I am pleased to have the opportunity of serving under your chairmanship, Mr. Caton, and to have secured this debate on an important issue for many of my constituents and people throughout the United Kingdom.

It might assist the Chamber if I first explain why I have chosen this topic. The universal service obligation has been an ongoing concern of mine for the past six years while I have been a Member of Parliament, but it has particular relevance and resonance at the moment following the recent application by the Royal Mail for zonal pricing for bulk mail, on which consultation with Postcomm has just concluded. That has particular relevance to this debate and I shall discuss it in greater depth later in my speech.

This debate must be put into its proper context of recent political history, particularly the way in which the Government opened up the letter post market to full competition. They did so at the prompting of many in Postcomm and, I regret to say, Postwatch with unnecessary and unseemly haste in what history will record as an act of commercial, economic and social vandalism. The full implications of that act, the way in which it was done, and the way in which it was driven by officials at Postcomm in particular, will ultimately show it to have been highly damaging to the basic market structure of postal services in this country, and especially to our most remote and peripheral communities. Too many people in the Department of Trade and Industry and in Postcomm feel qualified to speak on matters of competition without ever having run a proper business. If there is to be a new phase of Government, I hope that some economic realism will be injected into bodies such as Postcomm and—I say this with considerable regret, because it is supposed to protect consumers’ interests—Postwatch.

My concern is that if Royal Mail’s application for zonal charging for bulk mail is approved, bulk mail will be removed from the universal service and what is left will hardly be worth the name. It will hardly be universal and it will barely be a service.

According to Postcomm,

“The universal service means that anyone in the UK can post letters and parcels to any other part of the country at the same affordable rates. And it guarantees one delivery of mail for every UK household and business, each working day, and one collection of mail, six days a week. One of Postcomm's most important jobs is to protect the universal service, by requiring it in Royal Mail's licence and making sure the company has the resources to fulfil its duties.”

The USO covers letters and packets weighing up to 2 kg, the non-priority service and parcels weighing up to 20 kg, the registered and insured service, and a range of support services to ensure security and integrity of the mail—for example, the Royal Mail's re-direction service, international outbound services, Mailsort 1400 and the Cleanmail bulk mail services.

It would be remiss of me if I did not remind the House that the writ of the USO does not run in some parts of the country, where the availability of transport and the sparsity of population make it difficult to provide a daily service. Many of those places are in my constituency, but I shall strike an uncharacteristically positive note and say that since the creation of Postcomm and Postwatch, we have seen significant improvement in the service in those hard-to-deliver-to areas.

Communities in Orkney and Shetland depend on Royal Mail's universal service. Local businesses face many challenges—we have additional travel costs and exceptionally high fuel prices as a result of our geographical location. However, mail prices have remained largely uniform throughout the country and companies in the northern isles have been able to send mail at the same price as firms in other parts of the country. Some of the most innovative and exciting uses anywhere of the mail order business are to be found in the northern isles—indeed, I am told that no less a person than the hon. Member for Crewe and Nantwich (Mrs. Dunwoody) orders high-quality products by mail from businesses in Orkney.

My hon. Friend is making an excellent point. The same applies to the Isles of Scilly in my constituency. Because of their geographical remoteness from centres of population, the universal service obligation is vital because a decent postal service provides a good basis on which remote businesses can survive. The postal service is a vital economic link.

My hon. Friend makes an excellent point. It is often said that we need a solution that will suit both the Shetland Islands in my constituency and the Scilly Isles in his. In fact, I have often thought that that is the easy part; it is fitting in the bits in between that is more challenging. I thought for a moment that my hon. Friend was going to challenge me about competition for the business of the hon. Member for Crewe and Nantwich, and I am pleased that we do not differ on that.

Other parts of the Department of Trade and Industry, and the Scottish Executive beaver away to persuade more people to work in areas such as those that I and many of my hon. Friends represent. Maximum use is made of modem technology, which is tremendous and which I wholeheartedly support because it is crucial to the future of remote and peripheral communities if we are to maintain a balance and mix of population, but modem technology alone will never be enough. We must keep traditional communications in place as well. A business may have the most creative website in the world and supply the best quality produce in the world, but that is not worth much if it cannot get its goods to the customer.

According to a report produced by Postwatch Scotland in April 2003 on parcel and other postal services in the highlands and islands, 12.5 per cent. of companies have experienced difficulties with businesses refusing to send them goods, and I suspect that the figure for businesses in island communities is higher than for those in the mainland highlands. The report also revealed that 17 per cent. of highland and island firms were being charged higher delivery charges than businesses elsewhere in the UK. I have had many cases in my constituency of a 900 per cent. levy on parcel post to the isles compared with that to the British mainland. I realise that parcel post is not part of the USO, but I offer it to the Minister as an example of bad market liberalisation. No proper, meaningful protection was put in place for the universal service, with the result that areas such as mine have been left without a universal service.

My hon. Friend is making an important point about the disgraceful practice of imposing substantial surcharges on many parcel deliveries to the highlands and islands. Parcelforce Worldwide, the commercial arm of Royal Mail, charges a 100 per cent. surcharge to deliver in some parts of the highlands in my constituency. Does he share my concern that Royal Mail’s proposals for zonal pricing of business mail suggests that rather than rejecting that model, it is one to which it aspires?

That is, in essence, my concern, and I share my hon. Friend’s concern about Parcelforce, which draws an invisible line in Scotland, and once that line is crossed charges increase. Parcels sent from elsewhere in the UK to the north of Scotland still have a surcharge added and parcel recipients in my constituency must pay a surcharge wherever that parcel comes from. Allowing, in effect, a free-for-all in the parcel post market has given people living in Scottish highland communities a bad deal. I had hoped that Ministers had seen what we experienced with parcel mail, and learned some lessons.

At the heart of the debate is the challenge of reconciling liberalisation of the mail market with protection of the universal service. A truly free market would not produce or sustain a universal service. The Government have not thought through how to reconcile those differences and resolve the tensions. In truth, there is a tension between the two objectives, but the Government seem happy to continue to open up the mail market without truly considering the practical impact on the universal service.

Some Departments—particularly the Department for Work and Pensions at the beginning of the year—appear to think that there is no contradiction whatever between saying that they support the universal service and taking their own bulk mail contracts away from Royal Mail and giving them to its competitors. The hon. Member for Morecambe and Lunesdale (Geraldine Smith) highlights that point in her early-day motion 587, which criticises the DWP’s decision to award contracts to the Royal Mail’s competitors. I should point out to the Minister that the early-day motion has the support of no fewer than 67 of his Labour colleagues.

The universal service obligation has positive and negative aspects from Royal Mail’s point of view. Although there are costs involved, its universal coverage should provide it with a significant competitive advantage. I hope that Royal Mail can maintain the universal service obligation without a subsidy or a levy from other mail companies. However, the Liberal Democrats recognise that if that is not possible, a levy might be imposed on other mail delivery companies to help to finance the universal service obligation. Such a levy is specifically envisaged and permitted by the European postal services directive, which gave rise to liberalisation of the mail market in the first place. I hope that when the Minister replies he will tell us the Government’s thinking on the use of such a levy. Even if he were to place on record a willingness to consider it, he would send to operators in the postal service market an important and powerful message that the Government are prepared to act if necessary to ensure that constituencies such as mine and many other less peripheral areas in the United Kingdom will be protected from the worst excesses of a liberalised market.

My very real concern is that the Government, and Postcomm, are pressing ahead with the opening up of the mail market without first ensuring that there are adequate safeguards in place to protect the universal service. That point was demonstrated by recent proposals for zonal pricing of business mail. As the Minister knows, Postcomm’s second consultation on zonal pricing for some business mail products closed at the start of this month. When Postcomm last consulted on zonal pricing, the idea was not supported by large bulk mailers, who are key customers for Royal Mail, or by Royal Mail’s customers. Royal Mail applied to Postcomm in April 2006 for zonal pricing of business mail. The decision will be made no later than 2 January 2008; if the application is approved, Royal Mail will start zonal pricing in April 2008. As the Minister knows, Royal Mail wants to divide the country into five price zones, allowing it to charge its business customers different amounts.

I have real concerns about heading down that road. However, even if we support the principle of cost-reflective pricing, which I do not in this instance, Royal Mail’s proposals do not make any sense, and they are certainly not the best way to bring about that situation. The proposal is for a surcharge of 4.8 per cent. for delivery to rural areas. Royal Mail has also made it clear that that will be just an initial extra charge. Over time, it intends to increase the differential, which appears to be an open-ended commitment. Royal Mail estimates that, to be cost-reflective, the surcharge should be 11 per cent. Clearly, if the concept is introduced, there will be pressure for the surcharge to increase over time, which will result in uncertainty for local businesses when planning just how much bulk mail to produce.

My hon. Friend makes a strong case on the injustice, as many rural businesses see it. Does he agree with Postwatch that one implication of zonal pricing could be the reduction of volume in rural areas, which would reinforce many people’s case for diminishing the current delivery system and the number of deliveries in rural areas?

Yes, indeed. My hon. Friend returns to the point that I made at the beginning of my remarks. If we remove that business from the universal service, we will be left with a service that struggles to be universal—indeed, it will hardly be a service as we understand it.

The cost to businesses sending bulk mail will depend entirely on the destination of the mail. So, if a business based in Orkney wants to send out a mailing to customers who live in Orkney, it will pay the same as a business based in Cornwall which wants to send a mailing to customers living in Orkney. What on earth is cost-reflective about that? Answers on a postcard, please—a stamped postcard, if the aim is to get it to Orkney and Shetland post-2008. Royal Mail’s real ambition, as far as I can tell, is to cut back on business mail in rural areas, and to increase business mail in urban areas.

Does not my hon. Friend accept that the position is even worse than he describes? A business in Aviemore that wants to deliver to customers in Carrbridge will pay more than a business in Aberdeen that wants to deliver to customers in Exeter, because customers in Exeter do not fit the rural definition.

Yes, that is exactly the position. I hope that I was not understating it, because it was certainly never my intention to understate the difficulties that will result from the proposal. My hon. Friend outlines another Royal Mail ambition, which is to reach the low-hanging fruit. The real opportunities for profit are in the big urban areas that are easy to deliver to, and the rest of us can go whistle, as far as I can tell. Given the support that many in the House have given to Royal Mail, that is an act of betrayal. It is a betrayal of the areas that have given the best support to Royal Mail and that rely on it most for their communities’ viability.

If Royal Mail’s application to apply zonal pricing is successful, pressure will build to increase prices in rural areas still further and to cut them again in most urban areas. There will be a vicious cycle of higher prices in rural areas, which will produce less business mail, and therefore even higher prices. If zonal pricing is introduced, over time the differential between the cost of delivering business mail in rural and in urban areas will only increase.

There is also the danger that businesses will pass on the increase in costs to the consumer. Consumers will be discriminated against simply because of where they live. If electricity, gas and telecoms companies that send out bulk mail know that they will have to pay more to Royal Mail to send a bill to a customer in a rural area, they will pass on the cost to the customer and the people in rural areas will receive larger bills. Such a situation would hit Royal Mail’s most vulnerable customers hardest, and for some, Royal Mail’s services would no longer be cost-effective. The move towards electronic mail would become more compelling, and utility companies would have to go through the inconvenience of adapting their computer systems to take account of the differing costs of delivering their products. All of that would cost businesses time and money. The system would benefit and convenience Royal Mail, not the customers whom it seeks to serve.

My hon. Friend makes a powerful point about the effect on mail recipients. Sometimes, the regulators’ market view can be too narrow. They regard the Royal Mail’s customer as the person posting the letter, and in the sense of who passes on the cash that is the immediate customer. However, from our constituents’ point of view, the recipient is very much the beneficiary of the Royal Mail. Therefore, the universal service should protect the recipient as well as the poster.

My hon. Friend makes a very good point. He strikes at the heart of the lack of understanding, particularly in Postcomm and Postwatch, of the market and what competition within that market involves. For that very reason, I have used the term “consumer” rather than “customer”. We should consider the market as an unusual one in which “consumer” includes recipients as well as senders. To use the term “customer” is slightly misleading.

Providing equal access to our postal system, regardless of location, is an essential part of that system, and any attempt to erode that should be challenged. Postcomm’s statutory duties include taking into account the interests of customers in rural areas. Indeed, Postcomm has an obligation to ensure that, when promoting effective competition, it has regard to the interests of residents of rural areas. It must ensure that no section of the population is discriminated against. I cannot see how it would be possible for the regulator to claim that it was acting in the best interests of rural communities while allowing the introduction of zonal charging as proposed by Royal Mail.

Postcomm recently held a forum discussion on zonal pricing. Postwatch pointed out that the initiative had received “no customer support whatsoever” and that

“this change will be unreasonable for users of the service”.

At the same meeting, Nick Wells, TNT Post’s chief executive, said:

“Zonal pricing is bad for everyone—both consumers and businesses alike. It is complicated, reduces transparency and creates a tremendous amount of uncertainty. No one is asking for it, and it will threaten deliveries to the millions of people who live in rural areas. So why bother? It isn’t necessary. In fact, Royal Mail could haemorrhage millions of pounds from the introduction of zonal pricing, which will slow down the modernisation of the UK postal service. Everyone will lose as a result of zonal pricing.”

I could not have put it better myself.

I hope that Postcomm will reject the Royal Mail application. If it does not, I promise the Minister this: we shall be back here again and again until the Government provide meaningful protection for the interests, needs and wishes of my constituents. I warn the Minister that next time, I might bring the hon. Member for Crewe and Nantwich. He has been warned.

rose—

Order. I should like the wind-up speeches to start at 10.30. Several Members are indicating that they would like to contribute. I ask them to show a little self-discipline so that everybody gets in.

I congratulate the hon. Member for Orkney and Shetland (Mr. Carmichael) on his choice of debate and the thorough way in which he made his case. I cannot promise to have the same style as my hon. Friend the Member for Crewe and Nantwich (Mrs. Dunwoody), but I shall do my best to make a small contribution to the debate.

Last night, my bedtime reading was the Labour party manifesto. The hon. Member for Orkney and Shetland briefly referred to one of the promises that we made in it, which I shall read out for the record:

“We will review the impact on the Royal Mail of market liberalisation, which is being progressively introduced under the Postal Services Act 2000 and which allows alternative carriers to the Royal Mail to offer postal services.”

My hon. Friend the Minister has been a staunch defender of the manifesto. I was pleased that he and his ministerial colleagues defended the concept of the publicly owned Royal Mail making its decisions on Mr. Leighton’s recent proposals. I have high hopes that the review will be able to proceed without further delay. It appears to be a mechanism under which the impact of the Postal Services Act 2000 and the performance of Postcomm and Postwatch, to which the hon. Member for Orkney and Shetland referred, can be reviewed. In many circles, there is disappointment at the performance of Postwatch in comparison, for example, with Energywatch, which I would say was a stauncher defender of consumer interests. I hope that the review will proceed without delay and I would be interested in the Minister’s thoughts about how it might proceed.

It is interesting that Postcomm has made various calculations of the cost burden of the universal service obligation. A few years ago, it said that that was £80 million-plus—no doubt it has increased since then. Many things have changed in the postal market since Postcomm last looked at it. Even with bulk mail and so on, the postal market is declining for the first time in many years. Royal Mail’s share of bulk mail is also declining quite rapidly and about 40 per cent. of such mail is now in other hands. It is interesting to see how the rest of Europe is responding to the issue. Oxera, an Oxford-based research consultancy, has produced a report entitled “Funding universal service obligations in the postal sector” that considers about eight different postal services throughout Europe, including La Poste, Poste Italiane, Magyar Posta, Cyprus Post and Poczta Polska. Royal Mail did not contribute towards the study, which nevertheless provides interesting ideas, some of which the hon. Gentleman referred to.

If Royal Mail continued to lose market share, it would be possible to set up a compensation fund, as has been done to protect the universal service obligation in telecoms markets around the world. It would be possible to put a mark-up on the access charges for Royal Mail’s competitors. In Finland, a system of “pay or play” is already in place. In other words, competitors to the established operator contribute to the universal service obligation through delivering, or by paying towards it.

Those are many possibilities for the future. There is a feeling among Back Benchers of all parties that Postcomm is being a little complacent in its mantra that the only way to preserve the universal service obligation is to continue cost-cutting at Royal Mail—basically, that is its answer. Obviously, that is a comfortable message to give from offices in London, but ultimately it has implications for the terms and conditions of postal workers.

To be fair, Royal Mail has stripped out a lot of costs in recent years. It will be interesting to see whether Postcomm will at any stage feel the need to think about the perfectly legal measures that are being considered in other parts of the European Union.

Finally, it would be interesting to hear from the Minister about progress on other Royal Mail issues that are relevant to the pursuit of the universal service obligation. Obviously, certainty at the top is vital for any organisation. I note that Mr. Leighton has written a book entitled “On Leadership: Practical Wisdom from the People Who Know”—like the hon. Member for Orkney and Shetland, he does not believe in underselling his case. I do not know whether Mr. Leighton intends to spend more time on the lecture circuit. Incidentally, many Leeds United supporters remember his leadership while he was on the board of their club. At one stage, the Department was thinking of appointing a vice-chairman to bolster Royal Mail’s leadership, but I do not know whether that will happen.

As the Minister has often said, the Government have been generous in providing investment facilities to the Royal Mail. Are those being implemented? I hope that it is not still smarting from the rejection of some of its plans. Finally, while the universal service obligation is delivered during the summer, it would be extremely helpful if the industrial dispute could be solved. That will require both sides to talk together. I hope that, without taking sides, Ministers will encourage both parties to talk so that we can avoid an extremely damaging postal strike over the summer.

I congratulate my hon. Friend the Member for Orkney and Shetland (Mr. Carmichael) on securing this important debate. As he pointed out, it is also timely.

Recently, with my hon. Friend the Member for Truro and St. Austell (Matthew Taylor), I met Sarah Chambers, the chief executive of Postcomm, to discuss this very issue. Clearly, Postcomm remains confident for the time being that simple stamp mail will retain a uniform price. However, business bulk mail does not go only to business and it does not stay in bulk. Utility bills are sent out in batches across the entire country, but as we heard from my hon. Friend, any higher costs for delivering bills to rural areas will soon be passed on to the constituents in those areas.

As delivering to rural communities becomes unprofitable for mail order companies, the very sustainability of the stamped mail service will be put under threat. The delivery of letters between family and friends and that of bulk mail from advertising companies cannot be divorced from each other. Postcards and flyers come on the same van and one supports the other.

How long will it be until so few businesses want to pay the extra to deliver to rural areas such as Cornwall that Ministers say that rural deliveries are simply unsustainable and implore Parliament to re-evaluate how the universal service obligation is delivered? Will everybody be asked to collect their mail from their local post office, providing that it is still there? The price increases associated with zonal pricing are not clear, either. Postcomm says that there will be a small rise in the first year, but what about the second year or subsequent years? How long will it be until there is a significant increase in the price of delivery of business mail to rural areas? How long before the constituents whom hon. Members are here to represent, such as those in Cornwall, the Lake district and the highlands and islands, start to feel the pain and receive fewer deliveries?

It is worrying that Postcomm says that it does not have the final say on the proposals and that its remit is to protect the universal service obligation. As we have heard from the hon. Member for Selby (Mr. Grogan), it sees protecting the profitability of Royal Mail as the solution to how mail services will continue in the future. Bulk mail products, save for one or two, are not covered by the obligation, and so the whole service could be undermined in a piecemeal fashion.

It is seven years since the Postal Services Act 2000. As my hon. Friend the Member for Argyll and Bute (Mr. Reid) said in the Whitsun Adjournment debate, perhaps it is time to take stock and to review the universal service obligation with communities in mind, not competition. I have also recently highlighted concerns about so-called final collections. Many rural villages have found that their final collection happens shortly before the morning mail is delivered, which prevents people from responding by return and leaves the first class service with a two-day turnaround.

Royal Mail has turned its business around and, on the whole, it provides a good service. We should support it in finding solutions that can ensure its profitability without undermining its service. That is why I am pleased that my party has come forward with proposals that we believe will allow Royal Mail to be free to compete on a far fairer footing. Perhaps the Minister will be able to tell us why the Government restrict Royal Mail when it could flourish, but refuse to do so when its proposals could have a serious and deleterious effect on rural communities.

I know that other hon. Members want to speak, so I shall keep my remarks brief. It is our duty as Members of Parliament to defend the universal service, and I cannot impress on the Minister strongly enough just how important it is that we do not start to chip away at it. Our postal service was once the envy of the world. It has to change, but as that change occurs, we need to keep our country together and ensure that the service provided to rural areas is on a par with that provided to urban areas. We need to ensure that those who live in remote areas are offered the same service as those who live in more populous areas and that those who live in more deprived communities do not get a lesser service than those in more privileged communities.

The unwritten assumption behind such a move, which is often spoken of behind the scenes, is that those who live in rural areas, especially remote rural areas, choose to do so, rather than that they were living there in the first place. The assumption thus follows that this is a class issue in that the middle classes have a subsidised service so that they can live in rural areas. Does my hon. Friend agree that that assumption, which pervades a lot of views about the cost of services in rural areas, needs to be challenged? We are talking about deprived rural areas, especially those in many of the most remote parts of the United Kingdom.

As ever, my hon. Friend makes the point far more eloquently than I ever could. Given that there are no London Members here other than the Minister, we should draw attention to the fact that high costs for delivery have been a problem in London, too. The issue affects the whole country, and I am convinced that zonal pricing would be a retrograde step that would undermine the universal service obligation, which we should all be here to protect.

I am delighted to be able to speak briefly on the matter, and I congratulate the hon. Member for Orkney and Shetland (Mr. Carmichael) on raising it. I presume that it is a second choice, because its title is nice and bold on the paper that notifies us about upcoming debates.

For a good or bad reason, I was on the Committee that considered the Postal Services Act 2000 when it was a Bill, so I have some knowledge of what happened at that stage. To be fair, the Government made great play of the fact that it was not a privatising Bill. All the way through we heard the mantra of liberalisation, and that it was about ensuring that Royal Mail and the postal market were fit for purpose and were fit to compete in the UK market and further afield. It has not quite worked out that way, and that is why it is fair to ask the Minister, his team and Royal Mail to reconsider the Act. It was made clear when it was considered in Parliament that the universal service obligation was not an add-on and could not be undermined but was a key part of the Act. If it is not working properly, and if changes could threaten that universal service obligation, we should go back to the legislative process.

The then Minister for Competitiveness, now the Secretary of State for Education and Skills, made it clear that the Government would consider open-mindedly how we could maintain the universal service obligation. I reiterate the call for the Minister present to tell us whether they will consider how that is working, produce a report and talk to MPs from all parties to consider some of the implications. It is not just about Royal Mail per se. I always get a bit confused about Royal Mail’s domain, because it is made up of different elements that seem to drop in and out of what we mean by Royal Mail. Of course, it includes the parcel service, but it also included the sub-post office network.

The Minister knows that Gloucester sorting office might close. That is about presence on the ground, so I do not dismiss it, although I know that it does not form part of the debate. However, what is part of the debate is the controversy over the 2,500 sub-post offices that are likely to be hit by the proposals. I am sure that all hon. Members have their spies in the camp, as I have, but we have just had a meeting to go through the potential process. As always with Royal Mail, it is cloak-and-dagger stuff. No one is supposed to know that the meeting has taken place, and the only thing we know is the compensation package. None of the sub-postmasters or sub-postmistresses know whether their office will be one of those notified for closure, but some areas are going more rapidly. Once a decision is taken, we will be given a month to make representations, but the opinion is that the circumstances would have to be extraordinary for the decision to close an office to be changed. It is not much of a consultation, then, is it? It stresses the point that once a decision is made it is made.

Who is doing the work to ensure that there is a rural provision and that the three-mile rule is kept to? Sub-postmasters and sub-postmistresses have been asked to give their opinions by e-mail—an interesting statement on Royal Mail’s confidence in its own network—but who will be carrying out that co-ordination? It affects the universal service obligation, because if we do not have sub-post offices, we will not have a universal service. I accept that some areas are already without post offices, and we are told that is possible to put new post offices back in place where the need is not being met. That is an interesting point on which we need to dwell.

An interesting aside that presents a dilemma is that in one respect the universal service obligation works like osmosis—it is there because it has always been there and we assume that it will continue. With zonal pricing and the potential loss of sub-post offices, that must not be taken for granted.

Royal Mail cannot have it both ways. There is an incident at the moment in my constituency, where a post office might change hands for all sorts of reasons. It is a good post office and has a future, and I imagine that it will be maintained. Royal Mail wants to micromanage it, and the sticking point is that it wants to set the opening hours. It is not about whether it opens on a Wednesday or a Thursday; it is about whether it is open at lunchtime, even though the whole town shuts at lunchtime. That may be quaint, but in some rural areas people might have something of a siesta. It has been demanded that that post office should open through the siesta, which is not a good example of localism. On one hand Royal Mail is trying to micromanage the post office, but on the other it is trying to lose its responsibilities and say “It’s nothing to do with us, guv, it is to do with the market, and if the marketplace doesn’t allow the universal service obligation to operate, we want to lose our responsibility.” It is not fair to put the decision just in the hands of Royal Mail.

I hope that the Minister will at least consider—I shall put it no more strongly—whether, as was implied in the passing of the 2000 Act, other major national carriers, not just companies delivering the odd piece of post here and there, should, as my hon. Friend the Member for Selby (Mr. Grogan) mentioned, pay a levy to ensure that the key part of that Act is being adhered to. Otherwise, the universal service obligation will be under attack and will one day just disappear.

It is a pleasure to serve under your chairmanship this morning, Mr. Caton. I add my congratulations to my hon. Friend the Member for Orkney and Shetland (Mr. Carmichael) on securing this debate on an item that is of particular importance to both our constituencies, particularly on the islands, and on the powerful case that he made against the proposals for zonal pricing and the problems that it will cause.

One of the basic principles of Royal Mail has always been that whatever part of the country someone lives in, the cost of sending a letter to any other part of the country is exactly the same. That is an important principle for sustaining rural communities and the small businesses in them. The universal service obligation means that anyone in the UK can post letters and parcels to any other part of the country at the same rate, and it guarantees at least one delivery and one collection of mail throughout the country six days a week, excluding public holidays.

However, I have concerns that the USO is slowly being chipped away at. My hon. Friend the Member for Orkney and Shetland mentioned the case of Parcelforce, which shows the danger of what can happen in an entirely free market, free from the safeguards of the USO. Parcelforce has divided the country into three zones. Zone 1 is the vast bulk of the country, zone 2 is the highlands and islands and zone 3 is Northern Ireland, the Isles of Scilly and the Isle of Man. It costs far more to send a parcel from zone 1 to zone 2 or 3 than to send it to another part of zone 1. That means that some small parts of the country get a far worse service than the rest of the country. The pricing structure is complicated, but sending a parcel to the highlands and islands costs roughly double what it costs to send one anywhere else in the country. That is an indication of what would happen to postal services in the highlands and islands without the USO.

There are, of course, private companies in the parcel delivery market, but Parcelforce is a big player and the rates that it sets are largely the charges that others have to compete with. Parcelforce charging more to deliver to the highlands and islands makes it easier for private parcel companies to do the same. Parcelforce is an unelected quango and has the important job of deciding what is and is not covered by the USO.

We have heard from other speakers about the threat to the USO from Royal Mail’s application to introduce zonal pricing for certain types of bulk mail, which is a large part of the postal market these days. That means that organisations such as utility companies and magazine delivery companies will be charged more for sending bills or magazines to customers in remote areas. The initial proposal from Royal Mail is to increase the charges by 4.8 per cent. for postage to what are called low-density areas, such as my constituency and, I suspect, those of most hon. Members who have spoken, compared with a 2 per cent. fall for sending to a high-density area. That would mean a price differential of about 7 per cent. between living in a remote rural area and in a large town or city. We all suspect that that is only the thin end of the wedge. If the principle is established that Royal Mail can charge more for deliveries to remote rural areas, we will all expect the differential to increase greatly. In its submission to Postcomm, Royal Mail claimed that it costs about 11 per cent. extra to deliver to a remote rural area, which is perhaps an indication of what we will be faced with if the proposals are accepted.

The proposals would clearly have an unfair impact on recipients of mail who live in remote rural areas. Although they would perhaps not be buying the stamps, it is quite obvious that utility companies, banks and magazine distributors are likely to increase their charges to those customers, as they will want to recover the charges. There would also be an unfair impact on companies that regularly send bulk mail to residents of rural areas. The most obvious example that springs to mind is publishers of farming magazines. There would also be an impact on councils in rural areas, because when they sent rent or council tax notices they would have to pay more than they currently do or than a council in a big city would have to. I hope that Postcomm will reject Royal Mail’s application, mainly because it would impact unfairly on people living in rural areas but also because it would mean costs to big organisations such as utility companies and banks, as they would have to change their computer systems to be able to cope with the extra cost of mailing customers in remote areas.

Another example of Postcomm not properly protecting the USO is the 15-minute rule, which it has allowed Royal Mail to introduce from 1 July this year. It will extend the current 15-minute exclusion rule, which until now has applied only to individual premises accessed by a private track to which it would take the postman more than 15 minutes to carry out a round trip. The rule applies mainly to a single house at the end of a private track. Royal Mail has applied to Postcomm to extend that exception from a single house to a group of houses, and Postcomm has accepted the application.

I shall quote from Postcomm’s decision document and direction, “Policy Review of Exceptions to Royal Mail’s Universal Delivery Service”, which was published in April. Ruling 11(c) introduces a new long-term exception in the case of

“the need to make round trips to premises over private roads or tracks (whether or not they are the subject of public rights of way) which are in poor condition (but not in such poor condition as to preclude delivery on health and safety grounds) in excess of 15 minutes…by a vehicle driven in a safe manner, or…by foot if access by vehicle is not reasonably practical.”

Whereas I would be perfectly happy to accept an exclusion on health and safety grounds, I find it impossible to accept Postcomm’s decision. It has allowed Royal Mail to exclude a group of houses, even if it is safe to deliver to them, simply because it would take more than 15 minutes to carry out the delivery. That is simply a cost-cutting exercise and has nothing to do with health and safety. It chips away at the principle of the USO. The highlands and islands are full of badly maintained tracks, so the exclusion will deprive many of my constituents of their daily deliveries.

All is not doom and gloom, however. There is at least one piece of good news. At Postcomm’s insistence, Royal Mail agreed to review its recent decision to bring forward collection times in rural areas. When Royal Mail introduced earlier collection times, the only collection of mail in some rural areas was as early as 9 am, which is ridiculously early. That means, for example, that the mail in many rural areas is collected before that day’s mail is delivered, thus depriving people of the ability to reply to mail the same day that they receive it.

However, rather than reliance on Royal Mail’s review, there should be safeguards in the USO. As well as specifying at least one collection and one delivery each day, it should specify the time of the last, or only, collection and the latest time for the daily delivery.

Nearly every hon. Member who has spoken this morning has said that, as it is seven years since the passing of the Postal Services Act 2000, it is time that the Government reviewed its operation. I certainly endorse that view. It is obvious that if we do nothing, Royal Mail will gradually lose more and more of the profitable business to private operators, leaving it largely responsible for delivering mail to remote communities. Obviously, that is the more expensive part of the business.

A review is needed to create a more level playing field for Royal Mail and the private operators, otherwise the USO will be chipped away by Postcomm decisions and the gradually increasing cost of a stamp. I echo the suggestion that has been made by other hon. Members that a levy should be placed on major bulk carriers that do not fulfil the terms of the USO, and that the proceeds from it should be used to pay Royal Mail for the extra cost that it incurs in fulfilling the USO. That is the only way to create a level playing field. Clearly, a situation in which we simply allow the private sector to cherry-pick the lucrative parts of the market and leave Royal Mail with the USO would be unsustainable. A levy would create a level playing field.

We will be heading for a serious situation if steps are not taken now, so I hope that, in his winding-up speech, the Minister will respond favourably to the calls for a review and for imposing a levy on large-scale private operators.

It is a pleasure to serve under your chairmanship, Mr. Caton, for this important debate secured by my hon. Friend the Member for Orkney and Shetland (Mr. Carmichael). He chose a topical and timely subject, and reminded us again of the importance of the service that Royal Mail provides to all our constituents, and of ensuring that the best of that service is preserved, protected and enhanced, not chipped away at and reduced.

My hon. Friend highlighted the heart of the debate and the heart of what the Minister must address: the apparent conflict between the universal service obligation and the impact of market liberalisation. It is interesting to think back to when the market was being liberalised. Postcomm argued that the USO was an asset for Royal Mail, not a burden, yet, as it manages the liberalisation process, it seems to be entertaining reductions in the quality of what it called an asset. Clearly, Postcomm must consider carefully how it is managing liberalisation, and ensure that it is not damaging what was an asset or undermining what it said would be enhanced by competition.

My hon. Friend made it clear that the present situation has come about because of the opening up of the letter market, which was the result of European Union regulations and the decision to open up the whole of the European market—albeit not at the pace that it is happening in the UK. The UK has gone much faster and much more fully into competition. We now hear that the rest of Europe wants to back-pedal, to slow down—other countries do not want to keep up with the UK, so again we have a differential market.

I think of what happened in the energy market. Okay, there were upsides to the UK in getting competition in and in improving efficiencies, but there were also downsides to linking two markets—a free market and a rigged one. The linkage impacted on our high-energy consumers.

We now must consider the pressures on Royal Mail. The competition in the rest of Europe is not subject to the same challenges. Those companies are allowed to come here to do what they like, yet Royal Mail is not allowed to take reciprocal action in the rest of Europe and manage its business in that way. The regulator must consider carefully how the UK market is regulated, and it must protect what is valued by UK customers, rather than simply view the situation as the introduction of competition. The playing field across the whole of Europe is not at all level.

My hon. Friend highlighted the long-held grievance about what happened when parcel services were completely opened to competition and the reality of how consumers in rural and difficult-to-serve areas are affected when competition strikes. In many areas, there was a drop-off in service as the many rival delivery companies could not work out where people in rural areas lived. The quality of delivery became much worse. Often, Royal Mail staff—still public servants at heart—provided directions to the rival companies when delivery staff got lost on the rural roads while trying to find properties without names or addresses. Royal Mail knew that a parcel should be left in the shed around the back and exactly how to deliver parcels if there was no letter box and no one at home.

Not only has there been a loss of service across rural areas, but the pricing issue, which used to affect only the highlands and islands, has spread far wider. The north-east of Scotland, which was protected by being near the big city of Aberdeen, is now also affected by differential prices set by the delivery companies. As I emphasised in my intervention, ultimately it is the consumer who suffers, because the company that sends out the product puts a surcharge on it to cover the extra delivery costs. We have a very real challenge. What happened with zonal pricing in the parcel market is a warning sign that the regulator needs to take fully on board.

My hon. Friend made a point about cost-reflective pricing. The fact that what is proposed will just be a starting point and that Royal Mail will want to increase the differential brings uncertainty to the market, to people using the market and to business planning. Bulk mailers do not want such pricing. Postcomm will have to be extremely vigilant during the consultation to ensure that it protects the universal service and does not allow Royal Mail to go down that road.

The hon. Member for Selby (Mr. Grogan) said that the Labour manifesto promised a review of the impact of the Postal Services Act 2000. Royal Mail’s application for zonal pricing is a timely warning that we must review the Act to avoid irreversible damage. I hope to hear from the Minister how the review is to be implemented to produce a timely response. Royal Mail has responded dramatically to the challenges of competition, and it has done much to improve its services and operations. It must be allowed to bed in those improvements and to adapt to the pressures of competition in a way that does not destroy its operation.

When introducing competition, regulators try to get it absolutely right, but there is a risk that they will get it wrong by not introducing competition efficiently enough and therefore not getting the full benefit of it, or by introducing it too dramatically and thereby destroy what they are seeking to improve. The risks are not even. The risk of going too slow is that the full benefits of competition are not realised as quickly as they might be, but the risk of going too quickly is that the operation that was to be improved is destroyed, and it becomes impossible to rebuild it or recover.

This country has a great asset in the universal service currently provided by Royal Mail. The regulator must err on the side of not destroying it, even if that means that we do not get the full benefits of competition opening up the market as quickly as might otherwise be the case. A request for a review of how the regulators are interpreting their role of protecting the USO would be an extremely important message from the Government. It would highlight how important the universal service is to this country and this House, and how it supports our constituents.

My hon. Friend the Member for North Cornwall (Mr. Rogerson) made an important point that should not be lost on Members who represent London constituencies. It is not only in rural areas that Royal Mail wants to set higher prices; it wants to load on higher prices for deliveries in London as well. The breaking up of the universal service obligation is a UK-wide issue that will have a UK-wide impact, so Members from across the country need to take an interest in what is happening.

The hon. Member for Stroud (Mr. Drew), who served on the Committee on the Postal Services Bill and therefore remembers the promises made at the time, reinforced the need for a review. He also highlighted sub-post office closures and the way in which that process is being handled, and raised concerns about a cloak-and-dagger consultation process whereby a fait accompli is announced and there is not time to respond. He also mentioned the review of the USO. We must not allow it to be chipped away until only a basic service is provided. As I have said, we have a great asset that must be preserved.

The hon. Member for Argyll and Bute (Mr. Reid) also talked about the delivery service. If health and safety is not at risk and communities that are located at the end of a track have been delivered to until now, it seems odd that suddenly they can no longer be delivered to. When we met with Postcomm in the early days of opening up the market, it kept emphasising that the USO is an asset to Royal Mail. If that is so, why is it contemplating changes, such as those relating to delivery, that undermine the USO? Clearly, Postcomm is starting to think that the USO is a cost. If that is the case, it will need to look at how it has set access pricing in the market, as that is one means in its immediate control through which it can establish how that cost is borne.

It is perhaps time to explore how, under EU regulations, a levy would work in this country in fundamentally underpinning the USO. The Government rejected putting on the statute book the right under EU law to have a levy, but it might be sensible to at least have the power to impose a levy so that the regulator has full freedom to consider how to preserve the USO. Without the ability to respond quickly when things start to go wrong, it will be difficult to rescue the operation.

I would welcome the Minister explaining his view of the right under the EU directive to use a levy to preserve the system, whereby mail providers that are not interested in providing a universal service contribute some of the cost of ensuring that all consumers get the same access to Royal Mail services.

I ask this in the spirit of genuine inquiry and in the hope that if it is put on the record now, the Minister might be able to find the answer by the time he replies. Is it not the case that, by virtue of the nature of the postal services directive and the direct applicability of EU legislation, it is possible to introduce a levy without primary legislation?

I would welcome that information from the Minister, because when we were debating the 2000 Act, there was concern that it had not been put on the statute book. Will the Minister say whether Postcomm has the power to go down the levy route without legislation? That would provide a chance to put a safety net in place. Will he also update us on his view of EU competition and what rival providers in the rest of the EU are doing to implement competition in the market to which Royal Mail should be allowed access? Will he inform us when the review of the Postal Services Act 2000 will take place, as mentioned in the manifesto? Finally, the changes are taking place when Postwatch is going through a major upheaval under the Consumers, Estate Agents and Redress Bill. Will the Minister say how scrutiny will be maintained in the consumer interest during the transition?

I repeat: the regulator said that the USO is an asset. If it is an asset, we should not allow it to be chipped away, but should consider how it can be maintained and conserved. The Government must ensure that Royal Mail serves all consumers across the UK; not just the easy consumers. The Government will not be forgiven if they allow such a valuable asset to be lost.

I join other hon. Members in saying what a pleasure it is to serve under your chairmanship, Mr. Caton. I also congratulate the hon. Member for Orkney and Shetland (Mr. Carmichael) on securing the debate and on the way in which he introduced it. This is an extremely good example of how a Westminster Hall debate should work. It is a relevant and topical issue that affects the most rural parts of this country. There are certainly genuine grounds for concern about the future of the universal service obligation and the debate has raised a significant number of questions for the Minister to answer. I welcome the contributions of all hon. Members and the points that they have made.

If might be helpful to consider what Royal Mail achieves at the moment. There have been concerns about whether it is still operating a first-class service—no pun was intended as it obviously also offers a second-class service—but Royal Mail collects every day from 115,000 pillar boxes, 14,000 post offices, and 90,000 businesses. It delivers some 82 million items of post a day to 27 million addresses, six days a week. It is a formidable operation and for the overwhelming majority of the time it works well.

It is interesting to consider international comparisons. The cost of a British stamp is 34p, which is by far the lowest cost in the whole of the European Union. Let us consider some other countries. In Spain the price of the average stamp is 56p; in Sweden, where there is open competition, it is 75p; in France, 91p; in Germany, 103p; and in Italy, 109p—three times the price of ours. Even at that price, Italy manages to deliver only 88 per cent. of mail the next day, compared with 94 per cent. in the UK. We have by far the lowest cost mail service and one of the best delivery achievement rates. The hon. Member for North Cornwall (Mr. Rogerson) said that we used to have service that was the envy of the world; I think that we probably still do.

Let us be clear that we are absolutely committed to maintaining a universal service obligation. As the hon. Member for Argyll and Bute (Mr. Reid) said, that means one delivery and one collection of relevant postal packages every working day at a flat rate. He talked about the danger of that being chipped away, but when we look at that definition, it is hard to see how it could be chipped away. Anything less than one daily collection or delivery would be in breach of that obligation and anything that was not charged at a flat rate would also clearly be in breach. It is encouraging to see the extent to which Royal Mail shares that view of how important the universal service obligation is. In a briefing sent in advance of today’s debate it said:

“Royal Mail is committed to the one-price-goes-anywhere universal service - it is at the heart of what we do, it is a unique service that is important to customers particularly those living in rural areas.”

Today, we are considering issues that go beyond the universal service obligation. The ability to fulfil the universal service obligation has traditionally been a result of cross-subsidy whereby the service in urban areas subsidises the service in the rural areas, and the business service is used to subsidise the social service. The ability of Royal Mail to cross-subsidise has been eroded by the nature of the competition that it faces, which has taken on the most lucrative parts of the market. The other companies involved have not been placed under a universal service obligation. That means that Royal Mail is being undercut by its competitors, which highlights a real failure of the European single market, as the hon. Member for West Aberdeenshire and Kincardine (Sir Robert Smith) has said. Ministers need to do more to resolve that. We are in an unacceptable situation; our market has been opened up to full competition yet Royal Mail is not in position to compete elsewhere.

We should pay tribute to Royal Mail management for what they have achieved. They are having to fight with one arm tied behind their back. They do not question the universal service obligation, but they are unable to break into other European markets and they face increasing competition in some of the most lucrative parts of the domestic market, as well as strict price controls. Yet, against that background, they have managed to move back into profit. We should pay tribute to Adam Crozier and his team and all those who work at all levels within the Royal Mail for their contribution to that achievement.

The situation is complicated further by the fact in many circumstances the competitors still use Royal Mail to cover the last mile of the mail’s journey, which means that they carry out the central part of the distribution before putting the mail in the Royal Mail’s system for the final delivery. The prices for that are set by Royal Mail as a mixture of wholesale prices which are agreed by Postcomm. That is done already on a zonal-pricing basis. Royal Mail has lost the most lucrative part of its business, but has to carry out the most expensive part itself.

Royal Mail emphasises that the changes it suggests are nothing to do with the universal service obligation. It has asked for the ability to use zonal pricing for business customers so that it can charge more according to how much it costs to make the delivery, as is the case already with parcel deliveries. The hon. Member for Orkney and Shetland described that as the Royal Mail going for the low-hanging fruit, but the reality is that if the company does not reduce its charges in the areas in which it faces the most competition and in the most important parts of the market, it will lose out to competitors, which means that it will be unable to cross-subsidise other parts of the network. He quoted concerns expressed by the head of TNT, but it is precisely the competition from TNT and others that is causing Royal Mail to make changes, so it is not at all surprising that the head of TNT does not like them.

Will the hon. Gentleman be quite clear about this? Is he saying that his party favours the Royal Mail’s approach? I have to say that that view would be ill-received in our communities.

We are absolutely committed to maintaining the universal service obligation, but recognise that in a highly competitive world, Royal Mail has to look at alternatives if it is to run its business profitably and effectively, although certainly its proposals contain significant flaws, which I shall come on to. At this stage, however, I am trying to set out some of the background to why the company is looking to go down this route. I hope that the hon. Gentleman will not seek to represent my comments in his local media as, “Tories say, ‘Get rid of local services to Orkney and Shetland’”. We understand why Royal Mail is looking in this direction, but we recognise the flaws as well, which I shall come on to in a moment.

Why is the hon. Gentleman so determined to define the universal service so restrictively, as the Royal Mail seeks to do, as applying to stamped mail only and not to bulk mail?

Because that is the definition given by Postcomm. We are using the legal definition that currently applies and we say that there should be no change to that.

As the hon. Gentleman just mentioned, the changes affect bulk mail only, not stamped or franked business mail. He expressed concerns earlier on behalf of the hon. Member for Crewe and Nantwich (Mrs. Dunwoody) about internet orders placed in his constituency posted as stamped or franked mail, but such mail will be exempt from the changes. The hon. Member for St. Ives (Andrew George) should not be concerned about internet orders placed in the Scilly Isles either, because they, being dealt with as stamped mail, will not be affected. We must be very clear about that. I understand why the hon. Member for Orkney and Shetland might wish to blur those aspects of the debate. However, we must be very clear about what is included.

The important thing is that customers buy certain products only because they have been contacted and given information about them, and that information goes out as bulk mail, which means that those businesses still have to send bulk mail. Again, we must come back to the point that the consumer is the end recipient. If there is differential charging, there will be differential costs to consumers.

I share the hon. Gentleman’s concerns, and I shall discuss them, albeit briefly, because the Minister will need plenty of time to respond. There are certainly fringe areas, but we must be very clear about what is being included. The proposed changes are not an assault on the universal service obligation. Royal Mail has said that that is sacrosanct, and we agree that it should remain so.

The European Union directive states that member states must ensure that universal service tariffs apply with certain principles—affordability, geared to costs, transparency and non-discrimination. Postcomm proposes that those principles be applied when considering the application for zonal tariffs. It would be interesting to hear whether the Minister believes that consumers receiving such post would be discriminated against as a result of the changes.

It has been reported—we have covered this in today’s debate—that the measures might have an adverse effect on businesses based in rural areas using bulk mail for operating purposes, as the hon. Member for West Aberdeenshire and Kincardine just said. Again, will the Minister quantify his assessment of the problems that that might create for small and medium-sized enterprises in rural areas? There have been reports that the measures might be the thin end of the wedge and that the USO will be eroded gradually. Will the Minister give assurances on behalf of his Department—for as long as it continues to exist—that he will oppose any steps to erode the USO?

The Highland council’s submission to Postcomm on the application by Royal Mail noted that it could become prohibitively expensive for companies to circulate their correspondence and will result either in a reduction in services provided in affected areas or in the costs being passed on to consumers. Does the Minister share that analysis? What assessment has he made of the likely impact of the proposals on the standard of living in profoundly rural areas?

The hon. Member for Orkney and Shetland made valid points about the inherent absurdities of zonal pricing. I would be grateful for the Minister’s response to that as well. It would appear to be more expensive to send something within the zone than from there to an urban area. That does not seem to make economic sense. We look forward also to his response to issues raised today about whether other carriers should be surcharged to assist the funding of the USO and whether that would require primary legislation.

Other useful issues have been raised in the debate. The hon. Member for Stroud (Mr. Drew) talked about the closure programme and the unacceptable way in which that has been handled. The hon. Member for Argyll and Bute talked about the changes to early collection times.

This debate goes to the heart of the future of the postal service’s operation in the 21st century. We all agree, I think, on the importance of preserving the universal service obligation. We recognise also that Royal Mail must be allowed to adapt to new competition. Some 90 per cent. of its business comes from business post, which is vital to subsidising social mail, where the company is making big losses. To many consumers, that is the most important thing to preserve. If we do not allow Royal Mail to compete effectively, the ability to subsidise social mail will decline, with severe consequences for the cost and quality of postal services for all of our constituents. However, we are all right to be wary of where the changes might lead. The debate has raised significant and legitimate questions on which we would welcome the Minister’s reassurances.

It is a pleasure to see you in the Chair, Mr. Caton. I begin by congratulating the hon. Member for Orkney and Shetland (Mr. Carmichael) on securing the debate and by expressing my appreciation to all hon. Members who have contributed to this interesting and useful discussion. The hon. Gentleman spelled out clearly and fully his concerns about the future of the universal service obligation. I hope to be able to address the specific points raised by him and other colleagues.

Let me start by making it clear that the Government consider the maintenance of a universal postal service to be of the highest importance. I can assure the hon. Gentleman that there are no plans to abandon the universal postal service obligation, which is an obligation under EU law. The Postal Services Act 2000 reflects that and requires the universal service to be provided at an affordable, uniform tariff throughout the UK. The Government have no plans to change that requirement.

As well as enshrining the obligation in primary legislation in the Postal Services Act, we established Postcomm as an independent regulator and gave it statutory duties under the Act, with the primary duty of ensuring the provision of a universal postal service at an affordable, uniform tariff. Postcomm ensured that the obligation was written into Royal Mail’s licence as the universal service provider.

The universal service is written into law as well. Section 4(1) of the 2000 Act guarantees a delivery every working day to homes across the UK, a collection every working day from access points throughout the UK and a uniform and affordable price for posting a standard letter. Postcomm has taken the lead among Europe’s national postal regulators by initiating a thorough public consultation on what services should be enshrined as “universal services”.

In June 2004, following a year-long review, Postcomm listed five areas of service offered by Royal Mail that the company will be required to provide as universal postal services at an affordable flat rate. They are Royal Mail’s first and second class services, Royal Mail’s standard parcel service, a registered and insured service, a range of support services to ensure the safety and integrity of the mail, and an international mail service.

Postcomm is responsible for defining the scope of the universal service and may choose periodically to revisit it. Although there will be exceptions, they can be allowed only in specific and restricted circumstances. The 2000 Act is clear on that by asserting that the universal service is provided

“except in such geographical conditions or other circumstances as the Commission considers to be exceptional”.

Following a wide-ranging consultation, Postcomm published a policy statement in January 2003 in which it explained the circumstances under which Royal Mail could be exempted from its licence requirement to deliver letters to all homes or premises every working day. Long-term exceptions can be justified only, for example, in cases where there is a risk to the health and safety of Royal Mail staff, or in cases of geographical remoteness, to which the hon. Member for Argyll and Bute (Mr. Reid) referred.

The reasons for building that exception into the Act are clear. It is recognised that there are some circumstances in which it might be impractical to deliver and collect mail on a daily basis. The responsibility for determining those circumstances rests with the postal regulator, Postcomm. Consequently, Royal Mail requires authorisation from the regulator on exceptions. In such cases, there is a formal process involving four stages of assessment and scrutiny, under which any proposed exemption is carefully examined by Postcomm, together with the Consumer Council for Postal Services—Postwatch. Postcomm’s exceptions policy is designed to ensure that the number of homes or premises excepted from delivery every working day is kept to a minimum. I understand that just over 2,800 of the 27.5 million addresses in the UK are exempted from the universal obligation.

Postcomm fully opened the UK postal market to competition in January 2006. It is now developing a strategic review on how postal regulation should develop in the medium to long term. Specifically, Postcomm is addressing three fundamental questions: first, how the postal market might develop over the next five to 10 years; secondly, what postal users will need from the universal service and how that will be best provided; and, thirdly, what is the best long-term framework for promoting effective competition and deregulation. Following an initial consultation in 2006, Postcomm is expected to bring forward proposals later this summer. It is important that all those with an interest in postal services make their views known. Given the comments that have been made in the debate, I am sure that all hon. Members who have contributed are waiting for those proposals so that they can respond to them.

A number of hon. Members mentioned the levy. The Government have not said anything specific about the levy, but the 2000 Act allows Postcomm to put a levy on other operators to fund the USO, if that is necessary. Several hon. Members, including my hon. Friends the Members for Selby (Mr. Grogan) and for Stroud (Mr. Drew), raised the issue of “pay or play”, which is contained in the proposal for the third postal services directive. The UK strongly supports the option for USO funding. To respond to hon. Members’ questions, it is possible to raise a levy, if necessary, because Postcomm’s primary responsibility under the 2000 Act is to sustain the universal service obligation, and a levy would certainly be one way of doing that, via licensing obligations. I understand that the third postal services directive has been agreed and that it is expected to be introduced some time in 2008.

Let me respond to the question about conducting a review of the working of the 2000 Act, which was set out in our manifesto. The Government’s view is that that will not be appropriate until the strategic review has concluded, but that it might be appropriate after that time.

The hon. Member for Orkney and Shetland raised the issue of zonal pricing, as did virtually every other hon. Member who contributed to the debate. It is clear that Royal Mail is interested in charging bulk mail companies for the delivery of mail on a zonal basis, given that different delivery footprints, as they are known, have different costs, according to the geography and population density of the delivery area. There is, however, a critical consideration to bear in mind on zonal pricing. Even if it is ultimately agreed by the regulator, it will apply only to bulk mail products on which prices are negotiated commercially by Royal Mail. Zonal pricing will not extend to universal services. There is no question of the consumer being charged different prices for single-piece letters deposited in letter boxes simply because they are addressed to different destinations in the UK. As we know, international mail is different because prices vary according to the overseas destination.

Will the Minister give way?

If the hon. Gentleman will allow me, I have several points to make about zonal pricing, which might deal with the question that he wishes to ask. If I do not cover it, however, I will of course be happy to give way.

Hon. Members asked about the effect of zonal pricing on the recipient. That is a matter for Postcomm to take into account in its forthcoming consultation, which is due in the next few months. As I have mentioned, it is vital that all interested parties participate in the consultation when Postcomm issues its proposals. Postcomm is responsible for safeguarding the interests of vulnerable consumers, too.

I cannot remember the exact figure myself, but will the Minister remind the Chamber what percentage of the letter post market will be affected by the situation involving bulk mail? My recollection is that the figure is substantial. Does he not understand that that is the root of concerns about the chipping away of the universal service? Whatever the legal definition might be, the layman or woman in the street would consider that mail to be part of a universal service in any meaningful sense.

I do not have the figure that the hon. Gentleman requests to hand. It might be handed to me in a moment, but if it is not, I will write to him and other hon. Members who have contributed to this debate. [Interruption.] I am advised that bulk mail constitutes about 85 per cent., which is a significant element of the market, as he suggested.

The hon. Member for Wealden (Charles Hendry), among others, asked about the differential market in the EU. It is important to remember that we liberalised the market in the UK for consumer benefit, not to secure reciprocal access. Postcomm takes those elements into account when considering what Royal Mail can and cannot do in its overall business and when setting its price controls, which are to be reviewed later this year. According to Postcomm’s figures, 18 months after the liberalisation of the market in 2006, the effect of competition is that Royal Mail still has 96 per cent. of the market. The suggestion that Royal Mail has been decimated by its competitors therefore does not really stand up.

The Government consider the universal service to be of the highest importance. We have tasked the regulator with the duty to protect the provision of the universal postal service. It is not for the Government to become involved in decisions on deliveries to specific areas because that is rightly the responsibility of Postcomm. Postcomm has put in place a robust process for examining any proposed exceptions on the basis of established criteria. It also undertakes public consultations from time to time so that all postal service stakeholders may make known their views on whether the universal service meets consumer needs, or whether it should be modified. It is right that it should do so. As consumer needs and the wider communications market evolve, it is in all our interests that the universal service evolves with them. That is the best way of ensuring that mail services have a sustainable future.

I was asked about the consultation exercise on the Post Office restructuring programme. There will be considerable advance planning among Post Office Ltd, Postwatch and local authorities before proposals come forward, so they will be quite refined before the six-week consultation period.

Since the Minister has two minutes remaining in which to speak, will he say what he is doing to encourage his colleagues in other Departments to use the Royal Mail for their bulk mail?

As the hon. Gentleman knows, the Prime Minister established a Cabinet Sub-Committee—the Post Office Network Committee, or MISC 33, as it is called—to review Post Office Ltd. It has created a framework for all the main Departments to discuss Royal Mail Group and Post Office Ltd and the services that they provide. We have thus reinforced the Government’s awareness of the importance of the services provided by Royal Mail and the Post Office. Notwithstanding the fact that Departments have a responsibility to the taxpayer to ensure that they get the best possible value for money from services, I assure the hon. Gentleman that the £1.7 billion that we are committing to Post Office Ltd and the £3.5 billion that we have committed overall to Royal Mail Group demonstrate the Government’s full commitment to both the universal service obligation and the post office network. We are determined to ensure that that is in the best possible position and that it has a secure financial footing.

The September 2002 dossier, entitled “Iraq’s Weapons of Mass Destruction”, was central to the Government’s case for war in Iraq. There is little doubt that the dossier was “sexed up”—that the balanced judgments and reservations of the intelligence community were transformed into near certainties—but we also know that Lord Hutton and Lord Butler ultimately cleared the Government of sexing up the dossier, because they believed that the Joint Intelligence Committee had authorship and ownership of the document.

However, I suggest that recent evidence casts doubt on that conclusion. Part of that evidence points not only to a hitherto unknown first full draft of the dossier, written by a press officer, but to its importance in the drafting process itself. Indeed, it shows that spin doctors were on the inside of the drafting process and were integral to it, and that the JIC did not approve or sign off the document in any meaningful way. That is contrary to what we have been told by the Government so far. It is therefore no wonder that the dossier was characterised by spin and exaggeration.

I make no apologies for raising this issue four years after the event. It is important because the dossier was central to the argument for the war, which is still costing lives today. It is important because a public servant lost his life, and because, as the Chancellor of the Exchequer has admitted only very recently, we must learn the lessons from this episode and never again go to war on a false premise.

May I say at the outset that I would welcome any interventions from the Minister, as such interventions would help our discussion? I hope that he will show me the same courtesy when he is speaking.

Lord Hutton cleared the Government of sexing up the dossier, because he believed, as we all believed, that the dossier

“was prepared and drafted by a small team of the assessment staff of the JIC”

and

“was issued…with the full approval of the JIC.”

Since Parliament voted for war in March 2003, we have learned much more about the role of spin doctors in the drafting process. For example, from the Hutton inquiry, we know now what Parliament did not know in 2003—that Alastair Campbell commissioned the dossier from John Scarlett, chairman of the JIC, that Campbell chaired the two planning meetings on the dossier and that he bombarded Scarlett with drafting suggestions throughout the process.

However, what was not credited by the inquiry was the involvement of press officers on the inside of the drafting process, working alongside the assessment staff of the JIC and attending meetings. I understand, for example, that press officers attended the drafting meeting on 9 September 2002 at which the 45-minutes claim was picked up and subsequently inserted into the dossier. John Scarlett acknowledged the involvement of up to four press officers—one from 10 Downing street and the others from the Foreign and Commonwealth Office—in his memo to the Prime Minister on 4 June 2003, but new evidence shows that spin doctors were not only shaping decisions about the content; they were helping to write the dossier itself.

I congratulate my hon. Friend on securing the debate. Does he not think it extraordinary that a press officer was demanding documents from a member of the security and intelligence agencies? Surely any demands that are made of civil servants should be made by elected representatives, or am I wrong?

I think that my hon. Friend is right, but we must not forget—I shall come to this point later—that the document was commissioned by Campbell, who commissioned John Scarlett to undertake it. We can understand the relationship a little better once we know that fact, but on the face of it, I agree with my hon. Friend.

Part of the new evidence that I am bringing forward suggests—or proves, in my view—the existence of the first full draft of the dossier, written by John Williams, press secretary at the FCO. That new evidence confirms that Williams produced his draft on 9 September 2002 —one day before John Scarlett wrote his own first draft. We also know, from information supplied by the Information Commissioner only last month, that John Scarlett requested that draft before writing his own. None of that has been in the public domain until now.

Although we now know of its existence, the document has been withheld by the FCO in the face of parliamentary questions and a freedom of information request. It is now imperative that we see that draft dossier for ourselves. We need to know the extent to which the Williams draft formed the basis of John Scarlett’s draft on the following day.

On the morning of 9 September, there was a planning meeting on the dossier. In the afternoon, there was the first drafting meeting. John Williams was asked to produce a draft document. It is surely unthinkable that such a document did not significantly influence the drafting process. We need to know what that influence was, as Williams’s involvement runs contrary to the conclusion of the Hutton inquiry and the impression that the Government gave Parliament and the public about the origin and status of the dossier, yet the FCO still refuses to make the draft public. Originally, the Government defended their decision by arguing that disclosure would discourage officials from giving free and frank advice in the future. However, last month, the Information Commissioner ruled that such considerations were outweighed by the public interest argument in favour of publication. The FCO, I understand, is now appealing against that decision.

Is the hon. Gentleman saying that he believes that everything that is written by every official in any Government Department, whether it is a first draft, it is thinking outside the box or a suggestion about how policy could move forward, should be made public? Is he saying that every single draft of every document should be made public? If he believes that, how does he think that a Government could work in the future, including perhaps a Conservative Government?

Let us remember why this document is so important. It is the first full draft of the dossier—a dossier that was instrumental in convincing this country to go to war. The first full draft should, in my view, be made public, but my view is perhaps less important than that of the Information Commissioner, who has already adjudicated on the matter and believes that it is in the public interest to make the document available to the public.

In answer to my parliamentary questions, the Foreign Secretary talked on 23 April 2007 at column 914W of Hansard about “prejudicing national security”, but those concerns about national security hardly make sense, as the John Williams document was a draft document intended for publication—that was its purpose—and previous and subsequent drafts have already been made public.

Certainly the importance of the document was downplayed by the Government during the Hutton inquiry. During his evidence session, Alastair Campbell was asked very straightforwardly:

“Do you recall whether or not at 9^th September there was a dossier?”

He answered: “No, there was not.” John Scarlett, in his evidence, acknowledged Williams’s role in “some additional drafting”, but downplayed its significance. He said that Williams was working “on his own initiative”. However, when circulating his own draft in September 2002, Scarlett referred to

“considerable help from John Williams”.

We know, from new evidence from the Information Commissioner, that Williams’s draft

“was requested by the Chairman of the Joint Intelligence Committee”,

hence its importance. In his own evidence to the inquiry, John Williams failed to refer either to his draft document or to his presence at the drafting meeting on the afternoon of 9 September. No wonder the Hutton inquiry did not focus on the Williams document and the report did not even mention it.

I have recently been told in a letter from the Foreign Secretary that the Williams draft was indeed submitted to the Hutton inquiry on 12 September 2003. However, I have seen no evidence that its significance was appreciated, and it has not been made public on the inquiry’s website. We do not even know that Lord Hutton was made aware of the authorship of the document and its place in the chronology of the dossier.

The Minister will remember that at FCO questions recently I asked him about the Williams draft. He replied that Lord Hutton was given the opportunity to see the dossier because

“Both John Scarlett and John Williams referred to the draft dossier in their evidence sessions.”—[Official Report, 1 May 2007; Vol. 459, c. 1361.]

We now know that that is incorrect. Why did not the Minister—I believe him to be a very straightforward individual—simply confirm to me what the Foreign Secretary had stated in her letter? That long trail of smoke and mirrors in the downgrading of the importance of the John Williams draft is consistent with Government policy generally on downplaying the role of press officers in the drafting process.

However, let us move on. What about the idea that the JIC was given an opportunity to approve or sign off the final dossier? Ultimately, Lord Hutton saw the sexing up of claims in the dossier as the legitimate redrafting of existing intelligence assessments because he believed that the JIC had the power to reject or endorse any suggestions that were made. It is important here to distinguish between the JIC, the JIC assessment staff—the secretariat—and the committee’s chairman, John Scarlett. The dossier was always in the hands of Scarlett, whom Alastair Campbell commissioned to produce it, but I have seen no direct evidence that the JIC as a whole was asked to approve the dossier. The final draft was circulated among individual members for comment, but John Scarlett signed it off. Indeed, there is little evidence that the Committee even debated it. During the Hutton inquiry, Dr. Brian Jones of the Defence Intelligence Staff said:

“What was unusual or what did not follow the normal practice was that this was not a paper that was going through the process by which it was examined and argued over at a full meeting of the Joint Intelligence Committee”.

Essentially, the JIC was commenting on a document issued in the name of the Government, not the JIC. After all, the dossier included the words “The Assessment of the British Government” in its title and was written in the first person, with the JIC referred to in the third person. In addition, we know that Campbell tried to describe the dossier as

“the work of the JIC”,

but Scarlett would not allow it and insisted on the words

“based, in large part, on the work of the Joint Intelligence Committee”.

Had the dossier been written exclusively by the JIC, Scarlett could have had no objection to Campbell using the words that he had proposed. At the time, the grey area between the assessment of the Government and that of the intelligence community did not seem important. However, we now know that it was because the dossier upgraded or exaggerated assessments made by the JIC.

In summary, our understanding of the Iraq dossier must now fundamentally change. The idea that we had was that spin doctors stood outside the drafting process, making suggestions that could be endorsed or rejected by the JIC as a whole. We now know that spin doctors were inside the process, drafting material and shaping decisions about content. The JIC appears not to have been given the opportunity to approve the final dossier. When we understand that, the scope for sexing up appears much greater. Let us briefly look at some examples.

First, there is the notorious 45-minute claim. The claim appeared in the standing JIC assessments, but was not thought important enough to be included in the parallel draft dossiers of 5 and 9 September. The Government have always stated that the 45-minute claim appeared in the first draft dossier, but we now know that that is in incorrect, courtesy of a recent letter to me by the Foreign Secretary. Even when the claim did appear, there was a significant change in the wording. According to the assessment:

“Intelligence...indicates that chemical and biological munitions could be with military units and ready for firing within 20-45 minutes.”

The final dossier rendered that as:

“The Iraqi military are able to deploy these weapons within 45 minutes”—

a much stronger statement.

Secondly, let us take the changes that were made between the draft documents of 10 and 16 September. In the first, the executive summary makes a clear division between one set of bullet points, which are described as judgments, and a second set, which represent what recent intelligence was said to indicate. In the later document, the two sets of bullet points were merged, and all the points that had previously been described as indications were upgraded to judgments. The Cabinet Office has been unable to identify the person who wrote the executive summary.

Thirdly, there is the nuclear claim. It was claimed that if sanctions had been removed and Saddam Hussein had acquired fissile material from abroad, he could have produced a nuclear weapon within one to two years. The Prime Minister was careful not to attribute that claim directly to the JIC, and now we know why: the JIC assessment was significantly different, saying that it would take Saddam less than five years to produce a nuclear weapon. During the drafting process, that changed to “at least two years” and then, finally, to “one to two years”. Again, further new evidence shows that the Cabinet Office has been unable to substantiate that claim. Some weeks ago, I asked the Prime Minister on the Floor of the House to explain the justification for that timetable, but he was unable to answer. It appears to have been quite simply an exaggeration of the assessment provided by the intelligence experts.

Those three examples are serious enough, but the dossier is littered with others. In many places, a phrase such as “intelligence indicates” was replaced with one such as “intelligence confirms”. Even the title of the dossier was changed at the last minute from “Iraq’s Programme For Weapons of Mass Destruction” to “Iraq’s Weapons of Mass Destruction”—one suggesting that Iraq wanted WMD, the other implying that it already had them.

The Hutton and Butler inquiries acknowledged those facts, but the role of spin doctors and the marginalisation of the JIC must now be re-examined. In the light of the new evidence, will the Minister answer the following questions? First, what is in the John Williams draft of 9 September and why are we not allowed to see it? What are the Government hiding? Secondly, if the Williams draft was submitted to the Hutton inquiry, what form did it take? Was Lord Hutton fully informed of its authorship and the document’s place in the chronology of the dossier? Why is there no evidence of it on the inquiry website? Thirdly, who were the members of the drafting group supporting John Scarlett, and who, in particular, wrote the executive summary? Fourthly, in what meaningful sense, if any, did the JIC approve the dossier? Surely it was John Scarlett, the chairman, acting independently of the committee and reporting back to Alastair Campbell, who signed off the dossier, not as a JIC document, as we have heard, but as the Government’s assessment.

The case for addressing such concerns is overwhelming. On Monday, our future Prime Minister said that lessons should still be learned about the role of intelligence in presenting the case for military intervention. The Chancellor would not have said that if he believed that the Hutton and Butler inquiries had been exhaustive. British servicemen and Iraqi civilians are still dying in Iraq. The Prime Minister is leaving office this month, and the war is his legacy. We must never again go to war on a false premise, and the questions that I have put to the Minister must therefore be answered.

I congratulate the hon. Member for Billericay (Mr. Baron) on calling the debate and thank him for providing us with the opportunity once again to clarify the issue. Allow me to respond on behalf of the Government, who, I must report, have made their position on the issue clear in the past, and that position has not changed. I am sure that my response will disappoint the conspiracy theorists, but I am afraid that the truth about the production of the Government’s dossier on weapons of mass destruction is much more mundane than they would like.

In the short time allocated to me, I want to start with two important points about the John Williams draft. First, the draft was a personal attempt by John Williams at drafting a document in which the Government would explain the threat that Saddam and his regime posed. It was not specifically commissioned as part of the formal drafting process overseen by the then JIC chairman, John Scarlett, and it was not used as the basis for the dossier that the Government subsequently published. Secondly, I can assure hon. Members categorically that Mr. Williams made no reference in his draft to weapons of mass destruction being deployed within 45 minutes.

Before describing how the dossier was produced, it is important that I remind hon. Members of why it was produced.

I certainly did not claim that the 45-minute claim was in that first full draft. However, will the Minister not accept that John Scarlett, as we have learned since, actually requested that document one day before he produced his own first full draft? That is why the John Williams draft is important and why it is only right that it should be made public.

I will come to that in a moment if the hon. Gentleman will allow me. The sequence is important, and we need to get it absolutely right. He said that the war goes on and that men and women are still dying in Iraq. As a frequent visitor to Iraq, I know what the situation is like and I know the gravity of our military involvement. That is why it is important that we separate the conspiracy theories from the facts, so I will continue, if I may.

The threat posed by Saddam’s regime was real. It had waged a long and bloody war against Iran, occupied Kuwait and violently suppressed its own people—notably the Shi’a and Kurds. Saddam had used chemical weapons against Iran and his own people. No Iraqi, whatever his or her ethnic or religious background, was safe from the abuses of his appalling regime. The threat went further, into the international arena, where the regime’s flagrant disregard for the numerous Security Council resolutions that followed the first Gulf war was a running sore for more than a decade. Saddam’s serial flouting of international conventions and his determination to abuse programmes put in place to help the Iraqi people, such as the UN oil for food programme, not only added to the suffering of the Iraqi people but threatened to undermine international relations and the rule of law. We also had to take seriously the threat posed by Saddam’s determination to develop weapons of mass destruction, coupled with his proven willingness to use them against other states and his own people.

Through the UN’s inspection regimes, intelligence gathering and subsequent examination of Iraqi archives, we now know a lot more about the extent of Iraq’s nuclear, biological and chemical weapons programmes and Saddam’s determination to maintain or resurrect them up to and beyond the inspection regime. Despite exhaustive attempts to establish the facts, not least by the Iraq survey group, it remains unclear exactly which of Iraq’s WMD programmes were ended, or when. The fact that those programmes existed, and that Saddam had shown a readiness to use WMD, is beyond doubt. It was against that background that the Government’s dossier on WMD was conceived. It was designed to help explain, within the limits of our knowledge at the time, the extent of the threat that Saddam’s regime posed.

As the hon. Gentleman has told us, concern about the dossier has centred on two issues: first, the accuracy of the intelligence that informed it, and secondly, the drafting process—specifically whether it was modified in its tone and content to have more public impact. Both of those issues were extensively covered by the four inquiries that have already been conducted on Iraq. All found that the Government had acted in good faith and that the assessment of Iraq’s WMD presented in the September 2002 dossier was consistent with the Joint Intelligence Committee assessments on which it drew.

The hon. Gentleman has claimed that he has new evidence, and I shall try to deal with that. The inquiries, however, also made important criticisms of the Government dossier. They found that key intelligence used in drafting the dossier had been “unreliable” and that some intelligence—particularly that relating to the claim that Iraq could deploy chemical or biological weapons within 45 minutes—had been presented, as the hon. Gentleman has told us, without adequate context.

Following the Butler review, the then Foreign Secretary, my right hon. Friend the Member for Blackburn (Mr. Straw), announced in a written statement to the House on 12 October 2004 the withdrawal of some of the intelligence that had formed the basis of the Government’s dossier. The Government further accepted that by March 2003 it was unlikely that Iraq possessed actual stockpiles of WMD; and the Prime Minister accepted full responsibility for mistakes made with intelligence. Lord Butler’s committee said that some of the intelligence included in the dossier should have been better validated. The Government accepted that, and the Secret Intelligence Service has taken steps to improve the validation of intelligence, as the 2006 annual report of the Intelligence and Security Committee acknowledged. The ISC annual report also noted that the Government have introduced measures to ensure greater awareness and understanding of the limitations of intelligence among Ministers and other senior officials, including a confidential guide covering the nature and use of intelligence circulated to readers of intelligence across Government.

The inquiries confirmed that in drafting the dossier the Joint Intelligence Committee had not been subjected to political pressures; nor had its impartiality been compromised. That, I understand, is what the hon. Gentleman is saying. Yet some people continue to see conspiracies despite the work and findings of Lords Hutton and Butler, the Intelligence and Security Committee and the Select Committee on Foreign Affairs.

I suggest that the Minister is not addressing my central point. One accepts that elements of the intelligence were ropey and that in effect four inquiries have looked into the matter. However, my central point was that both Lord Hutton and Lord Butler accepted those points and accepted that the document had been sexed up, but thought that that was legitimate because the drafting process was owned by the JIC. The new evidence suggests that that was not the case—that spin doctors were on the inside of the process, driving it forward, and that that accounts for the sexing up. Will the Minister focus on that point about what the new evidence shows about the drafting process?

If the hon. Gentleman will allow me, I shall try to answer his questions and the debate in my own way, and my own words. I am sure that he would not have taken a leaf out of the book of spin doctors, and tried to mouth what I am about to say. However, I will say this: first, he has said that Alastair Campbell commissioned the dossier, and I can tell him categorically that that is not true: the Prime Minister commissioned the dossier. I have no doubt that Alastair Campbell was involved in subsequent discussions with other civil servants about the dossier—I should be surprised if that did not happen—but the Prime Minister commissioned it. That is the first assertion that must be nailed.

Secondly, it is claimed that the first draft of the of the Government’s dossier was produced not by intelligence officers in the Joint Intelligence Committee but by press officers. That is essentially what the hon. Gentleman is saying, and it is simply not true. As I have said, John Scarlett and the Joint Intelligence Committee were commissioned by the Prime Minister to produce the Government dossier and they led throughout in drafting and finalising it. What Mr. Williams did, on his own initiative, immediately after hearing the Prime Minister call for such a document in a speech made on 3 September, was to produce a version of his own over the weekend of 6 and 7 September. By the time that Mr. Williams produced it, it was already redundant, because Sir John Scarlett had in the meantime been asked by the Prime Minister to produce a dossier. That is what he set about doing. As I said earlier, John Scarlett and the JIC produced what became the Government dossier. It was not based on the Williams draft. Again, as I said earlier, I can also categorically assure the House that Williams made no reference in his draft to the issue of WMD being deployed within 45 minutes.

The hon. Gentleman also suggested that there is no evidence that the document was provided to Lord Hutton’s inquiry. As I told the House on 1 May, Lord Hutton had access to all documents that he wished to see, including the Williams draft. That document was provided to Lord Hutton’s team on 12 September 2003. It did not appear among the documents that Lord Hutton chose to make public on the inquiry’s website, but that was Lord Hutton’s decision. Next, the Government are asked why, if they have nothing to hide, they should refuse to release the draft in response to a freedom of information request. That is a very fair question, and it is currently the subject of an appeal to the information tribunal over the Information Commissioner’s ruling that the document should be released. I am therefore somewhat constrained in what I can say.

I will, however, say that an important principle at stake: it is vital that we provide thinking space for officials and others who routinely draft policy documents. They should not feel constrained in presenting new or challenging ideas because they fear that they will be made public. That is specifically recognised in the Freedom of Information Act 2000. I can understand that the hon. Gentleman would press hard on the question, which is at the heart of his case. However, when I intervened on him he said that the document was of such importance that it should be published, which implies that judgments must be made about what things it is important, very important or vital to release. He is making that judgment without having seen the document. This is a matter that has never been easy for any Government. It is very difficult to decide whether the release of a document may in the future prevent the radical thinking that is sometimes needed to take policy forward.

I thank the Minister for giving way with such a short time available. The whole point about the document—and others now acknowledge this—is that it was the first full draft of the dossier. We must not lose sight of that. That indicates its importance, and that is why it should be made public, as the Information Commissioner believes.

No. This is the heart of the problem. The first full draft—

I welcome the chance to have this debate on a very important matter under your chairmanship, Mr. Caton. It is the first time that I have had such an opportunity and I am sure that it is the start of a long relationship.

This is our first good opportunity to catch up and have a discussion with the Minister since Remploy’s announcement and the Secretary of State’s statement on 22 May. I missed the statement because I was in Washington with the Treasury Committee, but a fair number of hon. Members participated in the proceedings. The seriousness of the statement and the announcement was demonstrated to everyone. A description of the announcement as devastating to the people involved would be universally accepted as accurate. On the day, the closures were shamefully applauded by a handful of mainly Government-financed organisations, but for the people affected by the decisions, the announcement was traumatic, although it represented the end of a long period of uncertainty and trauma for many of the people in the factories.

The announcement means that 43 factories will close. Some 32 of the closures are straightforward, whereas 11 involve mergers. Having read the PricewaterhouseCoopers report, I have the suspicion that more closures are to come, because the figures demonstrated that a number of factories—the number was in double figures—would close before 2009. Unless the Minister is able to indicate otherwise, it sadly appears that the ground is being prepared for closing a further group of factories, give that the accountants’ figures demonstrate the case for that.

Some 2,500 people are affected by this situation and by redundancies, voluntary redundancies, early retirement, and forced—perhaps I should say agreed—employment moves, whereby people are moved out of the factories and into mainstream employment. I do not argue that that is being done with good financial support and pension arrangements in place, but it remains the case that the situation faced by a number of the people involved is not one that they would have chosen.

All this is happening to some of the most vulnerable people in our communities. Those with learning difficulties and mental health problems are among the most prominent of the casualties. People in the factories are often working for the first time in their lives. They are finding self-respect, self-confidence, friendship, dignity and focus in their lives, but they face uncertainty. I genuinely fear that people with the most complex cases will return to their former living in four walls, where they have no friends, no communication, nowhere to go, no one to speak to, no one to care, and no one to share experiences with.

I understand that those who move into mainstream employment are promised support. My next point is not a dig at the Minister, or the Department for Work and Pensions, but an empirical observation based on the support that was promised to youngsters in special schools. Such people are probably a younger version of the people whom I was just discussing. The minute the youngster moved out of a special school or a school was closed, the support generally disappeared. The speed with which that happened to youngsters in the mainstream was frightening and totally unacceptable. I believe that Ronald Reagan said that the worst words he ever heard were a Government official saying, “I have come to help you.” Therefore, when any Government promise support, one should always bank the cheque as quickly as possible, because it is often not long lasting.

Given all that, we are working on the basis that the unions and staff are taking steps to ratify industrial action. I hope that such action will not be necessary because I take it as read, with a qualification that I shall discuss later, that there will be dialogue on these matters. The Secretary of State has promised as much, and I am sure that the Minister will do so again now. Having said that, I fear that the consultation could be a section 90 consultation—I think that that is the term used. Such a situation occurs when a factory is been closed due to redundancy and consultation is confined to redundancy terms and the like, instead of being a real dialogue among the employees, the relevant Department and concerned Members to find out whether there is a different way forward. If the dialogue is about only how we place these individuals, or if it is about how to finesse the closure of 43 factories, I will find it unacceptable. I hope that the Minister will indicate that such a situation will not occur.

On the question of consultation, I recently visited Hillington, which is the site of the proposed closure in my constituency, and spoke to the workers. There were mixed feelings, because people were up for change, but some were concerned about their futures and the long-term future of Remploy. During the consultation process, will the Minister give thought to protecting those workers, who are providing work for the Ministry of Defence under article 19 of the relevant EU directive, so that they can get the same protection from foreign tenders that shipyards get when they provide MOD equipment?

I shall be genuinely straightforward with my hon. Friend by saying that while I understand the point about protection and support, I would prefer such things to be at the bottom of the agenda. I shall give some indication of how the process should go. I do not subscribe to the idea that these sheltered workshops are old-fashioned and should be done away with. I agree that they are 60 years old, that they operate in a certain way and that there should be changes, but I do not accept the Remploy board’s starting point that as the decision has been taken to close these factories, we should confine ourselves only to protecting the people in them.

We are fighting for not only the 2,500 individuals in these factories—they are the lucky ones because they are in the factories—but the hundreds of thousands of people who are in the community and desperately need such places. The people in the factories will not thank me for saying this, but if these places are closed, they will be the luckier of the two groups because they will have some protection and support and will be moved into a mainstream job. What will happen to the people in the community who want and desperately need a place? The starting point for all in the Chamber should be not the status quo, but the fact that these factories have a place, a function and a purpose, and that there is a desperate need for them.

I move on to my conspiracy theory. There is no secret about why the Remploy board is suggesting these drastic steps. While I say the Remploy board, I certainly mean Remploy senior management. If it is necessary to move people on, there is an argument for moving the management because a lot of the factories’ problems stem from its lack of dynamism, purpose and sympathy. The Remploy board seems to be backing that up. I think that such people have a gleam in their eye about a different lifestyle and a different and perhaps easier job. They want to move from running factories, where they must fight for work, run the factory and do all the rest—it must be murder on their salaries—to running a nice employment agency.

Remploy has set up an employment agency, Interwork. It argues that it costs only £3,000 to place somebody in work through the agency, while the average price of somebody working in a factory is £20,000. Remploy is also saying that it can employ more people through the agency than in factories. The fact that they are not the same people does not seem to cross anyone’s mind as long as there are boxes to tick and the numbers come through. The most desperate, needy and complex cases might disappear into the community to be ignored—they will have no voice—but the workers in the agency will have a nice life just ticking boxes.

Without being mischievous, I wonder—[Interruption.] The Minister shakes her head. That has been the story of this Minister nearly all our lives—she says no before I have even asked a question. It is worth questioning as part of the wider picture why on earth Remploy has set up an agency, given that that seems strange. Remploy is an agency within the Department for Work and Pensions. The Government are proud of Jobcentre Plus and we have put out press releases saying what a great job it does on the new deal for the disabled. We tell the disabled and anybody who cares to listen that if they just go into Jobcentre Plus, whatever their state of employment, they will be treated sensitively and appropriately and helped into employment, so why is Remploy setting itself up in the same Department? Something is not working. If Jobcentre Plus were working, we would not need Remploy’s agency, and if it were not for that agency, the board would not be so anxious to take money from the factories and to use it to expand Interwork agencies throughout the country.

I have two low-level questions. Why is Interwork—at least in Leeds—not proactive at the moment in Remploy factories to move employees into mainstream employment? The two bodies are in the same Department; they are the same agency. They are supposed to be helping those customers. One would think that the first place an Interwork agency called would be its local Remploy factory. It would have the closest relationship with the workers and know them all by name. It would know where they could work and where they wanted to work, and could go out to find them that work. I find it strange that Interwork seems to be a separate employment agency for the broader disabled population that is in competition with DWP’s Jobcentre Plus.

Remploy’s cover is that the cuts and redirected money are a response to the Government’s wish that there should be no blank cheque. That is a fair enough point. At the moment, £550 million goes into Remploy. The Government have said that Remploy must stay in that envelope for five years and it is struggling to comply. There must also be value for money. I mentioned that Remploy says that it costs £3,000 to put people into work through Interwork and £20,000 to put them in a factory. Certainly, when we deal with public money, we should always look for value for money. I accept that there will be a greater throughput of employees into mainstream employment, but the point is worth making again that I have seen the same thing operating with the new deal in my constituency. I wonder whether you, Mr. Caton, or my right hon. Friend the Member for Newcastle upon Tyne, East and Wallsend (Mr. Brown) have also seen that.

When we introduced the new deal in 1997, it worked a treat. Unemployment halved in my constituency during the first four years, but it has stayed the same—or, if anything, increased slightly—for the past six. There is a straightforward explanation for that. The first four years of the new deal—this is not to be quoted to the Chancellor in any circumstances; I make the point in the privacy of the Chamber—got the easy ones. It addressed the people who had been in work yet Thatcher had thrown out of work. They had worked, they knew the discipline of work and they wanted to work. When the new deal came along, they were whisked off the unemployment register. That was wonderful, but once they were off—I see my hon. Friend the Member for Bolsover (Mr. Skinner) nodding in agreement—then came to the more difficult and complex cases.

I can only speak personally—perhaps my constituency is entirely different from other places—but there has been a total lack of success in getting such complex cases into work. I fear that if we allow such cases in the Remploy factories to disappear into the community, Interwork will still get its throughput and the Minister will come to the Dispatch Box and say, “This was all right. Look how many more disabled people are in work.” However, this is about the layers of disabled people.

Some 80 per cent. of able-bodied people and 50 per cent. of disabled people are in employment, but among those with learning difficulties and mental health problems, the figure is 20 per cent. When drilling for employment oil, there is not much left after the 80 per cent., so the Government have come to the disabled, such as people with an arm off, a leg off, or asthma, as I see in one of the Government’s publications. Fine. That is wonderful work, but the complex cases are the real issue and the reason why I am participating in this debate. They are in the greatest majority now. They are in the community—we Members know them—and they are largely ignored, or put up with. They are sad people in the community who need help and focus in their lives. There will be no interest in those cases because they are not cases that one can tick a box for and get a reward. They are long, hard work. If we close the factories, they will disappear from view.

Is it not the hon. Gentleman’s experience that local jobcentres, reduced as they are in both number and scope, have increasing difficulty providing the support and guidance needed by the very group to whom he refers?

I totally agree. I recently met Ian Hunter, the regional manager of my jobcentre. I can tell the Minister that he is excellent, but she should leave him in Yorkshire. I have the names of five constituents whom I have encountered in one way or another and are all unemployed. Some are the wrong colour and so, despite having degrees, they are, incredibly, unemployed. Others have mild special needs or learning difficulties. I was at a loss to understand that, and thought that I should ask the manager to account for it. I am sending him the five names because I do not know why Jobcentre Plus cannot employ those people. There is clearly a problem. I totally agree with the right hon. Gentleman.

My hon. Friend might like to know that my most distinguished predecessor, George Tomlinson, set up Remploy in the first place, just after the war, and I should like him to be remembered today. We are in an era of fairly high employment. Is my hon. Friend as concerned as me that if the economy takes a downturn, those vulnerable people will be the first to suffer?

My hon. Friend makes a valid point. I noted that he mentioned his distinguished predecessor during an earlier debate on Remploy, but I am glad that he remembered him during this one, while his work is under attack.

I get a lot of abuse from our senior Members about this, but it is difficult for me as a Labour Member to accept that after 10 years of continuous employment growth, we have still not reached some people in the community. With the greatest respect to the hon. Member for South-West Surrey (Mr. Hunt), I have never found the Conservatives very interested in even thinking about reaching such people. If we do not help them, we will consign them to a lifetime of neglect and a sad existence without the rights and opportunities that we want for everyone.

Remploy might use the cover that it is doing what the Government want, but I hope that it has misread the signals and that there is the political will to find another way of moving towards the Government’s objectives. I cannot challenge those objectives. The Government cannot give blank cheques to anyone and the principle of value for money is fine, but I shall suggest how to get greater throughput with the present system. I hope that the Minister will tell the Remploy board that it has misread the signals and that it is not acting in a good way. This is not positive work, but butchery, and a redistribution of finances that will not help those with the greatest need.

Above all, I am not arguing for the status quo. I accept the Government’s objectives, but while the direction of travel is right, we need a different method of getting there. The unions are not arguing for the status quo, and the answer to anyone who suggests that they are is a resounding no.

I congratulate a fellow former Lawside academy pupil on securing this debate. I still discern the hint of Dundee accent somewhere.

My understanding is that one of the problems encountered by the trade unions when trying to get their argument heard was that they were at cross-purposes with the management. While the trade unions were rightly trying to ensure the future of the factories, the management was simply saying what would be left following the funding of the Interwork model. Does my hon. Friend agree that that is why the discussions between the unions and management were not more fruitful and why there was not the opportunity for them to be so?

When I was a young Labour party member growing up in my hon. Friend’s constituency, I had visions of perhaps being the Member of Parliament for that constituency, but I am glad that I moved because the quality of its Member is so great that I could never have matched it. I totally agree with my hon. Friend.

We do not want the status quo. There needs to be a change in the set-up—the operation is demanding change—but we want thoughtful, sensitive action, rather than the butchery suggested by Remploy.

On the financial argument, the trade unions and staff have worked earnestly over the past 18 months—many hon. Members have met them, seen their work and know of the time that they have put in—to agree plans to improve trading and output, and to cut costs. They even employed a firm of accountants to help them to draw up acceptable suggestions to help Remploy’s finances. Their reward was that their suggestions were ignored or scoffed at by senior management.

Why has that happened? The Minister has been genuinely supportive, open-minded and helpful. She gave Remploy a blank sheet of paper and told it to drop its plans and to return with other plans that she would ensure would be considered. However, that attitude did not percolate down to senior management. Perhaps that was because the unions were a little too blunt about the shortcomings of a management that seemed to accept the fall-off of manufacturing in the general economy as a cover for its inability to obtain work for various factories, or perhaps it was because the unions pointed to unnecessary spending by the management on the plant and at a personal level. Perhaps the unions were just too honest and blunt.

I have been in public life as a councillor—I was a council leader—and Member of Parliament for 30 years, but Remploy’s management has never approached me for help with procurement decisions. I wonder whether that is the experience of other hon. Members. Remploy has never asked me to lobby or speak to anyone. It would have been entirely reasonable for it to do so, but it has never approached me in 30 years, so I wonder how dynamic its management is and how interested it is in finding work for the people in its factories. Why are the unions being treated in such a shabby fashion when they are trying to be as constructive as possible about the agency’s financial problems?

The most important aspect of a refusal to accept the status quo is throughput, which must be discussed. At the moment, and for the past 60 years, a job with Remploy has been a job for life. Mild attempts might have been made to try to persuade an employee to consider a job in the mainstream economy, but as of now—I checked with my local factory today—the decision is left to the individual. In effect, that means that Remploy is seen as a destination. It is thought that once someone works there, no one is anxious for them to move on and that no one’s purpose in life is to see employees move out of the factory and into mainstream life. The decision is left to employees. If they wish to stay, they stay.

Modern thinking, which I accept, is that Remploy should be a gateway, rather than a destination or a stopping point. There is a place in modern society for a gateway, whether that is a sheltered workshop or a skill centre, that allows employees to build their confidence and self-esteem so that they believe that they can make a go of taking their place in society. Some of the people have never worked before in their lives and have had the most traumatic experiences. Their self-esteem is low and their self-confidence is non-existent. Their confidence should be built up, and they should then move on.

Modern thinking is that there should be a gateway establishment, whether in factories or appropriate skill centres—perhaps with a relationship with a further education college—to which people could go with the knowledge that their job was not permanent. They should be assessed and a time scale should be negotiated for how long they will stay there to acquire the necessary skills to build up their confidence. However, the people in the building and DWP partners would be responsible for guaranteeing to find those people a job before they left the establishment and for supporting them during the first few months in their new jobs. That would be a relevant change.

The trade unions have made some interesting suggestions about money, and even the Government have said that money is a secondary consideration. Is it fair to keep people in a workshop and an artificial situation? Should not we build up their confidence and set them free with suitable support? Remploy factories should not be a destination at which people stay. However, if people have gone through a bad time and, for the first time in their life, they have mates and a wage packet, feel that they are contributing and have self-respect, they would have to be very brave to risk all that by going to find a job. They know what failure is because they have been through that. It is asking a lot to expect people to do that, unless the aim is set out.

We must face up to the fact that some people will never be able to move and take the necessary steps to address that. However, Remploy should be a temporary gateway for the majority of people. Disabled people could come in and be out in three months. Other people with complex problems might take a year, but everyone should know that the objective would be for those people to move into a position in which they have the same rights as the rest of us.

The hon. Gentleman says that the factories should be a gateway. I do not think that anyone would argue with the point that enabling disabled people to move into the mainstream workplace is desirable. However, does he not accept that in some parts of the country, the opportunities for people to work in what must start as relatively sheltered employment are few and far between because the local business environment consists predominantly of small businesses, micro-businesses and the self-employed? People should not be cast as having failed if they thus stay in the Remploy factory for many years, as they do in my constituency.

No, I do not see that as failure. I said that the key aspect of being in such a factory, which I do not think that Remploy would like to accept, should be that it guarantees that it will find a person a job. I hate this business of failure and people failing. We fail, but they do not. Similar circumstances arise in Newcastle, Hartlepool and Dundee, so the situation is accepted. The situation is easier in Leeds, because there is full employment, but it is more difficult in the constituency of the hon. Member for St. Ives (Andrew George). The difficulty depends on the local employment circumstances.

We must accept, as must Remploy and the trade unions, that if we say that the positions are permanent, we are being very weak. Saying that would be generous to the people in work, but what about the people in a desperate state in the community whose gateway to a better life is Remploy? If a person plonks themselves in a job, and by their own decision, rather than other circumstances, stays in it, they are blocking another person’s opportunity. If we have a real partnership and we work to get people fit in their own minds and able to take on a job, we all succeed, and somebody else is given an opportunity.

The Minister might have some fun with what I have said, but I do not mind. However, the butchery that the Remploy board and the accountants have brought to the table does not solve anything. Yes, it solves financial problems in the DWP, but that is just putting right financial figures. It does not help the desperately vulnerable people in the community and the factories who need our help.

I shall be brief, because I do not have much of a voice today, and many other people are waiting to speak.

I have said all along that I endorse the long-term principle, but I am becoming more and more concerned about the current process. After the announcement in Parliament, I visited the factory in my constituency on the following Thursday on my way home, and I was truly alarmed by what I heard. For example, I was told that people could not understand the long words that were used by the counsellor whom they had all been promised. There were probably no specialist counsellors for people who have learning disabilities and may lose their jobs, but the situation worried me.

When I read fully the Remploy briefing, I saw that it said that there were 41 disabled people in the factory. I challenged that figure, and Remploy now accepts that there are 43. I do not think that private industry closes factories without knowing how many people are in them. That applied to two people, which worries me greatly.

I asked how long people had been working at the factory: one of the 43 had been there for more than 40 years, and 10 had been there for 20 to 35 years. I am seriously worried about whether there are suitable places that my constituents can be moved to in our local area. Is a move desirable if somebody has been in that situation for 20 to 35 years? The briefing notes that I was sent suggested that the alternative would be an office in Southampton. That is not suitable for people in Poole. If anybody present has ever tried to travel around Dorset, they will know why it is not suitable—especially for disabled people. I have challenged that suggestion, and I have now received an answer.

Since July 2006, I have had a vision that on a very big site in Poole, one could develop a centre of excellence for training people with disabilities, which would serve the whole of Dorset. One could run down the manufacturing side gradually, but locate it there as part of the training process. I have been asking and asking for that, but the latest reply that I have received says that there will be a meeting with the local council at the end of June. I am worried that time is running out and nothing is being done.

There is probably an individual solution for every factory. I have a good idea for my local factory, but I am losing confidence in Remploy’s ability to deliver it. My plea today is for us to work together with that local factory, because it could be a wonderful facility for future generations in promoting creativity and working with local employers, which is what the issue is all about. My worry is that we will be talking about jobs pushing trolleys in supermarkets, because there are not that many jobs around, but a long-term approach to the issue, with a specialist training centre, would lead to plus-plusses. I am sure that the issue of increasing productivity could have been tackled over the past year, instead of letting things drift along.

I have a real commitment to that local factory and to maintaining as many jobs there as possible, which we could do positively. I do not want a huge housing site. We have very expensive housing in Poole.

It is a pleasure to participate and make a short contribution to this short and timely debate under your chairmanship, Mr. Caton.

I have been a Member of this place for 25 years now, and occasionally one feels that there is a danger of being drawn into the establishment and into a complacent world of public administration. However, I have only to attend a debate and listen to my hon. Friend the Member for Leeds, East (Mr. Mudie) to be reminded why I joined the Labour party in the first place. It is absolutely typical of my hon. Friend that he takes up the cause of those who need his help most, and that he makes a powerful case for them.

The debate is not against Remploy, the Government or the Minister. We are in a consultation period, consulting on some very difficult issues. One week ago I had the pleasure and the honour of attending the conference of the GMB union, of which I am a member. Many Remploy workers are GMB members, too, and they had a delegation and elected delegates at the union’s annual conference. It is difficult to convey to such a parliamentary debate the sense of despair, anger and even betrayal that the work force felt. Very hard words were spoken at the conference, and I was struck by two points: first, the Remploy work force’s passion, commitment and strength of feeling; and secondly, the enormous amount of sympathy that they drew from the other trade unionists, from all walks of life, who were attending the conference. One could not miss the strength of feeling.

There is discrimination in the labour market. It is illegal, of course, but it still exists. One has only to look at the figures for how many able-bodied citizens are employed as a ratio of their total numbers, and then at the same figures for people who have a disability, to see that it is much harder for disabled people to make it in the mainstream labour market. I was a Minister in the Department for Work and Pensions for two years, and I saw the papers on Remploy, although I did not have direct ministerial responsibility for it, so I know that there is a real problem, and the Minister has my sympathies. It will not do just to hope that the problem will go away; it is absolutely right to face up to it. However, we must do so in the spirit in which my hon. Friend the Member for Leeds, East set out his ideas.

There are two main elements to this issue—a view that I formed some time ago. The first is the continuing debate about the case for sheltered workshops vis-à-vis the case for supported employment with a mainstream employer. Alongside that, however, is the debate about costs, and it is a fact that supported employment in a workshop is substantially more expensive than supporting an employee in mainstream employment. My hon. Friend said that the cost is £20,000 as opposed to £3,000, and my figures suggest that it is £20,000 as opposed to £5,000, but the ratio—the Minister may correct me if I am wrong—is roughly four to one.

There is a third issue, which relates to Remploy as a business. Some pretty hard things have been said about Remploy’s management—not universally, but at some local sites. There are also concerns, not only from the trade union side, but among people who have looked at the organisation independently, about the central costs of the organisation as a whole.

My view is that there is a case for both sheltered provision and supported mainstream work; they can exist alongside each other, and we should not let the debate about costs undermine the case for workshop-based employment. The view to which I came, and to which I still hold, is that even if the costs are greater, we just have to accept that we will have to pay them. There are also other things that we can do, and this debate gives us an opportunity to put forward what I hope the Minister will see as constructive ideas.

The case for sheltered workshops rests on the fact not only that members of the work force develop a sense of solidarity and comradeship, but that there is a specific understanding of individual special needs. People also get a sense of security from going to a place where their needs are understood and a sense of self-worth from having a job that they can do and workmates who are sympathetic. Although one would like to think that people with special needs would find that in mainstream society, I am not convinced that that will always be so, even with support. Of course, there are enlightened employers, who go out of their way to provide workplace placements for people with special needs and who ensure that management structures are in place to support their employment, but such employers are the exception, not the rule. It is easy to say, “Ah, well, the labour market is tight nowadays, but we’ll find you employment with a mainstream employer,” but it is much harder to find such employment.

I therefore want to offer what I hope are some constructive suggestions to support the factory-based employment part of Remploy’s operation. A year ago today—on 13 June 2006—the Prime Minister addressed the GMB conference. He said:

“I can assure you that we will both listen to the trade union submission on this, we want to see Remploy profitable as well, and we will certainly see what we can do from the perspective of public procurement to give Remploy a sustainable future.”

He is on to a good idea with that final suggestion. It will be difficult, at least for the factory side of Remploy, to be profitable as a sheltered workshop, because it is difficult to find things for a sheltered workshop to do that are profitable in the marketplace. We must face up to that. My answer is to subsidise such an arrangement and direct work to it. We must do that as part of public procurement—the Ministry of Defence is an obvious example and does, indeed, already do that to some extent—and say that there is a social reason for doing so.

We, as politicians, should not feel ashamed in standing up before our fellow citizens and saying, “We have made this decision. It does not conform to strict competition rules, but it is not a huge market distortion. It is an exception, but it is one for a special purpose. These people need our help and support.” Who would begrudge disabled people that? I do not think that our fellow citizens would say, “No, we want competition red in tooth and claw. Let the disabled take care of themselves.” Our fellow citizens would not say that, and the Government should not say it either.

There is a case for using public procurement to support workshops, and I do not accept that competition rules or European Union rules prevent us from doing so. Other member states do such things; indeed, when I was a Minister, all the Ministers whom I met from other European countries thought that such things were acceptable. They would want to do them in their own countries, and I am certain that they would not object to our doing them in our country. One has to keep a sense of proportion, of course, but we would be all right as long as we did so.

One could look at the issue the other way around and ask whether a mainstream manufacturing process—in the packaging or processing industry, for example—was suitable to be carried out in a sheltered workshop. We could then ask the employer whether public assistance could be used to turn the factory into a place that provided sheltered and secure employment. That approach has not been taken so far, but I urge it on the Minister and I hope that she will be look at it.

There is also strong role for the trade unions in all this. At the GMB conference, I was struck by the fact that those who were worried about their job security and about what would happen to them looked to their trade union to help and support them, and that support really matters to people with special needs. In the discussions that the Minister will be having, I would like a way to be found to ensure that that collective trade union support filters through to industry placements, as well as to the people retained in workshops.

I gently draw the Minister’s attention to the ratio of money spent on placements to money offered for early retirement. I accept that some people will want to take early retirement, but that is not the answer. Younger people will be looking for workshop places, just as some older people will feel that their time to work has come to an end and that it is time to retire. However, I would not like us to just to buy such jobs out and say that mainstream employment, not workshop placements, is the answer for young people. People are not supported in mainstream employment; indeed, they end up falling out of it and becoming claimants again. As a result, the very problem with which workshops are supposed to deal is not dealt with, and people end up unemployed or on long-term sickness benefit. That is not the right way forward or a positive way forward.

That brings me back to my core point: the labour market is a hard place. Yes, it is tight, but those who are recruiting look for the person who they believe can do the best job for them. There is still a tendency, very unfairly, to discriminate against people with disabilities. As we try to offer constructive solutions in this debate to the problems that we acknowledge Remploy has, we should, as my hon. Friend the Member for Leeds, East so powerfully reminded us, keep at the forefront of our minds the fact that the labour market is not a fair place. The people whom we are talking about are disadvantaged and they deserve our help.

I apologise to my hon. Friend the Member for Leeds, East (Mr. Mudie) for being late for the debate, as I had a difficult journey.

More than 25 years ago, I was the TUC representative on a committee called CORAD—the Committee on Restrictions against Disabled People. It was the first committee that the Government established to look at discrimination against people with disabilities to see how we might move forward. Hon. Members may remember that we had a quota at that time, under which companies and Departments were required to employ a certain percentage of people with disabilities, but none of them—even Departments—did. The committee therefore looked again at the issue and said that we needed to get people with disabilities into work. To do that, we recommended that those responsible should support people with disabilities by identifying opportunities, providing training and supporting people in work, as well as resourcing employers to enable such things to happen. To assist in that, the committee recommended that disability discrimination legislation be introduced, and both those recommendations have now been implemented.

The third recommendation was that there should be continuing support by way of specialist provision. Remploy, founded by George Tomlinson, the predecessor of my hon. Friend the Member for Bolton, South-East (Dr. Iddon), was a good example of that. Remploy’s role, along with other organisations, was to bring people into the working environment again, give them support and, if possible, allow that to be a transitional phase in moving towards employment, but if necessary, to give them an environment in which permanent employment would be provided. To be frank, I do not think that things have changed. I have heard about the economy booming; it has for some, but not for others. Employment has risen, but the report that has been published extensively in the press today shows that unemployment has risen too in some areas, and particularly in certain regions. Unemployment overall is not as low as many people think. The experiences of people with disabilities have, tragically, barely changed, despite the Government’s efforts over the past 10 years, for which I commend them. This is a hard nut to crack.

There are some tendencies in the economy that fly in the opposite direction, such as, I am afraid, outsourcing by Government. The example in my area is Ministry of Defence records, where there were 150 people, several of them with disabilities; it was then privatised and relocated off site. Not one person with a disability was redeployed elsewhere, despite all our promises. Another example is private equity operations, which we discussed in Parliament recently. We now have evidence that when private equity companies have taken over companies and shareholdings within them, there have been reduced employment opportunities. The GMB reports that in the case of the Automobile Association people with disabilities have been specifically targeted to get them off the books. The issues are as relevant today as they were 25 years ago, and in some ways more pertinent.

That is why I believe that before we do anything to reduce capacity in this field, we need to be convinced that the jobs are out there and the support mechanisms are in place, and that we are succeeding. I follow my hon. Friend the Member for Leeds, East in recognising the reality. We shall always have to subsidise the people in question, to enable them to have a decent quality of life. It is not just a matter of employment. As my hon. Friend said, it is a question of pride and respect and being part of overall society. I can understand where the Government are coming from in considering how to modernise provision overall. In areas such as this hard decisions must often be made; that is true in any management change. However, it is necessary to take people along, and we have failed to do that. It is not for want of trying; I am not criticising anyone. Nevertheless, we have failed to take people with us, and we should recognise that. We almost need to start again and to involve people in a wider discussion, particularly at the micro-level—individual factories and communities. The issues seem to have been dealt with at a macro-level, where we know there has been a lack of confidence in the management’s track record for some time. It is a question simply not only of confidence, either, but of the relevant management teams’ objective record of success and failure.

I urge the Minister to stand back, have a breathing space and allow us the next six months to bring the unions back in and consult all the relevant organisations again, and see whether we can build up confidence in a shared way forward. I know that that is ambitious and it may not be realistic, but at the moment we cannot continue with horns locked, while people become disillusioned and feel that we are undermining provision rather than supporting it in the long term. I support other hon. Members in urging the Minister to be positive and accept that we need a new route to bring people back together again. A six-month timetable will enable us to return with real solutions to enable us to bring everyone with us as best we can. If that means that additional resources will be needed, this is one area of Government in which I would expect resources to be found.

I want to make just four brief points in this last of the Back-Bench contributions to the debate. First, our factory in Bolton went through a lean period when some pretty high class, high priced labels decided to source their quality clothes abroad. The Bolton factory was making some very good, high quality clothes, which were on sale in some very fashionable shops at the time. For a period of some months the factory was without that work. The textile industry was in a slump, so it was decided to completely change the focus, using mainly the same labour force. I have always praised the labour force for doing this. At one time it made clothing, but today it makes boards for electronics, using robotic machinery. It has completely re-equipped the factory and gone in another direction, into electrical production. It even makes printed circuit boards for the Ministry of Defence. That proves that people can be retrained into a more profitable operation.

Secondly, I concur with the view of my hon. Friend the Member for Leeds, East (Mr. Mudie) that if Jobcentre Plus and Remploy work much more closely together we can probably get more people with disabilities of all kinds into the work force, by using some Remploy factories—we could not, of course, use them all—as gateways or training centres before entry, to give confidence.

Thirdly, in Bolton we have a sheltered workshop run by the local authority, as well as the Remploy factory. Has the Minister had detailed discussions with similar local authorities that run sheltered accommodation for production, about the possibility of a coming together, involving local authorities as well as Remploy, perhaps with a small subsidy from some of the local authorities—yes, I dare to mention the word “subsidy”—to keep some of those operations alive? It is obviously greatly preferable to keep people in work than to have them out of work on benefits.

My fourth point is this: we have been through this process before. It will be interesting to hear what the Conservative spokesman says. I look forward to that, because it was not that many years before the Labour party came to power that the Conservatives threatened to close all Remploy workshops, without exception. I remember opposing one of their Ministers, Peter Thurnham, who joined the Liberal Democrats just before the Conservatives left power. He argued vociferously for the closure of the workshop in Bolton. At least we have kept it going another 10 years. Incidentally, it is not on the present list, but that is not to say I have no sympathy for those hon. Members in whose constituencies the 43 listed workshops are situated.

I warmly congratulate the hon. Member for Leeds, East (Mr. Mudie) on securing this debate on such an important matter. In his passionate opening remarks he emphasised the point, which is worth restating, that half of all the Remploy factories will effectively be closed, taking into account the mergers, and 2,500 people will be affected by the closures. It is important to recognise the dramatic and damaging effect that that change can have on the individuals affected. We are debating a serious and important matter.

The hon. Gentleman also wondered aloud—I hope that the Minister will respond—whether what is happening was the end of the process that Remploy had in mind. We know that 43 closures are proposed now. Does the Minister foresee the investment in and support for the remaining factories that all hon. Members who have spoken today have described? I pay tribute to all those hon. Members for the way in which they have addressed the issue: the right hon. Member for Newcastle upon Tyne, East and Wallsend (Mr. Brown), the hon. Member for Hayes and Harlington (John McDonnell) and my hon. Friend the Member for Mid-Dorset and North Poole (Annette Brooke). I also want to mention my right hon. Friend the Member for Berwick-upon-Tweed (Mr. Beith), a number of whose constituents work at the factory in Ashington that is threatened with closure. I know that he takes a close interest in those matters.

It may be difficult in these circumstances, but there is a positive view to be considered. I would argue—and many have argued—that, on principle, promoting the idea of mainstream employment for disabled people must be the right approach. If the objective is to deliver an agenda about independent living, and to allow and enable disabled people to take on all the improved rights that have been campaigned for by many hon. Members who have been in the House much longer than I have, promoting mainstream employment must be the right direction to set off in. That was certainly the flavour of discussions among all parties during the passage of the Welfare Reform Act 2007, in which several hon. Members who are present today participated at different stages.

In that context, Remploy’s success in developing the Interwork programme should also be noted, given the importance of working towards mainstream employment for disabled people. Within its existing resources and with the existing factories remaining open, Remploy has been able to expand that programme, so that last year it placed more people in mainstream employment than currently work in those 83 factories. I shall return to the question of how the factories and the people who work in them are treated, but Remploy must be encouraged to move in the direction of expanding and developing the programmes that it already successfully offers. If Remploy can substantially increase the number of people whom it places in mainstream employment, the objective that all hon. Members have talked about in this debate—enabling more disabled people to find paid work for the reasons of fulfilment, confidence building and so on, which every other citizen sees it as their right to achieve through work—will be supported.

Remploy has said that it hopes through the changes to be able to place 20,000 disabled people into jobs by 2012. It is interesting to note, however, that three quarters of the people whom it placed last year were placed in jobs in the service sector, not the manufacturing sector. I liked very much the suggestion that the hon. Member for Leeds, East made that Remploy should be seen as a gateway or an intermediate step, and that people should perhaps go through Remploy for a few months in order to build up their skills and confidence, and make their way into mainstream employment. That is the sort of role that the Interwork programme should be playing, so perhaps the Minister could comment on whether it actually is. Developing Remploy’s facilities in that direction seems an obvious and sensible suggestion.

The closures will have a devastating effect on current employees. I do not think that anyone can doubt or debate that, and the hon. Gentleman made that point strongly. On the day before the announcement was made, I visited the Remploy factory in Halifax with the hon. Member for Halifax (Mrs. Riordan), who has also been an assiduous campaigner on such matters. Many of the staff there felt that the discussion about Remploy’s future had been dragged out for an inordinately long period. People had been facing uncertainty about Remploy’s future for a year or even 18 months. There had been consultations and consultants’ reports, but the staff had very little sense of what their future was, and there was still a genuine debate about whether the factory would remain open or close.

That was an unfortunate part of the process, from which I hope lessons have been learned. The problem not only caused difficulties for the staff, but led to uncertainty among the factories’ customers, as has been said elsewhere. People who might have wanted to purchase goods from Remploy were uncertain as to whether the factory producing them would remain open. The Government owe a duty of care to the people who currently work in the Remploy factories, whose interests must be at the forefront of this debate.

We have been told that there will be no compulsory redundancies and that Remploy has guaranteed to find a job for each current employee on their current terms and conditions—

Each disabled employee.

The Minister rightly corrects me. The chief executive of Remploy, Bob Warner, has promised that Remploy will support the move into new jobs and provide continued support for those people who find new jobs in the mainstream sector. However, there is still some uncertainty, so perhaps the Minister could say for how long that continued support for those people who are currently employed by Remploy will be maintained. I understand that they will retain their current contractual terms and conditions, but in addition, we should be clear that the support that they receive will continue long into the future.

Likewise, there needs to be clarity about pension rights and contributions. The point has been made that many of Remploy’s employees have worked in Remploy factories for a substantial period. Accrued pensions rights are therefore important, but continuing those rights also needs to be taken forward.

We are currently undergoing a consultation process, but some dubiety has been expressed in this debate about the nature of that consultation—about its breadth, the range of issues that can be taken into account and whether it is about the overall package or just specific local measures. I urge the Minister to encourage Remploy, through her good offices, to ensure that the ideas that my hon. Friend the Member for Mid-Dorset and North Poole set out—local solutions at a micro level, so that the facilities can be better used to support the longer-term objective of getting more disabled into work—are taken into account fully. It would be absurd if the process was based on a macro decision to close a certain number of factories, without considering how best to make use of the resources currently available, in order to continue to support disable people into work.

I have a few other remarks to make, but in view of the range of issues that have been raised and the Minister’s desire to respond to them, I shall finish now. I am sure, however, that there will be another opportunity to debate the issue in future.

I, too, congratulate the hon. Member for Leeds, East (Mr. Mudie) on securing this incredibly important debate and on the passionate and eloquent way in which he put the case for the 2,270 disabled Remploy employees.

Listening to the varied but thoughtful tone of the contributions, I realised that there are two distinct issues that we should recognise. The first is the move towards inclusive employment, which is a significant change. Listening to the hon. Member for Bolton, South-East (Dr. Iddon) talking about the battles that he fought under the previous Conservative Government also reminded me of the Andrew Marr series that is currently on television. I do not know whether hon. Members saw the episode last night, but it had a scene about the miners’ strike. That reminded me how much the country has changed, although I do not want to get into that debate, because I am somewhat outnumbered in the Chamber. Watching that programme also reminded me how much we have moved from being a manufacturing economy to being a service economy. That has good aspects and bad aspects, but for people with learning disabilities in particular, it can pose a problem, because jobs in manufacturing industries were often particularly well suited to people with learning disabilities.

I have visited a manufacturing business in Cardiff that is a social firm—an interesting new model that which should replace workshops. In a way, social firms are a modern version of the sheltered workshops that we used to have. The management at that business told me that people with learning disabilities had a competitive advantage over other employees when it came to certain types of tasks. The problem is that as we have moved away from being a manufacturing economy, a lot of those jobs have gone.

However, there is a consensus that the move towards inclusive employment is important. If disabled people are to move not only towards independent living, self-respect and dignity and out of poverty, which affects too many of them, but towards a sense of being part of mainstream society, then we should encourage a model in which disabled people are employed wherever possible in jobs where they sit alongside non-disabled people.

That is an important change, and I should like to do something that has not been done so far this afternoon: compliment Remploy on the way in which it has tried to adapt its business to take account of that change. Last year it placed 5,200 people in mainstream employment through the Interwork programme, which is a 25 per cent. increase on the year before. That is a lot of people who have been helped. Remploy has therefore been trying to adapt in a difficult competitive climate.

I, too, want to leave the Minister time to respond fully to the points that have been raised. The problem that the Government face is that there is a limited budget, which means that we shall at some stage have to consider whether the £5,000 that it costs to employ someone with a severe disability under the Workstep programme stacks up against the £20,000 that it costs to employ someone in a Remploy workshop. We have to be honest about that terribly difficult dilemma because the Shaw Trust, for example, says that it has 600 disabled people waiting to get on the Workstep programme and that it cannot get funding for them. The trust desperately wants to get those people into employment. If I can put it this way, there is an opportunity cost to not using the resources as wisely as possible.

That said, the other clear strand to this debate has been the genuine and heartfelt concern, particularly among hon. Members in whose constituencies Remploy factories are scheduled for closure, about the fate of the individuals who work in them. As the Secretary of State said in his statement on 22 May, the majority of those individuals have learning disabilities, and that group is the hardest to employ. The hon. Member for Leeds, East spoke of a 20 per cent. employment rate among those with learning disabilities and histories of mental illness, but according to a survey that Remploy did with Radar, the employment rate is even lower among those with learning disabilities only: it is 10 per cent. That group is the very hardest to employ.

A second factor has to be added to that: many such people are older employees. In his statement, the Secretary of State said that 650 of the 2,270 employees— 28 per cent. of the total—were over the age of 60. They may wish to take early retirement. However, we have not yet been able to find out how many of the employees are over 50, although I suspect that they make up about half the total. It will be particularly difficult to find another placement for them.

People are concerned that it may be very difficult for someone who has worked loyally in a role for much of their life—someone who has found the inclusion, involvement and friendship that the hon. Member for Leeds, East mentioned—to find another job full stop, even with all the support provided by Remploy. We know that such people will be financially looked after because the terms and conditions will be preserved, but it would be a tragedy if those people, at that stage of their lives, ended up receiving the money but not all the other incredibly important benefits that come from being at work.

The Minister could help us with some specific matters. One is the concern about pension entitlements. I believe that the Remploy pension fund has a £48 million deficit. There are particular concerns about whether promises made about pensions will be secure, particularly given the current environment.

There is also concern about how the factories were chosen for closure. Remploy factories in the constituencies of a lot of prominent Cabinet Ministers, including the Chancellor of the Exchequer—and the Minister, I think—have not been chosen for closure. The real concern is that Remploy has not published the business case on the future that it saw for each of the factories under consideration. That makes people worry that that is the first step to the wholesale closure of the entire Remploy network. I am prepared to accept the Minister’s assurances that she does not want that to happen. However, if we are to have confidence that that is not part of the plan, we need to see a good business case for the factories that are not threatened with closure to remain open.

I am grateful to the Minister and the management of Remploy for keeping me in the picture on this difficult issue in the past few months. I recognise the benefits of the financial package offered to the 2,270 disabled employees. However, money is not the only issue; a lot of other factors are very important in those people’s lives, and we are all seeking reassurance that those other factors will be adequately addressed in any restructuring.

It is a pleasure to serve under your chairmanship, Mr. Caton, in what has been a thoughtful and thought-provoking debate.

At the outset, I want to put some things up front and on the record. We still believe in supported factories and that there needs to be a subsidy for some employed disabled workers, whether within supported factories or in the mainstream. We still believe that Remploy has a future, and I ask hon. Members to remember that Remploy is more than the factory network. As the hon. Member for Inverness, Nairn, Badenoch and Strathspey (Danny Alexander) said, Remploy is part of a wider family of provision. We are guaranteeing the budget for Remploy over the next five years— £555 million, as my hon. Friend the Member for Leeds, East (Mr. Mudie) said.

I thank my hon. Friend for generating this debate and for some of the comments he made during it. We need to recognise that the issue that we are discussing is difficult. Colleagues from all political parties have made contributions. Other Members in the Chamber have not participated in the debate but have Remploy factories in their constituencies. My hon. Friend the Member for Motherwell and Wishaw (Mr. Roy), for example, is a Government Whip and so is not allowed to participate, but I welcome his presence.

When my hon. Friend the Member for Leeds, East was deputy Chief Whip, people would never dare say “no” to him or his colleague, my right hon. Friend the Member for Newcastle upon Tyne, East and Wallsend (Mr. Brown). It was a case not of getting retaliation in first, but of not retaliating.

We Members here today have a lot in common on this issue; we agree about a lot. I certainly welcome the comments of my hon. Friend the Member for Leeds, East on how he envisages Remploy’s future in terms of providing, not a destination, but a gateway for disabled people. I also welcome his comment about wanting more disabled people in work, because that is exactly what underpins the modernisation programme. Neither the Secretary of State nor I have embarked lightly on this process; we appreciate the sensitivities involved. However, we know that our underlying ambition is shared with Remploy and its trade unions. We want to get more disabled people into work—and more disabled people want to move into work.

We have to be clear that in its current configuration, Remploy is not going to rise to that challenge. That is why we brought in PricewaterhouseCoopers—not only, I say gently to my hon. Friend, as number crunchers. We also made sure that that consultancy included a senior employment adviser, who is disabled himself and who has extensive experience of disability employment issues. As part of the team, he was there to act as advocate in any disagreement on the disability-employment side. It was not just a case of number crunching.

I turn to the point made by my hon. Friend the Member for Hayes and Harlington (John McDonnell) about where we should start again. We can go round that issue as often as we like, but there comes a point when we have to make a decision. What we are discussing has not been sprung on the trade unions or hon. Members in the past few weeks. We have been talking about the modernisation of Remploy since May last year, when I laid a statement before the Commons that clearly stated that the Secretary of State and I had ruled out the two extreme options in the PricewaterhouseCoopers report, which were to do nothing or to close the whole factory network. As my hon. Friend the Member for Bolton, South-East (Dr. Iddon) reminded us, that was once an option in the dim and distant past.

Within that framework, we asked the Remploy board to consult, discuss and negotiate with their trade unions over that period to consider how we can reach a position on which we can all agree. Those discussions have taken place, a great deal of work has been done and the business has been opened for the trade unions to scrutinise over that period. Nothing has been hidden; it is all up front. We put the PricewaterhouseCoopers report into the public domain so that everybody shared the information, and we ensured that PricewaterhouseCoopers engaged meaningfully with the trade unions. However, to be frank, there comes a point when we need to consider making a decision.

Of course, we do not underestimate the difficulties that will be caused for individual people. I take on board the comments made by various hon. Members to the effect that the change is enormous for disabled workers who have worked in a factory for a long time. That is why we have built in a protection package, including the guarantee on final salary pensions. I am sure that when my hon. Friend the Member for Leeds, East was a trade union officer for the National Union of Public Employees and then for Unison, he would have been pleased if an employer had put that on the table as the first stage of the bargaining rather than having to have it pushed, shoved and dragged out of them.

We did all that, and we also ensured that Remploy engaged with the trade unions. I want to be clear about that engagement. In order to ensure that Remploy knew the parameters, we promised to maintain the baseline funding. The work with the trade union consortium deserves particular mention, and I am sure that my hon. Friend, who has extensive experience as a trade union officer, will recognise the quality of the engagement. A joint Remploy-trade union working group was established to consider the challenges that face the company and to discuss possible solutions.

The group has met on no fewer than 10 occasions since last July, with the business on the table. In order to enable the trade unions to have the support on the detailed financial and commercial information provided by the company and the advice that they thought was necessary, Remploy provided them with the services of the consultants Grant Thornton. Remploy paid for the consultants to ensure that that the unions had the same professional advice as the board. It has provided the trade unions with other financial support, including covering the costs of all the meetings on modernisation. Indeed, as we speak, 14 members of the consortium—16, in fact, but only 14 are employed by Remploy—are in Brussels to discuss the issues with MEPs, which was paid for by the Remploy company.

As a company, Remploy has been exemplary in the way in which it has managed the discussions with our trade union colleagues. I say our trade union colleagues because as a member of the GMB I recognise the sensitivity of the matter. When the new chairman, Ian Russell, was appointed, he held discussions with all the trade union general secretaries involved in the consortium. He also invited the consortium to present its own modernisation proposals to the February and April Remploy board meetings. The engagement has been widespread, and I hope that my hon. Friend will take that in the positive spirit in which it was—[Interruption.] I know that he is only trying to josh me, but he knows from his experience that there are few situations where engagement with the trade unions at all levels took place throughout a lengthy process.

I accept what the Minister is saying about the efforts that Government have made to urge management to support the unions in their discussions and so on. However, the process has failed and consensus has not been reached. It behoves the Government to go the extra mile and to intervene. They should bring all parties round the table and consider whether, in these last moments, we could reach some agreement on a way forward.

With the greatest of respect to my hon. Friend, the process has not failed. The trade unions and management will meet next week to discuss the proposals. I return to my earlier comment—there has been an extensive lead-in to the discussion of the proposals. At the moment, they are just proposals. Nothing has been confirmed.

I hope that I can give some comfort to the hon. Member for Mid-Dorset and North Poole (Annette Brooke), as we have discussed the matter extensively elsewhere. There ought to be discussions about local solutions. The hon. Lady, my hon. Friend the Member for Leeds, East and the hon. Member for South-West Surrey (Mr. Hunt) highlighted opportunities to consider local situations where sheltered workshops and factories, local authority factories and sheltered workshops run by voluntary organisations could come together. My hon. Friend the Member for Bolton, South-East mentioned that, too.

We have heard a great deal about the subsidy. We are in no way saying that there should not be a subsidy, and our Workstep programme is based on providing a subsidy to meet the difference in production between a disabled worker and a non-disabled worker. In Remploy, supporting someone in a sheltered or supported workshop involves a subsidy in excess of £20,000. In the area represented by my hon. Friend the Member for Leeds, East, Leeds city council provides sheltered factory support of £4,800 for individual disabled workers, who are similar to those who work in the Remploy factories and do the same kind of work in many instances. That pattern is replicated across the country. We want Remploy to draw its subsidy nearer to £4,800, but we are not asking it to draw it down that low and it does not propose to do so. Its aim is to have a subsidy of about £9,000 a year.

I know that public procurement causes great interest among Members, and Remploy recognises that some leverage is left in terms of public procurement. It has just appointed a new head of public procurement and has listened to the trade unions on that subject. The Department for Work and Pensions, Remploy trade unions and Remploy management have met regularly to consider how they can increase the amount of business from public procurement. Even under the current arrangements, I do not want anyone to think that there is no public procurement business in Remploy—indeed, £42 million of their sales are directly linked to the public sector, which is Remploy’s biggest customer.

A range of issues have been raised, which mainly relate to how we will get from where we are to where most of us want to be. That is where my hon. Friend the Member for Leeds, East and I share an ambition. Thousands of disabled workers want to be in employment, and Remploy has a crucial role to play. However, there comes a point in our deliberations where we have to make tough choices. Those choices are not driven by the budget. They are putting people on the dole. We are not saying that we want do not want to support disabled people in Remploy. We want to do all those things, but we need to decide how to get from where we are now, with only 5,000 people employed in the Remploy factories, to the situation that the Remploy board says that it can achieve, which is to have 20,000 disabled people employed for the same amount of funding from DWP. That would be a laudable achievement. We are still at the proposal stage, and I am sure that hon. Members and my hon. Friends will continue to make the case about how to pull together on this difficult decision.

There have been changes in the way in which disabled people are perceived in the labour market. Those changes have not happened fast enough or well enough in some instances, but I want to see Remploy continue for the next 60 years to deliver for disabled people—

Order. We must now move on to our next debate.

I am grateful for the opportunity that this debate gives me to dispel some of the myths about asylum seekers that have been put about by the British National party and other racist organisations. The debate is unusual because, although the Under-Secretary of State for Transport, my hon. Friend the Member for Glasgow, South (Mr. Harris), is on the Front Bench, it could as easily have been answered by the Minister for Immigration and Asylum. I wish to put on record my thanks to him for a number of meetings and the significant amount of correspondence that we have had on this issue.

Before I come to the details of bus passes in north Manchester, which I suppose sounds like an esoteric subject but has become important, I should like to give a little background information to help hon. Members understand why I am so concerned. North Manchester and Higher Blackley, in my constituency, have had an exemplary record in race relations. Relations were good in the mid-1990s and before, and a large number of Kosovan refugees came and stayed there successfully as the war took place in the former Yugoslavia.

The genesis of the increased problems that the BNP is trying to exploit was the decision by my right hon. Friend the Member for Blackburn (Mr. Straw), Home Secretary in the 1997 to 2001 Government, to disperse asylum seekers throughout the country. The dispersal went well in many areas, but not in north Manchester. We were promised that the asylum seekers who would be dispersed there would be from a small number of language clusters and serviced by a sufficient number of interpreters and extra resources in schools and education. To put it quite simply, they were not. There were no interpreters and the dispersed people spoke 30 or 40 different languages between them, which made matters more difficult for the public authorities. Iranians were put in the same house in multiple occupation as Iraqis, which was a most extraordinary circumstance. People who had been paying rent to private landlords were thrown out of their houses because the Home Office, via the National Asylum Support Service, paid higher rents.

The dispersal was a disaster and led to a number of racist attacks on asylum seekers, some of whom were hospitalised. After I spoke to my right hon. Friend the Member for Blackburn and Barbara Roche, who was then a Minister of State at the Home Office, it was agreed that there would be a moratorium. That was publicly proclaimed. Since then, my right hon. Friend the noble Lord Rooker and my right hon. Friend the Member for Stretford and Urmston (Beverley Hughes), when they were Home Office Ministers, have confirmed the moratorium on dispersal of asylum seekers. Race relations have improved and returned to their previous good state, with one exception. In 2005, just after the general election, my hon. Friend the Member for Harrow, East (Mr. McNulty), when he was the responsible Minister—a lot of people have been in the job in the past five or six years—had to apologise because there was a small breach of the moratorium.

Relations have generally improved but, as has happened throughout history when there have been waves of refugees and immigrants, the nasty bottom-feeding racists have exploited the situation and perpetuated myths and lies, some of which are still going around. That is really the point of the debate. Two of the myths, other than the one about bus passes, are worth referring to because they are so bizarre, but people repeat them anyway. One is that Oldham council, which is the neighbouring council to my constituency on one side, provides asylum seekers with cheques for second-hand cars. If I have heard that once, I have heard it ten times. It is unusual and ridiculous, but it creates resentment if some people are gullible enough to believe it. The second myth repeated by many people was that a shop on Kenyon lane in my constituency was open only to black people. They said that there was a sign there saying that white people were not allowed. Local councillors investigated and spoke to the shopkeeper, who said, “Look, 60 to 70 per cent. of my customers are white. That is the reflection of this area. This is absurd.” But still the myth was repeated.

That brings me to the persistent myth that asylum seekers are given free bus passes to travel all over Greater Manchester which are not available to other members of the public. When I go to public meetings, talk to people in the streets or go to street meetings, often towards the end I am asked, “Why are the asylum seekers getting better treatment than we are on public transport? It’s not fair.” A number of local councillors in the area have heard the same myths and, with me, have investigated the cause of the misconception. Councillor Risby, the long-standing councillor for Moston, Councillor Murphy, Councillor Cooper, Councillor Curley and Councillor Hackett have all helped to get to the bottom of what turns out to be quite a complicated story, which is worth relating and putting on record.

I wrote to the passenger transport executive, as did Councillor Risby. We got back a reasonable letter saying that there were no special passes available to asylum seekers, but the myth persisted. A little later, we found out that the Home Office was purchasing for asylum seekers about £53,000-worth a year of passes called system one scratchcards, which were not available in that form to the general public. Day saver tickets are the equivalent, cost the same and can be purchased on buses by members of the public, but the scratchcards are mostly bought by companies that want to give them to their employees, who can scratch the dates off and use them. Although there was no preferential treatment for asylum seekers, people had seen different passes on the buses.

I had a meeting on 1 February with my hon. Friend the Minister for Immigration and Asylum, who wrote to me on 15 March having exchanged information with the passenger transport executive. He explained the Home Office’s basis for purchasing the passes. It is worth my reading a couple of paragraphs of his letter. The letter explains how the passes are funded:

“The terms of the travel expenses policy were previously agreed by my predecessors and a rollout schedule was produced for the implementation of RepARC and travel expenses to begin on 10 October 2005 in Manchester and Liverpool. The travelling expenses policy is in the public domain and the terms of it are published on the IND website. Travel expenses are now available for supported asylum seekers requiring travel to each of our 12 Reporting Centres: four in London and a further eight across the rest of the country at Solihull, Kent, Liverpool, North Shields, Glasgow, Leeds, Loughborough and Manchester.

Travel expenses are provided in the form of travel tickets made valid for the applicant’s next reporting event. My predecessors considered a range of payment options which included the chartering of buses for those living outside the specified distance (this would have required considerable organisation in each location, empty buses still to be paid for and the arrival of large groups likely to diminish the efficiency of the reporting location) and payment in cash on production of receipts for the journey (cash would have to be held in all reporting locations to which people report, requiring secure handling, storage and accounting processes in every operational location). The chosen option was to obtain tickets from local Passenger Transport Executives and issue them to applicants for their next reporting event. This was considered as the most effective avoiding waste and the risks of cash handling whilst still encouraging compliance.”

The letter makes it clear that an asylum seeker who lives more than three miles away from the reporting centre gets a card that they can use on the day that they have to report to the centre. That is the travel assistance that they get. It is not preferential treatment for asylum seekers but the Home Office being as efficient and effective with its money and its policies as it possibly can be.

Because the myths were persisting, local councillors and I wondered whether there was some sort of scam going on at the same time. I wrote to the PTE, and it agreed to investigate what was happening. It reported its findings in a letter to Councillor Risby on 15 November 2006. It found that about 2 per cent. of activity on the buses was fraudulent—activity such as people sneaking past the bus driver, people not paying for a ticket, other people using the wrong ticket. A relatively small amount of money was involved.

That investigation took place before it was known that the Home Office was using a scheme that was, in principle, the same as the scheme that is available to the general public but slightly different. When I discovered that, I asked for another investigation to be carried out to see if there were any other scams going on, and the PTE investigated again. In an interesting letter dated 2 May, David Leather, the interim chief executive, said that in the final investigation

“7,000 passengers had their tickets and passes inspected during the two week period. The findings of the revenue inspection in Moston”

that is part of the area in north Manchester that I am talking about—

“were similar to the findings on the wider network and in line with our other inspections, when a ticket or pass was not deemed valid, it was withdrawn. A total of 241 tickets and passes were withdrawn; of these, 178 were System One PayPoint tickets”—

that is not the kind that asylum seekers have—

“45 PTE concessionary passes and 18 single operator tickets. Only six of the System One scratchcards which had been sold to the Home Office were seen, all of which were being used on the correct date.”

There is no evidence that there was any fraudulent activity by asylum seekers. The letter continued:

“A note was made of the number of each one seen and there was no evidence of the same ticket being used later the same day. However, we believe that there is fraudulent activity in respect of the System One PayPoint tickets and we are working with the bus operators and GMP to address this.”

I wish to conclude by making a series of points. What has been learned from the investigations and the exposure of the myths as racist myths is that a small amount of fraud is going on, as often happens in any cash system, and the police and the PTE are dealing with it. But, not uniquely in history, we have a situation that the British National party, which increasingly camouflages itself as an ordinary community activist organisation as opposed to the group of racist thugs that it actually is, has been able to exploit. There are lessons to be learned from this case about fighting racism and dealing with the BNP. When things that public bodies do go wrong—in the first place, the Home Office simply got this wrong—they have to be put right as quickly as possible so that the public service, whether it involves delivering bus passes or dispersing asylum seekers, is effective and can do what it is supposed to do as well as possible.

The system must be open. The most fertile ground for racists is a situation in which they are able to say to people who have lived in this country for a long time that people who have just arrived, in whatever circumstances, are getting a better deal than they are. We must ensure that all our services are delivered as effectively, openly and fairly as possible. We have seen in this case how, over a period of seven or eight years, racists have been able to exploit the situation. There is a by-election in my constituency at present, and the myths that are being spread include myths about bus passes, earlier myths that would be laughable if they were not seriously directed at refugees, and other racist myths that have gone on as long as people have existed.

This is a difficult debate for the Minister to reply to. It is about transport and the Home Office, and also about the big issue of how central Government, local government and local democracy deliver services. I hope that he can assure us that the principles of effective and transparent government will be pursued to expose myths.

I congratulate my hon. Friend the Member for Manchester, Blackley (Graham Stringer) on securing time this afternoon to discuss this issue. He and I have discussed transport issues on several occasions since I was appointed as Minister. He will be unsurprised to hear me say that this is probably the first debate in which I can honestly say that I agree with every word that he has uttered. He has performed a valuable service, and I will come back to that at length later.

I understand that there are some local issues regarding the issuing of payment for the travel expenses of asylum seekers in Manchester. My hon. Friend explained the system better than I could have, so he will know that the vouchers are issued to asylum seekers by the immigration reporting centres to be used for travel to the next reporting event—or appointment, which is how most of us would refer to it. The reporting centres purchase the vouchers in advance from the Greater Manchester passenger transport executive.

My hon. Friend has previously met my hon. Friend the Minister for Immigration and Asylum to discuss his concerns about the payment of travelling expenses for asylum seekers. I understand that my hon. Friend the Minister wrote to him in March setting out the background to the provisions. As was explained to my hon. Friend the Member for Manchester, Blackley, the payment of travel expenses is a fundamental part of the Government’s policy to encourage compliance with our requirements that asylum seekers keep in touch with the immigration and nationality directorate during consideration of their case. We make no apologies for that particular policy—it was the right thing to do because it prevents the use of lack of funds as a reason for failing to comply with a reporting event. Such payments are made to those asylum seekers who live 3 miles or more from a reporting centre or on the grounds of exceptional need. That is a national policy and is not unique to Manchester.

As my hon. Friend said, travel expenses are provided in the form of a scratchcard travel ticket that is made valid for the applicant’s next reporting event. In other words, it is valid only for that particular day and is not a travel card in the normally accepted definition of the phrase. That is the most effective way to avoid waste and the operational risks associated with cash handling. My hon. Friend discussed the issue of fraud with my hon. Friend the Minister for Immigration and Asylum, and he confirmed that fraudulent use of the system was not significant, but that his officials remain vigilant. If evidence of abuse on a significant scale comes to light, appropriate action will be taken to counteract it. The information that my hon. Friend has given hon. Members today is extremely useful in nailing one of the many myths surrounding the issue.

Asylum seekers are not being provided with bus passes as some people are claiming—my hon. Friend was absolutely correct about that. To be totally clear, the issuing of travel vouchers has nothing to do with concessionary bus passes and it is certainly not a preferential system. However, it is sadly typical of the extremists of the British National party to try to exploit the fears of ordinary people and to whip up resentment and hatred against a vulnerable group of people purely for political gain. Frankly, that is a disgraceful attitude and all hon. Members are grateful to my hon. Friend for highlighting that obnoxious tactic. He deserves the thanks of the whole House. I hope that I can share his optimism that now that we have nailed those myths, the spreading of the lies will cease. However, given the record of the British National party on fact and truth, I am not optimistic that the myths will stop being circulated.

In the meantime, as my hon. Friend has raised concessionary travel it might be helpful to explain who is eligible for the statutory minimum bus travel concession in England. From April 2006, residents of England who are 60 years of age or over and eligible disabled people have been entitled to free off-peak local bus travel within their local authority area, and across the whole passenger transport executive in the metropolitan areas, if that is where they live. Eleven million people in England and more than half a million people in Manchester are eligible for the statutory concession, which is already making a real difference to the lives of many constituents, including those of my hon. Friend—especially older and disabled constituents. In fact, those people account for two out of three public transport journeys, which is more than 4 billion journeys a year in England. As we all know, last year my right hon. Friend the Chancellor announced that from April 2008, people in England who are aged 60 and over and eligible disabled people will be able to travel for free by local bus anywhere in England, not just in the local authority or passenger transport executive area.

To make the national bus concession a reality, the Government introduced the Concessionary Bus Travel Bill to Parliament, which completed its Committee stage last week. Throughout the past year, in the run up to the Bill and since its introduction, we have actively involved members of the concessionary fares working group in our plans for the national concession. The group consists of representatives from all tiers of local authorities, including the passenger transport executives, and is assisting us in the implementation of the national bus concession.

The group advised that there would need to be greater consistency in the assessment of eligibility by local authorities across the country because, for the first time, a local authority will be required to reimburse operators for travel by a concessionaire who may not be resident in its area. I can assure my hon. Friend that we are seeking to improve the guidance that we issue to local authorities on assessing the eligibility of disabled people. Indeed, next week the Department’s officials are holding a workshop with local authorities, to which a passenger transport executive representative has been invited, to explore the issues surrounding eligibility. We intend to discuss the matter with stakeholder organisations as well, with a view to updating and reissuing guidance in the run-up to April 2008.

The Government, of course, share the concerns raised by my hon. Friend. We are constantly in dialogue with local authorities and passenger transport executives through our concessionary fares working group. The Government have an excellent record on concessionary fares and it is important to note that it is all too easy for extremist, neo-fascist groups to exploit for their own political ends a positive policy that offers social inclusion to a vulnerable group of people. I reiterate the gratitude that hon. Members and I feel towards my hon. Friend for raising an absolutely crucial issue. I share his hope that now that we have nailed the myths, they will stay nailed.

I am extremely grateful for the opportunity to speak about such an important subject, which is as diverse as the debate title suggests. I appreciate that the Minister will do his utmost to deal with the points that I am raising, but I would be grateful if he would write to me if there are matters that he is unable to address for any reason.

When I trained in personnel management, I remember being confronted with the following question from an old-fashioned recruiter: “Would he fit in at my club?” We were recently treated to the news that the British intelligence services—MI5—had had a record number of applicants from diverse backgrounds because it had advertised on the internet. The days are long gone when someone had to be an Oxbridge graduate who was watched carefully before being hand-selected for MI5—or so John le Carré novels would have us believe was the case. Today we realise that our spies need to look like the population that they are required to blend into and the civilian work force should have the same laudable aim.

Management theory teaches us that the best teams are made up of different types of character, which means that they can perform better because they incorporate different talents, aptitudes and abilities. That is also the case in relation to diversity in the work place. I will make the case for more sensitive employment policies for ethnic minority women. However, the case is just as clear for women generally, ethnic minority men, and people of a different sexual orientation—lesbian, gay, bisexual and transgender, to which I will refer using the term LGBT.

On ethnic minority women, I am indebted to the Equal Opportunities Commission for its excellent briefing, on which what I will say is based. The EOC research identified several employment gaps facing ethnic minority women, including participation in the labour market. Some 79 per cent. of white men are in employment, compared with 66 per cent. of white women and 62 per cent. of black Caribbean women. Those figures go down to 22 per cent. for Pakistani women and 18 per cent. for Bangladeshi women. On progression, 19 per cent. of white men are in managerial or senior official positions, compared with 11 per cent. of white women, 9 per cent of black Caribbean and Pakistani women and 6 per cent. of Bangladeshi women. On pay, although women as a whole face a pay gap, it is far worse for many ethnic minority women. For example, Pakistani women working full-time earn 28 per cent. less than a white British man working full-time. Surely that cannot be right.

The business case for employing ethnic minority women is clear. They represent a growing pool of talent with better qualifications than white males. Given that the Leitch review in 2006, looking at the UK’s long-term skills needs, highlighted a serious shortage of skilled school leavers, it makes no sense for so many Bangladeshi, Pakistani and black Caribbean women to be working in jobs so far below their levels of qualifications. Furthermore, businesses whose work forces reflect the diversity of the population are in a better position to tap into new markets.

The Government’s introduction, in April, of the gender equality duty is extremely welcome. It requires public sector employers to look more closely at their gender representation and to identify underlying cultural or other barriers to the recruitment and progression of women in the workplace. That duty extends down the supply chain as well, so at least some private business is covered. However, there is no requirement on private organisations per se to examine their recruitment and promotion strategies in order to tackle unconscious sexism.

Yesterday, the Government published the discrimination law review, which aims to enshrine all anti-discrimination law in one Act. For ethnic minority women, the single equality duty will be a big help because it brings the issues of women and ethnic minorities, which previously straddled two equality strands, under one integrated duty.

There are three main barriers to the progression of ethnic minority women at work. The first consists of racism, sexism and anti-Muslim prejudice. Bangladeshi, Pakistani and black Caribbean women under 35 and in employment are two to three times more likely than white women to be asked in job interviews about their plans for marriage or children. That research, which was carried out by Botcherby in 2006, also found that one in three black Caribbean working women under 35 and one in five Bangladeshi and Pakistani women have experienced racist comments at work.

The second barrier is workplace culture, which was well-documented in a report by the EOC entitled, “Moving on up? Bangladeshi, Pakistani and Black Caribbean Women and Work”. To be seen as team players, staff feel obliged to participate in out-of-work activities, which might make them feel uncomfortable—for example, going to the pub, gambling or even adult clubs—if I may dare to even mention them within these hallowed portals. The latter is hardly a Muslim woman’s cup of tea, or indeed that of a lot of other people. That club atmosphere does not exclude people deliberately, but it has that effect, I think. Furthermore, people who speak fluent English but with a foreign accent are often treated impatiently. Managers make assumptions about women’s home life, which is especially damaging if those assumptions affect recruitment or promotion decisions.

The third barrier is the lack of support for working parents and carers. Finding affordable child care and a job with flexible working arrangements is critical for black Caribbean women, who are more likely to be lone parents, and Bangladeshi and Pakistani women, who are more likely to have larger than average families. There are still far too few jobs available on a flexible basis. Another EOC investigation, published this year, found that 35 per cent. of people not in work said that they would be encouraged back into work if flexible working was on offer.

So how can the Government and employers address that unfairness?

I congratulate the hon. Lady on securing this important debate on a crucial topic. Has she had a chance to read the recent Select Committee on Work and Pensions report addressing participation by minorities in the workplace? The report identified not only the issues that she has mentioned, but a number of other vital points and difficulties experienced by many in minority groups trying to enter work, such as not having English as a first language and in some cases a lack of community support for entering work in the first place. Those are crucial issues as well. Does she have something to say about them, as well as ensuring proper employer attitudes?

I am extremely grateful to the hon. Gentleman for his intervention. I am afraid that I have not read the report, but I shall do so. Clearly, it is breaking new ground in a difficult area, particularly in relation to the attitude of local communities towards entering work. I am minded to recall the situation of women who have difficulties entering a job. Perhaps they would be interested in self-employment. A number of extremely valuable micro-finance initiatives compliant with sharia law are available. Starting up, even on a small scale, does wonders not only for women’s confidence, but for interaction with the local community. I am in total agreement with him and thank him for his intervention.

I would like to make some suggestions about how the Government and employers can redress the unfairness. I have three main solutions. First, we need to develop cultural intelligence in the workplace; employers need to confront racism, sexism and anti-Muslim prejudice. That could be done by up-skilling managers to facilitate better awareness, understanding, confidence and competence in relating positively to employees from diverse backgrounds. Given the critical role of line managers in determining whether ethnic minority women thrive in an organisation, such cultural intelligence is essential.

Cultural intelligence cannot be learned in a one-off diversity training course. It needs to be embedded in management practice and organisational values so that people can deal effectively with any incidents of racism, sexism or anti-Muslim prejudice by staff, customers or clients and adopt open and transparent recruitment practices for all job opportunities.

The second method would be to improve careers advice and guidance. Careers staff need a better understanding of the specific barriers facing ethnic minority women, and advisers should be trained in cultural intelligence. Equality should be built into the new quality standards for careers information, advice and guidance in schools. The new careers service for adults proposed for England and Wales should have access points at community venues, and the marketing of the service should specifically target unemployed Bangladeshi and Pakistani women. Employers should be linked into careers advice services, to promote job opportunities more widely and to set up opportunities for work placements.

The third strand is to improve support for working parents and carers. We should use Jobcentre Plus advisers to help women to find employment that fits with their child care responsibilities. I am sure that that is done to an extent at the moment. This year, I introduced a ten-minute Bill, the Flexible Working Bill, which deals with extending the right to request flexible working to parents with children under the age of 18. However, the issue is more the cultural attitude among employers towards employees. Employers who introduce such measures find that retention is improved, the absenteeism record is much better and employee loyalty is much enhanced.

The community company initiative Women Like Us is fantastic. That organisation works exclusively to match the work needs of mothers returning to the workplace after having children with the needs of employers who are willing to offer flexible working in return for the huge talent, flexibility, loyalty and retention that they get in return. Let us have more of that, please, and give Women Like Us and organisations like it the funding to develop throughout the United Kingdom.

I am indebted to Stonewall for its research relating to lesbian, gay, bisexual and transgender people. Lesbian, gay and bisexual people comprise about 6 per cent. of the population, according to Government estimates. That is roughly 1.7 million people in the UK work force. Stonewall found that 36 per cent. of gay employees say that they will change careers if discrimination continues. One third of gay staff conceal their sexual orientation from their employers and co-workers for fear of discrimination. Not surprisingly, at least 55 per cent. of gay employees facing discrimination report a direct negative work impact, so employers who do not deal with these problems will find their productivity decreasing. Most worryingly, approximately 20 per cent. of gay employees facing discrimination at work will consider suicide.

Sexual orientation is not yet within the auspices of the discrimination law review in so far as it applies to the equality duties being recommended for employers. Under present legislation, there are three separate duties in respect of race, gender and disability. The discrimination law review has one solid proposal to integrate those three into one duty, which I have already mentioned. It is considering extending that approach to sexual orientation. We certainly urge the Government to include that arrangement, as has already been proposed in Lord Lester’s Equality Bill of 2003.

Such a move would go a long way towards the measures that Stonewall is calling for. Will the Minister comment on what the Government have done so far to address the following solutions, proposed by Stonewall? It proposes measures to ensure that employers recruit and select fairly. Recruiters often have stereotyped notions of what LGB people are good or not good at. Stonewall proposes measures to ensure that recruiters understand fair selection criteria and apply them consistently.

Stonewall also proposes measures to tackle issues of workplace bullying and harassment and to make staff feel confident about using complaints procedures, even if that means revealing their sexual orientation. It proposes the establishment of employee networks—forums for staff who share one or more aspects of their identity. Employers increasingly appreciate the benefits that such forums can bring to the whole organisation. Also proposed are monitoring and evaluation on whether an organisation’s diversity policy is being implemented.

For as long as I have held a women and equalities portfolio, I have sought assurances that the Government will address the issue of transgender people, but despite that, in the equalities law review and indeed in all legislation relating to fair treatment in respect of sexual orientation, there remains absolutely no protection for transgender people unless they have had or are seeking gender reassignment surgery. The vast majority who do not want surgery—people such as transvestites and cross-dressers—will not be covered. Will the Minister please talk to his colleagues about that grave omission? Those people are not huge in number, but they are suffering and the Government are not listening.

With all the groups that I have discussed today, there is a huge pool of talent, skill, dedication and loyalty there for the asking. It makes huge economic sense for any employer to go fishing in that pool. Will the Government encourage and cajole employers to take the plunge, for the sake of their own profits, the economic prosperity of this country and fairness itself?

It is a pleasure to see you in the Chair again, Mr. Caton. It is only five and a half hours since I last saw you there, so I hope that you managed to have a break in the meantime.

I congratulate the hon. Member for Solihull (Lorely Burt) on securing this very useful debate. I am grateful that she gave notice of some of the issues that she intended to raise. We can all agree that there is no place for discrimination in a modern, tolerant society, and there is much of which we can be proud. The UK has some of the most comprehensive anti-discrimination legislation in Europe and human rights are enshrined in statute. The Government have extended anti-discrimination law—as well as protecting people from discrimination because of their sex, race or disability, we have ensured that it is now also unlawful to discriminate in the workplace on the grounds of gender reassignment, sexual orientation, religion or belief, or age. Those regulations were intended, among other things, to help to tackle bullying and harassment in the workplace.

Evidence from the implementation of the regulations shows that anti-discrimination laws can be a powerful tool for tackling prejudice and bullying. People are making use of the regulations to enforce their rights through employment tribunals. The Government have also extended regulations to outlaw discrimination in the provision of goods and services on the grounds of sexual orientation and religion or belief.

Yesterday, as the hon. Lady mentioned, we published our consultation document on the discrimination law review to help to ensure that we have a framework of anti-discrimination law that is fit for purpose for the 21st century. We want to simplify and clarify the law. Clearer law in a single equality Act will help to prevent discrimination in the first place, because everyone will know where they stand. If people are discriminated against, they will know what their rights are. The single equality Act will put the law on equality and discrimination in one place, supported by clear and practical guidance. We want to hear people’s views on the many issues that we need to consider for such a comprehensive statute. We want to see whether there are gaps in protection that need to be filled. The consultation will also consider whether, and how, statutory protection against harassment on the ground of sexual orientation should be provided outside the workplace. Even though we have a lot to be proud of, there is still a long way to go. It is not enough just to have laws on the statute book, because they must be accompanied by a change in attitude.

I want to deal with the specific issue of Pakistani, Bangladeshi and Afro-Caribbean women and work.

Before the Minister moves on to the specific issues of women and ethnic minorities, I would like to ask him something. He mentioned age discrimination. I believe that the Government recently said that they were reluctant to extend the protection from age discrimination to people who are older than 65 and that they will not be re-examining the issue until 2011. Given that he has mentioned that the Government are seeking comments on equality and anti-discrimination law, will they be considering comments on age discrimination in respect of over-65s before 2011?

The age discrimination regulations are relatively new and we are monitoring them carefully. The hon. Gentleman, should he wish to do so, will obviously have the opportunity to make a contribution to the equality consultation that is about to start—we are certainly interested in application and experience.

The Equal Opportunities Commission’s report “Moving on up?” showed a contrasting picture. It contains stories about women who have broken down barriers and overcome the preconceptions to become very successful in their chosen fields of education, business and the wider community. Young Pakistani, Bangladeshi and Black Caribbean women are increasingly well qualified and keen to work, but they find it harder than white women to get jobs and to get promoted. Bangladeshi and Pakistani women who have a degree and are seeking work are five times more likely to be unemployed than white British women with a degree. The EOC found that Pakistani women who work full-time face a large pay gap, earning £3.28 less per hour—or 28 per cent. less—than white British men working full-time

The gender and ethnic pay gap is not just bad news for women, because it means that women’s abilities and skills are not being fully utilised in business and the economy. The Government are committed to reducing the gap between men’s and women’s earnings, and tackling the obstacles that prevent people from achieving their potential. We can help by means other than anti-discrimination legislation. The EOC identified one of the main barriers as being the fact that working parents and carers find it hard to access the support that they need. I can proudly say that we have done a lot to support working families: we have created more than 1 million child care places; there are now more than 1,000 Sure Start centres across the country, providing families with support and advice; the right to request flexible working has made a huge difference, because in the five years since its introduction the number of new parents working flexibly has trebled; and we have just extended the right to request flexible working to carers of adults, giving the right to 2.65 million more employees. Our research shows that flexible working is becoming the norm. Almost all employees surveyed said that some form of flexible working was available.

The Government also have specific, targeted programmes to help the most disadvantaged ethnic groups to find work—for example, the science, technology, engineering and maths access grants given to increase the participation of Afro-Caribbean boys and Pakistani and Bangladeshi girls in those subjects. The programme aims to encourage those groups who are particularly under-represented in related careers. Another such scheme is the partners outreach programme, which is designed to help Pakistani and Bangladeshi women who neither work nor claim benefits.

Before the Minister leaves the flexible working arena, will he tell me whether the Government are examining the possibility of extending the right to request—I am not talking about any entitlement—flexible working from the current age provision to parents who have children aged up to 18?

I remember sitting on the Front Bench on 27 March listening to the hon. Lady’s ten-minute Bill on that subject. As I was able to tell her afterwards outside the Chamber, we are keeping the situation under review and taking this a step at a time. We believe that the approach that we have so far adopted is the right one. It is clearly seen to be working for individuals in business, and I can envisage further extensions. The time scale and the pace of the change remain open to conjecture, but the evidence so far is encouraging. We do not want to go too fast, and I believe that she knows where we are coming from.

As I was saying, diversity in the work force is not an issue for the Government to solve alone because employers must play their part, too. Equality and diversity in the workplace is about not only social justice, but competitiveness. Companies that have well thought-out and well implemented race equality policies will gain competitive advantage. Ethnic minorities now make up about 7.9 per cent. of the population—the figure was 4.6 million people in the 2001 census—and between 1999 and 2009 they will account for half the growth in the working age population. Ethnic minorities in the UK are a growing market with increasing disposable income.

For many businesses, it is essential that they understand and meet the needs of a diverse customer base. For example, HSBC and Halifax branches in London’s Chinatown employ staff who speak Chinese to help them access the small businesses around that area. Having a diverse work force is one part of the business strategy. All businesses need talented staff. If they do not recruit, retain and promote from all sections of the community, they will miss out on potential sources of talent at all levels of the company. Ensuring that employees have an equal chance to progress based on merit can lower staff turnover and the high cost of replacing skilled workers.

Some businesses are already taking that approach, and not just in the area of ethnic diversity. For example, companies such as Barclays, British Telecom, Credit Suisse, JP Morgan, IBM, Shell, Sainsbury’s and Ford proactively work with Stonewall in a scheme called diversity champions. They work with the sole aim of ensuring that their companies follow best practice in diversity policy in relation to their lesbian, gay, bisexual and transgender staff. They believe that that is not only the right thing to do, but that it gives them a competitive edge and better knowledge of their marketplace. I am pleased to say that the Government have supported Stonewall.

In terms of behaviour in the workplace and how people interact, the law exists to protect people from discrimination. It is the employer’s responsibility to ensure fair treatment and to prevent bullying. If issues around cultural sensitivity exist, it is for the employer to resolve them. The hon. Lady mentioned the situation where a workplace has all its work meetings in a pub. Such meetings could take place in more exotic locations, although she rightly disparaged those. In such circumstances, the employer needs to examine whether the practice excludes certain sections of the work force. Such an examination is good business practice, not political correctness.

Any business that wants to be successful should not close its doors to men or women with talent, whatever their ethnic origin or religion or sexual orientation. I welcome initiatives such as the EOC’s new campaign “Promoting people not stereotypes”, which looks to explode myths. Advice for employers on diversity is available from sources such as ACAS, Business Link, the Commission for Racial Equality and the new Commission for Equality and Human Rights. Training on diversity is available from organisations such as ACAS. I urge all employers to use the resources available. The Government’s ethnic minority employment taskforce will be looking further at working with employers.

We have spoken about particular groups in today’s debate, but the work force is still constantly changing. I am thinking of the Jewish and Irish workers in this country over recent centuries, the Black Caribbean, Pakistani, Indian and Bangladeshi in the decades after the second world war, and the most recent arrivals from Eastern Europe. As the work force and population changes, there will be new challenges. There may be issues that we have not even anticipated yet, but we have made progress and can continue to meet any challenges that may arise.

I hope that I have dealt with the issues that the hon. Lady raised, but I shall be happy to respond further in writing, as she requested.

Question put and agreed to.

Adjourned accordingly at three minutes to Five o’clock.