund managers into its remit.

The SEC requires firms with more than 13 clients to register with it, but it has looked beyond simply the number of direct investors to the next layer down. For example, a UK-based hedge fund could have, say, 10 investors—below the SEC limit—but if they each had 10 investors, the SEC would say that the hedge fund had 100 investors and it would be drawn into the net. So there is a continuing push from the SEC to draw more activities based outside the US into its remit, with the consequence of imposing additional regulatory burdens on those funds. Although the Bill tackles an aspect of extraterritoriality, we should be under no illusion that it deals with the issue in its entirety.

Does my hon. Friend agree that, if sensibly interpreted, the Bill is a bit of a first? It provides some kind of deregulatory ratchet, instead of a regulatory ratchet, which we have had so often in so many areas. It cannot just target one possible overseas buyer of the stock exchange and one possible overseas source of extra regulation. It has to target all of that. So as exchanges renew their regulations, there will be a gentle deregulatory pressure, which seems admirable.

I am grateful to my right hon. Friend for making that point. There is a great deal in what he says, because there will be an inherent bias in the Bill to look at how exchanges reviewing their rule books might lead to the introduction of more onerous regulations, affecting the competitiveness of those exchanges. There is a benefit there. It is a slightly curious irony that the Bill makes a small extension of regulation in order to protect the light-touch regulation that we see at the moment and to entrench it still further.

On that point, does the hon. Gentleman agree that, in order to make sure that we keep that deregulatory pressure on all exchanges, there is merit in the provision applying to all new rules and all existing exchanges regulated in London, and not simply to exchanges where there has been a change in governance?

Indeed, although the Minister is in danger of trespassing on the detailed scrutiny of the Bill in Committee. I have tabled a probing amendment to that effect, to elicit from him his thought process. He makes an important point. There is an issue in that the current ownership regime of all exchanges has not created a problem to date. Some may believe that these changes should be triggered only on a change of control. It is important that, in Committee, we flesh that out still further.

Let me turn to the background to the Bill and the importance of the measure. The global nature of international capital markets means that businesses looking to raise money can choose where they go to raise it. Historically, international businesses have looked principally to New York to do so, but, following the introduction of the Sarbanes-Oxley legislation in the aftermath of the WorldCom and Enron scandals, international businesses have found the regulatory burden in the US too onerous and sought to raise capital in the UK. As a consequence, we have seen an increase in the number of initial public offerings in London and the amount of capital raised. It was announced earlier this month that £22.3 billion of funds has been raised on the London stock exchange so far this year, which exceeds the amount raised on other exchanges.

We have seen a significant benefit to the UK from Sarbanes-Oxley and the impact of that regulation, and not just in terms of fees for merchant banks and issuers. There are also the accountancy and legal services. A whole range of people have benefited from the fallout from excessive regulation in the US. A recent study indicated why firms were coming to raise money in the UK. It said that the cost of capital at both the initial public offering stage and afterwards is lower in London than in other major European or US financial centres. The report, commissioned by the City of London corporation and the London stock exchange, found that London markets are cheaper than both the New York stock exchange and NASDAQ with respect to both underwriting fees and other direct IPO costs. Other direct IPO costs, including legal and accounting costs, are lower in London than in the US largely due to the fact that in the US one needs to comply with Sarbanes-Oxley.

It is interesting that, despite the additional costs associated with US listing, the report found no evidence that Sarbanes-Oxley has delivered any significant regulatory benefits not already available under the UK corporate governance regime. That indicates an area where regulation has not improved the protection available to consumers. In the US, those involved are bearing the costs without seeing any great regulatory benefit.

The unpopularity of US markets and the increasing popularity of UK and European markets has led to US exchanges looking abroad to strengthen their business. It led to the New York stock exchange seeking to acquire Euronext and to the NASDAQ bid for the stock exchange. The commercial logic of that is that the US exchanges would like to benefit from the success of effectively regulated markets in the UK and Europe. Indeed, we should be clear in acknowledging that it is not in the economic interest of potential acquirers of UK and European exchanges for the Securities and Exchange Commission to be in a position to exert pressure to enable US regulations to be imported into the UK and Europe. If such regulations were brought in, there would be a risk that IPOs would move from Europe to Asia and other markets, with money thus flowing out of the UK and Europe. That explains why acquirers have an interest in the legislation going ahead in the UK.

In meetings that my hon. Friends and I have had with institutions across the City, it has become clear that businesses are worried that the takeover of the London stock exchange could lead to the City losing its competitive advantage over US capital markets. We need to be clear that the Bill has nothing to do with economic nationalism or the protection of national institutions. It would be wrong for any country to use the Bill to defend its protectionist policies. We have thrived as an economy because we have open markets and enable foreign companies to buy UK assets. Indeed, that has been one of the factors behind the strength of the UK financial services market. The Bill is really answering the question of how we can best protect the regulatory advantage that we have at the moment.

In reply to an intervention made by the hon. Member for Edmonton (Mr. Love), I said that US houses had been more vociferous than others about the risk of Sarbanes-Oxley being applied in the UK, but it is not just US houses making such comments. In March, Angela Knight—she was then at the Association of Private Client Investment Managers and Stockbrokers, but is now at the British Bankers Association—said:

“What we need is a copper-bottomed guarantee that whatever framework is put into place we continue to trade and settle here, be governed by British law and be regulated by the FSA … Otherwise, the SEC believes very strongly in extra-territorial activities, and because NASDAQ and the NYSE are American they will find it difficult to resist”.

The Bill will achieve a single goal: to enable the ownership of not just the LSE but other exchanges to change without having a detrimental impact on the competitiveness of UK capital markets.

As the Minister said, the Bill gives the Financial Services Authority the power to veto changes to the rule book not just of the LSE, but of all UK recognised investment exchanges and clearing houses. Those powers are new. At the moment, exchanges in London have the freedom to set their own rules, subject to meeting certain recognition criteria. My hon. Friend the Member for Cities of London and Westminster (Mr. Field) asked the Minister whether there is a parallel with that elsewhere. I understand that many other regulators regulate the detail of rule books to a greater extent than the FSA has hitherto been able to do. Enabling the FSA to consider rule changes and the rule books of new exchanges is a significant change for London. Although the measure represents an extension of the FSA’s regulatory power, it is an attempt to entrench our present advantage and, as my right hon. Friend the Member for Wokingham (Mr. Redwood) said, to introduce a deregulatory ratchet.

One of the concerns about the Bill that has been expressed by several people is the extent to which the FSA will seek to look at individual rules. The FSA will need to minimise the additional compliance burden on exchanges without creating the opportunity for exchanges to impose unchecked rules that make UK markets less competitive. I welcome the letter that the Economic Secretary received from John Tiner today about the FSA’s recognition of that.

The Bill’s regulatory impact assessment reinforces the point about looking at relatively few changes to rules. It gives an upbeat assessment of the impact of the Bill, suggesting that of the estimated 1,000 rule changes a year, there would be only about 25 notifications, of which only one would be called in. On that basis, the RIA suggested that the measure would have a relatively low cost. I suggest that when the FSA considers regulations during the 12-month grace period before it must introduce detailed regulations, it should look at the type of rule changes made in the past, so that it understands what it would call in, because it is important for it to understand what is likely to happen in practice. We should continue to monitor the detailed regulations once they are applied to make sure that we are not calling in too many regulations, and imposing too many costs on exchanges and clearing houses in the UK.

The Bill sets out the framework within which the powers can be exercised. It is carefully worded, and it assumes that any rule required under EU or Community law is not excessive—a point that some in the industry might question, but I leave the matter at that. The Bill does not prevent the exchanges from ignoring excessive regulations that come from Brussels. It sets out the four criteria that should be considered in determining whether requirements are excessive. The first is the effect of existing legal and other requirements. The second is the global character of financial services and markets, and international mobility of activity. The third is the desirability of facilitating innovation, and the fourth is the impact of the proposed provision on market confidence.

On the framework, is the hon. Gentleman surprised that shareholder protection or consumer protection are not included in the factors to which he referred?

The hon. Gentleman raises a point about the context in which the Bill should be considered. Of course, the FSA has other powers relating to consumer protection, which is one of its regulatory objectives. The Bill deals with the regulations that apply to shares traded on exchanges, so I do not think that issues of shareholder protection come within its remit. There are measures in the UK listing rules that cover shareholder protection, too. The Bill is narrowly focused; it is more a rapier-like thrust than a clunking fist when it comes to tackling regulation, and we should keep it like that, rather than use it as a Christmas tree from which to dangle ever more baubles, although I may be in danger of mixing my metaphors.

Perhaps I did not make clear what I sought to tease out from the hon. Gentleman. A body might wish to increase consumer protection or shareholder protection by tightening its rules, but that does not come within the framework of the Bill, so that tightening could well be seen as “excessive” under the definition in the Bill. That is the issue that I wished to raise.

The hon. Gentleman is trying to make an important point. He is trying to find out whether there is any opportunity under the Bill for a Sarbanes-Oxley measure to be introduced, but I hope that it will not enable such a provision to be made. He should remember that although the conditions that I mentioned are in place the FSA seeks to ensure that regulation is proportionate and not excessive in its impact—so there is not leeway, exactly, but a wider context for such considerations.

On whether a requirement is excessive, proposed new section 300A(3) includes a test of whether something is

“required under Community law or…law in the United Kingdom” ,

and a second test, which is whether the requirement

“is not justified as pursuing a reasonable regulatory objective”.

One “reasonable regulatory objective” is the aim of protecting consumers, so I do not take the point made by the hon. Member for Wolverhampton, South-West (Rob Marris), as that aim can be pursued under that heading. As long as the requirement is not

“disproportionate to the end to be achieved”,

it would not be excessive.

Indeed. My hon. Friend has practised in that area of law, and he demonstrates his knowledge and understanding of the subject, and of the way in which the Bill will interact with the Financial Services and Markets Act 2000. The hon. Member for Wolverhampton, South-West (Rob Marris) is in danger of leading us up a blind alley.

The suggestion made by the hon. Member for Wolverhampton, South-West (Rob Marris) is dangerous, because if too many of those provisions were added to the legislation, Sarbanes-Oxley would indeed be legal in Britain and it would be used as a reason for excessive regulation.

My right hon. Friend is quite right. The narrow focus of the Bill and the way in which it has been drafted have received widespread support from the financial services sector and from trade bodies, because they seek to prevent that very thing from happening. If the wording were wider, more permissive and less restrictive, it would not necessarily command consensus, because it would not address the threat that UK financial services institutions attach to the imposition of extra-territorial jurisdiction in that area.

Surely the important factor is that scandals such as those involving Enron and WorldCom have not taken place in the UK, presumably because of the proportionate regulatory environment. When Parliament passes the legislation, it must provide reassurance that sufficient protection is available to prevent similar scandals.

The hon. Gentleman is right that those things did not happen in the UK. We did not suffer from the extensive financial scandals that afflicted US markets, partly because of the strength of UK regulation. A principles-based approach to regulation, with an emphasis on risk, puts in place the right framework to prevent the reoccurrence of those scandals. Too often, financial scandals arise because of a prescriptive, rules-based approach that requires people to tick boxes. We must therefore learn lessons from the American experience, and we must be careful not to repeat the mistakes that were made in the US in the past.

May I turn to the four conditions set out in proposed section 300A? People using the Bill must have a clear understanding of its import, and the purpose of the provision is to maintain the competitive advantage of the UK financial services sector relative to other global markets. We must look carefully in Committee at the language of proposed subsection (4)(b) to make sure that that message is clearly conveyed to people who are interested in regulation in the UK. The hon. Member for Wolverhampton, South-West asked the Minister about the lack of a backstop date in proposed section 300D. I am sure that, after consulting stakeholders, the Financial Services Authority will suggest an appropriate date. However, will the Minister or the Financial Secretary confirm that the FSA believes that the 30-day period in which it may deliberate on the changes is sufficient to consider fully the impact of any rule changes? Returning to the collapse of Enron and WorldCom, how long would it have taken people to discern the long-term damage that Sarbanes-Oxley would have inflicted if it had been introduced in UK capital markets? It is therefore important that we make sure that there is sufficient time for the FSA to consider fully the impact of any rule changes.

In conclusion, Sarbanes-Oxley has provided a great boost for the City, as US markets recognise, which is why, from Hank Paulson downwards, there has been pressure to water down the provision. It should be a warning to the Government and to Governments across Europe that while one piece of legislation can strengthen our competitive position, another can seriously damage it. We must pay great attention to the conditions that make the UK financial services sector a great success. It is not just about regulation—it is about the people and businesses based here, the tax system, infrastructure and many other factors. If the UK is to thrive, we must look at what we can do ourselves to ensure that it remains globally competitive in the financial services sector, rather than relying on others to make mistakes from which we can benefit.

The Bill gives the FSA the power to protect the competitive position of our capital markets, but as the provisions indicate, it cannot protect exchanges and clearing houses from excessive regulations imposed here in Westminster or in Brussels. Although it protects UK capital markets from one aspect of extra-territoriality, it does not protect them from all aspects. We welcome the Bill and hope that it will be effective, but we do not see it as the end of the story when it comes to maintaining the competitiveness of the UK financial services sector.

I am pleased to have the opportunity to speak in the debate. I welcome my hon. Friend the Minister’s opening remarks, which confirm that the Bill is intended not to impose additional regulatory burdens on the City, but to protect the light-touch system of regulation that has served the City so well since we set up the Financial Services Authority.

I also welcome my hon. Friend’s reaffirmation that the Government recognise that the City’s strength lies not just in its sensitive and light-touch approach to regulation, but in its internationalism and receptiveness to outside influences and outside investment. I am pleased to hear confirmation that the Bill is not intended to restrict foreign ownership of our recognised exchanges and clearing houses, that the Government are neutral on the matter and will remain neutral, and that the Bill is intended to safeguard the risk-based, principles-based approach that has made London such an attractive place for international financial institutions to do business, and its exchanges such a magnet for listings from around the world.

Far from imposing a new burden, the Bill will, by giving the FSA what I am sure will be a judiciously exercised power of veto, ensure that excessive, disproportionate or unnecessary regulation is not permitted. I am also pleased to hear the Minister confirm that the Bill is not about micro-managing the exchanges, and that safeguards will be built into it so that the FSA can allow exchanges to make minor changes to their rules without interference.

Many reasons have been advanced for the City’s position as one of the world’s two most successful financial centres—some would say the most successful. Such factors include the English language, our geographical position between the US and Asian time frames, our skilled work force, and the attractions of London as a place in which to live and do business. But the Bill encapsulates the two main reasons for London’s success: its internationalism and its approach to regulation.

Britain has always been ahead of the pack as far as globalisation is concerned. Its financial sector has for 300 years or more been internationally focused and outward looking. Unlike other financial centres that developed primarily to serve their own domestic markets, the City’s phenomenal growth has been due to its role in financing world trade, rather than financing our indigenous industries. Indeed, as Professor Anthony Hopkins said, the industrial revolution happened independently of the City of London.

In the past three decades or more, since the collapse of Bretton Woods, London has prospered as a financial centre not just by capitalising on its traditional strengths, but by embracing liberalisation and exploiting the advantage offered it by protectionist or fiscally restrictive regimes in other financial centres. We have spoken a great deal today about Sarbanes-Oxley, but in the 1970s the London Eurobond market flourished because of decisions taken in the USA.

In 1979, the scrapping of exchange controls by the Thatcher Government freed up the flow of capital in and out of the country, removing a key obstacle to globalisation and cementing the City’s position as an international hub. Big bang, 20 years ago last month, changed the City for ever, by relaxing the rules preventing foreign ownership of British financial institutions and leading to an influx of overseas investment. Of course, there has always been a foreign element in the City. The names of what we would regard as some of the most traditional City institutions, such as Rothschild’s, Warburg’s, and Kleinwort Benson, make it clear that they were established by immigrants, and they have now been taken over by yet more foreigners coming in.

With big bang we saw what is commonly dubbed the “Wimbledonisation” of the City—that is, its domination by foreign players. In particular, US banks, prohibited by Glass-Steagall from owning US securities houses, took the opportunity to move into London in force, and provided the City with capital for almost unlimited expansion.

This all means that London is now a truly international financial centre, handling foreign transactions worth £560 billion a day. It is the place where more international mergers and takeovers are arranged than anywhere else, and more cross-border transactions take place than anywhere else. It has the biggest foreign exchange, swaps and international insurance and reinsurance markets in the world. The City has more foreign banks than any other financial centre—264 at the last count. It has almost a third of the daily turnover in the world foreign exchange market. It has over 40 per cent. of the world’s OTC derivatives trade, 70 per cent. of the Eurobond market, 40 per cent. of the world’s turnover in foreign-listed equities trading, and the fastest-growing share, currently 20 per cent., of global hedge fund assets. It has taken a long time to establish a regulatory system which can cope with that new order. Most people accept that the fragmented, predominantly self-regulatory regime established at the time of big bang was a messy compromise that ended in failure.

If we look back at the 1980s and the early 1990s, we can all recite a litany of City failures and scandals—Johnson Matthey, British and Commonwealth bank; Bank of Credit and Commerce International, Barlowe Clowes, Lloyds of London, Brent Walker, the Guinness affair, the Blue Arrow affair, Roger Levitt, Asil Nadir and Polly Peck, Maxwell and the Mirror Group pension funds, and, of course, Nick Leeson and the ignominious downfall of Barings bank.

At the time of the Barings collapse, I was employed in Abbey National’s treasury division. At the time, Abbey National had a derivatives trading joint venture with Barings, which, I suspect, it would not care to remind people about these days—I hasten to add that it had nothing to do with Barings futures trading activities in Singapore. I was called into the Barings head office in London on the Sunday when Barings went under to help to sort out the mess with the Bank of England and the chief executives of the top UK banks. I remember that day well, because it was the day of my constituency Labour party’s annual general meeting. I was chair of my constituency at the time and had to give my apologies, which raised more than a few eyebrows among my comrades in Luton, North Labour party, who until then had no idea what I did for a living. I am glad to say that the Labour party has come a long way since then.

Barings management did not know what its traders were up to, the regulators did not know that the management did not know what the traders were up to, and the Government certainly did not know that the regulators did not know that the management did not know what its traders were up to. The old boy network comprehensively failed. It may be tempting fate to say that I do not think that such a scenario could happen now. Of course we should never be complacent, but the Financial Services Authority and the relationship between the Government and the regulators inspire a great deal more confidence now.

Surely the hon. Lady is experienced enough to know that there is no regulatory system in the world that is proof against all fools, knaves and crooks—so it is completely silly to say that there will never be a collapse in Britain again. We must accept that that will happen in the future.

As I said, we should never be complacent.

It is easy to portray the Barings situation as the consequence of one rogue trader acting in a criminal way. If one examines the matter closely, however, there was a systemic failure throughout the management and the regulatory system, and people simply did not understand the risks that the bank was taking. I am a member of the Treasury Committee, which has discussed with the FSA how it regulates matters such as hedge funds and the current risk-based system of assessment. I am confident that the FSA appreciates what the banks that operate out of the UK are doing, what sort of business they are engaged in and what risks are associated with it. [Interruption.] Farepak does not come under the FSA, although perhaps that is a subject for future debate.

The UK approach is widely seen as the best in the world, and it underpins London’s success as a modern international financial centre. It is important that we preserve that approach, which is the essence of the Bill. While we are debating how we regulate our financial markets and City institutions, I want to restate why, while we should aim to achieve a degree of harmonisation and a level playing field across the European Union—and, indeed, further afield—it must never be at the expense of our international competitiveness.

London has a comparative advantage in financial services, and if other countries want to compete with us they should do so by raising their game to our level, not by seeking to hold us back with inflexible, over-burdensome, gold-plated regulation. A one-size-fits-all approach in a new enlarged European Union is unlikely to be to London’s advantage, and we should resist attempts to force us down that path. However, we should do so not through withdrawal and seeking to isolate and disassociate ourselves from our European partners, as I have heard the right hon. Member for Wokingham (Mr. Redwood) suggest, but through co-operation, negotiation, being at the table and making our voice heard.

As the Minister has said, we should welcome European co-operation on regulation, but only where it is necessary, where it truly furthers the integration of the internal market and where other non-legislative policy solutions have been thoroughly considered. Any new regulation must be implemented in a sensitive light-touch manner, too.

The City is stronger because of its position within the EU. We act as Europe’s wholesale financial services gateway to the world, and the world’s financial services’ gateway to Europe. It is in Britain’s best interests that we stay fully engaged, but we must do it in the City’s best interests, not at the City’s expense. That is increasingly true on a global scale as developing markets open up, and countries such as China and India develop their financial sectors. Regulatory co-operation is more important than ever before, but we must continue to strike the right balance between protecting investors and entrenching financial stability, and encouraging innovation and foreign investment.

We should not be scared of foreign investment or foreign ownership in the City. In the late 1990s, more than 40 per cent. of City employees had an overseas employer, and I am sure that that percentage has, if anything, grown since then. Some of the recognised exchanges are subsidiaries of foreign companies. However, we need to be watchful to ensure that foreign takeovers do not lead to the imposition of burdensome foreign regulatory standards on UK exchanges and issuers, and that, as the hon. Member for Fareham (Mr. Hoban) said, the US’s extra-territorial ambitions are curbed. I say that as someone who has worked for an American investment bank and has been on the receiving end of the not-so-light regulatory touch of the Securities and Exchange Commission.

As a member of the Treasury Committee, I visited the US earlier this year with my hon. Friend the Member for Edmonton (Mr. Love), and we heard first-hand about the impact of Sarbanes-Oxley. The London stock exchange has benefited as a result of Sarbanes-Oxley. It attracted a record 129 international companies to its main market and the alternative investment market last year, up 82 per cent. on 2004. Twenty-five per cent. of companies surveyed identified the UK’s standards of regulation and corporate governance as the most important factor in their decision to float in London, and of those that had considered listing on a US exchange, 90 per cent. felt that the demands of Sarbanes-Oxley made listing in London more attractive. We were therefore right to choose not to go down that path. However, we need to be ever vigilant to ensure that we do not import overseas regulatory burdens, and that we have the best possible environment in which our financial services industry can continue to prosper and to create jobs.

I very much welcome the Government’s initiative in introducing the Bill. I am sure that it will be welcomed in the City, as it has been on both sides of the House.

It is a pleasure to follow the hon. Member for Bristol, East (Kerry McCarthy), whose presentation was all the more authoritative for being based on her own experience.

The Economic Secretary said at the outset that there is all-party consensus on the Bill, and I certainly do not intend to oppose it. I am not yet entirely persuaded that it is necessary, but that need will no doubt emerge in the course of the debate. When I see Conservative and Labour Front Benchers, together with most luminaries in the City and even Mr. Ken Livingstone, romping in the same bed, I tend to suspect that something not entirely wholesome is taking place.

I think that the characterisation of American financial regulation—I am not an expert, unlike the hon. Member for Bristol, East—has been a little overdone and rather unhelpful, given that the Americans are aware of the problems and are dealing with them. It was presented as the financial equivalent of avian flu against which we must put up defences.

Let me go over a few areas of undoubted common ground. First, it is true, as the Economic Secretary said, that the City is a crucial part of the British economy. Ten per cent. of gross domestic product is generated from financial services, although not all of those are based in the City—some are provided by retail banking throughout the country. It is particularly important for employment.

Secondly, we all agree that financial services must be regulated flexibly—but, as the hon. Members for Edmonton (Mr. Love) and for Wolverhampton, South-West (Rob Marris) said, flexibility must be balanced against investor protection and protection against systemic failure. There is more than one dimension to consider.

Thirdly, we all accept that we are dealing with global markets that move very fast and that this is not an area where nationalism or national ownership are appropriate concepts. Competition takes place not between countries but between sets of rules. People in the City often employ the imagery of Wimbledon to describe what they are trying to achieve, saying that they are hosting an event and that it does not matter whether British people win it. That is quite a comforting image in some respects. However, there are problems with the Wimbledon comparison. Will Hutton has observed that it is probably because we have Wimbledon that we produce such dreadful tennis players, unlike smaller European countries. He also argues that having an international financial centre may be to the detriment of domestic companies’ growth and innovation. I do not entirely buy that, but we have to look at both sides of the argument.

I part company with the proposals over two issues. First, we should be more honest about what this legislation is for. It is presented as being completely innocuous, but its proper title should be something like the “Investment Exchanges and Clearing Houses (Americans Keep Out) Bill”. That is essentially what we are talking about. The Minister and the Conservative spokesman have said that there is no objection to takeovers or to foreigners per se, but it is clear that a barrier is being raised and that powers are being created to deal with takeovers from two particular sources, which just happen to be the two biggest exchanges in the world: the New York stock exchange and NASDAQ. Because they are so big, they have the potential to launch a successful takeover in London.

Does the hon. Gentleman agree that Morgan Stanley, Merrill Lynch and Goldman Sachs are all important American investment houses that play a vital role in creating jobs and employing people in the City of London? We welcome those American investment houses into the UK, and the idea that we are trying to prevent American ownership in London is disproved by the reality of today’s City of London.

The Minister is being a little too defensive. I was not suggesting for a moment that there was a problem with American companies investing in London. The problem is with the American exchanges that might take over London or the Euronext market. That is the issue here.

There are certain forms of regulation that are not covered by the Bill. The right hon. Member for Wokingham (Mr. Redwood) might be able to make this point more comfortably that I can. The Bill does not cover European regulation, which may or may not be onerous. Let us envisage a hypothetical situation—after all, the Bill is all about hypothetical possibilities—in which, as a result of injecting this poison pill into the regulatory system, the New York stock exchange backs off from its interest in the Euronext company, and the Deutsche Börse, a German company that is interested in acquiring a Franco-Dutch operation, succeeds as a consequence of that. As a pan-European exchange, it could then choose to apply European regulation in a way that is unhelpful to London’s interests. That is purely hypothetical, but it could certainly happen.

There is nothing in the Bill to prevent that from happening, because European legislation has primacy here. One of the unintended consequences of blocking American takeovers could therefore be disadvantageous practices against which the Bill provides no protection.