I welcome the opportunity to discuss the case of one of my constituents and the need for the franchise industry to be regulated, and I thank Mr. Speaker and his staff for granting the debate. I thank also hon. Members who have turned up to give their support on this worthwhile subject. I have previously had a successful debate on this subject and I am sure that today’s debate will be equally successful.

My reason for securing the debate was to highlight the bad practices in some elements of the franchise industry. Despite previous debates and the tremendous amount of publicity on this issue, still no concrete action has been taken and people in the industry are vulnerable as a result. Many have had the same misfortune as my constituent, Mr. Andy Walker, whose problems I shall outline solely to demonstrate that the Government must give serious consideration to this issue and take a far more proactive approach.

The franchise industry is a fascinating study of what is happening in the commercial world. Franchising is worth £10.8 billion and is growing at twice the rate of the rest of the UK economy, so it is important both as an industry and in sustaining the growth of employment in our economy. The debate should in no way be seen as an attack on the thousands of people who are involved in excellent and, in the main, responsible business. The industry is supposed to be regulated by an organisation that I shall mention frequently today: the British Franchise Association. One of its main functions is to help potential franchisees to recognise the good, the bad and the ugly for what they are, but it has completely failed to fulfil that aim.

My involvement in this issue began when my constituent, Mr. Andy Walker, came to me with a complaint. He has been self-employed for 30 years—most of his adult life. For 15 of those years, he operated a fairly successful furniture company in Kilmarnock, but he later looked into franchising for a change of direction. Having done a tremendous amount of research, Mr. Walker decided that the franchise that he should choose was 24 Self Video. He had sold his furniture business some time before, and he used his life savings and his house as collateral, which proves that he did not take the decision lightly. He researched the idea for some time before deciding that taking on the 24 Self Video franchise would be the way to earn what he wanted to earn. However, the venture came to an end and he lost a significant sum of money. He might even lose his house as a result of money being lent to him. He has two main complaints—against the British Franchise Association and against the Royal Bank of Scotland.

It is apparent that this issue concerns more than just a single constituent, because there have recently been similar cases. This month, the High Court wound up five companies in the Warrington and Leigh areas of the north-west that were involved in bogus perfume franchises. The investigation of the Companies Investigation Branch showed that the companies had given false references to prospective franchisees to lure them into purchasing franchises. The companies were also held to have unfairly tampered with figures on prospective earnings.

The company that trades as 24 Self Video Ltd. is also known as RAS Partnership in some records. When it was set up it had three directors, two of whom had previously been disqualified by the Department. They hid behind the front man, Michael Duffy, who was the managing director and who has a clear record. The other two directors were Tony Sacco, who was disqualified from 2002 until 2009, and Martin Reilly, who was disqualified from 2000 until the present day. Indeed, those individuals persist in selling franchises under the aegis of the RAS Partnership and another company called WoK 2 Go. We need the Department of Trade and Industry to clarify the situation regarding the directors and their ability to operate, even though they have been disqualified. Will my right hon. Friend the Minister tell us what further action, other than disqualification, was taken in relation to those directors?

From February 2003 to 2005, some 30 outlets were opened as franchises of the company, of which 15 have now closed. Those figures tell their own story. The total loss to the franchisees, who stumped up approximately £120,000 each, was nearly £2 million. Of the remaining franchises, none has reported any profits. The people who invested in those franchises all thought that they were protected by the BFA, but it has failed them all. Regulation of some sort, by the Government or another body, must be introduced.

My constituent’s second complaint is about the role of the bank. His case is about the worst example of banks’ operations that I have seen in 15 years, and I have seen some really bad ones.

I want to make a point about the responsibility and accountability of banks. My hon. Friend will be aware of the company Filter Queen, which has caused problems in both our constituencies. It still owes wages to staff and has entered into illegal credit agreements with both the bank and its customers. Does he think that the bank has a moral responsibility to deal with the problem that Filter Queen has created?

My hon. Friend makes a good point. That is another example of companies, almost in collusion with banks, seemingly being able to hoodwink the public. In the case of Filter Queen, not only were the public hoodwinked; its employees were dealt an equally bad hand, in so far as they still have not been paid a penny for all their work. The public were being sold a virtual vacuum cleaner for about £1,600, involving an annual percentage rate of about 35 to 40 per cent. of cost. Vulnerable people are out of pocket by extremely large sums and will never be able to pay. We now have the ridiculous situation of the banks moving forward on that score and examining ways of getting their money back. That can involve all sorts of severity for those individuals. I am grateful for my hon. Friend’s intervention.

In the case that I was describing, the bank also failed; it was guilty of clouding the assistance, if any, that it gives. The impression given was that all that banks care about is whether the money loaned is to be repaid in full, without any checks and balances in the system. That was the clear impression given in this instance and in others. Another question needs to be answered: why would the RBS and its associated bank, NatWest, lend money for this particular event when no other bank in the country would? Clearly, such behaviour is unacceptable in an era of apparent corporate responsibility. There was nothing responsible in either RBS’s conduct or its subsequent actions and words.

In that connection, meetings have been requested and I have had meetings over a long period of time. I, like my constituent and others across the country, have written to the RBS chief executive, Sir Fred Goodwin. He takes the attitude that the bank takes no responsibility because in such circumstances, it is not deemed to have given any advice. I attempted to meet Mr. Gordon Pell, RBS’s chief executive of retail markets, to discuss these issues with my constituent and others, but he rejected any possibility of a meeting. I attempted to meet Sir Fred Goodman; again, I was refused any access. As a final attempt, I had a discussion with Sir Tom McKillip, who is a born and bred Ayrshire boy. We are normally quite proud of him, but in this instance when I tried to convince him, he, too, suggested that he did not see any merit in having a meeting on this subject.

I have written to the BFA and have had a meeting with Brian Smart, its director general. It takes no responsibility, either. It stated that

“the fact a franchiser is or was in the BFA offers only assurance that the business concerned succeeded in meeting our accreditation criteria at the time they were assessed.”

That is what we got from Brian Smart. I have also had discussions with other Members whose constituents have had similar experiences.

What could the solution be? I do not want this debate to be seen as an attempt to over-regulate the industry. We seek increased investment in its operation, free from excessive red tape. However, a responsibly regulated industry would increase the incentive for third parties to invest. Any publicity that can be given to that fact would be good publicity, and it would be good for the industry.

A tremendous number of individuals have been badly let down by the company, BFA and the bank. We must seriously consider making alterations to those two institutions. In the case of banks, there is little we can do directly, save reminding them of their common law duty of care for their customers—that has been missing from banks for a generation. Such care should include responsible lending practices.

I do not want to over-regulate the franchising industry but we need a thorough review of how it is regulated. The most popular online destination among potential franchisees is the BFA. Before coming here this morning, I went on to Google and typed in “BFA” and “franchising”. On every occasion, the BFA’s website popped up and gave the impression of a very professional operation that was overarching, secure and watchful as a regulator of the industry, whereas in fact, it employs eight people.

The website’s categories section mentions strict “ethical” and “viability” criteria for franchise operations. Associate members are committed to the

“Advertising Standards Authority’s code of practice and also to the association’s own complaints and disciplinary, appeals and re-accreditation rules.”

Potential investors would be forgiven for thinking of the BFA as a safe pair of hands. The Minister perhaps has a responsibility to enforce a revamping and expansion of the BFA, and to subject it to a renewal programme. The whole process needs to be reshaped in a way that protects the individual, and if that means introducing regulation, so be it.

A review of the DTI’s position in this area of business is necessary. Its twofold duty should be to ensure supervision of bodies such as the BFA and to make certain that giant banks such as RBS act with the correct integrity and with a degree of responsibility. It must be mandatory for the BFA to be advised of any closure of franchisees, in order to notify prospective franchisers. I am sure that the Minister is aware that such a provision is mandatory in the United States. It should be considered for the UK, in the light of the evidence that I am presenting this morning.

The BFA must make more rigorous checks on its franchises and must ensure that they are reviewed constantly. It is plainly wrong for an individual to be able to form a partnership while disqualified from being a director, no matter what sort of company we are talking about. In the interim period, while effecting far-reaching change in the BFA, we must ensure that the organisation clearly warns potential investors about the limitations of its vetting ability.

In summary: the individual requires protection, but that is missing; the BFA requires more resources in every sense of the word; banks need to demonstrate social responsibility and accountability; and the Government should consider introducing the US policy of mandatory conditions. Any individual in any circumstance who is considering such a business should not believe a thing that they see on the web.

I congratulate the hon. Member for Central Ayrshire (Mr. Donohoe) on securing this debate, and on his excellent work on franchising. It is rare to receive a letter from a constituent recommending that one speak to another Back Bencher who is an expert on a subject, but that is why I spoke to the hon. Gentleman about a matter that was prompted by a constituency case. I have had a number of conversations with him, and he is indeed a great advocate not only for his constituents, but for franchisees around the country.

The franchise sector is incredibly important. As well as generating £10.8 billion, it employs 370,000 people. Franchisers come in all shapes and sizes. When I wander down Southend high street, it may appear to be dominated by large companies, but in reality behind the facades of Threshers, McDonalds and so on are entrepreneurial franchisees. I am not usually in favour of greater regulation, but individual examples show that that the regulation of franchisees falls between two sets of regulations for small and large companies. I want to encourage the Minister to review the situation.

I have had a number of positive discussions with the British Franchise Association, which seems to pack more punch than the eight people it employs. I was quite shocked to hear that it employs only eight people, and I shall be interested to hear the Minister’s comments on its funding. That is a genuine comment and not a leading one. I am interested in the structure and the intent behind the association.

The association’s Brian Smart has been helpful in a constituency case that I brought forward. Richard Stallard purchased a British Franchise Association starter pack and looked at the required criteria for the association’s associate membership: two years’ audited accounts, and proof that the business was franchisable, viable, and could sustain a franchise network, and that the business operator had training skills and could help to operate the business remotely. If an organisation promotes itself through the BFA, it is the underlying organisation that has the duties and responsibilities, not the association. I think my constituent felt that the association’s endorsement did not exist, and that people should be cautious about the details of franchisees and visit other franchisees.

I declare an interest: I was a banker for 10 years, for which I do not apologise. During that time, I did not operate in the franchise sector, nor did I work for the Royal Bank of Scotland or NatWest, but I understand that most banks have franchise units to help to bridge the gap for entrepreneurs coming into the market. One paradox in asking for more regulation for franchisers is that many entrepreneurs go into a franchise operation rather than a small company because of the excessive burden of regulation on small businesses. It is hand-holding to get over the critical mass of branding issues, both in the external market and regulatory issues such as health and safety, and employee conditions, through which the franchiser supports the franchisee.

While supporting the hon. Gentleman, I would not want the Minister in a review of the franchise association to pour on an excessive burden. As the hon. Gentleman said, it is an expanding industry and bridges a gap between small companies, start-ups and multi-nationals. I look forward to the Minister’s comments.

I echo the hon. Member for Rochford and Southend, East (James Duddridge) in congratulating the hon. Member for Central Ayrshire (Mr. Donohoe) on securing this debate. The subject is incredibly important to an increasing number of people, and I pay tribute to him for his unstinting work in defending those who have been victims of what seems to be sharp practice—to put it mildly—with people who have attempted to make an honest living by owning a business as part of a franchise operation.

We have heard that franchising in the UK is worth almost £11 billion, that it is growing incredibly quickly at twice the rate of economic growth elsewhere in the economy, and that is employs 333 million people. The attraction of becoming involved in a franchise is clear. It enables people to get out of the rat race and to have their own business, with a lower risk because they are not going it alone. The financing may be easier because banks will lend up to 70 per cent. of start-up costs, which is a lot more than for a new enterprise, and franchisees take on a proven business concept and do not start out alone. They also have, at least in theory, a support network, training, and an operating blueprint.

The track record of franchisees is good. Less than 2 per cent. of the franchisee population failed in 2006. Risks are involved in any business, but they seem to be lower in franchise operations. However, one risk is that the initial cost of buying into a franchise operation can be high, and there may be termination restrictions. Anyone going into a franchise must consider those important issues. It is important to echo what hon. Members have said: that the franchise industry is reputable, by and large. Many high street names that we are all aware of are franchise operations, and many others, equally reputable, are not household names. It is a growing industry but there are con artists out there. We are privileged to be able to talk about one area and to ask the Minister to pay particular attention to it because there are also incompetent firms. The Daily Telegraph told the story of Grovewood Publishing, which was still signing up licensees when it was under investigation for insolvency. There are clear issues that need to be addressed, but by and large the industry is reputable and healthy.

On a personal level, a matter was brought to my attention late last year when a constituent, Mr. Paul Wakefield, came to my surgery armed with a printout from Hansard of a speech on this subject by the hon. Gentleman and with his dreadful story. On behalf of Mr. Wakefield and the many other decent business people who have been at the wrong end of sharp practice, l would like to express my happiness that the issue is now getting the airing in Parliament that it deserves, to thank the Minister for her presence and to express my hope that she will assist the many people who have been affected by this scandal by taking effective action.

My constituent was determined that I should tell his story in this debate, and I know that it will ring many bells with other Members here and outside. In early 2004, Mr. Wakefield entered into a franchise agreement with the company 24 Self Video. He showed due diligence and completed all the relevant checks, which included scrutinising the details of the agreement with his accountant. Everything seemed to add up, and there were no grounds to believe that it was anything other than a straightforward business agreement under which Mr. Wakefield, an experienced and successful businessman, could hope to operate fairly and with the expectation of doing well in his new venture.

The up-front fee to the franchiser was £127,000, so my constituent set about raising those funds, which he did via a business loan from the Royal Bank of Scotland’s subsidiary NatWest for £80,000, with the remainder being sourced from his own resources. Mr. Wakefield began trading in June 2004 and the business started well—it is important to say that. At that stage, 24 Self Video seemed to be fulfilling its part of the bargain, and Mr. Wakefield was demonstrating his successful business track record by doing well for the first nine months. It was clear that there was a good customer base, the business was progressing successfully, and there was every reason to be optimistic about the future, but after nine months things began to go wrong because the parent company of 24 Self Video, the RAS Partnership, massively increased the price of stock and Mr Wakefield's business immediately began to lose money. There was no warning of the price increases, and no obvious justifications were set out. Mr. Wakefield protested, but he continued to work hard at his business. Over the next two years, he kept his business going, but he struggled greatly, and in doing so, he had to pour significant additional amounts of his own money into the business to keep it afloat. At the same time, he had to continue paying back his loan to NatWest.

Mr. Wakefield approached 24 Self Video for help and advice. As I have already said, one attraction of being involved in a franchise is that one has a central support and advice network. However, 24 Self Video refused to help. He also asked whether he could see information about the financial situations of other franchisees—anonymised, if need be—in order to understand why his situation had become so difficult. As we now know, he was not alone in that dreadful situation, but needless to say, 24 Self Video refused to provide him with help in that situation, too.

Mr. Wakefield’s business folded in 2006. 24 Self Video offered him £15,000 to buy back his equipment and stock. He had to accept the offer; he had no choice, given his parlous situation. However, it subsequently became apparent that 24 Self Video had re-sold Mr. Wakefield’s equipment and stock for the staggering sum of about £130,000—presumably to another franchisee who could find themselves in the same difficult situation as my constituent.

Mr. Wakefield is now left with a substantial share of his loan to repay—plus lawyers fees—as a result of extremely questionable practice by the parent company. We already know that, to put it mildly, the directors had form. Mr. Wakefield discovered that he was not alone, and thanks to the work of the hon. Gentleman, it has become clear that there were other victims.

My constituent is an honest and competent business man with a successful track record. Nevertheless, his experience no doubt led him to think hard about what he may have done wrong to end up in that sorry position. It is now apparent that Mr. Wakefield’s situation was not of his own making, and that others who share his plight have similar stories to tell.

The victims of that practice wish to receive some form of compensation, and I should like the Minister to consider the way in which that may be possible. However, it is just as important to Mr. Wakefield and others to ensure that justice is done and action is taken to ensure that other business people are not put in the same position and do not suffer the same fate.

There are important questions to be asked. What checks did the Royal Bank of Scotland’s subsidiary, NatWest, which lent Mr. Wakefield the money, make when agreeing to such a substantial loan?

My ears pricked up at the mention of RBS and NatWest for a second time. Has the hon. Gentleman had any discussions with RBS? If he has found it as difficult as the hon. Member for Central Ayrshire (Mr. Donohoe) to receive an audience with the great and the good at RBS, would he support a cross-party letter to raise the issue, calling for a meeting about its treatment of and responsibilities towards franchisees generally?

I have and I would. We have attempted to establish communications with the bank, but we have not been terribly successful, so I would support the cross-party approach that the hon. Gentleman has outlined.

On the other side of the coin, when banks lend such amounts of money, they must realise that they are putting people in a potentially difficult position. We must ask what checks were made on the directors of the enterprise and their past record. If one were to set up one’s own private enterprise, separate from a franchise, there would be no chance of securing the type of loan that one can secure as a franchisee. There is clearly much greater need for due diligence by banks. I wonder what checks were made on the terms of the franchise agreement. One would have thought that any sensible business adviser at a bank would go through the terms that, for example, potentially allowed such unjustified hikes in stock prices. I should be grateful to hear from the Minister what she thinks can be done to ensure greater due diligence.

Will the hon. Gentleman explain his constituent’s problem when dealing with RBS and the director in question? Did the hon. Gentleman’s constituent make mention of the problem?

I cannot go into detail at this point, but my constituent’s difficulty was with getting an audience with anyone above branch level. He felt that he had been abandoned, and perhaps even that the bank understood that errors had been made and that it did not want to encourage a sense that they had been made by taking the matter further. I am happy to discuss my constituent’s details outside the Chamber, because he is happy for his experience to be used to help us get to the bottom of the situation.

It is important to state, as others have, that the British Franchise Association punches above its weight given its size. It has been in operation for about 30 years, and its code of conduct is based on the code that the European Franchise Federation recognises. The BFA provides mediation and arbitration schemes and an excellent service in many ways. However, it seems sensible for the BFA to require that members meet the criteria for accreditation consistently, not just when they join the association. I am glad that the BFA has tightened its rules to require notification of disqualification during membership, and that it has broadened disclosure to include key managers, not just directors.

The hon. Gentleman cited practice in the United States, where there are disclosure rules and a uniform franchise offering scheme to facilitate compliance with disclosure requirements. The United States is a different kettle of fish: there are 50 different states, and many have different legal codes. Theirs is a more complex situation, so I understand why the need for regulation may be greater in the United States than in this country. However, if our voluntary operation is not working, I hope that the Minister will consider taking further action.

I hope also that the Minister will determine to take effective and immediate action so that the victims of this scandal receive justice. That would make it certain that no other business people were allowed to suffer in the same way from a series of outrageous practices that aim to make the parent company huge sums of money at the expense of decent, hard-working business people.

I look forward to serving under your guidance in this debate, Mr. Chope. I shall begin by warmly commending the hon. Member for Central Ayrshire (Mr. Donohoe) on securing the debate. Members will know that he has a consistent record of dealing with the issue, and I am sure that his constituents value his interest and the contribution that he has made today.

At the beginning of the debate, the hon. Gentleman highlighted the case of 24 Self Video, to which the hon. Member for Westmorland and Lonsdale (Tim Farron) also referred. Clearly, there is a significant problem with that case, and I am sure that the Minister will wish to respond to it. Mention was made of the bank’s role, the apparent failure of appropriate due diligence on its part, and the unwillingness of its management to listen to Members’ concerns.

On that note, I welcome the remarks made by my hon. Friend the Member for Rochford and Southend, East (James Duddridge), who showed that such debates allow us to work on a cross-party basis. A joint letter, as was suggested, might be able to uncover some of the issues involved in the case. That is a good sign for the way in which many such issues can be dealt with—the heavy hand of Whitehall is not always required. Often, Members can use their position to apply a little leverage and pressure to remind large institutions that they have a role to play in our society and that they need to listen to our constituents’ concerns. I hope that that initiative will proceed.

The hon. Member for Central Ayrshire also raised the possibility of a United States-style mandatory disclosure, which I believe would take place every year. I do not claim to be an expert on the way in which that process operates, but I would be interested to know whether the Minister feels that such a scheme is to be encouraged, given that the costs might be, say, £5,000 a year per franchisee. My hon. Friend raised the issue of how we can ensure that we strike the right balance between regulation and investor and business confidence. Striking that balance is at the heart of the debate.

Clearly, franchised businesses are important to the UK economy. It has been estimated that some 370,000 people in this country are employed as a direct result of franchising. As the hon. Gentleman said, the turnover of such businesses and the supply chain that supports them is in the region of £10 billion to £11 billion. As a business model, franchising operates not just in one sector. It seems that 20 or more business sectors have a significant element of franchised enterprises—they might be the local print shop or graphic design agency, for instance, or involved in insurance, hairdressing, fast food and video rental, as we have heard.

A wide range of quite well-known brands are franchises. I suspect that we are all familiar with the long-standing Kall Kwik, but there is also Subway, the sandwich business from the United States that is now growing in the United Kingdom, and estate agency businesses such as Winkworth, which are often franchised. People will obviously be familiar, too, with fast food eateries such as McDonald’s and high-street chains such as The Body Shop. Other franchises that come to mind include Printfast and Snappy Snaps.

Given the money that is involved in all those different kinds of businesses and the employment that they generate, it is clear that franchising is an important part of the UK economy. However, franchising is also significant in the debate about small businesses. The franchise option is popular and profitable for thousands of new entrepreneurs beginning start-up businesses. The latest figures, which relate to the whole of last year, show that, roughly speaking, 3,000 small start-ups began their lives as franchised businesses in this country last year.

Why is franchising a popular option? The answer is fairly simple: an established brand or business will have been tested in the market and will therefore have a track record. For someone considering starting up a fast food outlet, for instance, choosing an established franchise, with a name that the public know and perhaps trust, is more likely to be successful than something of similar or greater worth, but which is inevitably untested. As we heard, ironically, a proven track record is also important when someone is seeking to raise finance to launch a business. It is clearly much easier to convince a bank with a proven business model. However, as we have also heard, the down side is the danger of assuming that that business model will not need the same level of due diligence that would be applied to any other. Those risks will fall either on the bank or—because in the end, the bank will have its money—on the shoulders of the entrepreneur.

The performance of individual franchises is underpinned by an annual survey of the sector, which is funded by NatWest bank and commissioned by the BFA. The survey has been run for more than 20 years. Given that it is commissioned by the BFA, there will be an interest in its outcome. However, to be fair, having checked it, I understand that it is undertaken by independent consultants, so I have reasonable confidence that it gives at least a fair picture of the market. The survey shows that franchising delivers the lowest business failure rates of any kind of business start-up. Last year, for example, just 1.8 per cent. of franchises failed, compared with more than 9 per cent. for comparable start-ups generally. The survey suggests that that pattern not only was evident last year, but has been so year in year out.

Given that evidence and its possible implications for encouraging more successful start-ups, can the Minister tell us what assessment her Department has made of the sector and its relative performance? Is that differential in success and failure reflected in her statistics? It would also be helpful if the Minister could tell us how the existing business support network interacts with start-ups and what advice business links provide to budding franchisees, as there might be an issue there relating to points that hon. Members have raised today.

The franchise industry is largely self-regulated, and has been that way since 1977, when the major companies involved in the business decided to set up their own association, the British Franchising Association. The BFA had just nine founding members, but over the years it has grown significantly. I am told that there are now in the region of 350 different franchise brands in the UK; indeed, the BFA tells me that under its franchise network alone there are some 15,000 businesses.

As I understand it—this is simply from some cursory research; I do not pretend to be an expert, as the hon. Gentleman clearly is—the BFA’s principal ability to regulate is based on its membership procedure and the requirements that it places on applicants who wish to join, whether as an associate or a full member. Even at what is called a provisional level—that is, before being approved for associate membership—the directors of a company are checked against the records at Companies House and then vetted for suitability. Thereafter, moving from the provisional list to associate membership requires certain guarantees and declarations from the applicant, as well as proof of earnings from existing franchisees.

May I correct the hon. Gentleman’s impression about that? One of the fundamental problems in the case that I raised was that that process did not happen. There was no check whatever. The people taking out the franchise were of the opinion that those checks had been made, but after correspondence between the franchisee and the association, it was determined that that had not happened.

I am grateful to the hon. Gentleman. If there was a failure of process by the association, that would need to be looked at with great care and concern. The approach that has been described to me seems reasonable. The question is whether it has been taken, and he is absolutely right to raise that question in his constituent’s interests.

Overall, my concern is whether there is due process to try to ensure that known rogues, as it were, do not become members of the association and that innocent potential franchisees do not therefore assume, albeit with good reason, that something is not as it claims to be. The question is whether the BFA or any other body should seek actively to police the industry, to try to prevent malpractice or illegality. The hon. Gentleman has quite rightly raised questions about his constituent’s circumstances. Although I have listened to the points that he has raised, I am not party to the case, so it would probably be wise for me not to comment in detail about the whys and wherefores. However, he has raised some important issues, not least that of the role of responsible lending, which I am sure the Minister will wish to address in full shortly.

For my part, I think that there are issues that we can and should consider, about how the industry operates and whether there is clear evidence of systemic market failure that this Government—or, for that matter, any Government—should address. First, with the exception that the hon. Gentleman just raised, the BFA seems to have tried to take reasonable steps within its powers to prevent rogues from coming into the business, yet without creating unfair, undue or anti-competitive barriers for new entrants. However, there may have been a failure in that process, and I am sure that the Minister would want to comment on that. I am also told that the BFA operates a complaint and dispute scheme, which includes low-cost mediation and arbitration for both current and former franchisees. However, I recognise that unhappy franchisees may feel that a body for franchisers may not be entirely representative of their interests and concerns. I wonder whether the Minister could say whether she thinks the existing arrangements are satisfactory.

Secondly, under the current law, anyone who is disqualified from acting as a director is also disqualified from any direct or indirect involvement in the management of a franchise company. Any breach of those restrictions is a criminal offence under the Company Directors Disqualification Act 1986 and should be dealt with appropriately. However, I should also be interested to know whether the Minister feels that the new Companies Act 2006, which she took through the House, might also assist in such cases.

Thirdly, although the cases raised today are clearly distressing to those affected, it is not possible to say that they represent systemic market failure that demands immediate Government intervention. Clearly, in any market there are and will continue to be failures in the sector, but the fact that franchises continue to have a lower rate of failure than the rest of the market weakens the claim that the industry somehow represents undue risk.

Lastly, there is the question of how far and how much Government should intervene to try to protect businesses from failure. By its very nature, enterprise is risky; I do not believe that it is desirable or practical for the state constantly to interfere to try to remove risk. That does not mean that I am unsympathetic to the constituents’ concerns and the instances raised by the hon. Gentleman and others in this debate. I myself have set up a business and run one for 10 years. I know and understand the stress and strain—and also the rewards—that come from running a small business. I am not unsympathetic. However, the best way to minimise the opportunity for malpractice—or, worse, illegality—is for there to be transparency in the marketplace and for people to abide at all times by the principle to which the hon. Gentleman alluded: that of caveat emptor, of buyer beware. We should take nothing for granted.

Without question, the franchising sector is an important and growing part of our economy. It is entirely right that we should consider how the industry is operating and whether the current regulatory framework is performing. Naturally, the Minister will wish to dwell on the issues raised by the hon. Gentleman, and I understand that. It is important that she sets out clearly the Government’s complete response to his points.

However, I also hope that the Minister will be able to respond to the questions that I have tried to raise, and that she will set out the Government’s assessment of the strengths and weaknesses of the franchising model and the regulatory environment within which it operates. The Government rightly speak of the need for light-touch regulation. I hope that today she will be able to show us her commitment to that principle.

I congratulate my hon. Friend the Member for Central Ayrshire (Mr. Donohoe) on securing this second debate on franchising, thereby ensuring an interesting exchange of views.

I start by saying that I completely understand the distress caused to the constituents of hon. Members here today. However, across the Government and Opposition Front Benches, there is good unanimity of intent and of understanding about how we go forward on the issues that have been raised.

Let me first put the context, as other hon. Members have done. We all recognise that franchising is growing and we want to encourage it. It is a well recognised route for many who start a business. It is particularly attractive to those with less business experience, who may want to limit their risk and buy into franchising. Particular groups, possibly including women, see franchising as a way into business; they may also include people coming out of the Army with a lump sum that they want to invest in starting on the route to entrepreneurship. We want to encourage franchising, as part of our general encouragement of the growth of small business and entrepreneurship. As all hon. Members who have spoken have said, franchise turnover and the number of people working in franchises are growing.

The hon. Member for Hertford and Stortford (Mr. Prisk) asked me to state our view of the franchising sector. I share his analysis that there are advantages. A franchisee buys an established brand with a proven business model and thereby somewhat reduces the risk in comparison with establishing a business from scratch. The franchisee also benefits from the franchisor’s promotion of the brand; that form of support is available. Furthermore, a responsible brand owner will provide support in other forms, such as training, marketing and other know-how of various kinds. As the business model of franchises is proven, it is usually easier to raise finance for them, although today we have heard doubts about whether the banks in the case that was raised practised the due diligence that one would expect of financial institutions. Furthermore, as other Members have said, some banks have teams that focus on franchising opportunities.

The sector also has disadvantages, such as the payments made to the brand owner, which caused problems and reduced the viability of the business in the case that has been mentioned. Furthermore, the franchisee is obliged to adhere to the established model and has to obtain approval for any changes that he or she may want, and the business can be sold only to those approved by the brand owner. Finally, the brand owner could go out of business. There are both advantages and disadvantages.

Franchises are a form of business that may be suitable for some people and unsuitable or less suitable for others. However, the advantages and disadvantages of franchising should not obscure the essential nature of the venture: to buy a franchise is to buy or start up a business. The plain fact is that business is risky; the essence of entrepreneurship is that businesses succeed and fail for a variety of reasons. If a business model succeeds in one place, that does not mean that it will succeed in another, or in a different time or market. Anybody who buys or starts up a business, whatever its form—franchise or otherwise—needs to assess the opportunities, costs and risks with great care. If they are starting in areas outside his or her personal experience, they need to get professional advice.

Both the hon. Member for Westmorland and Lonsdale (Tim Farron) and my hon. Friend the Member for Central Ayrshire raised the issue of the regulation of franchising. As my hon. Friend knows, during the debate last year, the then Minister for Energy, my hon. Friend the Member for Croydon, North (Malcolm Wicks), said that the Government had yet to be convinced that it was necessary or desirable to introduce regulation that followed the model in the States. There are two reasons for that. First, not enough cases have been brought to our attention. I questioned my officials in preparing for this debate, and discovered that the case raised has been one of only two that have been brought to the Department’s attention.

Is the Minister aware of the case in the High Court this month?

Interestingly enough, that case, to which I shall come, involves a company limited by a guarantee. In the instance that we are discussing, one of the issues that has bedevilled the individuals who took out the franchise is that they are dealing with a partnership, not a company. The legislative recourse available to them is different and more limited. In a partnership, the risk is to the individuals, who need to be pursued. In a limited company, there is a disqualification; that, I understand, is the route down which the recent High Court case went.

So we have not had enough evidence, although we shall keep monitoring, as we clearly need to. The other issue is whether regulation might provide a false sense of security. We always have to be wary. Even if we were to introduce the American-style regulation, that is not very different from what the BFA does voluntarily. In this case, it has probably not done so as effectively as we would have liked, and it has provided false comfort to the constituents of the hon. Member for Westmorland and Lonsdale and my hon. Friend the Member for Central Ayrshire. That probably meant that their constituents did not undertake all the assessments that they should have done to ensure that the venture, into which they put considerable amounts of money, was a proper one.

Surely what the website says about the responsibilities, checks and balances within the BFA would lead the reader to conclude that the organisation had the industry under control. It is clear that the constituents of my fellow debaters this morning are of the clear opinion that that was enough, along with other checks and balances to lead them to conclude that the venture was worth while.

I have looked at the website; in fact, I have various pages of it with me. Let me say to my hon. Friend, since this is the second time that he has raised the issue, that the start of the website states:

“All of our members have chosen to be vetted against a strict code of business practice”.

I can understand how that can provide some comfort to the people who visit that website. It is interesting to note that the BFA is sponsored by various banks, of which the Bank of Scotland is one.

As the Minister has visited the website this morning, it might be of interest to her to learn—in case she did not see it—that the president of the BFA is one Bernard Ingham.

I had not picked that one up. However, I did pick up on an explicit set of drawbacks of entering into a franchise agreement. One paragraph talks about the unethical franchisor and says:

“Unfortunately some franchisors have no intention of entering a long-term support relationship with the franchisee”—

that is what has been described this morning—

“instead they have heard that franchising is a way to make money quickly out of gullible franchisees. This is done by setting up a shell franchise—lots on offer but nothing to back it up, then selling such franchises”,

although I am not sure that that is what happened in the cases that have been mentioned,

“to those who are so keen to become a franchisee that they fail to make a thorough appraisal of the business on offer. Make sure that you spot this type of franchise, take time to investigate different opportunities. You cannot afford to learn from your mistakes.”

The website contains such warnings and, if I were investing a lot of money and putting up my house as security to buy such a franchise, I would go beyond simply seeing whether the franchisor is listed on the BFA website. There is an element of decision making where the onus and the burden have to lie with the individual who makes the decision. Those constituents should probably have investigated everything a bit further.

However, I am prepared to re-advertise the BFA through businesslink.gov.uk. I have asked my officials to investigate whether it is appropriate for the Government to advertise a voluntary organisation—a trade association of franchise institutions—to ensure that we do not unwittingly provide false comfort or false information to individuals who might use a Government website for support when buying a franchise. I will write to all hon. Members who have participated in the debate once we have undertaken the review to see whether listing the BFA through the Business Link website is appropriate.

Membership of the organisation is voluntary, and it is a trade association. The hon. Member for Rochford and Southend, East (James Duddridge) asked whether we funded it. No, we do not. I am pleased to learn that, rather than vetting franchisors when they first ask to become members, it vets its franchisors more regularly to ensure that they should remain members of the organisation.

Let me deal with a point that the hon. Member for Westmorland and Lonsdale raised when he described his constituent’s experience. It sounded to me as though his constituent might have been the victim of misrepresentation, fraud or some anti-competitive practices, or reckless mismanagement on the part of some company—I was not clear whether it was the company or the partnership with which his constituent had to do business. There are protections in law for anyone who thinks that they have been a victim of such abuses. If the hon. Gentleman believes that any of the circumstances in that case involve such practices, I hope that he will draw the matter to the attention of the appropriate authorities.

If we were to make some new form of regulation—some special controls of franchising—we would have to justify them as necessary and show that there has been a systemic problem or risk with franchise businesses that has not arisen for other businesses. I have not had evidence presented to me to show that that is the case, nor has new evidence been presented this morning that would lead me to conclude otherwise. It must be clear that, in cases that involve no misrepresentation, fraud or deception, but in which the business simply does not make it in the marketplace, no conceivable form of regulation could save that company. It is simply not possible for the Government to insure business against the possibility of failure.

I have dealt with the fact that some of the people involved in the franchise business were disqualified as directors. Once someone is disqualified as a director, we inform Companies House. In cases where someone acts as a director of a limited company while they are disqualified, we have a hotline at the DTI—we take that matter extremely seriously and we would pursue it. It was unclear from the speeches of the hon. Member for Westmorland and Lonsdale and my hon. Friend the Member for Central Ayrshire whether their constituents dealt with a company or a partnership, because the legal framework is different. Those who feel that they have lost money as a result of the actions of a partnership can pursue the individuals, so no disqualification procedure is in place. If either hon. Member wants to write to me on that, I am happy to write back to clarify the position for their constituents.

A number of hon. Members raised the issue of the banks. Clearly, we want to ensure that banks act with a duty of care for their customers, as my hon. Friend the Member for Central Ayrshire mentioned. My hon. Friend the Member for Paisley and Renfrewshire, North (Jim Sheridan) talked about banks’ moral responsibility, and we all believe that that is important. I am pleased that the initiative is going to be taken collectively to seek a meeting with the banks to ensure that they exercise due diligence when supporting individuals who move into franchises.

Will the Minister tell us whether she has meetings with the banks and their directors?

The banks, of course, are regulated by the Financial Services Authority. The Treasury, not the Department of Trade and Industry, has responsibility for financial services, but I do indeed meet individual banks and the British Bankers Association from time to time, and I am happy to raise the issue when I next meet them. I suggest to hon. Members that they also have available the services of the banking ombudsman. If they feel that inappropriate support and advice was given to their constituents, a reference to the ombudsman from my hon. Friend the Member for Central Ayrshire and the hon. Member for Westmorland and Lonsdale together, or with the hon. Member for Hertford and Stortford, might be appropriate.

The hon. Member for Hertford and Stortford rightly put the issue of franchised businesses in the context of the business support that we give to start-ups. Although we cannot insure businesses against failure, we do a great deal to help small business and support business start-ups. As he and I have often said in debates, we share the view that they are absolutely vital to the future health and prosperity of the economy.

We are proud of our record; he is more critical of it, but there are 600,000 more small businesses today than there were when we came into government in 1997, and employment in the SME sector has risen by more than 1 million. We have a record number of British entrepreneurs, including for the first time ever, I am delighted to say, more than 1 million self-employed women. I should like to go further than that. As he well knows, small business now accounts for more than half of private-sector turnover.

We do not keep specific information on the support and advice given to franchisees, but Business Link is reaching more people each year. In 2003-04, just over 600,000 people were supported by Business Link, and in the most recent year for which we have figures, we are up to nearly 800,000—a substantial increase in the number of individuals supported. I hope that the new contracts for Business Link that are just starting up, to be run by the regional development agencies, will increase its effectiveness yet further and enable it to provide further support to the SME sector.

As the hon. Gentleman will know, we are trying to make our advice and support to small businesses much more user-friendly, by reducing the number of business support schemes from 3,000 to 100, which will help with access and reduce the undoubted confusion that both he and I believe businesses currently face.

I do not wish to drift too far from the subject, but can the Minister tell us when the Government hope to publish the criteria for that simplification? We have had correspondence in the past on both franchised and non-franchised small businesses, but it would be helpful if she could say whether she expects to publish the criteria imminently. I think that they were due in March, but does she now expect them before we rise before the summer?

We are well on the route to developing the criteria, and they will be published well before the summer recess in a consultation paper that the Chancellor promised in the Budget. We are currently preparing that paper. The hon. Gentleman will know that we are doing effective work on raising the spirit of entrepreneurship among school children through Enterprise Insight, enterprise week and other initiatives. It is heartening, when comparing our record with those of other European and other G7 and G8 countries, to see that our rate and awareness of entrepreneurship and the likelihood of people becoming entrepreneurs is on the rise, and that we are moving up the international ladder. We are offering such things as a leadership and management programme for SMEs, which I know the hon. Gentleman agrees is important, and improving access to finance, particularly through the enterprise fund.

The Business Link website, businesslink.gov.uk, is particularly important. It draws together information from more than 50 bodies and provides straightforward details on regulations that apply to small businesses. It has a host of useful business tools, is an internationally award-winning website and now has more than 5.5 million unique visitors each year.

With that background, I appreciate the raising of the debate. It is important, and it has made me think clearly about whether we should consider more regulation for the franchising sector and whether current support is appropriate. I do not believe that the time has come for formal regulation, and I am not convinced that it would necessarily have provided the right support to the individuals who lost so much money in the constituencies of my hon. Friend the Member for Central Ayrshire and the hon. Member for Westmorland and Lonsdale.

We should do what we can to support franchises, because they are an important route into entrepreneurship, as hon. Members have said. But at the end of the day, it is up to anyone venturing into business, whether as a franchise or independently, to make their own inquiries and decide what to do in the light of their own priorities, judgments and capacities. Of course they should seek professional advice, from whatever source—we have discussed the role of the banks—but whatever the advice, the judgment must in the end be down to the individual making the commitment. However, I take on board the issue of the BFA, and I shall come back to hon. Members on that. I hope that they feel that they have had a good opportunity this morning to air their constituents’ concerns, and I assure them that the Government have listened hard to what they have said about the experiences of those constituents.

It is a privilege to serve under your chairmanship, Mr. Chope. The last time that I recall us having a full hour and a half debate on the state of the UK’s dairy industry was in November 2005, when such a debate was initiated by the hon. Member for Preseli Pembrokeshire (Mr. Crabb). Not many Members are here today; however, there is a similarity between the faces present today and those present then. I am sure that Members will agree that this debate is long overdue.

Since November 2005, there have been many developments in the dairy sector and it would be churlish not to acknowledge that a lot have been positive. The ongoing Competition Commission inquiry gives us hope that some form of regulation will be introduced into the market and that that will help to provide dairy farmers with better farm-gate prices. Farmers’ unions, the women’s institute and other rural interest groups are succeeding in building a much higher profile for the plight of Britain’s dairy farmers, notably through the great milk debate that was launched in April; many Members will have had experience of that in their constituencies. We ignore the WI at our peril, particularly as others have been less responsive to its concerns.

Supermarkets are starting to get to grips with their responsibility to ensure that farm-gate prices are set at a fair level. However, such progress cannot come a minute too soon for dairy farmers. Today, the average farm-gate price for a litre of milk is just under 18p, yet research by the National Farmers Union and the Royal Association of British Dairy Farmers estimates the price of production at 21.23p a litre.

The situation is compounded by the escalating costs faced by our farming community. Figures provided by the National Farmers Union of Wales show that the cost of diesel has more than doubled and that the cost of nitrogenous fertilisers has risen by more than 50 per cent. in the past six years. During the past four years, the average price of electricity for small industries, including farms, has risen by some 90 per cent. In that context, farmers secured a price of 24.5p a litre 10 years ago, compared with 18p a litre today.

I remind the Minister of the serious and worsening impact of tuberculosis on dairy farming. The Government’s perceived lack of action on bovine TB does little to support the industry. I know that the Minister takes a particular interest in this matter, and I urge him to implement a clear and universal strategy to deal with bovine TB at the first opportunity.

Agricultural policy is a devolved matter, but there are cross-border issues. For example, English badgers are free to enter Wales, as Welsh ones are to enter England.

The hon. Gentleman has rightly pointed out that policy on bovine TB has been devolved to the Welsh Assembly. Does he agree that we have had four wasted years under the last Assembly Administration, during which the problem was not tackled? Does he also agree that the interaction between low farm-gate milk prices and the spread of bovine TB in his constituency and in mine risks decimating the dairy sector?

I agree and I thank the hon. Gentleman for that contribution, as the situation is much as he describes. Issues associated with bovine TB ring out from cases brought to his surgery and to mine.

Sadly, there are few signs that the regulatory burden is lifting. In fact, many farmers across the UK are seriously worried about the impact of the nitrate-vulnerable zone regulations, which are likely to have significant cost implications by requiring farms to build storage units for slurry. I have heard estimates that implementation of the regulations will require capital costs of £300 million to £400 million. Does the Minister agree with those figures? How does the Department for Environment, Food and Rural Affairs plan to mitigate the effect of those measures and where will the burden fall? The great environmental challenges of our day are not lost on our farming community, but there are serious concerns about how the terms of the regulations will be met. I commend to the Minister the work on methane emissions undertaken by the Institute of Grassland and Environmental Research, which is based in my constituency.

The result of the shift in the balance of production and retail costs has been disastrous in Wales. I will resist the temptation to stray into devolved matters and will simply cite some examples. The Welsh Assembly revealed in its latest aggregate agricultural statistics that income from farming in Wales fell by about £44 million between 2005 and 2006. That dramatic reduction is mainly due to a downward slide in the value of milk and milk products that amounts to £23.9 million. The net result, which I am sure has been the experience of other Members in their constituencies, is that dairy farmers have left the industry. In Wales, the figure has fallen by about 30 per cent. to 2,400 farms.

The situation is compounded by the difficulties faced by new entrants and the average age of the work force, which is increasing every year.

I thank the hon. Gentleman for that comment. One concern that is doubtless raised in his meetings with farming unions is the ageing farming community. The problem is not that young people are not keen to enter the industry as a career, but that it is incredibly hard to do so. I will come back to that issue.

It is not just farmers who are under threat; there is also a decline in associated industries. Some 70 per cent. of Welsh milk is turned into cheese, and I hope that our discussions will not focus just on supermarket milk. The recent announcement in my constituency of the closure of the Aeron Valley creamery, which will result in the loss of 44 jobs, has given cause for concern. Its highly motivated work force had been working very hard to establish some well-known brands, and the decision to close came as a bolt from the blue. The closure came only 12 months after Dairygold closed in Felinfach, which resulted in 115 job losses. Dairygold is another dairy sector firm that has pulled its operations out of Wales. It has benefited from not insubstantial sums of public money.

I am pleased that the Dansco creamery in Newcastle Emlyn, which is just across the border from Ceredigion in Carmarthenshire, has secured its short-term future. Had it not done so, farmers in my constituency and more widely in west Wales would be in an even worse position. If milk is processed locally, transport costs are kept down, farmers’ margins are less and more of the value of the primary product is kept in the local community. That should be the benchmark.

As the hon. Member for Caernarfon (Hywel Williams) said, the average age of the dairy farmer is rising and we need to act now to ensure that more young people have an incentive to stay in the sector. Wales certainly has an impressive network of young farmers clubs. When I am on the hustings at elections, I am often asked whether I would encourage a young person to pursue a career in dairy farming. Faced with the current pricing regime, it is difficult for me to give an honest, objective opinion.

The looming spectre of the Competition Commission’s inquiry has at long last provoked supermarkets into taking some action to increase farm-gate milk prices. Out of the major retailers, Waitrose and Marks & Spencer have led the way. Waitrose has created a “select farm” milk range, which guarantees 65 farmers a price of 23p a litre. Marks & Spencer guarantee 61 milk suppliers a fair price. Tesco has recently announced that it will guarantee 850 farmers 22p a litre, which is welcome news. Sainsbury’s and Asda are both urging their processors to pass a premium back to the farmer, but we have yet to see any concerted action from Morrisons.

My hon. Friend is making a good point. On the Competition Commission inquiry, does he agree that the Tesco announcement was made largely in response to the requirement for a public relations boost for how it is seen by the dairy industry? Does he also agree that the nature of the contracts themselves—the short-term changes, the overriders, the paying for promotion and other conditions—need to be looked at? That is why the Competition Commission should come down hard on the retailers to protect primary producers.

I of course agree and it would be churlish not to welcome those moves, in so far as they go, but we have yet to see the detail. [Interruption.] The hon. Member for Caernarfon asks from a sedentary position, “How far have they gone?” and the answer, I think, is not very far at all. It is a step, when we need strides. As my hon. Friend the Member for St. Ives (Andrew George) said, we need to look more closely at such practices through, I believe, the Office of Fair Trading.

The hon. Gentleman is being extremely generous with his interventions. My discussions with representatives of Tesco have left me under the impression that it is very alive to the concerns of the dairy sector. The new contracts that it is trying to move towards represent a genuine attempt to get close to producers. There is a lot of cynicism among farmers about Tesco and the larger retailers, and we can understand where that is coming from, but Tesco’s initiative is a genuine attempt to move the debate forward, to get beyond the finger-pointing among retailers and processors of recent years, and to do something positive for the sector. However and as the hon. Gentleman said, we need to see the detail.

The proof of the pudding will be in the eating. What will happen remains to be seen, but I would like a lot more detail from those companies, so I shall reserve judgment.

Any recognition by supermarkets that their huge power bestows on them a social responsibility is, of course, welcome. Any initiative that guarantees farmers a return over and above the production costs represents a step—although we are looking for strides—in the right direction. For a long time, my colleagues and I have been urging supermarkets to look at the model of Fairtrade products. Wisely and necessarily, the Fairtrade movement guards its label and name for use with developing countries only, which I respect, but the model shows us how consumer power can lead to a change in practice by supermarkets. However, direct-supply contracts could easily create problems, as well as solutions. For those farmers not lucky enough to secure a direct contract—if it is an acceptable contract—the future would remain vulnerable and unsustainable.

The Royal Association of British Dairy Farmers estimates that only 11 per cent. of Britain’s 15,000 diary farmers will benefit from Tesco’s recent decision. Those left out in the cold will continue to face a very uncertain future. Supermarkets will continue to get the majority of their milk from milk processors, and for most farmers the farm-gate price will remain unsustainably low.

As I ate my breakfast this morning, I noticed the flag of St. George on the milk carton and the milk pledge by Marks & Spencer:

“We were the first retailer to introduce a scheme that guarantees our dairy farmers a fixed price for milk, removing the uncertainty of the milk industry's price fluctuations so our farmers have greater security and the ability to plan.”

We need to hold companies to such statements, and I sincerely hope that Tesco’s direct-supply contracts are robust enough to ensure that those guaranteed prices actually reach farmers—the contractual point made earlier by my hon. Friend the Member for St. Ives. The milk will still come via processors, so how it will work in practice remains to be seen.

There is a separate move by Tesco to allow its customers to support local milk producers, which represents an important development, too, but we should realise the limits of the current scheme. My county of Ceredigion is a big milk producer, but Tesco confirmed to me that although it has a local-choice milk supplier in Caernarvonshire for its Welsh milk, it does not have one in Ceredigion. The definition of localism depends on who is making the case.

Moreover, only half of raw milk is consumed as liquid milk. As I said earlier, 70 per cent. of Wales’ milk goes into cheese production. It is vital that supermarkets introduce fairer pricing structures for cheese, as well; reform of the milk sector on its own is not enough. I accept that the cheese market is more complex, but supermarkets must make efforts in this area, too. Sainsbury’s has worked to increase returns to farmers through its new cheese contracts; again, the details have yet to be seen. That must be the start of real change in the sector.

The Government can help, too. The Food Standards Agency and Ofcom model—it puts cheese in the same category as sugary cereals, crisps and burgers, and involves a ban on the advertising of cheese during children’s programmes—is very damaging to the product. If Ministers can bring pressure to bear there, I sincerely hope that they will. I commend the work of my hon. Friend the Member for North Cornwall (Mr. Rogerson) and the all-party group on cheese, which I believe has led the campaign. It is doubtful whether voluntary action by supermarkets alone will be enough to halt the erosion of the dairy sector. Indeed, I would suggest that the threat of regulatory action by the Competition Commission has stirred supermarkets into life.

Farmers across the UK are hoping for a strong conclusion to the commission’s inquiry, because its recommendations can do so much to aid the sector. That is why it is regrettable and frustrating that its announcement is not now expected until February 2008, according to the commission’s website this morning. The supermarket code of conduct should be scrapped and replaced by a fair trade inspector within the Office of Fair Trading. He could proactively investigate abuses of market power at every step in the supply chain and ensure a fair deal for farmers. I hope that the parties represented here this morning can reach some unanimity on that point.

I hope that the Minister will give a commitment to abide by the results of the commission’s inquiry and that he will set in train a review of Government policy, in order to recognise the pressures on the dairy industry and to investigate actively ways in which to bring bargaining powers back to dairy farms. In Wales, the NFU Cymru has proposed bringing together the Milk Development Council, the Dairy Development Centre and the Welsh dairy strategy group to lead the way for the Welsh dairy industry, according to the example of the Ireland model. Obviously, because such matters are devolved the Minister cannot comment directly on the Welsh example, but I hope that he can say whether he has made an impact assessment of the success of the Irish model, of the grants given to Irish cheese producers and of the competitive edge given to Irish milk products as a result of that support. Would he support the formation—I hesitate to say this, as a Member representing a Welsh constituency—of an England-wide or regional marketing board along those lines?

I remind the Minister that reinvestment levels in the UK dairy industry are unacceptably low and well below the European Union average, which does not make for a healthy industry. We need to do something about that. The NFU thinks that further rationalisation of the processing industry is essential if the UK is to compete effectively at an EU and international level. I would be interested to hear the Minister’s views on the principle of rationalisation and whether he agrees with the NFU that it should be encouraged.

I am interested in the relative gullibility of the hon. Member for Preseli Pembrokeshire (Mr. Crabb) in accepting Tesco’s announcement. On my hon. Friend’s point about the Competition Commission’s inquiry, does he agree that there is still time for dairy farmers and other producers to bring forward evidence to the commission before the initial findings are announced in September? In fact, it is urging producers to bring forward further evidence. It is an important moment in ensuring that we get a decent outcome.

I agree with my hon. Friend, and I have certainly sent that message in my dealings with farmers in my constituency. There were concerns early on that the body of opinion and evidence for which we had hoped had not been presented to the commission.

Dairy farming is more than an industry. I shall resist the temptation to be poetic, but, representing a rural constituency, I can say that it is much more than that. If we do not offer support to our dairy farmers, they will simply go out of business and we will lose much more than farms. We will lose the wonderful produce that is being developed and has been developed over the years, and risk destroying livelihoods and breaking down communities. Potentially, acres of countryside will be left untended. Once dairy farmers go, there is very little chance of getting them back. The cost of re-establishing a farm is uneconomic as things stand.

I detect a change. It might consist of token gestures, or it could be more substantial. There is greater awareness in this place of the farming industry. I pay tribute to the hon. Member for Shrewsbury and Atcham (Daniel Kawczynski) and the all-party group on dairy farmers—it consists of Government and Opposition Members—in bringing such matters to the attention of the House. Farmers need support now, before it is too late. The next time that I address a farming union meeting in my constituency and I am challenged with the question about young entrants to the farming industry, I want to be able to give the unequivocal answer “Yes”, rather than “It depends.”

I congratulate the hon. Member for Ceredigion (Mark Williams) on securing this important debate. I concur with almost everything that he said. When I was elected to Parliament, I started to realise the extent of the crisis in the dairy sector through meeting many of the dairy farmers in my constituency. Two constituents in particular, Mr. Stuart Jones of Asterley and Mr. Andrew Bebb from Cruckton, managed to teach me a great deal about the industry and have encouraged me throughout to pursue their interests and those of the wider dairy sector. Mr. Bebb is a member of Farmers for Action, and I pay tribute to the work that he does.

As a result of those meetings, about a year ago I started to campaign for action by supermarkets, but when I met chief executives of supermarkets, they were intransigent. At that time, they were saying, “We’re already doing a great deal. Don’t bother trying to kick up a fuss over this issue, because we’re not going to do anything about it.” That was their attitude. I was particularly disappointed with some of the comments from Asda at the time.

I therefore decided to set up the all-party parliamentary group on dairy farmers, because as we all know in the House, numbers speak and it is important for Members of Parliament from all political parties to co-operate to show the extent of feeling. It is a tribute to the extent of feeling on this issue that so many MPs are here today to take part in the debate. I introduced a debate the other week on Anglo-Russian relations and I was the only Member present.

And the Minister.

Indeed. Obviously, the dairy sector is far more important than Anglo-Russian relations.

I should like to inform the Minister that more than 170 MPs have joined the all-party dairy farmers group, which makes us one of the largest all-party groups in the House of Commons. We have a very large number of Labour MPs, Conservatives and Liberal Democrats, as well as Welsh nationalists of course and Members from Northern Ireland. The group has been very active: we have published a report, which has been widely circulated. I, together with my hon. Friend the Member for Preseli Pembrokeshire (Mr. Crabb), took it to the Secretary of State for Environment, Food and Rural Affairs, and we hope that he will consider some of the recommendations that we put together in the report. However, the Secretary of State left me with the impression that the view is that it is not the Government’s role to intervene with supermarkets and that the matter will have to be sorted out by the industry.

I very much regret that, because I feel passionately about the issue, even as a Conservative. We always think that we cannot buck the market and we have to let the market look after itself, but as a Conservative I can say that I feel passionately that, for certain industries, there has to be some form of intervention and regulation. The industry that we are discussing is of such fundamental importance to our country that it deserves to have a spotlight shone on it by the Government. The Government should at least be scrutinising far more effectively what the supermarkets and processors are doing.

For the report, the all-party group interviewed many people over the past 12 months, including the Office of Fair Trading, chief executives of various supermarkets, the NFU and many other outside bodies. I pay tribute to the RABDF, which has acted as an excellent secretariat for the group and has been a tremendous help to me in sorting out a great number of interviews and other exercises.

A delegation even went to Brussels recently. I see the hon. Member for Brecon and Radnorshire (Mr. Williams) and my hon. Friend the Member for Preseli Pembrokeshire here. The three of us, with other MPs, went to Brussels to lobby the Agriculture Commissioner, Mrs. Fischer Boel. For an arch-Eurosceptic such as myself, it was quite a difficult experience to go to Brussels to interact with commissioners. Nevertheless, I had to do it, because I feel that the Government of my own country are not doing enough on the matter. I had to go to Brussels to lobby the Agriculture Commissioner to intervene in our country. It hurts me to say this, but I had to ask her to intervene in our country.

Mrs. Fischer Boel was extremely encouraging. I hope that my colleagues will concur with that. She said that she would look at the situation of the dairy sector in Britain and would have negotiations with our Secretary of State for Environment, Food and Rural Affairs to see what could be done. She also said that, in her native Denmark, Arla has 80 per cent. of the processing capacity. That was one of the most interesting things that I took away from that meeting. We are in a common market, and Denmark allows a processor to have an 80 per cent. market share, so why cannot we do something similar in the United Kingdom?

My hon. Friend makes an extremely important point. Does he agree that one potential solution to the problem in the dairy industry is to have large farmer-owned co-operatives that are vertically integrated, similar to Fonterra from New Zealand and Arla in Denmark, emerge in this country? That will restore some of the balance in the supply relationship between farmers and the larger retailers. Does my hon. Friend also agree that there are significant concerns in the farming community about the attitude of the Office of Fair Trading to such a development? We need some of those co-operatives to become much bigger and stronger.

I totally concur with that. It goes back to the point that there is a role for the Government to examine the success of processors in countries such as Denmark and to see whether they can negotiate or make it easier for some form of rationalisation to take place.

I totally agree with the hon. Gentleman. The problem is that we had such a body—it was called the milk marketing board—but successive Governments and successive farmer organisations did their best to undermine it. Perhaps with the benefit of history, he can go back and rewrite it.

I do not know how to reply to that. I certainly stick by my comments that there should be some rationalisation of processors.

(Bishop Auckland) (Lab): What the hon. Gentleman says is absolutely right. The point about the message that he has been given by DEFRA—that it wants the market to operate—and the point that he is making is that in the market that we are discussing, the power structure is totally unequal. That is the problem. The farmers do not have the same power that either the processors or the supermarkets have. If the Office of Fair Trading, in its inquiry, does not pay attention to the unequal power and does not look to the long term as well as to the short term, we will not end up with a satisfactory and sustainable dairy industry.

Absolutely correct. I am grateful to the hon. Lady for that intervention.

The hon. Member for Ceredigion referred to the help that we have received from the WI. I pay tribute to its campaign. It has been instrumental in the great milk debate, in which I recently participated, and it is much better than us politicians in getting publicity. I remember that a lovely lady, who I believe was from Gloucestershire, came here on a cold January morning in a bikini and had milk poured all over her in the garden next to the Palace of Westminster to highlight the plight of dairy farmers. I applaud her for doing that on such a cold January morning.

As I said, I participated in the great milk debate in my constituency, at the West Midland showground in Shrewsbury. More than 400 farmers and constituents attended that event, which was one of the most popular events that certainly I have played a part in over the past few years.

The campaign is starting to pay off. I am extremely encouraged by Tesco’s action. I appreciate the point made by the hon. Member for St. Ives (Andrew George) that it is only a very small, initial, tentative step. However, the investment by Tesco adds up to approximately £25 million and will affect 850 farmers, who will potentially receive a price of 22p a litre. I am even more encouraged by the initiative whereby it will employ 150 local farmers to produce local milk.

The hon. Member for Ceredigion told us that Tesco does not yet want to sell Ceredigion milk, and I have to tell him that I have been banging on Tesco’s door, asking it to sell Shropshire milk in its Shropshire stores. I encourage every hon. Member to interact with Tesco and to continue trying to get it to sell local milk in their constituencies. I know that it is going to have a Dorset milk, so my question is, “Why can’t you have a Shropshire milk?” We in Shropshire are also major milk producers. Such proposals are an important first step, and I want other major supermarkets to follow suit. I have had numerous meetings with Mr. Justin King, the chief executive of Sainsbury, and I expect him and Sainsbury to follow Tesco’s action. Mr. King will be coming to the all-party group’s next meeting in the House of Commons, and I hope that hon. Members will attend and quiz Mr. King about his actions.

When I met Mr. King, I showed him a full-page advert in The Daily Telegraph, which clearly highlighted Sainsbury’s policies on bananas, describing how the supermarket would pay banana growers in Belize, other central American countries and the Caribbean a fair price. I said, “You show such enthusiasm and passion for telling your customers that you want to pay Belizean and Caribbean banana growers a fair price. Why can’t you show just a molecule of the same interest and passion for our British dairy farmers?” Part of the reason is that there has been a great Fairtrade debate, and constituents up and down the country have very effectively shown the supermarkets how many people care about farmers in the third world being paid a fair price for their products. Together with the WI and other bodies, we in England and Wales must show supermarkets the same determination and interest so that they will follow suit on this issue.

Let me add a couple of extra points. The all-party group’s report does not call for a regulator for the supermarkets. Having studied the issue, I desperately wanted a regulator, but, regrettably, I could not persuade the other MPs to agree. The only party that is prepared to contemplate a regulator is the Liberal Democrats—

And Plaid.

And Plaid. However, I hope that the Conservative party and the Labour party will look closely at introducing some form of watchdog, even if they are not prepared to have a regulator.

I welcome the hon. Gentleman’s endorsement of the concept of a regulator. What the sector requires is a food or grocery trade inspector at the Office of Fair Trading, rather than a new body. However, does the hon. Gentleman not agree that the code of practice has clearly not worked? Producers are not prepared to complain because they fear the consequences for their contracts. On that basis, we need someone to investigate proactively, rather than simply waiting for complaints that will never appear.

Yes, I totally concur. Indeed, that point was raised at the all-party group’s annual general meeting yesterday. We must come up with a solution under which our group or some other body encourages farmers to collate and present complaints to the Competition Commission.

I found that the OFT was prepared to take complaints from my constituency that I had anonymised for it, but that it would not take anonymous complaints directly from farmers.

Yes, that is very much the case. However, the point remains that many farmers are fearful, and the commission needs to hear their views. I have put on record that if any farmer wishes to write to the all-party group, we will collate their views, anonymise them and pass them on to the commission. We can act as a conduit between farmers and the commission.

I am conscious that others want to speak, so let me raise just a couple of extra issues. The hon. Member for Ceredigion mentioned bovine TB. A few months ago, the Minister kindly met me and a delegation of farmers from my area to discuss the soaring rates of bovine TB in my constituency. He replied to me in writing to confirm that it had gone up significantly—by more than 20 per cent.—in the past year in my constituency and kindly agreed to meet a delegation of local farmers to discuss the issue. I hope that he will be able to give us an update on what the Government will do about bovine TB. I know that the issue is controversial, but I would be grateful for an update.

I would also like to raise the case of a constituent, Mr. Chris Balmer from Snailbeach, who has been in the dairy industry for a lifetime, as were his father and grandfather before him. I feel passionately about the case of this one man in the very south of my constituency. He is a small farmer, he lives by himself and he had a terrible case of bovine TB on his farm, but despite my repeated interventions, he has still not had his full Rural Payments Agency payment for last year. In most cases, when the MP intervenes with the RPA’s chief executive in writing or over the telephone—I have telephoned personally and written on many occasions—the issue is usually settled. Indeed, I have intervened in 45, 50 or 60 cases in recent months, and they have been resolved. However, I want to put on record for the Minister that my constituent, Mr. Chris Balmer of Snailbeach, who has had terrible problems with bovine TB, has still not had his full RPA payment for last year. He is an honourable and decent gentleman and he came to me in sheer desperation and frustration—tears were almost coming down his cheeks—because he was at his wits’ end, and I take this opportunity publicly to ask the Minister to intervene on his behalf.

The Competition Commission has been mentioned, and I feel a certain frustration and regret at the fact that its report was not published last year. I very much await the publication of its report, which has been delayed on more than one occasion. It is now the commission’s responsibility to come up with a strong critique of what is going on and with serious recommendations to the Government. I look forward to it grasping the nettle, being controversial, putting its head above the parapet and coming up with some constructive, long-term solutions for the Government to implement.

I congratulate the hon. Member for Ceredigion (Mark Williams) on securing the debate. This is an extremely important subject, and it is gratifying to see Members from Wales here. Indeed, until a moment ago, when the hon. Member for Preseli Pembrokeshire (Mr. Crabb) left, we had what one might term a rainbow coalition on this side of the Chamber.

This is an important matter because, as has been said so many times, the family farm is of huge significance in Wales. That significance goes beyond the short-term bottom line, because individual businesses are not just businesses—they are the backbone of the rural community and the way to keep young people in our rural areas.

In a sense, the hon. Gentleman is right that there is a rainbow coalition on this issue. Does he agree that we are united by our shared concern about the seeming injustice that has been meted out to dairy farmers, with the treatment of bovine TB and the economic arrangements that the Government have imposed on the trade, which have done a great deal to force it into virtual bankruptcy?

The hon. Gentleman is quite right. Indeed, we in Wales are concerned not only about aspects of farming, which are important in sustaining rural communities, as they are in England, but about the further point that the agricultural community is the mainstay of Welsh language and culture.

I hardly need to say that there has been a huge and accelerating change in the dairy business over many years, with the size of herds increasing to a perhaps unfeasible level, along with the capital costs that are difficult to sustain. I occasionally talk to a constituent who is a good friend of mine, named Iestyn Hughes, of Mynachdy Bach. He is now retired but is fond of telling me that he brought up a family, farming a herd of 25 to 30 cows. It was very hard work, but he would not be able to do that now. There is innovation, and there are efficiency gains in the industry.

Another of my constituents has adopted the New Zealand method. He now has 800 cows out in the fields all year round and does not bring them in at all. It is a huge operation, with economies of scale, and, I hope, very good profits, but that sort of option is not open to the vast majority of farmers in my constituency.

I represent the area Hufenfa De Arfon, where the South Caernarfonshire Creamery is based. The creamery is a farmers’ co-operative set up in the 1930s. It has the vertical integration that is seen as so important and produces not only liquid milk but cheese, butter, yoghurt, buttermilk and, I am sure, other things as well. It is a hugely efficient and successful operation. It has always been in the highest 10 per cent. for paying its members; its products are of superb quality and it adds value. It handles organic milk for other retailers and it exports cheese. It produces a cheese called Monterey Jack, which is an American recipe, and exports it—to America. Its premium vintage cheese is called Hen Sir, or Old Shire—and an excellent cheese it is. However, even that co-operative cannot buck the market in which retailers get such a big share and producers get essentially what they are given.

I think that the situation is verging on market failure. It is almost as though the market does not sustain a viable industry, at least as far as farmers are concerned. I shall not go into the subject of retailers.

Will the hon. Gentleman reflect on the fact that, although dairy farmers in the United Kingdom are certainly among the most efficient, and we have arguably the best climate for dairy farming—certainly among the best grazing land in Europe—giving us the best conditions for the best dairy industry, our dairy farmers are closer to being on their knees economically than any dairy sector in Europe? That shows the extent of market failure in the UK.

The hon. Gentleman makes an excellent point. When dairying in this country—particularly in my part of the world, with its high rainfall and very good grassland—is compared with dairying in the southern parts of Europe, we have ideal conditions; so why does not it work? Clearly, there is something happening beyond the efforts of individual farmers, or even farmers working as a co-op, as they do in Hufenfa De Arfon.

Liquid milk is bought and sold as a commodity and is subject to short-term variations, while small farmers are trying to run long-term businesses. Cows cannot be turned off as though they were machines, and investments cannot be planned if farm incomes are so unpredictable. I am glad that the supermarkets have begun to recognise their responsibility and are paying a premium in a few cases, but those higher prices are for a minority of producers. Perhaps I am a sceptic, or even a cynic, but I must ask whether that is more than a gesture. We shall see, but I should like those favourable arrangements to be extended to more and more farmers.

I want to end with a point about the Competition Commission. I have meetings with farmers and recently met some from the Farmers Union of Wales, and members of the South Caernarfonshire Co-op at their building in Y Ffôr. We discussed the possibility of submitting evidence to the commission, and there was an element of real fear: people thought that, if they put their heads above the parapet, they would pay in the longer term. We discussed the possibility of anonymising evidence, and that should certainly be pursued. There is still an opportunity to provide evidence. Lastly, to reinforce the intervention on the hon. Member for Shrewsbury and Atcham (Daniel Kawczynski) that I made from a sedentary position, Plaid Cymru has pressed for a milk ombudsman for a long time, and I would commend that idea to the House.

It is a pleasure, Mr. Chope, to serve under your guidance twice in the same morning and to congratulate my hon. Friend the Member for Ceredigion (Mark Williams) on securing a debate that is crucial not just with respect to dairy farming, but, from my observations of the debate so far, for the fact that it brings out some good old-fashioned politics. We can talk about the role of the market, where we stand and what we understand by the term “the free market”.

To get to the point, the issue is simply one of market failure. Five years ago, the retailers’ margin throughout the country was in the region of 11 per cent. It is now 30 per cent. There is no market justification for that. In Germany the margin is still 11 per cent. Supermarkets have increased their margins for no appreciable reason, apart from the fact that they just can. Farmers have often been challenged with the claim that their calls for fairness will lead to higher milk prices in the supermarket and on shop shelves. Far from it, the figures show that supermarkets could keep prices on the shelves as they are, ensure that farmers get a fair deal and still have a mark up twice what it was in 2002. Why do not they do that? It can only be that the supermarkets, apparently entirely legally, are abusing their market power.

It is not good enough for the Government to shrug and say that it is all down to the market; that it is a sad fact of modern life. It is market failure. Adam Smith, the author of “The Wealth of Nations” and many other works, was in many ways a great man and a decent human being, but he was fundamentally wrong in my view in his assessment of how markets operate. There is no invisible hand making sure that everything reaches a nice satisfactory equilibrium. The only natural force that I can see in the marketplace is something akin to gravity, by which those who already have plenty of wealth and power accrue a lot more of it to themselves. It is therefore important—and it is something that I request of the Government, as I expect many hon. Members of all parties who are present for the debate would do—that the Government use their visible hand to ensure that regulation takes place. Perhaps I may offer some counselling to the hon. Member for Shrewsbury and Atcham (Daniel Kawczynski), who is clearly bruised by his trip to Brussels: if we are to tackle the problems of the abuse of market power by multinational companies, we shall need multinational solutions to face down such companies.

Does the hon. Gentleman believe that everything from Europe that affects the dairy industry is positive? Does he not agree that the nitrate vulnerable zone regulations are likely to cause huge and wholly disproportionate costs to small dairy farmers, about which they are justifiably in a state of extreme trepidation?

I do not believe that everything that comes from the European Union is positive. One of our problems is our tendency to gold-plate regulations in this country, whereas others are a little more flexible in their interpretation.

It is important to note the welcome changes to the price that supermarkets—notably Tesco—pay farmers. There is not a single Tesco in Westmorland and Lonsdale, and I am not about to start a campaign to get one, but although the supermarkets that we do have, Asda and Morrisons, would do well to follow that example, we should not put too much emphasis on the Tesco move, because many of the 1,000 British dairy farmers whose milk is sold via Tesco will not benefit from the system. I asked a very well-connected dairy farmer who lives down the road from me—he will know that I am referring to him when he reads Hansard—and he had heard of barely anyone who counted among Tesco’s chosen few. The answer is not voluntary action by one or two supermarkets, motivated, no doubt—perhaps I am cynical—by a desire to avoid bad publicity. The answer must be careful intervention.

On the subject of public relations, supermarkets are happy, as has already been mentioned, to display fair trade produce on their shelves, and there is a very welcome recognition, among consumers and retailers alike, that fair trade and free trade are not the same thing. Is it not ironic, however, that shoppers will go down one aisle in the supermarket, purchasing the fair trade coffee and tea products, and getting a warm ethical glow as they do so, and then turn their trolley down the next aisle to buy milk that has been produced by ruthlessly exploited British farmers? The fair trade movement is very important in helping to tackle international poverty and exploitation, and I hope that the fair trade brand will be extended or replicated to give consumers ethical choices about home-grown produce.

Dairy farmers in south Cumbria have expressed deep concerns about Ministers’ exhortations for them to be more efficient. They are committed to achieving greater efficiency, but they suspect that the Government have missed the point. Dairy farmers say that the abysmal price that they receive for their produce—up to 4p a litre less than it costs them to produce—makes it almost impossible to reinvest in their businesses and to work on improving efficiency. If the Minister wants dairy farmers to be efficient, he must ensure that the market is corrected, so that they can reinvest in achieving greater efficiency.

The lakes and dales of Cumbria have a jaw-dropping beauty, but that landscape does not occur naturally. It is the result of centuries of careful management. At the heart of that management is the maintenance of grazing livestock. Our tourism product is paid for largely by farmers, so taking a laissez-faire approach to the crisis in the dairy farming industry is likely to have far-reaching effects. It will significantly damage tourism and will deprive environmental bodies, such as Natural England, of the partners that they need to deliver important environmental programmes. If the Government were bold enough to intervene to give our dairy farmers a fair deal, it would be a far-sighted investment of the highest order.

I congratulate the hon. Member for Ceredigion (Mark Williams) on securing this important debate. Only 10 days ago, I visited a successful dairy farmer in my constituency, Mr. Kirkup, who has a herd of 400 cows. I was concerned to hear about the income levels of farms in my constituency. Despite making significant investments, dairy farmers in County Durham earn about £15,000 a year. Given the hours that they work, some of those farmers would be earning below the minimum wage if it were applied to the industry.

We need to consider the balance of power between the supermarkets and farmers. The essential problem relates to the time scale. Supermarkets work in a short-term time frame, and although the time frame in which farmers work does not quite span generations, the decisions that they take cannot have a significant impact in less than five years. That point is not well understood.

One practice that supermarkets and processors engage in, which some of my constituents have discussed with me, is the backdating of price cuts. That is absolutely intolerable because farmers cannot get out of it. Why are such contracts legal? I have raised this issue with the Office of Fair Trading, but I have not received a satisfactory answer.

I echo the remarks of the hon. Member for Westmorland and Lonsdale (Tim Farron) about the environmental benefits of dairy farming and how the shape of our countryside depends on it. We cannot ignore that, just as we do not ignore it when considering the financial regime for hill farming.

Another issue that has been raised is the burden of regulation on farmers. About 18 months ago, the Select Committee on Public Accounts took evidence from Department for Environment, Food and Rural Affairs officials. I pushed them on that issue, but their answers were most unsatisfactory. Surely, there is a lack of logic in imposing high levels of regulation on UK farmers, thus raising their costs, given that the dairy market is international and that we import milk from countries with lower regulatory standards. The market is not a fair one in any of the classical senses of what constitutes a fair and efficient market. We must look into this issue. However, Opposition Members have not made their case on bovine TB. Although I agree with their general analysis of dairy farming, I shall not go with them all the way on that point.

We must make the economics more sustainable. I am not sure whether we should aim to squeeze the supermarkets’ margins, or to have consumers pay more. The industry’s figures show that that would be unlikely to cost the average UK household more than 10p a week. That is a price well worth paying for a sustainable dairy industry.

It is a great pleasure to see you in the Chair, Mr. Chope. I pay tribute to my hon. Friend the Member for Ceredigion (Mark Williams) for obtaining this debate; he has been persistent, even relentless, in his work on the dairy industry. Dairy farming is an important facet of his local economy; indeed, it is the cornerstone of British agriculture in both Wales and the UK.

While there has been a limited increase in UK farmers’ incomes, it has not been on the back of improved returns for the dairy industry. The increased profitability in UK farming has come from the arable sector, where the competition for crops for food and for energy purposes has led to some movement. Dairy farms used to be a step on the ladder for young farmers entering the industry. As the hon. Member for Caernarfon (Hywel Williams) said, they could take on a small farm that did not have a huge number of cows, farm it intensively, put a lot of work in, make a living and bring up a family. However, those days are far gone.

Efficiency and effectiveness have increased enormously through improved nutrition, grazing techniques and breeding. Consequently, there have been increases in output per cow, per acre and per person working in the industry. However, the huge pressure on prices has put more and more dairy farmers out of business; now, there is barely half the number that there used to be. That did not result in a fall in milk production until quite recently because fewer farmers were producing the same amount, but such has been the pressure on price recently that milk production has fallen from 14 billion litres a year to 13.5 billion.

The fall in milk production has focused the minds of supermarkets a little. They know that they cannot import liquid milk into the UK in any real quantities, and that they will really feel the pressure if there is a shortage of British milk. They are also considering the Competition Commission’s inquiry. So there are two pressures on supermarkets: whether there will be sufficient British milk for them to stock their shelves, and the question of the outcome of the commission’s inquiry. That is why they have made certain moves recently. Those moves have given some people confidence, while others think them cynical. I pay tribute to my hon. Friend the Member for St. Ives (Andrew George) for his work in developing our party’s policy of having a fair trade inspector.

One of the real problems in the dairy industry is that although about 7 billion litres of the milk produced is sold as liquid milk and 3 billion litres goes into high-value differentiated products, about 4 billion litres still goes into producing a standard quality product—a basic cheddar. British-made cheddar cheese is of a high standard, but it must compete on a world market and it is not differentiated. Because such a large quantity of our milk goes into that market, there is a downward effect on milk prices. The task ahead is to work out how we can change more of our standard—very high quality—cheddar into a much higher-priced, differentiated product. We have some wonderful products, such as the organic yoghurt and other products produced by Rachel’s dairy in the constituency of my hon. Friend the Member for Ceredigion.

I would also like to pay tribute to the hon. Member for Shrewsbury and Atcham (Daniel Kawczynski), who has done sterling work as chair of the all party-group on dairy farmers. I accompanied him to Brussels, where we met the Agriculture Commissioner. She gave an indication of work that could be done in future, and encouraged us to refer to her anything that we felt was undue pressure on the part of the Competition Commission against the interests of the industry.

I should tell the Minister that a number of farmers’ organisations have been threatened with Competition Commission inquiries when contemplating amalgamation and working with other organisations to build up their market share. The mere threat of an investigation is often enough to put people off taking a step that would strengthen their place in the market, make them efficient and lower their costs. I know that the Minister will tell me that the Competition Commission acts at arm’s length from him, but he must have some influence on how it does its work, and on the levels and particular points at which it intervenes.

I believe that the hon. Member for Stroud (Mr. Drew), who is not in his place, told us that we had an efficient and effective system for marketing milk: the milk marketing boards. We saw their demise and the break-up of their successors.

Was the hon. Gentleman present when the all-party group held an interesting session with senior representatives of the Office of Fair Trading? They gave evidence saying that until about 15 or 20 years ago, competition legislation in this country enabled the Secretary of State to take into account the national interest in the survival of a crucial industry but that, as a result of competition legislation coming from Europe, we were obliged to amend our legislation so as to be compatible with that legislation. Does he think that there is room to lobby in Europe for the restoration of a provision that would allow the Secretary of State to have some influence over these crucial national interests?

Unfortunately, I was not present when those comments were made. I believe that there is room to make such representations to Europe. The market for food is different from the one for manufactured products. For instance, it would be immoral to keep the market short in order to drive up prices, because people need to have enough food to live. It is the purpose of agriculture to provide sufficient food both in the UK and globally for the world’s population. Keeping the market short to drive up food prices is intolerable, so for that reason and for those given by my hon. Friend the Member for Westmorland and Lonsdale (Tim Farron), it is proper to have a regulator within the food market. A number of arguments can be made in that regard.

On international competition, I have never argued that supermarket executives are products of the loins of the devil; indeed, does my hon. Friend agree that their behaviour is entirely rational? Swallowing up their competition and squeezing their suppliers is something that they rationally do, but the question is whether they acceptably use or unacceptably abuse their power. By abusing their power, they are creating a dysfunctional market that is incapable of competing internationally, which is where the UK dairy industry should be competing. We need to get our market right first to give us the strength then to compete internationally. That is what we are trying to achieve.

My hon. Friend makes a good point; indeed, he has been at the fore in putting those views forward. Most of the Members present come from the western part of Britain. Its higher rainfall and ability to grow grass means that it could compete internationally as well as any nation.

Mention has been made of the fair trade movement, which has been spectacularly successful in addressing poverty in third-world countries. I draw Members’ attention to the fair trade for British farmers campaign, which has been launched by Country Living magazine, Waitrose and Farmers Guardian. Members can still sign up to it on the website—they could even sign my early-day motion on the matter. On Friday, I am debating the issue at the Hay-on-Wye festival of literature with representatives of the fair trade movement. Please come to Hay-on-Wye to support the tourism industry and the wonderful food that is produced in my constituency.

The case has been made that supermarkets are abusing their power and position of strength in this marketplace and in the food industry in general. The Minister has a role to play, in the sense that where abuse is identified, we need to have systems in place to ensure that proper competition exists. In a perfect market there should be many sellers and many buyers, and everybody should know how much product is being produced and what it is being sold for. We are reaching the stage where we have the knowledge, but abuse remains very much present in the system, and the Government have a role to play in addressing that.

I, too, congratulate the hon. Member for Ceredigion (Mark Williams) on securing this debate, which, as he rightly said, is long overdue. It is great pity that we do not have regular debates on agricultural issues in the main Chamber any more—we always used to have them. We seem to have all sorts of Adjournment debates on weird subjects—

It is your choice.

The hon. Lady says that it is the Opposition’s choice, but if she were to look at some Order Papers, she would see how many Adjournment debates are chosen by the Government—on some pretty weird and wonderful subjects.

As has been said, the industry is in a parlous state, and I do not intend to rehearse all the points that have been made. As the hon. Member for Brecon and Radnorshire (Mr. Williams) said, the reduction in the number of farmers was initially compensated for by increased production by others, but overall production is now falling. Some people argue that that in itself will solve the problem, but I do not take that view. I do not believe that this is simply an issue of the oversupply of the marketplace.

I want to concentrate on three specific issues in the hope that the Minister will respond to them, but before I do so, I want strongly to endorse the point made about the advertising of cheese. A ludicrous decision was made, and it does so much to damage the image of cheese as a wholesome food.

There has been a lot of debate about the issue of regulation and intervention. The hon. Member for Westmorland and Lonsdale (Tim Farron) suggested that Adam Smith was wrong, but if he were to study Adam Smith, he would find that Adam Smith was right, because he said that a proper market operates only when there is a large number of both buyers and suppliers. That is what we do not have, so Adam Smith was right, but we do not have a proper market.

We can all spend a lot of time looking back into history, but this Government’s decision, early in their days, to break up Milk Marque when it had only 37 or 38 per cent. of the market was absurd, particularly when one compares that with the share of the market held by a number of the retailers. There are now a number of major farmer-owned groups or co-operatives, call them what you will, which is good, but they are very small in comparison with the major retailers and particularly with the major processors, such as Arla and Dairy Crest.

I share the concern about the Office of Fair Trading’s attitude. My proposition is that the dairy industry should be a European market. There has been a lot of comment about Europe, but the OFT judges competition in the domestic market, so whenever a milk group wants to acquire another cheese plant and so on, it is threatened with reference to the OFT, because it will have too big a market share. The OFT should understand that the dairy sector, particularly the processing sector, is a European-wide market, and it should look at market share throughout Europe. Reference has been made to Arla’s share of the Danish milk industry and to Frontera in New Zealand. Europe is supposed to be a single market, and competition rules should be based on that.

My second point is the milk price. Making co-operatives more sustainable, and allowing them to integrate more and merge if necessary would go some way towards redressing the balance in the marketplace. Obviously, I welcome the Competition Commission’s investigation, and I strongly welcome its interim findings, which were published in January. It is a pity that its final report will be delayed, but I hope that it will be as robust as those findings.

Supermarkets have clearly been making excessive margins, but I urge a word of caution to hon. Friends and colleagues who think that the solution is intervention and some sort of regulator. I am less enthused by that because we may end up with a belief that supermarkets make too much profit, so consumers should pay less, which would not help the dairy producer. Simply looking at the share of the retail price that the supermarkets take works both ways. It does not necessarily guarantee that it is passed on to the producer. It is more important to ensure that the market is working properly. As several hon. Members have said, fresh milk comprises only 50 per cent. of the market; the rest is made up of processed products, the major part of which is imported. That is where we should seek to make a real difference.

The latest figures show that, in 2006, we imported 352,000 tonnes of cheese, 154,000 tonnes of yoghurt, and so on. Those are huge amounts, and are partly an inheritance from the Milk Marketing Board which, for all the good points that some people claim for it, prevented innovation and investment in processing during the years of its existence, when the big co-operatives in Europe were so investing. That is why they now have the volume of scale and have penetrated our domestic retail market with processed products, yoghurts, ice creams and so on, yet they are paying their milk producers the same, if not more, for their raw milk as our milk producers receive.

If the supermarkets really care, as they profess to, about the future of our dairy industry and the need to retain a British dairy industry, they should work with the major processors to develop our own domestic lines of processed products—the high-value desserts, yoghurts, ice creams and cheeses that we import instead of, as the hon. Member for Brecon and Radnorshire said, the low-value, mild, bog-standard Cheddar.

The final issue that I want to raise will not be a surprise to the Minister. We have been trying for some time to have a debate in this Chamber on tuberculosis, but to no avail. He knows that I and other hon. Members have a real complaint about the Government’s lack of concerted effort. If he is honest, I suspect that he would accept in private that the issue is serious and that more can be done. Over the past 10 years, we have seen a piecemeal approach to dealing with TB. Recently, there has been a small but welcome increase in the use of gamma interferon and the introduction of pre-movement testing at considerable cost to the farming industry, but without the commensurate actions that the industry believed were part of the deal in accepting pre-movement testing. We have had the Krebs report and the triplets trials, and we are now awaiting Professor Bourne’s final conclusions.

We need a comprehensive, all-enveloping strategy, and to roll out the gamma interferon test across the board to ensure that the skin test, which is pretty crude, is as accurate as possible. We must increase the frequency of testing, particularly in the frontier areas where the disease is spreading. I am sorry that the hon. Member for Bishop Auckland (Helen Goodman) has left. It is all very well for her to say that, from Durham’s perspective, we are all wrong about TB, but she has no significant problem with it in the Durham area.

We must, of course, continue with research into badger and cattle vaccines, and I hope that the Minister will tell us where we are with that. We are told that they are getting closer. I also think we need much more research into mineral deficiencies as a precursor to TB infection. It has been argued that selenium deficiency in particular makes cattle more prone to TB.

Biosecurity is obviously important, and the Minister will not be surprised to hear me say that we must do a lot more on the polymerase chain reaction test. I am concerned that the Government are not addressing the matter as urgently as they should. I know that they have commenced a three-year study programme with Warwick university, which has done much of the work, but last year DEFRA was presented with a proposal, which included the central veterinary laboratory, the Veterinary Laboratories Agency, University college London and a private company, to develop a specific real-time PCR test for the detection and quantification of mycobacterium bovis in the environment—that is exactly what the Opposition have been calling for—to detect whether badgers and badger families in their sets are carrying the infection.

I do not believe that culling badgers is a silver bullet to solving the problems of TB, and I reject the argument that that is the sole solution, but as Professor Bourne has told me publicly, unless we get rid of the reservoir in wildlife, we will never get rid of bovine TB. It is part, but only part, of the overall package of necessary measures. It is more than a year since the Government’s consultation closed, and we need a decision. Even a negative decision would be of some reassurance that the Government were addressing the issue rather than, as it seems, trying to keep it in the long grass.

Those are three specific areas in which the Government could take a leading role to address what all hon. Members who have spoken agree is a very serious crisis in the industry.

I start by apologising for the absence of my hon. Friend the Under-Secretary of State for Environment, Food and Rural Affairs, who is engaged on duties connected with his biodiversity responsibilities. He usually speaks on these matters in the House.

I congratulate the hon. Member for Ceredigion (Mark Williams) on securing this debate on an important topic. I agree with him that while it is important to accept that the industry faces serious challenges, it is also important not to talk the sector down. He acknowledged that many of the recent developments have been positive. We must encourage new blood into the industry, as well as innovation and ideas. I believe, as one or two hon. Members here have acknowledged, that our natural advantages in dairy production should mean that our dairy industry has a good future. I hope that we can all agree on that, although we may differ in our opinion of how to arrive at that good future.

I must say to the hon. Gentleman, however, that the pressure on farm gate prices will remain; it is simply a fact of life. Dairy production exists in a competitive market, and there will always be pressure on costs. However, the acknowledgement of the increased cost pressures borne by dairy farmers, and the resultant action by a number of retailers to increase prices paid for liquid milk, is welcome. It follows discussions that Lord Rooker and I have held regularly with the chief executives of the major retailing companies.

The Government believe that it is in the supermarkets’ long-term interest to ensure sustainable arrangements for dealing with their suppliers. Several Members have acknowledged that those retailers have recently put in place initiatives to encourage closer working relationships with identified suppliers, some of which attract a price premium. There have also been positive developments in the contractual arrangements between processors and producers, which should help to develop greater transparency and trust. They are to be encouraged.

It is also important to recognise that a considerable proportion of milk and milk products are sold through middle-ground retailers, catering establishments or as food ingredients. The four largest grocery retailers account for less than one quarter of volume sales of raw milk processed in the UK. I know, because I heard it from the farmers in my own region at the Devon show last week, that the south-west has a particular grievance. One of our main recipients of milk is the farmers’ own co-operative, Milk Link, which, according to the table that I was given before the debate, pays the lowest price of any taker of milk. It is important to put the debate about retailers in that context.

Will the Minister give way?

I shall give way, but I must warn Members that my policy is to be courteous to the hon. Member for Ceredigion, who secured the debate. I want to answer the points that he raised, so I shall limit the amount of times that I give way.

I totally appreciate that point, and I am grateful to the Minister. He quotes Milk Link’s price, so I just want to put on record that the co-operatives also plan to pay a dividend on top of the milk price. Milk Link has just paid a 7 per cent. dividend, which needs to be added to the price.

I join the hon. Gentleman in welcoming that situation.

It is also important that we politicians and the industry focus not only on price, but on profitability. Several Members have acknowledged that there remains a worrying disparity in the cost of production of the most and least efficient dairy farmers. In 2003, there was on average a 12p per litre differential between the most and least efficient dairy farmers. We encourage all producers to examine carefully their production costs and to seek ways in which to minimise them. The rest of the supply chain also has its part to play in cutting costs, maximising efficiency, innovating and adding value.

There has been considerable investment in processing capacity, and as a result, we have some of the world’s best processing plants. However, there are some less efficient plants, too, just as there are efficient and inefficient producers. That is why the Department has funded a study through the dairy supply chain forum to benchmark processor efficiency internationally. The Milk Development Council is also conducting a benchmarking study on producer efficiency. We have invested more than £1.3 million through the agricultural development scheme to help the dairy sector address efficiency issues.

Profit margins are a concern, however, in particular the apparent increasing margins on liquid milk sold through the retail sector. Although that is a Europe-wide phenomenon, the Competition Commission, in the emerging findings from its inquiry into the groceries market, has noted that supermarkets are retaining an increasing share of the retail price for milk. The commission will look further into that issue, both in the milk sector and in other primary produce sectors. The Government welcome that development, and we will of course respond to any recommendations.

Several Members cited the Irish and Danish models. Let me say something about the support given to the Irish cheese market. The advice that we have received is that there is not unanimous support for the model that has been adopted in Ireland. There is concern about the system propping up inefficiencies in the Irish dairy sector, which is fragmented. Its processing industry is not as efficient as it could be, and we believe that the future of the UK cheese sector is best served by adding value, creating branded products and innovating, something that I am pleased to say is happening. It is also pleasing to note that Britain produces more varieties of cheese than France does.

I share Members’ concerns about the advertising decision last year by Ofcom, which was made on the advice of the Food Standards Agency. It is important to acknowledge the reasons for the decision. Although I understand that only 20 per cent. of advertising for cheese products takes place during children’s programming, 90 per cent. of that advertising was for highly processed varieties such as Cheestrings and Dippers products.

I welcome the FSA’s commitment to look again at the nutritional profile model and to review it now that it has been in place for a year. I understand the dairy industry’s concerns and I agree that cheese is a valuable part of a nutritious and balanced diet.

My hon. Friend the Member for Bishop Auckland (Helen Goodman) raised concerns about regulation. I have been responsible for many regulations in statutory instrument debates, and we have a debate on cattle identification this afternoon on a measure that will reduce the number of regulations from five to one. The Animal Welfare Act 2006 reduced from 21 to one the number of regulations. When one tots up the number of new regulations, it is also important that one takes into account the number of regulations that the Government have got rid of.

A number of hon. Members, including the hon. Member for South-East Cambridgeshire (Mr. Paice), raised the issue of bovine TB. Aside from badger culling, he raised several issues, and I can assure him that the Government are doing everything in our power to further the vaccine test, and field trials are under way. I met the academics who are attempting to develop the polymerase chain reaction test and I shall write to him about the matter. The hon. Member for Leominster (Bill Wiggin) was at that meeting, but I shall happily send the hon. Member for South-East Cambridgeshire the details of it. My understanding is that while there is potential, the test is not yet at a stage at which our scientists will advise that it can be put into field trials.

It was interesting that the issue of badger culling was raised, but I am not sure what the Liberal Democrat policy on the matter is. I am also not sure what the Conservative policy is. As the hon. Gentleman acknowledged, we have only one more month—hopefully—to go before Professor John Bourne’s independent science group produces its final report on the badger culling trials.

It would be odd for the Government to make a major policy announcement in advance a report for which we have only three or four weeks to wait. I assure the hon. Gentleman that we intend to make a decision on the issue soon after the report is published. I say to him what I also said to the dairy farmers that I met at the Devon show last week: it is important that the industry intensively engages in some of the practical and organisational challenges that would result in any decision to include wildlife controls as part of our bovine TB policy.

A number of Members talked about regulation. I do not intend to repeat what the hon. Gentleman said—he gave a good riposte to those who argue for the introduction of regulation. The hon. and learned Member for Torridge and West Devon (Mr. Cox) recalled that the Conservative Government under Prime Minister Thatcher agreed to the single market, which she trumpeted as one of her greatest achievements. I do not know whether the hon. and learned Gentleman suggested that we should go back and undo it, but as the hon. Gentleman pointed out to him—perhaps privately—the single market is of huge benefit to our industry and even to our farmers.

The difficulty with the Danish model is that Denmark has land borders with Germany and easy border arrangements with Scandinavian countries, so it operates in a completely different market. We have a GB market for liquid milk—we are a net exporter of liquid milk. The competition authorities in this country take a different view from those in Denmark. Arla was set up before the current competition rules applied. The Government encourage and help farmers to set up co-operatives, but we cannot condone or encourage the setting up of cartels. I hope that all hon. Members will accept that no Government should do that.

We have had a good, positive debate. I am sorry if I have not responded to all Members’ concerns, but I shall write to them if that is the case.

I also wished to raise the nitrates problem. Tomorrow, as part of the energy White Paper, there will be a positive announcement on anaerobic digestion, for which Members may wish to prepare themselves. There is huge potential for a win-win situation for the environment and for renewable energy.

Order. We now move to the next debate. Will hon. Members who are leaving the Chamber please do so quietly?

Last Thursday, Gordon Brown accepted his nomination to become the leader of the Labour party and the next Prime Minister, saying:

“I will bring forward reform proposals to renew our constitution with the first draft constitutional reform bill later this year.”

He named “building trust in our democracy” as one of the five priorities that he will focus on as Prime Minister.

How will that draft constitutional reform Bill work, what will be in it and how will it be implemented? I do not expect a clear answer from the Minister today. Not only is he new to his brief—I congratulate him on a well-deserved change of responsibilities—but he will have to pick his words carefully until that changeover. However, given such an unequivocal commitment from the current Chancellor and future Prime Minister, the Minister and his officials should now be on the alert, thinking and drafting ahead of the day when a new Prime Minister, with such a clear commitment, takes over.

A new democratic settlement in the UK—moreover, one driven by someone who believes in it—is a certainty. Clarity of leadership and greater self-discipline among reformers is essential if serious progress is to be made in the face of the forces of conservatism and the status quo, which will be ranged against us. The lost landslides for change will not be repeated and things will be even harder than they could have been. However, we can now use our democratic imaginations once again. That means councillors who make their own policies and raise the income to implement them; MPs who genuinely hold the Government to account; Prime Ministers directly elected by the people; our health, police and other public services given meaningful democratic governance; and people at the top who not only preach “change or die” to others, but practise it themselves, changing their own outdated political institutions first.

Reform can mean a Britain whose democratic culture and heart is finally matched by an institutional framework that is also democratic, finally catching up with what is commonplace in virtually every other western democracy. Great prizes await us if we can seize this moment, freeing the talent of the nation and extending the right to govern beyond the incestuous confines of No. 10, the media and the bureaucrat. Change will mean enabling every parish, neighbourhood and community to run what is appropriately theirs, doing so because it is right for them, not because it ticks a target box to placate Whitehall. Change will also mean returning responsibility, so as to revive interest not merely in voting but in running our localities, our regions and our lives.

Of course details on the constitutional reform Bill must remain scarce, so let me sketch some possibilities. Perhaps we can be honest about our federal system in the UK, defining what the regions and the nations can do, and what central Government are entitled to do. Perhaps we will finally commit to a separation of powers—a legislative, a judiciary and an Executive, each with its own legitimacy. Perhaps we will list and legalise prerogative powers and for the first time give the prime ministership statutory legitimacy.

However, making any of those things happen and sustaining them will require a written constitution and entrenchment. Gordon Brown’s reference to a written constitution at the 2006 Labour party conference gave hope that, for the first time, the British political system would finally be created on an honest and understandable basis. That is the last unfinished business of British democracy—the British people prising the political rulebook from the closed grasp of the Executive.

Imagine the rules of our politics and government not being discovered by “judicial archaeology”, as John Smith used to describe it, but being in the pocket of every child at school and on every family’s kitchen table or bookshelf, understood and proudly owned by those whom it affects. If we already have a constitution, as some claim, what is wrong with writing it down, so that all those who are affected and governed by it can read it? The way we are governed should not be secretive, and made up as government goes along; it should literally be an open book for all.

A written constitution would also introduce a dynamic into British politics. Merely describing what currently exists would not be enough. No self-respecting founders would dare stop at a snapshot of our over-centralised system. Imagine enshrining as article 1, “The chief executive of our nation may not be elected by the people, nor even endorsed by a new Parliament, but shall be summoned by an unelected sovereign”. Imagine article 2, “Laws will be subject to veto and delay by an unelected second Chamber”, or article 3, “Local government will be the creature of statute, changeable on the whim of central Government”, let alone article 4, “The British people shall not be citizens with rights and responsibilities. They shall be subjects of an hereditary monarchy”. The simple effort of writing down an unwritten constitution must, after a brief period of disbelieving ridicule, invite analysis and generate a serious momentum for reform.

The very act of committing a constitution to paper would raise the question that lies behind all our key debates on UK democracy. Do we want to continue our centralised unitary system or evolve a pluralist democracy, with many equally legitimate institutions? The latter would inevitably precipitate the most radical package of democratic reform ever presented to the British people by a major political party. Moreover, putting our political settlement beyond easy repeal, in a written settlement, would change our political system for good and bring an end to short-term tinkering and tampering by the Executive. It would do for democracy what putting the Bank of England in charge of interest rates did for our economy and end winner-takes-all politics, replacing it with an acceptance that political action in future must be checked, negotiated and accountable, as it should be in a modern democracy.

Replacing our command politics with the synthesis of all our talents will not only facilitate better democracy; it will be a more effective way of governing ourselves in the modern world, freeing our economic potential and improving value for money. The 1980s proved that Executive power at its most extreme and unhindered has failed, even when led by its most obsessive and dynamic driver, Mrs. Thatcher. A written constitution is a different path, which is about using the abilities of all our institutions and people, at all levels and in all locations, not about deference, hierarchy and control from the centre. Although Labour will, I hope, be the midwife of pluralism, it will not be our sole property. Pluralism echoes the best traditions of liberalism and conservatism, and will liberate us all.

There will undoubtedly be a serious debate between the different institutions. A reformed House of Commons will of course discomfort the Executive. An elected second Chamber will want to spread its wings. Individuals using a British bill of rights will expose the Government to much greater accountability and influence the future development of the judiciary. European initiatives will have to be debated much earlier and in greater detail, while constitutionally independent local government will be assertive and rejuvenated and will—like all the new institutions to which I have referred—make mistakes. Above all, not only will individuals feel greater ownership of the political system and be more demanding of it; they will be less tolerant of abuse of power and better equipped to put it right, as we should be in a democracy.

Winning the general election to decide the national Government will always be vital. However, in a balanced pluralist democracy, with other equally legitimate institutions available through which political voices can be raised and progress realised, losing a general election will never again be the end of meaningful politics for four or five years. A written constitution would end the subcontracting, from a whole nation to a small elite in the Executive and around No. 10, of the political action that we should all enjoy.

How can we bring this about? The most obvious way would be to put the key ideas and reforms in a draft constitutional reform Bill. Parliament and people would then debate in the most extended pre-legislative consultation in our history, and the draft would define the powers of each political institution, the separation of powers between Executive and legislature and how a constitution would be approved and amended.

Meanwhile, the components of a new constitution could evolve. While the national debate proceeded, each separate reform, carefully formulated and consistent with the others, could be progressed by legislation. When the legislative programme necessary for the democratic agenda was completed, a written constitution extracting the fundamental principles, briefly and elegantly, could be simply crafted.

Unlike constitutions that have been the statements of political victors in history, fortifying their own power, ours in the UK will need to be part of a programme of democratic change. A draft Bill with full pre-legislative scrutiny involving the public—in person and online—would make the remaking of our constitution massively educational. A constitution could only be the product of a nationwide debate. That in itself would re-energise and revive politics in the UK. Unlike all previous constitutions, this one—in the age of television and the computer—could have a million founding fathers and founding mothers, rather than being the property of a handful of the great and the good.

The constitution would need to be accompanied by a serious burst of democratic activity. Imagine the political parties and the Electoral Commission acting with passion and exuberance, promoting education in democracy and citizenship at school and in the community, rebuilding the local political base by training and equipping the next generations of councillors and political activists, funding research, monitoring and advising on the mix of electoral processes, spreading best practice at home and abroad, shaking up the more fusty local electoral registration offices and promoting tax donations and other funding of political parties and linking their state aid to activity. We could be in serious danger of exciting people about our democracy.

A written settlement for our democracy will mean a different world for the media too. Initially, the clash and reconciliation of independent political institutions will doubtless be painted as splits and crises by those habituated to inhaling the line from No. 10. However, the media too, freed of the illegitimate burden of being the only institutional voice on a par with central Government, will grow to understand and revel in diversity and legitimate debate. Advocates of the new settlement must be clear that, of itself, pluralism does not provide answers, but creates an accessible, open set of democratic structures—the framework in which real policy battles and choices can be expressed and then reconciled.

The followership of today’s unitary system wants certainty, not democratic interaction. The written constitution is the boxing ring, not the political fight itself. It will be the guarantor of a fair contest, not the deliverer of a pre-determined result in which the Executive always seem to win. Pluralist democracy—with all its debate, conflict and compromises—will be represented by the centralists as a system out of control. Thankfully, power will indeed be out of their control; it will have passed into the hands of the many in British politics.

The obstacles are many, the most deadly being our own conservatism and timidity; even those with little or nothing to lose will fear change unless it is put forward confidently and coherently. Even in this legislature, daily abused by Government, there are still the self-deluded who cling to the mythology of parliamentary sovereignty, unable or unwilling to see that that was superseded long ago by governmental sovereignty.

As with any framework or rulebook, a written constitution will be fought over and interpreted—and rightly so. Usually, that interpretation will be made by the elected political institutions placed there for just that purpose. Of course there must be a backstop of judicial interpretation; there is now. However, it should not be based on unseen and unwritten rules and conventions, as it is now, but played out in public on a basis formulated and endorsed by the people. Such a responsibility will itself be a catalyst for a new role for the judiciary and the new supreme court that will start on the other side of Parliament square in 2009. The judiciary—properly and democratically ratified—will have to become a real partner under a genuine separation of powers and no longer mistake isolation and irrelevance for independence.

Let the draft constitutional reform Bill be published this year, as promised by the incoming Prime Minister. Let the debate begin, and let the natives of the last country in the empire finally be free to govern themselves.

Before I call the Minister, I should remind you, Mr. Allen, that the conventions and constitution of this House stipulate that we should identify Members not by name but by constituency. You referred to the Chancellor by name at least twice. I know that you are a stickler for having a constitution; let us hope that we can stick to the one we work to.

Thank you, Mr. Hancock. I congratulate my hon. Friend the Member for Nottingham, North (Mr. Allen) on securing this debate, which he knows is timely, given the contribution made by my right hon. Friend the Chancellor of the Exchequer.

My hon. Friend has a long history of challenging and trying to modernise the institutions of Parliament and Government. A regular review of the Order Paper reveals that he still appears in respect of a number of issues that are important to the parliamentary integrity of this House and another place.

Safeguarding and reforming the constitution has been one of the key aspects of the Labour Government’s intentions since our election in 1997. When my hon. Friend reflects on what has happened to date, he will recognise that considerable work has been done. I thank my hon. Friend for his congratulations on my taking up office, about nine days ago, as Minister in the brand new Ministry of Justice. One of the key, central and integral roles that the Ministry will play will be to examine constitutional affairs and the role of the constitution in our society at large.

I recognise the fact that my hon. Friend has become a Minister in the new Department. What gives me even greater pleasure is that not only is the Minister a personal friend, but I wrote the policy on creating a ministry of justice in 1992. Sometimes, good things are worth waiting for.

I am grateful for my hon. Friend’s foresight. It would have been nice to have had a little more foresight of my arrival at the Department. I appreciate my hon. Friend’s contribution to that debate.

I refer my hon. Friend to the document “Justice—a new approach”, published by the Ministry of Justice on 9 May, the day of its formation. On page 26, the document sets out the approach that the Government will take to constitutional affairs. That page is headlined, “We will safeguard and reform the constitution”. That will certainly involve examination of further reform of the House of Lords. It will also have other aspects: examination of the management of relations between the UK Government and the devolved Administrations; ensuring that the values of proper ministerial accountability and parliamentary sovereignty are upheld; playing an international role in developing coherent EU and international strategies; and the creation of the United Kingdom supreme court in 2009, as my hon. Friend has mentioned. That role and the one that we have taken to date in developing the constitutional agenda are important. I wanted to place those issues on the record.

The Minister of State, my right hon. and learned Friend the Member for Camberwell and Peckham (Ms Harman), will lead on those issues, reporting to my noble Friend the Lord Chancellor and Secretary of State. It is important that we recognise that the Government will wish to consider how we take these things forward in future. My hon. Friend has put his finger on it: Parliament will be central in helping to define that debate. Today’s debate is an important contribution towards that.

My hon. Friend will be aware that we have undertaken significant constitutional reform. I have been in this House for 15 years and I can recall a time when there was no devolution in Scotland or Wales, or indeed in Northern Ireland, as I know from my previous ministerial job; when there were hereditary peers in the House of Lords; when there was not a freedom of information Act; when there was no London government, and when there was no potential for votes, as my right hon. Friend the Chancellor has indicated there will be, on whether we deploy military forces in future. All those things have been introduced by this Government. The debate will continue after today and after my right hon. Friend the Chancellor of the Exchequer takes the office of Prime Minister in June.

Devolution has been a major constitutional change. We need to consider how it will be implemented in future. I recognise the need to consider the future and the constitutional arrangements between the devolved Administrations, between us and the other place, and between us and the wider government machinery. We need to examine how we will modernise those aspects, based on experiences of the extensive modernisation of the past 10 years. There is now a more clearly defined separation than ever before of powers between the Executive, the legislature and the judiciary. With the reform of the Lord Chancellor’s role, the independence of the judiciary, the establishment of an independent Appointments Commission, the removal of the Lord Chancellor’s powers to appoint judges and the establishment of the supreme court, we are in an exciting time for the development of the forward agenda.

As my hon. Friend said, my right hon. Friend the Chancellor of the Exchequer, who occupies the unconstitutional position of Prime Minister-elect and will assume the prime ministerial role on 27 June, has said in the process of securing the nominations of more than 313 Members of Parliament that he will consider constitutional reform. He has said that the draft Bill will be published later this year, because he wants to lead a different type of political engagement in society at large. He will bring forward proposals to renew our constitution for the simple purpose of building trust in our democracy, ensuring a more open form of dialogue between citizens and politicians, and finding a way to relate to the United Kingdom citizen. I am excited and interested by the suggestions made by my hon. Friend.

What type of forward planning do we need to undertake, and how do we put into practice the aspirations of both my hon. Friend and my right hon. Friend the Chancellor? The notion of a traditional written constitution can be seen in such diverse countries as the United States, South Africa and Australia. It would be a radical departure from our constitutional and historical arrangements. A carefully defined constitution, bound in a single document, would change the constitution and the way we operate in our day-to-day lives. My hon. Friend is quite clear that that is what he wants to happen. We need to examine the potentially wide-ranging implications, not only for the framework of our constitution, but for the institutions of state, the rule of law, the delivery of justice and the building blocks of democracy. The way in which we can marry the aspirations of my hon. Friend and those of my right hon. Friend the Chancellor is a key issue that will be debated in the weeks and months to come.

The implications of such radical change will be wide-ranging. We need to reconsider aspects of our constitution, to emphasise, explain and ascertain certain values in our constitution, and to consider measures to make the Executive more accountable. I look forward to that debate, in which I know my hon. Friend will engage constructively. We need to consider how we can document and express the core democratic values of the UK. If we have a draft Bill in due course and a more enforceable written constitution, that will be a significant undertaking. I am sure that you would agree, Mr. Hancock, that we would wish Parliament to be integral to the consideration of those matters.

Does the Minister agree that we also need to exercise some imagination? He rattled off a monumental list of achievements of the Labour Government in the past 10 years, which was an incredible list of progress. Last week, both the Labour and the Conservative parties agreed to consider the war-making powers of the House. When I first tabled that proposal in the remaining orders five years ago, it was regarded as outrageous and somehow off the radar, but now it is—sadly, from my point of view—mainstream thinking in both main parties. We should not be constrained. Many things that the Government have done in the past we now take for granted. Let us try to imagine that we are looking back in 10 years’ time, thinking about the great challenges that faced us. I suspect that a written constitution might well fall into that bracket.

I accept my hon. Friend’s foresight and vision on such matters. I often try to think about how they would be considered in years to come. I look forward to the day when my grandchildren—not yet born—will say to me, “Granddad, do you remember the time we learned about in school today, when people were in Parliament, not through election but through the nature of their birth, their parents and their grandparents?” I can say proudly that we have removed those hereditary peers, but it would have been the norm once upon a time. I hope that in the future, people will be incredulous that it happened.

Change happens slowly, with deliberation and consideration. My hon. Friend is aware that my right hon. Friend the Chancellor has indicated that we will consider these matters in detail. We will be drawn to a wider debate in this House and outside, I hope, for the reasons that my hon. Friend has mentioned—to electrify the public’s engagement with political life. I am sure that that will happen in the near future.

Parliamentary sovereignty is one of the foundation stones of our democracy, and so is the convention that no single Government can bind their successors. My right hon. Friend the Lord Chancellor made it clear in another place:

“I have no problem with our values being expressed in a document, but not in one that is superior to parliamentary sovereignty.”—[Official Report, House of Lords, 16 April 2007; Vol. 691, c. 7.]

We need to examine the issues in the light of my right hon. Friend’s discussion points, and consider how to take the matters forward positively. My right hon. Friend the Prime Minister explained to my hon. Friend:

“The UK has been well served by its existing uncodified constitution, which has evolved to meet changing circumstances…the need to ensure that Parliament holds the Executive to account is absolutely right.”—[Official Report, 25 May 2005; Vol. 434, c. 700.]

We need to examine all those issues. The changes that my hon. Friend has proposed today are significant and major. The agenda and the climate are right to examine them, and we need to examine how to take them forward.

In the context of the change of leadership that is about to occur, does the Minister feel that it is indicative of the strength of the Chancellor’s feeling on the issue that he has made no commitments for legislation to date other than to bring forward a Bill for constitutional reform? Does not that underline how significant he feels the issue is?

Will the Minister take back to his officials the concept that when we move forward on constitutional change we ought to involve not only Parliament, which is central, but the public, children at school, community groups, councillors and everybody else, so that we can generate some excitement? We all feel that we should excite people about politics again, particularly after the recent local elections, whichever way the results went—they were good in my city. This is one of the ways to do that.

Order. That was close to a second speech.

I accept my hon. Friend’s encouragement to excite people about politics. That is important to our democracy as a whole. I believe that my right hon. Friend the Chancellor will follow the lead that was set by my right hon. Friend the Prime Minister to take forward the constitutional agenda. Devolution, reform of the Lords, freedom of information and war-making powers are key things that have happened in the past 10 years. I look forward to the next 10 years of government, when the aspirations that my hon. Friend has laid out will be discussed by Parliament and set in context. I commend my hon. Friend for raising those issues; they will form part of a widespread debate. I look forward to hearing from him on them again in due course.

I am delighted to have the opportunity to discuss this serious issue.

A company in my constituency called ProEconomy is a successful business that has controlled legionella in water systems since 1993. It told me only this morning that there has not been a single case of legionella in any of the premises for which it has been responsible. I am grateful for the opportunity to put forward some of its concerns.

The Health and Safety Executive produced a document, the approved code of practice and guidance, entitled “Legionnaires’ disease: The control of legionella bacteria in water systems”, which was published in 2000. It recognised several ways of keeping water systems free of legionella. One of those, mentioned on page 42, paragraph 169, is under the heading “Temperature regime” and states:

“This is the traditional approach to Legionella control.”

Copper-silver ionisation, the technique that the company in my constituency applies, is listed as a treatment programme on pages 44 and 45 of the document, in paragraphs 175 to 178. Furthermore, in paragraph 185 on page 46, under the heading “Monitoring for legionella”, it is recommended that

“this should be carried out…in water systems treated with biocides where storage and distribution temperatures are reduced from those recommended in the section on the use of temperature to control Legionella.”

The risk of contracting Legionnaires’ disease is greater in NHS premises than elsewhere, because the immune systems of people there are suppressed, so the Department of Health recently updated its guidance document, the health technical memorandum known as HTM04. It is designed specifically for NHS premises and took five years to produce. It recommends in the introduction and on page 24 that

“the temperature control regime is the preferred strategy to maintain systems free from Legionella and other water-borne organisms”

and that

“the water temperature should be at least 50° C after draw-off for 1 minute.”

Furthermore, in is recommendation, the report strongly recommends that

“thermostatic mixing devices should be considered for many outlets”.

Because of the use of the word “preferred” in HTM04, customers of ProEconomy who have until now happily and successfully applied the copper-silver ionisation process are moving back to a regime of temperature control after years of legionella-free water and water systems that ran at temperatures lower than those recommended in the document. ProEconomy has therefore not only been jeopardised but is concerned that HTM04, which was written without taking into account research showing the inefficacy of temperature control, represents a substantial risk to the public.

Legionnaires’ disease does not just affect the elderly. I shall give some examples. In Torbay in 2002, David Bick, at only 53 years old, died after being infected from the sink alongside his bed. In 2004, Daryl Eyles, a young father of 37, died from legionella found in the water system of the Royal United hospital in Bath. In 2001, there were 449 confirmed cases of Legionnaires’ disease in Spain, and only last week a 78-year-old lady died in the Netherlands.

Legionnaires’ disease is a killer, or makes people extremely ill if it does not kill them. We should not underestimate it. How are the Government dealing with it? When ProEconomy expressed concerns about the recommendations made in HTM04, it was assured that the overall scientific evidence supported the temperature control regime of having water at 50° C and above, after the drawing-off of hot water taps for one minute.

The Minister of State, Department of Health, the hon. Member for Leigh (Andy Burnham) wrote in a letter that

“the strength of evidence continues to support a pathogen control strategy based primarily on keeping hot water above specified temperatures throughout hospital systems as appropriate. Similar arguments apply in terms of cold water temperature limitations.”

However, the business in my constituency was unwilling to accept that, and requested on three occasions to see the evidence. It was only when it put in a freedom of information request that it was given the evidence that the Government are effectively using to put it and the rest of the industry out of business. I wish to register my considerable concern about that.

Under freedom of information law, 31 scientific papers were produced, and they have been examined by a team of university graduates and legionella experts whom ProEconomy asked to assess them. They concluded that none of the 31 papers supported the temperature control regime. Three were against it, 21 did not discuss it at all and seven were in favour of copper-silver ionisation. That has been found to be safe because of the minimal concentrations required to control legionella. Those concentrations are particularly safe compared with using chemicals such as chlorine and chlorine dioxide, which were treated on a par with copper-silver ionisation in HTM04. The silver levels required are equal to those found in milk and within the values prescribed by the drinking water inspectorate. I have to hand the inspectorate’s certificate, which confirms that it is happy with the technique. The copper released in copper-silver ionisation systems is well below the current prescribed values, and most water distribution pipes are made of copper.

In America, copper-silver ionisation is welcomed and used widely as an effective method of controlling legionella. It has received the most extensive research of all the available methods and is the only disinfection modality to have fulfilled the four evaluation criteria set out by the university of Pittsburgh and the veterans affairs medical centre of Pittsburgh. Their report states:

“It demonstrated efficacy of Legionella eradication in vitro using laboratory assays, anecdotal experiences in preventing legionnaires disease in individual hospitals, controlled studies in individual hospitals, and in validation in confirmatory reports from multiple hospitals during a prolonged time (5 to 11 years).”

The study also evaluated applying temperatures of 70° and concluded that

“contamination with Legionella will often recur within months”

using the temperature control regime.

“Furthermore, it is tedious and labour intensive to implement.”

I would add that it is expensive.

Copper-silver ionisation is also welcomed in the Netherlands. A recent Dutch trial carried out over a one-year period at nine establishments, including hospitals and prisons—two of them were using ProEconomy’s system—and funded by the Dutch Ministry of the Environment concluded that

“copper/silver ionisation is an effective method for the control of Legionella in complex tap water systems…The results of this study also indicate that this method can be used within the legal limits for drinking water.”

As more and more countries become aware of the inadequacies of the temperature control regime, copper-silver ionisation is becoming increasingly favoured. Yet Great Britain, once a pioneer in the technology, is now losing ground to the rest of the world—Canadian, American and Dutch companies. ProEconomy is not the only company that does it in the UK—there are about five, and all face going out of business. We will lose our technological lead to other countries.

Of the 31 papers that were provided by the HSE only under a freedom of information request, it is staggering that one paper supposedly in support of the temperature control regime, by Pablo Visca for the university of Rome, found that

“repeated heat based control measures were ineffective in eradicating Legionella.”

Furthermore, Roland Schulze-Roebbecke of the University of Bonn concluded that

“frequent failure to eradicate Legionella by elevating the water temperature indicates that it is impossible to achieve effective temperature levels concomitantly in all parts of the system.”

In a paper on the subject, Dr. Yu-sen Lin concluded:

“Copper-silver ionisation has effectively controlled Legionella in the hot water systems of numerous hospitals.”

The temperatures required by HTM04 pose a risk of scalding to the extent that they cannot be employed without the installation of thermostatic mixing valves, which I believe were the subject of a recent private Member’s Bill. The valves mix the heated water with untreated cold mains water to achieve a non-scalding temperature, which is the ideal temperature for legionella growth. HTM04 contradicts itself by conceding that

“water quality can deteriorate in mixing valves, particularly when utilization is low, because the mixed water then becomes stagnant at a temperature favoured by pathogens such as Legionella.”

It seems irresponsible that the part A executive summary of HTM04 “strongly recommends” that valves be installed. Indeed, a paper produced by the Department of Health clarifies the point. It states:

“Mixing valves where cold and hot water are mingled in order to achieve 45°C become the principal reservoirs for Legionella in a hospital.”

Mixing valves have been and continue to be widely installed in hospitals and public buildings. Hospitals may have up to 1,000 mixing valves, at a cost of £150 each—£150,000—plus the cost of installation and maintenance, which is required every six months in a typical large acute hospital.

For 14 years, ProEconomy has eradicated legionella using copper-silver ionisation at places such as the Medway Maritime, Northampton general and Royal Alexandra hospitals, and the Hong Kong and Shanghai Banking Corporation headquarters at Canary Wharf—I believe that it is home to some 8,000 employees—to name but a few. ProEconomy has found legionella at significant levels, despite adherence to the temperature control regime, in 90 per cent. of the hospitals that it visits for the first time. That might be because the temperature regime does not require legionella testing but asks hospitals only to monitor temperatures. That strikes me as burying one’s head in the sand, because monitoring temperatures on its own does not prove anything. Only by regular testing for legionella can one be sure that it is not there, and that is part of what ProEconomy and other companies do. The extra cost for testing for legionella is outweighed by the proof that one is in control of and free of legionella.

ProEconomy has successfully reduced temperatures and removed mixing valves in large hospitals. Because HTM04 prefers the temperature control regime, ProEconomy has lost contracts to the value of £75,000. One of those contracts was with the Oxfordshire health trust, which used ProEconomy’s systems in 12 premises and has been legionella-free for nine years. The trust is now spending an estimated £180,000 to install mixing valves, so that it can raise temperatures. The director of the trust clearly did not wish to put his head on the block and go against the HTM04 preferred option, and who can blame him?

Medway Maritime hospital, which removed its mixing valves and reduced temperatures four years ago when it installed ProEconomy’s product, is now uncomfortable with its legal situation, having read HTM04. Despite being completely satisfied with copper-silver ionisation’s effectiveness in eradicating legionella, it is considering reinstalling mixing valves at a cost of £200,000. Are NHS budgets not under enough pressure already?

HTM04 has an impact not only on ProEconomy’s business; it also affects the Government, who have set a target of a 20 per cent. reduction in CO₂ emissions and at the same time are investing in raising temperatures. That will significantly escalate the carbon footprint of the whole of the NHS estate.

Furthermore, the fact that the Department has spent time and public money producing guidance that does not appear to be supported scientifically should raise considerable concern. ProEconomy is adamant that the Department has failed to justify or substantiate its statement that the temperature control regime is the preferred strategy for controlling legionella. ProEconomy would like the Minister to explain why the temperature control regime, which has been demonstrated to be inadequate in various instances, should be given preference over copper-silver ionisation. ProEconomy and the other companies in the field believe that they can prove that copper-silver ionisation is cheaper, more energy efficient and wholly more effective.

Furthermore, in the light of the fact that, over a 20-year period, a typical hospital would save £375,000 in energy consumption using copper-silver ionisation instead of the temperature control regime and taking into account the cost of replacing copper-silver ionisation systems with mixing valves, ProEconomy estimates that there would be significant extra costs to the NHS if HTM04 were to be followed to the letter.

That is a summary of the concerns. The Minister and I are not scientists—I am putting on the record the views of my constituent’s company—but I am sufficiently concerned about the process, the fact that scientific papers were not available and the fact that other large, industrialised, scientifically advanced countries seem to deal with the problem differently. It is wholly legitimate for me to raise these serious questions in this Chamber, and I hope that the Minister has reflected on them. As I said, he and I are not scientists, but I hope that he shares my concerns and will, at least, seriously consider the matters that have been raised, particularly the word “preferred”, which will sound the death knell for the UK industry.

I congratulate the hon. Member for South-West Bedfordshire (Andrew Selous) on securing this opportunity for us to debate this important subject. I commend him for speaking up on behalf of ProEconomy Ltd, a company in his constituency whose interests clearly lie at the heart of the debate.

The debate has shown clearly why it is important to have proper and effective water management systems in place to control the risks from legionella bacteria. The Government fully recognise the serious consequences if those risks are not adequately controlled. That is why there is a clear health and safety regime to minimise risks to people arising from legionella. Under health and safety law, it is primarily the duty of an employer or person in control of the premises to ensure that that happens.

Legionnaire’s disease was first identified after a large outbreak of pneumonia among people who attended an American Legion convention in Philadelphia in 1976. A previously unrecognised bacterium was isolated from lung tissue samples and subsequently named Legionella pneumophila. The bacteria occur naturally in environmental water sources such as rivers, lakes and reservoirs. They are usually found in low numbers but appear to multiply at temperatures between 20° C and 45° C. The bacteria can colonize artificial man-made water systems such as cooling towers and the hot and cold-water supply system in buildings. When the bacteria are found in large numbers, they can cause problems.

Humans exposed to the bacteria may contract Legionnaire’s disease, normally by inhaling the bacteria deep into the lungs, either as tiny droplets of water or as the contaminated particles left after evaporation. The incubation period is usually between two and 10 days.

As the hon. Gentleman said, exposure may have serious consequences. Not everyone exposed to the bacteria will develop the full-blown disease. Some will suffer from no more than mild flu-like symptoms, but cases may be far more serious, and, tragically, death may occur. On average, some 300 cases of Legionnaire’s disease are reported each year in the United Kingdom, but about half are associated with travel abroad. Twenty-nine deaths were recorded in 2005, and more than 30 in each of the previous three years.

I should quickly say something about the legal context, as it leads to the points that have been raised. The primary responsibility for controlling risk lies with the employer or the person in control of premises. Those who use or run water systems in their workplaces or other premises must assess the risk and provide for systems that manage it sensibly and effectively.

The legal duty is set out in health and safety legislation. There are general duties on employers and operators to provide safe and healthy working environments under the Health and Safety at Work, etc. Act 1974. Employers and operators also have responsibilities under the management of health and safety at work regulations. More specifically, the Control of Substances Hazardous to Health Regulations 2002, which I will refer to as COSHH, provide a framework for control of the risks from a range of hazardous substances, including biological agents such as the legionella bacterium.

The essential elements of the control framework provided by the COSHH regulations are: assessment of risks from exposure to an agent; prevention of that exposure where risks are harmful; control of exposure where prevention is impracticable; maintenance, examination and testing of control measures; provision of information, training and instruction; and health surveillance of employees. Those responsibilities are fairly and squarely on the shoulders of the employer or the person in control of the premises.

To assist those responsible for managing the risks associated with legionella, the Health and Safety Executive has published guidance and an approved code of practice entitled “Legionnaires’ disease: the control of legionella bacteria in water systems”—commonly known across the industry as L8. The code of practice gives practical guidance, but there is also a special legal status attached to an approved code of practice. Under health and safety law, duty holders may use alternative means of compliance, but if they were to be prosecuted, failure to follow a code would be taken as being indicative of a breach of law, unless an employer could prove the adequacy of those alternative means of compliance.

In case I have missed something, has the Minister said anything that would lead an employer to have to use a temperature control regime? I apologise if I have missed the answer to that question.

No—the simple answer is that there is not anything that would do so.

The approved code—L8—explains that the risk from exposure will normally be controlled by measures that do not allow the proliferation of legionella bacteria in the system and reduce exposure to water droplets and aerosols. Many suggested precautions are cited in the document.

Although L8 was written with the best knowledge available at the time, the HSE recognises that new technologies are continually being developed and introduced to the market. As with any new technology, the regulator will recommend a precautionary approach in adopting a new method of control, particularly when the consequences of failure can be—as in this case—so serious. To support innovation in the field of legionella control, the HSE is keen to engage industry and to discuss and offer advice on potential technologies while working closely with the Legionella Control Association, the Water Management Society and the British Association of Chemical Specialities.

To help ensure the effective communication of good advice, the HSE has formed the legionella committee. One of its aims is to develop a more coherent and consistent approach to the inspection and investigation of legionella-related plant and management systems with stakeholders, particularly local authority partners. The HSE works closely with the Legionella Control Association, which is an independent body that aims to improve health and safety standards in the water treatment industry. By working closely with that body, the HSE can reach a large number of people working in the industry and help to ensure that key safety messages are fully assimilated and applied.

Following consultation with the Legionella Control Association, the technical committee of the Water Management Society and the British Association for Chemical Specialities, the HSE legionella committee has recently produced further guidance. That guidance is intended to be the first in a series and will deal with fill pack removal in cooling. It will shortly be placed on the HSE website as a technical supplement to L8. Provided a suitable evidence base is available, the HSE committee intends to issue technical guidance in that way, which will mean that advice and guidance on the introduction and application of new water treatment techniques can be made available.

The HSE has also produced industry and sector-specific guidance, for example for residential care homes. Such guidance can be downloaded from the HSE website, to which the most recent addition was “Management of Spa Pools”, produced in 2006. Recorded data indicate that spa pools are one of the three main sources of Legionnaire’s disease in England and Wales.

The HSE co-operates with the Health Protection Agency and the Health and Safety Laboratory on further research. The existing framework for control of legionella, set out in the approved code of practice, was based on consensus about what was recognised to be the best science at the time. However, the Government and the HSE recognise that the science can move on. We want to review our advice in the light of new developments and actively to support the ongoing process of scientific inquiry. For example, the HSE and the Health Protection Agency are currently collaborating on a project looking at the relationship between legionella risk systems and the environment, and the virulence of individual strains of legionella. Another project on which we are working is looking at in situ cleaning techniques for cleaning packing materials in cooling towers.

On the core of the hon. Gentleman’s point, the Government do not rule out the use of other techniques such as water ionisation as a means of control. In fact the HSE’s guidance devotes several paragraphs to the use of such methods of control. Temperature is referred to as the traditional approach to legionella control. It is recommended that hot water be stored at 60° C and distributed so that it reaches the outlets at 50° C within one minute. At 60° C it takes approximately two minutes to inactivate 90 per cent. of a population of legionella. The effectiveness of maintaining the circulating temperature at 60° C has been demonstrated in both hospitals and hotels. Hot water systems maintained at temperatures above 50° C are less frequently colonised by legionella.

Ionisation is the term given to the electrolytic generation of copper and silver ions for use as a water treatment. Metals such as silver and copper are well known bactericidal agents. They act on the cell wall of the micro-organism, which leads to cell death. Provided copper and silver ions are maintained at suitable levels within the system, they can be effective against legionella. It is important that ionisation be properly assessed, designed and maintained as part of an overall water treatment programme. In hard-water systems, for example, silver ion concentrations can be difficult to maintain due to build-up of scale on the electrodes, unless anti-scaling electrode cells are employed.

For both hard and soft water, the ionisation process is pH sensitive and it is difficult to maintain silver ion concentrations above pH 7.6. The build up of scale and concentration of dissolved solids therefore needs to be carefully controlled so that suitable ion levels are consistently maintained throughout the system. That may require additional water treatments. Also, unless automatic control valves are employed, the system is subject to fluctuations in concentration. Furthermore, if the treatment is used continuously, it is necessary to check that the maximum permissible concentration for drinking water under current legislation is not exceeded. That can be found in the Water Supply (Water Quality) Regulations 2000.

Will the Minister come to the nub of the matter regarding health technical memorandum 04 and the health service? I am reassured by what he said about the HSE, but it is the use of the word “preferred” in HTM04 that will close down the industry in the UK.

I do not accept that it will close it down. As I am trying to explain to the hon. Gentleman, the documentation considers alternative sciences and we do not rule out any system or say that one system must be used instead of another. That is why I am discussing in detail the context in which the guidance was issued. I am also trying to point out that the science is continually under review and that the guidance will be supplemented as we consider scientific developments. I do not accept that the situation is as closed off as the hon. Gentleman is implying.

As I have tried to explain to the Minister, the use of the word “preferred” in HTM04 means that people who work in the public health sector believe that if they use another system, they will be publicly liable. Will he address that specific point because it is of great concern to the industry?

I have tried to address that point specifically. If the hon. Gentleman wishes to check Hansard, he will see that I dealt with exactly that point. The Department of Health has produced additional guidance for NHS hospital trusts. It states that temperature control is the preferred strategy, but it also acknowledges the appropriateness of other systems and includes extensive reference to silver and copper ionisation and other techniques, so that—this is the crucial point—trusts are free to choose a temperature control option if local circumstances suggest that it is appropriate.

The Department of Health conducted a review of the available scientific literature in 2006 and concluded that both systems had merit.

I am pleased to have secured today’s debate, under your guidance, Mr. Hancock. It is important that we understand and are aware of the matter before us. The UK produces more than 17 million tonnes of food waste each year. I submitted a parliamentary question today seeking an assessment of the food waste generated by the 13 outlets in the parliamentary estate—a third of the UK’s waste comes from large-scale food manufacturers, and I do not expect the House to have an equivalent wastage.

With many people turning to ready meals and packaged food, the problem of food and package waste has exploded over the past 10 years. In fact, the British might waste more food than any other nation in throwing out 30 to 40 per cent. of all the produce bought and grown each year, according to research. Figures collated by the Government, supermarkets, processors and farmers show that modern food production methods might appear efficient, but the reality is that large-scale manufacturing and rigid supply chains are creating significant quantities of waste.

Separate Government figures show that some 17 million tonnes of food, worth up to £20 billion a year, are being put into landfill, even though approximately 25 per cent. of it could be eaten safely by people or animals, or turned into compost or, in this case, energy. The cost of transporting that waste is thought to be more than £175 million a year.

In seeking today’s debate, my aim was to highlight a unique technology developed by Inetec, a company in my constituency, and to seek solutions to the problems it faces in rolling out and developing that major contribution to energy and landfill problems. Inetech was formed in 1997 to address the problem facing large-scale food manufacturers with food and non-recyclable packaging waste. I should like to recognise the financial support from the Welsh Assembly and the grants gained by the company to support its research and development, including two Department of Trade and Industry smart awards.

Inetec’s research discovered that food waste and its non-recyclable packaging contained a high energy value that was being squandered. The waste stream was discovered to be a valuable means of generating renewable energy, allowing an on-site energy recovery system to be placed alongside a food processor, resulting in a reduction in fossil fuel usage and greenhouse gases, saving on transport and landfill costs, and increasing bio and food security.

The technology is known as abrasive drying and, explained simply, involves the water contained within food being removed to a very low level, after which the food and packaging waste is loaded into a vessel where it is macerated against itself, while heat is applied gently. As the waste warms, moisture held within it becomes exposed and evaporates. The vapour is drawn out of the vessel and run through a condensing unit to convert it back to liquid. The liquid has a near-neutral pH, so it can be discharged straight to a foul sewer without the requirement for further treatment. After the batch process, a powdery biomass fuel remains, similar in appearance to coffee grains. The whole process takes about 24 hours to complete.

The technology was developed via two commercial operations: one with Greggs bakery, in which bakery and food sandwich waste was processed, and a second with a pedigree chicken hatchery in which eggs and dead chicks were processed. After thousands of test runs, the technology has proved highly successful in processing waste as different as supermarket waste, chicks, cows’ stomachs, offal, fish, airline waste, bakery waste, oil-laden sludge and many other forms of waste too attractive to mention.

Britain has a large work force employed in food production who could be offshored unless production, and bio and food safety costs can be reduced and a viable alternative to landfill found. Drawing on those two problem areas, Inetec has two lines of progress. The first is working with individual food producers, such as Ethnic Cuisine, which produces Chinese ready meals for Sainsbury’s. Food and packaging waste will be used to provide heat and energy for the plant, thus reducing its carbon footprint by one third and reducing the need for electricity drawn from the grid and fossil fuels—an option that perhaps the House of Commons could pursue.

The second line is to develop a UK-wide network of 10 large-scale Inetec plants, using biomass prepared in the Inetec process that is converted to synthetic gas and then to renewable electricity. Each plant will generate 21 MW of electricity from biomass, and a further 5 MW of thermal energy by-product. Each site will prevent 500 tonnes of food waste and packaging per day—1.5 million tonnes per year—including food-contaminated packaging, from going to landfill.

We know that we must find alternative means of providing power. Energy consumption is continuing to rise at a staggering rate and the population continues to grow. The world’s energy demands are predicted to reach an all-time high by 2050. We know that renewable energies are needed, and biofuels have emerged as a viable means of generating large quantities of energy from sources that previously have been squandered. Landfill is an option that is rapidly running out; landfill sites are unpopular alongside local communities and generate great controversy.

Food producers, hotels, supermarkets and households could benefit from the Inetec process, with communities benefiting from energy provided from their food and packaging waste by a local Inetec site. With the recently announced rise in landfill tax, which will lead to a substantial increase in food waste and packaging disposal costs, this novel technology becomes even more financially attractive.

During a recent Environment, Food and Rural Affairs Committee visit to Germany, we saw such small-scale energy-producing plants utilised to provide energy in small villages in southern Germany. If such a scheme was adopted and centres placed alongside towns, it is conceivable that as much as 75 per cent. of a town’s electricity requirement could be provided by the waste stream that it generates. That is especially relevant following the announcement of the development of five eco-towns by 2020.

For companies such as Inetec to be successful, we must remove the barriers faced in rolling out this new technology. Although the Government announced yesterday that they will simplify the planning process for large projects, smaller proposals such as Inetec’s still face problems with regulations, procedures and planning policy. A major problem is the time scale and cost of meeting necessary approvals. The planning system is slow, very expensive and risky, with Inetec having to spend £2 million on the planning application for its first proposed plant, which could ultimately be refused.

The slow and expensive nature of planning permission must also be viewed alongside the time and cost of obtaining a pollution prevention and control licence and national grid connection. Those hurdles need to be jumped with each new planning or licence application at a new site. Each application starts from a zero base with no recognition of past success and past examination of the issues concerning the application.

In the UK, the cost of creating a connection to the grid is dependent on a price dictated by regional electricity companies. The purchase price of the electricity is set by the power companies. In Germany, during the Select Committee visit, I found that the Government set low connection and high sale prices, which has successfully fostered a growing alternative energy supply industry. The cost of connection to the grid must be paid upfront before the planning consent is gained, possibly adding £1.1 million to the gamble for success.

Inetec and its novel technology have received huge interest from many of the largest food production companies in the UK, such as Northern foods and Greencore, but it still finds itself receiving little assistance from the Government and is stuck trying to navigate through the complex legislation and planning regulations.

We know, and have known for generations, that people produce waste. Our archaeology and our understanding of past generations is often based on the uncovering of waste sites and seeing the food, utensils and packaging—the earthen-based vessels—that archaeologists uncover. However, we can change how much we produce, how we manage it and what we do with it.

If we are to adopt a renewable energy-based industry in the UK, we must resolve the question of how the potential of such an industry can be harnessed, by reviewing the current barriers of regulation, planning and processes, while retaining the protection that they afford to local communities. I am aware that the Government will announce a greater concentration on food waste in the energy White Paper that is coming soon. There are those who would say that this debate is perhaps one or two days too soon, but better that than one or two days too late. If I am to applaud the energy White Paper, it will also, as I hope, announce initiatives to liberate innovative uses of waste to generate heat and power, so that food can provide energy not only for the body, but for the home and for industry.

As my hon. Friend the Member for Bridgend (Mrs. Moon) acknowledges, the timeliness of the debate is extraordinary, given that yesterday the Government’s planning White Paper was published—she raised a number of planning issues in connection with the company in her constituency—that tomorrow we will see the long-awaited energy White Paper, and that on Thursday the new waste strategy will be published. I hope that, if she is able to, she will be present in the main Chamber to listen with interest to what my right hon. Friends the Secretaries of State for Environment, Food and Rural Affairs and for Trade and Industry have to say on those two policy areas, on which we have not yet made announcements.

That puts me in a slightly difficult position, because if my hon. Friend’s debate had taken place a week later—rather, two weeks later, because of next week’s recess—I might have been able to say more on the issue. However, given the timing of her debate, she can perhaps claim some of the credit for the announcements when they come later this week. I hope that she and other Members who take a close interest in these very important issues will be encouraged by what the Government propose to announce.

I congratulate my hon. Friend on championing not only a very good local firm in Bridgend as the constituency MP, but the whole issue of our environmental sustainability, of our management of waste in particular, and of the potential for generating renewable energy from waste streams. I also pay tribute to the work that she is doing in trying to persuade this place to be a bit greener, which is a worthy cause. I always think that when we are trying to persuade the country to do better on the environment, it is important that we can lead by example.

My hon. Friend is right to portray the challenge that we face. According to our latest figures, about 17 per cent. of municipal solid waste is waste food. It was estimated in a recent report that, on average, each person in this country wastes more than £400-worth of food every year—quite a scandalous figure, in my view. Our first priority, of course, should be to prevent as much as possible of that waste from being produced. We shall announce measures on waste prevention in the waste strategy on Thursday. Also and as my hon. Friend acknowledged, my right hon. Friend the Chancellor of the Exchequer in his most recent Budget announced a substantial increase in the landfill tax escalator, which acts as one of the main incentives for businesses and local authorities to divert waste from landfill. I hope that that will help companies such as Inetec, in my hon. Friend’s constituency.

There is a variety of ways in which food waste could be put to much better use. My hon. Friend has described very well the work that Inetec does in her constituency. If that company has not yet had the opportunity to talk through some of these issues with people from either my Department or, as it is largely a devolved issue, the Welsh Assembly, I would be happy for it to talk to my officials about what potential there may be for the company across the UK more widely.

I thank my hon. Friend the Minister for that offer, which I welcome. Inetec is based in my constituency, but it plans to roll out the 10 new large-scale electricity generating plants across the UK, so it would be particularly helpful if such a meeting could take place with his officials.

I am sure that my officials, very over-burdened as they are at the moment, would be delighted to arrange that.

I noted the points that my hon. Friend made about the problems of the planning system. One of the announcements that my right hon. Friend the Secretary of State for Communities and Local Government made yesterday will, we hope, help to ease the planning process for such significant environmental waste management projects. We can have all the right waste management policies in the world, but if, because of the planning process, local authorities and businesses cannot establish the recycling facilities, the energy-from-waste facilities, the anaerobic digestion facilities and the other facilities that my hon. Friend talks about, there is no doubt that we will have a real problem not only with meeting our landfill diversion targets—with the resultant fines for local authorities, which would not be popular in her constituency—but with meeting our environmental goals.

My hon. Friend is absolutely right to stress the importance of diverting more of our waste away from landfill. I think that we are third out of all 25 countries, or out of the old EU countries, in terms of our reliance on landfill, and although our reliance has decreased significantly in recent years, we need to do an awful lot better. Food waste, as my hon. Friend also rightly says, is a major source of methane. If food waste goes to landfill, it can rot down into methane, which is one of the most potent greenhouse gases—21 times more potent than carbon dioxide.

As I said, we will announce a number of measures in the waste strategy on Thursday, in particular to target food collection from households and to encourage local authorities to extend separate food collections. Research shows that where that happens, it is much easier to re-use, recycle, compost or divert into a new technology, such as Inetec’s, that food waste, and to make a valuable resource out of it. Exciting things are on the way.

If I may, I shall say a little about anaerobic digestion, because that is another technology that has huge potential. Without being a technical expert and without having studied Inetec’s technology, I suspect that my hon. Friend may also be interested in some of the measures that we hope will be in the energy White Paper tomorrow to encourage these alternative technologies. We hope that changes to the renewables obligation certification scheme will serve as a major boost to anaerobic digestion and to other technologies to help to manage food waste. I cannot remember whether my hon. Friend has any rural areas in her constituency, but anaerobic digestion also has major potential for dairy and other livestock farmers, who may be worried about what they will do with all their slurry when the nitrates directive kicks in. There is massive potential for a win-win situation in terms of sustainable environmental management of farms and increasing farmers’ incomes by using slurry as a positive fuel in some of these technologies.

My hon. Friend will be aware that the way that we collect waste is intimately linked to the way in which it can be processed, and thus to the value that we can extract from it, whether as a recyclate or as an energy source. Nowhere is that more true than with household waste collection. There has been an awful lot of ill-informed comment in the press in recent weeks on that issue. We shall say more about it in the waste strategy, but I can say, without revealing too much of the detail, that the objective of that strategy is to pursue the course that I think my hon. Friend and her colleagues on the Environment, Food and Rural Affairs Committee would endorse. It is to move away from our reliance on landfill, to stop treating waste as waste and to treat it as a resource, and to try to move this country to a position where we do not accept, as we have in the past, a throwaway society. We need to stop throwing away into landfill anything that has a useful or valuable potential, because that not only contributes to greenhouse gas emissions but means that we are constantly using virgin materials—many of which, such as wood and oil, are from the developing world—to generate energy when we could be generating it, as my hon. Friend rightly says, from the waste that we all produce.

I was interested to hear my hon. Friend say that there was the potential for 75 per cent. of a given town’s or city’s energy to come from waste. That sounds like a high figure to me, but I will certainly look at it. If it is right, it will make even more strongly the argument that we will make when we publish our energy White Paper tomorrow and our waste strategy on Thursday.

In summary, I am grateful to my hon. Friend for raising such an important topic. I have tried to explain what the Government believe can be done to join up our policies on waste, energy, biomass and planning, and we will see a good example this week of not only joined-up government, but very active government. A lot has been said in recent weeks and months about the Government’s being adrift or in limbo during this period of transition, but nothing could be further from the truth. The Department for Environment, Food and Rural Affairs has certainly been hyperactive, not only on the waste strategy, but on the Climate Change (Effects) Bill and so forth. This week, a whole tranche of new policies will be published that are vital to our economic and environmental futures. Indeed, that will happen against the background of a policy vacuum on the other side of the House, but I will leave that for others to judge. When my hon. Friend sees the strategies that will be published tomorrow and on Thursday, I am sure that she will welcome them in her usual constructively critical way.

Although my constituency does have incredibly large rural areas, one thing that I also hope to hear over the next few days is that the Government will not only look at the anaerobic digestive system, which my hon. Friend mentioned, but ensure that grant is available to support technologies such as Inetec’s. We must not go down only one possible energy source route, with anaerobic systems being the only ones that we look at and support.

My hon. Friend will have to study the details of the energy White Paper very closely. Not being an expert on the technology that she talked about, I am afraid that I cannot pre-empt what my right hon. Friend the Secretary of State for Trade and Industry will say tomorrow. However, it is certainly the Government’s desire to encourage all sorts of innovative technologies that have an environmental benefit.

The technology that my hon. Friend mentioned has particular benefits in terms of dealing with a mixture of materials, including food waste and packaging waste, because they can all be dealt with together. That is slightly separate from composting and anaerobic digestion, which involve separating food waste from other waste. The company that she mentioned therefore has some niche potential, and my officials advise me that that it is perfectly possible that it will benefit from the announcements that will be made later this week. However, without knowing some of the figures for biomass content and so forth, it is difficult to make a judgment today.

If my hon. Friend is not happy with what I have said, she should remember that we are talking about a White Paper, and that things are never set in stone. I am sure that she looks forward to debating the issues that the White Paper will spark between its publication and the next election.

Question put and agreed to.

Adjourned accordingly at seven minutes to Two o’clock.