I am grateful for this opportunity to debate the effect of the cuts in the Department for Environment, Food and Rural Affairs grant to British Waterways.

Canals play an important part in the life of my constituency. I have enjoyed taking part in activities and events on them, and I am a very keen narrow boater. Last Sunday, on dry land, I walked part of the route of the Lichfield canal with fellow keen supporters of the Lichfield and Hatherton Canals Restoration Trust. I ought also to declare an interest in that I am a proud member of the Lichfield branch of the Inland Waterways Association.

To get back to the cuts, however, the background to this sorry story goes back to last summer. After British Waterways had set its annual budget for the year—a budget already diminished by more than £1 million—the then Secretary of State for Environment, Food and Rural Affairs discovered a large hole in her Department’s budgets. It was a £200 million hole, which no one—including DEFRA—has been able to explain properly. It is clear that the Chancellor of the Exchequer was equally unimpressed with DEFRA, because he refused to bail it out using the Treasury's contingency reserve.

The various lamentable ministerial explanations of how the funding gap arose could be the subject of an entirely different debate—a point that my hon. Friends have frequently made. Suffice it to say that the gap has had an enormous impact on everyone but the very people who created it, one of whom, to her immense surprise, was not sacked by the Prime Minister for incompetence when she was suddenly called to see him, but was instead promoted to Foreign Secretary.

British Waterways woke up last summer to discover that, as a result of the hole in DEFRA’s budget, it had to make cuts year in, year out, in a totally unplanned manner. It is not good enough for the Minister to say, as I am sure he will later in the debate, that British Waterways was already restructuring. All bodies are always looking at ways to save money. Yes, British Waterways would certainly have made some changes and probably some redundancies. The difference is that they would have been planned and properly constructed, not handed down from on high to be delivered within the same financial year. They would certainly not have been worked out on the back of an envelope, as these cuts apparently have been.

The exact size of the cut that was imposed has been much disputed. The Minister’s oft-repeated line implies that it is just a few million pounds. Only last Monday, the Minister gave evidence to a Sub-Committee of the Environment, Food and Rural Affairs Committee on that very subject. I shall return to that topic, but it is worth noting that he made an extraordinary announcement, which implied that the British Waterways board was deliberately misleading the Government. I know that British Waterways was told to make the cuts and to plan to spend up to 95 per cent. of its revised budget. It is a sign of the success of the anti-DEFRA cuts campaign that that particular cut was quietly forgotten.

Whatever the exact figure, the impact has been massive. There were 180 job losses this month; millions of pounds of maintenance have been put back; the freight division of British Waterways has been completely dissolved, and, in the centre of canal country, two units have been merged into one, thereby taking British Waterways further away from the very people it serves in running our waterways.

Does the hon. Gentleman accept that there is now a question mark over some very worthy causes in the waterways network, such as the reconnection of the Montgomery canal to the rest of the network? In the long term, canals pay for themselves many times over, so in macro terms the economy is a false one.

The hon. Gentleman is absolutely right. Not only is there a question mark over the future of some projects, but a project has actually been stopped, as I shall explain. Incidentally, I have been on the Montgomery canal and it is a beautiful route. Actual cuts have now taken place because of the incompetence of DEFRA.

Does my hon. Friend agree that one of the manifestations of sheer incompetence has been the increase in mooring fees on the Kennet and Avon canal? One of my constituents wrote to me to say that there has been an increase of 44 per cent. in the mooring fee for their narrow boat. Many people using the canals are not people of massive means; very often they are pensioners. What does my hon. Friend think of that? Is not the problem attributable directly to DEFRA’s incompetence?

My hon. Friend makes his point well. DEFRA’s incompetence is depriving ordinary people such as pensioners and people with restricted incomes of their use of canals, and that incompetence has been repeated year after year. It is quite extraordinary.

On the few occasions on which he has met with organisations involved with the waterways, and notably on Radio 5 Live, the Minister has said that the cuts were just for the one year. They were a disaster, but at least a one-off disaster. Now, however, we know that that is not the case. Indeed, the Minister is now making it clear that the likely budget increase for British Waterways will be based on the retail prices index minus 5 per cent., year after year, and might be even worse. That is my concern, because most organisations can take a one-off hit on their budgets, but the problem for British Waterways is that we now learn that the cuts will be year on year.

No similar organisation is treated in that way: financially crippled through the mistakes of others. I argue that British Waterways, the guardian and steward of 2,500 miles of linear park up and down the country—I use the word “park” advisedly—and custodian of hundreds of listed structures, several ancient monuments and 65 sites of special scientific interest, is a national institution that should be cherished.

Ongoing cuts will have a terrible effect on maintenance of existing canals. The Environment, Food and Rural Affairs Committee was told only recently that certain businesses will not operate in future. On the Monmouthshire and Brecon canal there have already been two breaches that have put the canal out of action for a few months.

The hon. Gentleman is absolutely right, and he must have read my speech, because I shall come to that subject.

The Bridgwater and Taunton canal has enormous problems because the lock gates that would connect it with the sea cannot be used, and the status of the maintenance programme has completely removed any chance of it ever being opened up. Does my hon. Friend agree that the Minister is now likely to cut such canals on the basis that they have no practical use and exist only for aesthetic reasons? Does he agree that that is utterly wrong?

It is indeed wrong, and I hope that the Minister feels ashamed of himself. He has spent most of the debate grinning from ear to ear, but he has nothing to grin about.

More than 200 million visits are made to the waterways each year, and that number is growing. The waterways constitute a national linear park and some might say that they should be treated as such. Some argue that they should be a national park, while others argue that they should receive UNESCO world heritage site status. When in Washington DC recently on a private visit, I went on the Georgetown canal. Members of the excellent US National Park Service, a part of the US Government's Department of the Interior, told me how much they envy our canal system and how they had themselves been on narrow boat holidays in the UK.

When I have been on canals up and down England and Wales—I have yet to visit Scotland’s canals—I have met Americans, Canadians, Australians, New Zealanders and Israelis, all of whom had come to Britain for a canal holiday. That generates useful foreign currency earnings and benefits the United Kingdom economy, as the hon. Member for Montgomeryshire (Lembit Öpik) rightly pointed out.

Does the hon. Gentleman agree that Britain was a world leader in developing the canal system and that there are canals that are world heritage sites, such as Marple locks, an aqueduct on the Cheshire ring in my constituency?

I absolutely agree and I can tell the hon. Gentleman that I have been through those locks as well—hard work it was, too.

Our inland waterways hit all the Government’s buttons in encouraging outdoor activities and, in particular, encouraging young and old to take part in sport. They are a catalyst of inner-city and rural regeneration up and down the country. The Environment, Food and Rural Affairs Committee has been taking evidence to that effect and did so as recently as last Monday; I look forward to its conclusions. I know that for every £1 spent in regeneration around our canals, there is a payback far beyond the usual returns. I think that everyone here will agree with that—perhaps even the Minister, who has finally stopped grinning.

That effect can be seen in my own area. I am proud to say that we have the hidden jewels of the midlands canals: the disused Lichfield and Hatherton canals, abandoned by Acts of Parliament in the mid-1950s, severing the northern access to 42 miles of the Birmingham canal navigations, from which British Waterways could usefully increase its income. Closure of the Lichfield canal as a through route has put increasing pressure on passage through Fradley junction, just north of Lichfield, and also in my beautiful constituency. It has been the centre of the grand cross of England’s canal system for more than 200 years. Visiting boaters in the busy tourist season can wait for many hours to go through the locks, when a short distance to the south there is a viable alternative route that is under restoration, but only through piecemeal efforts by hard-working volunteers.

I pay tribute this day to those volunteers from the Lichfield and Hatherton Canals Restoration Trust and from the Inland Waterways Association. I am a member of both organisations. I also praise Lichfield city council, which has granted a lease of land in the centre of Lichfield to enable the restoration work to continue, and Lichfield district council. There can be no doubt that opening the Lichfield and Hatherton canals would solve some of the network’s acute bottlenecks and open up a whole new area for boaters and everyone else to enjoy, yet all that is now being put in jeopardy.

My hon. Friend is right to say that one of the most important things that is put at risk because of the cuts is the links between existing canals, such as the link between the Kennet and Avon canal and the Cotswold canals, just outside my constituency, through the vital Wilts and Berks canal. Does he agree that those links have to be put in place if boating is to carry on developing as it has done in recent years?

We are having quite a tour of the English and Welsh canal system, but my hon. Friend is absolutely right to make that point.

British Waterways itself, in evidence to the Select Committee this year, spoke of the potential of the Hatherton canal, which is the canal that links to the Lichfield canal. The route of the Lichfield canal passes close to the centre of the cathedral city of Lichfield. The canal’s restoration would not only bring colourful narrow boats, but provide a leisure amenity for residents and visitors who enjoy the relaxing waterway ambience away from unhealthy and noisy roads. Evidence of that can be seen in Daventry’s decision to have a new canal cut into the very heart of the town to create a focal point for the area. Towns do not make such a decision lightly. They do so because they understand the attraction and potential of both new and old canals.

Early research to justify restoration of the Lichfield and Hatherton canals shows that there could be a boost of £6 million a year for the midlands economy. I urge British Waterways to recalculate the cost of reopening the 7-mile Lichfield canal to the extensive midlands canal network. Once complete, the restoration will deliver huge benefits to British Waterways’ northern Birmingham canals by facilitating access via the Staffordshire and Worcestershire and the Coventry canals. Spin-off benefits from sympathetic modern waterway management as seen elsewhere in the country would enhance the poor post-industrial image still lingering in the midlands. We have only to look at the improved economy along the route of the restored Edinburgh to Glasgow canal system to see just that.

Does my hon. Friend agree that the loss of the public money that has gone into these canals in recent years is also a problem? The Kennet and Avon canal had more than £20 million of lottery money, and public money has been spent through organisations such as British Waterways. A further issue is the hours and hours of volunteer time that have gone into the work. That will all go to waste if the canal has to close, as the Kennet and Avon Canal Trust is saying, because some of the lock gates are unsafe. The situation will be disastrous for so much of the economy in so many constituencies in this country.

My hon. Friend is right. A golden opportunity is waiting to be maximised with that canal and many others, but I fear that all that is in jeopardy because of the incompetence of DEFRA Ministers, who have caused the cuts. Already, the Grantham canal is to be closed as a direct consequence of the cuts. Which canal will be next?

The ineptitude displayed by Ministers and in particular by the Minister present here today, who is responsible for waterways, is mind numbing. Our canals need proper stewardship and interest from Government. Until recently, that has been the case and the Government have invested in our canals. That is to their credit. However, the events of the past few months are swiftly unravelling that previous good work.

I am well aware that the Minister will seek to demonstrate, as he tried to do last Monday to the Environment, Food and Rural Affairs Committee, that thanks to the efficient work of British Waterways the net effects of the cuts are minimal, but that simply will not wash. A 200-year-old structure is not something that can be left to its own devices. It needs constant care and maintenance and we currently have a multi-million pound backlog requiring attention. The safety backlog has been dealt with for the time being, but there comes a time when poor maintenance leads to safety issues. We heard earlier in an intervention of a canal’s banks being broken and water ingress, which, if a narrow boat had been passing through at the time, could have caused great loss of life.

Last winter saw unexpected breaches and failures leading to bills running into millions of pounds. British Waterways is expected somehow to absorb those unexpected costs, plan for the future and engage in expanding the system, yet there is no clarity from DEFRA about what the grant in aid will be in future years. That will not do.

It is time that Ministers woke up to the responsibility and reality of caring for our national treasure. If DEFRA is not prepared or able to take on that responsibility, it should be handed to a more competent Department that can provide that care—perhaps the Department for Transport. Originally, of course, canals and inland waterways were part of our transport system, and in some ways they still are. Or waterways could go to the Department for Education and Skills, as they are an invaluable tool for telling the story of our nation’s history and development. Or they could go to the Department for Culture, Media and Sport, with its responsibility for tourism, sport and the heritage of our nation. Or we could even move waterways to the Department for Communities and Local Government, with its important role of regeneration. As it is, waterways are stuck with the leaden hand of DEFRA.

I hope that in his reply the Minister will dispense with the usual excuses and not bother to repeat what he said to the Sub-Committee and blame British Waterways, and that instead he will clearly state what funding will be available for British Waterways over the next five years from the Government. I and others await his reply with interest. I hope that it will be a serious reply, delivered seriously. The Minister’s excuse that the success of British Waterways in its commercial ventures somehow absolves the Minister and his Department of gross incompetence will be believed by no one.

The editor of “Canal & Riverboat” magazine, in an editorial this year, said to the Minister: “For God’s sake go”. Today, I provide an opportunity for the Minister to redeem himself, but I am not optimistic.

rose—

Order. I remind hon. Members that we have 41 minutes to accommodate five Members who are seeking to catch my eye. Hon. Members should bear that in mind when making contributions and particularly, given the number of Members present, when accepting and responding to interventions.

I am pleased to have the opportunity to speak in this important debate and I congratulate the hon. Member for Lichfield (Michael Fabricant) on securing it. I was unable to attend the well attended debate on 6 December, and I should like to talk today about the waterways in the Eccles, Salford and Greater Manchester city region.

I have had dozens of written representations from constituents and friends, as well as face-to-face meetings with them, about the British Waterways budget cuts. I wrote to the Secretary of State for Environment, Food and Rural Affairs to express my opposition to the cuts proposed in October 2006 and my concern about the future of the proposed restoration of the Manchester, Bolton and Bury canal. I also supported and spoke at the “Save our Waterways” campaign protest at Castlefields in Manchester on 25 November, and I was pleased to join constituents and friends who are members of the Worsley and Eccles cruising clubs in Salford.

As hon. Members will know, waterways played a significant role in the development of Greater Manchester in the 19th and early 20th centuries. After decades of decay, the waterways, like other parts of the UK, began to blossom again after Labour came to power in 1997, and we have big plans in my area to develop them. British Waterways originally announced proposals to restore the Manchester, Bolton and Bury canal to navigable status in about 2001. The canal runs through the Salford, Bury and Bolton local authority areas to Manchester. Those three authorities immediately agreed to work in partnership with British Waterways and the Manchester, Bolton and Bury Canal Society to help to secure the resources necessary to restore the canal.

Waterside regeneration is seen as a fundamental aspect of the regeneration work in Salford. Salford city council has achieved significant successes in that respect, with the highly acclaimed redevelopment of Salford quays, which is now the home of famous landmark buildings such as the Lowry and the Imperial War museum, together with significant retail, leisure, commercial and residential properties. Planned developments at the quays continue to demonstrate the demand for waterside locations, with major new developments planned on all sites adjacent to the quays and the banks of the Manchester ship canal. Such developments include the relocation of the BBC to the heart of Salford and the visionary Salford MediaCity project.

Salford city council therefore welcomed the restoration plans for the MBB canal as a real opportunity to add several miles of waterside development potential to land in the area. Much of that land is currently scarred by industrial decline and lies derelict, neglected and underused. Restoration of the canal would bring major improvements and much needed social, environmental and economic benefits to some of the poorest wards in the country, stimulating new, redesigned sustainable communities and neighbourhoods.

Aspirations for the MBB canal have been raised in Salford, where the canal is seen as a fundamental asset in a number of existing regeneration projects. It runs through the heart of the new deal for communities area and is potentially a key component of the Chapel Street regeneration project, the urban regeneration company’s plans for central Salford, the Newlands programme in the Lower Irwell valley and the regional park proposals for the Croal Irwell valley. Unlocking the canal corridor’s potential is recognised as crucial to major regeneration in the area. It has been estimated that restoring the canal alone would create 6,000 jobs, lever in more than £200 million in additional investment, provide major recreation and tourist opportunities and link the urban core with the rural fringe, securing two-way benefits for all.

Even before the proposed cutbacks, British Waterways had limited funding to contribute to the proposed restoration. The main asset that it brings to the table is a highly skilled staffing resource, which can co-ordinate the programme to restore the canal, bid for match funding, design and implement engineering works and so on. However, the cutbacks could have an immediate impact on that resource. British Waterways announced about 150 job losses. Those posts have now been lost, and there is the prospect of more job losses to follow. Salford city council is very disappointed at that outcome.

There are at least three narrow boat builders in my constituency, who are naturally concerned about the impact on their businesses and employees of a reduction in funding. If people have reduced opportunities to use their boats, they are less likely to buy new or refurbished ones. Some months ago, I wrote to the Financial Secretary to the Treasury on behalf of constituents who were alarmed by the prospect of a significant increase in the cost of fuel for pleasure craft—so-called red diesel—under EU harmonisation plans. The Minister has kept me regularly updated on the Government’s negotiations with the European Commission to renew our derogation from the relevant EU directive so that private pleasure craft can continue to use rebated gas oil. Sadly, the Commission did not see things as clearly as the Government, and although we fought the good fight, we lost the argument.

It has become almost trite to talk about joined-up government, but joined-up government does not always happen. If it does, however, it leads to better decision making. I therefore urge the Minister to recognise the significant role that investment in canals and waterways can play in urban regeneration and to take early action to reverse or to reduce the impact of the cuts. My local boating community has suggested that the Government consider making available to British Waterways over the next three years a small sum of £5 million to £10 million from capital rather than revenue resources to cushion the impact of revenue grant reductions. I urge the Minister to look at all the options, and I hope that British Waterways and the Government will work closely together to address the major challenges facing our waterways and to ensure that Salford’s exciting development proposals can be realised.

rose—

There are 33 minutes remaining, and four Members bidding.

I shall be brief because I have just a few points.

First, I have a good news story. It is appropriate that the hon. Member for Lichfield (Michael Fabricant) introduced the debate, because Stourport-on-Severn, which is one of the few dock towns in the country and the place where the Staffordshire and Worcestershire canal goes into the huge River Severn, has just received £3.2 million for the rejuvenation and re-flooding of the Lichfield basins. There is now water in the Lichfield basins, which, as the hon. Gentleman said, is a huge catalyst for the regeneration of the town. The money was raised from the Heritage Lottery Fund, British Waterways, Advantage West Midlands and various local, county and district councils. That is a huge benefit. The message, therefore, is that it is relatively easy to raise money for one-off, exciting regenerations.

Of course, funding must be regular because of the maintenance that is needed. A small group of officers from the all-party group on flood prevention went to see a Treasury Minister a few months ago to plead for DEFRA, the Environment Agency and all the bodies that they support to have more money. We met, of course, with completely deaf ears.

It is perhaps not surprising that those people met with deaf ears. Did the hon. Gentleman know that, at the British Waterways annual general meeting in October, Robert Lowson, who was representing DEFRA, said:

“David Miliband took the political decision not to ask the Treasury to fund the shortfall”?

Given that DEFRA did not ask the Treasury to fund the shortfall, it is hardly surprising that the all-party group was met with deaf ears.

I thank the hon. Gentleman. I find that interesting.

To return to funding, income generation must obviously be maximised, but it is impossible to ask walkers and cyclists to pay. Should a cyclist have a licence clamped on his cycle to allow him to go along the path? We cannot do that. Obviously, any income that can be generated is a plus, but this is—I shall be extremely brief, for your pleasure, Mr. Cook—a major political issue.

Everyone knows that there is not enough money in the system to do everything. I believe that everyone supports money going to the NHS, education and the police. They agree that those are priorities. However, if half the population living within five miles of a canal were to be asked whether they would rather have regular money for its maintenance, or Trident, I think that we know what they would choose.

I congratulate the hon. Member for Lichfield (Michael Fabricant) on obtaining the third debate on this issue in Westminster Hall. I suspect that it may not be the last before the campaign is finished, but I congratulate him none the less on bringing us back here to debate this most vital issue. Hon. Members may know that I am probably not the most impartial Member when it comes to discussing matters relating to British Waterways, having formerly been its vice-chairman. However, I shall be as impartial as I can in my remarks today.

Earlier in the week, I attended, as a member, the meeting of the Environment, Food and Rural Affairs Sub-Committee to which the hon. Member for Lichfield referred. I have looked back to refresh my memory at the uncorrected evidence that the Minister gave at that Committee sitting. Of course it is on the record and hon. Members can read it, but I was and am astonished at the Minister’s extraordinary attack on an organisation for which he and his Department are responsible. He slated British Waterways, he said, for not being transparent, and he repeated that accusation several times in his evidence. In effect he was saying that British Waterways had not been open and honest with him or us about its financial situation. When hon. Members examine the evidence they will see that he went into considerable detail, at some length, about the matter and his accusations.

With my background I shall not attempt to defend British Waterways here today. Frankly, I have not got a clue what it was asked for by the Minister, and what it provided him with. I am sure that it can look after itself and adequately defend itself. Nor have I the slightest interest in a spat between the Minister and an organisation for which he is responsible. I want to concentrate on what his attack signifies. From what he said and from the papers that he provided to the Committee, which included letters and notes that British Waterways had provided to other organisations, it seems clear to me—although he can clarify the matter when he replies—that he has the impression that British Waterways is somehow campaigning on the issues in question, and is campaigning on duff information.

I suggest that in attacking British Waterways the Minister appears to fail to understand the issues that we are debating. There is no need for British Waterways to organise a campaign. The reason hon. Members are here today is not that British Waterways has wound us up—it certainly has not in my case, and I am sure that that applies to other hon. Members too. We do not need British Waterways to wind us up on this issue, and nor do the thousands of people who have demonstrated on the issues and expressed their deep concerns about the future of our waterways network. They have demonstrated not because of figures or other information issued by British Waterways, but because of their fear for the future of the network. They have been protesting, as we have, because of the fundamental importance of the waterways network in our history; because the network was saved by campaigning—the work of individuals, groups and the Inland Waterways Association; and because of the importance of the network in our heritage, education and recreation today. They are concerned about its history and its potential for the future.

There is not a lot of point in the Minister’s repeating to us how much money the Government have put into the waterways. He did that in response to the debate in Westminster Hall on 27 March. Focusing on the figures again entirely misses the point. No one, as the hon. Member for Lichfield generously reminded us today, is suggesting that the Government have not been generous in their support to the waterways in the past decade: they have. Nor is anyone suggesting that British Waterways has not been successful with its commercial activities: it has. Nor, I respectfully suggest, is anyone saying that British Waterways did not need to revise its plan of five years ago and bring it up to date, in light of the Government’s generous support. The concern is not about the figures, whether they are given by British Waterways or anyone else; the concern is about confidence in the future of the waterways. I hope that the Minister will focus on that in his reply.

We do not need a defence detailing precisely what proportion of the financial problem of the Department for Environment, Food and Rural Affairs is due to the Rural Payments Agency. We need no further explanation of the proportion that is due to other aspects of DEFRA’s mismanagement of its budget. We need to know from the Minister what he will do to engage with those of us who care about the waterways, and to reassure us that the inland waterways are safe in his and DEFRA’s hands. We need to know from him what he and his ministerial colleagues are doing and how they are working to find solutions and restore confidence in the future, rather than going into the minutiae of the figures that have led to the present situation and the lack of confidence.

Like the hon. Member for Lichfield, I hope that the Minister will avoid the temptation to blame others and to muddy the waters with futile disputes over figures. I hope that this time he will give us a clear indication that he understands the issues and will engage with them, not avoid them; and that he will give us a clear answer about what he is doing to respond to our concerns. We need clear answers from him about how he will restore confidence in the future of the vital inland waterways network.

I am grateful to catch your eye, Mr. Cook, and to have the chance to speak soon after the passionate speech of my hon. Friend the Member for Lichfield (Michael Fabricant). It is unusual for us to see him here in the Chamber wearing, as it were, a boater—perhaps holding one of those lovely flowered watering cans that they have on narrow boats. We usually think of him as someone who analyses polls—most recently as someone who found that in a Brown-Cameron contest the Conservative majority would be 133 and the Liberal Democrats would be down to 15, but I must not tempt you, Mr. Cook, by straying there. If, of course, we were having this debate 20 years ago, when I had the honour to enter this House, there would have been a few jokes about wets and dries. I cannot really see my hon. Friend the Member for Congleton (Ann Winterton) as anything other than a dry, but she might be described as a wet for speaking in this debate.

I shall take a leaf from the book of the hon. Member for Wyre Forest (Dr. Taylor) and make a few short points. First, DEFRA has become a byword for incompetence. We have been presented with yet another example of money that it has lost—money that has gone down the plughole. We have already had the fiasco of farmers coming to our surgeries and pleading for help with the grant that DEFRA managed to lose, and now we have problems with the canals.

Secondly, this is not all to do with tourism and unnecessary development. Real safety issues are involved. I was struck by the remarks about safety of the hon. Member for Brecon and Radnorshire (Mr. Williams). There is a major safety issue in my constituency—the Shenton embankment. Extensive repairs are required on that very important aqueduct, and if they are not done, there could be a breach, in which case the village and surrounding areas would flood. I think that my hon. Friend the Member for Lichfield referred to the possibility of a narrow boat going over the side. Those are real issues. The people who work the canals know about them, and I ask the Minister please to take note.

My third point is about the importance of the Ashby-de-la-Zouch canal, which runs through my constituency. It runs from Hinckley through Market Bosworth and up as far as Shackerstone, which is a fantastically beautiful village. There has been very important development there. The Trinity marina is a good example of the importance of waterways to tourism and development generally. There are narrow boat companies functioning there. I nearly stayed on a narrow boat for a general election—I told my wife about my idea, but we later decided that we had better stay with the chairman instead. However, opportunities exist to stay on narrow boats.

My final point is that there has been massive investment in Leicestershire, beyond my constituency, in north-west Leicestershire. Obviously, the hon. Member for North-West Leicestershire (David Taylor) could not attend today, but perhaps I can allow myself to speak for him. Some £3.5 million of county council money has been spent between Donisthorpe and Moira on a very successful development. The next stage is to connect Snarestone to Measham, which is the bit near Shackerstone up to the bit that the county council has developed. Those projects are important, but I fear that the way in which DEFRA has addressed the hole in the funding has very serious implications.

I return to my overriding point: there is a safety issue here. When the Minister rises, will he tell me what I should say to the villagers in my constituency who are looking up at a crumbling aqueduct?

There are now 19 minutes left, and two new names enter the fray. I call Charlotte Atkins.

Thank you, Mr. Cook. I congratulate the hon. Member for Lichfield (Michael Fabricant) on securing the debate, which is timely because the Minister gave some very dramatic evidence to the Select Committee on Environment, Food and Rural Affairs on Monday about British Waterways. I hope that the debate will give us all a chance to clarify matters and put the record straight. I assure the Minister that I speak today not as a pawn in British Waterways’ campaign to maintain its funding, but as someone who genuinely fears the impact of the cuts in its funding on my local canals—the Caldon and the Trent and Mersey.

In the debate on inland waterways in the west midlands that I secured last month, I pointed out what a success story the Government’s policy towards British Waterways has been. In my constituency, I have seen regeneration funding and the matching volunteer input directed at a project called “Destination Froghall”, through which the first lock and basin of the Uttoxeter canal at Froghall have been restored. That area is now an enhanced visitor destination with access for all and walking paths, which are particularly popular because the Caldon canal runs side-by-side with the heritage steam railway through the Churnet valley. The Churnet valley railway is not only a tourist attraction—only last Saturday, I enjoyed a leisurely meal on the train with friends. The canal and the railway enhance the life of the community and the local economy.

A unique feature of the Caldon canal is the Beatrice Charity’s trip boat, which takes children with special needs and wheelchair users into the Staffordshire moorlands countryside to places that they would never otherwise have the opportunity to experience. It is a wonderful charity that widens the horizons of our most vulnerable children, and it would be devastating if it had to close because of problems on the canal.

The British Waterways’ funding cuts are short-sighted given that there is still so much more potential for investment in our canal network. British Waterways already has a much expanded network to look after because of the excellent restoration work. In Leek, the Caldon canal corridor feasibility study has set out the potential for the restoration, extension and development of the Leek arm of the canal into the edge of the town. There are also plans to bring the Uttoxeter canal back to life by opening a 13-mile stretch from Froghall in my constituency to the wharf in Uttoxeter. Leek, Froghall and Uttoxeter would all benefit hugely from such a development, as would the whole of the moorlands.

Rural areas, like urban areas, need such regeneration to boost their local economies. However, all that requires real partnership, which the Government wholly support, involving heritage organisations, councils, British Waterways, the Environment Agency and bands of enthusiastic local volunteers. Such volunteers kept the canals alive during the dark days before the Government’s generous funding. The Caldon was reopened in 1974 only because of the dedication and hard work of local volunteers. We do not want to go back to those days of dereliction—I am sure that we will not do so—but it is vital that the Minister is not complacent about the current situation.

Last month, I gave just two examples of where urgent action is required to maintain waterways structures where money has not been forthcoming, and we have heard more on that today. The examples that I gave were the Netherton tunnel near Dudley, where two towpaths were closed, and the Tividale aqueduct, which is a grade II listed, double-span aqueduct whose stone arch parapets are falling down. Those examples are in addition to the essential, but delayed, local repairs on the Hazelhurst aqueduct and its embankment, and on the Long Butts bridge on the Caldon between Baddeley Green and Norton Green. Will the Minister give me an update on all that? I raised those issues last month, but, sadly, although the Minister sensibly diverted from his prepared speech, he did not have time to address them. I hope that he will do so today. I also raised some more general and fundamental points, and I hope that he is now, nearly one month on, in a position to answer them.

The 2004 DEFRA review of British Waterways recommended a contract between the Government and British Waterways to ensure that it would be able to predict its funding and therefore to plan the efficient—I emphasise the word “efficient”—use of its money. A contract would ensure that in-year cuts were not imposed and would allow British Waterways to plan with certainty. Surely that should be a basic requirement of any proper partnership between the Government and British Waterways if we are to get the best possible outcome for our local communities. What has happened to that contract? Will the Government be making a contract in the near future?

I am very concerned that British Waterways’ central freight unit has been disbanded, given that water freight could help the Government to achieve their key environmental objectives by cutting carbon emissions. With the responsibility for freight now passing to hard-pressed British Waterways regional offices, it will not be as high a priority. When did the Minister last meet his Department of Trade and Industry colleagues to discuss the carriage of water-borne freight, what conclusions did they reach and what action will they now take?

With the comprehensive spending review coming in the autumn, has the Minister had the opportunity to talk to the Treasury about waterways funding? We have heard that no application was made to the Treasury for additional funding. Has he discussed British Waterways’ long-term funding with it? I was disturbed to hear that the Minister said on Monday that British Waterways had not been entirely transparent about its funding. If that is the case, will the Minister assure me that he will do all in his power to provide the EFRA Committee with all the information that it needs to get to the bottom of the figures? Will he fully co-operate with the Committee and provide a full audit trail of all the available information on British Waterways’ funding and the projections for the future?

I have full confidence in the Select Committee inquiry into waterways that is being chaired by my hon. Friend the Member for Stroud (Mr. Drew). I am sure that the Committee will get to the bottom of the issues that have been raised in the debate, if all parties are fully involved and transparent in their evidence. I urge the Minister and British Waterways to do all they can to assist the Committee.

There are 11 minutes remaining and two bidders left. I call James Gray.

Thank you, Mr. Cook. I shall speak very briefly, given the short time that is left. I am glad to have the opportunity to take part in what has been a good cross-party debate. It is interesting that not one Labour Member so far has spoken in favour of what the Government have done. We are all in opposition today with the single exception of the Minister.

Will the hon. Gentleman give way?

If I have wrongly quoted the hon. Lady, she will forgive me, I know.

I praised the Government for their extensive investment in British Waterways, which has created a renaissance of a whole network.

I am grateful to the hon. Lady for having told me the interesting fact that she is strongly in favour of what the Government are doing. They are making cuts of about £60 million in DEFRA’s funding for the waterways, which will result in the closure of canals.

Will the hon. Gentleman give way?

No, I am afraid that I shall not.

I do not speak as a member of the Environment, Food and Rural Affairs Committee, but I shall carefully examine what the Minister said to its Sub-Committee Chairman, the hon. Member for Stroud (Mr. Drew), when matters return to the main Committee, as the debate will be interesting. Nor do I necessarily speak in favour of the Wilts and Berks canal, although it is close to my heart as it runs through my constituency. We seek matching funding with regard to the Cricklade country park, which is a vital constituency issue that will come up shortly.

I am more concerned about a general policy matter that has been brought to my attention; is British Waterways or are the Government to blame for this situation? I again draw the attention of hon. Members to a matter that I raised in an intervention. It has been reported to me that last October, at the British Waterways board’s annual general meeting, Robert Lowson, who I understand was representing DEFRA at the meeting, said:

“David Miliband took the political decision not to ask the Treasury to fund the shortfall”.

He was talking about the shortfall that came about as a result of the downfall of the Rural Payments Agency.

If the Minister is to answer this debate properly, rather than giving us a lot of stuff about how marvellous the Government have been in respect of the waterways, he must answer the central charge: did DEFRA ask the Treasury for special funding to cover the shortfall in the RPA? That is what we did at the time of the bovine spongiform encephalopathy crisis—we got contingency funding from the Treasury, which paid extra money because of the cost of BSE. We need to know just one thing from the Minister—he may want to reply to this in a moment, because I am keen to let others take part in the debate. Did the £62.5 million shortfall in waterways funding and the catastrophic results that we face, which we have all discussed, come about because the Secretary of State took the political decision—the DEFRA spokesman whom I mentioned used the expression “political decision”—not to ask the Treasury for extra funding?

I am happy to try to answer the hon. Gentleman—I have given this answer in previous debates, as he would have known had he cared to read the record. Of the total of £200 million in-year pressures that DEFRA was facing, the amount relating to the RPA was £23 million, which represents slightly more than 11 per cent. of the total. The comparison that he just made about calling on the Treasury reserve was inappropriate. Ministers in the Department rightly took the decision that the situation should be managed within the Department’s own budget and that an approach to the Treasury should not be made. I stress to the hon. Gentleman that of the £200 million pressure on the Department, only 11 per cent. related to the RPA.

I am most grateful to the Minister for his clarification, because we now have it in straightforward Hansard terms: DEFRA and its Secretary of State took the view that they would not ask the Treasury for emergency funding. The Secretary of State decided to take the hit himself within DEFRA. That is now plain, so we know that the cuts in British Waterways’ funding do not result from action taken by Her Majesty’s Government, the Prime Minister or the Chancellor; they result from a particular personal decision taken by the Secretary of State, who is represented in this Chamber by his Minister.

When the Minister stands up, he must answer the accusation that he and his Department, rather than the Government, British Waterways or anyone else, took the decisions that will lead to the terrible cuts that we have been hearing about this morning. I look forward to hearing him try to defend his position.

There are now seven minutes remaining.

I congratulate the hon. Member for Lichfield (Michael Fabricant) on raising this subject, because many of my constituents are concerned about it. The Llangollen canal runs through my constituency, and I suspect that he might have been on it—I am sure that he has been over the Pontcysyllte aqueduct, which is like flying over the Dee valley.

I want to make two points. As I am sure the hon. Gentleman is aware, the aqueduct is up for UNESCO consideration for world heritage status. I am concerned that cuts in the funding of British Waterways will have an effect on the bid, because it might appear as if the Government are not concerned about it. That would be a grave mistake.

Secondly, and possibly more importantly for the tourism potential in my area and for the tourism revenue that we are obtaining at the moment, should two breaches in the canals in Wales occur within a short time of each other, miles of canals might be put out of commission for a long time. That is a grave concern for the users of the canal in my area. I hope that the Minister takes both those points on board.

I congratulate the hon. Member for Lichfield (Michael Fabricant) on securing the debate. As fellow west midlands Members of Parliament, we share an admiration for the way in which enthusiasts have played such a vital part in regenerating our inland waterways and in all the regeneration and tourism benefits that that has produced. That is particularly true in the west midlands. Today feels like groundhog day because on 27 March the hon. Member for Staffordshire, Moorlands (Charlotte Atkins) rightly secured a similar debate. I am delighted that we again have the opportunity to discuss this important issue. The hon. Member for Lichfield has brought out some salient points, to which I hope to make reference.

The exact size of the cuts has been debated. I understand that they are in the region of £7.5 million this year, and up to £60 million over the next five years. Hon. Members have also discussed the incompetence of the Department for Environment, Food and Rural Affairs and the £200 million fine resulting from the mishandling of grants to farmers. That has been attributed to overspend on preparations for avian flu and to Treasury changes to the accounting rules, although I do not think that it matters what caused the problems. We must work together to ensure that the impact is kept to a minimum.

It is important to pay tribute to other organisations. Several hon. Members have referred to British Waterways, heritage funds and lottery funds. In the west midlands, Advantage West Midlands has rowed in—I hope that I may use that expression—with a £400,000 grant to increase access to and awareness of the waterways, and to enhance visitor moorings and amenities.

Everyone is working together to try to minimise the blow, but the situation is worrying because the Environment Agency has lost £25 million this year alone and the jobs of 180 British Waterways workers have been lost. All that pales into insignificance when one considers the effect that the situation will have had on all the volunteers. The staff are vital, but they could never begin to cover the amount of work that needs to be done to maintain our waterways were it not for the wonderful and sterling work done by enthusiasts. They do the less exciting jobs day in, day out and year in, year out.

The effects of the cuts are disproportionate to the amount involved. My hon. Friend the Member for Montgomeryshire (Lembit Öpik) remarked that the cuts are a false economy because rubbish and weeds are clogging up the canals, making them not only less attractive but less popular and, most importantly, less safe. There is a £119 million maintenance backlog, and many fear that a number of canals are in danger of closing.

Our waterways are such an important asset. People can use them for green holidays—that at a time when we are being encouraged to reduce our carbon footprint. I cannot think of a greener way to spend a holiday other than to take a cycling holiday, and even cycling holidays can be carried out using our waterways. Three hundred million people a year visit our waterways, not only boaters, but people who like to walk and cyclists, and that gives rise to regeneration in pubs, hotels and so on.

We should not forget that canals also carry water. In fact, half of Bristol’s water supply is carried along the canal network, so it is important. In addition, an important meeting was held recently on the opportunities of exploiting freight.

The Minister will probably quote the document, “Unlocking the Potential—a New Future for British Waterways”, which the Government published in 1999 and which refers to £70 million of investment in waterways. It would be churlish not to acknowledge that the Government have poured a large amount of investment into the waterways. However, there is an underspend. Arguments about whether that is due to Government incompetence, changes to Treasury accounting rules or other factors are irrelevant. We need to work out how to deal with the problem now.

Will the Minister comment on something that I read when preparing for this debate: that DEFRA has underspent its budget by £747 million since it was formed five years ago? I quote that figure because it puts the cuts into perspective. In a spirit of helpfulness, I suggest that it would be possible to fund the immediate shortfall out of a contingencies budget and allow British Waterways to plan for future cuts. The hon. Members for Staffordshire, Moorlands and for Lichfield alluded to in-year cuts, and that is perhaps the unkindest cut of all because British Waterways has not been given the opportunity to plan for it. Will the Minister discuss with his colleagues a way to row back on the decision and give British Waterways and the canal trusts, which care so much about our inland waterways, the chance to minimise the blow and to plan for the future?

It is a pleasure to have you counting us down this morning, Mr. Cook.

This is the third debate on British Waterways in Westminster Hall since the in-year cuts were announced last autumn, and I warmly congratulate my hon. Friend the Member for Lichfield (Michael Fabricant) on securing it. He is a member of the Inland Waterways Association and has a long track record of supporting canals in his constituency and beyond. Like many hon. Members, he has been out there campaigning to save the waterways and their user value, which the Minister has left in jeopardy. My hon. Friend has been especially active in campaigning along the Lichfield canal and at Fradley junction.

Yet again, the strength of feeling among hon. Members today is of concern for the future of our waterways, and we have heard excellent speeches from both sides of the House, particularly from my hon. Friends. In the last debate, the Minister displayed a reluctance to deal with some of the important points that were raised and focused instead on British Waterways’ projected income and how it might have been more than it expected in 2002. His performance on Monday in the Environment, Food and Rural Affairs Sub-Committee on British Waterways was something else. The Minister claimed that he had been given a series of important figures relating to British Waterways’ finances only on Friday night, and had been applying “greater and greater stridency” in his approach to obtain them. If it turns out that his Department had previously been made aware of the figures by British Waterways, will he apologise?

The Minister has known about the problems facing British Waterways for many months, especially as they have been highlighted by hon. Members so prominently in debates here in Westminster Hall since the in-year cut was announced. It seems to be a rather convenient coincidence that one working day before he had to give evidence to the Sub-Committee the figures magically appeared, especially when British Waterways had been in close contact with the Minister and his officials for many months. In fact, the Minister did not confirm that the organisation had been in daily contact by telephone, but we know that he has met British Waterways representatives once a month for the past six months—six times in the past six months. It is extraordinary that the figures could be produced only the day before he was due to appear before the Sub-Committee.

The Minister made it clear in the Sub-Committee that he thought that there were problems with the current long-term plans and financial arrangements. In the 27 March debate, he said that DEFRA was awaiting proposals from British Waterways for a regulatory reform order to this effect. Can he provide a progress report on that reform order?

To the Sub-Committee the Minister stated that he was now aware that British Waterways has altered its arrears elimination target, but on 16 April he made no mention of the change from the December 2012 target. Why did that information come to light only last week? What is the correct figure for British Waterways’ maintenance backlog? Is it the £97 million claimed by the chief executive, or the £107 million claimed by the chairman, or does the Minister have a different figure now that he has studied the figures? He told the Sub-Committee,

“well, here you have to decide whether you are going to believe the Chairman or the Chief Executive”,

and then quoted those figures. When he made the in-year cut, why did he not engage in the rigorous examination of British Waterways' financial situation, business plan and modelling, which he now claims he is doing, and why was that not done before, when the accounts were signed off?

In a written answer the Minister stated:

“As a matter of good financial management, DEFRA keeps its budgets and spending under regular review and challenge”.—[Official Report, 7 November 2006; Vol. 451, c. 1068W.]

Given the difficulties he claimed to have had in obtaining figures from British Waterways, does he think that DEFRA's previous reviews and challenges of British Waterways were not sufficient? It is no good him saying that it is about British Waterways having more money than it expected in 2002.

Why did it take the Minister so long to get the figures that he needed? He seemed to imply that British Waterways was being obstructive, but in the past few months there have been two Westminster Hall debates and he has also answered a number of oral and written questions. He has had plenty of opportunities to get the answers he was after.

In the Sub-Committee, the Minister was very critical of British Waterways’ financial modelling and the use of its predictions of a financial settlement from DEFRA over the next five years of RPI minus five. He described that as the worst possible scenario. That modelling gives British Waterways a £55 million reduction over the next five years. Can the Minister confirm whether that will be the case; and if he cannot, can he let us know when the decision will be made, and whether the comprehensive spending review is still on track to be concluded this summer, as he has previously asserted?

I apologise for not being present for the first part of the debate. I was attending a private Bill Committee upstairs.

The Macclesfield canal, which is part of the Cheshire ring, is an important facility in my constituency. I am picking up the point that my hon. Friend has just made. A member of the Macclesfield Canal Society has indicated that the cutbacks affecting British Waterways could well undermine the massive amount of voluntary help that is available to it because that help needs some top-up from British Waterways, although the sum involved is fairly modest. Is my hon. Friend concerned about that?

My hon. Friend always makes excellent points, and that one is no exception. Many hon. Members here today have mentioned the importance and value of the contribution that those kind and generous people make to British Waterways because they love the canals. I shall say a little more about that in my closing comments.

My hon. Friend is absolutely right, and what is more alarming is finding out the facts behind the stories that we have heard from the Government so far. In the Sub-Committee’s evidence session, the Minister referred to a letter, which I think he said would take 20 minutes to read out. I just wonder whether he has given that letter to the Sub-Committee and whether it is in the public domain. I am sure that he has given it to the Sub-Committee, as he nodded helpfully. However, I do not know whether it is in the public domain; I have not been able to see it. I asked British Waterways if it would let me have a copy, but perhaps to protect its Minister, it would not pass one on to me, thus showing a degree of loyalty for which he should perhaps be grateful.

Was the Minister aware that British Waterways had already informed his Department when he accused the chairman and chief executive of deceiving him about BW’s plans? If he had the information, or if he was really suspicious about being deceived, why did he not take any action against those two people? He can do so. Alternatively, is it true that his Department had the information but he was simply not aware of it? I am sure that if that were the case he would not have made such strong accusations against British Waterways. He said:

“I slate them for not being transparent and saying when they found out they got it wrong.”

If he knew that the information was in his Department, will he apologise? It may turn out that he got it wrong. Is it true that he does not know what is going on in either his agency or his Department, and that as a Minister he does not have the control that he should have?

The Minister’s hon. Friends have suggested that he has lost control of his office, so will he apologise and get a grip? Does he recognise that the public, boat owners, canal users and taxpayers expect the Labour Government to run their Departments properly, and that when he goes to a Committee and admits that he does not know how public money is being spent, they have every right to be angry about his failure?

I must be careful not to push the Minister too far. It is far easier if my opponent is a Minister who publicly admits that he has lost control of his job and then gives evidence to a Committee to prove it. I suspect that that is why people will vote Conservative on 3 May.

I congratulate the hon. Member for Lichfield (Michael Fabricant) on securing the debate. I am aware of his long-standing interest in our waterways, and of the particular importance of the Lichfield and Hatherton canal that runs through his constituency.

I welcome the opportunity to restate in a more accessible form my responses to the Sub-Committee of the Select Committee on Environment, Food and Rural Affairs on Monday evening. In fairness, this morning’s cries of outrage from the Conservative Benches were wholly absent during the 20 years when successive Tory Administrations refused to invest in the network, turning it into a dilapidated shambles, in stark contrast with the £542 million that this Government have invested during the past decade.

However, I pay tribute to many Members for their remarks, and in particular to my hon. Friend the Member for Leicester, South (Sir Peter Soulsby), whose knowledge of the waterways network is extensive and comprehensive, and to my hon. Friend the Member for Staffordshire, Moorlands (Charlotte Atkins).

My hon. Friend the Member for Leicester, South said that it does not need BW to organise a campaign to protect the waterways, which is absolutely right. People demonstrated because they care about the future of the waterways. My hon. Friend focused us, saying that the concern is about people’s confidence in the future of the waterways. That is precisely why I was not prepared to sign up to a long-term settlement with BW, as I was urged to do, until I could see clearly the way in which such a settlement would bring the network to a gradual, timetabled conclusion in steady state.

My hon. Friend the Member for Staffordshire, Moorlands asked us to conclude a long-term contract. Let me make it absolutely clear that I wish to do so, but on a clear and transparent basis where we know the required estimates of the network’s remediation and maintenance programme. Unless the estimates are clearly and properly articulated, it is neither possible nor right to conclude such a long-term contract.

I recognise that my evidence to the Sub-Committee came as a surprise to many hon. Members, who now seek further information. I do not intend to prejudge the Sub-Committee’s findings, but I am happy to set out my position more clearly. I put on record that the British Waterways management of our canal system has been a tremendous success. It has the ability and vision to continue to deliver public benefits, including leisure, recreation, tourism and—of paramount importance—regeneration, as many Members have said this morning. BW’s record speaks for itself: its canals and rivers are in better shape than they have been for 30 or 40 years.

Following 20 long years of under-investment, BW has in the past decade turned around the fortunes of the waterways. It has a strong track record in managing the waterways and its associated assets, and it has fostered excellent relationships with local authorities and private sector partners. I want to see BW continue to build on that, using its property portfolio to increase its income in order to reduce its dependency on grants. I am confident that we have the right board, management, chairman and chief executive to do so. I had an insight into BW’s effectiveness and ability to engage in partnerships when I met a range of its development partners earlier this year.

It is clear from the weight of correspondence, parliamentary questions and debates just how much concern and interest there is in the fortunes of the waterways, and I wish to ensure that BW has sufficient resources to fulfil its statutory duties. To that end, I sought greater clarity on the strategy and financial projections that BW uses to work up its maintenance programme, notably its target of 2012 to clear its statutory maintenance backlog. Any well run organisation should set itself challenging targets, but they must be realistic.

I was surprised and not a little annoyed that, despite repeated requests, I did not receive the full information until last Friday evening in the form of a letter from the chairman and a spreadsheet setting out BW’s projections in 2002 against its actuals to date and its business plan for 2007-08 and 2010-11.

Will the Minister give way?

I shall do so in a minute.

The information includes grant and commercial income, and both documents have been made available to the Sub-Committee. The table showed that by 31 March, Government grant in aid to BW was £8.8 million more than the projection in BW’s 2002 plan. It also showed that despite BW’s assumptions—some might say, pessimistic assumptions—about future grant levels starting next year, which it calculated on the basis of RPI minus 5 per cent. to show a £48 million loss of grant by 2012, commercial income over the same period was due to rise by some £78 million more than it forecast. That leaves a net increase in BW’s projected total available income by 2012 of £30.1 million—that is, £30.1 million more than it projected in its original plan. Despite that, BW no longer believes that steady state for the network can be achieved by 2012 and has revised its maintenance assumptions.

I should in passing pay tribute to the hon. Member for Leominster (Bill Wiggin), who set out clearly some of the critical questions that need to be answered. He did not make an unreasonable speech, but here is the critical point that I should like to make in response. What we discovered on Friday evening—in fact, what I received on Monday morning, as I was on ministerial business over the weekend—was that the revised maintenance assumptions now show that 15 per cent. of the assets will still be in classes D and E by 2016, instead of only 10 per cent. of the assets being in classes D and E by 2012, as we had previously been led to believe.

In his letter, the chairman advised that a number of factors other than grant would cause the target for the elimination of the backlog by 2012 to be achieved later than anticipated. Among those was the fact that no account had been taken of the wider population of BW’s assets that needed maintenance. Among those assets are what the chairman referred to in his letter, which I have made available to the Select Committee, as the non-principal assets. He confirmed that BW’s calculations of the maintenance programme took account of the principal assets that needed maintenance, but not of the non-principal assets.

Will the Minister give way?

Will the Minister give way?

There is time, and I shall give way shortly.

A number of assumptions were made, not all of which have been borne out. They have meant that in BW’s view the 2012 target cannot now be achieved. It gave me no joy to receive that letter, although it clearly and unequivocally set out the information that I had requested for so long. However, the letter clarified that BW had underestimated the true cost of the maintenance and upkeep of the waterways in its original projections.

The fact that BW’s assumptions were wrong, however, is not the issue for me. We are talking about a highly technical, 200-year-old network and it is understandable that assumptions about the costs of maintenance can change over time. What caused me concern was that I had waited for the information for as long as I had. It should have been made available earlier, both to me and to stakeholders.

I thank the Minister for giving way, but we are again experiencing a muddying of the waters, with confusing figures that do not answer the concerns that we have expressed here and that others have expressed outside about what he is going to do to restore confidence in the future of the inland waterways. He has told us that he was surprised and annoyed that BW did not provide him with the information before last Friday, but how many times over the past six months has he met the chairman and chief executive of British Waterways to demand those figures?

I have met the chairman and the chief executive, I have had telephone conversations and there has been correspondence between our offices. I cannot tell my hon. Friend how many times I have asked for those figures, but I assure him that on many occasions I have specifically requested the timetable and the assumptions upon which BW could move to steady state.

Will the Minister give way?

I shall of course give way in a moment.

As my hon. Friend will appreciate, the important thing is that we have clarity about an end point, when all of us can be satisfied. I wish to move further in my remarks and to address the points that he made about what is going to happen, because that is the important issue. However, I have on many occasions asked for clarity on the timetable and on the assumptions on which steady state could be achieved. I had not, before now, received the information that 15 per cent. of the assets would still be in classes D and E by 2016.

Hon. Members will have noted that the Minister did not answer my question about how many times he had met the chairman and chief executive of British Waterways over the past six months. If the Minister’s assertion that he was surprised and annoyed when he finally received the figures is to have credibility, he needs to demonstrate to us that he made some serious attempts to get those figures from British Waterways. Crucial among the actions that we might expect him to have taken would be to have met the chairman and chief executive to demand those figures.

Briefly.

The Minister can correct me if I am wrong, but is it not the case that over the past two years he has met the chairman and chief executive on precisely two occasions?

I am absolutely confident that I can correct my hon. Friend on that score, because I have met the chairman and chief executive on more than two occasions. However, as I have already promised the Select Committee, I shall make available a full audit trail of the requests by my Department to British Waterways, as the hon. Member for Leominster requested, so that the Sub-Committee can see for itself the requests that have been made on the matter and my insistence that there should be clarity about how the network can move to steady state.

To be clear, I have not sought to evade my hon. Friend’s question at all. I have met the chief executive and the chairman of British Waterways on many occasions over the past year—not the past two years; I have not been in this post for that long—and my Department has been in correspondence with them to seek precisely the clarification that I have outlined to the Chamber today.

Will the Minister give way?

Will the Minister give way?

I shall press on, but I shall try to give way before the end.

Now that we have more transparency over the true cost of the upkeep, I am confident that BW and I can work together to agree a way forward that will manage the waterways in a sustainable manner, which will include gaining greater self-sufficiency. I look forward to sitting down with the chairman in the coming days to discuss the issue further, which my office has already been arranging with his. Let both sides stop belabouring the problems of the network that divide us and explore the single problem that unites us: how to construct a viable and vibrant future for this national asset.

BW has been a success story over the past 10 years. My discussions with Robin Evans and Tony Hales over past months have given me an insight into the tremendous contribution that British Waterways makes to the public good. That must now be our focus, in order to ensure that the success story that BW has been over the past 10 years continues.

My concern is about safety at Shenton, which I raised. Notwithstanding the cuts, I wonder whether the Minister might not make provision for special operations where safety is affected.

The hon. Gentleman and others asked about specific problems in their constituencies. I am happy to write to all those who have raised specific concerns, whether they be those that my hon. Friend the Member for Staffordshire, Moorlands raised about Caldon and Netherton or those that the hon. Gentleman raised. The hon. Member for Lichfield spoke about the Grantham canal, which he said had been closed as a result of cuts. The Grantham canal is in fact a remainder waterway, part restored, but there is an active partnership to continue developing it with BW. However, I should be happy to write to him and to pursue such matters, although they are of course issues for BW’s programming, and it is appropriate for BW to make priorities within the network.

The Minister told us that 15 per cent. of assets were in classes D and E and would remain there until 2016, instead of 10 per cent. being in classes D and E by 2012. What will be the bill to shift those assets, how many of them were principal assets and is RPI minus 5 per cent. still—

Order. We must proceed to the next topic for our consideration.

I welcome for several reasons the opportunity to raise the issue of policy options in respect of the United Kingdom’s relationship with Iran. In my view, the United Kingdom is not demonstrating a coherent strategy in our bilateral relations with Iran. Nor is it doing what I think would be appropriate—mobilising European Union opinion to deal with the issues in a way that neither appeases nor falls the other way into the danger of making a bad situation much worse. It is, after all, a dangerous world and I am talking about a dangerous region.

I am being generous in saying that at the very best the United Kingdom Government have been sending mixed messages. I am worried about that. Furthermore, I was disappointed at the official Opposition on 16 April when the Defence Secretary made his statement about the seizure of royal naval personnel in the waterways and their subsequent release. I thought that there should have been greater probing and I want to ask more questions about those events, particularly in view of the news in the past 24 hours that—I think that the phrase is “low level”—some of the inspections and boardings are being reinstated as of today.

I say that there have been mixed messages because the record shows that the Prime Minister has been pretty robust in criticising the Iranian regime as being made up of people who provide ordnance, arms and ammunition to insurgents in Iraq and elsewhere around the world. The regime is clearly exporting terror and encouraging suicide bombers in some of the terrible, tragic hotspots in its region. The Prime Minister has been fairly consistent. For example, one of his most recent utterances on the issue was made this month:

“the general picture, as I have said before, is that there are elements of the Iranian regime that are backing, financing, arming and supporting terrorism in Iraq.”

My view is that with the full knowledge and consent of the Iranian regime, armaments, support and encouragement are coming from Iran to the insurgents, bringing tragedy and mayhem to the people of Iraq and elsewhere. Furthermore, our British service personnel are the victims of such weaponry.

On this matter I agree with the Prime Minister, yet some other Ministers such as the current Foreign Secretary and her predecessor, my right hon. Friend the Member for Blackburn (Mr. Straw), say different things. They did not use quite the terms used by the Prime Minister. There is great danger in that. If the United Kingdom Government are going to accuse people, that needs to be forced, reinforced and emphasised right across that Government, but we are not doing that.

I also feel that we in the United Kingdom send mixed messages—to some extent, Parliament is to blame—when we afford dignities to the so-called President of Iran and the Parliament of Iran. It never ceases to amaze me how some of my colleagues in this House who rightly go on about gender issues cannot see that half the Iranian nation were prevented from standing for the office of President on grounds of gender. Never mind their politics—they were not allowed to stand for office because they were women. This House sends delegations to the so-called Majlis, the Parliament of Iran, and receives Iranian delegations.

That sends all the wrong messages. It is rather hypocritical, is it not? We do not, for example, send delegations to Belarus and we do not receive delegations from that country. We do not extend any honour or dignity to President Lukashenko, but somehow we extend them when it comes to Iran. That is because, as I recognise, Iran is a bigger player and certainly provides external threats. However, if we behave in such a way to bullying, powerful people, we are, in essence, appeasing. That is happening in respect of Iran and our response to it.

Will the hon. Gentleman give way?

I will, but only briefly. I would be grateful if hon. Members gave me a bit of scope to develop my points. I imagine that one or two others will want to catch your eye and intervene, Mr. Cook.

I thank the hon. Gentleman for giving way at this point. My only point about what he just said is that surely a show of strength against such a regime is what is needed rather than appeasement. Appeasement just gives the Iranian regime encouragement to try it on even more.

The hon. Gentleman makes the point more candidly and coherently than I. I totally agree that that is the problem. Furthermore, although our Foreign Office spends a great deal of time and energy every year producing a very good report on human rights abuses, it is not strong on the extensive human rights abuses in Iran. Through our silence and inactivity, we are to some extent acquiescing in those abuses, in contrast to our response to other bad countries in which human rights abuses are extensive. Sometimes we are more heavy on those countries, simply because they are not as big a player as Iran.

Those mixed messages concern me. However, the most serious point, which concerns hon. Members with an interest in Iran from right across the political spectrum, is the fact that the United Kingdom Government, who have encouraged the European Union on this matter, try to trade with the Tehran regime. They say, “If you do not go down the road of uranium enrichment and developing an atomic weapons programme, we will continue to proscribe and ipso facto persecute”—albeit at a fairly low level—“those people in exile who try to draw attention to the human rights abuses in Iran, want to bring democracy to it and are in exile around the world.”

I refer in particular to the People’s Mujaheddin of Iran, or the PMOI, which was proscribed at the insistence of the British Government in their attempt to trade good will with the Tehran regime. To its credit, the PMOI took the British Government to the European Court of First Instance, I think, in December. The court found in favour of the applicants, the PMOI. When the referee blows the whistle, a person normally leaves the pitch, but the British Government are playing cat and mouse. After the court had made a judgment that the proscription of the PMOI as a terrorist organisation was wrong, the British Government persuaded the Council of Ministers to reinstate that proscription, without any basis whatever.

The court made it clear that the PMOI has never been furnished with the information on why it is still regarded as a terrorist organisation; the PMOI might otherwise have had the opportunity to rebut it. I suspect that it has not been furnished because it does not exist. That is the first thing. Secondly, when the PMOI asserted to the court that it was not engaged in terrorism, the defendants—namely the Council of Ministers, at the instigation of the British Government—again refused to rebut the claim of innocence. That state of affairs is very unsatisfactory and grossly unfair and it sends the wrong signals to Tehran.

Is it not a fact that while seeking to appease the regime that was responsible for the abduction of British servicemen and women, Her Majesty’s Government continue to proscribe the People’s Mujaheddin of Iran, which is effectively the opposition to that pernicious regime? Is it not a fact that the Home Secretary and the Prime Minister have both said that the PMOI is a terrorist organisation? Will the hon. Gentleman—my hon. Friend, in this case—ask the Minister to state clearly on the record what shred of evidence the Government have to suggest that the PMOI is a terrorist organisation?

Indeed. I will go further. First, I want to know what is different now from when we were in opposition, when we used to welcome the PMOI to our Labour party conference. I suspect that it went to the Conservative party conference. Secondly, we have it in black and white that the EU3 stated in November 2004 that “If Iran complies”—with the demands of the EU for it to abate and to pull back from its pursuit of developing nuclear weapons—

“we would continue to regard the MEK”—

that is, the PMOI—

“as a terrorist organisation.”

That is quite shameful and disgraceful.

I hope that the Minister will reflect on that each time that his car goes to the Foreign and Commonwealth Office and he sees those people who demonstrate day after day, in vigil, joined by Members of Parliament such as me and others who are in the Chamber today, to draw attention to the fact that the British Government are behaving disgracefully by not being candid or upfront and by not adhering to the views of the European Court of First Instance.

I will buttress that argument before I move on. It is not merely those in the Chamber today who take that view, but distinguished parliamentarians across the political spectrum, including Lord Archer of Sandwell, a former Solicitor-General of a Labour Government who the Prime Minister has appointed to carry out some inquiries—so he is held in high regard, unlike me, by the Prime Minister. He is one of the Prime Minister’s men, but he takes that view. So does Lord David Waddington, who was a Home Secretary under Margaret Thatcher and knows all about security, internal and external. So does Lord Fraser, a Scottish Law Officer, and many others, including Lord Slynn, an independent but a former High Court justice. They think that the British Government are wrong in terms of justice, and in persisting in the pretence that the PMOI is a terrorist organisation.

Although I agree with everything that the hon. Gentleman has said, could he share with the Chamber his view about why, given that all political parties in both Houses have supported a change in the British Government’s view of the PMOI, we have all failed? Does he have any suggestion of who might possibly influence the Government to change their view?

Of course, we have not heard from the Minister yet. Never mind what he might say working off the brief, we will have to read between the lines. I hope and suspect that he might be mindful of the fact that he—I do not want to embarrass him—has spoken to those people at various meetings and conferences. He is a courteous Minister, and he has done that. However, there needs to be at least a dialogue. Hon. Members should be able to take along some representatives to the Foreign Office to ask the Minister, or other Ministers, what is wrong, and what Ministers want those representatives to do to satisfy them that the PMOI is no longer a terrorist organisation, if—we are not conceding this—it ever was.

I congratulate the hon. Gentleman on his work in this area. It is well known, and we appreciate it. He has described the process by which the British Government have not only ignored a decision of the European Court of First Instance but actively led the fight against it. Is that purely due to ministerial incompetence, or is there more to the matter than meets the eye?

There are too many Carlton-Brownes in the FO still, and too many Sir Humphreys. I look to the Ministers who will say to those folk, “I hear what you say. Now, this is what we are going to do. We are going to listen to our parliamentary colleagues.”

I am anxious to move on to two points before I conclude. The first concerns events in the Shatt al-Arab waterway. In my view, on 16 April, the Defence Secretary did not satisfactorily—and the Opposition let him get away with it—answer one point. We were told that it was imperative in the interests of Iraq, the coalition and good enforcement of law that there should be boardings and inspections of craft in the location where our royal naval personnel were seized. That process stopped when they were seized. Today, we are told that it will be reinstated. I read the Defence Secretary’s statement carefully, and he implied that others—presumably other coalition partners—were filling the void. I want to know to what extent that happened, on how many occasions, with what frequency and whether it was in the same location as where our royal naval personnel were seized. Has that work been going on and which country has carried it out? We were told that the Iraqis do not have a navy that has been developed to that extent, so who else has been doing that in the interim?

My second point is that we have been told in the press releases today that the inspections will be reinstated today, starting at “a low level”. What does that mean? When will we be carrying them out to the same robustness and extent and in the same location as before the royal naval personnel were seized?

Does the hon. Gentleman agree that the suspension of such operations is a signal of appalling weakness by the Government and that it aids and abets our enemies, particularly as it is a question not of suspending all operations but of asking other, apparently stronger, naval nations than us to do the job for us?

I agree. I wish the official Opposition had pressed that point on 16 April. We have to provide both the Government and the Opposition in this Parliament, it would seem, and I am trying to do that this morning.

The Defence Secretary referred to operational issues in his statement and said that he would be guided by Permanent Joint Headquarters. Of course, that is right. I am not insensitive to the need for operational considerations, but there are foreign policy ramifications, one of which is that if there was a period when there were no inspections or inadequate or low-level inspections, the contraband—the stuff we are trying to stop—would have been getting through. That endangers Iraq and our personnel, and that is not satisfactory. Tehran has been emboldened, too, by its success in preventing such actions.

The hon. Gentleman has been very generous with his time. We are rightly concerned in this debate with UK policy options on Iran, but does he share my concern over the implicit threat of military intervention by the United States, particularly in the context of remarks by Condoleezza Rice? Does he agree that any such military intervention is likely to be entirely counterproductive and to lead only to an escalation of conflict in the middle east?

I wholeheartedly agree, and I am pleased that the hon. Gentleman has prompted me on that point. Those in the Iranian resistance in exile, with whom many Members in this Chamber meet and are pleased to be associated, emphasise as good, proud, patriotic Iranians that they do not want appeasement, but they certainly do not want their country to be invaded. They believe, as I do, that there is a third way, which is to send the right signals to the Iranian regime and to have robust engagement rather than appeasement. That is precisely what we have not been doing, for the reasons that I have tried to articulate this morning—the sending of mixed messages, the failure in respect of the inspections and boarding, and so on.

No doubt the Minister will say that he does not have a lot of time, but there is one thing that he might tell us. We have been told in the past 24 hours that the Council of Ministers met yesterday and was going to increase the European sanctions against individuals, freeze additional assets and enforce a total ban on arms. Who are the additional people who will face travel bans? What additional assets will be frozen? Can we be sure that no armaments from the EU or British Government will go to Tehran, including chemicals such as zirconium silicate, which was diligently held up by Bulgaria on the borders? It had been exported from the United Kingdom some months ago, but was allowed to go through at the prompting of the UK.

It seems to me, and I shall leave the Minister with this thought, that it would be stark, staring bonkers to have these new sanctions—as I say, I hope that he will tell us precisely what they are and how they will be enforced—and still to send parliamentary delegations to Iran. Presumably—I ask the question—that will stop.

First of all, I shall do my duty and congratulate my hon. Friend the Member for Thurrock (Andrew Mackinlay) on securing today’s debate. I was genuinely hoping that we could have a serious discussion about the intricate issues involved in Iran’s relationships with us and its multilateral and unilateral relationships. In his usual style, my hon. Friend has missed an opportunity to have that discussion. I will write to him on the specific questions that he asked, as I had no notice of them. As he rightly said, issues have arisen in the past few hours, and I do not want to mislead him or any other Member here. I will place a copy of the letter in the Library so that all Members can read it.

I reject totally my hon. Friend’s assertions that there is no coherent strategy and that we are failing to mobilise European and wider international opinion. Nor are we sending mixed messages. I agree with him and with other hon. Members—although their comments, sadly, have been somewhat politically partisan—that we need a coherent relationship with Iran. We support those in Iran who want a democratic, accountable country that operates to international norms and does not engage internally or externally in the abuse of human rights or the encouragement of terrorism through support, financing or the provision of hardware. We want to resolve peacefully issues of the use of nuclear power for military rather than civilian purposes.

We also want to see Iran play its part effectively in the international community. It is an important country and its people are important people. It must be seen to be embraced openly by the international community. It is therefore important, despite the difficulties, that we should have a bilateral relationship with Iran and work multilaterally with the international community to deal with many of those issues, some of which my hon. Friend mentioned in his speech and some of which I shall touch on generally.

I have only a few minutes to respond to the debate. I am not using that as an excuse not to cover the waterfront of Iran, but that would be impossible do to in a few minutes. If at the end of my reply I have not covered all aspects of the debate, I shall write my hon. Friend a detailed note and, again, put a copy in the Library for hon. Members.

Iran can play a more constructive role, particularly in relation to Iraq, about which it faces increased isolation, including among its colleagues in the region. It can take action to meet human rights commitments. Although it has signed up to them, it still imprisons its own people for demanding those rights. All those issues will determine the future shape of our relationship with Iran. We are committed to diplomacy and dialogue in our engagement with Iran, but that does not prevent us and the international community from maintaining pressure about legitimate concerns.

Let me put the question of military action to bed. On 6 February this year, our Prime Minister said:

“Nobody is preparing for military action and nobody wants military action.”

On 2 February this year, US Defence Secretary Robert Gates said:

“The President has made clear, the Secretary of State has made clear, I’ve made clear…we are not planning for a war with Iran.”

That was followed by a statement from the Israeli Foreign Minister saying that Israel would prefer issues with Iran to be resolved through diplomatic channels. It is not helpful to continue this story. It is a red herring. It does not help our multilateral or unilateral relationships. Neither we nor the international community are preparing for war with Iran.

During the past few years, international concerns have arisen about Iran’s nuclear programme. Iran’s uranium enrichment and reprocessing activities were secretly developed for 20 years, and questions put for the past four years by the International Atomic Energy Agency remain unanswered. Why is Iran’s military involved in a civilian programme? Why will it not explain its dealings with A.Q. Khan’s network, which helped North Korea and Libya with their secret nuclear weapons programmes? Why did it experiment with polonium-210, which has no use in electricity generation but can set off nuclear explosions?

As I said, we remain committed to taking the diplomatic route in relation to Iran’s nuclear ambitions. Last summer’s generous proposals would give Iran everything that it needs to develop a modern civil nuclear power industry. This is where I take issue with my hon. Friend. The proposals were among a range of measures in which Britain has played its part multilaterally to promote engagement between Iran and the international community. We presented proposals that Iran could accept to resolve the issue effectively and sustain its own independent civil nuclear power industry, but it has chosen to reject that multilateral approach. We still need to work with Iran to gain active support for building, for example, new light-water power reactors, which would benefit Iran, not only technologically, but by moving it away from using nuclear power for military purposes.

On regional issues, many countries in the middle east feel threatened by Iran’s increasingly malign role in Iraq, Lebanon and Palestine. They wonder how much worse it would be if the President had a nuclear arsenal. If we sit by while Iran acquires a nuclear bomb, how many other countries will try to follow suit?

It is important to recognise that the Iranian Government, uniquely, opposes a two-state solution to the Israel-Palestine conflict—a two-state solution that this Government have worked in the heart of international diplomacy to promote, develop and secure, despite difficult circumstances. Iran’s President still queries the existence of the holocaust, in which 6 million lives were lost during the second world war.

Iran remains a key source of funds and arms for Lebanese Hezbollah and Palestinian Islamic Jihad, using Iranian taxpayers’ money that would be better spent on providing housing, education and jobs closer to home. It is an ignominious regime that, while needing to provide 800,000 jobs each year to the talented young population from which it must secure support, spends and diverts that money to the promotion of terrorist activities. Iran is arming and funding extremists who are undermining security and stability not only in Iraq but throughout the region as a whole, and that should be ended.

I turn to human rights, which was raised by my hon. Friend in relation to the MEK or PMOI. My hon. Friend suggested that I had been meeting that organisation. I have no recollection of doing so, either as a Minister or as an individual member of the Labour party; I want to put that on the record. That does not mean that I never met somebody who belonged to it—people come up to me in their hundreds at party conferences, so I may well have done so. But I want to put on record the fact that I have never had discussions with that organisation about its activities.

I am certainly not suggesting that the Minister has had meetings with PMOI members as a Minister—I do not want to cause him any unfair embarrassment. However, I think that he has met them informally, as many people have. We will look to see whether there is advice on the matter for him, but I do not want to cause him embarrassment now.

It does not cause me embarrassment. Why should it? I just wanted to place on the record that I have not met that organisation in my professional capacity. As for whether, like many people, its members have come up to me at a party conference, that may well be the case. I do not know, but my point is that even that situation would not be meeting with them, nor have I had discussions with them.

I am grateful to the Minister. Briefly, in the time that he has left, could he address the curious decision to suspend boarding operations and then reimpose them?

The statement made yesterday by my right hon. Friend the Secretary of State for Defence was quite clear. It was the second occasion of setting out the processes and procedures. My hon. Friend the Member for Thurrock asked me about the operations. That was extremely unfair, although not to me.

Why?

First, because the Secretary of State gave an absolute commitment that an inquiry would take place and the findings would come before the House; and secondly, because he has instigated a second inquiry—the Hall inquiry—into other matters relating to the incident. We should wait for those reports, which will be available in May. Apart from that, it is critical, whether in the Gulf or any other theatre of operation, that we should be allowed the maximum ability not inadvertently to provide information to people who might want to trespass on our military operations. The military operation in the Gulf is under the direction of the United Nations as a multinational force, as hon. Members know, and nothing happening in relation to the inquiry has prevented, stopped or undermined that operation. It continues and will continue, today and beyond.

As for the lessons to be learned, my hon. Friend the Secretary of State’s report will be submitted some time in May, and will be debated in the House. The Select Committees on Foreign Affairs and on Defence might want to discuss it further, and that will be a matter of their choice, but let us be absolutely clear—

I am pleased to bring the issue of concessionary bus fares before hon. Members today. I believe that the proposals for free bus fares for elderly and disabled people have almost universal support. The Government are to be commended for introducing local free fares in 2006 and for extending the scheme nationwide from 2008. Someone given a pass in Newcastle will be able to use it on holiday in St. Ives. A pass that is given out anywhere in England will be valid anywhere in England, and I hope that at some future time the scheme will be extended to anywhere in the United Kingdom.

I thank the hon. Gentleman for giving way at this early point. Is there any good reason why other parts of the United Kingdom, particularly border areas, should have to wait until after 2008 for this valuable scheme?

I can think of no good reason in principle. I suspect that as I go through the details of my speech, practical problems that any Government would face in introducing such a scheme will be raised. What I really wanted to say is that the scheme is a good idea that everybody supports.

I want to use the debate to ask the Government some questions and to air some issues, so that we do not have another example of the law of unintended consequences whereby good ideas result in bad and poorly thought through outcomes. I shall not go through all the examples, but I think of the money that has gone into GP services, which has resulted in a huge increase in the number of people attending accident and emergency units at weekends. The Government did not intend that, but the initiative has resulted in extra costs at both ends and a poorer service for many of my constituents. We want to avoid another situation like that.

I hope that my hon. Friend the Minister will provide answers to some of my questions, either in her summation at the end of the debate or in writing. Her responses will help when we consider the Concessionary Bus Travel Bill on Second Reading on 14 May.

I have three areas of concern. The first is about how the Government intend to disburse the money to the 291 local authorities that will administer the scheme, because that will be difficult to do fairly under the current rules. Secondly, I have concerns about the appeals system and some of the perverse incentives in the scheme for bus companies to put up fares and increase the public subsidy. Thirdly, I have concerns about the implementation of the scheme and how it will work in detail, and I would like to ask some practical questions about whether pensioners will have the passes in their hands by 1 April 2008.

Under the 2006 scheme, which is now in operation, the Government used the normal local authority grant system to hand out support. I am sure that my hon. Friend the Member for Tyne Bridge (Mr. Clelland) will refer to the consequences in his constituency of using that formula—there were £3.5 million of cuts because the Government underestimated the number of people in the north-east who had concessionary passes. It is not very important, but there are also anomalies such as the Scilly Isles getting part of the grant even though they do not have a bus service. Furthermore, of very pound spent on the scheme a percentage goes to Scotland and Wales, so that when the Government properly say that £250 million will go into the scheme in 2008, in fact England will probably get some £212 million after the disbursements to Scotland and Wales. However, that is part of the wider debate on the Barnett formula.

What does all that mean? As I said, when the national scheme comes into effect in 2008, someone from Newcastle will be able to use their pass in St. Ives. If at that time the money is paid out under the grant scheme, things may work very well in areas where few tourists go. However, there will be much larger consequences for councils such as Blackpool, which has millions of visitors every year, as visitors from England will be able to use their passes on the local buses. The problem will affect virtually all passenger transport authority areas that have cities with shopping and tourist centres. Quite simply, the way in which the local government grant is disbursed is not subtle enough to cope with such variations. There will be winners and losers.

I have three questions on this aspect for my hon. Friend the Minister. Can she give an assurance that the subsidy for the scheme will follow the passengers and that no local authority or passenger transport executive will be underfunded? A much better principle is for the money to follow the passengers rather than be distributed to local authorities on an historical basis. Secondly, can she provide an assurance that concessionary fare schemes for children and young people will not have to be cut because of Government underfunding to local authorities or passenger transport executives for the national concessionary fares scheme for pensioners? Thirdly, can she give assurances that the introduction of the new national free scheme will not lead to withdrawal of local authority-supported bus services, thereby undermining the value of the scheme to its users? People want reassurance on those three important questions.

The second area of difficulty is appeals by operators. I know more about PTA areas than I do about other areas. When the 2006 scheme came in, there was a huge number of appeals by bus companies saying, in effect, that they were not getting the right level of subsidy, even though local concessionary fare schemes had been accepted by both sides for many years. If I understand it properly, the point of difference was that the bus companies wanted 100 per cent. repayment for every fare, whereas the PTAs and local authorities quite reasonably said that some elderly people would pay anyway, so that the bus companies’ claims did not represent their real loss or the real subsidy that was required. The adjudicators seem to have taken a purist view of the matter. They awarded the bus companies in Greater Manchester £3.4 million more than was expected, and the consequence was a 70p increase in the fare for schoolchildren. I am sure that that is not what the Government wanted, but it was inevitable once the scheme had started.

That brings me to perverse incentives. If the Government are giving 100 per cent. subsidy in respect of pensioners and disabled people, there is an incentive for a bus company to put up fares and to attract more and more pensioners on to the buses at the expense of the fare-paying public, who would be much more likely to find another way to get to their leisure activity or work if the fares went up. They might buy a car or go with a friend; however, they could also lose their job if they could not afford the fare

The easiest way in which I can illustrate that point is to ask hon. Members to imagine a virtual bus that is travelling down a radial route with 100 passengers on it—buses do not normally have that many passengers on them, but this is only an illustration. Let us imagine that half of those passengers receive concessionary fares paid by the local authority and half pay a £2 fare. If the bus company doubles the fare, it is likely to have more pensioners and fewer fare-paying passengers on the bus, which makes it easier for the bus company to make a profit.

We have monitored the decline in bus patronage since the second world war. Patronage increased when buses were deregulated, but since then it has declined. There has been an improvement in patronage in London, and in other parts of the country there has recently been improvement, but that has been caused mainly by elderly passengers and other concessionary fare users. In future, to compare like with like, how will the Government compare statistics on fare-paying passengers with the statistics that we have from the second world war? It would indeed be perverse of the Government to claim an increase of 2 or 3 per cent. a year in passengers if that was masking a real decline in fare-paying passengers and it was only pensioners and disabled people who were using public transport. We all want them to use public transport, but not at the expense of people going to work or to the shops.

The real solution is quality contracts, which I will not discuss in detail because we have had a number of debates on the subject and the Government are to introduce another Bill on it later in the year. If we had quality contracts, we could specify the concessionary fare and all fares at a particular time. That would remove the problem of perverse incentives and of appeals being decided outside the system.

I will start the next part of my speech with a series of questions because they illustrate how difficult it will be in practice to make the system work. Will the Minister guarantee that the national scheme will be secure? What measures will the Department for Transport take to minimise the dangers of fraudulent passes and applications? Will the Minister provide an assurance that pensioners will have a new nationally valid pass in their hands by 1 April 2008? That will involve the administration of more than 9 million passes by 291 authorities—a tall task. Will the Minister provide an assurance that the scheme will continue to be locally administered, so that local authorities and passenger transport executives can offer a more generous scheme if they wish? For example, they might wish to extend the hours to before half-past 9 or to extend the scheme to other categories of people.

I would like assurances on those questions because the Government have been late in providing guidance on the scheme to passenger transport authorities and local authorities. I understand that it has been issued only in the last week. I also understand that it is too late to move straight to a smartcard scheme. However, it is important that we have a consistent and coherent scheme that can be administered locally, and that local authorities understand the scheme so that they can distribute the passes to those who have been awarded one.

I will conclude with a number of questions and points. Some £250 million—less the amount that will go to Scotland—is being put aside for the scheme in 2008. I shall be grateful if the Minister explains where that figure has come from and assures us that the amount will be adequate. Judging by what I have seen in Manchester and heard from colleagues, there has been a terrific take-up of passes and a real increase in bus usage following the start of the local free pass scheme. I can only see take-up increasing by large amounts.

I know that the Minister has heard me say this on a number of occasions, but the scheme is open to abuse by bus companies. I have made the case that there are perverse incentives in the scheme, but what action can she take to stop bus companies exploiting the scheme? Their business plans relate not to obtaining extra passengers and improving public transport, but to maximising the public grant. I have previously given examples of that to the House. First Group is the main operator in my constituency—it runs a virtual monopoly. When First Group drives a bus out of the depot, half the basic costs of that bus have already been paid for by the taxpayer, which is extraordinary. First Group is withdrawing from less profitable routes and putting more pressure on the public purse for subsidised routes. Now, it is putting more pressure on fares and on the public purse. The result is higher fares and fewer passengers. Evidence to support that scenario can be found in Wales, where a national scheme is in operation. In Wales bus companies’ profits and fares have gone up by more than in England, where there is not a national scheme. They have increased by 12 per cent.

How will my hon. Friend stop avaricious multinational bus companies from effectively ripping off the public sector? The profits of bus companies are increasing and so are subsidies from the public sector. In addition, deep in the statistics there is a decline in the networks of bus routes and in the number of fare-paying passengers.

The hon. Gentleman makes a good point about perverse incentives. Does he share my concern that one consequence of perverse incentives is that the bus companies are no longer doing enough to promote their services, timetables and concessionary fares and to provide the other aspects of a good service? In the conurbation that he and I share as Members of Parliament, there certainly seems to be a marked lack of such promotional activities.

The hon. Gentleman raises the point that I am making in a different way. The main target for bus companies in their business plans is how to increase their grant. That is the most effective way for them to get money to their bottom line. They are not looking to provide a good public service and that worries me. I am concerned that we will end up in the same situation as we had with the railway companies six or seven years ago, when public expenditure on the railways was completely out of control. To deal with that situation, the Government introduced the Railways Act 2005, which got rid of the Strategic Rail Authority and provided some control over public expenditure.

I am asking for a fair grant distribution system that allows the money to go where it will be used. That is best done by having a safety net and money held back that can be paid to Blackpool, Manchester, York or wherever there are extra traveller journeys. We also need to guard public sector interests. I look forward to my hon. Friend’s response to the points that I have made, whether it is given in this debate, in writing or on Second Reading of the Concessionary Bus Travel Bill. The drive behind the Bill is good and it has good ideas, so I do not want to see it ruined by a bus industry that wants to make huge profits at the expense of the public purse.

rose—

Order. There are 41 minutes left—40 by the time I have finished this announcement—before I call the first of the three Front Benchers. Will hon. Members please bear that in mind when making their contribution and when accepting and responding to interventions?

I am glad that the hon. Member for Manchester, Blackley (Graham Stringer) has raised this subject today. He is right in commending the Government for what will be a much appreciated scheme. He is also right, however, to mention that there are some important questions about it. He has raised some of them previously and they are significant, so I hope that the Minister will give attention to them.

I want to concentrate on a particular aspect of the scheme. Virtually all my constituents have to travel out of the local authority area to get to a major shopping centre or a district hospital. Many of them also have to travel out of their area to visit their nearest local shopping centre or supermarket. Some of them even have to travel out of the local authority area to visit their GP. They will benefit greatly from the introduction of the scheme.

Many of my constituents have to change buses, which means that they immediately forfeit even discretionary help on the rest of their journey, because they have completed the journey that started in their local authority area of origin, and they board a bus in a different such area. It is a nightmare for pensioners to get help under the current system, which relies heavily on discretionary arrangements whereby one local authority agrees to provide free travel for pensioners who travel in another local authority’s area. Such arrangements are limited and complicated.

For many of my pensioners, therefore, 2008 will be a delight, because all that will be swept away and they will have a national bus pass. However, that applies to only half of them. Unless the Minister acts, the other half will find April or May of next year an extremely disappointing time, because they will not benefit at all. The reason is that, when they visit their nearest city, district hospital, supermarket or in some cases their GP, they have to travel into Scotland. They will not get help unless there is interchangeability between the Scottish and English schemes. To the limited extent that they receive help at the moment it is because Berwick-upon-Tweed borough council gives some discretionary assistance for a limited number of journeys to Scotland, but not those on which one has to change buses.

If some of the financial problems described by the hon. Member for Manchester, Blackley come to pass, local authorities might find that they are unable in any way to supplement the provision of the national bus pass with discretionary arrangements. The financing of the scheme does not assume that local authorities will have to make further discretionary arrangements, but those in border areas would have to do so merely to keep the support that people have now, and they might not have the money to do that. What is needed is interchangeability between the English and Scottish bus passes—that stands out a mile.

The comments that I have made about my own constituents apply also in reverse: all those in Scotland whose nearest GP, supermarket or indeed shop is in Berwick need to be able to travel the opposite way and need to be able to benefit from the scheme. If their national card runs out, they will not be able to do so.

Tourism is a relevant issue as well. The hon. Member for Manchester, Blackley mentioned that, although in a negative sense, saying that the bus pass situation could be a problem for tourist areas. My own area is a tourist area, although not on the scale of Blackpool, where there are all those people wanting to use the trams for free. Nevertheless, there will be a problem. If tourists can travel around on the bus, in particular those who want to use the bus to go on walks, it is an attraction to our area. Many pensioners walk—let us not assume that they are all restricted in their movements. Many are keen walkers and ramblers, and would be delighted to use the scheme to arrive at one place and walk to another—down the coast, for example. A similar situation must exist in the Welsh borders as well.

Unusually among Ministers, but commendably, those dealing with the scheme have foreseen the problem—they have included powers in the legislation to enable interchangeability. However, all the replies that I have received from them have lacked any sense of urgency on the negotiation of interchangeability, and no commitment to achieve it by the time of the introduction of the national bus pass. It is vital that the national bus pass is interchangeable from the day on which it is introduced—otherwise half my constituents will say, “What use is this to us? It is not getting us to the GP, the hospital, the shopping centre, or the city.” They will be extremely angry and there will be a pensioners’ backlash in border areas—not just in my constituency but in the Carlisle area and in all the areas along the Welsh border. The local authorities in those areas, which provide for a certain amount of cross-border travel, will not have spare money to continue provision if the scheme financing presents the sort of difficulties that have been referred to in the debate.

I have one simple request of the Minister, therefore, which is that I hope that she will respond today by saying, “Yes, as soon as the Bill is on the statute book and the Scottish elections are over I shall be negotiating with my Scottish and Welsh colleagues to ensure that there are interchangeable national bus passes from the date of introduction of the national bus pass scheme.”

I congratulate my hon. Friend the Member for Manchester, Blackley (Graham Stringer) on securing the debate. It is timely that we recognise a successful and important Government policy initiative, although we should highlight certain potential and existing problems. I shall reinforce some of the comments made by hon. Friend, and perhaps elaborate on one or two.

I welcome the Government initiative of having local free fares for pensioners and the proposal to extend that to a national scheme next year—they are among the benefits of a Labour Government with a policy of tackling disadvantage and social exclusion. Furthermore, the scheme can be paid for because we have a Labour Government who have created a successful economy. That has produced the financial wherewithal to ensure resourcing of the scheme.

On the subject of the existing scheme, not only are there local arrangements of the type that the Government have funded in South Yorkshire, but a Labour-controlled passenger transport authority means that there is also an extended scheme operating over a greater time. Pensioners can use their free passes from 9 am—the same situation as that which applied under the old concessionary reduced fare scheme. The free fares apply to the trams as well as to the buses—that has also been agreed at local level. Furthermore, cross-border agreements with West Yorkshire mean that pensioners can travel between South Yorkshire and West Yorkshire on the free fare scheme, and on the same basis certain routes into Derbyshire can also be accessed, which is important for my constituents as my constituency abuts the border, so there is a certain amount of cross-travel.

Those are all welcome and important local extensions of the existing scheme, and I seek reassurance from the Minister that, on the move to the national scheme, the ability to have local scheme additions will remain available to local PTAs—particularly the earlier start and the extension to the tram. When the Government initially proposed the new scheme and indicated that it would apply only to buses, rather than to trams as well, I received enormous numbers of letters from constituents saying, “What are you going to do about us? We like the tram and we use it, and we want to make sure that we are not disadvantaged.” That has certainly been achievable at local level in Sheffield and South Yorkshire.

I have certain worries about the scheme funding, particularly the subsidy element, and I want to emphasise the points made on that by my hon. Friend the Member for Manchester, Blackley. It cannot be a coincidence that, around the time that the Chancellor made his announcement of funded free fares for pensioners at local level a couple of years ago, First Group, the major bus company that provides services in my constituency and throughout Sheffield, managed to have three fare increases in a 12-month period.

The basis for funding and subsidising operators for the concessionary scheme is that they should be neither better nor worse off commercially as a result of the scheme. However, it just so happens that whether they are better or worse off depends on the comparison with off-peak fares, and who sets off-peak fares but the bus companies themselves? In certain circumstances, we have almost given operators the ability to write their own numbers on a cheque.

Again, it cannot be a surprise that when First comes to look at its fare increases this year, some of my constituents face double-digit increases—increases far in excess of inflation or any reasonable increases in costs that operators have. Some people have to pay those fares: they have no choice but to ride on a bus and will pay the fare anyway. Pensioners riding on the bus at times when free fares are available will not really be concerned about what the level of off-peak fare is and how much money that will cost the passenger transport executive to pay over to the operators. They will simply get on the bus because it is free, and the operators will get extra money for them, having put fares up that people do not have to pay anyway. There is something slightly wrong about that system.

Let me explain my real concern. The PTE’s budget was, understandably, £18.3 million in the last financial year to pay for concessionary fares for pensioners. There was a more than 100 per cent. increase on the previous year, and we understand why—because the fares were free, rather than 40p, as they previously were. This year, however, there is a further increase of 5.66 per cent., which, given that the overall PTE budget is not expanding by the same amount, means that to fund the increase in fares that the operators are putting on at off-peak periods, which gives them an increased subsidy for the concessions for pensioners, other aspects of the PTE budget are starting to be squeezed and the ability to deliver other concessions to other groups that are in need of concessions will be affected, or the ability to fund tendered services will be squeezed out. The price of tendered services is already rising because there really is not competition for those, either.

I have supported in the past, and my hon. Friend the Minister will not be surprised to hear me again extol the benefits of, a move to quality contracts and to a franchise system for local bus services, because that is the right thing to do in order to be able to regulate the service and to deliver a real public service. It is not that I want to go back to where we were before the free-for-all was brought in by the Conservative Government. Rather, I would like to bring an element of real competition into the delivery of concessionary services.

At present, the bus operators, by being able to determine fare levels themselves, while recognising that many people who have to pay for them will have no choice but to use the buses and that no one will be put off getting on a bus if they have to pay nothing for that anyway, can almost name the increase in subsidy that they want each year, by putting off-peak fares up.

It is no surprise, either, that the price of single off-peak fares in my constituency has on average gone up more than that of weekly tickets, which are often bought by people who make a decision to pay for a local bus service and to get on it. That is because the local weekly ticket and the cost of it do not relate back to the subsidy for the concessions that the bus operators get. They put up those fares that will directly ensure that they have an increased subsidy at the end of the process, to compensate them for the concessionary passengers they carry.

However, as my hon. Friend the Member for Manchester, Blackley mentioned, if we moved on to a franchising basis and there were a competition for the franchises between different operators, that would cover the delivery of service not only to fare-paying passengers—people who hand money over weekly, monthly or on the bus as they undertake individual journeys. It would also be a tender and a competition to deliver the concessionary travel at the same time.

Under the arrangements in London, we do not have all this business of operators and PTEs having to sit down and argue with one another about what the real value of the concessionary travel is—what is the point at which the operator does not make a gain and does not make a loss from concessions? We do not have the issue of appeals going through and the decision being taken out of the hands of locally elected councillors or their appointed officials in the PTEs. The matter is determined by the tender that is put in for the franchise by the operators. They tender for a package of services.

I am arguing strongly that we must retain the concessionary scheme and bring in the national scheme and we must have the ability to retain, even when the national scheme is introduced, additions at local level such as we have in South Yorkshire, but we must also consider the business of how operators can be properly compensated, not overcompensated, as I believe many are at present.

When we move to transport authorities and transport executives being able at local level to decide what the best way is to run bus services in their locality, if they choose to go to quality contracts, that will mean that we have a proper element of competition in the entirety of local bus services—we do not have much now, because in most parts of Sheffield, one operator runs the services full stop. There will also be competition for the concessionary element of those services. It will stop the nonsense of operators simply putting up fares to get an increased subsidy for the concessions. It will stop all the nonsense of trying to arbitrate between the views of PTEs and of operators about what the actual and proper subsidy is. That will be a much better arrangement for the future.

I welcome what the Government have done so far. I welcome the extensions. Clearly, I would like to hear the Minister’s answer to some of the problems with the national scheme in relation to the introduction of smart cards and cross-border travel that my hon. Friend the Member for Manchester, Blackley has already put to her. I also hope that we move as quickly as possible to allowing a choice in favour of quality contracts and franchising at local level, because that will mean that there is a much fairer way of reimbursing operators for the cost of the subsidy, and ensure that we get proper value for public money, which I am not sure that we are totally getting under the current arrangements.

I, too, congratulate my hon. Friend the Member for Manchester, Blackley (Graham Stringer) on securing this important debate. I join my hon. Friend the Member for Sheffield, Attercliffe (Mr. Betts) in praising the Labour Government for introducing the free transport scheme for elderly and disabled people and for rolling it out nationally next year. That is not something new for many metropolitan areas and certainly not for Tyne and Wear, where we introduced a free travel scheme in the late 1970s for pensioners and disabled people. Charges had to be introduced in 1979, when the Tory Government came in, and I certainly objected to that at the time. I felt that the free scheme ought to have been protected at all costs, but unfortunately that was not done, and fares have increased ever since, so I welcome the new scheme; indeed, it has been widely welcomed in Tyne and Wear.

As has been pointed out, however, there have been unintended consequences because of the way in which the funding for the scheme has been distributed. There must be a rethink on the distribution of funds when the new national scheme comes in. It is crazy that the Isles of Scilly received a share of the money when they have no bus services at all, that Scotland and Wales received a share of the money through the Barnett formula when they have their own funded schemes anyway, and that some local authorities received more than they needed to run the scheme in their areas and others received less.

As my hon. Friend the Member for Manchester, Blackley pointed out, that cost Tyne and Wear dearly. I am referring not to the £3.5 million to which he referred, although we did have to make £3.4 million-worth of cuts. Some £2 million also had to be taken from balances, so the total cost to Tyne and Wear of introducing the scheme in the last financial year was £5.4 million. As I have said, £3.4 million of that related to cuts. There was a 25 per cent. rise in child concessionary fares to 40p, a 50 per cent. rise in the cost of teen travel tickets for 16 to 18-year-olds in further education, and the scrapping of 11 subsidised bus routes providing services where no other public transport could be provided. Those were the consequences of introducing the scheme under the formula that applied.

If the national concessionary travel scheme will be funded in the same way as it has been up to now—on the basis of population, not journeys—Nexus, which is the Tyne and Wear passenger transport executive, faces the certainty of further cuts in years ahead. It is also certain that urban Tyne and Wear will be a hotspot area in attracting greater numbers of journeys than the net journeys made by its own citizens. That is because the Metro shopping centre and the Newcastle and Gateshead cultural and other leisure attractions, which bring people into the area. In 2008, local authorities and PTEs will have to cover the costs of all concessionary journeys that start in their areas, including those of non-residents, so we will be severely disadvantaged. We would therefore like the Government to reserve funds from the national concessionary travel budget to compensate hotspot areas as they emerge.

If possible—this is a serious request to the Minister—we would also like Tyne and Wear to receive some compensation, if not 100 per cent. compensation, for the £5.4 million that it lost last year. If we do not get it, we will start next year not on a level playing field with other PTE areas, but with a severe disadvantage, as we try to get back, if we ever can, to where we started from.

Will the Minister therefore give an assurance that the subsidy for the scheme will follow the passengers and that no local authority or PTE will be left underfunded? Will she provide an assurance that concessionary fares schemes for children and young people will not have to be cut because local authorities or PTEs have received insufficient funds for the Government’s national concessionary fares scheme for pensioners? And will she reassure me that the introduction of the new national free scheme will not lead to the withdrawal of local authority-supported bus services, which would undermine the scheme’s value to its users?

There is also the question of appeals by operators. PTEs and local authorities currently reimburse operators for the cost of providing free travel by means of local formulas, which are broadly based on a proportion of the off-peak fare. Operators have appealed against such reimbursement arrangements, and appeals in PTE areas alone gained operators additional revenue of about £12 million in 2006. That resulted in some PTEs having to raise fares for other groups, and fares for children in Greater Manchester had to be increased from 50p to 70p to cover the cost of appeals. A further 40 appeals are already in the pipeline for 2007.

There is a further problem. As the number of fare-paying bus passengers continues to decline, while the number of state-subsidised non-fare payers increases, there is a perverse incentive for operators to raise off-peak fares. As my hon. Friends the Members for Manchester, Blackley and for Sheffield, Attercliffe have said, the answer is the introduction of quality contracts or a franchising system, under which local authorities can have some control over fares and bus services in their areas. That would simplify the arrangements for concessionary fares and eliminate the perverse incentive to increase off-peak fares. The provision of a concessionary fares scheme would be part of the quality contract, and operators would have to build that into their overall tender price. Fare levels could also be regulated as part of the contract.

Finally, there is the question of attempting to prevent fraud when the national scheme is introduced. The Department for Transport has been slow to produce a strategy setting out how the national scheme will work, and it is already too late to have a working national smart card scheme in place for April 2008. Will the Minister guarantee that the national scheme will be secure? What measures will the Department take to minimise the dangers of fraudulent passes and applications? Will she provide an assurance that pensioners will have a new nationally valid pass in their hands by April 2008? Finally, will she provide an assurance that the scheme will continue to be locally administered so that local authorities and PTEs can offer a more generous scheme if they wish to?

I shall be brief, Mr. Cook. I congratulate the hon. Member for Manchester, Blackley (Graham Stringer) on securing the debate, and he contributed thoughtfully on a subject that has caused considerable concern on all sides. I speak as a former member of the Greater Manchester passenger transport authority and a keen supporter of public transport, whether bus, light rail or the railway system.

As the hon. Gentleman has said, there is all-party support for free travel for pensioners after 9.30 am, and it has been a considerable success. However, he will be aware, as will the Minister, that many of us remain gravely concerned about the unintended consequences of the proposed move. I refer, of course, to the decision by bus operators in Greater Manchester, which has been mentioned, to rack up concessionary fares for children by 40 per cent., from 50p to 70p. I shall not go as far as one member of the Greater Manchester PTA, who referred to the operators as “robber barons”, but I certainly understand where that comment came from. Whether or not the problem is down to the Government seriously underestimating the take-up of free fares among older people, we are certainly all aware that the situation is serious, and I look forward to the Minister perhaps giving us some idea of what the Government intend to do, or might be able to do, about it.

When the Minister responds, I encourage her to touch on the way in which the money is distributed to transport authorities. I am referring, of course, to the fact that it goes via local authorities, and we have heard of the problems that that has caused—it was certainly clear who the winners and losers were in Greater Manchester. I have no problem with Manchester, as the regional capital of the north-west, benefiting most from the proposals, but I certainly do have a problem with the fact that my borough of Stockport, as well as those of Trafford and Bolton, received nothing very much as a result of the funding formula. With those few comments, I would be grateful to hear the Minister’s response to the debate.

There are 44 minutes remaining, and I appeal to both Opposition Front-Bench speakers to take no more than a third of that time.

I assure you that I shall take up no more than my allocated time, Mr. Cook. I, too, congratulate the hon. Member for Manchester, Blackley (Graham Stringer) on securing a debate on this important subject. As he rightly said, the measures have almost universal support across political parties and the general public.

The hon. Members for Sheffield, Attercliffe (Mr. Betts) and for Tyne Bridge (Mr. Clelland) and my hon. Friend the Member for Cheadle (Mark Hunter) all mentioned the serious issue of the potential shortfall in funding, and I shall concentrate my remarks on that. However, I also urge the Minister to respond to the concerns of my right hon. Friend the Member for Berwick-upon-Tweed (Mr. Beith) about cross-border arrangements, which are clearly important for Members with constituencies near the borders with Scotland and Wales.

In his 2006 Budget speech, the Chancellor announced that, from 1 April 2008, 11 million over-60s and disabled people in England would be entitled to free off-peak local bus travel in every area of the country, and the Concessionary Bus Travel Bill will legislate for those changes. Free bus travel will be available to those who are eligible from 9.30 in the morning until 11 at night on week days and all day at weekends and bank holidays across the whole of England. Local authorities will still be able to offer residents additional benefits, such as travel before 9.30 am, concessions on other modes of transport such as trams and tokens for use on taxis and community transport.

The Liberal Democrats welcome the proposed extension of the national fares concession, but we are concerned that the Bill as it stands simply contains enabling provisions, rather than details of how the funding mechanism will work. Questions remain over whether councils and passenger transport authorities will face any financial risk in administering the programme.

The issue is as much about how funding is distributed as it is about the total amount of funding. For example, under the earlier scheme for local free travel, which came into force on 1 April, a number of councils, including in Tyne and Wear, experienced severe financial impacts as a result of the administration of the funding distribution regime, and those problems have still not been fully resolved. The hon. Member for Tyne Bridge noted that his local PTA is about £5 million down, and any PTA or local authority would have serious problems with the cuts to services to which that might lead. The worry is that problems remain unresolved from the first time round, and the more complicated national scheme may bring even more. Council tax payers should not have to pick up the tab for a poorly managed and administered national scheme.

The present scheme is funded through the local authority block grant system, which is very crude and bears no relation to the numbers of concessionary fare bus travellers. That is why the Liberal Democrats support the inclusion in the Bill of the opportunity to introduce a smart card system, along the lines of what has been introduced in Scotland. That system would provide not only a method of buying tickets, but, more importantly, a measure of bus use. It would therefore facilitate a much better method of distributing money to operators by ensuring an accurate link to the number of passengers carried. Some local authority areas are already introducing smart cards, so it is vital that all adhere to a national standard that will make integrated ticketing and funding possible.

Unfortunately, there are potential problems with the current proposals. In areas with large numbers of visitors aged over 60, there will be additional pressures, as current funding arrangements do not take into account journeys made by visitors—only those taken by residents. Where there are high numbers of visitors, the level of bus use by the over-60s will be higher than average. If the funding formula does not reflect that, local taxpayers may pay for holidaymakers aged over 60 to use buses free. The problem is that no one really knows how many additional journeys will be created, or where.

There is a notable lack of research or data held by the Government on visitor numbers and, consequently, on the likely impact on bus use in areas more likely to be visited by the elderly. Figures on the age of visitors and on the likelihood that elderly visitors will use local bus services are not readily available. However, the raw figures on visitor numbers are a useful pointer to the areas that might experience significant increases in bus travel. For instance, London is clearly at the top of the table, but interestingly Blackpool is second and my own authority, Manchester, is in third place. It is not only seaside resorts that will feel the impact. Research needs to be done to find out the number of visitors, by age, in each local authority, their current bus use and the likelihood that those people will use bus services once they are free.

There should also be provision in the Bill for an eligible journey to be extended on to another mode of transport, where that is considered appropriate. My Liberal Democrat colleagues in the House of Lords have raised the matter of Croydon Tramlink, which for part of its journey from New Addington to Croydon is a substitute for a bus service that was withdrawn. That substitution will prove to have been very unfair, if the journeys are not included in the free scheme. Similarly, on Merseyside a number of journeys from Birkenhead to Liverpool will include a ferry journey, but at the moment such journeys will not be included in the scheme.

The original 2006 scheme received £350 million of funding, but the distribution system to councils, through the revenue support grants, has not covered costs, and some councils have lost out. Those councils have had to cut subsidised bus services, increase children’s bus fares, use reserves or increase council tax to fill the funding gap between the Government grant and the actual cost of free bus travel. Serious annual shortfalls have affected, for example, Tyne and Wear, Devon county council and Bath and North East Somerset council. The extended scheme for 2008 will receive an additional £250 million in Government funding, but the Government again propose to distribute that by a revenue support grant formula.

Recently, in January, the Local Government Association regeneration and transport board discussed that serious issue of funding. It has argued for a more transparent system of distributing funds, preferably by way of a direct ring-fenced grant to local authorities that are transport authorities. It has also suggested a safety net of money top-sliced from the Government’s £250 million to prevent local authorities from incurring unintended deficits and extending the fares-free concession to tram and light rail, local heavy rail, local ferry services and community transport. Unfortunately, the Government rejected all those proposals in the House of Lords Grand Committee debate.

There is a danger that unless a system is devised to ensure that each journey is paid for, some local authorities and passenger transport authorities will be short-changed. No one really knows what impact the national extension of the concessionary scheme will have on the take-up of free journeys. We do not really know how many people will decide to go on a day trip from Manchester to Blackpool by bus, which is why it is vital that resources are directed to the areas where journeys are created. The sensible solution is a smart card system that will log every journey and allow direct payment to be made to the bus operators, ensuring that no local authority will be left out of pocket and have to make up a shortfall.

There are 34 minutes remaining.

I shall try to take well under half of that time, Mr. Cook, to give the Minister time to reply to some of the issues that have been raised today.

I confess to some surprise at this debate today, given that in less than three weeks, on 14 May, the Concessionary Bus Travel Bill will have its Second Reading. The Bill was introduced in the Lords last November and had its Third Reading there on 5 February. Everyone knows that it will guarantee concessionary off-peak travel for people aged 60 and over and disabled people on all local buses in England from 2008. It will also allow future mutual recognition of national concessionary bus passes. Like other hon. Members, I would like the Minister to tell us when that mutual recognition of passes across border areas is likely to happen. The Bill will also effectively give the Secretary of State reserve powers to alter the scheme.

All hon. Members who have spoken in the debate have pointed out that the concept of concessionary travel is supported by all parties. The key intention of the Bill, the introduction of national concessionary bus travel, certainly enjoys our support. Clearly the clauses will require fairly detailed scrutiny. As I have said, Second Reading is on 14 May, so one might wonder why this debate should be happening today. I initially thought that it might be an appeal to humour: you wait for a while and then several come along at once.

I am sorry to ruin the hon. Gentleman’s joke—

So am I—it is the only one I have got.

Nevertheless, the debate is timely, because it may give the Minister the opportunity to change her mind.

I thank the hon. Gentleman for his contribution, but the Minister has been extremely generous in preparing for the Bill by inviting Opposition spokesmen to help to iron out several issues before it comes to the House. She has been able to answer several of the questions on which the Liberal Democrat spokesman and I sought reassurance—although that does not, as I am sure she can imagine, mean that we shall not give the Bill extensive scrutiny in Committee.

We have heard the usual comments today about bus companies. Some such comments are undoubtedly true, but there is no balance. One of the problems with the deregulated markets at the moment is that bus companies are becoming increasingly frustrated by what they see as local authorities’ failings, and local authorities are increasingly frustrated by what they see as bus companies’ failure to invest or to be responsive. The operators have freedom to decide where and when to run buses, but they are banned from co-ordinating with other operators. Local authorities can offer subsidised and non-commercial schemes, but there are restrictions on deals and on what they can negotiate on service levels. Of course, local authorities can invest in quality bus corridors and bus improvement schemes—I have been to see several of those. The private sector benefits from them, but several local authorities feel that they do not make a greater contribution to the public purse. However, those are not necessarily good arguments for the reintroduction of older schemes or for making the tests on quality contracts easier.

There is a lot of talk about the schemes that quality contracts might enact if the test were made easier. The schemes would be similar to those on the London bus network, but that is not the paragon of virtue that many people who live outside London’s precincts believe it to be. The Government believe that the current test for quality contracts is far too exacting and that the public interest clause should be redefined to state exact circumstances. Although it is clear that voluntary partnerships continue to work and can be made to work, it is not clear, even with the revision to the test that the Minister proposes in “Putting Passengers First”, whether quality contracts can ever work. They seem to take us back to the pre-1985 solution. The Minister talks about the Bill and “Putting Passengers First”, but rather than trying to make quality contracts work, we want her to make voluntary and quality partnerships work.

The essence of the Government’s proposals is that it should be up to transport authorities to decide locally the best way to run bus services in their areas. Surely the hon. Gentleman would not want to rule out the possibility of quality contracts being the right way in which to run services in certain areas and the passenger transport authorities in those areas having that choice.

I merely remind the hon. Gentleman that the proposed change to quality contracts will re-enact the status quo ante. It was a former Secretary of State for Transport who said that there should be no going back to that era.

Will the hon. Gentleman give way?

No, I have given way twice and I am mindful of your strictures, Mr. Cook. We could rehearse our Second Reading speeches and raise questions of cost, definition and reimbursement, but I intend to save much of that for Second Reading and Committee stage of the Concessionary Bus Travel Bill.

It is clear that concessionary schemes are not simply a subsidy to bus operators. As the Government have said, and as the evidence from a number of passenger transport executives and bus companies shows, reimbursement is made to work on a no better-off, no worse-off basis, which inevitably means that the scheme is revenue neutral in most areas. The level of reimbursement that is offered can be imposed by local authorities, so the ultimate power in terms of reimbursement resides with local authorities.

The funding of local government and of free local concessionary bus travel, which will soon be a national scheme, has caused considerable problems. The Liberal Democrat spokesman said that how funding is distributed is more important than how much is spent, but both questions are relevant. Several operators have written to me about the Bill to say that local concessionary and reimbursement schemes have resulted in many of them not receiving the appropriate level of reimbursement for carrying passengers who travel free, or for the investment required to introduce new vehicles or increased frequencies as a direct result of that concessionary travel being offered.

Equally, many local authorities have complained that the mechanism for allocating Government resources to cover the cost of local concessionary and free bus travel has resulted in a fairly major shortfall. When local concessionary fares were first offered, my office phoned 15 local councils to inquire whether the proposed extra Government funding would cover the schemes that they would have to introduce in their areas. Only one said that it would. I understand that there were 60 initial appeals, of which 44 are still outstanding, against the level of funding given to local concessionary schemes.

It is instructive to look at an example of how some local authorities have been hit. I shall use Christchurch as an example because it has one of the highest percentages of citizens aged over 60—36 per cent. Before the mandatory free scheme, it ran a half-fare scheme that allowed some cross-border travel and travel outside the district, which cost £138,000 in 2005-06. The new scheme cost substantially more, and the Government adjusted the grant to Christchurch by £237,000 from 1 April 2006, but the amount that was needed to enact the new local scheme to meet Government stipulations was £395,000, leaving a deficit of £20,000 for the local authority to pick up. The following year, take-up and usage exceeded expectations by 69 per cent., partly because of local usage and partly because of other people coming in. As a result of the scheme, Christchurch faced a £345,000 hole in its account. Therefore, the issue of how the money is being distributed is of concern.

The hon. Member for Manchester, Blackley (Graham Stringer) told us that Greater Manchester has pointed out that although the national allocation was £250 million, only £212 million actually reached local authorities. The history of the scheme is that the Government are clearly putting money in, but not all of that money is covering the full cost of implementing schemes in local areas.

The Minister has already claimed that, with the additional moneys that the Government are providing to make the local concessionary schemes and now the national concessionary scheme work, they will provide an extra £1 billion of funding. The £350 million that was made available last year and the £250 million for the national scheme add up to £600 million. I am told that the £1 billion is made up by extra movements in grant funding to local transport authorities. I hope that the Minister will clarify how that money will be delivered and how local authorities will recognise that.

Today, we have briefly discussed the hotspot scheme. A number of local authorities are clearly concerned that if the funding for the concessionary scheme does not follow the passenger, there will be a fairly dramatic impact on local council tax payers. It would be worth the Government giving us a clear statement, perhaps before Second Reading, about their thinking on one or two matters associated with the Bill.

The hon. Member for Sheffield, Attercliffe (Mr. Betts) talked about his local residents’ desire for trams to be included, but in several rural areas, although community transport or dial-a-ride is the only form of public service transport available, they appear to be excluded from the national scheme. For many disabled people, the ability to travel or to use the scheme will be real only if it applies to their carers as well. I am sure that, like me, the Minister will have had representations from various charities on that point. Does she intend to amend the Bill to allow that to happen?

The Government’s policy is relatively rare internationally, in that most countries do not offer 100 per cent. concessionary travel. We should be pleased that we do. We are almost unique in that regard. One reason why other countries do not offer 100 per cent. concessionary fares is because they contain a dead weight loss initially unless the funding is sensitive to journeys. I hope that the Minister will give us further guidance as to whether the pass that will be issued to citizens aged over 60 or to disabled people will have smart card technology. If such passes will not be available at the start of the scheme, when will they be? In future years, will the subsidy be entirely allied to usage and entirely follow the passenger?

I congratulate my hon. Friend the Member for Manchester, Blackley (Graham Stringer) on securing this time to discuss the Government’s concessionary fares policy. Many of my hon. Friends and I believe that it will further improve the lives of 11 million over-60s and disabled people in England. I share the views expressed by my hon. Friend the Member for Sheffield, Attercliffe (Mr. Betts). He described this Labour Government’s commitment to improving the well-being and social inclusion of those people on the back of economic success. That success allows us to make a level of commitment that no previous Government have ever been able to make and to which no party other than ours has committed.

Will the Minister give way?

If the hon. Gentleman allows me to continue for a moment, I will gladly give way.

I should like to make a few general points and then go on to discuss the specific points that hon. Members have raised. As we all know, my right hon. Friend the Chancellor of the Exchequer announced last year that from April 2008 people in England who are aged 60 or over and disabled people will be able to travel for free by local bus not only within their local authority area, but anywhere in England. That guarantee will apply from 9.30 am on weekdays, and all day on weekends and bank holidays. The Government are providing up to an extra £250 million a year to fund this important and popular policy.

The Minister is clearly not aware that when the Chancellor introduced in the Budget the decision that local travel was going to be free, it was already Liberal Democrat party policy.

The hon. Gentleman has called for the scheme’s further extension, and I shall be interested to hear the costings and to see whether the Liberal Democrats will commit to them.

This extension will benefit the people whom we represent. To make it happen, we introduced the Concessionary Bus Travel Bill, which moved to this House earlier this year. It has made excellent progress, and I look forward to the further debates in the coming weeks about its contents. I am glad to hear support on both sides of the Chamber for the positive difference that the enhanced concession will make to people in communities throughout England.

The hon. Member for Manchester, Withington (Mr. Leech) urged me to change my mind before the Bill’s Second Reading. I wondered what I could possibly change my mind about, because my commitment is to extending this scheme and having national free travel in England for those 11 million people whom I mentioned. While listening to his comments, I became concerned, because I got the feeling that we are all doomed—I heard criticism after criticism of the policy. It is important to remember that we would not even be having this discussion were it not for the Labour Government’s commitment to the people whom I mentioned.

We all know that April 2008 is a challenging deadline, but it is achievable with the assistance of local authorities and bus operators. I wish to put on record my thanks for the valuable input from the concessionary fares working group and its task groups. This has been, and will be, a good example of how central Government, local authorities and the bus industry can work together to deliver a real difference to people’s lives. I emphasise that it is in all our interests to ensure that we get this popular and correct policy right, which is where my commitment lies.

Buses are enormously important for getting people out and about, and bus journeys account for two out of three public transport journeys, which comprise more than 4 billion journeys a year in England. We want buses to be used by even greater numbers, and our commitment to concessionary travel will help that aim. Reference has been made to the need to change the way in which buses are run in some areas to attract more people on to them, and I share that view. Our proposals published in “Putting Passengers First” represent the most fundamental change in bus policy for 20 years.

Last April saw, for the first time, free local off-peak bus travel for older and disabled people. Some local authorities had concerns about the funding that they received from the formula grant. An extra £350 million was distributed—the figure is increasing to £367.5 million for this year—and that reflects local government’s wish to have freedom and flexibility in how it spends its funding. That Government policy is generally welcomed. As I have said before, we recognise the concerns expressed about the distribution of existing and future funding, especially in respect of visitor hotspots.

I shall refer to some of the points made by hon. Members. Some of my hon. Friends, who are tremendous advocates for bus passengers in both their local areas and up and down the country, have made several points. I was asked about funding following the passenger. Funding will certainly follow where the trip originates, and it is in all our interests to ensure that funding reflects usage.

Clarification has been requested on the administration of the national concession. We have announced that, in order to give some stability, from April 2008 the national concession will be administered by local authorities and passenger transport executives, as it is at present. I also confirm that the Bill will allow local decision making to continue. Local enhancements to the national scheme may continue, and I look forward to that.

An inquiry was made as to whether the funding level is sufficient. I am confident that it is, and it includes a large contingency due to uncertainties about take-up. The positive concern is that success will put pressure on the scheme, but, as always, I would rather deal with the consequences of success, and the extra funding from this Government allows for that. It is important to state that local authorities were consulted on how we calculated the extra money, and we included them all along the way.

I move on to the card that will be used. What will people have in their hands in April 2008? That question is still subject to consultation. I assure hon. Members that we are working with local authorities and are in the process of holding a series of workshops around the country this month and next month, whereby local authorities can give their input and find out more. We are discussing all aspects of the pass design with our stakeholders, including bus operators and local authorities, and the proposals will go out for consultation before a final decision is made. We intend to negotiate framework agreements with suppliers, which authorities will be able to use, should they wish. We also recognise that issuing passes represents a new burden, and we have proposed to pay an additional grant to cover the issuing costs. We are doing everything possible to assist local authorities in delivery, and we will continue to offer advice and support beyond April 2008.

Subject to consultation, the card will be a credit-card-sized photo pass. It will bear the national logo to ensure recognition by bus drivers throughout England, and it will have space for local customisation, such as a logo, to show eligibility for local concessions. In London, the freedom pass will have a national sticker put on it as a temporary measure, because it is not practical or cost-effective to introduce a national pass there in April 2008.

Concerns about cuts in other services have been raised. Sufficient funding is going to local areas for the statutory scheme, but it is for local authorities to implement affordable schemes that meet their statutory obligations. After that, they must assess local need and their overall financial priorities, and exercise freedom, flexibility and responsibility in deciding how they spend their funding.

I hear what my hon. Friend has said about local discretion, but local discretion in Tyne and Wear before the free bus pass system was introduced was that an extra £3.4 million should be spent on local services because of the introduction of the free pass.

Perhaps it will be helpful if I turn to Tyne and Wear. I was pleased recently to have the chance to go to Newcastle for continuing discussions with Nexus about its good work to develop bus services in the area.

On Tyne and Wear, the Government accept that in such schemes there will be winners and losers. However, that is not specific to the issue of concessionary fares. Indeed, local authorities have long argued in favour of unhypothecated funding. The issue is not unique to concessionary fares. The Department for Communities and Local Government continues to talk to concerned local authorities, such as Tyne and Wear. It is in all our interests to ensure that local authorities are adequately funded to provide the statutory concession.

Mention has been made of the Isles of Scilly, particularly by my hon. Friend. I have no brief to speak specifically for the Isles of Scilly, but their eligible residents will be entitled to the national concession on the mainland, so they will need to administer passes for their residents.

On reimbursement and appeals, which a number of hon. Members have mentioned, we have acknowledged that there are some problems with the current arrangements for reimbursing operators, which are rather complex and open to too much interpretation. Appeals are time-consuming, costly and in no one’s best interests. We are working closely with operators and local authorities to put in place revised and rather more efficient arrangements for the new 2008 concession. We aim to issue new guidance on reimbursement in the autumn, and I hope that hon. Members will take an interest in them.

On the general issue of appeals, it is right that bus operators should have a right to appeal. They should be reimbursed on a not-better-off, not-worse-off basis, and the Secretary of State has appointed an external, independent decision maker to determine appeals on his behalf.

On the allegations of operators putting up fares, it is worth reminding hon. Members that “Putting Passengers First” will give local authorities a role in the determination of maximum fares as and where appropriate. It is also worth reminding ourselves that the majority of bus passengers are not in receipt of concessionary fares. Bus operators must take account of the fact that putting up fares will be a deterrent to fare-paying passengers. Operators receive not the full fare charged, but an average fare, taking into account the whole range of tickets, including discounted tickets.

My hon. Friend the Member for Sheffield, Attercliffe asked specifically whether local scheme additions will remain available. The answer is yes, absolutely, and the Bill makes that provision.

On fraud prevention and the delivery of passes, smart cards contain a chip that can record data, which will be immensely helpful. They have many benefits, including the potential to reduce fraud, precise targeting of concessions, and allowing ease of travel, which is very much in line with our integrated approach and our encouragement to get people on to buses. We are actively exploring the possibility of the passes being smart cards. We propose that they should be used as smart cards in areas that have the necessary readers, but will be flashed up in areas where there are no readers. Again, in our discussions with bus operators and local authorities, the need to be pragmatic about what is possible by April 2008, with an eye to beyond, is paramount.

The right hon. Member for Berwick-upon-Tweed (Mr. Beith) mentioned the mutual recognition of concessionary passes throughout the UK, and that was raised with me when I had the pleasure of being the guest of my hon. Friend the Member for Carlisle (Mr. Martlew). I understand the point, but it is the nature of devolved Administrations to take devolved decisions. Concessionary travel on buses is indeed a devolved policy area, but I assure the right hon. Gentleman that the Bill contains the powers it does because we hope that in future—we have had initial discussions with the devolved Administrations—it will be possible to travel on eligible local bus services throughout the entire country. However, I want to make two points. First, it is our absolute priority to get a workable national concession in England in April 2008. That must be the No. 1 priority. Secondly, local authorities across borders can make their own arrangements, if they fund them. That option will always be available under the Bill.

The hon. Member for Manchester, Withington called for a range of extensions to the Bill, but it extends geographical scope only. I shall give some figures, which the Liberal Democrats might want to consider their commitment to. If the scheme were extended statutorily to the under-18s, it would cost an extra £500 million a year, and if it were extended to community transport, it would cost an extra £25 million a year. Those are rough estimates, because the figures would be affected by take-up, and we do not know about the switch from other transport or the additional capacity required. I understand the point, but cost is clearly not the only concern—the Government have already made a substantial commitment of £1 billion a year—and we must consider fair and robust definitions for eligibility, demand, and whether community transport, which is largely a voluntary sector, would be able to cope without full and proper consideration, so I urge caution.

The hon. Member for Wimbledon (Stephen Hammond) extended his support to the legislation, for which I am grateful, but I am disappointed today, as on previous occasions, by the paucity of interest from his hon. Friends. His party has given no commitment to our sustained investment in transport.

There have been references to quality contracts, and the proposals in “Putting Passengers First” will make them a realistic option, while ensuring that the legitimate interests of operators are safeguarded. Quality contracts are about not only cutting social exclusion and reducing traffic congestion, but the radical rearrangement of bus services, and it is important to ensure that that benefits local people.

The concessionary fares scheme is the right policy for this Government, and it is in all our interests to ensure that we get it right. I record my thanks to all those who continue to give us support, and I am pleased and proud to be involved with this important scheme.

I am delighted to have secured this debate, and I shall use it to seek to change Government policy on the restrictions that are placed on Romanian and Bulgarian nationals in this country. The restrictions are flawed in four ways. First, they are unfairly discriminatory: Romanians and Bulgarians are treated as second-class people, especially when compared with other European Union citizens, including those from recent accession countries. Secondly, the restrictions are counter-productive: they encourage people to work illegally or they force them into the hands of criminals or people traffickers, and they probably cost us in lost tax revenue. Thirdly, the restrictions are ineffective: there are many legal ways around them. Finally, they are costly: the system costs the UK Government a great deal of money, especially when we consider the relatively small number of people involved.

For those reasons, it would be better to abandon the specific restrictions and allow Bulgarians and Romanians the same access to the UK labour market as A8 nationals—people from countries that were admitted to the EU in May 2004. I strongly favour equal access to the UK labour market for all citizens of EU countries—a view that is already on the record from a previous debate of mine in this Chamber on local authority funding and the impact of A8 immigration. It has been my position since well before my election to the House; indeed, I can trace it back to 1989. I do not approach the debate with a general view that the UK should loosen its immigration controls, but the restrictions on Bulgarians and Romanians are wrong, counter-productive, expensive and chaotically administered.

I have been to Romania and Bulgaria on many occasions, but I have not been since I became an MP. I spoke at various stages of the European Union (Accessions) Bill in 2005, and I count myself as a friend of both countries. Indeed, I was in Bucharest during the Romanian revolution of 1989-90. For those reasons and others, it is wrong that the two countries have effectively been demoted to second-class citizens in the EU. However, that is what the Government have done.

Last week I chaired an open, public meeting in Hammersmith for London’s Romanian community. It was organised with a presence from the Romanian embassy, the Joint Council for the Welfare of Immigrants and the Immigration Advisory Service. The meeting was held at the Irish centre, ironically, as it seems that eastern Europeans have already overtaken the Irish as the biggest set of immigrants in Hammersmith and Fulham, although nobody is clear about the precise numbers.

Hammersmith and Fulham hosts not only the Irish centre, but the national Polish cultural centre, POSK. It is one of the—if not the—top UK destinations for eastern European nationals. I cannot say so with certainty, because the Government seem incapable of producing satisfactory numbers on any of those points. Generally, A8 immigration to my part of London has been very positive, with only a few negative side-effects, such as homelessness and handling people whose trip to the UK has not worked out.

I also consider myself to be relatively knowledgeable about UK immigration regulations. Somewhat surprisingly, the Home Office produces a league table of which MPs produce the most immigration casework. It normally includes me and other inner-London MPs in the top 10. However, at the open meeting that I called, even I was surprised by the amount of confusion about the Bulgarian and Romanian regulations. I have since spent a considerable amount of time researching the issue, and the more time I spend, the more confused I become. The Immigration Advisory Service argues that the Government’s extremely complex set of rules relating to A2 nationals may be deliberate. It says:

“It is almost as though the Government has made it deliberately difficult for them and for their potential employers to understand their position.”

Part of the problem arises from the immigrants’ unusual status. They are allowed free entry into and free movement within the UK as other EU citizens, but they are not allowed the same rights to the labour market as them. Like French or German nationals, a Bulgarian or Romanian national who stays here for a long period—normally more than five years—may eventually also gain the right to permanent residence. Students have the same rights as any other EU nationals, and the self-employed—an important group—also have the same rights. The only differences are for people acting or wishing to act as employees.

Unfortunately, there is no time today to describe the regulations in detail. I have the official version, and from the JCWI, an even more lengthy guide to them. Roughly speaking, there are 11 different areas of employment—a real pot pourri of trades—in which an A2 national might obtain an accession worker card. The areas include airport ground staff, but only of foreign airlines, ministers of religion, private servants in diplomatic households and so on.

There is just enough time, however, to consider a few cases that have come before me, showing the perverse effect of some of the regulations. Many of the Bulgarian and Romanian complaints will be familiar to Members who regularly deal with such places as Lunar House: no one picks up the phone, inquirers are left on hold for 30 minutes or more, they never receive an answer to written requests and so on. Those situations arise only after people have applied for registration or some other form of certification, because for those people—Bulgarians and Romanians included—who make initial inquiries, there is no helpline at all. They are given a phone number only after refusal has occurred.

However, many complaints are unique to Bulgarians and Romanians. They are the only nationalities who are not allowed to apply in person to the Home Office. Other EU and non-EU citizens can go to Lunar House in Croydon or another Home Office building, but not A2 nationals—at least that is what I am told. When Romanians get in touch with the Home Office, it is startling how often they are given conflicting advice. I urge Home Office officials to look at the online forum for Romanians in London. I shall happily forward them the website address, so that they can read about some of the Romanians’ experiences.

Returning to my open meeting, I was told by Romanians working in London—generally well educated, professional people—that the regulations are “manufacturing exploitation”; that people are being ripped off by others offering to help them to move from Romania to London; that many are

“paying for documents that are free of charge”;

that the “biggest problem” they face in London is neither housing costs nor the other problems that my other constituents are familiar with, but simply “government regulations”. There have been quite a few cases of Romanians being fined and paying up, even though they have been working legally with a self-employed status.

At the same time, it can be expensive to obtain good information. Self-styled advisers charge between £250 and £600 to assist in claiming self-employed status. One such adviser whom I have heard about sees nothing wrong with the situation: he says that “business is business”. Another adviser—again, I shall not name him—has been shown to have spent some £25,000, which is a great deal of money in Romania, on advertising his services in Romania this year alone. It must be a lucrative business if that is simply one’s advertising bill.

The Romanian press in London carries classified advertisements from advisers offering basic information for £150, and £450 costs for helping with worker registration forms. The point is that overly complex rules drive expensive advisers, and the Minister should really consider changing the situation.

The Bulgarian embassy reports similar problems with overly costly advisers. Agencies in Bulgaria, which UK nationals frequently own or operate, will arrange for a client a period of work that is often as short as two weeks. The embassy has seen some of the contracts, and many state that the agency cannot guarantee further placements. In that sense, the Bulgarians have been forewarned, but few seem to understand the situation. After the worker’s two weeks, the agency simply abandons them and they are left to fend for themselves. The worker cannot be sent home or claim benefits, and they will not get another job unless they become self-employed or a bogus student.

A Romanian has e-mailed me, ironically, with details of how a few individuals have fraudulently gained registration as students. In the public interest, I shall not put on the record the way in which the scheme operates, but the over-complex regulation is driving evasion. Evasion probably extends to tax and national insurance, so it costs us all money.

Ironically, owing to the fact that there are probably so few A2 nationals compared with A8 nationals, most employers do not bother to check the regulations behind A2s. They know that the regulations are different, but employers do not see any good reason to check out the rules; they simply play it safe and do not hire the Bulgarian or Romanian person. That is especially the case for self-employed builders in London. Employers are scared by the threat of fines. It seems that there is not too drastic a shortage of labour, and employers simply do not take the risk. If we as Members of Parliament do not understand the regulations, what hope is there for a small employer or, indeed, the Romanian national?

Let me take the case of Mr. A, a construction worker. He arrived in Britain in February 2007 and applied to Her Majesty’s Revenue and Customs for registration as a self-employed tradesman, in order to qualify for the construction industry scheme card. The card should have arrived later in February, but it did not, despite repeated promises by HMRC. In March, Mr. A was told that he could not have a CIS card after all, because the scheme was about to change. The contractor for whom Mr. A had undertaken to work abruptly considered supporting him to be not worth the risk, declared him to be working illegally and made him leave the site. Administrative delay and changing procedures cost Mr. A his livelihood. It is that sort of unfortunate experience that has made working on the black market become all too common, as it is regrettably far easier. Indeed, I hear that more than 20 Mr. As have been affected by the change in the construction industry scheme.

Others unscrupulously take advantage of the fact that Romanians and Bulgarians are known to have a different status and difficulties. Such people charge more for other services, such as private sector rents, which have nothing to do with the worker status of Romanians and Bulgarians in the UK, and simply exploit the fact that it is known that those two countries are treated differently.

There are cases where the rules for Bulgarians and Romanians are stricter than those for non-EU or non-European economic area nationals. For example, if one member of a couple is self-employed and given permission to work in the UK, the other generally has an unrestricted right to work in the UK as well, and that is valid in respect of non-EU countries, too. However, it does not seem to be the case for Bulgarians and Romanians. I am told that wives and husbands are frequently informed that they need to send a written job offer to the Home Office with a BR4 form and then wait for two to three weeks for permission. It would be helpful to know of any other information that the Minister has about that.

There are also fears that the rules are helping trafficking. Those involved are unlikely to come to an open public meeting or contact an MP by e-mail. However, their concerns that the rules are “manufacturing exploitation” have been raised on their behalf at such meetings by others in the community. Some regulations are simply crazy. For example, anyone graduating from a Scottish university does not require prior authorisation before coming from an A2 country to work in the UK, but they do require it if they have graduated from an English or Welsh university.

I cannot find a single Bulgarian or Romanian with words of praise for the Home Office. Interestingly, by contrast I hear a lot of praise for the police and the Met in particular. The head of the Romanian Orthodox Church in this country has echoed that favourable view of the police, who are reaching out to the community, but has also said that there is a lack of interest from the Home Office. Because Romanians and Bulgarians have free movement, but do not have free access to work or recourse to public funds, there is a small but growing number of cases putting a strain on church and charitable resources as a result. The head of the Church has told me that the police are “highly commended”. However, the Home Office did not contact him in the run-up to accession and has not done so since, and has not made any information available to the Church. I hope that the Minister will guarantee to change that.

I shall give a flavour of the comments that have been made to me by Romanian and Bulgarian nationals in the UK about the issue. One said:

“In our community, the feeling of discrimination is very strong. It seems like we have become the scapegoat for all the immigration problems in the UK, and we feel like the current government is trying to cover up for its mistakes…with ridiculous and draconian rules against EU PARTNERS!”

Another said:

“Doesn’t the Home Secretary realise that he is getting adult, healthy young workers for free? People in which the UK has not invested 1 penny to raise them and educate them, or care for their health? Romanians are coming here wanting to become tax payers from day one, with zero investment on the UK’s part”,

yet they are told that they are no good. Another person said:

“The majority of us have worked incredibly hard, managed to integrate well into British life and contributed back to the British society and economy. I would say be fair with the fair ones and be merciless with the bad ones.”

Another said:

“The only option for us is to become self-employed. A work permit is almost impossible to get because of the conditions and the limitations they’re asking”.

Let us consider what happens when one does become self-employed. One of my constituents, a Bulgarian working for an international bank, has been asked in a letter to produce within 28 days a set of 16 different documents to demonstrate her self-employed status. Let us contrast that with another Hammersmith and Fulham resident, who is not Bulgarian or Romanian. His letter from the Home Office actually apologised to him for all the delays that have been caused. The letter said:

“I am sorry it has taken so long to process the ILR application”,

but it went on to say that the reason the process had taken so long was that Mr. X

“appears on the United Nations listing for individuals belonging to or associated with the Al-Qaida organisation”.

Why is the Home office apologising to al-Qaeda members, but putting huge obstacles in the way of fellow EU citizens who are simply trying to work here?

The problems do not exist just in London. The National Farmers Union has also been in touch with me. It is concerned with some of the bizarre regulations in place, specifically the strange decision to restrict the seasonal agricultural workers scheme, or SAWS, to Bulgarians and Romanians from next year. The NFU says that that will deny British agriculture a pool of skilled reliable labour from other countries, ironically mainly from non-EU eastern Europe. Because of their general rights as EU citizens, Bulgarians and Romanians are not obliged to return to their own countries at the end of their time on SAWS. Equally, however, if they stay here, they are not allowed to do other work unless they become self-employed or a student, both of which seem somewhat unlikely for agricultural labourers. The NFU has rightly pointed out that the system appears to be designed to create a potential black market in labour.

The Minister told the Select Committee on Home Affairs and the European Scrutiny Committee on 7 December that

“we were aware that the restrictions that we imposed may be too draconian”,

but that

“what we wanted to do is commit, and commit publicly to an early review in case we have got the decision wrong.”

I urge him to conduct that review now. The scheme set up specifically for the A2 nationals was estimated to cost £1.6 million. About £450,000 of that was for the scheme’s estimated annual running costs. I suspect that the actual cost is rather more than that, but I would be interested to hear his views on whether the costs of the separate scheme for the A2s are justified at all, given the smaller numbers involved.

The Home Secretary has called A8 immigration “a success”, and I for one agree with him. In announcing the new measures for Bulgarian and Romanian nationals on 24 October, he said, ironically, with reference to the A8 nationals:

“Studies have found no evidence that they have taken jobs away from British workers or undercut wages. Employers and customers alike have welcomed their skills.”

So why should the A2 nations be any different? It is a curious world when something branded a success leads one to introduce measures to prevent further success.

I have five specific questions for the Minister. First, how many Romanian and Bulgarian nationals have come to the UK to work since 1 January 2007, what proportion of the total number of visitors from those countries does that figure represent, and how many have already exited? Secondly, why does he not simply apply the same rules for A8 nationals to those from the A2 nations? Although the A8 system has its problems, it is massively easier than the system that applies to Bulgarians and Romanians. Thirdly, when does he believe that he will have enough information to give serious consideration to lifting the restrictions?

Fourthly, what discussions has the Minister had with his EU counterparts on an EU-wide relaxation of restrictions? As he knows, various countries have relaxed restrictions on A8 nationals since May 2004. I urge him to work with his counterparts to make Britain part of a more welcoming regime overall. That would also be likely to reduce any risk—albeit small—of a sharp upturn in A2 numbers. Fifthly, this debate is about A2 nationals rather than A8 nationals, but I should also like to ask the Minister whether the Government make a profit out of the A8 registration scheme, as the £75 fee seems inordinately high.

In conclusion, most Romanians and Bulgarians to whom I have spoken or who have e-mailed me in the past few weeks have stories to tell. Obviously, most immigrants would. I myself was once a migrant worker, working in McDonalds in west Berlin in the 1980s. Nothing is very easy as a migrant worker. The bureaucracy can be intense and the hostility shown on occasion is unnerving. However, all that is at least partly offset by the overall experience and, potentially, the financial rewards. The point is that, unfortunately, the stays of most Romanians and Bulgarians in this country are made far more complex, difficult and subject to downright obstruction than they should be. It is high time that the Government took action to change that.

I call Keith Vaz—briefly, please.

Mr. Cook, I shall be very brief because we want to hear from the Minister. I support everything that the hon. Member for Hammersmith and Fulham (Mr. Hands) has said. In 1999, I was at the European summit meeting in Helsinki with the Prime Minister when he made the pledge and plea for Romania and Bulgaria to join. I was also aware of the speech that he made to the Romanian Parliament.

All the statistics mentioned by the hon. Gentleman bear scrutiny and are correct. I hope that the Minister will accept the arguments that have been put forward and make the changes necessary for there to be fairness to the people from Romania and Bulgaria.

I do not believe that I have served under your chairmanship before, Mr. Cook, and it is a privilege to do so this afternoon.

I congratulate the hon. Member for Hammersmith and Fulham (Mr. Hands) on securing this important debate. It appears that we have one thing in common: we both began our illustrious careers in McDonald’s, although I did not have the chance to work anywhere as glamorous as West Berlin, so my experience has not been quite as wide as his. I genuinely welcome the Conservatives back to the debate on immigration. They have been quieter during the past 12 months. I had not realised that the hon. Gentleman was a revolutionary; I hope that in the not-too-distant future he will bring a bit of that experience to his Front Bench.

I should like to start with two points of context before trying to answer some of the hon. Gentleman’s specific questions. My first point is that last July, my right hon. Friend the Home Secretary launched the immigration service on the biggest and most radical shake-up in its history. On 2 April this year, the border and immigration agency started work as an arm’s length organisation. Subject to parliamentary approval of the UK Borders Bill, in the months to come we shall have a more powerful inspectorate to cast some transparency on an organisation that has been too dark and hard to see into. New regions will provide a much closer interface with local communities and their immigration priorities.

The issue is not all about immigration policing. There will be communities that say to us, “Look, we need a bit of help with changing the kind of migrants that are working in our economy.” I visited Newcastle at the end of last year and was struck when Liberal Democrat local authority leaders and others told me that they wanted to grow the population of Newcastle by 8 per cent. in the next few years and that they could not do that by encouraging the good citizens of that city to breed faster. They need migrants to help fill some of the skills gaps in their economy. I hope that in future years, the border and immigration agency will be able to work much more closely with local communities to plan for such changes.

We are also undertaking a number of important reforms to how immigration policing is effected in this country. We have set out plans to establish a second offshore border control, and we are harnessing new technologies, some of which the Conservatives have not yet signed up to. I was struck by the hon. Gentleman’s story about the woman asked to produce 16 or 17 different documents—I am not sure whether she was his constituent. When we introduce biometric ID cards, that process will get slightly easier.

We had to consider a decision about the work rights of Bulgaria and Romania against that general reform of the immigration system. Of course, we considered the experience of A8 migration. The hon. Gentleman is absolutely right; in 2004, when 10 countries joined the European Union, we gave their people access to our labour market. Our evidence is that the decision was absolutely right. There have been calculations of the considerable impact and contribution that those migrants have made to our economy and society. Research by the Department for Work and Pensions found that there was no evidence that jobs had been taken away from British workers.

The hon. Gentleman’s second question was important—he asked why we were not simply rolling forward the rules that we put in place for the A8 so that they apply to people from Bulgaria and Romania. The answer is simple—I thought that we set out our rationale and logic clearly at the time—and I shall repeat it. In some parts of the country, there was still evidence of transitional impacts caused by changing levels of migration. The hon. Member for Peterborough (Mr. Jackson), who is with us in the Chamber, has talked about that in the main Chamber and in the Committee considering the UK Borders Bill.

Last week, I talked about some of the changes that I had seen in schools in my constituency, and other hon. Members have discussed changes and pressures that they have seen in the health service. Against that background, we are witnessing evidence of admittedly isolated impacts on public services. It was sensible for us to wait a little longer to understand the overall impact. Our determination to put things on a more rational basis is best expressed in our recent decision to put immigration decisions as a whole on a far more open and transparent basis. That is why just before Easter, I said that we would set up a migration advisory committee to advise on where in the economy the UK needs migration and where it does not. Alongside that, I added that we would set up a migrations impact forum to ensure that the Government as a whole were taking into account the wider social impacts of migration in making decisions.

I do not think that the Minister’s answer to my question makes sense. On the one hand, he says that it is important to continue assessing the impact of the A8 migration, which started three years ago, yet on the other, the Home Secretary has declared it an unqualified success. Surely one cannot continue assessing something while declaring it a success. Will the Minister say how he thinks Bulgarian and Romanian nationals feel, given that the A8 migration has been declared a success but the jury is still out on them?

The success that we have seen from A8 migration has largely been centred in the economy. However, there is evidence of specific, isolated pressures on public services. My argument has been that some such pressures have been experienced in some of the poorer communities in this country and that it is incumbent on a Government who believe in social progress and in strengthening and raising the safety net to understand those pressures before we take any more big steps in migration policy.

The hon. Gentleman asked for data on the number of A2 migrants coming to this country, and they will be available on 22 May, when they will be published alongside Office for National Statistics data on a range of other migration matters. That will be the starting point for a debate that we should have in this House and elsewhere. As the hon. Gentleman has said, we have committed to undertake a review of the decision within 12 months of its coming into effect. I confirm that although, under the derogation to the accession treaty, we have the right to maintain restrictions until the end of 2011, we will undertake that review within those 12 months. I hope that we will be helped in that debate by the migration advisory committee. It is important that this country finds a way of having a rational, logical, open and transparent debate about what has historically been a very sensitive area. If we were able to establish that independent committee with the legitimacy and expertise that I am hoping for, that will make a considerable contribution to getting the right answer when the review is undertaken.

We are in constant discussion with our EU partners about the restrictions that they are imposing. I want to take issue with one point that the hon. Gentleman made. He said that somehow the decision was unilaterally taken by the UK. That was, of course, not the case. France, Germany, Spain and Austria—a number of what are sometimes called old European economies—took exactly the same kind of decision as we did, and many of them rolled forward the restrictions imposed on the A8. I do not think that the Bulgarians and Romanians are feeling bad because of decisions that we took. Actually, our decisions were very much in line with those of the rest of Europe.

Countries such as Germany and Austria realised their mistake and changed their minds quickly after 1 May 2004, precisely because they could see that the system, as it was introduced, made no sense. Surely it is time for this Government to change their mind.

I do not accept that. When we consider the decisions that other great European economies made on A2, we see that their decisions were very much in line with our own.

I am about to run out of time and I believe that you are about to call me to order, Mr. Cook, so I shall undertake to write to the hon. Gentleman to answer his particular points about information. The decision was a measured one and, I think, the right one.

Order. That brings us to the final topic for consideration.

The debate centres on a case involving my constituent, Mr. John Braithwaite, but it also raises some general issues about private security companies that provide services in Iraq. The company in this case is ArmorGroup. My concern is the absence of any effective regulatory regime for such companies.

I shall start with the case of my constituent. John Braithwaite was a serving police officer with Thames Valley police when in early 2006 he responded to an advertisement, specifically aimed at police officers, offering vacancies to provide short training courses for Iraqi police recruits in southern Iraq. The advert said that the scheme augmented a UK Government-sponsored programme in Basra. It was placed by ArmorGroup and stated clearly that the contracts on offer varied in length.

Mr. Braithwaite applied and was in due course offered by e-mail a posting for 12 months, although it was renewable. He assessed his future options, which included satisfying himself that he could take up to two years out from the police pension scheme and then rejoin it. On that basis, he accepted the offer, resigned from Thames Valley police and, after having the requisite immunisations and making other preparations, presented himself in London for deployment on 2 May 2006.

Only at that point, after he had resigned from his employment and was ready to leave for Iraq, was Mr. Braithwaite allowed to see a copy of his contract. It became clear that he was being offered only a six-month contract. He questioned that but was given to understand that company practice had changed and that no 12-month contracts were now on offer, but that there was a good chance of renewal. No clear information was available about the client details, which contravened company policy, but Mr. Braithwaite was given to understand that the Japanese and Dutch Governments were partly funding the project. In those circumstances, he felt that he had little choice but to go ahead and fly to Iraq.

He arrived at his final destination in Iraq after passing through three different staging posts and started work, but 24 days later he was handed his redundancy notice and flew home. He was subsequently told by ArmorGroup that his redundancy was a result of changes with the Japanese contract. Mr. Braithwaite was obviously extremely angry about his treatment by ArmorGroup. He had accepted an appointment to work in a conflict zone, using his considerable experience to help to train Iraqi police recruits. He had left a secure post with Thames Valley police expecting to be away for 12 months at least and possibly 24. Instead, he had been employed for only one month.

He was relatively fortunate in that he was able to find employment again with Thames Valley police, but he was unemployed for three months, his career progression at Thames Valley police was set back by two years and he had to rejoin the pension scheme on less favourable terms than before, because its terms changed while he was away.

Unsurprisingly, Mr. Braithwaite tried to take legal action against ArmorGroup over his redundancy on a number of grounds, including the fact that the redundancy decision, which affected others employed by ArmorGroup, seemed to be made arbitrarily and was not based on experience or other objective criteria. He then discovered that ArmorGroup is incorporated in Jersey, and so any application would have to be dealt with under Jersey law and through a Jersey employment tribunal. The tribunal rejected his application, because Jersey law does not apply to employment outside Jersey.

Mr. Braithwaite then attempted to complain directly to ArmorGroup and to clarify why he had been employed on a six-month contract that was terminated so quickly. None of the information that he has received, none of that which I have received from the Foreign and Commonwealth Office through ministerial letters and written parliamentary questions and none of that which he has received from freedom of information requests to the FCO has made the situation any clearer—if anything, it has been made more opaque.

It appears from those sources that ArmorGroup had a contract with the FCO for police mentors that started on 4 June 2004 and was due to expire in June 2007. The contract was initially for five months, and was reviewed and renewed five times—in November 2004, January 2005, September 2005, April 2006 and finally in October 2006. As of January 2007—this information was given in answer to a written parliamentary question—the contract specified 71 police mentors, although to ensure that there were 71 mentors on the ground at all times, extra personnel were employed up to a maximum of 91. In August 2005, the contract with the FCO was extended to include an additional 17 mentors. That extension was funded in full by the Dutch Government and lasted until February 2006. There had also been a contract funded by the Japanese Government, but that was for six months and ended on 18 May 2006. When the Minister responds, I would be grateful if he were to confirm whether the information I have summarised is correct and whether there were other related contracts involving ArmorGroup that I have not cited.

To summarise, Mr. Braithwaite was employed by ArmorGroup for six months, on a renewable basis, on 2 May 2006, when the FCO contract had just been renewed and was due to run until June 2007, the Dutch contract had finished two months previously and the Japanese contract had only two weeks left. Given that ArmorGroup had already been making people redundant because of the end of the Dutch contract and approaching end date of the Japanese contract, it is difficult to understand its reasons for hiring Mr. Braithwaite and then terminating his employment so abruptly.

My understanding of the way in which the main UK contract operates is that ArmorGroup contracts to ensure that the full complement of training posts is operative at all times. That means that it has to employ staff over and above the 71 mentors stipulated to provide cover, and the cost agreed with the FCO takes that into account. It is therefore most profitable for ArmorGroup to employ sufficient extra personnel to ensure that it can always meet its contractual requirements, but to keep the number of staff to a minimum in order to reduce costs and maximise profit. I can only surmise that Mr. Braithwaite was hired to fill a temporary gap in cover and that once that immediate problem was over he was made redundant.

It appears that ArmorGroup, by taking on extra staff—including Mr. Braithwaite—and quickly making some redundant, is essentially transferring the risk inherent in such contract work to its employees while making fat profits for itself. It can do so because it is registered in Jersey, so overseas employees are given little or no employment protection.

I have recently been contacted by another former employee of ArmorGroup in Iraq, who is not my constituent, and it appears that ArmorGroup’s hiring and firing policies are persistent and well known.

I congratulate the hon. Lady on securing this debate. I believe the individual to whom she has referred to be a constituent from Northern Ireland who has been in contact with me. Will she keep me advised of any further contact on the issue? It appears that the problems apply not just to one individual, but to others.

I thank the hon. Gentleman for his intervention. I will certainly keep him informed. After this debate, it may be that other hon. Members contact me about their constituents, and I should be more than happy to co-ordinate with them.

I want to make it clear that as far as I can tell, the company has done nothing illegal, but I believe that it has acted with a total lack of consideration for the effect of its policies on its employees. Being incorporated in Jersey, it is not subject to UK employment law. Will the Minister clarify whether Jersey is obliged to conform with EU employment law? Because Jersey law does not extend to extraterritorial employment, the company appears to be able to hire and fire as it pleases. In respect of my constituent, it appears even to have ignored its own company policy in a number of instances: it did not make the contract available before deployment; it changed the terms of engagement after the offer had been accepted; and the selection of individuals for redundancy was arbitrary and based on no objective criteria, as was admitted at the time by ArmorGroup personnel in Iraq.

The case also raises the general issue of private security companies and the implications of their increasing involvement in conflict and post-conflict situations. I am grateful to a paper produced by Sarah Percy of the International Institute for Strategic Studies, of which I am a member, entitled “Regulating the Private Security Industry”. I have used it to inform myself on the issue.

Since the Foreign Affairs Committee report on the Sierra Leone arms investigation in 1998, most of the attention has focused on private security companies at the front end in conflict situations. The ambiguous legal position of mercenary forces and the absence of effective regulation was the subject of a Green Paper in 2002 and a further Foreign Affairs Committee report, but has not, as far as I am aware, led to UK legislation, as yet.

The issues raised by the case of my constituent and that of the hon. Member for Lagan Valley (Mr. Donaldson) are, of course, much less serious than the legal vacuum that appears to allow foreign mercenaries to commit human rights abuses and breach international law with an impunity that, quite rightly, does not apply to military personnel in the same situation. However, it is our Government who are commissioning and funding post-conflict reconstruction projects in Iraq. If that work is being done on the Government’s behalf by employees of a private security company, the Government should take some responsibility for ensuring that those employees are protected against the exploitative employment practices to which my constituent and others appear to have been subjected by ArmorGroup.

The FCO has admitted in a parliamentary answer that the contracts include no stipulation requiring conformity with UK employment law, and I should like the Minister to explain why not. In response to my first letter to the Foreign Office on 24 October, the Minister for the Middle East said that ArmorGroup had undertaken an internal inquiry reporting on 10 November and had assured the Foreign Office that all proper procedures were followed in Mr Braithwaite’s recruitment, employment and redundancy. I am tempted to say, “They would say that, wouldn’t they?” I certainly do not think that the Foreign Office should have been satisfied with that response. Essentially, the firm was allowed to be its own judge and jury.

The IISS article states that Christopher Beese, ArmorGroup’s chief administrative officer, has suggested that with the demise of Sandline and now that no UK firm is involved in providing front-line fighting personnel:

“the need for regulation is less pressing.”

Given his company’s cavalier employment practices, I can see exactly why he is not keen on regulation, but the British Government owe it to people such as my constituent, who actually do the work in Iraq that the Government are paying for, either to introduce better regulation of private security companies or to include in their contracts better protection for employees.

As I have pointed out, my constituent has been relatively fortunate in being able to return to employment with Thames valley police after only three months out of work, but I do not believe that it is acceptable for firms such as ArmorGroup to continue to operate in a way that exploits their employees, particularly when their major customer is the British Government and therefore the British taxpayer.

There is very little evidence about the cost-effectiveness of using private security companies in post-conflict situations. Costs are simply not available publicly, and so few firms are involved that there is little effective competition. The Foreign Office has commissioned independent reviews of the policing programme to assess its effectiveness, such as the security sector development advisory team’s review in May 2005, Sir Ronnie Flanagan’s assessment in January 2006 and Chief Constable Paul Kernaghan’s progress assessment visit on 4 to 7 October 2006. However, it is not clear whether any of those reports considered cost-effectiveness or employment practices, and there has not been an opportunity for parliamentary scrutiny.

I ask the Foreign Office seriously to re-examine its use of private security companies, independently to assess their cost-effectiveness to the taxpayer and institute proper controls in contracts to protect employees. Will it ensure that those reviews are available to Parliament and drawn to the attention of the relevant Select Committee? No one else employed by ArmorGroup on a British Government-funded contract should be subject to the same experience as my constituent, Mr. Braithwaite.

I congratulate my hon. Friend the Member for Milton Keynes, South-West (Dr. Starkey) on securing the debate. I am genuinely pleased to have the opportunity to respond to her concerns and the contribution of the hon. Member for Lagan Valley (Mr. Donaldson). I commend the commitment and bravery of John Braithwaite and the many individuals like him working for a range of organisations who put themselves forward to work on the ground in difficult environments in Iraq, Afghanistan and other parts of the world.

The security situation in Iraq remains a matter of great concern. Key to its resolution is building the capability of the Iraqi security forces, including the Iraqi police service, so that they can assume control. The Iraqi Government will take increasing responsibility for security in all provinces in 2007. The UK is heavily involved, and we have much to offer. Our work in the south of Iraq has been laying the foundations for security transition there, and the transfer of security responsibility has now been achieved in the provinces of al-Muthanna, Dhi Qar and Maysan.

Much of the progress in building civilian security capacity has been achieved through the work of the UK civilian policing mission to Iraq. Civilian police trainers and mentors, including those employed by ArmorGroup, have made a vital contribution through their work to build the capacity of the Iraqi police service. The UK has had a policing assistance mission in Iraq since 2003, working to train and mentor Iraqi police in the three southern provinces of al-Muthanna, Maysan and Basra, as well as providing specialist input into police development and reform in Baghdad. In the southern provinces of Iraq, police trainers have worked alongside the Iraqi police service on projects to increase the capacity of local police stations, to support investigations into allegations of serious corruption in the police and to build the command and control capabilities of the provincial police leadership.

Helping democratically elected Governments to develop an accountable and effective police service to enforce the rule of law is a critical part of the UK’s work overseas, not only in Iraq but in many countries and regions, including Afghanistan and the Caribbean. External organisations have a valuable role to play in ensuring that we can respond to local needs quickly and flexibly by providing individuals with the necessary skills and experience to make a difference on the ground.

The civilian police advisers and mentors who use their skills to carry out that essential work on the ground in Iraq are recruited in two ways. Many, including the chief police adviser, are recruited on secondment from their police forces and then continue as serving or retired British police officers. Others such as Mr. John Braithwaite are recruited through a contract with ArmorGroup Services Ltd, a company registered in the UK and elsewhere, including Jersey. Since June 2004, the Foreign and Commonwealth Office has had a contract with ArmorGroup to provide police trainers and mentors to assist the Iraqi police service in southern Iraq and Baghdad. A similar contract for Afghanistan has been in place with ArmorGroup since late 2006.

The information that my hon. Friend the Member for Milton Keynes, South-West gave about the FCO’s contract with ArmorGroup in Iraq is accurate. I would only point out that in May 2006 the company’s contract with the FCO in respect of Iraq was due to run to September 2006, and that the company formerly held a separate contract with the FCO to guard embassy premises in Iraq.

As a provider of security services, ArmorGroup works with several national Governments, international peace and security agencies and private sector organisations. It was formed through the acquisition of Defence Systems Ltd by Armor Holdings Inc., a New York stock exchange listed company, and a subsequent management buy-out by ArmorGroup. In 2005, the company had a turnover of $233 million, and it has been listed on the London stock exchange since 2004. It is led by chief executive officer Mr. David Seaton, and the company’s non-executive chairman is the right hon. and learned Member for Kensington and Chelsea (Sir Malcolm Rifkind) who, as my hon. Friend will be aware, served as Foreign Secretary from 1995 until 1997. He became non-executive chairman of the group in 2004.

There is a role to be played by the private sector in the provision of security services in third countries. The FCO recognises that and in line with certain other Government Departments uses private military and security companies to provide security to staff working in difficult locations overseas, including Iraq and Afghanistan, or, as in this case, to provide expert advice to local agencies.

Possible options for regulation were explored in the Green Paper on private military companies, which was published in February 2002. Since then, the industry has expanded considerably. In late 2004, the then Foreign Secretary, my right hon. Friend the Member for Blackburn (Mr. Straw), therefore requested a further review of the options for regulation of the private military and security company industry. It was completed in mid-2005 and its findings are currently being discussed by Ministers and officials. If it is agreed that regulation is appropriate, the Government will introduce proposals for public and parliamentary consultation. I will ensure that the details of that debate and the correspondence that my hon. Friend the Member for Milton Keynes, South-West has sent to the Department on the matter are made available to the Ministers who are involved in the review.

I make a point of historical fact. In opposition as a shadow Minister and in government as a Minister, I worked on ensuring that legislation was introduced to regulate the private security industry in Britain, so I am very much aware of the points that my hon. Friend made.

There are already several tools available to counter potentially illegal or unethical activity. They include export controls, legislation on arms brokering, UN and EU arms embargoes and the national law of the countries in which companies operate. We work with the British Association of Private Security Companies, private military and security company representatives and the Security Industry Authority to encourage best practice and adherence to standards.

My Department has been in regular contact with my hon. Friend regarding Mr. Braithwaite’s case, including through parliamentary questions and written correspondence. I understand that following the end of his employment with ArmorGroup, Mr. Braithwaite has sought compensation from the company and pursued his case through relevant channels. For our part, we raised Mr. Braithwaite’s concerns about his contract directly with ArmorGroup and asked questions to which the company responded.

I have read the correspondence—that is to say the correspondence that we have been given; there will be other correspondence that we have not seen. It appears from the correspondence that has been revealed to the FCO through letters and e-mails between Mr. Braithwaite and ArmorGroup that there are several potential discrepancies and issues that clearly need to be resolved. The first is the extent to which ArmorGroup does or does not practise a duty of care in employing its employees, wherever they may be based. The second, more specific issue is the inconsistency between the accounts given by Mr. Braithwaite and ArmorGroup regarding the offer of a 12-month contract, which was set out in an e-mail to Mr. Braithwaite from Lucy Bampoe-Parry on behalf of the group on 23 March 2006. The third matter is the need for the FCO to protect its reputation by ensuring that those through whom it procures services operate consistently with best practice.

I have read the correspondence that Mr. Braithwaite sent to the non-executive chairman of the group, the right hon. and learned Member for Kensington and Chelsea, which was passed to ArmorGroup’s chief administrator Christopher Beese for reply. My hon. Friend the Member for Milton Keynes, South-West may wish to seek a meeting with the chairman to raise her concerns with him, given his responsibility as chairman of the organisation.

We would like to discuss with my hon. Friend what more we may be able to do to satisfy her and her constituent Mr. Braithwaite that the Government have done their utmost to ensure that any legitimate concerns have been addressed by the company in an appropriate way. I would be happy to offer my hon. Friend a ministerial meeting at the FCO at a convenient time to discuss the matter further, and the hon. Member for Lagan Valley may come to that meeting as well, if he wishes.

In cases where individuals are employed by companies overseas, it is for the relevant courts rather than the contracting authority to determine on a case-by-case basis whether either UK or EU employment law applies. As my hon. Friend knows, the branch of ArmorGroup with which Mr. Braithwaite signed a contract is registered in Jersey. Although I am not aware of the particular circumstances in which the case was dismissed, I can give a response to her question on the applicability of EU employment law in Jersey.

Jersey’s employment laws are not exactly the same as the UK’s laws, but there is a significant degree of commonality in the level of protection available to employees, including the right to a minimum wage, the right to a minimum period of paid leave, the right not to be unfairly dismissed and the right to a minimum period of notice. In that regard, one of the interesting factors in this case is that the job was advertised and then offered as a job with a UK company based in the UK, but on departure Mr. Braithwaite learned that he had actually been employed by a company based in Jersey. The point that my hon. Friend made about that was well made.

The FCO expects its contractors to meet high standards in their employment relations practices. We very much hope that Mr. Braithwaite and ArmorGroup will be able to reach a satisfactory conclusion to the matter, and I hope that the company takes seriously the comments made by my hon. Friend and by me after having reviewed the papers. I thank hon. Members for listening to my response.

Question put and agreed to.

Adjourned accordingly at four minutes to Five o’clock.