Skip to main content

Commons Chamber

Volume 458: debated on Monday 12 March 2007

House of Commons

Monday 12 March 2007

The House met at half-past Two o’clock


[Mr. Speaker in the Chair]

Oral Answers to Questions

Work and Pensions

The Secretary of State was asked—

Freud Report

1. What assessment he has made of the implications for his Department’s budget of the recommendations of the Freud report on welfare to work. (126359)

The Government have welcomed the publication of the Freud report and are giving careful consideration to its recommendations and their financial implications. We hope to respond more fully later this year.

I think that I thank the Minister for that reply, but could he please give us a bit more detail, particularly on his quantification of the risks that one or more of the prime contractors will fail to deliver what they are supposed to achieve? Does he agree that two substantive risks need to be both quantified and managed? First, the prime contractors may fail to engage with one or more important groups of vulnerable jobseekers in their area because they will have a regional monopoly. Secondly, as commissioning bodies, they may fail to develop the capacity of the local voluntary and third sector organisations that will deliver the services on the ground.

I agree with the hon. Gentleman about the risks involved in proceeding along the lines that David Freud has recommended, which is why we have not yet made any final decisions. The hon. Gentleman mentioned a number of those risks, and rightly so. It is worth reminding ourselves that, although David Freud proposed a network of regional monopolies, as the hon. Gentleman suggested, he felt that there could be some circumstances in which we should not proceed along those lines. Although tremendously exciting opportunities are opened up by Freud’s report to target more effective help and support on those who are hardest to reach and have proved to be the most difficult to get into employment, it is right that we look carefully at his recommendations. Obviously, we need to do some more modelling with the Treasury, but I am confident that we can find a way forward. David Freud was right also to suggest that the most sensible thing to do, if we can model the proposals and manage the risk carefully, would be to test the proposals in a number of pilots, and I think that is the right way to proceed.

Given the record number of new jobs under this Government and the record expenditure on welfare to work, how do the Government account for the only modest fall in inactivity rates?

I think that 1 million people have been taken off benefits and, as my right hon. Friend would acknowledge, as others have, including the Organisation for Economic Co-operation and Development, Britain has an outstandingly good track record on welfare reform. The significance of David Freud’s report is that although he has—rightly—charted the success of the new deal and other interventions that we made, his prescription, looking forward, is right and we must now target an increasing share of our available resources on the hardest to reach and particularly those who are economically inactive, such as lone parents and people on incapacity benefit. That is very much what we want to do, and I look forward to my right hon. Friend’s support when we do so.

If the Government are doing so well on welfare reform, why is the male employment rate in the United Kingdom now 10 percentage points below what it was under Harold Wilson, and why must we wait another six to eight years for David Freud’s proposals to be implemented?

There you have it, Mr. Speaker: the curmudgeonly voice of the Liberal Democrats. It is worth making the obvious point: we have never claimed that every problem has been solved, and it is clear from the Freud report that that is so. However, it would be futile and rather pathetic not to acknowledge the progress that has been made. The employment rate in the United Kingdom is now among the highest of all the developed countries in the world and is the highest for nearly 30 years. That is progress. I look forward to the day when the Liberal Democrats come here and celebrate that progress with us, although I suspect from the hon. Gentleman’s comments that that will be some time yet.

The Freud report stresses the particular challenges faced by lone parents not in paid employment who have disabled children. Can my right hon. Friend tell the House what measures the Government plan to take to ensure that there is affordable, accessible and appropriate child care for such lone parents and their children?

I am grateful to my hon. Friend, who will be aware that we have made a significant investment in improving access to child care since we came to office 10 years ago. There is a great deal still to be done, but it is important that that investment goes in. My hon. Friend will also be aware that as part of the work on the comprehensive spending review the Treasury is leading a project to look specifically at disabled children’s needs. My personal sense is that we should always look to do more to help families who are bringing up disabled children, and I very much look forward to the outcome of that piece of work.

There is no disagreement that those with multiple disadvantages need a great deal of input and help if they are to access the job market. David Freud recognises that that will cost a great deal of money. Does my right hon. Friend agree that the best people to get those with multiple disadvantages into the workplace may often be in the voluntary and third sectors, not just in the private sector? Will he ensure that the best quality of help is given to such people to make sure that they are not forced into work that is totally inappropriate for them?

I agree strongly with what my hon. Friend says. When it comes to providing the most effective help and support, we can probably leave on one side a lot of the outdated ideology. We should look for the providers that can make the biggest impact. It is significant that virtually all the programmes in the new deal for disabled people have been delivered by the private or voluntary sector—they have been a great success. I urge hon. Members on both sides of the House to approach this with an open mind. We will look to contract with the best providers that hold out the prospect of helping the most people at the best value for money. That is the challenge that David Freud has put down to us and we intend to pick it up.

The Secretary of State will know that concern has been expressed about the adequacy of the funding of the roll-out of pathways to work under the existing welfare benefits reform. Will he assure us that he will ensure that that is working properly before he embarks on the next phase? Has he held discussions with other Departments and the devolved Administrations about the cost of the child care that will be necessary if he is to push the programme for lone parents with children of 12 and over, especially those in the difficult group of the younger teens?

We will obviously have proper discussions with the Scottish Executive on how to take this forward because, as he knows, child care is a devolved matter. However, it is worth putting on record the progress that has been made in Scotland in the past 10 years or so. We calculate that the jobs dividend to Scotland has been 200,000 extra jobs. Most, if not all, of that progress would be put at risk if the Scottish people were daft enough to accept the hon. Gentleman’s advice and move towards independence.

Does the Secretary of State agree that as there is a common interest in sustained, long-term employment for these hard to place groups, it is absolutely essential that he does not close his mind to new and innovative organisations that might come along with something fresh to offer, or to specialist organisations that might operate either under the overall umbrella of commissioning or, in certain cases, independently, because of their specialist expertise?

I agree with the hon. Gentleman, and I do not want to close my mind to any of those things. The hon. Member for Weston-super-Mare (John Penrose) properly identified one of the risks. If we go down the road that David Freud has recommended, we will need to ensure that we do not compromise the ability of some of the specialist providers to make a valuable contribution to the welfare to work agenda. I will do everything that I can to ensure that that does not happen.

Freud has made several radical proposals, including a progressive reduction in the age of the youngest child at which a lone parent would be expected to seek work. However, in the Secretary of State’s speech to last year’s Labour party conference, he went further than that and spoke with admiration for the Clinton reforms in the US, a central plank of which was the time-limiting of benefits for lone parents. Will the Secretary of State clear up the confusion about his attitude by confirming to the House that he has specifically ruled out the time-limiting of lone-parent benefits?

I am surprised that the hon. Gentleman asks that question, because I have been asked it at least twice during recent Work and Pensions questions. On each occasion, I made it quite clear that we were not going down the road of time-limiting benefits.


2. What recent assessment he has made of the adequacy of the basic state pension; and if he will make a statement. (126360)

The Pensions Commission examined the adequacy of the state pension system and made recommendations for reform. On the basis of those recommendations, we have come forward with our proposals. The International Monetary Fund’s 2006 annual assessment, which was published this month, set out its broad agreement with our proposed pensions reform, saying:

“it will help ensure both adequate saving for retirement and fiscal sustainability”.

I thank my hon. Friend for that answer. The work that the Government have done to get pensioners out of poverty is very much appreciated. As part of the coming Budget, will he consider whether to restore the earnings link, which is very important to pensioners?

As my hon. Friend knows, that is slightly above my pay grade. We have made our intention to restore the earnings link very clear. We have said that our objective is to do that in 2012, subject to affordability. It is worth saying that no pensioner has to rely on the basic state pension alone. Pension credit, which we brought in, has reduced the number of pensioners in relative poverty by 1 million. Pensioners are now less likely to be poor than the rest of the population, which is a remarkable achievement at a time of economic growth. According to the Institute for Fiscal Studies, the last time that it was achieved was

“as a one-off blip … in the depths of the recession of the early 1980s”.

We have no intention of going back to that.

What message does the Minister have for those who are just entering the workplace about the likelihood of their having an adequate state pension when the time comes to retire?

That is a good point; we are moving from a situation in which women get £90 a week on average from their state pensions to one in which they will get about £130 a week. That is a significant change, and it means that we can tell people who are starting work that if they work or care for most of their lives they will be lifted well above the level of the means-tested safety net, and so will have good incentives to save. That is exactly the message that we should be giving people.

The Minister will know that when pensioners attain the age of 80, they receive a derisory increase of some 25p a week to their state pension. Does he agree that the time is right either to scrap the 25p a week or to raise it significantly?

I am aware of the situation, not least because pensioners have written to me saying that they spent their first increase on a stamp to send me a letter about it, but it is worth putting that increase in the context of our introducing free TV licences for over-75s and winter fuel payments of £300 for people over 80. We recognise that as people get older they need more benefits, and that is exactly what we have provided. As my hon. Friend knows, the policy to which he referred has existed since the 1970s, and neither of the past two Governments have changed it, but we recognise the needs of older pensioners, and that is why we introduced the measures that I mentioned.

The Minister has just spoken in favour of the supplementary benefits available to pensioners, but does he realise that those benefits are means-tested, which means that many people have no incentive whatever to save for their retirement? Is he worried about that, and what will he do about it?

I wonder where the hon. Gentleman has been, because the Pensions Commission, which Lord Turner led, has just addressed exactly that point, and the IMF said in its findings that it will address the issue of the incentives to save. The IMF thinks that there is a good policy, and consensus has been built up on what the Pensions Commission supports. If he wants to stand outside that consensus, he is welcome to do so, but I think that we have a good set of policies for the future that will give people good incentives to save.

Despite the efforts of the Government and many hon. Members on both sides of the House to publicise pension credit entitlements, nearly 90,000 pensioners across Scotland are missing out on the pension credit to which they are entitled. Does the Minister think that that highlights the injustice of the complex and bureaucratic means-tested system of pensions? Surely it is high time that we moved to a system in which the Government paid a decent state pension, as of right, to everyone.

First, those figures are rubbish, and we told the Daily Record that before it published them. Secondly, the hon. Lady and her party are committed to scrapping the state second pension and the pension credit; that is what her party leader said recently. About half of pensioners get more from the state pension system than they would from the citizen’s pension that her party proposes. I am looking forward to the hon. Lady telling millions of pensioners, at the next election, that the Liberal Democrats propose to reduce their pension by making those changes.

Following two decades of the Tories breaking the link between earnings and pensions, our pensions in Britain fell to the lowest level in Europe as a proportion of earnings. The comparisons now may not be as comfortable as we would like to think. Will my hon. Friend undertake to investigate pensions on the continent of Europe and in the European Union, to make a comparison, and to bring that comparison to the Commons with his statement?

There is a process under way within the European Union to do exactly that, but I am afraid that the figures do not show the whole picture. For example, they do not include all private pensions saving, which is important in our system in a way that it is not in other European systems. As a consequence of our proposals to link the state pension to earnings, the state pension will in future be worth twice as much as it would otherwise have been, so that is a big commitment. People in the Labour movement have campaigned for a commitment to a link to earnings for a long time, and I urge my hon. Friend to welcome that commitment as part of his support for our policies.

I am sure that the Secretary of State enjoys his regular cosy chats with the Chancellor, but will the Minister share with us, and with the estimated 3 million older people who will die before the link with earnings is implemented, how the Chancellor can say that the implementation may not be affordable in 2012, yet will definitely be affordable by 2015?

We have set out very clearly how we will finance that, but the interesting thing is the hon. Gentleman’s policy. Last time we debated the issue, his colleague the shadow Secretary of State said that he thought that restoring the link was affordable now; the hon. Member for Eastbourne (Mr. Waterson) then contradicted that in Committee; and last week his hon. Friend the shadow Chancellor said that there will not be any more money for pensions. What we are finding out about the Tories is that on presentation they want to face both ways, but on policy they are all over the place.

Disability Discrimination Acts

3. What assessment he has made of progress by private companies in meeting their obligations under the Disability Discrimination Acts 1995 and 2005. (126362)

We published research on 1 March which shows that organisations in the public, private and voluntary sectors are responding very positively to their obligations under the Disability Discrimination Acts.

I have seen that research and note that it finds that many employers still take a narrow view of disability, focusing mainly on sensory and physical impairments. What is my hon. Friend’s Department doing to ensure that all employers take on board their full obligations under the Disability Discrimination Acts to tackle all forms of discrimination against all forms of disability?

I thank my hon. Friend for drawing the House’s attention to that part of the research, which clearly indicates that there is still a very narrow focus. Some 10.5 million people in Britain are covered by the Disability Discrimination Acts, and not all of them—indeed, a minority—have sensory or mobility impairments. We need to broaden the scope and the impression and view of disability, and we are doing that by engaging with employers and the media and ensuring that people understand that there is a whole spectrum of disability, and not just people who have sensory or motor impairment. Later this year, we will start to roll out a campaign aimed specifically at employers to ensure that that message gets across.

What role does my hon. Friend envisage for local authorities in raising awareness and providing advice to small businesses on their obligations under the Acts? Does she agree that communities can make co-ordinated progress only if local authorities and her Department work with the voluntary sector, including organisations such as the disability information and advice line in my constituency, which my hon. Friend recently visited?

I take this opportunity to thank my hon. Friend for arranging that visit, which clearly showed that where good local voluntary organisations work in partnership with other public authorities, they can enhance the message that is conveyed to the wider community. My hon. Friend is perfectly correct: we need to ensure that we use the leverage that local authorities, in particular, can bring to a local community, not just in the dissemination of information, which is crucial, but in how they conduct their own business in delivering services and employing disabled people. The disability equality duty was placed on public authorities to ensure that they do just that.

Personal Accounts White Paper

The proposal to establish personal accounts has been broadly welcomed in the House and by many others. The consultation on the detailed proposals set out in the White Paper ends on 20 March, and in the light of those responses, it is our intention to bring forward legislation in the next parliamentary Session.

Given that the public have more faith in the judgment of Lord Turner than the Secretary of State, has the right hon. Gentleman reconsidered his somewhat naive decision to cap those accounts at £5,000 a year instead of £3,000, as proposed by Lord Turner?

In the White Paper there is reference to personal accounts being delivered by a modern organisation, managed independently in the interests of its members, and within a framework set by Government. No one could dispute those criteria, but the fourth one—delivery by a private sector firm—would make many people nervous. Does the Secretary of State agree that, given the private sector’s track record in that area of pensions, it is not the natural area of society or of the economy to take on a responsibility as important in our pensions policy?

We want a value-for-money solution to implementing the proposed national pension savings scheme, and it is my view that the private sector has the appropriate expertise and experience to do that and provide a good service for the public in the process. At some point, we will obviously need to tender that work, and we will make judgments in due course. However, it is not an area in which Government have the right expertise to take the policy forward.

Does my right hon. Friend agree that minimising costs and charges is crucial to the success of personal accounts? What steps is the Department taking to achieve that?

My hon. Friend is right. Clearly, the lower the annual management charges and costs, the greater the return for those who are saving in the national pension saving scheme. That must be our principal objective in taking forward Lord Turner’s proposals. This, however, will be a matter for detailed consideration by the proposed personal accounts delivery authority, but I can assure my hon. Friend and the House that we will work closely with the delivery authority to make sure that this important aspect of the scheme is brought to fruition.

Construction Industry Training

5. What programmes for increasing skills and opportunities for work for young people wishing to enter the construction and related industries are supported by his Department. (126365)

The responsibility for skills falls within the remit of the Department for Education and Skills. However, my Department offers training and support for young people who take up work in a wide range of occupational areas, including the construction industry, through the new deal for young people. Since the new deal started, nearly 180,000 young people have been helped by the full-time education and training option, and over 85,000 through the employment option. There are already 19,000 young people employed in construction across London, and there is no shortage of further opportunities, given that there are currently around 11,000 vacancies.

The Minister is right. The Chartered Institute of Building confirms that seven out of 10 firms are expecting more work this year, and three quarters have difficulty recruiting people with the right skills for the industry. Could he, with his colleagues in the DFES—I appreciate that it is a cross-departmental responsibility—ensure that all the young people who, in constituencies such as mine, are keen to get into the building industry, have not just the initial training, but the opportunity to go from the training into apprenticeship and the work that give them the security of employment that they need, London needs and Britain needs?

Indeed, those opportunities exist. The hon. Gentleman may be aware of the on-site training and the job shop at Battersea power station, which I am sure is attractive to many of his young constituents hoping to get into the construction industry. We are working there with Lambeth college and South Thames college. There have been more than 10,000 inquiries to that job shop already, and I am pleased to tell him that as a result 640 young people have gone straight into construction work in London, 43 per cent. of them drawn from the ethnic minority communities.

Will my hon. Friend speak to his colleagues to ensure that the young people who are enticed into training go on to get full-time apprenticeships—not short, modern apprenticeships—where they can learn all the skills necessary for them to be of use not only to the London area, but to the entire country?

My hon. Friend is right. There are extensive opportunities for young people to find employment in the construction industry and to develop skills. He will be pleased to know that £63 million was available to support construction apprenticeships last year, as a result of which 24,000 young people came forward and began construction apprenticeships. We are grateful for the fact that there are 15,000 employers around the country offering construction partnerships.

In the past 10 years, the number of young people aged 16 to 18 not in education, employment or training has risen by 27 per cent. What does the Minister intend to do about that?

As the hon. Gentleman will know, a number of schemes have been extremely effective already in helping young people find work. I suggest that he looks at the results of the new deal for young people. Some 700,000 young people have gone through the new deal for young people programme, and as a result we now have a very low level of youth unemployment. The programme has helped us virtually eradicate long-term youth unemployment.

Has my hon. Friend given consideration to tapping into the skills and expertise of construction workers who have had to retire through ill health or personal injury? That would be a double whammy, in the sense that it would take them away from daytime television and pass on their skills to the young people who need them. Such a scheme would need the support of the appropriate trade unions, and should not affect their benefits.

My hon. Friend is right: those who formerly worked in the construction sector have an enormous range of skills of which we can make use. In many parts of the country, learning and skills councils, when they are delivering locally, are engaged in that process, as are colleges. He will be aware that the Scottish Executive are looking at ways of developing those ties even further.

David Freud has talked of a “poverty of skills” in the UK, yet only 11 per cent. of benefit claimants who lack everyday literacy and numeracy skills complete a basic skills qualification. Will the Government now assess all new claimants so that those with reading or maths needs, for example, can participate in training as soon as they make a claim, without having to wait six months for an assessment?

David Freud also pointed out that the Government have a “genuinely impressive record” in helping young people to gain the skills to find work. If the hon. Gentleman cares to look at the skills base that exists for young people, the opportunities for acquiring skills, the expansion of the further education sector and the contribution made by the new deal for young people, he will accept that the opportunities now are far greater than they were 10 years ago.

Lone Parents (Employment)

The lone parent employment rate now stands at 56.5 per cent.—an increase of more than 11 percentage points since 1997—and is at the highest rate since records began.

I thank the Secretary of State for that answer. A survey of 1,000 lone parents undertaken by One Parent Families showed that a staggering 71 per cent. of non-working lone parents cited lack of child care or of flexible working as a reason for not being in paid employment. Does not that highlight the Government’s 10-year failure to offer lone parents a real choice between employment on the one hand and dependency on the other?

No, I do not think that achieving the highest ever recorded rate of employment for lone parents can fairly or reasonably be described as a policy failure in the way that the hon. Gentleman tries to do. It is worth pointing out to him and his hon. Friends that we have made an historic investment in child care. We have introduced new legislation, for example, to allow people the right to request part-time working, which he and his hon. Friends opposed. Of all the people in the House who can lay down the law about what more needs to be done about lone parents, the hon. Gentleman is certainly not among them.

Given that child care support is a key element of getting lone parents back into the workplace, what support is being given to teachers, classroom assistants and schools to provide breakfast clubs and out-of-school clubs, which already have a huge amount of work to do? Although I applaud the Government, schools need support if those proposals are to be brought forward.

My right hon. Friend the Secretary of State for Education and Skills speaks for those matters in this place, but it is true that the Government have made a significant investment of additional funds into that sector as well. That has been broadly welcomed. In relation to the point to which I think the hon. Gentleman was alluding about conditionality as an entitlement to benefit, we have to match that to the availability of child care locally so that we are not asking lone parents to do something unreasonable in taking more active steps to get back into the labour market, but if we continue the investment, I think that we will get to that point. We should now have that debate in the country as a whole.

In my constituency, the progress in the increase in employment among young people can almost be mapped against the development of the tax credit system. Is that a common feature across the country? Is there an absolute parallel? If so, is that because we have put so much into child care through that system?

A number of factors explain the significant increase in the lone parent employment rate. Obviously, the strength of the economy generally has helped; so, too, has the new deal for lone parents. The hon. Member for Reading, East (Mr. Wilson) should know that it has helped more than 400 lone parents in his constituency to get back to work—a policy that his Front-Bench team opposes. The policy of making work pay through tax credits, the national minimum wage and now the in-work credit for lone parents who come off benefit and into work has made it possible for us to increase substantially the rate of employment for lone parents. However, we need to do more. That is obviously the case. It is what Freud highlighted and it is what we are now looking to do.

Inactive Benefits

There are more people in work in the UK than ever before. There are also 900,000 fewer people on out-of-work benefits compared with a decade ago. However, there is more we can do, which is the purpose of the Welfare Reform Bill and, of course, the Freud review.

What is my hon. Friend’s view on the proposals in the Freud report to do more for the existing group of people on long-term incapacity benefit by extending obligations for them to participate in work-related activities, as long as that is supported? The proposals currently cover new claimants only.

My hon. Friend is absolutely right. David Freud has suggested an innovative and imaginative way of supporting existing incapacity benefit customers. The core point is that no one should ever be written off, which has happened for so long in our welfare system. One in six current incapacity benefit customers have dependent children, so there is a real opportunity to lift those families out of poverty.

Will the Minister answer the question which the Secretary of State ducked when the right hon. Member for Birkenhead (Mr. Field) posed it earlier? Why is it that when the Government claim such success on employment levels and the number of people who are actually in work, the number of people who are inactive but of working age has barely changed over the past decade?

My right hon. Friend the Secretary of State has answered that question on three separate occasions. In case the hon. Lady missed the answer on every one of those occasions, there are 900,000 fewer people on out-of-work benefits than there were when her party was in power. To break it down, that equates to 250 people on every single day for the past decade leaving benefits and entering work to provide for their families, which is real success.

Will my hon. Friend ensure that the quality of the medicals that incapacity benefit claimants must undergo as part of the welfare to work process is very good, because yet another case was raised with me by a constituent over the weekend? My constituent has been unable to work because of a disease so serious that I cannot pronounce it. The doctor who undertook the medical for that young lady failed to recognise any of the well documented and serious symptoms, which means that my constituent must use the appeal process in order to pursue her claim for benefit. Can the medicals that are provided to claimants be improved?

We can improve the medical procedures to support incapacity benefit customers, particularly when we review the personal capability assessment, which is part of the architecture that supports the Welfare Reform Bill. Incapacity benefit assessments have not kept pace with the changing nature of disability in this country—for example, there has been a big increase in those who report a fluctuating mental health condition, and attitudes in society have changed towards people with a learning disability and their role in the place of work. Supporting people with learning disabilities to have a chance to play a meaningful role in the workplace can be an important part of the revision to which my hon. Friend has referred.

Child Poverty

I have not had any discussions at the UN since the recent UNICEF report on child poverty. If I had, I would have confirmed that in the space of a decade the UK has gone from the worst position in the EU to the greatest improvement in child poverty levels.

The Minister has demonstrated breathtaking complacency in relation to the UNICEF report. We were placed 21st out of 21 for childhood well-being, which is bottom among the Organisation for Economic Co-operation and Development countries. After 10 years in power, to which the Minister has referred, surely that is the legacy of the Prime Minister. The Government have attempted to concentrate on education, but we are near the bottom of the tables for educational well-being, for childhood material well-being and for two-parent relationships for children.

I am mildly sceptical about the UNICEF report. I think that it was actually unfair to the Government. [Hon. Members: “Aw!”] Those are not my comments; they are the comments of the hon. Member for Surrey Heath (Michael Gove), who is a shadow Minister. Perhaps the hon. Member for Surrey Heath knows a little more about the subject than the hon. Gentleman, given that the report interviewed children who were born between 1985 and the early 1990s. While we still have many things to do to reduce and eradicate child poverty, we cannot be held accountable for the mistakes, misgivings, errors, poor policies and increases in child poverty that happened on his party’s watch.

In a recent submission to the Scottish Affairs Committee, the Rowntree Foundation said that while the tax credits system was lifting lone parents and children out of poverty, it was driving couples with children into poverty. Does the Minister recognise that as having some element of truth? If so, what steps will he take to review the tax credits system to ensure that couples are not being penalised in this way?

It is important that we support everyone who gets the opportunity to go into work to lift themselves and their entire family out of poverty. However, the same report supported the expansion of Sure Start, the national minimum wage, the introduction of tax credits, flexible working, and maternity and paternity leave, all of which have helped to lift children out of poverty and all of which were opposed in policy terms or investment terms by the hon. Gentleman and his party.

9. What recent assessment he has made of the level of child poverty in the UK; and if he will make a statement. (126369)

In 2004-05—the latest period for which data are available—2.4 million children were living in relative poverty in Great Britain. That represents a fall of 700,000 since 1997. As a result of our reforms to the tax and benefit system and the national minimum wage, by April 2007, in real terms, families with children will be an average £1,550 a year better off, while those in the poorest fifth will be an average £3,450 a year better off.

Save the Children claims that 55 per cent. of families with disabled children are living in poverty. It costs three times as much to look after disabled children as it does children who are not disabled. Will the Minister tell the House exactly how the Government are addressing that problem?

As my right hon. Friend the Secretary of State said earlier on in questions—I appreciate that the hon. Gentleman did not hear him—it is important to improve matters for disabled children as well as non-disabled children in poverty. Let me be clear to him. We know that disability costs extra; that is why we have a disability living allowance that supports families, including those with children, where there is a disability. Of course, we will ensure that as part of our child poverty strategy we take particular cognisance of the issues affecting disabled children.

Can my hon. Friend confirm that the target of eradicating child poverty by 2020 is still a firm target, not an aspiration, showing that we are still committed to dealing with deprivation in all our communities?

I am delighted to reconfirm our commitment that by 2020 we will have an eradication of child poverty in this country. That stands in stark contrast to the position of the Conservatives, who initially thought that they were giving a commitment, and then decided that it was not so much a commitment as an aspiration.

I can tell the hon. Gentleman one target that the Conservatives met when they were in power—they increased the number of children who had to live in poverty. To be frank, that should bring shame to him and to his whole party.

Given the link between workless households and child poverty, and the fact that the mother of a disabled child is seven times less likely to be in work than other mothers, what specific policies will the Minister’s Department bring forward to attack that problem? In particular, will she talk to colleagues at the Department of Health about the problem of a lot of social services delivery happening in working hours, making it very difficult for parents with disabled children realistically to consider working?

The hon. Gentleman touches on a genuine problem for the parents of many disabled children: how to manage the support of their disabled child while working, as many want to do. Of course, working together is vital and I am sure that my colleagues in the Department of Health will have heard the hon. Gentleman’s question, as well as Ministers in other Departments who have connections with local authorities. We need a joined-up approach to supporting disabled children and their families. We held the Prime Minister’s strategic overview, “Improving the Life Chances of Disabled People”, to encourage Departments to work together to ensure that nobody falls through the gaps in our public service provision when we can, by joined-up working, improve the lot of disabled children and disabled people in general.

The Government’s recently released figures suggest that, when regional income is taken into account, relative child poverty in London could be more than one third higher than the current official figures based on national median income suggest. Is the Minister confident that she can tackle relative child poverty issues without examining regional variations in income? What will she do to ensure that the matter is properly considered during the current review of the Government’s child poverty strategy?

I can give the hon. Lady a commitment that we will review the matter that she identifies as part of our child poverty strategy. As I said earlier, it is a massive challenge to any Government because, as my hon. Friend the Minister for Employment and Welfare Reform noted, we inherited a position when Britain was at the bottom of the league for child poverty. We now have the best record of any Government in the EU on lifting children out of poverty. However, we are not complacent. We know that there is still a lot to do and we are committed to our target, unlike the hon. Lady and her party, which still perceives it only as an aspiration.


10. What support his Department is giving to those who lost occupational pensions prior to the introduction of the Pension Protection Fund. (126370)

The Pensions Act 2004 puts in place a range of measures to provide support, advice and protection to schemes and scheme members. In particular, the financial assistance scheme provides support to members of defined benefit occupational pension schemes that started to wind up, underfunded, between 1 January 1997 and 5 April 2005.

The High Court recently ruled that the Government were completely wrong to reject the parliamentary ombudsman’s report on failed pension schemes. The Secretary of State subsequently told the House that the Government would re-examine the report. What can the Minister tell the House today about that? What can the Government devise to assist scheme members who have been so hard hit? Will he take a leaf from the book of the right hon. Member for Birkenhead (Mr. Field) and perhaps consider using unclaimed bank and building society assets for compensation?

We will look at suggestions from hon. Members of all parties, as my right hon. Friend the Secretary of State made clear in his statement on 22 February. He also said that we were examining the financial assistance scheme in the light of the European Court of Justice case. We have made a commitment to pay the claimants’ costs in the appeal to ensure that they are not disadvantaged. We have said that we will come back to the House as soon as possible—certainly before the Pensions Bill completes its passage.

I want to correct one point that the hon. Lady made. The court did not find against the Government on all aspects. It found against the Government on the 1996 leaflet that was issued and upheld the Government’s case on causality and the operation of the minimum funding requirement.

Does the Minister recall an uncomfortable debate before Christmas, when he was almost isolated in the House in rejecting the recommendations of the ombudsman and the Public Administration Committee? Will he confirm that the Government do not wish to have a confrontation with Parliament on the matter and that, against that background, he does not rule out giving financial assistance to the group of pensioners whom my hon. Friend the Member for Congleton (Ann Winterton) mentioned?

The question has always been one of proportionality. We introduced the financial assistance scheme and extended it to more than £2 billion. We recognise that people in these circumstances face the real personal tragedy of losing their pensions. We have always said that the financial assistance scheme is there for exactly that reason—to reflect that loss of pension. The question has always been what we can justifiably ask the taxpayer to pay. In that debate, I made the case on the issue of causality that we did not agree with the ombudsman that we were responsible for the whole of the losses and should therefore make good the whole of the losses—and the court actually upheld that part of our argument.

Department/GP Communications

12. If he will make a statement on steps being taken to modernise communication methods between his Department and GP surgeries. (126373)

We are aware of the critical importance of the role of GPs in shaping customers’ perceptions about their ability to return to work, and we are piloting the use of employment advisers in GP surgeries to give patients advice about the work-related support and to offer them non-medical help to achieve their work aspirations. To assist GPs, we also have two projects testing the electronic transmission of data between GPs and our Department via a secure link. We are also developing educational and training packages in conjunction with the Royal College.

Can the Minister tell me what else is being done to help GPs get their patients back to work and whether the Government will consider allowing those not fully fit for work to attend very short part-time training courses to enable them to get back to work more quickly?

Yes, we are doing a variety of things. As I think my hon. Friend will know, we are testing the pathways advisory service—indeed, the pilot is in east Lancashire, close to her constituency. We are also piloting the electronic transfer of data to facilitate the process for GPs. As I said in my earlier answer, we are developing education and training packages. My hon. Friend makes a very helpful point in respect of the further assistance that we might offer and I would be happy to look further into it.

House of Commons Commission

The hon. Member for North Devon, representing the House of Commons Commission, was asked—


17. What target he has set for the percentage of waste from the parliamentary estate to be recycled in 2007. (126350)

The House has set a target of 44 per cent. for recycling of waste in 2007-08. The current policy for waste recycling is to increase the target by 5 per cent. each year. The percentage of waste recycled during 2005-06 was 35.9 per cent. and the quantity of waste recycled was 800.72 tonnes.

I thank my hon. Friend for that reply and I am sure that all hon. Members will welcome the success in increasing recycling in the parliamentary estate. However, does the House of Commons Commission share my concern that the total waste produced by the parliamentary estate last year actually grew by 17 per cent? Given the priorities of “reduce, then re-use, then recycle”, what steps will be taken to reduce waste overall?

I am pleased that my hon. Friend recognised the progress made on recycling, but if her point is that the actual volume of waste overall should be the greater focus of our efforts, I am sure that the current awareness campaign could broaden its scope to take that into consideration. I reassure her that the issue of paper waste from early-day motions and parliamentary questions is an issue of concern and that the Procedure Committee is currently looking further into policies on that matter.

While it is in the House’s interest to drive up rates of recycling, as the hon. Gentleman mentioned, is it not in the national interest that we drive down the recycling of waste draft policies emanating from the Opposition Front Bench, which fall apart at the first examination in the first light of day? Is it not in the national interest to minimise all that effort?

I am sure that it is indeed in the national interest to minimise the degree of waste, but whether the Procedure Committee can quite go as far in scope as the hon. Gentleman suggests, I am not too sure.

Leader of the House

The Leader of the House was asked—

House of Lords Reform

18. When he expects to be in a position to bring forward legislation on reform of the House of Lords. (126351)

Before answering this question, I would like to say a few words. As the House will be aware, the Deputy Leader of the House of Commons, my hon. Friend the Member for Edinburgh, South (Nigel Griffiths), tendered his resignation to my right hon. Friend the Prime Minister earlier today. I would like to place on record my appreciation of the excellent work that my hon. Friend undertook in this post.

To answer the question, following the debates and votes here last Tuesday and Wednesday, the House of Lords is holding its debate on the future composition of the Lords today and tomorrow, with the votes planned for Wednesday. I have said all along that we must wait until the other place has expressed its view. I then intend to reconvene the cross-party group that I chair and obviously to discuss the matter within Government. I will return to the House in due course to make a detailed statement on the way forward.

I am grateful to the Leader of the House for that response. Notwithstanding his comment about waiting, press reports over the weekend have suggested that, on the back of those votes, he felt an obligation to press ahead with House of Lords reform. Does he believe that the right hon. Member for Kirkcaldy and Cowdenbeath (Mr. Brown) feels a similar obligation?

My right hon. Friend the Chancellor of the Exchequer voted for an 80 per cent. elected House of Lords, so I think that the answer to the hon. Gentleman’s question is yes.

Is it not clear that the chances of reaching consensus with the House of Lords on this matter are very remote indeed? Bearing in mind the fact that the 80 per cent. vote was carried by 305 to 267, are the Government sufficiently determined to use the Parliament Act if necessary—and it looks like it will be—to ensure that the will of this House is implemented?

I do not want to anticipate the outcome of what will no doubt be vigorous discussions with the other place, but it certainly does not lie in the hands of any one Member of this Chamber to decide to abrogate the law of the land, and the Parliament Acts are the law of the land.

When the Leader of the House convenes his all-party group, would it not be wise, as well as considering the Lords, to consider cutting the number of people in the House of Commons by about a third—[Interruption.]

The Under-Secretary of State for Work and Pensions, my hon. Friend the Member for Warwick and Leamington (Mr. Plaskitt), asks whether the hon. Gentleman is offering. I have a lot of time for the hon. Gentleman, but I honestly think that the cross-party group on the future of the Lords will have enough work to do without doing that as well; that is for another group.

When the Leader of the House reconvenes the all-party group, will he bear in mind the fact that, last week, only 80 Conservatives voted for the party’s official policy, and that 98 voted against it?

That is more a matter for the Leader of the Opposition to bear in mind than for me. That was the hon. Gentleman’s party’s manifesto commitment. If he is saying that the Conservatives’ manifesto commitments cannot be trusted, of course I agree with that proposition.

In advance of the legislation referred to in the question, and against the background of last week’s vote, would it not be sensible if the Prime Minister made no more political appointments to the upper House?

That is a matter for my right hon. Friend the Prime Minister. The present arrangements will have to continue unless and until we have a reformed Chamber; I would have thought that that was a statement of the blindingly obvious.

May I suggest that the Leader of the House consult as widely as possible on this matter? There are divided views within parties and across the Chamber, and this is not a matter on which the Front Bench can compel its Back Benchers to vote.

What the right hon. and learned Gentleman has just said is the self-evident truth, and I agree with his suggestion of consulting as widely as possible. I do not agree, however, that convening the cross-party group is incompatible with wider consultation.

Did the Leader of the House interpret the vote for a 100 per cent. elected House of Lords as a mandate—indeed, an instruction—to abolish the archaic system whereby Church of England bishops have ex officio seats in the legislature?

I did not interpret the vote in any way; I simply read the words on the Order Paper. It was a vote, in the opinion of the House, for a 100 per cent. elected Chamber.

May I assure the Leader of the House that the Conservatives are also sorry not to see the hon. Member for Edinburgh, South (Nigel Griffiths) in his place alongside him any longer? On the reform of the upper House, the right hon. Gentleman listened to the views of this House about his proposed preferential ballot system. He also listened to the views of the House when it rejected his White Paper and voted for a more democratic upper House. As he looks towards legislation, will he now listen to the views expressed by hon. Members across the House about the list system of proportional representation that he is proposing for the elections to the upper House?

My proposal was for 50 per cent. elected, but it was made clear that that was not the Government’s proposition. The right hon. Lady was consulted extensively on our White Paper, and she knows that it contains a great deal that has all-party agreement. I said last week that we will listen to proposals for altering the electoral system, and it is important that the House move on that by consensus as far as possible. Before she tries to makes a party point about the semi-open list, let me say that that proposal originated from the Wakeham royal commission on which several of her distinguished colleagues and former Conservative Cabinet Ministers sat, along with Liberal and Labour Members.

I also extend my best wishes to the hon. Member for Edinburgh, South (Nigel Griffiths). I hope that nothing that any of us said on Thursday precipitated his decision.

In the euphoria that followed the surge of radicalism last Wednesday, the Leader of the House said two things: first; that he would reconvene the all-party group; and secondly, that he could not pre-empt the Queen’s Speech by announcing legislation. Irrespective of what another place says, will he ensure that the cross-party group is convened, and that it is convened before Easter? Will he also make it clear that legislation will follow in the next Session of Parliament?

On the hon. Gentleman’s first point: would that the decision of my hon. Friend the Member for Edinburgh, South were related to something that was said in the House last Tuesday and Wednesday! On his second point, I cannot anticipate the Queen’s Speech. As for a meeting of the cross-party group, we will get it together as quickly as possible, although I cannot say for sure that it will meet before Easter; if we can have a meeting, we will. My noble and learned Friend the Lord Chancellor mentioned this afternoon, as I did last Wednesday, the possibility of producing a draft Bill, but that must be discussed by the cross-party group.

Programming of Legislation

Both the Modernisation and Procedure Committees considered that subject towards the end of the previous Parliament. Following their reports, the House approved changes to the relevant Orders—including making them into permanent Standing Orders—in October 2004. The Modernisation Committee also touched on the subject in its report last year on the legislative process. The Government have no current plans to conduct a further review of the operation of programming or to ask the Modernisation Committee to conduct such a review.

Does the Leader of the House accept that the programming procedure is thoroughly unsatisfactory to both sides of the House? It does not allow Back Benchers on either side of the House to participate properly in many important debates. Will he consider that matter again? Can I make a plea to the usual channels—of which I have never been part—to give more authority back to the Back Benches? In that regard, will the Leader of the House please consider setting up a business committee duly representative of the Back Benches?

There is a wider issue about Back Benchers’ involvement in the business of the House. As a senior member of the Modernisation Committee, the hon. Gentleman knows that it is currently considering the use of non-legislative time and ways in which the role of the Back Bencher can be strengthened. The programming arrangements are not wholly unsatisfactory; they are a great deal better than those to which he and I were used when we first came into the House, when there was no programming and a ritual of Opposition Members talking Committees into the night, then going for guillotining and not considering Bills in any detail. We were always ready to consider proposals for improving arrangements, and we did so in the summer of 2004. I am not certain that his specific proposal, made when he was Chairman of the Procedure Committee, of a 48-hour gap between Second Reading and agreement on the Sub-Programming Committee, would produce any benefits. That is the issue—nothing else—between us.

European Council

With permission, Mr. Speaker, I shall make a statement about the European Council summit that took place in Brussels on 8 and 9 March.

There were three main agenda items for the summit. First, the Council agreed to cut the administrative burden arising from EU legislation by 25 per cent. by 2012. This has long been a key British objective. It was a major part of the United Kingdom presidency of the EU in 2005, and it mirrors our own Government’s decision made last year. This decision makes another clear break with traditional European policy on regulation, and is hugely to be welcomed. It follows up a recent Commission decision to withdraw some 78 pieces of legislation—the first time that the EU has done that. I congratulate the Commission, and especially President Barroso and Commissioner Verheugen, on their determination. The decision has full British support.

Secondly, the Council agreed on an action plan to liberalise the energy market. The centrepiece is to free up the distribution of energy across the European Union to create a genuinely competitive, interconnected and Europe-wide internal energy market. That will bring major benefits for EU consumers, improve the security of supply, and strengthen European competitiveness. The European Council decided in particular that supply and production activities should be separated from network distribution to allow competition on the networks, as already happens in the UK.

Ever since the Hampton Court summit of October 2005, energy liberalisation and security of supply have been key objectives of ours for the European market. It is true that we still need to do more in Europe, especially in respect of the vertical integration of energy companies. Nevertheless, this means that for the first time, at least at distribution level, British companies can compete on equal terms with French or German companies—in particular, in France and Germany, not just here in the UK. That will bring reduced costs to business and to customers, and again it has our full support.

Thirdly, and most importantly, the European Council committed itself for the first time to a binding Europe-wide environment target: a 20 per cent. reduction in greenhouse gas emissions by 2020, compared with 1990. Moreover, the European Union undertook to go further and achieve a 30 per cent. reduction in emissions by 2020, if this was part of a wider international agreement. Until last week, no group of countries had committed itself to such deep reductions. This is a landmark decision, which will mean changes in all member states' domestic policies.

The Council also agreed on a binding commitment that renewable energy will comprise some 20 per cent. of overall EU energy consumption by 2020. However, the agreement allows for differentiated national targets within that overall EU objective. In particular, it recognises that for some member states, nuclear energy will play a significant role in achieving overall climate change targets.

The Council agreed a 20 per cent. increase in energy efficiency, again by 2020. It also recognised the importance of clean coal technology. We welcomed the Commission's undertaking to support, by 2015, the construction and operation of up to a dozen commercial-scale clean coal demonstration plants, with a view to all new coal-fired power stations’ being fitted with carbon capture and storage technology by 2020. That technology must be a crucial element in the overall response to the climate change challenge, and it is important that we signal that to investors now. Clean coal can be part of the future.

All these targets impel us towards a far more ambitious European emissions trading scheme. The Commission President is currently negotiating country-by-country caps on emissions for 2008 to 2012. Britain, as he has acknowledged, has helped by setting an ambitious cap for itself. The Commission has proposed that after 2011, aviation should also be within the ETS. We want to make the scheme more transparent, and we want it extended after 2012 to 2020 and beyond. All these proposals are set out in our recent paper to our European colleagues, and we are actively building the alliances in Europe to ensure that they are implemented.

Of course, these European commitments must be part of wider international action. As the Stern review demonstrated, without concerted international action there will be disastrous consequences for global economic development. The European Council therefore reaffirmed the importance of agreeing a long-term framework to address climate change. It set out a coherent and united vision for how such a wider international agreement would work. It paves the way for further action on climate change at the G8 summit in Germany in June.

This is, in the end, the crucial prize. It is important that we take action here in Britain, as tomorrow's climate change Bill will show. It is critical for the EU then to show leadership, as it did at the summit in a remarkable and groundbreaking way. For those who doubt the relevance of the European Union to today's world, last week's Council meeting and its historic agreement on climate change is the best riposte. It shows Europe following the concerns of its people, and giving real leadership to the rest of the world.

Ultimately, only an agreement that is global and includes America, China and India will halt the damage of rising greenhouse gas emissions. Everything else is, of course, justified in its own right, but this is, most of all, a means to that end. The G8 plus 5 dialogue which was started at Gleneagles under the UK presidency in 2005, and which has all the main countries within it, is the forum in which new principles for an international framework can be agreed. The summit in Germany this June will be the time to agree those principles, including a stabilisation goal, a route to a truly global carbon market, support for new technology, adaptation measures and action on deforestation. This is the next stage of the journey to effective multilateral global action on what is the single biggest long-term threat to our world.

Let me conclude by paying tribute to the leadership of Chancellor Merkel at the European summit. The agenda was bold and she carried it superbly. Unsurprisingly, as the matters it addressed were all fundamental British objectives, we were able to give that leadership full and active support. Once again, that shows the significance of strong, constructive and positive engagement in Europe.

May I thank the Prime Minister for his statement, and may I also do something that he is perhaps not always used to from the Leader of the Opposition after European statements, and congratulate him on helping to negotiate a successful outcome to the European Council?

We very much welcome the agreements on deregulation and liberalisation of the energy market. We have long shared those goals. The Prime Minister said that they had been goals of the British Government since 2005; I can well remember their being goals of the British Government in the 1980s. We welcome in particular the agreement to cut EU greenhouse gases by 20 per cent. by 2020. In our view, that is an essential step towards ensuring that there is the necessary international and domestic action to combat climate change.

The Prime Minister and I have many disagreements on European policy—no doubt we will continue to do so—but some issues go right across parties and across countries, as these negotiations show. Indeed, I have found out something over the last year, whether in talking to Nicolas Sarkozy, or the Swedish Prime Minister, or the Nordic Foreign Ministers, or the Greeks—[Hon. Members: “Or the Czechs?”] Yes—or indeed the Czech Prime Minister. They all agree. There is a growing consensus on the need to take action on climate change. Indeed, the agreement negotiated in Brussels at the weekend was unanimously agreed by leaders in Europe belonging to all parties and all countries right across the political spectrum, from Spanish socialists to Dutch Christian democrats and from the Italian centre-left to Polish conservatives. It is a consensus that I know that the Prime Minister welcomes as much as I do.

I have some detailed questions on how we make the 20 per cent. target, which we support, a reality. Clearly, we need to make the EU emissions trading scheme work better. In particular, does the Prime Minister agree with me that further steps need to be taken to stop European Governments issuing too many carbon permits? Will he confirm that those steps can be taken and that that does not require some deep institutional reform of the EU? Will he agree to a progressive tightening of the cap on such permits?

We also need to ensure a long-term price for carbon throughout the European economy. In order to make that happen, will the Prime Minister push for the completion of the third phase of the emissions trading system—the phase from 2012 to 2020? The Prime Minister talked about 2008 to 2012, but I would be grateful if he would explain when he thinks the next stage will be completed. Is it not the case that emissions trading needs to be aligned with the new 20 per cent. carbon reduction target?

Turning to the steps that we need to take domestically in the UK to meet the 20 per cent. target, does the Prime Minister agree that we need a critical path in order to hit that target? I know that he has set his face against these, but will he look again at whether there is a need for annual targets? Does not the recent experience of long-term targets show that such an approach is necessary? The Government have committed themselves to a 20 per cent. cut in emissions by 2010 three times in their manifestos, and we now know that that will not happen. Does not that show that annual targets are necessary? Clearly, all targets need to be backed by independent auditing. What measures will be taken to ensure that targets are independently set and independently audited so that we do not fail to meet them?

The summit also rightly concluded that we need a separate target for renewable energy as a share of energy consumption. When will we see the country-by-country allocations—[Interruption.]

Order. Please allow the Leader of the Opposition to speak. We gave our courtesy to the Prime Minister; the right hon. Gentleman should be able to respond.

The shadow Leader of the House has lost his deputy, and he is taking it out on the rest of us. [Interruption.] I am sorry—I meant the Leader of the House. I am getting ahead of myself: he is soon to be the shadow Leader of the House.

The 20 per cent. target for energy efficiency is also welcome. Performance in the UK on this issue has been disappointing, and it will take a step change to meet the target. The agreements that were reached at the weekend on renewables and energy efficiency have effectively changed Government policy. The Prime Minister said as much in his statement. When does he expect the Minister for Energy to set out the steps that we need to take to meet those targets? In particular, is he planning to change the national grid system to help to decentralise the domestic energy market? What is his plan to ensure that the renewable obligation favours the development of all renewable energy and not just onshore wind power? Above all, does not this European summit show clearly that when the EU focuses on real issues such as climate change and global poverty, rather than on centralisation, institution building and agreeing a new constitution, it can take real steps forward that are agreed by everybody?

I agree that it is important that Europe focuses on those key questions. May I deal first with domestic policy issues? I am against binding annual targets because they are too inflexible. Changes in temperature and in the cost and price of fuel can make a dramatic difference to the economy’s ability to cope with such a binding annual target. We have to strike a balance the whole way through between what we do to give leadership here, and not putting our industry in a position where it becomes uncompetitive or our consumers in a position where they get clobbered.

I am dubious about the right hon. Gentleman’s proposals to put VAT on air travel, or a new tax on airline fuel, because they might hit consumers and businesses in this country very hard, while having a small impact on CO2 emissions worldwide. It is important to get right the balance between what we do here and what we do by international agreement, because on it will depend whether we give the right leadership on this issue, as this country has in the past few years, but also whether at the same time we make our businesses uncompetitive and harm our consumers, which would be unfair to them.

We will set out steps for introducing more measures on energy efficiency, as we have already done in respect of new buildings. For example, it would plainly be sensible to build into the building schools for the future programme, through which we will rebuild or refurbish many schools in the country, measures for the use of environmentally sustainable energy and for energy efficiency. That is very important and is right. Of course, we will also be improving and increasing the amount of money that we devote to research on renewables and to our use of renewable energy.

I basically agree with the right hon. Gentleman’s points about the European emissions trading system, as that is precisely what we are trying to achieve in Europe. We are trying to get a progressive tightening of the cap, and to ensure that there are policies in place for post-2012 and that we extend the scheme. Bringing in aviation will play a major part in that.

By way of conclusion, I say to the right hon. Gentleman that we will need alliances to build all this. It was interesting, when we got to the discussion about what would be in the Berlin declaration, that there was a general agreement that we should put in a measure on climate change and protecting the environment. I must say that the only Prime Minister who spoke against it was—[Interruption.] It was indeed the Czech Prime Minister. To be fair, however, I must add that he made a very strong statement in favour of nuclear power, so I warmed to him on that.

The basic point, surely, is that if we want to get this done in Europe—I totally understand what the right hon. Gentleman says about what Europe focuses on; I make the same points myself a lot of the time—we have to recognise that this European relationship is the only way in which we can take critical action and make a critical difference to climate change. If we put at risk the European relationship in any shape or form, we diminish our capability to take that effective action on issues such as climate change. I really believe that this summit, particularly under the leadership of the German Chancellor, has indicated that over the years the agenda that we have been pressing for from this country—some of it, I agree, under previous Governments—has the chance now of really leading the agenda in Europe. We simply do not want to do anything that puts that at risk.

I, too, begin by congratulating Chancellor Merkel on achieving an agreement on the environment, which many people predicted would be difficult, if not impossible.

I welcome the review of the single market and the efforts to strengthen internal competitiveness. Does the Prime Minister agree that those are a necessary response to the challenges of globalisation and, in particular, the challenges of emerging economies such as India and China? I, too welcome support for a new transatlantic economic partnership, not least because it may be able to create a better political relationship across the Atlantic than the one we have had in recent years. There will be agreement on both sides that reducing the administrative burden of EU legislation by 25 per cent. by 2012 will be welcome, but does the Prime Minister agree that that needs to be matched by Whitehall with resistance to gold-plating and over-interpretation of EU legislation here in the United Kingdom?

In the discussion of the Mecca agreement and a Palestinian Government of national unity, can the Prime Minister tell us what practical steps, if any, were considered to maintain the momentum of that agreement as a contribution to the middle east peace process?

It is clear from the Prime Minister’s statement that the agreement on the environment was the most significant outcome of the Council. Does he agree that the real test lies not in the fact of the agreement, but in whether it is fully implemented? That leads me to ask him what additional measures the United Kingdom will adopt to meet those targets. I hope it is not too late for him to draw to the attention of the Chancellor of the Exchequer the advantages of using the tax system to encourage environmentally friendly behaviour. Can the Prime Minister tell us whether there is any greater role for the European Union than promoting energy efficiency, and whether he sees any opportunity for the United Kingdom to promote industrial development in renewables such as tidal and solar power?

Finally, what is the Prime Minister’s response to the Council’s research and development target of 3 per cent. of gross domestic product by 2010?

On the latter point, we are, through the research and development tax credit, improving the amount of support we give to industry in increasing its R and D, and the big increase in the science budget has made a difference too.

In relation to Whitehall, we have made it clear that gold-plating is no longer on the agenda—indeed, we are going back. We have a whole series of mechanisms in place now to prevent it. Occasionally it still crops up, and I assure the right hon. and learned Gentleman that we are vigilant in ensuring that it should not and does not, as there is no point in our over-interpreting European legislation.

In respect of the national unity Government and the Mecca agreement, what is important is that any such Government, if we are able to support them, are consistent with the Quartet principles in the position that they adopt vis-à-vis Israel. We wait to see whether that takes place.

As for the United Kingdom, the single most important thing that the UK can do is to be part of a progressively strong European emissions trading system. That is the best thing for us to do and, as I said to the Leader of the Opposition, we have to be careful; we have to strike a balance. We must be careful not to punish our own business and consumers, without ensuring that the measures are also taken at European level.

On China and India, it is important, of course, to do what we can to encourage them to be part of this wider agreement, but there is another point that is very important indeed. The latest figures from China indicate that it is building a new coal-fired power station every four days. China on its own, incidentally, is also due to build something in the region of 40 airports over the next few years. The single most important thing is to develop the science and technology and then to have the proper method of transferring that technology to the Chinese and the Indians. That is why we need to get an international agreement involving China, India and America that incentivises, through a carbon price and a stabilisation goal, the right science and technology, and then to share that. I am sure that China and India want to grow sustainably, but they will not put at risk their determination to reduce the poverty of their population. That is a reasonable position, which is why the G8 summit in June will be so important.

This is a good outcome that demonstrates the value of full engagement with the European Union, and one of the EU’s strengths. At last month’s meeting of the Washington legislators forum, there was a real willingness among legislators from the G8 plus 5 to sign up to the idea of stabilisation goals and global carbon markets. Does the Prime Minister think that that will be reflected by the leaders of China, India and the US at the forthcoming G8 plus 5 meeting, because that will be an important way of building support for a proper outcome post-2012?

First, may I pay tribute to the work that my right hon. Friend has done on this issue, especially at the recent meeting in Washington, in which he made an outstanding contribution, for which I thank him? Yes, that is precisely how we ensure that China and India come into this. As I was saying to the leader of the Liberal Democrats, China and India want to play a big part and we have to encourage them. However, they will not take action unless America is part of this—as is the case vice versa. We will not get further than this at the G8 summit in June, but if we get that far, agreeing the principles of a new deal will be a very big achievement. Part of that will be the technology transfer that those countries crave.

Was the Prime Minister personally involved in the drafting of the presidency conclusion on Palestine, which says that the European Union would deal with a Palestinian Government who

“adopts a platform reflecting the Quartet principles”?

Does he accept that that is, in a characteristically European way, a fudge, and will he give a clear assurance that the British Government will not deal with Hamas as long as it continues to support suicide bombing and the complete destruction of the state of Israel—which is, indeed, what it reaffirmed in a statement this morning?

The position certainly has not changed at all. All sorts of words are used in respect of the national unity Government, but they all amount to the same thing: that such a Government must be in line with the Quartet principles, which means that they must accept the right of Israel to exist, and that the way to pursue a settlement is through negotiation, not violence. That will remain our position. The issue for us is whether, in this national unity Government, it is possible to get Hamas to understand that we cannot support people who attempt to achieve their aims through terrorism and that we cannot, in particular, take forward negotiations on two states if Hamas is saying that one of those states does not have the right to exist. That is our position, it has been our position, and it will remain so.

The Prime Minister mentioned leadership in his statement. Is this not an example of the European Union showing world leadership before the G8 plus 5 and the United Nations conference of Kyoto protocol states in December? The Leader of the Opposition mentioned the European emissions trading scheme. Is that not the appropriate mechanism through which to ensure that, by 2020, we reach the 20 per cent. reduction target without penalising or interfering with our manufacturing industry?

I entirely agree with my hon. Friend—that is exactly the way to do it. If the European trading scheme develops in the right way over time, it is perfectly possible that we can get other countries or states in the United States to join. For example, the state of California has not ruled out the possibility of joining the system at a later time, and given that it has the sixth or seventh largest economy in the world, that would be of huge benefit.

It is reported that the most important decision taken at the summit’s Friday night dinner was to remove the word “constitution” from the European constitution. If the EU wants to earn a more important description as a democracy, will the Prime Minister insist that it respects the clear verdict on the substance of the constitution by the French and Dutch electors, who said no? Will he ensure that the European Council does not smuggle through bits of the constitution by changing its name? If he wants to put the matter beyond doubt, will he hold the promised referendum in this country, to give the people a final say?

I am afraid that, not for the first time in our deliberations about European summits, the right hon. Gentleman has been somewhat misinformed. That was certainly not the purport of the dinner on Thursday night. We agreed that it was important that the Berlin declaration did not get tangled up with issues to do with the constitutional treaty, which will come up at the June summit. In respect of the French and Dutch no votes, I can assure the right hon. Gentleman that the European Union as a whole is well aware of the implications of those verdicts.

May I congratulate the Prime Minister on the part that he played in securing an environmental agenda and agreement, but does he accept that a unilateral imposition of tax on fuel by the UK would make us a laughing stock, as airlines could import the oil from countries that do not pay the tax? Does he agree that a global agreement is necessary? I welcome the fact that aviation will be covered by the EU emissions trading scheme by 2011, but will the Prime Minister take it from me that there will be a bit of ducking and diving by the airlines when it comes to reaching a realistic price for carbon emissions, and will he assure colleagues and me that he will be firm in achieving that realistic price?

My right hon. Friend is absolutely right. As I say, we have to strike a balance, which is why I think it is very important that we do not take measures that harm our own industry or our own consumers, but at the same time ensure that we play our full part. He is right again in his implication that it is through the trading system that we will be able to do most, because that is on a common basis.

I welcome the statement as a positive step forward, and I welcome the reference to clean coal technology. The Prime Minister rightly said that much will depend on the wider international agreements that are reached through future debates. How well placed is Britain to take full advantage of clean coal technology and, importantly, to be able to transfer that technology to people in India and China?

We can certainly play our part with the rest of Europe in doing that. There is a certain expertise in the technology in Britain, but it is found elsewhere in Europe and the world, too. The hon. Gentleman is right to imply that the single biggest benefit of developing the technology is the possibility of exporting it to India and China—and America as well, of course, which has huge reserves of coal. Clean coal technology could offer a wholly different future for our own coal industry.

May I add my welcome for the Prime Minister’s statement, and particularly for the introduction of a mandatory 20 per cent. cut in emissions by 2020? However, it follows behind our voluntary target of a 20 per cent. cut by 2010 by a whole decade. Does my right hon. Friend detect any enthusiasm among other European states for voluntary cuts above the baseline—and it should be considered a baseline—of the mandatory target?

I think we should take it stage by stage. The targets are very challenging for the European Union; there is no doubt about that at all. The renewable energy target is particularly challenging, which is why I think it is just as well that we are able to take account of different member states’ energy mixes. My hon. Friend is right that once things really get under way, particularly if the European emissions trading system incentivises business and industry to do more, all the evidence is that people can be more bold and more radical than hitherto they thought they could be. The argument has already changed dramatically in the past few years, and I think that it will do so further in the next few years.

It makes sense to cut CO2 emissions, but has the Prime Minister had the chance to watch or be briefed on last Thursday’s Channel 4 “Dispatches” programme? There are eminent scientists who dispute the orthodoxy on the causes of global warming; one may or may not agree with them, but their voices are out there. Does the Prime Minister agree that before we take steps that might damage economic growth in the third world, where poverty is the main problem, we should ensure, on an ongoing basis, either nationally, or through the Commission or the EU, that all scientists are given a voice, so that we take the right decisions?

I have not been the greatest watcher of Channel 4’s “Dispatches”, for pretty obvious reasons, over the years. The hon. Gentleman is right: there are people who still dispute the science on climate change, but there is a problem. In most respects, I am a fan of people who are prepared to be iconoclastic and say things that are unpopular, even if the conventional wisdom is all one way, so I do not dispute his right to raise those issues at all. However, the fact is that all people who advise us say that the science is becoming increasingly clear, not less so, and the fact is that, should we not take action, and it turns out that the warnings of climate change are right, the implications are enormous. Even on a precautionary principle, it is as well to take avoiding action now. The debate will carry on among scientists, but as I have watched it develop in the past few years, the body of opinion has moved very solidly in favour of this threat being real. Therefore, the implications of it being real are so enormous that we would be foolish not to sit down and take action now.

May I welcome my right hon. Friend’s statement, which is of potentially huge significance and will be enormously welcomed by British manufacturing industry? Does he agree that crucial to its success are, first, mechanisms to ensure that European countries liberalise their energy markets; secondly, that the Commission is robust in upholding its national allocation plans for emissions trading; and, thirdly, that the Commission consider a sectoral approach to stop certain industries, such as the energy supply industry, hoovering up carbon credits and passing on the extra cost to British manufacturing?

My hon. Friend makes some very wise points. The important thing is that the Commission takes, as he says, the necessary robust action on energy liberalisation, and makes sure that the emissions trading scheme works properly. In that regard, another interesting change has taken place. British attitudes towards the European Commission have not always been clothed in the utmost warmth—indeed we have often regarded the Commission in Brussels as the problem. Interestingly, this President of the Commission—we played a part in ensuring that he became President—has provided us with an opportunity on regulation, liberalisation and issues such as climate change, as he has the necessary tough appreciation of what is right for Europe’s competitiveness, and is prepared, too, to take a long-term view on issues such as climate change. We need a robust European Commission to complete the agenda.

I agree with the Prime Minister and with the Leader of the Opposition that the summit shows that British interests can work in harmony with those of the European Union, which is another justification for our being fully integrated into the Union. I agree, too, with a remark that the Prime Minister just made about the Commission. It is vital, particularly in competition policy, that energy distribution industries are opened up, which means that the Commission must take tough action that is backed by the European Court. During the summit, did the Prime Minister discuss energy security? There are increasingly worrying signs that the Russians are trying to interfere with our key pipeline—both the distribution networks through the pipeline and the source of the oil itself. That sort of Russian politics is becoming quite worrying for the European Union.

It is interesting that the Baltic states—Estonia, Lithuania and Latvia—are coming together to build a nuclear power station to improve the security of their energy supply. Although it was not the main subject at the summit, there was a great deal of concern and discussion about energy security. The hon. Gentleman’s point about the European Commission is right and true, which is why Britain has an unparalleled opportunity in Europe. First, we have an enlarged European Union—again, the hon. Gentleman’s and then our Government fought for that—so that alliances in Europe are far more fluid than they were before. Secondly, the European Commission is increasingly on all fours with the agenda that we want. Both those things give us big opportunities in Europe.

I wish to take up a comment that my right hon. Friend made a few moments ago. Although all Palestinian factions should recognise the existence of Israel’s pre-1967 borders, is he aware that while the European Council was meeting many of us saw on television Israeli troops using Palestinian children as human shields, clearly in defiance of international law? What protest will be made by the European Council, the British Government and, I hope, the United States Government about what the Israelis are doing and what we have seen on television, which is totally unacceptable?

The only way through is to get negotiations going between the Israelis and the Palestinians. I hope that the meetings that are already taking place between Prime Minister Olmert and President Abbas of the Palestinian Authority continue. I know that the US Secretary of State, Condi Rice, is to go back to the region shortly—[Interruption.] I understand what my hon. Friend says, but the only thing that will put a stop to the grief and hardship on both sides is a negotiated settlement.

I warmly welcome the environmental conclusions of the Council. In his discussions with Angela Merkel, did the Prime Minister learn of the fact that in Germany some 200,000 people are employed in the renewable energies industry, largely owing to the much more advantageous terms on which Germans who install renewable systems have their electricity purchased? What plans has he to reconsider how electricity is purchased in this country, to make the installation of renewable technology much more attractive?

The point that the right hon. Gentleman makes is right. People in Germany who generate energy through microgeneration are able to feed any surplus energy back into the system. These matters are all under active consideration, and he may learn more about this in the next few days.

I join the Leader of the Opposition in congratulating my right hon. Friend on achieving his objectives at the Council. The conclusions refer to progress with the Lisbon agenda. Is he confident that the target of 7 million jobs to be created in the next year in the EU will be met? Given his leadership in this area over the past seven years, since Lisbon began, what steps will he take to ensure that our European partners pursue that agenda as vigorously as Great Britain?

Europe has generated millions more jobs in the past few years, but we still have levels of unemployment that are far too high. We also need a labour market that is more geared to employability, rather than a more old-fashioned view of the social dimension. It depends to a great extent on the Commission being allowed, and being given support by member states, to take measures on liberalising the European market and on making sure that we support our work force through training, education and skills—active labour market policies, rather than old-style regulation. That is the agenda that we will push. The good news is that the Commission is on the same track. We need to ensure that all member states are on the same track.

Will not the apparent decision to allow member states to count investment in nuclear power against their renewable energy targets have the effect that the renewable industries have long feared—that encouraging investment in nuclear power will undermine investment in the truly renewable industries?

That it not what it does. The overall target for renewable energy is 20 per cent. for the whole of the European Union. It is in the allocation of that 20 per cent. that account can be taken of the energy mix of individual countries. The 20 per cent. target is at the bold end of the spectrum. We will face considerable difficulties in ensuring that all the European Union meets that target. If the energy mix could not take account of the reliance of the UK, France and other countries on nuclear power, it is hard to see how that could be fairly done. So that is necessary to protect the British interest, and it gives Europe more flexibility in how we meet that target. It does not change the target itself.

Further to the point about the Russian Federation, considering Europe’s heavy dependence on Russia for much of its energy, is it not vital that we get Russia to sign up to the CO2 emissions action as well, and that we try to persuade Russia to adopt a more secure path in the liberalisation of its market so that people can have confidence in the investment that they make in Russia?

That would be sensible for us and, dare I say it, for the Russian Federation as well, but it is a decision that it has to take. For our country and other European countries, the concept of the common European energy policy has come about in part because people want the strength of countries acting together when we negotiate with those who are going to supply a large part of our energy needs. It is very sensible for us to do that. I also think that if we can get the right type of relationship with Russia, it will make a big difference to our security and, as my hon. Friend rightly implies, to its competitiveness.

I am sure that my right hon. Friend will agree that the summit will have a significant impact on companies that are considering investing in energy-saving technologies and in particular in developing new businesses. At a recent awards ceremony, sponsored by Shell, that I was privileged to attend on this very subject, a number of companies that were the winners displayed products that were near to market and at-market, which could significantly help this country. He mentioned the building schools for the future programme. Will he ensure that such companies are given support in public sector procurement, because it is a way in which the Government can give a lead?

My hon. Friend is right to say that. We must ensure that we give proper support to those companies that have imaginative and near-to-market proposals. The important thing for Governments is not to try to pick the technologies, but to incentivise the development of the technologies. The market will do the rest.

Did the European Council discuss the proscription of the People’s Mujaheddin of Iran? Will the Prime Minister explain his Government’s reluctance to accept the findings of the European Court of First Instance in that matter?

How do the Government propose to measure the Commission’s action programme for reducing administrative burdens in the EU and the success of the programme? It is easy enough to count directives or regulations merged or scrapped, but what is the cost of European regulation on British business? Do the Government propose to publish figures showing that the cost for that will start to decline instead of carrying on increasing?

The Commission has its own means now of assessing and, I think, publishing—I shall check that in case I am wrong—the administrative costs of legislation. The idea is to reduce the percentage of those costs by 25 per cent. That is its purpose and it is similar to what we have proposed in the UK. The whole point is that administrative costs should be measurable. I agree that it is a big change in what the European Union has done up to now, but I would think and hope that the hon. Gentleman welcomed that.

Given that the Prime Minister has told us that aviation is supposed to enter the emissions trading scheme in 2011, will he or his Chancellor be making proposals to offset their massive increase in air passenger duty against that scheme?

I think that I am right in saying that the increase in air passenger duty will cost significantly less, certainly for most domestic travel, than VAT on airline fuel or the proposals of the Leader of the Opposition. The most important thing is that whatever we do, we do it Europe-wide. I am not saying that we cannot do certain things domestically, but we must be careful to get the balance right, as I said. I think that those proposals do not.

What action are the Prime Minister and Europe taking to ensure that the global price for carbon will enable the carbon trading policies to work effectively?

The way in which the emissions trading system works is to set a cap on emissions for each individual country and trade the permits within that system. Basically, the price is set through the cap. Progressively, we need to lower the cap so that the carbon price is transparent and the necessary incentive is given for business and industry to develop the science and technology to deal with it.

Incidentally, I agree that we have to be careful in the way in which permits are traded, but the single most important thing is to be able, progressively over time, to reduce that cap. If we could get a situation whereby there were other regional emission trading systems and they at some point linked up, that would probably be the best route to a global carbon trading system, which is, in the end, what we need.

The President of the European Commission, José Manuel Barroso, told Der Spiegel on Friday that the EU has no formal competency on energy policies, which it would have only after the passing of the EU constitution. On getting action on climate change, he said:

“With the constitution, it would be much easier”.

Does the Prime Minister agree that he needs to send a message to Mr. Barroso that we do not need to wait for structural change in the EU to get strong collective action on both energy security and climate change?

To be fair, President Barroso is taking action. He is right in saying that energy was part of the constitutional treaty. Irrespective of what is in the treaty, we can take common action at a European level, which is what we have agreed to do. I think that he has shown commendable leadership on that issue.

Does the Prime Minister agree that the effectiveness of the existing EU emissions trading scheme has been undermined by the over-generous allocation of carbon credits to certain member states?

That is probably true, but it is not very surprising at this stage. The scheme has just begun, and it is the first of its type in the world. Just as at a national level we have to be careful that we do not get so far out in front of the pack that we damage our own business and consumers, so at a European level we operate in a globally competitive economy. I think that I am right in saying that European emissions comprise 15 per cent. or possibly a little bit more of the total. In the end, the purpose of the European emissions trading system is, as it develops, to become more effective, which is why President Barroso is trying to set much more ambitious caps for 2008 to 2012. In time, we will bump up against a limit in Europe, unless we can draw in other countries. As the hon. Gentleman will know, it would be an understatement to say that the leaders of European industry are concerned about how the European emissions trading system may develop. We need to take the process in stages. It is important that we achieve an agreement at the G8 plus 5 to the principle of a stabilisation goal and of a global carbon trading system to make the process move forward.

Given that Russia’s increasing authoritarianism and truly lamentable human rights record should be of continuing concern to all EU member states and that regional instability threatens to hinder progress on a wide range of issues from organised crime to nuclear proliferation, will the Prime Minister tell the House about whatever discussions took place at the summit on the need to engage with Russia above and beyond energy matters?

I cannot recall offhand particular discussions on that at the summit, but I think it a fair characterisation to say that it is a running theme of all European meetings at the moment. There is a desire to engage with Russia as a major partner for Europe, but there is also a great deal of wariness for the very reasons that the hon. Gentleman gives. One of the reasons countries around Europe are taking decisions on energy policy, such as some of the decisions that we have taken here, is the concern about that. I hope that Russia understands and realises that its best prospect of playing its full part in the international community, and certainly its best opportunity to be a strong economy, is if it plays by the same rules as everybody else in Europe and America, too. I assure the hon. Gentleman that at every opportunity we discuss the matter both with our allies and, in so far as we can, with the Russians. I think that developments in the next couple of years will be extremely important.

Further to the question asked by the right hon. Member for Leicester, East (Keith Vaz), may I ask the Prime Minister again about the Lisbon agenda? How much discussion took place on the Lisbon agenda? Is it still his Government’s intention to retain Britain’s individual opt-out on the working time directive?

We will not do anything that puts at risk our position on the working time directive. We do want a resolution of this, however, since, as the hon. Gentleman knows, we have real problems with the SIMAP and Jaeger judgments, which are costing our health service a very significant sum every year.

Yes, there was a discussion about the Lisbon agenda, and it forms part of the conclusions. In the end, however, the best way of getting the Lisbon agenda taken forward is to support a strong European Commission. That may not be absolutely to the hon. Gentleman’s liking, but it is the best way of doing it. The whole point about the single market is that what ultimately stands in the way of its completion is the various vested interests of the various member states and their industrial sectors. The only bulwark against that is the European Commission, which is why it is so important that we give full support to President Barroso and his agenda.

Points of Order

On a point of order, Mr. Speaker. I know that you are not responsible in any way for the quality of Departments’ replies to written questions, but I believe that the named day procedure was put in place to limit the number of questions that we ask on a given day for written answer so that we would have a good chance of getting a decent answer to them. In mid-December, I tabled a series of very specific questions about the assassination of Georgi Markov in 1978, bearing in mind that next year the statute of limitations will run out for any possible prosecution of the alleged assassin, Francesco Gullino. I was given a holding answer on 19 December saying that a reply would be given as soon as possible, but I have had to wait until 8 March to receive the substantive answer, which reads:

“The investigation into the death of Georgi Markov is a matter for the Commissioner of metropolitan police.”—[Official Report, 8 March 2007; Vol. 457, c. 2164W.]

I could just as easily have been told that on 19 December and not have lost two and a half months. Is it not part of the deal that if the Department is going to give an answer such as that it should give it on the named day?

I can take the blame for many things, but I am not responsible for the answers that Ministers give.

On a point of order, Mr. Speaker. I wonder whether I can seek your advice. Some 1,400 of my constituents wrote to the Secretary of State for Health about their concerns about the closure of our local general hospital. On 1 February, the Minister of State, Department of Health, the hon. Member for Leigh (Andy Burnham), who is on the Front Bench, wrote to me assuring me that even though acute services would be closed, an independent sector treatment centre would be built in my constituency. Yet on Friday evening, the chief executive of my trust phoned to tell me that the ISTC was not going ahead and my constituents had been misled. How can we clarify such misleading statements from Ministers?

It sounds to me as though the hon. Gentleman should apply for an Adjournment debate. I cannot make any promises, but sometimes the Speaker looks at local constituency matters favourably.


[2nd Allotted Day]


NHS Deficits

[Relevant documents: The First Report from the Health Committee, Session 2006-07, HC 73-I, National Health Service Deficits, and the Government Response thereto, Cm 7028; and the Department of Health Departmental Report 2006, Cm 6814.]

Motion made, and Question proposed,

That, for the year ending with 31st March 2007, for expenditure by the Department of Health—

(1) further resources, not exceeding £94,395,000, be authorised for use as set out in HC 293,

(2) a further sum, not exceeding £1,000, be granted to Her Majesty out of the Consolidated Fund to meet the costs as so set out, and

(3) limits as so set out be set on appropriations in aid.—[Huw Irranca-Davies.]

First, let me say how pleased I am that we have this opportunity to debate the Health Committee’s report on national health service deficits and the Government’s response. I thank the Liaison Committee and the scrutiny unit of the House of Commons for assisting us in this process. I thank members of the Health Committee, some of whom are in their places this afternoon. They have spent many weeks and months working on the report. I thank the secretariat and the special advisers who helped us to draw up the report, which we published before Christmas.

I would also like to thank the Department of Health. It published not only the response to our report on 20 February, but, by coincidence, its own examination into deficits—[Interruption.]

Order. An awful lot of private, loud conversations are taking place in the Chamber. That is unfair to the right hon. Gentleman.

The Department published a document to explain the national health service deficits. It was conducted by the chief economist of the Department’s corporate analytical team. Coincidentally again, on the same day that the Government response to our report was published, they also published quarter three of the NHS returns for this financial year.

I want to pick up some of the more serious points that we made in the report and consider the Government’s response to them. Let me begin with the introduction in 2004-05 of resource accounting and budgeting. The Health Committee considered that in great detail and took evidence from the Audit Commission, which had also examined the change in accounting in NHS bodies. It and the Health Committee were critical of resource accounting and budgeting.

I appreciate that the Minister of State, Department of Health, my hon. Friend the Member for Leigh (Andy Burnham) will doubtless speak about the matter at some length, but let me cite paragraph 25 of the Government response, which states:

“In this context, the Department is looking seriously at the case for reversing the impact of past RAB deductions for NHS trusts for delivery of financial balance in 2006-07 and at the future application of the RAB regime for NHS trusts.”

Will my hon. Friend the Minister tell the House the Government’s exact thinking on the matter? It worried the Committee, the Audit Commission and many parts of the NHS.

The Select Committee sought the disapplication of resource accounting and budgeting to the NHS. For me—and, I suspect, for the Government—there is a good case for not applying it to NHS hospital trusts run as businesses, or, indeed, to NHS provider trusts. However, there is not a good case for not applying RAB to primary care trusts, which receive a given amount of public expenditure resources. They should live within the overall resource envelope.

As an individual, and not speaking on behalf of the Committee, I accept that all sectors of the NHS—primary or acute sector trusts—have the responsibility to the taxpayer to work within their budgets and their means. That has clearly been difficult for some of them in recent years because of the change to resource accounting and budgeting. The Committee and the Government’s analytical team have considered that in recent months.

Let me make my point clear. All provider trusts in the NHS are businesses. In the course of their normal business, they may well incur deficits and losses on their income and expenditure account one year and surpluses in others. There may be legitimate reasons for that. However, a primary care trust, in its proper role as a commissioner of services, receives a given amount of resources and has a responsibility not to spend more than the resources that are voted to it through the House. The discipline of RAB should therefore apply to primary care trusts but not to businesses that are trying to provide services year on year.

We need to extend the debate. I shall say a little about what the Committee found in some health communities, which told us, “Last year, we were the overspenders and we were the acute sector, so we’ll move it to the primary sector this year and they can be overspenders.” That is an unhealthy state of affairs and I shall mention it briefly again later. We cannot say that RAB is all right for one sector of the NHS but not another.

The hon. Member for South Cambridgeshire (Mr. Lansley), speaking from the Conservative Benches, raised a very important point. Does the Chairman of the Select Committee agree that there is an inherent contradiction between a primary care trust, which has a finite budget to manage, and foundation trusts within that PCT, which have a “payment by results”, more open-ended agenda? There are two conflicting arrangements there, which are certainly not conducive to balancing the books.

At this stage, I would say to the hon. Gentleman that we looked at the issue of payment by results, but whether or not it is a distorting factor has not yet been finalised. If the hon. Gentleman reads the report in detail, he will find that the Government put their hands up in some respects and brought in some elements of payment by results and some tariffs that were clearly off the mark. Some changes were made earlier in this financial year to try to get them back to a more sensible balance.

This has been and remains very much a moving picture. Once we start to make national health service expenditure transparent, as the Government have tried to do, all sorts of things are brought into play. That is not historical, but quite new in respect of payment by results. Other aspects, which I shall come on to in a few minutes if I can make some progress, have been more historical.

Yes, I have the honour of being a member of the Committee of which the right hon. Gentleman is the Chairman. Before he moves on, I agree that everyone should stick within the allotted budgets, but the problem is that the formula in many areas is so bad for trusts that they cannot both stay within budget and produce the care that our constituents deserve.

The hon. Gentleman uses the phrase “so bad”, which I am not sure I would use, but we tried to establish what it was in the formula that led to the problem. Indeed, that is what the Government’s own analytical department has been trying to do. I will refer both to what we found—or, in that particular case, what was not found—and how the Government responded to it in their own report of 20 February.

We all greatly respect how the right hon. Gentleman chairs the Select Committee. I have raised with him the serious problem of historic deficits where the Government order one trust to merge with another trust, which can often lead to a very substantial deficit that the newly created trust then finds it almost impossible to get out from under. The trust has no alternative but to deal with that. Does the right hon. Gentleman agree that the Government really need to find a more sympathetic understanding and a more coherent way to deal with those inherited deficits that does not cause such terrible difficulties later on in the trust’s life?

The hon. Gentleman will see exactly what we tried to do in the report. We dealt with how to manage the situation where deficits, historical or otherwise, are a very high percentage of the turnover of one organisation while at the same time being fair to other organisations in the NHS and to the taxpayer. Basically, deficits are about overspending. Whether historical or not, they are overspend against the budgets allotted to each individual constituent part of the NHS.

My own view—I have said it for many months now—is that that problem has to be addressed in the interest of the taxpayer and in the interest of the NHS. We cannot have all this extra money being invested only to find out that there is still overspending. Often we do not know exactly where the money has gone or whether it is improving productivity and so forth. Under those circumstances, these are big issues. I would not want to argue—neither did the Committee, to its good sense—that where there are massive overspends or deficits, we should not find some mechanism for dealing with them. It is up to the Government, who run the organisation, to find out how they can make people more responsible than they have been in health communities in the past where overspend has taken place.

One of the biggest issues for me—I speak from a personal level—was how the Government decided this current financial year to take on the matter of the overspend or deficits by seeking to balance the books nationally by the end of the financial year. They sought to do so on the basis of top-slicing. It certainly hurt my health community when more than £7 million was withheld from the Rotherham primary care trust, but I am pleased to say that that came out of growth money rather than current services. If it were not for that, I would have been even stronger in my criticism of top-slicing, which was done to bring back some discipline.

I have a question for my hon. Friend the Minister. Paragraph 26 of the Government’s response to the Select Committee report states:

“We agree that top-slicing of PCT allocations to create SHA reserves is a temporary expedient,”—

the Committee agreed with that—

“with 2006-07 contributions being returned to the originating organisations as soon as possible.”

According to the quarter three returns of the NHS finances that were published on 20 February, there is a suggestion that £300 million could be paid back from the top-slicing within the year in which the top-slicing has taken place. That is my understanding of the situation; if that is correct, will my hon. Friend tell me how that money will be paid back, and to which primary care trusts or NHS organisations?

Ministers have already told us that, in many instances, top-slicing has taken place in areas where there are high levels of health inequality. Those are the last places in which we should be holding back national health service expenditure, not the first. The top-slicing took place as a percentage across the board in SHA communities. If that money is to be repaid within the year, how will that be brought about? In Yorkshire and the Humber, for example, will a percentage be given back to all the NHS trusts? I will not bore the House with the details, but if we look at the health inequalities in that area, we see that there is great diversity there, although there was no diversity involved in the top-slicing. Perhaps my hon. Friend can respond to that point at some stage.

I should like to move on to the contingency plans. The Government had planned to set up what we called a buffer in relation to the present in-year problems. They said that it was not a buffer, but it related to the top-slicing. In paragraph 31 of their response to the Select Committee report, they state:

“No additional resources would be provided by Government for these purposes.—”

that is, for the purposes of dealing with the current overspend. Given that nowhere near all the deficits will be cleared by the end of this financial year, what action can we expect to be taken next year by SHAs? Will we see the repayment of the £300 million—if my analysis is correct—in this financial year, only for further top-slicing to take place in 2007-08? I would like my hon. Friend to answer that question as well.

The lack of a failure strategy to deal with in-year problems was not acted on quickly, but the Government are now talking about the implementation of a formal failure strategy in response to our criticisms. Will my hon. Friend tell the House what the situation is, in that regard?

The hon. Member for Hemel Hempstead (Mike Penning) mentioned the funding formula. The Committee took evidence from three professors for our report, and I think that we heard four different interpretations of the funding formula on that occasion. We were trying to determine whether the formula disadvantaged rural areas, and it would only be fair to say that that was denied by our witnesses. I note, however, that page 6 of the report that I mentioned earlier—which was placed on the website by the Department on 20 December—stated:

“Since deficits are found to be more prevalent in rural areas, further investigation of the costs and organisational aspects of servicing rural populations is recommended.”

In the report, the Government say that the formula is being considered by the relevant committee. How long is it likely to be before we get an explanation or interpretation of whether the funding formula impacts negatively on rural areas?

The individuals who gave evidence to the Select Committee were joined by the chief economist for the NHS, who said that the formula did have a detrimental effect on areas such as mine in Hemel Hempstead. In evidence on page 103 of the report, however, the Secretary of State said that the correlation was “very, very small”, which is contradicted by her own Department’s report.

The Department mentioned six areas in its executive summary in relation to the current deficits, and that is certainly one of them.

My hon. Friend the Minister will be familiar with the cuts in education and training budgets. Given the overspend in certain areas, those seemed to be easy targets. Effectively, budgets are held by SHAs and are consequently easy to hold back in order to balance national budgets. The Government said, in paragraph 65 of their response:

“Although…funding will not be ring fenced”—

for which we had asked, because of the raids, so to speak, in the current financial year—

“there will be a more robust service level agreement which will seek to ensure that SHA decisions on what training to fund and the level of commissions of training places required are made on the basis of long term workforce need.”

The Health Committee will, I hope, agree a report on work force planning later this week, and no doubt the House will debate the matter again. I would be interested, however, to know exactly what the Government mean by the phrase, “robust service level agreement”.

Cuts to vulnerable services were also criticised. Numerous witnesses suggested that mental health and public health expenditure were the easier targets in health care. Several organisations wrote to us to make that point. The Government effectively denied that in their response. They said:

“However, improving financial management does not mean compromising services for patients. To ensure that these services are not compromised the Department of Health has asked SHAs to ensure that local changes to spending plans are equitable across the local health economy, and that NHS organisations providing mental health and learning disability services should not be asked to contribute more in savings or cost improvement plans than any other service”.

I accept that entirely as it is written, but none of the three services that I have mentioned has national targets set. When services do have national targets, the NHS believes that those must be met. Under those circumstances, it is right and proper to say that matters should be equitable, but do we have equity when there are national targets and when some areas of the national health service have had such problems recently?

On the delay in recognising deficits, the analytical body said in its report that the NHS’s inability to recognise the implications of changes in resource accounting and budgeting and therefore what was likely to happen in the particular year was one of the major problems.

The Government responded, and I am pleased that they did. We had said:

“We are surprised that it took so long for the unsustainable financial commitments which trusts were undertaking to be recognised.”

The Government’s response was:

“We have changed this financial focus, and, in the context of greater transparency, now encourage the NHS to plan towards achieving surpluses.”

That represents a big change in the culture of the national health service:

I remember, many years ago when I was an Opposition health spokesman, reading Audit Commission reports showing that the priority of hospitals at this time of year was to spend their budgets immediately. If they did not do so, regardless of whether they needed the relevant equipment, the budget would be withheld from them in the following financial year. Has that changed? Rather than spending all its annual budget, can a part of the NHS—while not making a profit—keep some money that can be rolled over into the next financial year? That could help the NHS to plan for different departments.

Recommendation 29 of the Select Committee report expresses concern about short-term answers to some of the financial problems faced by acute trusts in particular. Does the right hon. Gentleman feel that the transfer of access to brokerage on deficits from acute trusts to strategic health authorities was a positive or a detrimental step?

I think it was a positive step. The hon. Gentleman will find “Explaining NHS Deficits, 2003/04 – 2005/06” on a Department of Health website. I do not think it has been published yet, but it appeared on 20 February. As it explains, the main reason for the deficits is the fact that in 2003-04, strategic health authorities were told that they could no longer move capital into revenue accounts, as the NHS had done for decades. Capital expenditure budgets were easy targets, because they were not as obvious as revenue budgets. When the practice stopped, the whole issue of deficits was brought to light.

I hope the House accepts that I am not being partisan when I say that that was a brave decision for any Government to make. Sir Humphrey would say “That was very brave, Minister.” It brought the House, as well as the Government, into the debate on whether enough money was going into the system. In the past, SHAs had covered up overspend by ensuring that other parts of the NHS effectively underspent. It is possible that there was underspending in areas where there was more need—no doubt examples will be produced—but that was not the intention. The intention was to ensure that an NHS organisation’s budget was the property of that organisation, to serve its health community. Until two years ago, that was not the case because of the brokerage that was taking place. I am very pleased that it has ended.

I am listening to the right hon. Gentleman’s speech with interest, because he is describing many of the factors that have disrupted local health services in my constituency. Earlier, he suggested that primary care trusts should be able to run up their own reserves to cushion the impact of changes and new targets issued by the Government. Is that recommendation in the Select Committee report? I cannot find it. If it is not, would the right hon. Gentleman consider making such a recommendation to the Government? That really would be about financial independence for PCTs and others.

Let me read out the Government’s response again:

“We have changed this financial focus, and, in the context of greater transparency, now encourage the NHS to plan towards achieving surpluses.”

That is very plain, and very specific. It is in paragraph 80 of the Government’s response. I think I know what the Government mean by it; all I want to know is whether organisations would lose any money that they did not spend in any one year. I do not think that that is necessarily wrong, but it is a major issue.

Will the trust that has not been overspending—it might be spending up to the mark because it feels that it has to do so as the end of March is coming up—be able to save however many millions of pounds are involved and then take that into the next year with no consequences for the following year’s expenditure? That is important.

The Health Committee was very critical of what we call the failure of financial management inside the national health service. I am pleased that the Government have accepted that

“within the highly complex NHS system, day-to-day financial management practice has not always been of a consistently high standard.”

Many of us agree with that.

We also criticised the role of finance directors. Indeed, some NHS organisations—some with budgets of more than £200 million or £300 million per annum—did not have what would be called a finance director who is responsible to the board for the income and expenditure of the organisation. I am pleased that the Government have now said:

“A national training programme for Strategic Financial Leadership is in the process of being set up and every organisation will be expected to support their Finance Director in attending this programme.”

However, the end of that statement is a little thin, so I ask how far we have got now in setting that up. If we are to avoid the situation that has arisen in the last few years—and probably decades—in the national health service of there being overspending which is hidden by this type of brokerage, it is important that people have confidence that their finance directors know exactly what is happening and what should be happening and that they are looking after the interests of both the taxpayer and the people who use the national health service.

I shall not carry on much longer as I know that other Members wish to contribute. The whole issue of national health service deficits arose early last year, and question marks still hang over some aspects of it. I have posed a few questions this afternoon, to which I hope my hon. Friend the Minister will respond and I am sure that other Members will have other questions to ask. It is crucial that the taxpayer—and everybody else—knows exactly how their money is being spent inside the national health service.

When the Health Committee comes to report later this year, we will have further thoughts on how we have ended up in our current situation in respect of at least one other area that we shall look at. I hope that Members agree that some progress has been made in the past few weeks in explaining the history of national health service deficits and in finding a mechanism for tackling the problems that some trusts face. Some parts of the national health service still face deep problems because of their amounts of overspend, regardless of whether that overspend is historical—they have inherited it—or they have created it themselves. The Government need to address these issues soon.