House of Commons
Tuesday 1 May 2007
The House met at half-past Two o’clock
[Mr. Speaker in the Chair]
Oral Answers to Questions
Foreign and Commonwealth Office
The Secretary of State was asked—
I have had regular discussions with my German colleagues during their presidency about many issues, including EU institutional reform—so, too, has my right hon. Friend the Prime Minister, who met Chancellor Merkel most recently on 24 April. At present, there remains no consensus among EU partners on this issue, but we will discuss it at the European Council in June.
Will the Foreign Secretary confirm that she has received a letter from the German presidency and Mrs. Merkel, suggesting how to revive the European constitution by using
“different terminology without changing the…substance”
and preserving part 1 of the constitution
“with the necessary presentational changes”?
Is not this a deceitful way to proceed? Why are these negotiations taking place in secret? Will the Foreign Secretary make an urgent statement to the House about the Government’s intentions?
There is nothing to make an urgent statement about at the moment. I do not recall the letter that the right hon. Gentleman referred to, unless he is referring to some kind of questionnaire that came round a little time ago—[Hon. Members: “Questionnaire?”] Yes. I presume that Conservative Members know what a questionnaire is: people ask us questions and we fill in the answers, so that they can get a picture of the general range of views—[Interruption.]
Thank you, Mr. Speaker.
As I was saying, that might be what the right hon. Gentleman was referring to. It is clear that the German Government would prefer to keep as much as possible of the constitutional treaty. As the presidency, however, the German Government will have to determine where the consensus lies among colleagues in the European Union, and do their best to give effect to that. As I have said, there is at present no such consensus.
The Foreign Secretary refers to the process of finding where consensus lies. In this House, we have found it extremely difficult to find out what the British Government’s position is, never mind determining where consensus lies. Will she at least acknowledge that one of the biggest difficulties for the British Government is that there is a huge division between the needs of the countries in the eurozone, which will require greater political integration from such a document, and the needs of those that are outside it?
I believe that we have been quite clear about this. The Minister for Europe has set out on a number of occasions the principles on which we base our approach to the issue. My right hon. Friend the Prime Minister and the Dutch Prime Minister recently made it clear that we would certainly be looking not for a constitutional treaty but for an amending treaty that did not contain the characteristics of a constitution, but which might tidy up the rules of the European Union to make it operate more effectively. With regard to whether there is a difference of approach for those countries that are members of the eurozone, I know that my hon. Friend the Member for Birmingham, Edgbaston (Ms Stuart) takes a great interest in these matters, but, for my own part, I would be reluctant to say anything that encouraged the idea that there should be some kind of two-speed Europe.
Are not the mooted proposals for treaty change either so obviously in the interests of democracy and transparency, such as an increased role for national Parliaments, or so obviously in the national interest, such as reducing the numbers in the Commission while we keep a permanent seat, or reducing the current bias against us in the qualified majority voting system, that it is difficult to see how anyone could rationally want to oppose them? Furthermore, how could we possibly conceive of having a referendum on what are essentially procedural and administrative matters, or even on matters relating to personnel management and job description? If we are going to have a referendum on that kind of thing, surely we should simply put all the amendments in the Finance Bill this afternoon—[Interruption.]
Following on from the interesting, predictable and common-sense view expressed by the hon. Member for Grantham and Stamford (Mr. Davies), does my right hon. Friend agree that it is important in the public debate to draw the distinction between the management of the European Union—especially in the Commission—and the powers of its respective bodies? Would not we make a lot more progress towards reaching consensus in this House and in the Council of Ministers if that distinction were to become more clear-cut?
My hon. Friend makes an entirely sensible point. As the hon. Member for Grantham and Stamford (Mr. Davies) has identified, it is hard to see how a sensible person could disagree to a number of the propositions, especially the notion of an enhanced role for national parliaments. Members on both sides of the House have long called for a proper degree of greater subsidiarity. At the moment, however, it appears that not everyone wishes to draw the kind of sensible distinction that my hon. Friend is making. I suspect that we may get closer to that as people get closer to having to try to draw conclusions.
I am sure that the Foreign Secretary will be aware that my hon. Friend the Member for Grantham and Stamford (Mr. Davies) is out of step with the overwhelming majority of the people of the United Kingdom. Does she accept that the people of the United Kingdom do not trust the European Union and will not accept any further handover of powers to it without a referendum? I expect the Government to honour their commitment to the people of this country.
I am slightly shocked to hear the hon. Gentleman say that the hon. Member for Grantham and Stamford is out of step with opinion, even in his own party, let alone the country, since, as he pointed out, much of what he said was simple common sense. I certainly accept that many people would be concerned if they felt that massive transfers of powers to the European Union were taking place—
I have some sympathy with the hon. Gentleman’s concern, as I know the point of view that he has long expressed. I wonder, however, how he managed to contain himself during the passage of the Single European Act and the many steps taken by the Conservative party in government that did indeed hand over powers to the European Union.
Does the Foreign Secretary agree that what we need now is not the waving of letters by Angela Merkel, as the right hon. Member for Wells (Mr. Heathcoat-Amory) has done, but a sensible and practical discussion with our European colleagues? Given that the constitution has been defeated in the referendums so far, such a discussion will allow us to proceed with the reform agenda so that a Europe of 27 can be governed in an efficient and effective way.
My right hon. Friend is entirely right. He will recall, as will many Members of the House, that we are committed by existing treaties to, for example, reconsider the numbers in the European Commission now that Romania and Bulgaria have joined the European Union. People are bound to consider whether sensible improvements can be made to the way in which Europe works, of a kind that have been made on several occasions in the past without a referendum having been held.
It is obvious that two years in the deep freeze has done nothing to alter the flavour of this debate, in this place and elsewhere. Does the Foreign Secretary at least accept that we must have a proper public debate about the issues? Any significant changes, other than overdue institutional alterations, cannot be introduced by stealth. Will she publish the answers to the questionnaire that she has received? Will she set out clearly what parts of the existing constitutional treaty would have to be removed for the Government to believe that we had gone below the threshold at which a referendum would be required?
As the hon. Gentleman and the House will appreciate, I am not intending to do so, as I have pointed out already that the opinion of member states has moved little hitherto. I am certainly not going to conduct, in public, negotiations that have yet to commence seriously. We have made it clear that there should not be anything that has the characteristics of a constitution. There would be merit, however, in having an amending treaty, which could tidy up some of the ways in which the European Union works—[Interruption.] Well, for example, we must consider the issue of the number of members of the Commission. There is also merit in considering whether the practical working and efficiency of the European Union can be improved in the interests of this country. We certainly have not the slightest intention of consenting to decisions that would not be in the interests of this country.
If my memory is correct, it is 33 years since an incoming Labour Prime Minister received an electoral boost from announcing that there would be a referendum on the United Kingdom’s future in Europe. Does the Foreign Secretary believe that there is an historical parallel that might be beneficial to us? Would she urge such a course on the Chancellor, on my hon. Friend the Member for Hayes and Harlington (John McDonnell), or on my right hon. Friend the Member for Oldham, West and Royton (Mr. Meacher)—whichever of them will lead our party in years to come?
My hon. Friend is entirely right in saying that that was the only time when we had such a referendum. A Labour Government did indeed invite the British people to make that basic decision—which was not done by the previous Government, in breach of every undertaking that had been given. Nor did the Conservative party in office ever hold a referendum on any of the changes made to the European Union. That includes the introduction of qualified majority voting in the Single European Act and its extension to 12 areas, and its extension to—I speak from memory—some 30 areas in the Maastricht treaty. The Conservative party did not believe in referendums then, and to be perfectly frank I do not believe that it really believes in them now.
I think that the Foreign Secretary acknowledged receipt of a questionnaire from the German Chancellor, Angela Merkel, which set out 12 propositions on how to proceed with the EU constitution by making presentational changes such as replacing the full text of the charter of fundamental rights with a short cross-reference having the same legal value. Will the right hon. Lady now publish the Government’s response, following cross-party support for that step? Does she understand that people will view these cosmetic changes as spin and deception while the EU constitution is introduced through the back door? Will she now match our unequivocal pledge that we would give the British people a referendum on any treaty that transferred powers from Britain to the EU, whether it was called a constitution or not?
All I can say is that the British people would be very ill-advised to take the hon. Gentleman’s assurance any more seriously than they took the assurances that were given and broken in 1972.
No, I will not publish any response that we may make to the document that has been circulated, which I presume to be the document to which the hon. Gentleman referred. It was intended to give the German presidency an overall picture of the views of member states. The hon. Gentleman is leaping to a conclusion on what will be the outcome of the discussions in a way that is wholly unjustified by the facts.
I am sure that the House will join me in expressing condolences to the family of Rifleman Paul Donnachie of 2nd Battalion The Rifles, who was tragically killed in Iraq last Sunday. Rifleman Donnachie was killed by small arms fire during a routine patrol in Basra city while he and other members of his patrol were escorting a police training team.
United Nations agencies estimate that there are some 1.9 million Iraqis displaced internally, and up to 2 million refugees in neighbouring states. Many of those now in neighbouring states left Iraq before 2003, and there are no accurate figures on how many have joined them since then. However, the United Nations High Commissioner for Refugees estimates that currently 10,000 people are leaving their homes every week, many of them crossing into neighbouring countries.
Does the Minister agree that the almost 2 million refugees who have fled Iraq since the war are, to a large extent, members of the professional and business classes in Iraq—the very people who are required if Iraq is ever to enjoy proper civil reconstruction? Given that nearly 2 million have fled as refugees, that a further 2 million are internally displaced and that hundreds of thousands have been either killed or injured—including, sadly, further British soldiers—does the Minister still argue that the British Government’s policy has contributed to progress and stability in the region? Has not Iraq in fact been transformed from a rogue state under Saddam Hussein to a failed state, with appalling consequences for its own people and for the region as a whole?
The right hon. and learned Gentleman makes some very good points, but I remind him that, before the invasion, Iraq was run by a fascist dictator who tortured people readily and murdered hundreds of thousands of people, not just Kurds but fellow Arabs, and that many people had already left the country. This is not a comment on the right hon. and learned Gentleman or his question, but it seems to me that the silence that existed before the invasion of Iraq about the behaviour of Saddam Hussein is in stark contrast to the sudden interest and the protests about Iraq now.
It is two years since the Iraqi Government seized the assets of the Iraqi trade unions, three months since three raids were carried out on the offices of the trade unions by US troops and a month since the leader of the mechanics union in Iraq was assassinated after being tortured. Will the Minister agree to meet me and representatives of the trade unions in Iraq to try to find a way forward, because at the moment our policy towards the trade unions in Iraq is not working?
I disagree with my hon. Friend. Our policy towards trade unions has been very supportive because they are a key part of civil society and are building the new society in Iraq. We must ensure that the sectarians who are killing trade unionists and those who for their own reasons are opposing democratic trade unionism in Iraq, are opposed. They are opposed regularly by the British Government and by our diplomats in Iraq.
Does the Minister agree that there has been excellent progress socially, economically and politically in the other Iraq—Iraqi Kurdistan? Does he also agree that, in order to maintain that progress and to guarantee the stability of populations and the return of internally displaced persons, the Kirkuk referendum must go forward later this year, without any interference, either internal or external, or delay?
The British Government certainly have no intention of interfering in any way in the referendum on the future of Kirkuk. I know that the hon. Gentleman is very interested in the Kurdish-administered part of Iraq and that he wants the referendum to go ahead. So do the British Government, but we want to ensure that that referendum is carried out properly and in a clear fashion, and that it is as inclusive as possible. As he knows, many allegations have been made about gerrymandering and the rest of it, so the referendum has to be seen to be as clean as possible. This is potentially a volatile area and we have already seen some jihadists and insurrectionists moving out of Baghdad to Kirkuk and murdering people with their suicide bombers. It is an important issue. We will do all that we can to ensure that the referendum is properly conducted and benefits the people of the Kurdish north and the people of Iraq in general.
Does my hon. Friend agree that the information that has been sought by the right hon. and learned Member for Kensington and Chelsea (Sir Malcolm Rifkind) is exactly the propaganda information that the insurgents in Iraq are seeking? Will my hon. Friend confirm that those killed or displaced in Iraq are not being killed or displaced by allied forces?
That is an important point. Sometimes it seems as if we are killing those tens of thousands of people. They are being killed by sectarians: there are Sunni on Shi’a murders, and Shi’a on Sunni murders. Sometimes the murders are committed in Basra by criminal gangs, who are making millions out of smuggling petroleum products. My hon. Friend is right to highlight that. The British armed forces in Iraq are trying their best to make that country a much more stable and prosperous place than it is now. I believe that they will succeed when the Iraqis themselves have the will to take on that fight to provide the security that their people need. That is why we are helping, in very difficult circumstances, to train Iraqi policemen and soldiers.
Following on from what has been said about the tens of thousands of people who are now leaving Iraq and the internal conflict there, what prospect does the Minister think there is of the Iraqi Government hanging together in the near future given the enormous strains that are now on both Sunni and Shi’a members of that Government? What pressure can the British Government bring to bear on the Iraqi Government to take this matter forward? If it is not taken forward, there will be a complete collapse of political credibility in Iraq.
The hon. Gentleman is right: this is about political credibility and national reconciliation, and about how that Government can become more inclusive—how they can represent not only Shi’as but Sunnis, and also Assyrian Christians, Kurds and everyone else who makes up that huge nation. I believe that that can be done. In the constitutional review that is under way in Iraq there will have to be imaginative thinking about, perhaps, forms of devolution and about trying to understand how it might be possible to reconcile the different pressures that there are in Iraq at present. That can be done, and in recent weeks Prime Minister Maliki has expressed a desire to do just that—to make the Iraqi Government a more inclusive Government who reach out to encompass all parts of society.
My right hon. Friend the Foreign Secretary has not had any discussions with the United Nations about the request to recover overpayments to claimants identified in the 2006 audit of the United Nations Compensation Commission. Her Majesty’s Government, along with other permanent members of the governing council of the UNCC, agreed to the adoption of a “best efforts” approach to recover overpayments. We are taking such an approach in contacting concerned claimants. We are aware, however, that in some cases it will be difficult for claimants to repay the money, and we will handle them with due concern for the claimants’ welfare.
But does my hon. Friend understand that these were payments, modest ones, made 17 years ago to those detained against their will in the first Gulf war? My constituent, Chris Shaw, received a payment of £9,000 and is now being asked to repay £1,300 within 30 days. Is that not shameful, and ought it not to be written off?
I certainly think that, in the case of my hon. Friend’s constituent, that is an unreasonable demand. However, I am sure that he knows that there have been UNCC-approved compensation awards totalling $52 billion to 1.5 million claimants worldwide, and so far $21.8 billion has been paid out. That amounts to 5 per cent. of Iraqi oil revenues. The figures for Britain are that 5,000 United Kingdom claimants have received awards totalling $428 million. Those are large sums, but I take on board my hon. Friend’s point and, as I said, where there are difficulties we must look carefully at the demands and where possible ask that the most difficult payments be written off.
The United Kingdom has strong relations with Muslim-majority countries and communities, through our governmental, people-to-people, cultural, educational, trade and other links. Based on shared values and interests, we are working together for a safer, more just and more prosperous world for all, addressing the common challenges that face us all, such as development, terrorism and climate change.
Turkey is crucial to our relations with the Islamic world. What specific steps is the Foreign Secretary taking to follow up on the statement of the Prime Minister earlier today on the political crisis in Turkey, and would intervention by the Turkish army in the selection of a new President of that country result in the UK dropping its support for Turkish European Union membership?
Irrespective of our approach to Turkish EU membership, everyone must recognise that it is highly undesirable for armed forces to interfere in a democratic process. We would certainly discourage that, and we have done so very firmly with the Turkish military.
Does my right hon. Friend agree that another very important Islamic country is Bangladesh? In the light of recent developments such as the warrant for the arrest of one of the major political leaders and the house arrest of another, the putting off of elections and the increasing dominance of the military, will she look again at Britain’s support for the interim Government?
We do of course keep a careful eye on the position in Bangladesh and recognise the concerns that my hon. Friend identifies, and I hope that she will recognise that there was great anxiety about the position in Bangladesh before the caretaker Government were appointed. Throughout the state of emergency and in our engagement with that Government, we have emphasised the need to balance concerns about stability and security with respect for individuals’ rights and democratic processes. We have urged them to put in place the circumstances and conditions that will lead to well run, free and fair elections, to recognise that concern exists about the timeline identified for those elections, and to recognise that there is a great deal of work to do before they can be carried out in a way that could meet suitable standards.
May I return to the question of Turkey, which is our most important ally in the Islamic world, and ask the Foreign Secretary, given that the nominee for the presidency of Turkey is her opposite number—the Turkish Foreign Minister, Mr. Gul—whether she has congratulated him on his nomination or counselled him otherwise?
I would never venture to counsel even as good a friend as Abdullah Gul as to how he should judge his political career. This is of course a matter for the people and the democracy of Turkey, and our chief hope and concern is that it should be democratically and peacefully resolved.
Is it not interesting that on Sunday hundreds of thousands of people demonstrated in Turkey in defence of the republic and of freedom, and against the nightmare of a religious-run state? Should we not congratulate all those who demonstrated and all their supporters on the fact that Turkish freedom and democracy will not be undermined?
My hon. Friend makes a very powerful point. As I said to the hon. Member for North Dorset (Mr. Walter), it is of course right and proper that people make their views known, and in peaceful ways that contribute to the democratic outcome that we all hope to see.
Events since the last Foreign Office questions have underlined that our most difficult relationship in the Islamic world is with Iran. Should we not do everything we can to make it clear that Iran can have a normal relationship with the western world if it suspends nuclear enrichment and some other activities, but that if it does not the United Kingdom will ask other EU countries to join the United States in taking progressively more serious economic and financial action against Iran—on access to the banking system, export credits and investment in oil and gas fields—so that the maximum peaceful pressure can be applied against nuclear proliferation, before it is too late?
I agree with every word that the right hon. Gentleman has just uttered. He is right to say that it is very important not only that we maintain pressure on Iran to realise that there is a price to be paid for continuing on her present route, but that we do so in concert with our partners. He may be aware that at the last meeting of the General Affairs Council it was agreed that the European Union will indeed fully implement, and go slightly further than is demanded by, the previous UN sanctions resolution. We shall continue to urge our colleagues to maintain that firmness.
Given that approach by the European Union, is the Foreign Secretary happy with the recent agreement by the Austrian energy firm OMV to develop Iran’s Pars gas field? Is not the view of the US State Department, which said,
“perhaps this is not the most appropriate time to be making or committing to making large investments in the Iranian oil and gas sector”,
one that should be shared throughout the European Union?
I understand the concern that the right hon. Gentleman raises. Although this is of course a matter for the Government of Austria, we do have some concerns about whether we are all trying to make the right kind of decisions, in the context of the overall background to which he refers. As I say, it is a matter for the Austrian Government, but there will no doubt be others who share the concern that he—and, indeed, the United States Government—have expressed.
High Commission (New Delhi)
The FCO’s estate in New Delhi provides efficient office and residential accommodation for our staff and those of other Government Departments. We do, of course, keep our estate strategy in New Delhi, as elsewhere, under constant review.
Given the ties of history that bind our two nations and the economic and political significance of India to this country and the wider world in the 21st century, does the Minister agree that it is desirable that the British high commissioner to New Delhi should continue to reside at 2 Rajaji Marg as he does at present? If it is impossible to negotiate a commercial deal with the Indian Government to enable him to do so, will the Minister give me a categoric assurance that the new residence will be of sufficient prestige to demonstrate to the Indians and the wider world how seriously we take that relationship?
I very much hope that our high commissioner stays there, if only for the architectural value of that beautiful building, which also has a beautiful garden. In 2006, 7,500 guests were entertained at the residence, including the hon. Gentleman. I do not know what wine he enjoyed, but I know that the wine is as good as the architecture.
Notwithstanding property wrangles, the Minister will be anxious to reassure the House that the services rendered by our post there continue apace, not least the consular services, especially in the light of the continuation in custody of my constituent, Panjab Singh, who has been held since Christmas eve by the authorities in the Punjab, without proper trial. It is strongly suspected that he has been mistreated. I know that the consular services are working hard, but will the Minister assure me that every effort will be made to assist my constituent, as happens in every other case of such difficulties in the sub-continent?
I can certainly give my hon. Friend that assurance. India is an extremely important country for the UK and we will do everything we can to continue with the excellent consular services that are provided. It is a complex country and, as my hon. Friend knows, there is considerable devolution to the states that make up India, which has, on occasion, resulted in great difficulties in some consular cases, including the one he raises.
The UN Security Council debate was a landmark event. The participation of 55 countries was an all-time record for a thematic debate. The vast majority of those who participated recognised climate security as an issue of immediate international concern. That should add momentum to the UN negotiations to galvanise collective action.
Does my right hon. Friend agree that much of the debate about climate change so far has been understandably couched in terms of the humanitarian consequences of failure to address it? However, the security implications of failure to deal with the humanitarian issue are profound and important. Can she make an assessment of how far the international community has appreciated that and taken it into account in developing policies to combat climate change?
My hon. Friend is right. It would be fair to say that we have been in on the early stages of recognition by the international community of the security implications of that challenge. As he may know—and, by coincidence, on the very day of the debate in the Security Council—a group of retired American generals and admirals published their own assessment of the security issue, describing climate change as
“a threat multiplier for instability in some of the most volatile regions of the world.”
They also identified it as a security risk to the United States, as it is to the whole world.
Is it not the case that the countries that will be most affected by the first changes in climate will be the poorest, such as Bangladesh, where large parts of the country will disappear? What assessment has my right hon. Friend made of the possibility of some 100 million refugees pouring out of some of the poorest countries and the security implications not only for the surrounding countries, but the regions in which they sit?
My hon. Friend is entirely right, and the country that he uses as an example—Bangladesh—is an area where substantial movement of people is causing security difficulties. However, I advise him and the whole House that a range of different threats have much the same effect. For example, there is great concern about the implications that difficulties with the flow of the River Nile would have, both in Egypt and all along its course, and about the pressures caused by the possible migration of millions of people. My hon. Friend is therefore right to identify such challenges. It is very important that the countries of the world work together to adapt to the changes that are already inevitable and to head off those that are not, as they might be even more damaging.
I am in regular contact with my EU, US, Israeli, Palestinian and Arab counterparts, as well as with other international partners, to discuss ways to move the peace process forward. I most recently discussed that with my EU counterparts at the General Affairs and External Relations Council on 23 April.
I am not sure that it is very fruitful to assess Britain’s contribution in that way. Over the past 10 years, all my predecessors in this post, and my right hon. Friend the Prime Minister, have made a most determined effort to do everything possible to move the middle east peace process forward and to identify the potential of the road map. My right hon. Friend the Prime Minister displayed the same determination in respect of the Northern Ireland peace process. At present, there is an opportunity to move the road map process forward, with regular meetings taking place between President Abbas and Prime Minister Olmert. That opportunity could slip away, but many people from all parts of the world are determined to try to work together to get a good result.
Now that an independent judicial inquiry has exposed the reckless culpability of Israeli Prime Minister Ehud Olmert—his popularity rating is now 2 per cent.—in bringing about an invasion of Lebanon that killed 1,200 Lebanese and 160 Israelis without achieving any of its objectives, what action is being taken by my right hon. Friend and her road map and other partners to require the Israeli Government to comply with the UN Security Council resolutions that that Government have violated consistently?
My right hon. Friend is referring to the interim report of the Winograd committee, which is, of course, a matter for the Israeli Government. Of course I recognise that a series of international resolutions have made various calls on different participants in the middle east. The Government are determined to do everything we can to support the peace process and move it forward, as in the end that could provide the answers to many of the questions that my right hon. Friend has raised.
Will the Foreign Secretary utterly condemn those who have been holding the BBC correspondent Alan Johnston for the past 50 days? Will she join me in sending a message of sympathy to his family, colleagues and friends at this very difficult time? She will know that the whole House will support her in any effort that she makes to secure his release, but can she give us any additional information this afternoon—for example, about who might be holding Mr. Johnston? What discussions has our high commissioner in Jerusalem had with President Abbas about this matter?
First, I am sure that the whole House will want to express its sympathy and concern for Alan Johnston and his family. He has been most cruelly treated, despite his long-standing friendship with, and support for, the people of Palestine. We are certainly doing all we can to work with his employers, the BBC, and with his family and other interested parties to try to be effective in obtaining his release.
There is little I can say to the hon. Gentleman about the situation. There are people who, it is thought, are likely to be holding Mr. Johnston, although they deny it. Every effort is being made at every level. My hon. Friend the Minister for the Middle East raised the matter when he chaired the Security Council recently, and the hon. Gentleman may know that the Prime Minister of the Government of national unity, Prime Minister Haniya, said only yesterday that he and his colleagues are also working quietly, but actively, to try to release Alan Johnston. Everyone is doing everything they can and we will continue to do so. I know that the hon. Gentleman understands that sometimes such things are better conducted more in private than in public.
One of the continuing obstacles to the middle east peace process is the presence of illegal settlements in the occupied territories. Notwithstanding the limited withdrawals from Gaza not long ago, the evidence is that the rate of increase of settlements on the west bank is growing; in fact, some settlers removed from Gaza are taking on new settlements in the west bank. What are the Government doing to increase pressure on Israel to stop the growth of illegal settlements in the occupied territories, which is now clearly undermining the peace process?
I am not aware of evidence that suggests that the pace of settlement expansion has increased, but we absolutely share my hon. Friend’s view in opposing any extension of settlements. We believe that they should be halted and that any construction barrier beyond the green line should also be halted. Both are contrary to international law and run the risk, whatever anyone’s intention, of creating so-called “facts on the ground”, which could impede the peace process. That, too, is something we deplore, as we have made very plain and will continue to do so.
Matters relating to the dossier on Iraq’s weapons of mass destruction have been examined in great detail by the inquiry led by Lord Hutton, Lord Butler’s “Review of Intelligence on Weapons of Mass Destruction” and the Intelligence and Security Committee’s report “Iraqi WMD—Intelligence and Assessments”. The Foreign and Commonwealth Office co-operated fully with those inquiries and FCO officials gave evidence to them.
In answer to my written questions, the Foreign Secretary has again refused either to publish the draft dossier, written by John Williams, a press officer in her Department, on 9 September 2002, or to explain why those papers were not made available to the Hutton inquiry. The reason cited for the refusal is national security, but how can the Minister justify that cloak of secrecy when the paper was a draft document intended for publication, and when previous and subsequent drafts have been made available? Or is the real reason because the Williams draft was the first to mention the 45-minute claim and was the basis for John Scarlett’s draft the following day?
When Colin Powell gave evidence to the United Nations Security Council was he fully aware of all the hesitations and qualifications in the intelligence community behind the dossier, which only subsequently became apparent?
I do not want to tread on the Minister’s sensitivities but he should recall that of the four inquiries two were by Committees that were cheerleaders for the Iraq war and the other two dealt only with certain parts of the evidence. We have not had a full inquiry. That dossier was a disgrace. It was presented as evidence to the House on which a decision was taken to take this country to join in Bush’s war in Iraq. If the evidence in the document was true, I do not believe—
Thank you for that, Mr. Speaker, as I did not hear a question either and I would certainly not recognise the two Committees as being “cheerleaders” for any war. They were filled with very distinguished Members of this House and the other place, so I think that my hon. Friend does them a great disservice.
There is at present no consensus among EU partners on the way forward regarding the constitutional treaty or, indeed, any new treaty. Those issues will be discussed at the European Council in June. The Government’s approach to the discussions was set out in my written ministerial statement of 5 December 2006. As my right hon. Friend the Prime Minister said on 16 April this year, we should return to the idea of a conventional amending treaty that makes a European Union of 27 work more efficiently and focuses on its citizens’ priorities. However, as we have made consistently clear, if the constitutional treaty comes back in its present form, the Government would want to hold a referendum.
I will surprise the hon. Gentleman because I looked for some help and advice on this issue from the Opposition Front Bench. I received some useful advice from the right hon. Member for Richmond, Yorks (Mr. Hague), who voted against holding a referendum on the Maastricht treaty on 21 April 1993—as, incidentally, did the right hon. Member for Wells (Mr. Heathcoat-Amory), who asked a question earlier. That is significant because the Maastricht treaty established the European Union, as we now call it. It made significant amendments to the European treaties and, in that light, clearly affected the relationship between Westminster and Brussels, which is what the shadow Minister for Europe has been talking about. It introduced a common foreign and security policy, a European security and defence policy, a new competence for the EU in respect of co-operation in the field of justice and home affairs, qualified—[Interruption.]
On 20 March in response to my question, the Minister said that the Government’s policy had not changed and that if the constitutional treaty returned,
“there would be a referendum”—[Official Report, 20 March 2007; Vol. 458, c. 679.]
Yet on 20 April, the Prime Minister, when asked by Le Monde whether the modified treaty would be put to a referendum, said: “No. That is clear.” The Government’s position has changed, so who is correct—the Minister or the Prime Minister?
The Government have been quite consistent on this issue. We made it clear that, because of the constitutional nature of the constitutional treaty, it would require a referendum. Again, however, the hon. Gentleman should check with his own Front Benchers precisely what the Government’s policy should be. We have been asking them to set out their position, but unfortunately, the right hon. Member for Richmond, Yorks—[Interruption.]
Will my right hon. Friend ensure that there will be no EU constitution without a referendum in this country? The public out there are absolutely fed up with the creeping transfer of powers to Europe. We need a referendum: will my right hon. Friend give us that guarantee today?
Will my right hon. Friend resist the siren calls from both sides of the House for this constitutional referendum? May I say how pleased I am that there will not be one? If we are to join together in Europe to tackle the challenges of migration, terrorism, immigration, threats to public health and climate change, we need to work together incrementally to do so. I ask my right hon. Friend not to take any lessons from Conservative Members, whose sole promise to pull out their people from the European People’s party has been delayed while they find someone to sit with.
I am grateful to my hon. Friend. She has pointed out the total inconsistency of the position adopted by the Opposition. That position varies according to whether they win or do not win elections. There is no principle involved, as far as the right hon. Member for Richmond, Yorks is concerned; it is simply tactical opportunism.
The Minister may be aware that a large group of Labour and Conservative MPs, together with professors and academics, have formed the national campaign for a referendum, of which I am chairman. What words of encouragement will he give to that important body?
I must apologise to the hon. Gentleman: I must have missed the press release announcing the significant elevation that he has achieved. I take this opportunity of congratulating him on his appointment and I look forward to the long discussions that he will have with the right hon. Member for Richmond, Yorks on referendums.
The Minister has said that if the constitution comes back, there will be a referendum. The leaked letter that Chancellor Merkel sent to the Prime Minister and other heads of European countries makes it quite clear that the only differences that are going to be proposed are purely presentational ones. Therefore, will we have a referendum if the Merkel proposals go forward?
The hon. Gentleman refers to it as a letter, as I think did the right hon. Member for Wells earlier. I have seen a series of questions that the German presidency has raised. Those questions are not necessarily answered in the document. I am sure that the hon. Gentleman logically recognises that, being no more than questions, they are not necessarily indicative of anyone position’s at present.
I have had regular discussions with my German colleagues during their presidency—so too has my right hon. Friend the Foreign Secretary and my right hon. Friend the Prime Minister, who met Chancellor Merkel most recently on 24 April. Our discussions cover many issues, including the way forward on institutional reform. As my right hon. Friend the Foreign Secretary has made clear, there is no consensus at present among EU partners on this issue. This will obviously be discussed further at the European Council in June.
Can the Minister confirm that, if there is a European Union constitutional treaty, its provisions can be implemented in the United Kingdom only through an Act of Parliament and, irrespective of the outcome of any referendum, that Act of Parliament remains paramount?
Our relationship with Iran is under review.
Iran is playing a role in Iraq. There is no question about it. I would not say that it was an entirely benign one. We know that there are guns and ammunition that have already been taken into Afghanistan, in a curious relationship between the Iranian Government—or at least some part of the Iranian Government—and perhaps al-Qaeda groupings in Afghanistan. I agree with my hon. Friend that it is important that we keep a close eye on that situation to ensure that it does not develop any further.
I bought a new suit for the occasion, but nearly missed out on making a contribution.
We welcome the lull in fighting in Mogadishu in the last few days and hope that a lasting ceasefire can now prevail. We want a political process pursued that can deliver lasting peace and stability and allow for much-needed humanitarian relief. The Government’s annual development and humanitarian programmes provide £21 million for Somalia, and the UK has provided a further £3.5 million of humanitarian assistance following the fighting in recent months. We expect Somalia’s transitional federal Government to show leadership and commitment in reaching out to all parts of Somali society and to intensify their dialogue with the clans in Mogadishu.
I thank the Minister for that response. Does he agree that considerable concern is growing about the role of the Ethiopian troops, and particularly about some of their activities in and around Mogadishu, and does he agree that we ought to do all that we can to support a political, rather than a military, solution?
My hon. Friend is absolutely right. That is why we have engaged in the way that we have done. In particular, we need a settlement that ensures that the Ethiopians leave the country, but in such a way that there is common agreement by all concerned not to return to the situation of the past few months, and the damage that it has done to the individual citizens of that country.
Medical Training Application Service
With permission, Mr. Deputy Speaker, I will bring the House up to date on the two security breaches of the medical training application service, MTAS, that arose last week.
As I explained in a written statement to the House last Friday, on Wednesday 25 April, a serious breach of security protection occurred on the MTAS website. To enable the necessary pre-employment checks to be carried out, personal details of medical graduate applicants for foundation programme posts were made available to the postgraduate deaneries on dedicated web pages. The information was loaded on to the site at about 8.30 am and the deaneries were notified of the relevant web page address for their area at 9.30 am. In making the information available to the deaneries, the MTAS contractor, Methods Consulting, failed to provide the usual and essential password security protection.
At about 2 pm, “Channel 4 News” became aware of the situation. At 4.35 pm “Channel 4 News” telephoned the Department of Health press office to inform it of the security breach. The Department checked the position and informed the contractor, who immediately arranged for all the personal details to be removed from the site. That was completed by 5.15 pm. The Department’s security team undertook an immediate initial investigation, which has established that information on foundation programme applicants was accessed from just 21 different internet addresses, mostly belonging to postgraduate deaneries.
The overwhelming majority of individual accesses before the security breach was closed came from an internet address belonging to ITN, the providers of “Channel 4 News”. The access by ITN began at about 2 pm and ceased at about 5 pm. More than two hours elapsed between ITN and “Channel 4 News” starting to access personal information and “Channel 4 News” actually notifying the Department of the security breach. [Interruption.] There is no evidence that members of the public or other commercial interests, apart from staff at ITN and “Channel 4 News”, accessed the site. None the less, it was an extremely serious breach of security, as well as a breach of contract between the IT provider and the Department of Health. The company concerned has taken appropriate action in relation to its staff, and it fully co-operated with our security investigations. We have already reported the situation to the Information Commissioner. I will also report it to Ofcom and draw it to the attention of the chairman of Channel 4 and ITN.
The following day, Thursday 26 April, it became apparent that junior doctor applicants, who have secure access to MTAS, could randomly access another candidate’s messages on the messaging facility—used, for instance, to inform candidates about interview appointments—by varying the digits of their own message reference. It appears that, although the content of the message could be accessed, details of the sender and recipient could not be accessed. The Department of Health was advised of this second problem at 3.45 pm on Thursday and informed the contractor, which closed the messaging facility. The whole site was then suspended just after 5 pm and remains suspended.
In view of the two lapses, the IT contractor, Methods, immediately appointed an approved security company, MWR InfoSecurity, to carry out a full security review and penetration testing. Some weaknesses were identified and MWR InfoSecurity has been working with the contractor to rectify them. However, to provide further reassurance, the national technical authority for information assurance, Communications Electronic Security Group, is also advising the Department, and the MTAS site will be re-opened as soon as we have the necessary security assurances.
Those two security breaches were utterly deplorable. They should not have happened and appropriate steps are now being taken. However, there is no evidence that members of the public or other unauthorised people, apart from ITN and “Channel 4 News”—[Laughter.] I am very sorry that the Opposition regard this as a matter of such enormous levity. There is—[Interruption]
Thank you, Mr. Deputy Speaker. There is no evidence that members of the public or other unauthorised people have in fact accessed personal information on MTAS. Furthermore, no applicant for the foundation programme or specialist training will be disadvantaged because of the two security breaches.
Already, following the recommendations of the review group chaired by Professor Neil Douglas, junior doctors have been offered the opportunity to change their training preferences. Following successful testing by junior doctors from the British Medical Association and the Academy of Medical Royal Colleges, nearly 26,000 specialist training applicants have reviewed their initial preferences and either revised or confirmed them. That process took place between 20 and 23 April, using MTAS, without security or technical problems. Where issues arose about a candidate’s ineligibility, they will be resolved by the relevant deanery, which determines eligibility.
As a result of the changes made to application preferences by junior doctors, around 15,500 additional interviews will be offered in England during the extended round 1. Although some interviews will be delayed because of the security problems, we still expect them to be completed by early June.
There is no doubt that confidence in the applications system, MTAS, has been further damaged by these deplorable security breaches. That is why the Department and I are taking them extremely seriously and taking appropriate action. I apologise again to junior doctors or foundation programme applicants who have been caused anxiety or, in some cases, inconvenience as a result. I will, of course, continue to keep the House informed of further developments.
Once again, the Secretary of State has had to make a statement to the House about the appalling shambles that has become the Government’s system of selecting training for junior doctors. I am sorry that the Secretary of State could not bring herself to say sorry. [Interruption.] It is interesting that in the copy of the statement that she sent to me beforehand, the word “sorry” does not appear at all.
The right hon. Lady must understand that the most outrageous security breach has occurred. It is astonishing that in her statement she did not tell the House what kind of data we are talking about—not only the application, but personal details, address details, references, the religious denomination of the applicants, their sexual orientation and full details of their criminal records check, including previous police records. It is astonishing that such an outrageous security breach could have happened.
The Secretary of State has not yet told us on what basis the breach occurred and what the consequences are. She said in her statement that the information was accessed from 21 internet addresses, mostly belonging to postgraduate deaneries—mostly. We do not know precisely who they were. Does she know who all those 21 internet addresses belong to?
The Secretary of State has said that there is no evidence that members of the public or commercial interests accessed the site. She may not have the evidence, but can she say that it is her certain knowledge that members of the public or commercial interests did not access the site? As it turned out, there was not only one, but two security breaches.
The Secretary of State must have known about the problems, because of, for example, the following letter to her from the British Orthopaedic Trainees Association on 5 March:
“We have also had concerns about the security of the site, with shortlisters reporting they could access deanery data and applications they had nothing to do with.”
She knew that there were problems with security on the site, and her Department did not take the necessary action to prevent that gross security breach.
Will the Secretary of State explain why on the morning after the breach her Minister, Lord Hunt, went on to the “Today” programme, where, having being asked by Jim Naughtie why it had happened, he said:
“Someone has apparently deliberately leaked that information”?
Jim Naughtie asked:
“You think it was deliberate rather than a mistake?”
Lord Hunt replied:
“It’s quite clear it was leaked.”
What was the justification for the Department putting out that information to the public and junior doctors on the day after the breach occurred? If the Secretary of State cannot guarantee security—she has failed lamentably in this case—what possible guarantee can there be for the patient record data, which will be loaded on to the electronic patient record? We need much greater assurance.
The Secretary of State went on to discuss what is happening now to junior doctors. She said that they are continuing to go through the process without further security or technical problems. I have received 14 examples of occasions when junior doctors have gone on to the site to try to book interviews. They have seen their preferences change; they have seen interviews being booked for two weeks prior to their application; they have seen double interviews; they have seen their eligibility disappear; and they have been told that there are no vacancies, but when they have telephoned, they have been told that there are choices. The system is not working. It is probably just as well that it has been suspended, because it needs to be suspended until we are satisfied about both security and the technical problems.
How can the Secretary of State simply assume that the timetable will be met? According to the review group’s plan, junior doctors should have started booking their interviews on Saturday and completed the process by this Thursday. We are four days into the process, and the site is still suspended. In theory, junior doctors have only 48 hours in which to book their interviews in order to maintain the timetable.
We had a debate last week, from which there are still outstanding questions that the Secretary of State must answer. Her Department asked trusts across the country through strategic health authorities to provide applications for additional training posts, and the trusts were asked to send in those applications by 27 April, which was last Friday. How many applications has she received? What opportunity is there now for additional training posts to provide the flexibility for junior doctors to have greater confidence? Will she assure the House that flexibility will be given to Professor Sir John Tooke’s group for next year by adding training posts this year and next year and by ensuring that wherever possible temporary, one-year training posts are appointed this year, rather than all the posts going on run-through training posts?
Does the Secretary of State not understand that the lamentable shambles that has brought her to this House on, I think, four occasions—we have brought her here twice—has done untold damage to the confidence of the medical profession in the way in which its education and training is being managed. It is down to the profession to restore confidence, and I hope that Sir John Tooke and his colleagues will be able to do so.
Frankly, the medical profession has lost confidence in the Secretary of State. Last Saturday, the British Medical Association junior doctors committee unanimously called on her to resign. I know that she will not walk, but the next Prime Minister ought to move her, and I hope that he does so. Does she not understand that there are two words that junior doctors across this country want to hear her say when she gets up and that those two words are, “I resign”?
The hon. Gentleman asked a series of questions; let me deal with them in turn. He asked about who exactly accessed the site after the first breach. As I indicated, our security investigators have established that access was made from 21 different addresses, the great majority of which belonged to postgraduate deaneries. I am confident, from that investigation, that no members of the public or other commercial organisations accessed the site. Those investigations are continuing, and as more information is established appropriate action will be taken.
The hon. Gentleman referred to shortlisters having access to applications. It was part of the system designed at the request of the postgraduate deaneries that those assessing applications should be able to access the full range of applications because in some cases multiple assessments were being made.
On the leak, we have still not been able to establish how “Channel 4 News” came to be told of the existence of these unprotected website pages. However, since the address of the website page for each of the postgraduate deans included a randomly allocated number, it seems highly unlikely that it was by accident. That is why my noble Friend Lord Hunt made the statement that he did on the morning following this outrageous security leak.
The hon. Gentleman referred to the electronic patient record system. That is a completely separate system established under completely different security and governance arrangements and with a very well developed security compact with patients and the public. It is currently being trialled in various parts of the country, and so far patient response has been extremely good.
The hon. Gentleman referred to junior doctor candidates changing their preference for applications. It is perfectly true that in a relatively small number of cases people were told inaccurately, or rather were told that there were no vacancies or that there were question marks about their eligibility. That did not come from the MTAS site but was a matter for the deaneries. It was not a fault in the MTAS site, nor did it have anything to do with security breaches; it was a matter for the deaneries, and it is being sorted out where necessary between the individual postgraduate deaneries and individual applicants.
More than 40,000 interviews were arranged initially as part of round 1, and that part—now round 1A—has been completed. As I said, more than 15,000 new interviews are being made available in round 1B. Some of those appointments were sent to junior doctor applicants before the security breach and therefore the suspension of the site; others, of course, have not been confirmed because of the site’s suspension. However, if the hon. Gentleman looks, for instance, at the London deaneries website, he will see that applicants have been informed through that site that interviews are planned to start on 8 May and that candidates will be contacted either through MTAS, when that is restored, or through other administrative arrangements if necessary.
I can confirm to the House that, as I said last week, we are working with postgraduate deaneries and with the service to create new training posts that will help to meet the aspirations of junior doctors but will also meet the needs of the service. We will confirm the number and the specific specialties, where they will be available, as quickly as we can.
Can my right hon. Friend confirm that the leaks that took place on the site last week are nothing at all to do with the electronic patient records that run inside the national health service, and that the words of the Opposition Front-Bench spokesman are nothing more than irresponsible scaremongering from backwoodsmen?
This is the fourth occasion on which we have debated this scandalous sequence of events.
The Secretary of State sought to reassure us that the only web addresses that accessed information were at one of the country’s main news organisations, which is not particularly reassuring. Even so, does she accept that the situation could have been far worse and that far more accesses could have been made in other circumstances? Will the right hon. Lady also concede that the information could have been passed on by those who accessed the site?
The Secretary of State said that the overwhelming majority of internet addresses were at ITN, but that suggests that not all of them were there. Where were the others? Are they being investigated? What has been discovered so far?
Will the right hon. Lady concede that the real outrage is that the matter could and should have been avoided through adequate piloting to identify exactly that sort of risk and if the Government had listened to all the warnings that were being given? Does she accept that she knew about IT glitches? The letter from the British Orthopaedic Trainees Association has already been mentioned. What action did she take when she received it to investigate the concerns?
The website states:
whatever that means—
“will resume as soon as possible.”
When is it expected to resume? Methods Consulting runs MTAS. The Secretary of State referred to a breach of contract. What action is being considered about that? Could the actions—or inaction—of Methods Consulting or others amount to a criminal offence under data protection legislation? Will that be investigated? Will a thorough, independent investigation—not by a company that Methods Consulting brings in—take place into the causes of the security lapses and to ascertain whether other breaches, about which we do not know, occurred?
How many individual medical graduates’ confidential information was accessible? We know that only a few people accessed it, but how many people’s confidential information was accessible to anyone who sought to find it? As we have heard, Remedy UK has received numerous details from junior doctors of strange glitches, such as preferences being changed without their knowledge.
The hon. Member for South Cambridgeshire (Mr. Lansley) gave other examples, but an especially serious example was that of Dr. Hua Luk, a Surrey-born doctor and a British citizen who was told that his application had been rejected because he did not have the correct immigration status. That is a scandal. Does not that evidence show that the system is discredited?
I have repeatedly questioned the Secretary of State about whether it is logistically possible to conduct all the extra interviews in the time scale provided. With the website down, what guidance is being given to applicants about arranging interviews? What faith should we have in NHS IT and the Government’s plans for a national spine of patient data when such a debacle occurs?
I entirely agree with the hon. Member for North Norfolk (Norman Lamb): it was a serious, deplorable breach of security, as I have already said. It could have had far more serious consequences.
The hon. Gentleman referred to those—one or more individuals—whom we know accessed personal information without authority. It is a matter for their employers—and possibly others—to establish whether the personal information that they accessed was made available to other people.
The hon. Gentleman asked about the 21 addresses and establishing precisely who accessed information from each address. As I said, those investigations are continuing. He referred to piloting. I have no doubt that it is useful—indeed, we piloted the system for the re-preferencing exercise with the help of the BMA and academy junior doctors and it worked well. However, the security breach that occurred last Wednesday was simply due to a decision by an individual at the IT contractor. It was a case of human error, which I am afraid that piloting could not have predicted or prevented.
The hon. Gentleman asked when the website would be restored. As I said in my statement, that will happen as soon as we are satisfied about security. He asked whether investigations are continuing, who by and whether criminal offences might have been committed. It is possible that criminal offences have been committed but we will not know that until the investigations have proceeded further.
Perhaps I could stress to the hon. Gentleman that, as I said in my statement, in order to establish the enhanced level of security that I believe is now necessary—given the publicity that the site has attracted and the danger of further or additional attempts to hack into it—we have brought in the country’s leading experts on the subject: the Communications Electronics Security Group in Cheltenham, which is part of the National Technical Authority for Information Assurance, will be quality assuring the security arrangements.
The hon. Gentleman asked about the number of applicants for foundation programme posts whose personal details had been made available in this wholly improper manner to the postgraduate deaneries. The number of medical graduate applicants involved is just over 6,000. He referred specifically to the case of the Surrey-born doctor who was told that he was ineligible. It is not, however, the MTAS system that makes decisions about eligibility; it is the individual deaneries. I understand that that case was raised with the help desk—some others certainly were—during the re-preferencing exercise, and such cases were quite properly referred to the individual deaneries to sort out. If the hon. Gentleman gives me further details of that case, however, I will ensure that the deanery concerned sorts it out.
We are keeping in close touch with the postgraduate deaneries on this issue, and at this stage we expect the additional 15,500 or so round 1 interviews to be completed by early June. As I have already said, information on the dates for those interviews is already being made available by the individual deans. Appointments will then be confirmed—or, where necessary, changed—either directly through MTAS, when it is restored, or through the deaneries’ making other arrangements to contact the applicants concerned.
I think that those on both sides of the House agree that this was an outrageous security breach. Given that we all rely on IT, and on having access to such websites, is it not incumbent on all agencies, when they come across such security breaches, to alert the authorities rather than to exploit the situation? Am I right in understanding that ITN and ““Channel 4 News”” knew about the breach for more than two hours? If so, was it not extraordinarily irresponsible of those broadcasters to exploit that situation rather than notifying the Department of Health so that it could deal with it?
My hon. Friend makes an important point. Of course, “Channel 4 News”, having been informed of the breach, was entitled to report it. It was a serious security breach, and the programme was entitled to report it; indeed, it might well claim that it had a public responsibility to do so. I agree with my hon. Friend, however, that it also had a responsibility to notify us of that breach urgently—indeed, immediately—so that the proper action could be taken to ensure that people’s personal confidential details were not accessed by others who had no right to access them.
This recent debacle will have even more serious effects on family members and loved ones who are trying to get training posts. The BMA said this morning that 34,250 doctors were trying to find posts, but that only 18,500 posts were available. The BMA also said that the vast majority—two thirds—of those doctors will not stay in the NHS. This is a crazy situation. We need those doctors to stay in the NHS—they have been paid for by taxpayers’ money—but under this Secretary of State’s leadership, if we can call it that, there is massive distrust in the system.
I have already said that there is a real, and unsurprising, failure of confidence in the MTAS system, the computerised application system for recruitment. I am afraid, however, that once again Conservative Members are, deliberately or inadvertently, muddling up the numbers. There are 32,000 eligible candidates for training posts. There are 23,000 training posts—more than ever before. Of the applicants, about 30,000 are already working in the NHS. Some are in training posts, but thousands are in non-training junior doctor posts—staff posts, non-career consultant grade posts, and so on. All those jobs will continue to be needed in the NHS. It is therefore simply wrong to say that an applicant who does not get a training post, or does not get the training post that he or she wanted, will inevitably be unemployed.
Having spent three decades in large-scale public sector IT, I must say that I tend to agree with the chairman of the BMA, in his letter to the Secretary of State this morning, that the IT system concerned is relatively simple, and that technological failings would tend to remove the confidence of patients in the care system being developed. Will the Secretary of State indicate how she will reassure the wider general public? Will she bring in the Office of Government Commerce to consider the lamentable lapse by Methods Consulting, which seems to have been instrumental in this latest debacle?
I have already explained what we are doing about the two lapses that took place last week, and the failures of Methods—human failings rather than inbuilt system failings—which allowed that to happen. On the much broader issue of the electronic patient record, we have known from the beginning that it was essential to have the highest possible level of security before putting confidential medical details about NHS patients into an electronic system. It is well worth saying, however, that the current manual system is not exactly a model of security, and that regrettable breaches of privacy and confidentiality have been reported on various occasions over many years. Because of the concerns about electronic patient records, we have gone to considerable lengths over some years to put in place a carefully worked out patient record guarantee, and to discuss that with patient representative organisations, the BMA and many others in the medical profession. We are currently piloting the electronic patient record in a small number of places in the country, to establish that there is justified public confidence in the electronic patient record.
Is the Secretary of State briefed on a daily basis on the material on the Mums4Medics and Remedy UK websites? Does she agree that the interest of the broadcast and print media has brought to public attention many of the issues from which junior doctors were suffering without the knowledge of the outside world? Will she try to clear up the eligibility issue? When I took it up with a deanery, I was told that the issue was nationally determined, whereas the Secretary of State said that it was determined by deaneries. It should not be possible for deaneries to have inconsistent views on eligibility, so will she have a clearing desk at the Department? Finally, will she give an answer on whether it is possible to apply for round 2 without having applied for round 1, given that many doctors are waiting for exam results and, on advice, withheld their applications at the beginning?
I do indeed keep up to date with the Remedy UK and other relevant websites. Various websites have raised concerns, particularly about last Wednesday’s security lapse, suggesting, for instance, that people’s future credit rating might be compromised. That is why I have taken pains not only to establish the facts and to deal with the security breach, but to put the information that we have so far been able to establish directly into the public domain.
On the issue of eligibility, there is one set of rules about eligibility in relation to immigration status, and there are specific eligibility criteria that relate to different posts, at different levels of seniority, in different specialties. In both cases, the postgraduate deaneries check whether individual candidates are eligible, in relation to their immigration status and their educational qualifications and experience, for the jobs for which they have applied. As for round 2, the review group is considering that at the moment, and I shall make a further statement in due course.
Obviously my right hon. Friend cannot say exactly when the website will reopen, because of the rigorous checks that will be required, but can she reassure us that the delays will not jeopardise junior doctors’ training?
That is an important point. Had it not been for the publicity and the heightened risk of people hacking into the site, the initial investigation by MWR InfoSecurity would have provided enough reassurance to enable us to reopen it; but because of that heightened sensitivity and the need to restore junior doctors’ confidence in the system, we decided to take a little longer, and to involve the national technical professions as I described. That will ensure that, without creating any unnecessary delays, we can give people the security assurance to which they are entitled and which I certainly intend to obtain.
This breach is extremely unfortunate, and a number of my constituents have written to me expressing their concerns—but what concerns them most is progress. My right hon. Friend told my hon. Friend the Member for Portsmouth, North (Sarah McCarthy-Fry) that it would take “a little longer” to get the site up and running. Can she be more specific? In my constituency and nationwide, junior doctors are keen to get on with it.
I know my hon. Friend will understand that I cannot say this afternoon exactly when we will be able to reopen the website, but I stress to her constituents and others that if it takes longer to establish the necessary level of security and assurance, I believe that that is worth while. The individual postgraduate deaneries have already said that if necessary they will make other administrative arrangements to contact junior doctors, confirm their interview dates and go ahead with the 15,500 additional interviews that have been made available as a direct result of the work of Professor Neil Douglas and his review group.
Wading valiantly through this continuing disaster are more than 30,000 junior hospital doctors. When I asked the Secretary of State to give regular progress reports last week, I did not expect her to be back this week explaining that the situation had worsened. Will she ensure that when the Department thinks it has put the situation back on the rails, she—or perhaps her successor—can come to the House and reassure us that enough training posts will be available for the commitment and dedication of junior hospital doctors not to be lost?
I do not think that either of us expected to be dealing with this subject again quite so soon, but I stress again that already more training posts are available than have been available in the NHS before—the 23,000 to which I referred last week—and that in addition we will have new training posts. They are currently being established between the postgraduate deans and the service, and will be validated by PMETB—the Postgraduate Medical Education and Training Board—because that is a requirement for training posts. Moreover, we will still have the staff posts, the non-consultant grade career posts, that already exist in the service. Thousands of applicants for training posts are currently employed in those posts, and will continue to be employed in them if their applications are not successful.
Can my right hon. Friend reassure me that she believes that to date there has been no criminal activity as a result of the website problem?
For many years I was involved in IT systems development, including writing a security system to protect online records, which was used by the NHS. The Secretary of State described the second breach in the following terms: “applicants…could randomly access another candidate's messages on the messaging facility…by varying the digits of their own message reference”—without, it appears, requiring a different password related to that different message reference. I am wholly shocked. Who agreed the security testing plan? Who signed it off? Who agreed, approved and signed off the outcome of the security testing plan for MTAS? Will she agree to place in the Library the full technical details of the security plan and its outcome, so that those in the know can have a look at those things to determine whether the Department signed off and approved something that may not have been wholly appropriate?
On the first point, to access the MTAS website any junior doctor applicant has, of course, to enter his unique identifier and user password, but the hon. Gentleman is right that it appears—this is what I have been informed—that an applicant who was already legitimately on the site could access part, not all, of other candidates’ messages without going through a further password approval. Again, further investigations are going on into that point, but the security breach is being remedied and will be tested and assured before the website, and that messaging facility, are restored.
Procurement, the security specifications and so on were a matter for the Department, but also for the programme management board. I have asked the Office of Government Commerce to look at the details of that procurement, so that we can learn any necessary lessons—although I stress that Methods was already an approved Government contractor. The hon. Gentleman asked me to put into the Library the full technical details of the security systems on the site. I do not propose to do so, because although that might be helpful to him, it might also be helpful to others possibly less well disposed than he.
I welcome the Secretary of State’s continued openness and helpfulness on this matter. On 16 April, before the last two security breaches, I asked during the statement whether anyone had been disciplined for the problems that were then apparent, and she told me that
“no disciplinary or performance management steps are being taken in the Department”.—[Official Report, 16 April 2007; Vol. 459, c. 48.]
I now understand from her statement today that “appropriate steps are…being taken.” She also said in her statement that this was “an extremely serious breach of security, as well as a breach of contract between the IT provider”—Methods—“and the Department of Health.” Can she tell me whether Methods has had its contract terminated over those two security breaches, and if not, why not?
No, we have not terminated the contract with Methods. It is responsible for the MTAS site. Our first priority is to deal with the security breaches, and to get proper, full independent assurance that the security breaches have been remedied and that there is an adequate full level of security on the site before it is restored. Our priority is to ensure that the junior doctors can complete the first round of interviews. The job offers can then be made and we can then move on to round 2. Clearly, it would be helpful to have the MTAS system back up and running, with proper security and greater confidence in it, in order to complete the interviews.
Until my statement this afternoon, I have no idea whether the chairmen of ITN and Channel 4 News were aware of the details of what has happened, the length of time that elapsed between their beginning to access the site and actually telling us about it, or the extent of the access that was available to them. What they do with the information is entirely a matter for them, but I do intend to draw it to their attention.
Will my right hon. Friend confirm that both the BMA and the royal colleges are still in favour of reforming the system of appointment to training posts? If not, when did they change their minds? It would be helpful if there was at least some consistency from the medical profession.
The BMA and the Academy of Medical Royal Colleges have been involved for many years in the review of medical training that has led to the decision to create modernising medical careers, as they were also involved in the successful establishment of the foundation programme two years ago. They remain closely involved, in particular through Professor Douglas’ review group, in helping to ensure that we overcome the serious difficulties that have arisen with the MTAS system. Those difficulties do not call into question the underlying principles of modernising medical careers or the substance of the new training programme, which remains widely supported. The problems have arisen, in the first year of transition to the new specialty training posts, with the system for application, shortlisting and interviewing. We are in the process of working through that, and I am grateful to the BMA and the academy for continuing to help us ensure that as quickly as possible we get junior doctors properly interviewed and job offers made—and that we do that in a way that is absolutely fair to junior doctors and meets the needs of the service and, above all, of patients.
The Secretary of State said that she hoped that interviews would be finished by early June. May I remind her of the case of my constituent about whom I have corresponded extensively with her Department? He is currently serving as a junior doctor in Afghanistan with the Territorial Army, and he has now had to fly back from there to have his interview. Given the very large increase in TA medical presence projected for next year, I urge the Secretary of State in reviewing the system to ensure that this category of junior doctor, small as it is, does not get disadvantaged again.
Why do junior doctors have to declare their sexual orientation in making their applications in this competition, and will the Secretary of State give a categorical assurance that any junior doctor who declines to do so, in the light of the monumental mess that has recently arisen, will not be discriminated against in the intense competition for these posts?
That is equal opportunities information, obtained simply for the purposes of monitoring. It is fairly standard nowadays. That information does not form part of the decision on whether a job offer should be made to someone, and of course, people are not penalised if they do not supply it.
Was it ever requested that the data upload on to the MTAS website be password protected? Was Methods ever asked that? If it was not, why did the Secretary of State not take a closer interest, given that the website has been a shambles from start to finish, and given the order in which events arose and decisions were taken?
The issue was simply that the postgraduate deaneries needed the information, and it would have to be supplied from MTAS. The decision to upload the data in the way in which it was done was made, improperly, by an individual at Methods. We could do nothing about that until we learned about it.
Is not the reality that on the 10th anniversary of Labour coming into office, suitably qualified junior doctors do not have training posts and hospitals are at risk of losing services? If the Secretary of State thinks that that is wrong, please can she explain to my constituents why for the first time in almost half a century the Horton general hospital in my constituency is at risk of losing 24/7 children’s services and consultant-led obstetric services because—we are told, among other reasons—there are insufficient junior doctors? What happened to “24 hours to save the NHS”?
In the last 10 years under this Labour Government we have ensured—against opposition from the Conservative party—that the NHS has more than 30,000 more doctors, more than 80,000 more nurses and about 280,000 more employees in total. I well remember what was happening 10 years ago, when our constituents, and those of the hon. Gentleman, were waiting 18 months, or two years or more, for a desperately needed hip replacement operation, and when cardiac death rates were among the highest in Europe. Patients know very well just how bad things were under the Conservatives, and how much better they are now—how much better and faster they are being cared for as a result of the policies of this Labour Government.
Young Offenders (Provision of Speech Therapy)
I beg to move,
That leave be given to bring in a Bill to require the provision of speech and language therapy for young offenders; and for connected purposes.
In preparing today’s Bill, I have been indebted to Juliet Lyon and Jenny Talbot of the Prison Reform Trust, and to Kamini Gadhok and Jane Mackenzie of the Royal College of Speech and Language Therapists. The problem is simply stated: more than 60 per cent. of the 11,000-plus young offenders in institutions today lack the communication skills to engage effectively and profitably with educational programmes, with courses in behaviour and anger management, and with initiatives designed to enhance their thinking skills.
The House will be aware, not least from the work of the educational charity I CAN, that it is estimated that the lifetime cost of the failure to treat communication disorders is of the magnitude of £26 billion. We are also commonly reminded that some 80 per cent. of young offenders reoffend: they go through the revolving door of the criminal justice system over and over again. We also know from a vast literature of published evidence of repute and academic expertise that a lack of education and the inability to communicate are risk factors in reoffending. People in the situation that I have just described are less likely to obtain a qualification, less likely to land a job and less likely to find a home; conversely, they are more likely to suffer emotional and behavioural problems, more likely to experience mental health challenges, and more likely to commit, or to go on to recommit, crime.
That is the situation with which this country is faced, and it prompts the obvious question: what can be done about it? I put it to the House that we could do a lot worse in dealing with this client group of people with severe communication disorders than to go for a significant, far-reaching and intensive programme of speech and language therapy.
As chief inspector of prisons, the then Sir David Ramsbotham—now Lord Ramsbotham—visited Polmont young offenders institution in Scotland. There, he had an intriguing and memorable conversation with the governor of the institution. Going round the prison estate, he was struck by the governor’s observation that if by some mischance he was obliged to get rid of all the institution’s staff, and if it was within his discretion, the last person to be let out of the gates would be his speech and language therapist, because of the invaluable extra that that person provided for the institution and the young people incarcerated there.
Sir David subsequently became aware, as others will have done, of the work undertaken on commission for the Home Office by the Learning and Skills Research Centre as long ago as 2001-02. A study of a particular group of young offenders in an institution found that when that group were given help with their oral communication skills, they were 50 per cent. less likely to reoffend in the year after release than the group who were not so helped. The reoffending rate was cut from a typical rate of 44 per cent. to 21 per cent. Armed with the impressionistic material and the empirical evidence, the chief inspector of prisons said to the Home Office, “I think that this is significant. I have taken advice and I am told that the most distinguished speech therapist in England is Professor Karen Bryan. I would like to undertake a two-year trial at particular institutions, to see whether help could effectively and cost-effectively be provided.”
It was agreed that the trial would go ahead, and it took place under the auspices of Professor Karen Bryan between 2003 and 2005. Speech therapists were appointed at Brinsford and Werrington young offenders institutions, both of which are in Staffordshire. Working to Professor Karen Bryan, their responsibility was to assess, to diagnose and to plan effective interventions to help those young people. The young offenders suffered from a miscellany of difficulties, but the significant point is that they suffered from difficulties of hearing, of listening, of understanding, of remembering, of relating to people and of expressing themselves in terms that were simultaneously comprehensible and legitimate.
At the end of the two-year study, which was privately financed courtesy of Lady Helen Hamlyn, Professor Bryan concluded that 100 per cent. of the young offenders studied would benefit from, or—to put it more strongly—were palpably in need of speech and language therapy. The report went to the Government. What did Ministers say? They were full of plaudits. The response was laudatory. They were grateful for a striking, important and valuable piece of work. One could deduce from Ministers’ observations that the report would have a significant influence on future Government policy. Therefore, I am bound to inquire what, two years on and in the light of those public ministerial utterances, has happened. The answer is: absolutely nothing.
To add insult to injury, in December 2005 the Department for Education and Skills published a document entitled “Reducing Re-offending Through Skills and Employment”, which consisted of 47 pages, 20,000 words and no fewer than 58 footnotes, but made not one reference to speech and language therapy. In the House of Lords on 27 October, Baroness Scotland of Asthal said that there was no problem, because the service was “already available”. If people were identified as having a problem, they were referred. The unspoken message that we were entitled to take from those remarks was that if there was a problem, it was being handled and there was no reason to worry. That is cold comfort, and rings hollow to the people at the coal face who know that it simply is not the case. The impression was given that it was happening, but it is not; that people can get the help, when they cannot; and that the system will work, when it will not.
There is an institutional paralysis at the heart of the system, not noticed by the Under-Secretary of State for the Home Department, the hon. Member for Bradford, South (Mr. Sutcliffe) in dealing with the Offender Management Bill—and it is the fact that the Home Office, the Department of Health, the Department for Education and Skills, the Youth Justice Board, the Prison Service and children’s services are all involved. When everyone is responsible, no one is responsible. Nothing happens, nothing changes and nothing beneficial accrues.
The proposal in the Bill is simple. I suggest that we should cut the Gordian knot and place responsibility firmly in the hands of the Home Office. It provides that every young offenders institution—all 18 of those that cater for young men and the four that cater for young women—should be required to employ a speech and language therapist. That person would screen, diagnose and provide. The cost, at £34,000 per therapist, is infinitesimally small compared with £30 million spent on the respect agenda, or the £80,000 per head cost of uselessly and unproductively incarcerating someone who, we can confidently predict, left untreated, unqualified, unreformed and unemployed, will come back into a young offenders institution all over again.
I understand the strength of public feeling that says that when people commit serious crimes they must be locked up and pay their dues. The deprivation of liberty must take place. But we have to give people hope. We have to do something to make a difference. My Bill is not a panacea, but it would improve lives, offer opportunities and do something to hold out the prospect that those young people who are on the wrong track can become productive, effective and worthwhile citizens. I am proud of my Bill, which enjoys cross-party support, and I commend it with enthusiasm to the House.
Question put and agreed to.
Bill ordered to be brought in by John Bercow, Mr. Kevin Barron, Mr. Richard Benyon, Angela Browning, Mr. Tom Clarke, Mr. Geoffrey Cox, Mrs. Joan Humble, Mr. Ian Liddell-Grainger, Bob Russell, Mr. Ben Wallace, Hywel Williams, Sir George Young and Mr. Geoffrey Cox.
Young Offenders (Provision of Speech Therapy)
Mr. John Bercow accordingly presented a Bill to require the provision of speech and language therapy for young offenders: and for connected purposes: And the same was read the First time; and ordered to be read a Second time on Friday 15 June, and to be printed [Bill 98].
On a point of order, Mr. Deputy Speaker. During the exchanges on the modernising medical careers statement, the Secretary of State said that she was going to get in touch with the chairmen of ITN and Channel 4 because of the time taken to get in contact with the Department. One of the rules of Parliament is to maintain an open society, with the media able to investigate and report. Has there been a change of policy that requires Secretaries of State to comment on the actions of the media, instead of the other way around?
Orders of the Day
[2nd allotted day]
(Clauses Nos. 1, 3, 7, 8, 12, 20, 21, 25, 67 and 81 to 84, Schedules Nos. 1, 18, 22 and 23, and new Clauses relating to microgeneration)
Considered in Committee [Progress, 30 April.]
[Sir Alan Haselhurst in the Chair]
Abolition of contributions relief for life assurance premium contributions
It may be for the convenience of the Committee if I say that it will be in order to refer to schedule 18 in the course of the debate. I would then expect the amendments to the schedule to be taken in short order, and similarly the formal question on schedule 18 being the schedule to the Bill.
Thank you for your guidance, Sir Alan. It is a great pleasure and honour for me to serve for the first time under your chairmanship in a Committee of the whole House.
Clause 67 relates to changes to the relief available to individuals for their pension contributions that are used to fund personal term assurance policies, and it also introduces schedule 18 of the Bill. In summary, clause 67 and schedule 18 are a response to a process of consultation with industry, announced at the time of the pre-Budget report, on the application of tax relief to personal term assurance. Throughout that process, and indeed throughout the whole consultation period when developing the new pensions tax regime in the period up to A-day on 6 April 2006, the Government have consistently applied the PBR’s principles for providing tax relief—namely that such relief should support saving for an income in retirement.
Indeed, the Government stated in the 2002 consultation document issued before A-day that
“to encourage people to save in a pension, the Government awards favourable tax treatment...which people must use to provide a secure income in retirement. Most of the savings built up in this way must be used to generate a taxable income in retirement.”
The tax reforms that came into effect last April removed the complexity that had led over many years to different tax rules applying across numerous types of pension scheme. The long-term benefit is a streamlined regime that is easier to understand and cheaper to administer and which was at the time, as it is now, broadly welcomed by the pensions and savings industry.
As we announced at the time of the pre-Budget report, we became aware in the summer and autumn of last year that the rapid growth of pension term assurance—a life insurance death benefit that in most cases was providing no income in retirement—was leading to rising costs and was clearly at odds with the principles we had set out. To deal with the problem, we announced in the pre-Budget report that we would work with the pensions industry to explore, in time for the Budget, how our principle that pensions should be tax-advantaged to provide an income in retirement could be applied to pension term assurance contracts. We announced that any changes we decided to make would not affect either personal arrangements entered into before 6 December 2006 or existing types of employer arrangements.
Following detailed discussions with industry representative bodies, such as the Association of British Insurers, it became clear that a meaningful link could not be provided between those policies and pension saving without making the products commercially unviable or leading to high compliance and tax costs to Her Majesty’s Revenue and Customs and the Treasury. That is why the Budget announced the changes before us today.
In making the changes, we have worked with the industry to protect the position of consumers who had taken out policies before the pre-Budget report announcement in 2006 and, as I will set out in more detail later—either in the debate on the amendments or in the wind-up—we have tabled amendments to the transitional arrangements in schedule 18 to ensure that they work in the best interests of the consumer. On that basis, given the amendments we shall propose to the schedule, I commend the clause to the Committee.
As the Economic Secretary indicated, clause 67 abolishes pension term assurance, which was introduced in its current form in the Finance Act 2004 and was part of last year’s A-day reforms to introduce pensions simplification. This is the third major pensions U-turn since the 2004 Act; it follows hard on the heels of taking residential property out of self-invested personal pensions and the changes to alternatively secured pensions foreshadowed last summer.
I am concerned about the implications of the abolition of pension term insurance and I have four key questions. First, should not the attractions of pension term assurance have been apparent to the Treasury at the outset? Secondly, how has the Government’s thinking evolved over the past few years? The Economic Secretary gave us a flavour of that, to show that it had remained constant, but I contend that the Treasury’s thinking has changed since the 2004 Act. Thirdly, how did the industry respond to the Government’s concerns? Finally, what are the consequences both for the pensions life insurance industry and for consumers?
First, however, I shall consider why pension term assurance was introduced in the Finance Act 2004. Members on both sides of the House are lucky. As part of our pension scheme we receive a death in service benefit. When we die our widow or widower will receive a lump sum, on top of their pension. Our contribution to that benefit is tax-free. If I die as a Member of the House—
It is not something I am anticipating but if, unfortunately, I died while I was a Member my wife would receive a lump sum, which she could use to pay off our mortgage, thus freeing up income. Alternatively, she could invest the lump sum to provide an income.
A substitution effect arises from the death-in-service benefit. The lump sum can be invested either to generate an income or to pay off a mortgage to increase disposable income. The importance of that point will be apparent when I discuss the evolution of the Government’s thought process a little later in my remarks.
I am very fortunate as a Member to have that benefit, but others are not so fortunate. People who are self-employed, for example, will not have the same benefit and will have to pay for it themselves. Prior to A-day, this type of cover could have been subject to tax relief as part of a pension policy. Now, however, as we shall see later, even that is not available to the self-employed. Anyone not covered by an employer’s scheme will have to bear the full cost of cover—something that we do not have to do. In fact, we are doubly lucky because in a sense the cost of the benefit is split between us and our employer. Someone who is self-employed will not only have to pay the full cost of a stand-alone policy, but will not receive any tax relief either. That raises real questions about the affordability of protection cover for many people on low or moderate incomes.
The change that the Government have introduced creates some ironies. We will recollect that yesterday we discussed the incentives for incorporation in respect of small traders. As Taxation recently noted, if the policy is paid for by the employer, it is acceptable. That leads to the ridiculous situation whereby someone operating through a personal service company can get tax relief, but a sole trader or partner cannot. Yesterday, the Government tried to reduce the incentive for incorporation, but this afternoon we are discussing changes that have encouraged it.
When pension term insurance was introduced, the perspective from the industry was that it would lead to the closure of the protection gap. People out there on low and moderate incomes feel, as I said earlier, that they cannot afford life cover to provide for their dependants in the event of their death. It is worth reflecting on a recent article in Money Marketing by Vanessa Owen of Liverpool Victoria. I am afraid that I am going to refer back to it regularly throughout my remarks, because it provides an insightful view of the development of opinion in the industry about the introduction and development of this product and its subsequent abolition. She said:
“Everyone, including consumer bodies and the Government, understands that most people do not have enough life protection to cover sudden death of the main breadwinner or family carer. It is in all our interests to encourage more people to provide for their dependants and reduce dependency on the state. Despite all the talk about the size of protection gaps, since Swiss Re published its data, the problem has got bigger, with everyone scratching our heads over how to solve it. Then came pension term assurance.”
I want to understand the principles guiding the hon. Gentleman’s approach. In 1984, tax relief on life assurance products was abolished by the Government of the day. Is the hon. Gentleman suggesting that we should revisit that principle and that tax relief on life assurance and term assurance products should be reintroduced? Should we reverse the 1984 decision?
It is interesting that the Minister raises that point, because the Government effectively reintroduced the relief in their A-day reforms for pension term assurance and they are now seeking to abolish it. What I aim to achieve this afternoon is to understand rather more about the Government’s thinking on that matter, particularly why they felt it appropriate to introduce this tax relief in 2004, when they want to remove it 2007. That is the purpose of my remarks today.
What the introduction of pension term assurance enabled in the 2004 Finance Bill was the creation of a level playing field, so that the indirect tax relief that we receive through our contributions to pension schemes, which gives us death-in-service benefits, is also available to others who are in a less fortunate position than us. It is worth reflecting on the debate that took place on the 2004 Finance Bill. The right hon. Member for Bolton, West (Ruth Kelly), who was then Financial Secretary to the Treasury, said in the Standing Committee debate:
“Simplification will introduce greater individual choice and flexibility.”
She continued—this is the key quote—by saying:
“For the first time, everyone will have the same opportunity to make tax-relieved pension savings over a lifetime.”—[Official Report, Standing Committee A, 8 June 2004; c. 427.]
She referred to the creation of a level playing field.
I am obliged to the hon. Gentleman for giving way—I think. Does he not accept that, by and large, as I understand it, the financial press did not really bat an eyelid about this measure? The only point that the financial press seemed to make was about the timings and implementation. That is why the Government have tabled the various amendments to schedule 18. Given that there was not really the clamour that he appears to be trying to make out that there was and given that the Government have tabled amendments Nos. 6, 7, 8 and 9 to schedule 18, does he not agree that those amendments are the best way forward and will he support them?
I will not discuss the amendments at this point. I think that you indicated in your opening remarks, Sir Alan, that we may have a brief debate. We will support the amendments, because they help the Government to get out of a bit of a hole that they have created of their own volition. The Government dealt poorly with the transitional arrangements and there was a lack of clarity about the original statement that was made at the time of the pre-Budget report. That led to some concern and confusion about whether there would be relief for pension term assurance that was included within a pension policy and whether that tax relief would still continue. We have clarity now, whereas we did not have it in December. So, we will support the amendments.
I am a little perplexed by the hon. Gentleman’s remarks about the lack of concern in the financial press, because my reading of that press—particularly at the time of the pre-Budget report—was that there was a significant degree of concern among members of the industry. Certainly in conversations that I had in the aftermath of the pre-Budget report, there was quite significant concern, particularly given that so many industry members—I will come on to this later—had invested a significant sum in preparation for the launch of the policy. They are now left trying to administer a relatively small number of policyholders.
To go back to the question of principle—it is important that we establish the principles that are guiding us in these debates—the hon. Gentleman quoted one of my predecessors, a former Financial Secretary, talking about tax relief for pensions. But term assurance is about not pension income but death benefit. It is a life insurance product. Does he accept that it was never our intention to tax-relieve non-pension savings in the manner that has transpired, or is he saying that introducing a tax relief for term assurance is his proposal to close the contributions gap—as he referred to it?
That is slightly curious. If it was not the Government’s intention to introduce tax relief for pension term assurance, why on earth did they include it in the Finance Act 2004? The Government put the measure forward three years ago, in that Finance Act, but are now seeking to reverse it. If it was not their intention to have that provision, why did they include it in the first place? That is the problem that the Economic Secretary has to think about. The reality is that the measure was well understood by the industry. Perhaps the Economic Secretary will tell us why the Government included the provision in the Finance Act 2004, because the Committee would be interested to hear that. I would happily give way to enable him to give that explanation. [Interruption.] The Economic Secretary says that he will give an explanation in his speech. Well, we have heard that before.
If we go back to the Committee Hansard for the 2004 Finance Bill, it is interesting to note that there was no discussion whatsoever on the introduction of pension term assurance. According to my reading of Hansard, that clause seemed to pass through without comment. The then Financial Secretary to the Treasury did not give the merest warning that abuse could lead to the scheme being closed down; that is in stark contrast to the warning that she gave about alternatively secured pensions.
The Government introduced the tax relief back in 2004, and when one talks to people involved in the industry, one finds that their view is that the Government should have been aware of the impact of the relief on the life assurance market. As the Association of British Insurers said:
“Even before this change was made, the insurance industry told the government of the positive effect this could have on the term assurance market.”
It was an opportunity for that market to rejuvenate itself. That should have come as no surprise to the Treasury. Indeed, some people were so concerned that the change would lead to a large-scale re-broking of business that they started to lobby the Treasury. I once again point out what Vanessa Owen of Liverpool Victoria said:
“When I first read the proposed death benefit rules back in 2004, I wondered if boards of directors across the country would be turning pale at the risk of churning to in-force books. But after much lobbying, it became clear the rules were not going to change before A-day”.
There appears to have been plenty of discussion and debate before A-day, and what happened should have come as no surprise. Indeed, when I spoke to a group of industry experts in January this year, I specifically asked them whether the take-up of pension term assurance should have come as a surprise to the Treasury, and they emphatically said no; the Treasury should have been aware of the scale of interest.
The effect of the A-day change was to encourage people to think again about life assurance, as they could pay their premiums net of the basic rate of tax, if they were basic rate taxpayers, or net of the higher rate of tax, if they were higher rate taxpayers. When consumers went to see their financial adviser or someone at the bank, the person giving them financial advice would have been remiss if they had failed to point out that they could take out pension term assurance at a lower cost than normal life assurance, because of the generous tax relief introduced by the Government in their Finance Act 2004. It is worth considering one insurer and the rates that it was offering. According to an article in The Times, a male non-smoker buying £300,000 of level-term cover from Legal & General would pay £27.25 a month in cover. If he chose pension term assurance, he would pay £25.25 a month in cover if he was a basic rate taxpayer, but if he was a higher rate taxpayer, he would pay only £19.39. I suspect that the hon. Member for Wolverhampton, South-West (Rob Marris) is thinking about the difference between £27.25 and £25.25 and saying to himself, “That does not sound like the basic rate reduction,” and indeed it is not. There is recognition in the industry that the cost of pension term assurance cover was higher than the cost of basic cover, if we exclude tax relief.
There were significant caveats about pension term assurance cover. As Richard Eagling, the editor of Investment, Life & Pensions Moneyfacts says:
“Although price is not the only differentiating factor to be considered when choosing between the two, the cost savings cannot be ignored, and for those clients who have no existing cover in place, the case for PTA is compelling.”
Consumers were warned that the policy might not be for them, as an article in The Sunday Telegraph said:
“For a start, only basic life insurance is available with these PTA packages. The tax-breaks do not apply to extras that are often added on to conventional term assurance products, such as critical illness cover which pays out if you suffer a serious illness that leaves you unable to work. Family income benefit is not covered either—this product pays out an annual income on death rather than a lump sum.”
So there were caveats in respect of the sale of such policies; it was not a straightforward slam dunk, as it were, to sell the policy to clients. There was a proper process that had to be gone through. Certainly, the increased affordability of term assurance would enable people who had previously found life cover prohibitive to take greater personal responsibility for their family, but as I said earlier, it also gave those with existing life cover the chance to see whether their cover could be re-broked.
Again, Vanessa Owen made some perceptive comments about what happened in the industry at the time. She said:
“What we did find was that, although not a storm, life protection volumes started to pick up from all channels. Consumers were interested in the tax relief message which was clearly stimulating demand although, judging by our average premium levels, it was not wealthier clients who were buying but people on more modest means.
In other words, it was not just the wealthy who were taking advantage of another opportunity to claw back higher-rate tax relief but also regular policyholders looking to take out life cover at a competitive rate.”
What about churning—the re-broking of in-force life protection? Vanessa Owen said of the in-force life protection book:
“It has remained largely intact, with rebroking activity at a minimal level”,
so it appears from her evidence that people on low and moderate incomes were taking the opportunity to put in place cover that they may have considered too expensive before.
The interest in pension term assurance should have been apparent at the time. It certainly seemed to attract new customers. Has the Minister asked his officials to conduct any research into who purchased the products, and did the research that the Government conducted reflect Miss Owen’s perception of the change of business in the market?
If so many businesses were thinking of taking advantage of the introduction of pension term assurance—clearly, the Liverpool Victoria thought about it—why was that not obvious to the Treasury? Plenty of people seem to have told the Treasury. Why did not the Treasury realise sooner what the take-up rate would be, or was it so naive that it did not think it would happen after all, or so incompetent that it did not think of taking action prior to A-day?
It is worth noting the cost of the Government’s failure to take action. According to the regulatory impact assessment, the estimate of lost tax revenues if the clause is not reversed would be £160 million, out of a total estimated cost of £250 million for A-day reforms. What was the Government’s original estimate of the amount of tax relief that would be claimed as a consequence of introducing pension term assurance? Presumably, in their calculation of the £250 million, they would have produced an estimate back in 2003-04. It would be interesting to understand the difference, from the Minister’s perspective, between the original estimate and the current revised estimate, as set out in the regulatory impact assessment. If the Minister knows, I should be grateful if he enlightened me and the Committee about the difference between the estimate at the time that the A-day reforms were consulted on and the £160 million cost referred to in the regulatory impact assessment.
I fear that the hon. Gentleman is in danger of misleading the Committee. The regulatory impact assessment refers to the cost that would arise to the Exchequer, had we not taken action at the time of the pre-Budget report. As I said, it was never the Government’s intention to incentivise through pensions tax relief what became a rapid switch to pension term assurance. It was to prevent that cost from arising that we acted. I am still trying to work out whether the hon. Gentleman is supporting our action to protect the revenue base, or advocating a reversal of the 1984 decision not to tax advantage life assurance. On that question of principle, he still has not given us any clue.
I am only up to page 6, so there is plenty of time before we discuss that.
I hope I did not inadvertently mislead the Committee. I am clear that £160 million is the Government’s estimate of what the costs would have been in the future. It would be interesting to know what they think the cost is now and what they thought the cost might have been. [Interruption.] The Economic Secretary says from a sedentary position that the cost at present is none, but we have had nine months of sales of the products. In a parliamentary answer, he told me the number of sales in the quarter to June and the quarter to September, so there would be some indication of the cost to the Exchequer. I am keen to understand what the Government’s estimate of cost was at the time that they conducted their pre-A day consultation. The Minister still has not responded to that question. I happily give way to him.
The estimate would have been that it was a negligible cost, because it was not the Government’s intention to tax-advantage term assurance. The hon. Gentleman is not answering the question whether, as a matter of principle, he supports the extension of tax relief to life insurance and term assurance products to close what he has called “the coverage gap”. Until he answers that question, it is hard for the Committee to understand whether he supports or opposes our proposals. At the moment, he is just drifting in the middle.
My hon. Friend is ploughing a steadfast course through the middle of the Economic Secretary’s argument, and he is right to press the Economic Secretary. I struggled through the Red Book in an attempt to find an estimate of the current cost of relief to the Treasury, but I could not find anything. The Economic Secretary tells us that the amount was negligible in the past, which suggests that the Treasury had no idea not only what the relief would amount to, but that it was allowing it in the first place—he has just told us that it was unintentional relief. My hon. Friend is doing a noble thing in getting to the bottom of the matter.
It is remarkable that the Government introduced a change that happened to slip unintentionally through the legislative process and past the eagle eyes of the Treasury and Her Majesty’s Revenue and Customs and that it will cost nothing. That does not stack up. I cannot understand whether the Treasury was naive or incompetent when it introduced the measure and failed to understand the ramifications. My hon. Friends are encouraging me to believe that it was both naive and incompetent—I am a generous man, and one or the other is enough for me.
The Economic Secretary has raised the question of the future cost of the policy. I assume that the £160 million figure is an annual cost, and I am intrigued to know what assumption he made on how that cost would build up. Does he expect growth to continue at the rate of the increase in sales that took place towards the end of last year prior to the closure of the schemes? Does he expect the rate of growth to plateau? Or was there simply pent-up demand out there, because people who could not previously afford to take out such cover suddenly rushed to do so?
The regulatory impact assessment does not make it clear how the Government reached the £160 million figure—I presume that the logic is more robust than the estimate of negligible cost, which the Government made when they introduced the pre A-day consultation. It will be interesting if the Economic Secretary elaborates in his answer on how officials calculated the cost of £160 million.
The Economic Secretary has nodded, and I am delighted that we will be furnished with that information.
I want to refer to a broader point in that context. At one level, this Government, more than any other Government, understand the behavioural impact of changes to the tax regime; otherwise, the Chancellor would not meddle in the tax regime quite as frequently as he does. At the same time, there has been a fundamental failure properly to think through the behavioural impacts of those changes and the extent to which increasing reliefs, cutting rates or increasing allowances would change people’s behaviour. The Association of British Insurers indicated prior to A-day that those products would have a positive impact on the term assurance market, with new policyholders taking advantage of the increased affordability of products.
The Treasury does not seem to have responded. It does not seem to have thought through whether the situation would encourage new participants to enter the market and offer new policies to try to close the protection gap. One of the problems is that the Government have not properly thought through their A-day reforms; that is why this is the third U-turn on those reforms since they were enacted in the Finance Act 2004. Slowly but surely, the Economic Secretary is unpicking the work that one of his predecessors, the right hon. Member for Bolton, West, did when, as Financial Secretary, she was responsible for the same areas. I feel sorry for her at times. She must be wondering why on earth she spent so much time working on these reforms only for the Economic Secretary, who was at the Treasury at the time advising the Chancellor in some capacity, to conduct a series of U-turns once they were on the statute book.
We can see how, and how quickly, the Treasury’s approach to pensions has unravelled over the course of the past couple of years in moving on from the intention that was set out in the then Financial Secretary’s speech in Standing Committee only three years ago. In the context of the Pensions Commission report, the 2006 Budget said that one of the five tests that the Chancellor set to see whether these reforms were acceptable to him was whether they would promote personal responsibility. Yet here we are with a product that would appear to promote personal responsibility and reduce dependency on the state but that the Government are seeking, through this clause, to abolish.
In last year’s pre-Budget report there is a section headed “Fairness for tomorrow’s pensioners”, where, at paragraph 5.77, the Government casually say that they have
“become aware that, at a result of the flexibilities that the new pensions tax regime has brought in, life insurance policies that provide lump sum death benefits alone are being offered as personal pension arrangements eligible for pensions tax relief.”
If the industry knew about it prior to 2004 and A-day, why did the Treasury just happen to become aware of it? Surely it should have played a much more active role in understanding what was happening in the market and what would be the impact of the legislative changes that suddenly crept into the Finance Act 2004.
In this year’s Red Book, we have greater amplification of the Government’s approach to pensions tax relief so that no one can be in any doubt about what might happen in future. It sets out some key principles that have guided and continued to underpin the Government’s approach to pensions tax relief, one of which the Economic Secretary repeated in his brief opening remarks. It says that
“generous tax relief is provided for pension saving to produce an income in retirement. Pension saving is not, however, provided to support pre-retirement income, asset accumulation or inheritance”.
Let us ponder for a moment the meaning of that principle. The death in service benefit that our widows and widowers receive on our death as Members can be used to be invested in an income in the same way as a widow’s pension. It can be used as an alternative to pay off the mortgage so that their existing income is protected. Yes, we are talking about a lump sum that is gained on death, but the purpose to which it is put can enhance the widow’s or widower’s pension by supplementing it through direct investment or by repaying the mortgage debt with which so many people are burdened.
If one is a member of an occupational scheme, the contributions are subject to tax relief, and many such schemes clearly include death in service benefits. The Government are trying to remove the opportunity for those who are self-employed or not part of such a scheme to receive the tax relief on a stand-alone, pension term assurance policy. Another key principle that underpins the Government’s approach to pensions tax relief emphasises that point. The Red Book states that
“incentives for employer contributions are provided as it is more efficient for pensions to be provided on a collective basis through the employer”.
What happens to those who are not in employment—the self-employed and temporary workers? They will not benefit from tax relief on a stand-alone policy. Indeed, other changes make it more difficult for them to get that tax relief. They will have to bite the bullet and not only pay the costs that we pay in our pension contributions and the sort of costs that the Exchequer pays into the parliamentary pension scheme, but get no tax relief. They are therefore hit by a triple whammy and in a far worse position than us as employees in the context of death in service benefit and how to fund it.
This is the last time that I shall try. The hon. Gentleman has clearly outlined the principles that guide the Government’s approach, which I set out in a speech a month or two ago and has appeared in repeated documents. His speech makes it clear that he disagrees with those principles because he advocates the use of pension tax relief to pay for term assurance, life assurance and products for individuals. As I said, that is a reversal of the 1984 position. I shall give him one last chance to confirm that he is taking that principled position. He was concerned when I suggested that it was unprincipled. Have I outlined his principled position? This is his moment.
I acknowledge the Economic Secretary’s persistence. He is trying hard and, at some point, I might satisfy him. However, he ought to tell the Committee why the Government sought in the Finance Act 2004 to reverse the position that was adopted in the early 1980s. I am intrigued to hear his arguments.
My point in opposing the measure is more about the Treasury’s chaotic approach to policy making and the impact of the change on consumers and the industry. It is clear from speaking to people in the sector that there is a problem with the protection gap. The Economic Secretary and I support the concept of financial inclusion and want to spread to more people the benefits that those of us who are lucky enough to be in employment enjoy. We should consider carefully the way in which we spread those benefits, but that is not a commitment to tax relief because, as I said yesterday, we are not in a position today to write the first Budget of the next Conservative Government.
That was a simplistic question. People oppose measures for many and varied reasons. If the hon. Gentleman survives into opposition, perhaps he will understand the way in which such decisions are made. I am not sure whether I hope that he experiences that, but he might.
My final quote from the Red Book demonstrates the hubris of a Government who are 10 years into their life. It states:
“The Government recognises the importance of a stable environment that allows the pensions industry to plan ahead and minimise disruption to the regimes already in place that are working well.”
That comes from a Government who have already made three main U-turns on their post A-day reforms. How many more are consistent with maintaining
“a stable environment that allows the pensions industry to plan ahead”?
When the Economic Secretary read that bit and let it go through, he must have smiled at the irony of those remarks, and at how many people in the industry would not recognise the Government’s principle in relation to the reforms of the pensions system. Another principle is that the cost of pensions tax incentives must be affordable and fall within current fiscal projections. I am sorry that I forgot to mention that earlier, because it is relevant here.
This raises a doubt in my mind, and in the minds of those in the industry, about what other changes might be planned if the cost of these reforms continues to mount. Will the Economic Secretary unpick other measures in next year’s Finance Bill? Will the Government take fright at the levels of the lump sum contributions that many people are putting into their pension schemes this year? I recognise the importance of the argument about affordability, but this leaves the door open to further U-turns in the future.
Where does this leave the consumer and the industry? Let us consider the industry first. It estimates that it has invested some £35 million in new systems and processes to introduce the type of policy that the Government have created, and that sum will have to be written off. This sudden withdrawal without consultation has left an estimated 50,000 policy holders in the pipeline. Insurers could not deal with inquiries promptly because there was so little information available from the Treasury when the announcement was made.
The final details of the transitional arrangements were announced only on 13 April, a few days after the previous deadline had expired. That is not an orderly way in which to conduct business. I know that the industry is pleased that those transitional changes have been made, and we should welcome them on that basis, but this is not the way to make policy. All sorts of changes had to be made by the industry: automated advice systems had to be amended to redirect customers to alternative products, for example, and the industry now has sub-scale portfolios of business to administer for the next 25 years or so.
The Minister and I agree on the importance of maintaining London as a global financial services centre, and we recognise that insurance, along with other financial services, covers a global market. Companies seeking to expand their businesses need to think carefully about how and where they use their capital. It will not help the UK market if there is a perception that we have an unstable, unpredictable pensions tax regime.
It is also worth pointing out that the industry has sought to reach a compromise with the Treasury on this issue. It has come forward with a series of proposals to facilitate the continuation of this type of business, as it recognises the importance of the protection market. It is also thinking of ways of avoiding writing off such a large investment in the new systems. It has proposed that all pension term assurance offers would contain clear information about the pension to which they were linked, including details of the provider and a policy number, reinforcing the link that the Government think is so important between the term assurance and the pension. That would produce an integrated policy that provided a pension and a lump sum death benefit. The industry made that proposal so that contributions could continue, but the Treasury rejected it. In effect, it rejected that position before A-day.
The lack of clarity in the Government’s position on integrated products is such that in one of today’s amendments to schedule 18 we see explicit recognition of that type of policy and of the new transitional arrangements involved. The industry also suggested, as an alternative, that it would cap the amount of the lifetime allowance that could be utilised by taking out term assurance. A third of the allowance, about £500,000, was suggested, but again the Treasury rejected this attempt by the industry to reach a workable compromise.
Many consumers have therefore been left with a protection gap. Those who are outside an occupational pension scheme will have to pay more for the coverage that all Members of the House take for granted. There is an uneven playing field, which favours those who are lucky enough to be in jobs that have a death in service benefit as part of the package, and disadvantages those who are self-employed or contractors. Perhaps more sole traders will be encouraged to incorporate, despite the Government’s best efforts yesterday, to access the tax relief that comes from being an employee.
Another important issue is that consumers and industry cannot assume that just because something is a Government policy one month, it will be a policy next month, next year or the year after. That undermines consumer confidence in saving for the long term. In a subtle but important way, it undermines the Government’s long-term goal for more people to take responsibility for their financial affairs. That has a destructive effect on the industry and on consumers’ willingness to plan for the long term. Every Member of the House recognises the importance of that, and we have had many debates about the Pensions Bill, which is an attempt to encourage more people to save for the long term. One message seems to be coming out from the Department for Work and Pensions, and a different one from the Treasury and the Economic Secretary.
Two quotes highlight the combined impact of the change in policy. First, Vanessa Owen of Liverpool Victoria—perhaps I should start to pay her royalties, given the number of times that I have quoted her—said:
“Our members and customers who do not have access to life assurance through their employer are now at a greater disadvantage because the option of tax relieved life protection has been removed.”
Secondly, according to AEGON,
“Not to mention a complete waste of millions of pounds in making pension term assurance available in the first place, following extensive consultation with the Treasury.”
Finance Bill by Finance Bill, the Economic Secretary unpicks the work of the former Financial Secretary, the right hon. Member for Bolton, West. Instead of the clear, simple scheme that she advocated, we have an increasingly complex and restrictive scheme. It is surprising that the pitfalls were not seen, and warnings not given, when the legislation was introduced in 2004. The Bill is destructive—it undermines the confidence of consumers in the stability of the Government’s pensions policy, inhibits both innovation and the sector’s willingness to respond to Government initiatives, and is destructive of the Treasury’s ability to make policy in an area in which long-term stability is fundamental if we are to promote long-term savings.
The hon. Member for Fareham (Mr. Hoban) spent three quarters of an hour teasing out the issues, as he put it. I shall be very much briefer.
The hon. Gentleman started well in explaining the origins of pension term assurance, and making the point that it was an entirely innocent and reasonable way in which the industry should evolve. All individuals are faced with the question of how to hedge the risks when they look forward to their old age. There is the risk of death, and in that regard we provide for our dependants either in the form of a widow’s pension or a lump sum. We must also hedge against the risk of living, and therefore provide an income for ourselves. It is entirely sensible and natural that the two sets of risks should be considered together, as many pensions providers do, and many of us are beneficiaries of such an arrangement. It was therefore natural that the industry should evolve a product that sought to provide those two activities together: pension term assurance. As the hon. Member for Fareham pointed out, in 2004, the Government saw no problem with that, and extended tax relief.
With regard to the Government’s answer, about which the Economic Secretary has intervened several times, there are two issues. He has laboured the point about the need to maintain the integrity of the distinction—which he calls the principle, although it is probably more an established practice than a principle—between tax relief for pensions and tax relief for life insurance. Clearly, that is established practice, and must be maintained. The practical issue, however, is not so much the restatement of that principle as tax avoidance. There are clearly individuals who have seen, and would see in this new product, an opportunity to maximise tax relief on life insurance products, particularly if they have high incomes and are able to take advantage of higher rates of relief.
What I would like to know—and the Economic Secretary might strengthen his case if he told us—is how much of the £150 million or so that the Government hope to retrieve originates in the higher tax relief. If it is true that, as the hon. Member for Fareham suggested, this product was designed principally for people on low incomes, we can see that it may have evolved in a fairly innocent way; but if it is designed for high earners—we are talking about 40 per cent. tax relief—I am more sympathetic to the Government’s view that there is a potential for avoidance. It would be helpful if the Economic Secretary could give us an idea of the relative proportions.
The Liberal Democrats approach the matter differently from the Conservatives: from the opposite direction, in a sense. We are not trying to maximise the scope for tax relief. Generally, we have gone rather further than the Government in arguing that there is no justification for giving people on high incomes not just more tax relief, but higher rates of tax relief, on pensions, let alone life insurance. However, we agree with the Conservatives that the distinction between what happened in 2004 and what happens now has created confusion, and has not been terribly well handled.
I should like to hear from the Economic Secretary how the Government responded to proposals from the industry. The hon. Member for Fareham summarised ways of meeting the Government’s requirements that had been suggested by the Association of British Insurers and others, some of which seemed perfectly sensible at first sight.
If the Government’s primary concern was to maintain the link between life insurance and pensions, organisations in the industry were willing to propose ways of checking that it was being maintained. They suggested, for instance, that if someone died and life insurance was claimed, it should be checked that there was a parallel pension product to maintain the integrity of the connection. Perhaps the Economic Secretary will tell us whether that proposal was explored, and whether it was deemed feasible. Organisations also suggested a limit on the tax relief that could be available, and a mechanism for fraud checking.
I have a sense that the industry has gone out of its way to try to meet the Government halfway, addressing their central concern that there must be a link between the life insurance and pension elements. As for how far the Government have gone to meet the industry’s concerns, I have an open mind. Our stance on whether the clause should stand part will be determined partly by how they respond.
I want to reiterate some of the points made by my hon. Friend the Member for Fareham (Mr. Hoban) in his comprehensive and thorough speech. I shall cover some of the same ground, however, because it would be difficult not to: my hon. Friend really did cover the waterfront. It is worth my repeating one or two of his points in the hope of provoking an answer from the Economic Secretary.
It is not entirely clear what was the rationale for the simplification of the rules governing pension term assurance in the Finance Act 2004, which came into force on 6 April 2006. The Economic Secretary made it clear that it was never the Government’s intention to encourage the granting of tax relief on products that were not connected with pensions, but that gives rise to one or two questions. There was no real explanation or debate about the issue during the passage of the 2004 Act. As for the rationale, as my hon. Friend the Member for Fareham pointed out, it was rather slipped through.
So what, if it was not simplification, was the justification for extending the relief to pension term assurance?
What happened after 6 April 2006 to make the reforms in the Finance Act 2004 so unattractive and undesirable? We have had an answer from the Economic Secretary on that: the provision was used for non-pension purposes and for lump sum purposes. However, that begs the most important question, which my hon. Friend the Member for Fareham dwelt on: why was that not anticipated at the time?
One has to put that in the context of a number of cases. Yesterday, we debated the rate of corporation tax for small businesses. We have seen change after change: the introduction of a 10 per cent. band, then a zero per cent. band, which was abolished last year, and now the small business rate is increasing. That is an example of the Government introducing a policy and businesses altering their behaviour accordingly.
We have seen something similar with pension term assurance. Does it not worry Ministers that there often seems to be an almost systemic failure within the Treasury to anticipate the consequences of tax changes? Every year, a Finance Bill is presented and contains detailed provisions. The Treasury is keen to encourage certain types of behaviour and discourage others, yet it does not have a good record of judging what the consequences of the changes will be. This appears to be a very good example of that. Surely it could have been anticipated that pension term assurance would be used in the manner in which it has been. Within only a few months, the Treasury has been forced to change policy.