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Commons Chamber

Volume 464: debated on Tuesday 9 October 2007

House of Commons

Tuesday 9 October 2007

The House met at half-past Two o’clock


[Mr. Speaker in the Chair]

Oral Answers to Questions

Foreign and Commonwealth Office

The Secretary of State was asked—


1. What assessment he has made of the recent presidential elections and other political developments in Turkey. (156123)

Turkey’s recent parliamentary and presidential elections have delivered a strong popular mandate to the AK party to continue with a programme of reform and economic development in that country. That has sent out a strong signal about Turkey’s commitment to democracy both in Turkey and elsewhere in the Muslim world. When I went to Turkey on 5 September I made it clear that the UK remains committed to supporting Turkey’s modernisation and its EU accession. I am confident that the new Turkish Government will be positive partners for the UK and the EU.

What are we doing on the soft power front? Is the British Council being upgraded, and will we do more school twinning and that sort of thing?

I am happy to confirm that the British Council is active in Ankara and across Turkey; when I was there, I participated in a seminar that it organised. I think that the school twinning is now supported by the Department for Children, Schools and Families, which has a special website for international twinning operations. The increasing engagement of Turkish business with business across the EU and indeed globally is a positive sign. I might add in parentheses that Turkey’s commitment to helping to support the development of a stable and peaceful Iraq is also an important indication of the way in which Turkey wants to fulfil its international responsibilities.

Will the Secretary of State bear in mind that one of the many reasons for not invading southern Iraq was that it was likely to precipitate a Turkish invasion of the Kurdish north? As that may be imminent, are we strongly advising Turkey not to do it?

I find that a peculiar question, given that we have just been through a referendum—[Laughter.] That is the next question. We have just been through an election campaign in Turkey—[Interruption.] I do not want hon. Members to use their best lines before a later question. We have just been through an election campaign in Turkey, in which PKK terrorism was a serious threat to southern Turkey, and the governing party’s restraint in refusing to undertake the sort of activities to which the hon. Member for Louth and Horncastle (Sir Peter Tapsell) referred was a marked feature of that campaign. Although he talks about the imminence of some sort of Turkish invasion of northern Iraq, it would be better to commend the Turkish Government on their restraint and say that we want to work with them, and that we want the Iraqi Government to work with them and to make sure that we crack down on that dangerous terrorism in northern Iraq.

Does the Secretary of State share the concern felt by many people in the Republic of Cyprus about the fact that the new Turkish Government have still not kept to their undertaking that once they had secured the opening of EU accession negotiations, they would lift their embargo on ships from Cyprus entering Turkish ports?

Obviously, I discussed relations with Cyprus when I was in Turkey. The fairest thing to say is that there are responsibilities on both sides. My hon. Friend rightly refers to the embargo, but it is important that we emphasise that there are responsibilities on both sides. The 8 July UN process that has now been started needs to be followed through, with responsibilities on both the Turkish and Cypriot sides.

The Secretary of State will be aware that on the sixth anniversary of the 11 September bombing, a large bomb was intercepted in Ankara. It is likely that it was to be detonated with a device in Germany. Has he any comment to make on the political implications of that for Turkey?

When I was in Turkey I talked with the Turkish Government about the terrorism that they face; we all know about the Istanbul bombing, which claimed many lives. The political implications are twofold. First, we need enhanced security co-operation, including with the Turks, and that is taking place. Secondly, we need to send out a very strong message that those who would seek to plant bombs anywhere in Europe will affect people of all religions and none, and that is why it is in all our interests to make sure that we work together against them.


The Government do not promote investment in Iran. UK Trade and Investment’s advice to business makes it clear that potential investors should be aware of the implications of existing and future sanctions before investing in Iran. Any company or individual considering investment in Iran should contact officials in UKTI, who will be able to inform them of the legal constraints and considerable commercial and political risks that they would face.

I am sorry to tell the Minister that that is a very misleading answer. The UK Trade and Investment website says:

“Iran has the potential for significant growth…How can we help you?”

Is the Minister aware that Iran is exporting terror, threatening to wipe Israel off the map, manufacturing nuclear weapons and manufacturing bombs to kill our troops? He is using taxpayers’ money to support the economy that has paid for that. Does he accept that that is nothing short of a policy of appeasement, and will he stop it?

Unusually, the hon. Gentleman gives good advice from a sedentary position. There is a sentence that needs to be changed, and I have spoken to the chief executive of UKTI about that. However, many British and European companies in Iran are trading within the law imposed by sanctions. UKTI gives them advice and tries to help them to ensure that they do not encroach beyond the law, which is an important function. I quite agree, however, that the regime in Tehran is obnoxious, and we must do everything that we can to put pressure on it to ensure that it changes those policies.

I agree with my hon. Friend that it is not a very nice regime in Iran, but is it not time that we started new initiatives and a new dialogue with Iran? Is it not about time that we distanced ourselves from the United States and showed Iran that we want to talk to it? Is that not the way to persuade it to change its ways?

We have always maintained diplomatic relations with Iran, unlike the United States. My right hon. Friend the Foreign Secretary has met the Iranian Foreign Minister, and we have had many discussions with the Iranians. The E3 plus 3 has made offers to Iran which, by any definition, are very generous and sensible. We have offered, for example, to help them with a civil nuclear programme, but they have rejected those offers. They have constantly played for time, and they are developing—as far as I believe on the intelligence that we have been given—a nuclear bomb programme. They have enriched uranium with that in view, which is something that we cannot ignore—it is extremely important. In my view, it is one of the most serious difficulties that the world faces at the moment, because if the Iranians develop a nuclear bomb, there will be proliferation across the world, as others will want to develop nuclear bombs.

How does the Minister explain recent reports that the British Government are resisting pressure from France and the United States to accelerate further EU sanctions against Iran? Given his very strong criticism of the Iranian regime, will he commit the Government today to press urgently for action to deny Iranian banks access to European financial systems and to impose restrictions on European investment in Iranian gas and oilfields?

Yes, I can give the hon. Gentleman those assurances and tell him that my right hon. Friend the Foreign Secretary will argue at the appropriate EU meetings next week that we should tighten sanctions across Europe against the Iranian regime. I am very confident that that is exactly what we will do.

EU Reform Treaty

6. What Government policy is on a national referendum on the new treaty reforming the constitutional arrangements of the European Union; and if he will make a statement. (156129)

The mandate for the reform treaty agreed by all 27 Heads of Government makes it clear that the constitutional concept has been abandoned. The reform treaty reforms the EU institutions just as previous amending treaties have done. In line with these precedents, ratification should be a matter for Parliament.

Given that today’s European Scrutiny Committee report describes the new treaty as “substantially equivalent” to the EU constitution, does the Foreign Secretary not accept that the British people should have a right to vote on that in a referendum? Does he not remember that that was his pledge at the last election?

I am sorry, but I think that the hon. Gentleman must have listened to the “Today” programme rather than read the document from the important Committee. Let me read to him exactly what it says. It says that the reform treaty is “substantially equivalent” to the constitutional treaty

“for those countries which have not requested derogations or opt outs from the full range of agreements in the Treaty”.

Whatever the shadow Minister shouts out, that is in the section of the Committee’s report labelled, “Conclusion”—which, I think, is rather important in this respect. The framework referred to earlier does not supersede the conclusion of the report, and I suggest he reads it more carefully.

I, too, have been reading the European Scrutiny Committee’s report, from which I quote, for the benefit of the Foreign Secretary. It states that

“references to abandoning a ‘constitutional concept’”


“likely to be misleading in so far as they might suggest the Reform Treaty is of lesser significance than the Constitutional Treaty”,

so will the Foreign Secretary ensure that he and his junior Ministers abandon that bogus argument, which has fallen apart under detailed examination?

We know the hon. Gentleman’s position. He says that leaving the EU would be a positive step. I suggest that he reads the legal draft that came out on Friday, which was put in the Library and given to the Clerks of the Committees of the House. It makes absolutely clear the direction in which Europe is moving, which is to respect the red lines that the United Kingdom has asked for. I commend to him the words of the chairman of his own party’s democracy taskforce, the right hon. and learned Member for Rushcliffe (Mr. Clarke), who said that if Parliament cannot decide this sort of thing, Parliament is worthless. Parliament should not be worthless.

The treaty makes it clear that if it goes through, Britain will increase the number of votes that it has in the Council. In other words, it will increase our power to make decisions in Europe. It also makes sure that the French, who for years have been trying to prevent the liberalisation of their energy policy, to the detriment of British consumers, will have to comply with European policy. Would it not make sense for us to ratify the treaty as fast as possible, in the interests of the British?

My hon. Friend makes important points. I, for one, look forward to the treaty coming before the House and being debated at great length, so that the myths that have been propagated can be properly debunked.

Does my right hon. Friend agree that the new treaty gives the European Union the opportunity to put behind us procedural arguments about the changes required for enlargement, and instead gives us the opportunity to concentrate on the really urgent challenges that we face, notably climate change?

My right hon. Friend makes an important point. If she has read, as I have, the report of the Dutch council of state, which is the only independent legal body to have looked at the treaty, she will know that it considers that

“these changes are aimed, as far as possible, at purging the Constitutional Treaty of those elements which could have formed starting points for a development of the EU in a more explicitly centralised or federal direction”.

In other words, it does indeed lay the basis for us to ensure that the EU gets on with its proper business, which is about climate change, jobs, crime and immigration.

As a member of the Select Committee that produced the report, I condemn the remarks made by the Foreign Secretary. He is coming to see us on 16 October and he will not have quite such an easy ride in front of the Committee as he may try and get away with on the Floor of the House. The document is substantially equivalent to the treaty and requires a referendum. The Foreign Secretary said the other day that we are a parliamentary democracy and that we therefore make such decisions in Parliament. The Referendum Act 1975 was passed by Harold Wilson and a Labour Government. It specifically returned, as it should, the right of the British people, through their representatives, to make a decision by referendum to enable the people of this country on an impartial question to come to a decision about a matter of massive importance to their future—

The fairest thing to say for the hon. Member for Stone (Mr. Cash) is that he has been consistent on the issue. When the Maastricht treaty came before the House, dozens of Back Benchers who are still in the House, and Front Benchers, voted against a referendum. He voted in favour of a referendum. I look forward to talking with him and his Committee next week. He cannot deny that the quotes that I have given from his report are accurate.

Although some of us on this side of the House will take no lessons about referendums from the Conservative party because of its failure to hold one on the single market and on Maastricht, we still feel that this is a manifesto commitment. If anything, a referendum gives significant authority to the Foreign Secretary when he goes to talk about the red lines in respect of ensuring that at least those red lines are kept and that we seek further improvements. Will he stick to his guns and go for a referendum?

I will certainly stick to my guns, but that involves saying that the decision should be taken in this House. My hon. Friend is right to say that we still have a couple of months before the treaty is finally signed in December. We shall work right up until that final agreement to ensure that the red lines are properly respected. The Prime Minister said that yesterday and I am determined to repeat it today. I look forward to taking on the discussion with my hon. Friend, because it will become clear that Europe and the Heads of Government have rejected a centralised or federalist future. We have the opportunity to make the European Union work for people and I think that that is what unites the two of us.

On the question of the treaty being substantially equivalent to the constitution, should not the Foreign Secretary have read on to paragraph 45 of the Committee report? It states:

“Even with the ‘opt-in’ provisions on police and judicial cooperation…and the Protocol on the Charter, we are not convinced that the same conclusion does not apply to the position of the UK”.

Given that the report says that his central argument on the treaty’s constitutional characteristics is not helpful and is even likely to be misleading, should he not now drop this specious line of argument? Is he not simply padding along in the footsteps of the Prime Minister at the weekend and trying to treat the people of this country like fools?

The Committee’s report was written and printed before the legal text was published on Friday. I am happy to go through the detailed arguments about justice and home affairs, and other issues raised by the Committee with it—I shall do so next week—because I think that if one examined the treaty, one would see that the red lines are being respected.

No one believes the Foreign Secretary any more when he argues that this is not the EU constitution. When the Prime Minister met the Irish Prime Minister on 17 July, even he referred to it as the European constitution. Do we not now have an extraordinary double of a Government who are too scared to hold a general election that they had planned and too scared to hold a referendum that they had solemnly promised the people of this country? Is it not time that the Foreign Secretary summoned up the courage that his predecessor but one showed to the previous Prime Minister and told the Prime Minister that he needed a democratic mandate for such a far-reaching treaty, rather than colluded in this cynical betrayal of the promises made to the country?

I am very pleased that the right hon. Gentleman has mentioned predecessors, because he has recently recruited Lady Thatcher back to his campaign team. I suggest that he listens to what she said:

“Perhaps the late Lord Attlee was right when he said that the referendum was a device of dictators and demagogues.”

The right hon. Gentleman will never be a dictator; how does it feel to be a demagogue?

In my reply to the three constituents who have written to me about this matter, I made it clear that it is the historic role of this Parliament to scrutinise and consider in detail treaties with other nations. Does my right hon. Friend agree that it would be a profound abrogation of responsibility on the part of this House to set that detailed scrutiny aside in favour of a ludicrous tick-box referendum?

My hon. Friend makes an important point. I do not wish to damn his or my political career by saying that we agree with the chairman of the Conservative democracy taskforce but it is the role of this Parliament to undertake that work. I point out to Conservative Members that every previous amending treaty, Labour or Tory, has been presented to and passed by Parliament. That is our job and we should get on with it.

At the centre of this debate is the status of the charter of fundamental rights. The timely and useful report from the European Scrutiny Committee raises a number of issues about it. In particular, it highlights the potential imbalance between the general obligation on the Court of Justice to ensure the uniform application of union law and the protocol secured by the Government, which seeks to ensure that the charter does not extend the ability of the court to find that UK law is inconsistent with the charter. On reflection, does the Foreign Secretary believe that the current text is robust enough? Will he ensure that we get a stronger set of words before the final treaty is developed?

The hon. Gentleman approached this issue in a serious way and he deserves a serious answer to his question. [Hon. Members: “A boring approach.”] Conservative Members describe a serious approach as being boring; that says a lot about the modern Tory party.

The hon. Gentleman raises an important point about article 1 of the protocol, and it is significant to consider it because the protocol is legally binding. It says:

“The Charter does not extend the ability of the Court of Justice, or any court or tribunal…to find that the laws, regulations or administrative provisions, practices or action…are inconsistent with the fundamental rights, freedoms and principles that it reaffirms.”

In other words, it is for these islands, and for this Parliament, to set their own laws in respect of the issues covered by the charter. We shall certainly see that through in our negotiations.

Recognising that any change to a European treaty is, in effect, a constitutional change, does my right hon. Friend agree that deciding how to deal with such a change is a matter of balance and, perhaps more importantly, workability? I urge him to stand firm and act against some of the hypocrisy we have heard this afternoon from colleagues who argued that there was no need for a referendum on the Maastricht treaty, which retained far more power for the European Union than the current treaty. I urge my right hon. Friend to stand firm.

My hon. Friend will be amused to know that a number of the Opposition Members chuntering away during his question were actually there in 1992, voting against a referendum. One of the things we shall be able to do as the debate proceeds is to ask them how they could be against a referendum in 1992 and in favour of one in 2007. I am sure that my hon. Friend, as a former Minister for Europe, will ensure that his historical experience is brought to bear on this debate.


The situation in Zimbabwe gives grave cause for concern. That is why the Prime Minister has stated he will not attend the EU-Africa Summit if President Mugabe is present. It is also why we are working for change by maintaining international pressure on the regime; supporting those working in Zimbabwe working for democratic change; and giving up to £40 million in humanitarian aid every year.

In 2003, the Select Committee on Foreign Affairs suggested revoking Robert Mugabe’s knighthood. In July this year, Lord Malloch-Brown said in a letter to me that his Department will continue to keep the issue under close review. When will the Foreign Office stop dithering and take some action on this issue?

I understand the cause of those who wish to see the knighthood removed, and as my noble Friend said, we are currently reviewing the matter. However, let us clear about this: the situation in Zimbabwe demands a great deal more than that, and removing President Mugabe’s knighthood might detract from that focus and give him more publicity. We need to concentrate on the real problems faced by the people of Zimbabwe.

Following on from the Prime Minister’s welcome statement that neither he nor any of his senior Ministers will attend any summit between the European Union and the African Union, and the agreement of the Foreign Office last week not to allow Peter Chingoka, the chairman of the Zimbabwe Cricket Union, into this country, would the Foreign Office consider taking up the suggestion of Lord Morris, the former Transport and General Workers Union general secretary, that we consider co-ordinating with Australia a wider sporting boycott on Zimbabwe?

We are happy to hold discussions about that. There are currently no formal agreements about sporting sanctions but we have made our position clear and are happy to discuss those matters.

It must be right for the Prime Minister to follow our advice and say that he will not attend the EU-Africa summit if Mugabe is there. Will the Under-Secretary confirm that if any of Mugabe’s senior henchmen are there, the Prime Minister will not attend? Otherwise, we will send a bad message to Zimbabwe.

We have always said that Zimbabwe should be represented because it is important that the issues that affect it and the whole of Africa are discussed. We will have to consider specific personnel at the time.

My hon. Friend knows that the German Chancellor has repeated the Portuguese Government’s mistake of suggesting that Robert Mugabe should attend the EU-Africa summit later this year. Will she make representations to not only our German colleagues but other EU countries to try to ensure that the embargo on Robert Mugabe is maintained?

I assure my hon. Friend that we are in discussion with our EU partners on the matter. Chancellor Merkel was clear that all African countries should be invited to the summit, and we agree. However, we have always said that Zimbabwe should be represented, but not by President Mugabe.

We welcome the Prime Minister’s statement and I am glad that we have moved on from our debate in July, when the Under-Secretary was unable to give us the guarantee that the Prime Minister would not go to the EU-Africa conference. Following the comments of the hon. Member for Barnsley, Central (Mr. Illsley) about Chancellor Merkel, do the Government believe that we need to generate additional EU sanctions against Zimbabwe? In particular, does she believe that the EU could go much further and home in on some of the more obnoxious members of the Zimbabwean regime, such as Reserve Bank governor Gideon Gono, who is a leading friend of President Mugabe and helps finance the regime? Does she agree that it is disgraceful that he can still travel abroad and that we cannot impose sanctions on him?

It is important to examine sanctions carefully. European Union targeted measures are there precisely to ensure that they do not further hurt ordinary Zimbabweans. On the specific issues that the hon. Gentleman raises, we have already argued for Gideon Gono to be added to the EU list. We will continue to do that, and the Home Secretary has excluded him from the United Kingdom.

Discussions are fine but action is needed. The sooner action is taken, the better. The whole country has been razed to the ground. I have met groups from Bulawayo and they cannot accept that everyone seems simply to be talking. They need action now. I urge the Government not to wait any longer, please.

I agree with my hon. Friend, but the situation ultimately needs an African solution. Since July, when we had our debate here, the UK has committed a further £8 million to the World Food Programme and we have ensured that Zimbabwe is discussed at the United Nations Security Council. We in the EU have put pressure on Zimbabwe at the UN Human Rights Council. We are clear that action needs to be taken, but the UK cannot do that alone; we need to work with other people. African countries in particular need to act on the matter.

Middle East Peace Process

The Government believe that the UK must be involved in seeking genuine progress on the middle east peace process. With the combination of the continuing dialogue between Prime Minister Olmert and President Abbas, Tony Blair’s engagement, an international meeting scheduled for November and a rejuvenated Arab peace initiative, the prospect of progress appears more promising than it did at the start of the summer. We will continue to work with international partners to move us closer to a two-state solution.

I thank the Minister for that answer and his robust attitude to the matter. What plans do the Government have for convening a formal meeting of the Quartet and arranging for former Prime Minister Blair to brief Members of the House of Commons on his actions?

I certainly think it is a very good idea for former Prime Minister Blair to come to the Commons to brief an all-party meeting on the issue. I shall certainly put that to him and I hope that he will do so. As for a Quartet meeting, there are of course regular such meetings. There will be one in the run-up to the November conference that is being organised in the United States. It ought to be an important conference and we are pinning a lot of hope on it.

May I tell my hon. Friend that last month I discussed with businessmen in the north of Gaza their plans just to export like businessmen in any other part of the world, but that their ability to do so is being strangled by the Israelis’ continuing blockade of the Karni crossing? The blockade does not affect the firing of rockets from Gaza, but does collectively punish the innocent people of Gaza. What are the Government doing to ensure that the excuses are put on one side and that the Karni crossing is opened as it should be?

I assure my hon. Friend that, along with my right hon. Friends, I have been pressing the Israeli Government to open the Karni crossing. He is quite right and has great experience of the issue. It is interesting to hear that he has held discussions about the issue in northern Gaza, because it is one of the most crucial issues. I cannot for the life of me understand how Israel believes it can have an economic basket case on its border, because there is no more potent way of generating violence and opposition to the idea of a two-state solution than strangling the economy of one’s neighbour.

The Minister is entirely right in what he has just said. However, is he also aware that the United Nations Relief and Works Agency is unable to get necessary supplies into Gaza because of what is effectively a blockade and that it is thus unable to help to build temporary accommodation for the many refugees who are in Gaza? The situation in Gaza is getting more difficult as a result and encouraging the sort of behaviour that none of us wants to see.

Yes, we have been very worried that that reading of the situation in Gaza is going to make things worse. We recently gave £1 million extra to the International Committee of the Red Cross to meet some of the extreme humanitarian problems inside Gaza. We are glad to see that UNRWA is now lobbying widely, in Europe and the rest of the world, to make people aware of just how acute the difficulties are inside Gaza. That is something on which we shall continue to lobby, as it is a very important issue.

How does my hon. Friend assess the impact of Iran’s actions on current attempts to reach peace in the middle east, particularly following the statement by Iran’s judiciary chief on 5 October, when he described the rallies in Tehran as a good start to the destruction of Israel?

Iran is playing a mischievous role. The Iranians’ support for the extreme elements of Hamas and for Hezbollah in Lebanon is an indication that they do not want a two-state solution. They want to destroy Israel, and as far as they are concerned, the quicker the better.

May I associate myself with the comments of the hon. Member for Birmingham, Northfield (Richard Burden)? I was with him in northern Gaza last month, when we met the businessmen whom he described. Will the Minister stress to the Israeli Government that closure of the borders is now creating a burgeoning humanitarian crisis that will not wait until November to be resolved? It is hurting the ordinary people in the Gaza strip, not the Hamas Administration. We should not confuse one with the other.

Yes, I take that point clearly. I am glad that the hon. Gentleman managed to get into northern Gaza and hold those discussions. We do not want to hurt the ordinary people of Gaza. Nobody wants to do that; indeed, I do not believe that opinion inside Israel is in favour of that. The Israelis have had long experience of suffering as a consequence of the terrorism that has been generated inside Gaza and other areas where such difficulties have occurred.

At the same time, there must be pressure on Palestinian and Israeli neighbours to do their utmost to ensure that the supply of rockets and weapons to Hamas militants and jihadists inside Gaza is also curtailed and that those people are not firing rockets into Israel, because that does not help the argument either. However, the hon. Gentleman is quite right. The issue is immensely important and I agree with him entirely.

To follow up on the points that colleagues have made about the importance of the economy of Palestine, does my hon. Friend recognise that the Balls and Cunliffe report made it clear that there is high and growing unemployment among the Palestinian people and that that is increasingly speedily making the situation worse? What can the British Government do to help to tackle that crisis?

The British Government, led by my right hon. Friend the Prime Minister when he was Chancellor of the Exchequer, have worked very hard to try to raise international consciousness of the need to provide employment and housing for so many people in Gaza. There is a new generation of young people there now who will not have jobs, and of even younger people who will not have an education. It is extremely important that we pay attention to that, and I think that we have a good record of trying to do so. However, we can introduce any plan for economic reconstruction that we like, but if we cannot get the politics fixed, we will never build a house or a road in Gaza, or do any of the things for the infrastructure that we want to do. We have to get the politics right, and that is why these international agreements and the other work that we are doing on the middle east peace process are so important. That is absolutely crucial if we are to take forward my hon. Friend’s agenda for economic reconstruction.

EU Intergovernmental Conference

The legal group producing the draft treaty finished its work on 3 October. The United Kingdom has set out our red lines and we are determined that they will be delivered. We will continue to press, right up until the December European Council, to ensure that they are met.

The Government’s case relies almost entirely on the effectiveness of the red lines, but today’s report from the European Scrutiny Committee makes it clear that there may well be an argument that the charter of fundamental rights will apply to the UK. In those circumstances, and if there were a dispute—the report makes it clear that there might well be—can the Minister confirm that it would be the European Court of Justice, not Parliament, that would decide whether the charter applied in the UK?

The Foreign Secretary has already made it clear today that the constitutional approach has been abandoned. On the hon. Gentleman’s specific point about the legally binding protocol and the charter of fundamental rights, it is absolutely clear that the protocol has the same legal force as European treaties. That is a very strong legal protection indeed.

Why has the Minister not responded to my point of order yesterday—it appears at column 57 and was supported by the Deputy Speaker—in which I complained that the documents—

Sorry about that, but my point of order related to the fact that the documents to which I referred were not in the Vote Office yesterday, and they were not there before Prayers today. They should be available so that we can quiz the Foreign Secretary tomorrow afternoon, not only in the Chamber but in the Foreign Affairs Select Committee. Will the Minister ensure that the legislation on this is not so narrowly drawn and crafted that we cannot table an amendment that is acceptable to the Table Office relating to the ability to have a referendum? We want an assurance that the legislation will be drafted so as to leave that scope open to Parliament. What say you?

On the specific point about publications and paperwork being available, it is certainly my understanding, and that of the Foreign Secretary, that that material was placed in the Libraries of the House of Commons and the House of Lords on Friday last week, when it became available. I hope that my hon. Friend will accept that, throughout this process in recent months, we have shared with his Committee and others all the material as it became available. On his wider point about the breadth of the Bill, the House has a long tradition of enabling European Bills to be amended in relation to calls for a referendum. After all, one third of those currently on the Conservative Front Bench voted against such a referendum on Maastricht. As I have said before, and am happy to say again, it would certainly be our intention—with your permission, of course, Mr. Speaker; it is entirely a matter for your discretion—to craft the Bill widely enough so that an amendment calling for a referendum on the reform treaty could take place.

The Minister has clearly looked at the scrutiny report and will have read its paragraph 71, where the Committee characterises the drafting process as

“essentially secret…conducted by the Presidency, with texts produced at the last moment”.

It goes on to say:

“The compressed timetable now proposed, having regard to the sitting terms of national parliaments, could not have been better designed to marginalise their role.”

Do the Government agree with that view?

Not at all. At every opportunity, the Foreign Secretary and I have sought to be available to the Select Committees of this House. I believe that I have given evidence on five separate occasions to such Committees, and my right hon. Friend the Foreign Secretary has also spoken in glowing terms of his anticipation of appearing before Select Committees. The fact is that the reform treaty gives greater powers to national Parliaments, and it remains the case that it is this House and the other place that will ultimately take a view on whether or not to ratify that reform treaty.

The Foreign Secretary seemed to suggest in an earlier answer that the draft of the document now available since 3 October is so different that it invalidates the findings and some of the conclusions of the European Scrutiny Committee. He suggested that the conclusions were drawn before the Committee had sight of the 3 October document, which implies that there have been significant changes. Will the Minister for Europe indicate just two or three changes in the document of 3 October that were not present in the earlier version?

My right hon. Friend the Foreign Secretary was recording a statement of fact. The Select Committee report was drafted and went to publication before the legal text was available. That was my right hon. Friend’s point. The differences between the old constitutional treaty and the reform treaty are very clear. Every member state has moved away from the old constitutional approach and it is quite clear that it is the end for those who had a federalist dream or a federalist vision for Europe. It is equally clear that of all the member states of the European Union, the United Kingdom has moved furthest away from the old constitution.

What is clear is that it has hardly changed at all. Yesterday’s press release on the Downing street website said that if the red lines were not met

“there will either be a veto or there will be a referendum”.

Given that the European Scrutiny Committee has now cast very serious doubt about the Government’s red lines and its Chairman told the BBC this morning that they would “leak like a sieve”, will Ministers now admit that they are morally bound to offer the British people the referendum that they themselves promised them in the first place?

Not at all. It is absolutely clear that the legally binding protocol and the charter of fundamental rights offer very strong protection indeed. That is acknowledged by other member states and other prominent politicians. As the president of the European Parliament, Hans-Gert Pöttering—[Interruption.] The shadow Minister for Europe, the hon. Member for Rayleigh (Mr. Francois), scoffs at him, but the president of the European Parliament is a gentleman and a Conservative. In other places, those things are not mutually exclusive. The president said:

“Since making the Charter legally binding and extending Community competence to JHA were two of the most important features of the original constitution, the deal struck by Tony Blair in June means that—for better or worse—much of its substance will simply not apply in Britain.”


Iran has every right to be a secure, rich country. However, it does not have the right to set off a nuclear arms race in the middle east. That is why we deplore its continued enrichment of uranium in defiance of three UN Security Council resolutions. We will continue to work with our E3 plus 3 partners—France, Germany, Russia, the US and China—and with our EU colleagues to persuade Iran to suspend all reprocessing and enrichment-related activities and return to negotiations on the basis of the far-reaching proposals that we presented in June 2006.

Will the Foreign Secretary tell the House, in a word, whether there is any substantial difference between the policy of the United Kingdom Government and that of the United States Administration?

We are joint members of the E3 plus 3 process. Six countries are leading the diplomatic effort. We are working together with the United States, Russia, France, Germany and China, as I said in my answer to the hon. Gentleman’s main question.

What discussions is my right hon. Friend having with Iran’s neighbours to prevent any expansion of nuclear proliferation in the region should the worst happen?

Obviously I have spoken to the Iranian Foreign Minister himself. I talked to him about the risks that he was taking, not just for his own country but for the region and the wider world. In discussions with Egyptian, Saudi and other Foreign Ministers and ambassadors, I have emphasised our concern for the non-proliferation treaty to be respected, and for Iran not to play the proliferating role that is so dangerous in the current circumstances.

Does the Foreign Secretary agree that if military action against Iran is to be discouraged, it is crucial for there to be a robust and effective alternative that cannot be scuppered by Russian or Chinese vetoes? As President Sarkozy of France—along with the United States—is enthusiastically calling for financial and banking sanctions against Iran, and as Deutsche Bank, UBS, HBSC and other banks are already responding, will the Foreign Secretary do all in his power to encourage other European Union countries, particularly Germany, Italy and Spain, to support such a policy?

The right hon. and learned Gentleman’s general point about the importance of the diplomatic route having proper teeth is absolutely correct. He could have added Standard Chartered to the list of banks that he mentioned.

The right hon. and learned Gentleman will be interested to know that in the year to May 2007, EU trade with Iran fell by 34 per cent., which constitutes a significant tightening of the sanctions. We are exploring all avenues. I will of course discuss the matter with EU colleagues next week, and will continue to monitor it at an international level.

Iran is almost certainly in breach of its undertaking on the non-proliferation treaty, given that it is a signatory. It is our duty to ensure that the treaty is enforced: it has maintained a very good record over many years. However, the policy lacks some coherence when we are prepared to tolerate the development of nuclear weapons in Pakistan and India—and, indeed, welcome it, as the Americans did recently. We really must have a coherent and comprehensive policy if we expect to make real progress on the Iranian problem.

I understand my hon. Friend’s point, but I think he will agree that the present situation in regard to India and Pakistan is far preferable to that which existed in 2002, when people were extremely worried about relations between the two countries. I think that the efforts by the Governments of both countries to lower the temperature in the region should be recognised, notwithstanding my hon. Friend’s point about nuclear weapons.

Does the Foreign Secretary believe that prospects for the development of nuclear weapons by Iran would be strengthened or weakened if the British Government lifted its illegal prohibition and proscription of the People’s Mujaheddin Organisation of Iran and the National Council of Resistance of Iran?

I think I am right in saying that the issue is currently before the courts, and in that context it would be very unwise of me to venture any opinion.

Have there been any discussions at any level between the British Government and the United States Administration about the possibility of taking military action against Iran?

As I have said—and as representatives of the United States Administration right up to the top have said on every occasion—we are 100 per cent. focused on the diplomatic process, and on making the diplomatic route work. That is what we will continue to argue and urge in all forums.


The United Nations Secretary-General is clear that the UN has a significant role. We welcome the appointment of a new special representative: he has our full support in implementing the UN's role under Security Council resolution 1770.

The EU is committed to developing its engagement and supporting the UN. We welcome the recent high-profile visits by the Swedish and French Foreign Ministers, and the discussion stimulated within the EU.

I welcome the Minister’s response. Will he join me in welcoming the recent statements by the French Government and the EU High Representative, Javier Solana, on the need to help and to co-ordinate the reconstruction work of the Iraqi Government and indeed their allies in projects such as Operation Sinbad, which has recently ended in Basra? Will he expand on the success of that project?

That is an important question. The effect of Operation Sinbad on employment levels, for example, in Basra has been significant. There is a long way to go, though. Basra is still suffering greatly. There is an enormous amount of work to do on infrastructure. It will be helped if EU nations and wealthy nations of the west realise that that reconstruction helps everyone, not just the people of Basra and Iraq. It will help to prove that a democracy can function well in the middle east, ensuring that people are employed, children are educated and the health system works. It will become a model for the rest of the region.

The Minister will be well aware that there are possibly as many as 2 million internally displaced Iraqis and that possibly as many as 2 million people have fled to a place of safety in neighbouring countries. What support is being offered to Jordan and Syria to cope with that very large influx of desperate people? What is being done to support the people who have been displaced within Iraq, who are living in desperate poverty, without any support or services whatever?

My hon. Friend has asked an important question. This Government have given a great deal of financial support to try to help to improve the humanitarian situation. We know that the Governments of Syria and Jordan especially require a lot more help. We have been lobbying to ensure that our partners in Europe give some money for humanitarian support as well and, even more importantly, that the very wealthy neighbours of Iraq, Jordan and Syria, especially the oil Governments of the Gulf, realise that they have a role to play too and that they could alleviate that suffering significantly.

EU Treaty (Climate Change)

10. What assessment he has made of the likely impact on the ability of the UK and its European partners to combat climate change of proposed changes to qualified majority voting in the new EU treaty. (156133)

In response to the question tabled by my hon. Friend, I make it clear that the EU can be effective in tackling climate change. That process began with the targets agreed at the spring European Council this year. The move to QMV under the reform treaty will help by removing the veto of any one country on the liberalisation of energy markets and steps to improve energy diversity.

I am sorry; I was put off earlier by the unusual applause, to which I am not accustomed.

Is it not clear that, if we in the EU are going to make our contribution to meeting the challenge of global warming and to achieve our high, demanding and necessary targets for reductions in carbon emissions, we need to get the necessary implementing legislation through in a timely fashion and unambiguously and that, for that purpose, we need to have QMV in a Union of 27 members? Therefore, is there not evidently more than the usual degree of confusion in the minds of those on the Opposition Benches who claim—[Interruption.]

My hon. Friend is giving yet another reminder of why he left the Opposition Benches and joined us. Opposition Members scowl and dismiss. Euroscepticism is now a mainstream ideology for the Conservative party. The reform treaty provides, for the first time, an opportunity to unblock decision making. It will give the United Kingdom and the European Union the capacity to deliver change and effective improvements on one of the biggest issues facing the EU. That is one of the important parts of the reform treaty. It is one of the reasons why Labour Members support it so wholeheartedly.

Pakistan (Detentions)

11. How many cases there have been of British citizens under the age of 18 being detained by Pakistan authorities while custody issues are considered by the Pakistan High Court in the last five years; and what support the high commission has provided in such cases. (156134)

We are not aware of any British citizens under 18 who have been detained by the Pakistani authorities in the last five years while custody issues are considered. We have, however, provided consular assistance to many British parents involved in custody disputes and child abduction cases in Pakistan. When providing such assistance, we take care that our actions do not contravene Pakistan law and any determination by the Pakistan courts.

I thank the Minister for that answer. I am sure that she is aware of the case of my constituent, Asma Akhtar, who is currently involved in a child custody case in the Pakistan High Court. Such cases are covered by a protocol. In view of the difficulties Asma is experiencing, will the Minister undertake to review the operation of that protocol?

The UK-Pakistan protocol is in place to enable us to come to decisions on children’s welfare in such custody disputes regardless of whether the child is in Pakistan or the UK, and it is operating. We need to keep it under review, and next year we will have an international child abduction conference in Islamabad to promote greater awareness of that protocol on children’s matters and how it can assist in reducing the number of child abduction cases.”

Pre-Budget Report and Comprehensive Spending Review

Today I can present the pre-Budget report and the conclusions of the comprehensive spending review. The background to this year’s report and spending review is a time of increased international economic uncertainty and a more fragile global environment which has already seen turbulence in America, Asia and Europe. The theme of this year’s pre-Budget report is that, provided we maintain the course for economic stability that we have set, we can respond to that global environment. We will do so by taking no risks with stability and no risks with unaffordable promises that put the public finances at risk. We can respond as well to the rising aspirations of the British people, and we can do that by taking the right long-term decisions for our country. Today I will set out how we will maintain that stability and strong economy, meet our international obligations, improve our public services and invest more in the highest standard of education and health care, and equip our country for the future as we meet these new global challenges.

Let me start with the economic figures. In March, inflation had risen to over 3 per cent. but decisive action has brought it down to below our target of 2 per cent., and I am able to forecast that inflation will again be on target next year and the year after. We are determined to hold firm to our economic framework, which has proved resilient over the past 10 years and which we can be confident will do so now and in the future. While this year growth in America is expected to be 2 per cent., in Japan 2.3 per cent. and in the euro area 2.6 per cent., growth in Britain—with exports and investment rising and employment at record levels—is expected to be 3 per cent. this year: Britain, the fastest growing major advanced economy in the world.

That underlying strength of the economy will stand us in good stead as we face the current international instability that started in the American mortgage market and has now spread across the world. The full impact of turbulence in the international financial markets is as yet unclear. The House will rightly want to discuss in some detail the current international instability and its effect on Northern Rock, and I intend to make a full statement to the House later this week. The International Monetary Fund has said that this international uncertainty will have an effect on growth right across the world, and independent forecasters expect growth next year in America, the euro area and Japan to fall to 2 and 2½ per cent. In those circumstances, it is right that we, too, are cautious. So my forecast for growth next year is also 2 to 2½ per cent. [Interruption.] But because of the strength of our economy, our commitment to openness and liberalised trade across the world—[Interruption.]

It is because of the strength of our economy and our commitment to openness and liberalised trade across the world, and our flexibility and dynamism here at home, that my forecast for growth in 2009 and 2010 is 2½ to 3 per cent., in line with the economy’s trend rate of growth and in line with the Budget forecast.

We can afford sustained investment in our priorities only because of our two fiscal rules that ensure sound public finances. I can report that last year, borrowing was 2.3 per cent. of national income—£4 billion less than forecast. I can also report that debt was 36.7 per cent., also less than forecast. Over the past 10 years of this economic cycle, borrowing and debt in Britain have been lower than in Japan, the euro area, America and the Organisation for Economic Co-operation and Development area as a whole.

I can tell the House that we are meeting our first fiscal rule with the current budget and surplus over the cycle. In the previous economic cycle, from 1986 to 1997, that rule was missed, with a deficit of £240 billion. But over this cycle, with a current budget deficit last year lower than forecast, we have a surplus of £18 billion and we are therefore meeting our first fiscal rule. Even taking into account the impact of what is happening in the financial markets, we have a current balance going forward of minus £8 billion this year, then minus £4 billion, then surpluses of £3 billion, £9 billion, £14 billion and £20 billion by 2012-13. So we will meet our rule in the next cycle.

We will also meet our second rule that net debt should be at a sustainable level. In America, debt is 44 per cent. It is 49 per cent. across the euro area, 86 per cent. in Japan and 94 per cent. in Italy. The figures in Britain are 37.6 per cent. this year and then 38.4 per cent., 38.8 per cent., 38.9 per cent., 38.8 per cent., and 38.6 per cent. in 2012, so meeting our second fiscal rule. Debt interest was 3½ per cent. of national income in 1997. Next year, it is expected to be just 2 per cent. That low debt allows more investment in front-line services. Net borrowing is forecast to fall from 2.7 per cent. this year to 1.3 per cent. in 2012, compared with a peak in 1993 of almost 8 per cent.—the equivalent of £110 billion today. The measures that I am taking in this pre-Budget report allow fiscal policy to support the economy while ensuring that the fiscal rules are met. As a result, net borrowing is forecast to fall from £38 billion this year to £23 billion in 2012.

In this cycle and the next we are meeting both our fiscal rules: borrowing not for current consumption, but for investment in Britain’s priorities. As the Prime Minister made clear in the Budget earlier this year, this spending review is tighter for many Departments—all the more reason to identify increased efficiencies and savings. The spending review has identified substantial savings that can be made by Departments. Building on the £20 billion already achieved, Departments will save a further £30 billion by 2010. That is money available for reinvestment in public services. In addition to that, asset sales in four years’ time will have reached £36 billion, reducing debt and releasing further resources. Departmental plans will be published, setting out in detail how these savings will be achieved.

We are also seeing the rewards that can come from a successful economy and record levels of employment. Just under a decade and a half ago, as much as three quarters of all new public spending was spent on debt and social security costs. The figure for this spending review will be a third of that. Today I can announce that, because unemployment continues to fall, we will spend £400 million less than forecast in each year of the spending review on the costs of economic failure.

Those three elements—a strong economy, sound public finances and efficiencies—make possible the investment that I can announce today. Departmental spending will rise from £345 billion this year to £397 billion in 2010. Departmental spending is published today; investment will be matched by reform and clear objectives, set out in new public service agreements, which we are also publishing today.

Let me now turn to our proposals. The foremost duty of any Government is protecting our country. The whole House will want to join me in acknowledging the dedication and courage of our armed forces in action overseas, including in Iraq and Afghanistan. To support our armed forces and all that they do, I am today allocating an additional £400 million for operations this year. That is on top of the increase in the defence budget to £37 billion by 2010 that will provide over £500 million-worth of investment for improvements in accommodation for members of the armed forces and their families. In the mid-1990s, defence spending was cut by 20 per cent. This settlement is the longest period of rising investment in the defence of our country for almost 30 years.

Matching our commitment to international security with international diplomacy, we will increase the Foreign Office budget, including spending £460 million in 2010 on the British Council, the BBC World Service and the launch of the BBC Farsi and Arabic TV channels.

The terrorist attacks in July 2005 and the attacks since remind us all of the constant threat to our security here in Britain, and of the critical importance of our police and security services. Since 2001, spending on security and intelligence has more than doubled to £2½ billion a year. I can now announce a new single budget that brings together the work of the police, the security services and all parts of the Government responsible for addressing the threat from terrorism. The budget for the intelligence agencies will continue its historic real-terms growth since 2001, with real growth over this period of 9.6 per cent. a year. I can announce that the single budget will rise every year over the next three years—a rise of £1 billion in total, to £3½ billion a year in three years’ time. That is a trebling in cash terms in a single decade. It also includes £700 million over the next three years for the Home Office for its work in combating the terrorist threat. Overall, I am allocating additional resources to the Home Office and Ministry of Justice that will now rise to £20 billion by 2010, as we guarantee neighbourhood policing in every community, build 9,500 extra prison places and finance over £400 million in technology to strengthen our border security.

Our ability to compete and succeed in the global age will depend on our competitiveness and continuing investment in our economy. Britain’s future success will depend on investment not just in physical capital but in skills, innovation and intellectual property. I am publishing today a new analysis which shows that Britain could now be investing as much in those areas as the United States of America. That means that almost £250 billion a year—up to a quarter of today’s income—is being invested in the priorities essential for securing tomorrow’s prosperity.

Lord Sainsbury’s science review reported last week, and I can confirm that investment in science and university research will rise to over £6 billion a year in three years’ time. That will help to ensure that British research and industry are brought closer together to develop the new products and services that the world wants to buy.

Britain has more Nobel prize winners than any country outside the US. Yesterday, another prize was awarded for medical research, and that is testament to Britain’s continued scientific success, which is recognised across the world. So that more British medical discovery can be translated into new health drugs, treatments and preventions, I can today announce that I am funding in full the recommendations of Sir David Cooksey’s review. We will expand the single fund for health research to £1.7 billion by 2010.

In the past, we paid a heavy price as a country for failing to invest when it was necessary, particularly in transport. We are putting that right and will double investment. By 2010, it will rise to £14½ billion a year, providing extra money for strategic road schemes such as the widening of the M1 and M6, and £1.3 billion a year for improving local and regional transport across the country. In addition, we will double the amount that we spend over the next two years on upgrading the national rail network, ahead of a further £15 billion for railways over the following five years. This also provides for the construction of Crossrail, which will be the largest transport project since the channel tunnel and essential for the competitiveness of not just the City of London but the whole country.

However, because transport requires investment year after year and decade after decade, I am extending to 2018 the long-term funding guideline of annual growth of 2¼ per cent. above inflation. That is possible only because of our commitment and ability to fund those long-term improvements. I am also today publishing proposals to give local authorities the power to set a business rate supplement for investment and local economic development, so that with their support they can provide opportunities for business expansion.

Making Britain one of the best places in the world to do business also demands a modern tax regime based on three clear principles: that our system is competitive, simple and fair. I confirm that the main rate of corporation tax will be cut by 2p to 28p next year. That is the lowest in the G7.

Working with business, we need to do more. I am announcing three reviews proposing simplification to the tax system that will let 3 million self-employed people pay their tax and national insurance contributions more easily and 500,000 businesses reduce their paperwork by removing a separate payroll. Taken together with other measures that I am proposing today, that will save British business up to £100 million a year.

The capital gains tax regime here has continued to encourage investment and enterprise. I now propose reforms to make the system more straightforward and sustainable; to ensure that it sets consistent incentives for investment and enterprise; and to ensure that it remains internationally competitive. The new code of conduct for private equity firms drawn up by Sir David Walker will be published next month and will set out much needed steps for increased transparency and disclosure.

I can tell the House that the changes that I propose to capital gains tax also, taken together with the tax loopholes that I am closing, will ensure that those working in private equity pay a fairer share. So from April next year I will withdraw the capital gains tax taper relief and in its place there will be just one rate of 18 per cent.—one of the most competitive single rates of any major economy. I am also proposing measures to combat income shifting, vehicle excise duty evasion, and to tackle the exploitation of national insurance exemptions.

I believe that it is right that everyone who lives and works here should pay their fair share. I therefore propose to close a number of loopholes which have allowed some people to avoid taxes that everyone else has to pay. Non-domiciled taxpayers already pay about £4 billion on their earnings. Any proposal for change has to be fair, workable and affordable. I can tell the House that I have examined proposals to impose a flat-rate annual charge of £25,000 on 150,000 non-domiciled taxpayers, which it is claimed would raise £3½ billion. There are in fact only 115,000 registered non-domiciles. I can tell the House, too, that if the charge of £25,000 were imposed, only an estimated 15,000 of those would earn sufficient money abroad to make it worth while to maintain non-domiciled status.

As a result, the combined effect of people paying this charge or changing their tax status would be revenue not of £3.5 billion but of only £650 million a year at most—a shortfall of more than £2 billion. In addition to that, such a charge could discourage men and women—doctors and nurses, business men and women—from coming to this country in the short term. Such men and women do pay tax on their earnings here, and do contribute to the country’s wealth, and we do not want to turn them away. So I will now consult with a view to early legislation on an alternative route. As a first step, we will introduce a charge after seven years, then a higher rate after 10. We will prevent people claiming that they are out of the country when they are actually here, from disguising income as capital and from claiming in effect two allowances; and for completeness we will introduce a flat-rate charge for everyone. Those measures will raise an average of £650 million.

The two great challenges for this generation are the need to tackle climate change and poverty across the world. So alongside the pre-Budget report I am publishing the next stage of the implementation of the Stern review, setting out how Britain is meeting its environmental obligations. We are the only country to have met our Kyoto obligations. We have reduced our greenhouse gas emissions by almost a fifth since 1990.

Next month, when the climate change Bill comes before the House, we will become the first country to introduce legislation on binding carbon targets. I am today increasing the budget for the Department for Environment, Food and Rural Affairs to £4 billion in three years’ time to help us tackle climate change and protect the countryside. I can confirm that that includes provision of £800 million a year by 2010 for flood defences. We now need to move further and faster on the next stage of the European emissions trading scheme. As part of that, we propose to increase significantly the use of the auctioning of carbon allowances, as we move further towards a low-carbon future.

Today I am also publishing an interim report by Professor Julia King, which shows that, by choosing the most efficient cars on the market today, drivers can cut emissions and their fuel bills by up to a quarter, and that with new technology and cleaner power we could cut carbon emissions from cars by up to 80 per cent. I will bring forward proposals in the Budget, after Professor King’s final report, on ways to encourage the next generation of cleaner cars and incentives for people to buy them.

Air travel accounts for a growing share of carbon emissions, so it is right that aircraft emissions should be part of the EU emissions trading scheme. I also propose that aviation makes a greater contribution in respect of its environmental impact. For that to be as environmentally effective as possible, I intend from 2009 to levy the duty not on individual passengers but on flights, to encourage greater and more efficient use of planes.

I can also announce a new environmental transformation fund, and that fund will have a three-year budget of £1.2 billion, which will provide investment in new energy technologies here at home and resources to meet our obligation to support poverty reduction in the poorest countries through environmental protection.

I believe that it is to the lasting shame of this country that, in the 1980s and 1990s, aid to developing countries from Britain fell by almost a quarter. In 1997, we devoted just £2 billion—a quarter of 1 per cent. of our national income—to development aid. That figure today is over £5 billion, and today I can announce that overseas aid will rise again to £9 billion by 2010. In doing so, we will meet our commitment to double multilateral and bilateral aid to Africa from 2004 to 2010. That puts us on course to meet our European commitment of 0.5 per cent. of national income devoted to development aid by 2010; and then to meet our commitment to achieve, for the first time, the United Nations goal of 0.7 per cent by 2013. I can tell the House that we will meet all our international obligations to developing countries in full.

In the 20 years up to 1997, child poverty in Britain doubled. Since then, we have lifted 600,000 children out of poverty. Two and a half million more people are in employment. We believe that helping people into work is the best way of cutting child poverty and providing opportunity, which is why we shall continue to support the new deal. For the first time in 30 years, the number of people on incapacity benefit is falling, with almost 100,000 people taken off the incapacity benefit roll in the past two years. The roll-out of pathways to work will bring together the public, private and voluntary sectors to help more people into work.

I can confirm that, with 300,000 more lone parents in employment compared with 10 years ago, we can help even more lone parents by extending the top-up that they receive for the first 12 months that they spend back in work. In addition, I can also announce today further measures to take more children out of poverty. First, I am doubling the amount of child maintenance that a family can receive without affecting their family benefits to £20 a week next year and then £40 a week in 2010. Secondly, I am increasing the child tax credit by a total of £175 a year from next April, with a further increase in 2010, so that, for families on low incomes, children’s benefits and tax credits will be worth at least £3,500 a year for the first child. Taken together, those measures will lift a further 100,000 children out of poverty.

Next year’s rise in the basic state pension and other benefits will be announced later this month, but the pension credit for older people with just a small pension of their own will rise from next April by £5 a week and £260 a year for a single person and by £7.65 a week and £397 a year for a couple. That guarantees every person over the age of 60 at least £6,450 a year. We will bring forward the start date for flat-rating the state second pension to 2009.

I can announce that direct funding for social care will increase to £1.4 billion by 2010. That will help to provide new homes for older people and help people with disabilities to live independently in the community, as well as offering more services for carers. I can also announce an extra £200 million next year to deliver on our commitment to every pensioner and disabled person in England—guaranteed free off-peak national bus travel.

Today, home ownership is at 70 per cent.—that is nearly 2 million more than 10 years ago—but we need to do more; we need to ensure that there are homes for people to buy. Last year the number of homes increased by 185,000. That is the largest increase for nearly 20 years. Planning reforms that are coming before the House will help the building of more homes in an economically and environmentally sustainable way, as we provide additional investment to increase the level of house building to 240,000 a year by 2016. In total, that is an extra 3 million new homes between now and 2020.

I can announce that we will also spend over £4 billion over the next three years to help people living in poor quality housing to make renovations to their homes, so that by 2010, some 1.9 million of the poorest children and 1.7 million pensioners will have benefited. As we build more homes, we need to ensure that properties are not left unrented, unsold or unavailable for people to live in. I am introducing measures today that will help to bring empty residential properties back on to the market.

Buying a home is probably the biggest investment that people make in their lives. Fixed-rate mortgages can offer more certainty. I want to see more fixed-rate mortgages not for just two years but for 10 years or even longer. I will bring forward proposals at the Budget on reforms to help lenders to ensure that more people can fix their mortgages as a matter of routine, if it is right for them. As we prepare plans for more home building, for eco towns and for shared equity, we will also consider how else we can increase the supply of housing to help first-time buyers to enter the market.

Grants to local authorities for local services in England will increase to £26 billion by 2010. We have provided sufficient resources to ensure that local authorities can keep council tax rises substantially below 5 per cent. The budget for the Department for Culture, Media and Sport will increase to £2.2 billion in three years’ time. That guarantees an inflation increase for the arts, free access to museums and galleries, and extra sport, so that every child and young person can take part in sport for five hours a week. It will also deliver the cultural Olympiad in the run-up to London 2012.

I can also set out the total settlements for the devolved Administrations in Scotland, Wales and Northern Ireland, giving them their full entitlement. In Scotland the figure will rise to £30 billion in 2010; in Wales it will rise to £16 billion; and in Northern Ireland it will rise to £10 billion. That, of course, is in addition to spending in Scotland, Wales and Northern Ireland on matters that are not devolved, such as spending on defence, tax credits and pensions, which benefit all parts of the United Kingdom.

I now come to my final decisions. In respect of capital gains tax, there is currently transferability between spouses, to recognise the fact that capital assets are built up jointly over a lifetime. In inheritance tax, there is currently 100 per cent. spouse relief over a lifetime, but there is no transferability of allowances. I want to ensure that husbands and wives can benefit from each other’s unused inheritance tax exemptions, so I will raise the total amount of inheritance for married couples on which no tax is paid, and this will apply to civil partnerships, too. I can announce that, from today, the combined tax-free allowance for their estates will not be the current £300,000, but up to £600,000. By 2010, the combined tax-free allowance for couples will rise to £700,000. And I can do more: to ensure that people who have already lost their husband or wife will also benefit, I will backdate that indefinitely for every widow or widower.

Those changes mean certainty for up to 12 million married couples, with an allowance of up to £600,000, rising to £700,000, and the same entitlement for 3 million widows and widowers. That allowance is worth more than the value of 97 per cent. of homes in this country. In future years, we will take both house prices and inflation into account when setting inheritance tax thresholds.

I now have a further choice to make. As a result of our economic management, I can meet both our fiscal rules and invest more—£2 billion in 2010, in addition to the sum proposed at the Budget. If I was to raise the inheritance tax threshold to £1 million, it would cost a further £2 billion. I found that, under that proposal, £1 billion would go to estates worth more than £950,000—the top 1 per cent.—only. Instead, I decided to go ahead with raising the inheritance tax exemption to £700,000 for married couples and civil partnerships, and invest the additional £2 billion in health and education.

Let us now have a debate about what is affordable and what is fair in the future of inheritance tax. I welcome that debate. In this statement, I have managed to raise the arts and culture budget; to give the go-ahead for Crossrail; to meet our international obligations on overseas aid; and to double the budget for social housing and expand owner-occupation.

I can now announce that the final figures for education will be higher than originally proposed. I hope that all parties will support and match these new plans when I explain where the additional money is going. The Budget proposed that investment in education and skills will rise to £74 billion in 2010, increasing education spending as a share of national income rising from 4.5 per cent. 10 years ago to 5.6 per cent. now. Today, I can announce, in addition, further investment, providing a £250 million fund to ensure that all children at school are ready to learn and benefit from personalised support.

I can also do more for the national health service. Over the next three years, the money we spend will rise again by more than its historic rate: on average, by 4 per cent. above inflation. This new investment will allow us to ensure a maximum wait of 18 weeks from referral to hospital, increased access to GP services and cleaner hospitals.

With the additional £2 billion I have available, I can now announce that investment in health in England will rise from £90 billion this year to a total of £110 billion in 2010. I could have spent that £2 billion on an inheritance tax reduction for the few wealthiest estates. Instead, I am able to raise the inheritance tax allowance and invest more in schools and hospitals for the British people. That means, in education, helping to build a new primary school in every local area by 2010. In health, when added to its budget, this will deliver 20 new hospitals, 140 new walk-in centres open seven days a week, and 100 new GP practices. We aim to ensure a regular check-up for every adult in the NHS, saving lives and improving the quality of patient care across the country.

We propose not unaffordable tax cuts that deprive public services of the money they need, but an affordable tax cut and improved investment in health and education, founded on economic stability. I commend this statement to the House.

I do not know why the Prime Minister even bothered to turn up. He should have called that election, and let us give the Budget. Instead, we had a pre-election Budget without the election. We all know that the report was brought forward, so that it could be the starting gun for the campaign, before the Prime Minister took the pistol and fired it into his foot.

Let us deal straight away with the announcements on aviation, and on non-domiciles and inheritance tax. For 10 years, the Prime Minister has been sucking millions of families into the inheritance tax net. For 10 years, he has been pulling first-time buyers into stamp duty. For 10 years, he could have reformed air passenger duty. For 10 years, he did nothing on non-doms.

Now, a week after we introduced our plans, the Prime Minister and the Chancellor scrabble around in a panic trying to think of something to say. The Prime Minister talks about setting out his vision of the country, but he has to wait for us to tell him what it is. That is not leadership of this country—it is followership, Prime Minister. It is not strong, Prime Minister, it is weak. He has learned nothing from recent events. The public will see today’s measures as a desperate, cynical stunt from a desperate and weak Prime Minister, and the public can tell the difference between a Labour party that sees this all as a cynical, calculating game, and a Conservative party that believes in lower taxes and in aspirations.

The Chancellor attacked my non-domicile policy, but then announced that he would consult on it. Will he confirm that? From this day on, let there be no doubt about who is winning the battle of ideas in Britain. If the Prime Minister wants to debate our policies, and if he wants to challenge the independent experts who support our costings, he should have the courage to call a general election, but he will not. This Prime Minister’s name may appear on the cover of books about courage, but it is never likely to appear in the index.

These cynical stunts should not distract us from the fact that today was the day when the economic chickens came home to roost. Britain needs a Government who prepare us for the new economic revolution by freeing our economy, reforming public services and putting us on the path to lower taxes. Instead, we got a speech that boils down to this: growth is down, borrowing is up, the spending rate is down, and overall taxes are likely to go up. What a mess after 10 years in office.

The real charge against the Prime Minister is not just that he got his growth forecasts for the next year wrong, although he did. The real charge against the Prime Minister is, first, that he should have prepared the public finances for a slowdown in the economy, and he did not; and secondly, he should have prepared the public services for a slowdown in spending, but he did not do that, either. The pre-Budget report is the opposite of what a sensible, prudent Government should do.

Let us look at the public finances. After 15 years of global growth, we should be running a surplus in this country. Instead, we are entering what the Chancellor himself admits are difficult times, with Government borrowing out of control. The Prime Minister told us in last year’s Budget that 2007 was the year when the finances would move into the black. Then, in this year’s Budget he told us that he was wrong, but that at least borrowing would fall.

Today the Chancellor admitted that borrowing is going up again. Total borrowing this year is now expected to be £4 billion higher than forecast. We all waited for the moment when, as the former Chancellor used to do, he would rattle off the borrowing figures for the years afterwards, but he entirely missed them out—talk about burying bad news! Indeed, the annual deficit, which he did mention, will be £4 billion higher in the current year. The real tragedy is that the Government should not have borrowed in a boom; they should have saved. Now there is nothing left to prepare Britain for the rainy days that may lie ahead.

Why did not the Chancellor tell us that the savings ratio has fallen? Page 146 of the report shows that the savings ratio this year has fallen from 5½ per cent. to 3½ per cent. That is the lowest savings ratio on record. He did not tell us that the estimates for the growth of disposable income for millions of families have also fallen sharply from 2½ per cent. to 1½ per cent. this year. Why did he hide those figures? He should be blaming his predecessor, not copying him.

The Chancellor has not prepared us for the economic slowdown or the spending slowdown. The growth rate of spending has been cut in half. The Chancellor has been forced to share the proceeds of growth. This is another example of us setting the agenda. Why cannot the Chancellor be honest with people about what that means, instead of trying to spin the figures?

Let us take the education budget. When the more gullible Labour Members cheered, perhaps they did not realise that the Chancellor is cutting the spending growth rate of education in half. The real tragedy is that the Government failed to use the boom years to reform education and prepare it for this slowdown. The building schools for the future programme, which the former Chancellor used to boast about, is now in such a mess that just 14 of the 100 schools that were supposed to open this year will do so. The £1 billion spent on tackling truancy has led to a 45 per cent. rise in it. The question people are asking is simple: where has all the money gone? [Interruption.]

Order. Members should allow the hon. Gentleman to be heard. Clapping is not in order in this House.

I might try that again: where has all the money gone in health? Why does not the Chancellor be honest with the public about what this health settlement means? The growth of health spending is set almost to halve in the next three years, so a health service that is already seeing maternity wards closing, accident and emergency wings shutting and staggered pay awards for nurses will now have to make do with a much slower rate of spending growth. It would have been able to cope better if the recent spending boom had been matched by reform.

I know that the Prime Minister has found himself a new health guru, Lord Darzi. Remember him? He is the one whose report sunk without trace last week. The Prime Minister should listen to the previous health guru, Derek Wanless, who says that the hoped-for productivity gains have not been achieved and that a lot of money has been wasted. When Wanless compared our health care with other similar countries, he found that Britain was still lagging on crucial outcomes such as life expectancy, infant mortality, cancer survival and health inequality. The Health Secretary puts it in a more technical way:

“We’ve put a lot of money in, but that hasn’t led to a lot of happy bunnies”.

Even with today’s spending slowdown, this report confirms that the tax burden is now set to reach a record high—at a time when all our global competitors are trying to reduce their taxes. By the way, why did the Chancellor not tell us that this is a tax-raising pre-Budget report? We heard all the talk about inheritance tax and so on, but I see that in 2010-11 there will be a £1.4 billion rise in taxes as a result of the measures that he announced from the Dispatch Box just a few minutes ago.

This pre-Budget report should have prepared our country for the new economic revolution, but instead we got over-spun claims, desperate stunts and fake figures from a Government who have given us fake photos, fake troop withdrawals and fake hospital openings, all led by a Prime Minister who is increasingly seen as a fake.

The Chancellor should spare us the Brownite nonsense and save it for the election campaign. Instead, he should give us straight answers to these straight questions. First, will he confirm that the Prime Minister got the growth and borrowing forecasts wrong? Secondly, will he confirm that the growth rate of health and education spending will be cut by almost half? Thirdly, will he confirm what he did not say when he gave his original report: that this report raises taxes overall? Out of curiosity, will he also confirm that he had no plans to reform inheritance tax in this PBR until we made our announcement and he looked at his polls? We know that the Prime Minister cannot give straight answers to straight questions, so let us see whether the Chancellor can do any better—let us see whether he can begin to restore trust in this weak and cynical Government.

I thank the shadow Chancellor for his response. It strikes me that he might have benefited—[Interruption.]

The shadow Chancellor might have benefited from rehearsing his lines a bit longer before he delivered them. Listening to him and to some of his colleagues, it is striking that they find it difficult to acknowledge in this Chamber that we have one of the strongest and most stable economies in the world. They have no difficulty in doing so outside this Chamber when talking to business audiences, when they have to concede that thanks to the stewardship of my right hon. Friend the Prime Minister over the past 10 years we have a very strong and stable economy. It is precisely that stability that will enable us to deal with the international uncertainty that we now face.

Another striking thing about what the hon. Gentleman said—as he desperately confers with his colleagues on the Front Bench—is how on earth he thinks he can maintain stability when he has made promises during the past week on inheritance tax, stamp duty and tax credits and has no means of delivering on those spending commitments. He has a black hole—£6 billion that he cannot find.

When he was talking about inheritance tax, the hon. Gentleman said that he set great store by independent experts, so I thought I would check to see which independent expert advised the Conservatives on their inheritance tax policy. I listened to the Leader of the Opposition as he went round the television studios last week, and he kept referring to Accountancy Age as the authority for the fact that there were so many people not paying tax. I read Accountancy Age and found out the source of this independent expert, and it turned out to be an article in a Sunday newspaper. And when I read the Sunday newspaper to find out where its figure came from, I learned that it was an “unnamed tax expert”. How on earth can we have any confidence in a man who wants to be Chancellor when he bases his estimates on what is in a Sunday newspaper, not on firm evidence?

If the Opposition make promises that they cannot afford, there will be instability, increased borrowing and taxation rises elsewhere, or cuts in health, education and other areas. It is precisely such instability that got the Conservatives into so much trouble when they were last in government. The choice is between an affordable tax cut and irresponsible, unaffordable promises being made by the Conservative party.

The second striking thing relates to my announcement in my speech that we were able to spend £2 billion on health and education. I noticed that at no point did the hon. Gentleman say whether he would match that commitment. Now, next week and during the next few months, we shall continue to ask the Conservatives whether they are prepared to meet our commitment on health and education. The truth is that they cannot afford to; they are already committed to reductions in tax and increases in expenditure that they cannot afford because they have not identified how they would carry them out.

The hon. Gentleman criticised us by saying that health spending was not rising as fast as it should. I came into possession of certain information just a few hours ago, and I can tell the House that we are spending more on health than the Conservatives thought. Helpfully, one of their Members—perhaps someone waiting to cross over to us in the next few months—left the Tory crib sheet in the photocopier in the House of Commons. There is a suggested question on this and, by the way, I have all the suggested questions. [Hon. Members: “Answer!”] I intend to answer the question that they have for me in the document. It asks whether the Chancellor can confirm that growth is only 3.5 per cent. a year. The health increase is at 4 per cent. a year—more than the Conservatives thought.

It is obvious that if the hon. Gentleman had his way, we would have a series of unaffordable promises on tax and spending that his party could not meet. In contrast, we will continue to take no risks with stability and we will continue to build the stability our economy needs because that is the best way of protecting the interests and aspirations of people in this country.

I thank the Chancellor for an advance copy of his statement, but 12 of the 18 pages were blank. Is that a new signal of open government and transparency? I congratulate him on adopting our long-standing policy on aviation taxation. There have also been welcome announcements on overseas aid, carers and social housing—[Interruption.]

Order. That is bad manners. The hon. Gentleman should be heard and any Member leaving the Chamber should do so quietly.

May I also sympathise with the Chancellor for having obviously spent the past 72 hours rewriting a speech that was originally intended to be a chapter in the election manifesto, and for having only just recovered from the ignominy of being the first Chancellor of the Exchequer since 1866 to preside over a run on a bank? Not since Black Wednesday has there been such a collapse of confidence in the authority of Government.

Let me begin with the key point in the Chancellor’s statement: the slowdown in the economy. We are in a rapidly changing and deteriorating environment. In the United States, to which we are closely linked,Alan Greenspan estimated that the risk of a recession approaches 50 per cent. What is the Chancellor’s assessment of the risk of a recession in Britain—50 per cent., 30 per cent., 20 per cent., 10 per cent.? It is an important question because factors that could precipitate a recession in the United States—personal debt and a bursting bubble in the housing market—are even more extreme in the United Kingdom.

Let me put to the Chancellor a question that I posed to his predecessor four years ago. I asked,

“is not the brutal truth that…the growth of the British economy is sustained by consumer spending pinned against record levels of personal debt, which is secured, if at all, against house prices that the Bank of England describes as well above equilibrium level?”—[Official Report, 13 November 2003; Vol. 413, c. 397.]

In the subsequent four years, every one of those indicators has deteriorated. Cannot the Chancellor bring himself to accept that millions of families are being squeezed by a combination of reducing disposable income and higher interest rates as a result of moving from fixed-rate mortgages in the next few months? Does not he accept that there is a major vulnerability in the UK economy?

The slowdown has major implications for the spending review, which makes grim reading for many Departments. The Chancellor has promised the largest increase in health spending. As I understand it, he said today that health spending will grow by 4 per cent. Will he confirm that the Wanless report argued that 4.4 per cent. growth was the absolute minimum required to sustain improvements in patient care? That assumed that the maximum amount of health service reform was achieved, which has clearly not happened. Will he confirm that, when we consider all the spending commitments, the growth that he suggests—I believe that it is 1.9 per cent. a year—is only fractionally higher than that achieved in the 18 years of Conservative government?

Will not local government now take the biggest hit? Something that did not appear in the statement but is buried in the report is the fact that council tax is due to rise by 5 per cent. a year throughout the UK. That tax bears disproportionately on low-income families and pensioners. At a time when the Chancellor is scrambling to catch up with the Conservatives on inheritance tax, why has he paid no attention to a report and an analysis conducted over four years on the need for reform of that hated and regressive form of taxation?

On poverty more generally, has the Chancellor made time today to glance at the parliamentary ombudsman’s report on tax credits, which has the wonderful, evocative title, “Tax Credits: Getting It Wrong?”? Is he willing to be a little more open-minded than his predecessor and consider the parliamentary ombudsman’s recommendations for simplifying and making a great deal fairer that hopelessly overcomplicated system?


On taxation, I am glad that, a few months after I introduced a debate in the House on the super-rich, there appears to be an all-party consensus that we should do something about it. However, the Government have got only themselves to blame for their current position with regard to non-domiciled investors. Five years ago, they commissioned a report, which was suppressed under the Freedom of Information Act 2000. The data were released only a few days ago. However, I agree that there is little merit in the idea of a poll tax on non-domiciled investors. It would be unfair to many immigrant workers of modest means and a fleabite to the super-rich. For the Abramovichs of this world, a £25,000 charge is roughly the equivalent of what they would spend on a day out at Stamford Bridge. For the noble Lord Ashcroft, £25,000 is roughly the equivalent of one marginal seat.

In conclusion, perhaps I could say something a little more positive and sympathetic to the Chancellor. We know from the press releases that he advised the Prime Minister against a dash to the polls and to stay the course. In the light of the gloomy outlook for the British economy, whatever else one says about the Chancellor, he is a very brave man.

First, may I apologise if we sent a series of blank sheets of paper to the Liberals—[Hon. Members: “You always apologise.”] Well, I will apologise, but it did enable the hon. Gentleman to jot down today’s Liberal party policy. Rather like the Conservatives, he overlooks the fact that over the past few years we have established a strong and stable economy, which will enable us to deal with the uncertainty that we face today. As I have said to the House and as I said last week, the reason we have adjusted our growth figures is that it is sensible in the light of what people are saying—that the uncertainty will have an effect not just here but across the world—to do that.

If I understood the hon. Gentleman correctly, I agree with him that there ought to be more fixed-rate mortgages. Indeed, I said that during my statement and I said it just a few weeks ago. I would like people to be able to fix their mortgage rates for a lot longer, not just because that would be good for them, but because it would be good for the country as a whole.

I am not sure that I follow the hon. Gentleman’s point in relation to the Department of Health. We have been able to increase the amount of money being spent on health over the past few years. There is a further 4 per cent. real-terms increase, which will enable us not only to build more hospitals and provide new GP practices, but to provide health check-ups for individuals, which is important. It has never been clear to me whether the Liberals want to spend more on health or less—it really depends on what day we are listening to them. What I do know, having looked at the Liberals’ proposals on tax, which cost around £18 billion a year, is that it is not clear where they are going to get the money from even to finance a small part of what we believe is necessary in public services.

The hon. Gentleman talks about poverty. I strongly believe that we need to do more to reduce pensioner poverty and child poverty. Today I announced proposals to take another 100,000 children out of poverty. However, the Liberals’ proposals on income tax would actually disproportionately benefit people with higher incomes, so I do not think that he is in a particularly strong position to lecture us on that.

As I said at the last Treasury Question Time, there are problems in the administration of tax credits. However, the hon. Gentleman should not lose sight of the fact that more than 6 million families have benefited from tax credits. I believe that the policy of helping people on low incomes is absolutely right, which is why I intend to stick with it.

I welcome the measures that the Chancellor has announced on simplifying the tax system, particularly on corporation tax and capital gains tax, and on fairness in private equity. As he knows, the Treasury Committee looked at the issue. We had practitioners from the industry lining up to say that it was terribly unfair for millionaires to pay less tax than their cleaners, so the steps that the Chancellor has announced today are welcome.

However, does my right hon. Friend agree that if we are to continue to enjoy prosperity in this country, we need economic stability? In that context, the Governor of the Bank of England mentioned that the UK’s economic fundamentals were there when he appeared before our Committee, while the Organisation for Economic Co-operation and Development has praised the UK’s monetary and fiscal framework. Will the Chancellor give a guarantee that any tax initiatives that he has announced today have been costed and can be funded in the long term? Otherwise, the chickens will come home to roost sooner than people expect.

I agree with my right hon. Friend. As the Chairman of the Treasury Committee, he knows a great deal about the subject. In particular, he knows that it is essential that the Government stick to the position that they have followed over the past few years. It was our strength and stability that meant that we dealt with the problems that arose after the collapse of the Asian stock market in the 1990s and of the American stock market in the early part of this decade. We have been able to do that precisely because we have not made promises on tax and spending that cannot be financed. As I said earlier, it is striking that the shadow Chancellor made little attempt to defend his position or to explain how he would fill that black hole.

In relation to spending, as my right hon. Friend the Member for West Dunbartonshire (John McFall) has said, it is important that we maintain expenditure where it will benefit the country in the long term. I understand that a Conservative Front Bench spokesman has already been on the radio failing to say that he would match us in spending that additional £2 billion on health and education.

The Chancellor has acknowledged that we are going to have a very sharp slowdown of the economy at the end of a period in which a sea of household and Government debt has sustained growth so far. Does he not therefore accept that people will be looking to today’s statement to see whether he can restore confidence in the Government’s fiscal policy through what might be a very difficult phase for our economy? Does he not think that he should have introduced some new fiscal rules to replace the two discredited fiscal rules of his predecessor? Does he not also think that it was a mistake to start playing around with the dates of the cycle as he did, so as to pretend that either of those rules was remotely credible? Does he not think that, when he announces that he is obliged to halve the rate of growth in public spending, compared with the rate that we have experienced for the past six or seven years, such an announcement should be combined with measures to indicate how reform can be accelerated, productivity improved and choice and competition actually delivered, in order to get a better quality of service for the money? With respect, his statement was devoid of any such measures. So far as he was concerned, this was the end of the party conference season. Does he not acknowledge that he will have to do some serious work over the winter if he is to retain even the modest levels of economic growth that he announced?

I seem to remember that the levels of debt that we have today are rather better than those that existed when the right hon. and learned Gentleman was Chancellor of the Exchequer. In relation to spending, I think that he was complaining that we were not spending enough, yet I had always understood that his party’s position was that we were spending too much. The amounts of money that we are spending on public services such as health and education are considerably more than was the case 10 years ago when he was Chancellor of the Exchequer, as he well knows.

In relation to the revision to the growth figures that I have given, I believe that it is sensible to do that because of what is happening internationally. The problems that started in the American housing market have clearly spread across the world. I made the point earlier that we need to take account of that, although, given the strength of the British economy, there is every reason to believe that we can get back on track with growth in the years after that—that view is shared not only by me but by independent commentators—because our economy is fundamentally strong, and it can deal with these difficulties. That is a rather different position from that of the Conservative party in the early 1990s.

I welcome the continued stability and growth outlined in the pre-Budget report. I want to ask my right hon. Friend about Northern Rock and the financial assistance scheme. When Northern Rock was in difficulty, the Chancellor rightly stepped in and made the state the insurer of last resort. The Government have consistently said that they will not do that in relation to the 125,000 pensioners who will benefit from the financial assistance scheme—set up, uniquely, by this Government—but not at a rate of 100 per cent. I did not notice anything in the statement today to suggest that the Government had changed their position on this and made themselves the insurer of last resort for those pensioners—in whose case there was an adverse ombudsman’s finding—as they did in the case of Northern Rock, in which there was no such finding.

I am sure that we will have an opportunity to discuss Northern Rock later in the week. The reason why I agreed that the Bank of England could provide lender of last resort facilities to Northern Rock was that I was concerned that damage might be done to the banking system as a whole. That is the only ground for intervention—a fear of systemic failure. It is not the policy of the Government or the Bank of England to intervene unless there is a risk that something that is happening in one bank will spread to other banks. That is why we intervened, and to that extent the case is quite different from that of any company in another sector.

In relation to the financial assistance scheme, my hon. Friend will recall that we gave an undertaking in July to bring the support up to 90 per cent., if we can do that, and I hope that we will be in a position to say something about that in the not too distant future.

Given that the Chancellor’s predecessor consistently overestimated corporation tax receipts and ended up having to borrow £100 billion more over the last five years than was originally forecast, what assurance can the right hon. Gentleman give that his revenue and borrowing figures are any more robust than his predecessor’s?

Just a few moments ago, the hon. Member for Tatton (Mr. Osborne), who is continuing his huddle on the Front Bench, was criticising me for taking the necessary steps to ensure that I had made the necessary provision. I say two things in response. First, I want to ensure that we maintain a strong economy, which will help the financial health of companies and enable them to contribute through the tax system. I want to ensure that this is a good place to do business so that we can continue to attract more companies here, which we have been remarkably successful in doing. Secondly, as I said at the start of my statement, I have taken a prudent approach to the economy in order to ensure that we can support the economy as a whole. What we do fiscally must be the right thing to do in the light of present circumstances.

I warmly welcome my right hon. Friend’s announcement on the increase in supply of housing for sale, which will be greatly welcomed, particularly by young families just starting out in life. Will he confirm whether there will also be an increase in the supply of social rented housing?

I know that my right hon. Friend has long been concerned that that should happen. I hope that, with the additional money that we can make available, we will be able to improve the stock when it comes to new build or renovation of affordable housing. It is important that the supply of housing and the housing market should reflect the differing needs of people in this country. Most of us are concerned about the difficulties faced by people on lower incomes. There are two sides to dealing with the problem. We look to see what we can do to help generally, but the key is to get more affordable housing into the market. That means money, and we are prepared to provide it, but it also means reform of the planning system, for which I hope we will gain all-party support.

Does the Chancellor accept that the NHS, for which the Government have responsibility, has consistently done better than social services, for which local government has responsibility? Will he confirm that he has done the same today? Does he recognise that local authorities are now spending billions more than their formula spending assessments on social services and are increasingly having to ration care and introduce charges? Would it not have been preferable, if we want to take some of the pressure off council tax, if we believe in joined-up government, and if we want to spend effectively on individuals, to have a better balance between health and social services?

I agree with the right hon. Gentleman. It is important to ensure that social services are properly funded. In my statement I announced a number of measures to help elderly people in particular, and also those with disabilities. We have increased the amount of money going to local government. It is obviously for individual councils to decide how they allocate that money. I believe that we have provided resources, through the health service and local government, to enable councils and others to make improvements to provide the care that we all want to see.

May I ask my right hon. Friend a bit more about his welcome announcement of increased spending on law and order, especially on local police budgets and local police teams? What would that mean in terms of the number of officers? Many people, including those in my own area, want to see more armed officers—[Interruption]—sorry, I mean uniformed officers, out on the streets.

I agree that we all want more uniformed officers on the streets, and I know that my hon. Friend has been vigilant in ensuring that the Government live up to their promises in that respect. We have made additional money available to the Home Office, but it is obviously for chief constables to decide how best to employ that money. I hope that by making this additional money available, we can ensure that police officers are placed where and when they are needed. I hope that the chief constable in my hon. Friend’s area recognises the additional funds invested and uses them to place the right number of officers where they are needed to police the streets.

I warmly welcome the £1.7 billion for the full implementation of the Cooksey reforms, but can the Chancellor confirm that the increase in resources by 2011 will not be at the expense of the Medical Research Council and basic research, and that resources for NHS clinical research will grow at the same rate?

I am grateful for what the hon. Gentleman has said. Over the past few weeks—and, indeed, in my previous capacity as Secretary of State for Trade and Industry—I have been struck by how advanced many developments are in this country, and the collaboration between universities and the health service is something that I want to encourage. The Prime Minister and I were at University college London this morning, and saw an excellent example of the way in which such collaboration is producing treatments and diagnostic skills that simply were not there just a few years ago. It is not only cutting the amount of time for which patients have to be in hospital to receive their treatment, but enabling more effective treatment to be provided. Yes, the Cooksey budget was identified as being a separate budget, and I think it very important for that to be the case. Sir David spent a great deal of time looking into the issue, and I was determined to ensure that he was given the funds that he needed.

Rather disturbingly, neither Opposition Front-Bench spokesman sought to match the Chancellor’s excellent achievements, or his projections on overseas aid to help some of the world’s poorest people in the world’s poorest countries. Does the Chancellor agree that when the Government achieve the figure of 0.7 per cent. of gross national income by 2014—as I believe they will—it will be consistent with our millennium development goals, and that when the Government achieve it, as some Scandinavian countries already have, it will not be beyond their horizons to build even on that?

For many years, in the House and outside, my right hon. Friend has campaigned for an increase in the amount that we contribute to overseas aid. I remember wondering years ago—before I was in the House, and during my first 10 years here—whether we would ever be able to get back on track to meet our international obligations. Now we are back on track, and have been able to bring forward the date for our commitment of 0.7 per cent. of gross domestic product.

As my right hon. Friend knows, the Prime Minister and his predecessor spent a great deal of time at Gleneagles securing international agreement and persuading all countries to join us. I am absolutely committed to meeting our international obligations. I only hope that there is cross-party support for that—although I am bound to say that, given their spending commitments, it is not clear to me how on earth the Opposition could possibly meet them.

Do the Chancellor’s estimates for public sector debt in total include the liabilities of private finance initiative and public-private partnership schemes? If they do not, can he tell us what the figure would be if they did?

I think the hon. Gentleman will find all that spelt out in the pre-Budget report that I have published today. As for whether PFI projects are classified as being on or off the Government’s balance sheet, that is a matter for the Office for National Statistics.

I congratulate my right hon. Friend on finding money to put into health and education rather than giving tax cuts to the extremely wealthy, but despite the excellent progress we have made, inequalities still exist in our country. Will my right hon. Friend use his position to ensure that the greatest proportion of the additional money that he gives to the Department of Health and the Department for Communities and Local Government goes to the areas with the most inequalities?

I very much hope that we shall continue to reduce those inequalities in all that we do, whether in local government or in the health service. It is important that we in central Government do our bit. That is why I said to the hon. Member for Twickenham (Dr. Cable) that although we clearly have difficulties to overcome with tax credits, they are clearly a very good way of putting money into the pockets of families who need that help.

It is sometimes forgotten that there is another big thing we can do to deal with inequalities. As my hon. Friend knows full well from the area that he represents, getting people into work makes a massive difference to their prospects. I worry about the Opposition’s proposals and the instability that they would create, because the inevitable result would be that, sooner or later, unemployment would go up. That has happened in the past, and we do not want it to happen again.

The gloom that was evident on the faces of the Members behind the Chancellor today when he talked about the pre-Budget report will be reflected in Northern Ireland. It is predicted that growth will fall by 50 per cent and that growth in public expenditure in Northern Ireland will be 1.2 per cent, as against the 1.9 per cent. generally that is announced in the report. That will have an impact on the economy. In light of that, will the Chancellor consider proposals to change fiscal policies, for example, in Northern Ireland, which will help the Northern Ireland Executive to grow the private economy to fill the gap left by the reduction in public spending?

Perhaps I could make a general point to the hon. Gentleman, which I might equally make to the Welsh and Scottish nationalists—[Interruption]—well, I certainly see a Scottish nationalist—[Interruption.] Two of them, indeed. The devolved Administrations all have their Barnett entitlement in full. There have been no changes to the basis on which that is calculated. They get the money as they always have done. However, that is not the whole story, because money spent nationally on, for example, tax credits, pensions and defence is also money that is spent in Scotland, Wales and Northern Ireland.

On the particular point that the hon. Gentleman made, I strongly agree that we need to encourage more private sector investment in Northern Ireland. I am sure that he will agree that at the moment public sector investment and public sector spending in Northern Ireland is disproportionate; it is much higher than any of us would like. He will also know that we asked Sir David Varney, who has been working on his report, to look at those things. However, a lot of things in Northern Ireland need to be looked at to encourage investment. One in particular is education and skills. When we ask business people in Northern Ireland what they want, they say that they want to ensure that when they set up businesses, they have the work force with the necessary skills, as well as investment, infrastructure and other factors.

Will the Chancellor confirm that he can afford free health checks, better health and a better future for the many by resisting the temptation to go back to the past by offering unsustainable tax thresholds for inheritance tax for the very few?

My hon. Friend makes a good point. Free health checks for people are a very good policy. I am sure we can all think of individuals who are alive today who might not have been if they had not happened to go to the doctor for a check-up. Doing that as a matter of routine seems to be eminently sensible, not just for them but for the good of the country as a whole. There is no doubt that if a party gets itself into a position where it promises to cut taxes by £5 billion and it has no idea where to get the money, sooner or later it will find that it cannot pay for the health service, education or anything else.

Why was more not made today of efficiency gains? Since 2001, the Public Accounts Committee has made some 2,500 recommendations in more than 300 unanimous reports. Most of those recommendations have been accepted by the Government, but many of the lessons are not being applied across Whitehall. In the light of the sheer size of the Government budget, does the Chancellor accept that an efficiency gain of just 2 per cent. in the use of resources would generate £8 billion-worth of savings every year? That would be enough to lead not only to increased spending on priority areas, but to a real reduction in the overall burden of taxation. Finally, does he agree that any Government or party that promised to return to the people a share in the proceeds of growth as well as a share in the proceeds of efficiency would be on to an election winner?

It is funny that the hon. Gentleman should say that, because at the last election the Conservatives said that they could get lots of savings out of paperclips, and it did not turn out to be the election winner that they thought it might be. When we started to look at what was being proposed, we found, just as we are finding now, that one did not have to look too far to see that promises were being made on the basis of money that had not yet been saved. That way lies the very instability that I have talked about.

On the hon. Gentleman’s more serious point, I agree that Government can always be more efficient. I said in my statement that our review identified £30 billion-worth of savings, which Departments will have to accomplish because if they want to meet the spending that they have set out they will have to find that efficiency saving. Following the Gershon report, £20 billion has already been saved; I have not the slightest doubt that all Government Departments, and the public sector generally, can always do more, and the pressure that the hon. Gentleman’s Select Committee brings to bear on Departments in this regard is useful.

Will the Chancellor confirm—so that I can welcome the fact—that the new improved child element of child tax credit will benefit some 130,000 families in Northern Ireland? On the wider issues, did an earlier answer that he gave indicate that in spite of significantly improved allocations to health, education and social housing, there will not be any translated increase in the Barnett allocation to Northern Ireland beyond what the Chancellor’s predecessor promised to the Northern Ireland parties back in the spring?

I welcome again the Government’s reaffirmed commitments on official development assistance. Will the Chancellor confirm that they will hold, no matter what the uncertainty brings, and will he colour in what that means in terms of the Department for International Development’s budget for education and the fight against AIDS, tuberculosis and malaria?

I am happy to hear a slightly different view from Northern Ireland in relation to Government expenditure, because increasing expenditure for Northern Ireland to £10 billion is very good for Northern Ireland. I can also tell my hon. Friend that, of course, the money that I announced to help us meet our target of getting 100,000 children out of poverty covers children in Northern Ireland—as it does children in the rest of the United Kingdom. I am sure that the tax credit increase will be welcomed by many families living in Northern Ireland, and my hon. Friend is right to welcome that.

My hon. Friend is also right to welcome the increase in the money that DFID will receive for overseas aid. However, the allocation within the Department is a matter for my right hon. Friend the Secretary of State for International Development, who will no doubt want to make further announcements in due course.

My hon. Friend highlights the fact that we have been able to make and confirm such allocations. We know that we will be able to deliver on them, because we have been running the economy and not making uncosted and irresponsible promises. Being unwilling to play to the gallery can at times be unpopular, but it is the right thing to do in the long-term interests of this country.

The Chancellor confirmed a number of things today, such as that the growth rate will fall and borrowing will remain high at about £30 billion. However, he failed to confirm that 75 per cent. of his PFI liability was off balance sheet—hiding the numbers—and he did not tell us what research and development spending was this year. Instead, he said there would be another report, which I will look at with some interest. However, we know that R and D spending for the future has been lamentable. Nor did he tell us, although it has been published, that the balance of trade deficit is some £45 billion—a direct consequence of the 1 million lost manufacturing jobs.

The Chancellor did, however, tell us two things, and I have questions about those. He spoke about Crossrail and the Olympics. There will be Government funding of at least £5 billion for each of those projects. Will he confirm that that will be subject to the Barnett formula? He also said that the Scottish departmental expenditure limit would rise to £30 billion by 2010. That would appear to amount to a 1.4 per cent. annual rise for each of the three years, but can he confirm that, with the shaving of more than £300 million off the Scottish baseline figure, that amounts in real terms to barely a 0.5 per cent. rise for each of the next three years? If that is the case, when his own report states that

“oil prices have risen above consensus forecasts”

because of factors such as “resilient demand”, and oil revenues are flooding into the Treasury, is it not shameful that a mere trickle of barely a 0.5 per cent. rise in real terms is returning to Scotland?

Let me respond to the various points the hon. Gentleman makes. First, most people might think that an increase of the budget in Scotland to £30 billion was not only the right thing to do, but that it also provided the Scottish Executive—even one currently led by somebody whose ambitions far exceed his ability to deliver them—with sufficient resources to spend on health, education, transport and many of the other things that Scotland needs. Scotland got its full share of Barnett expenditure; absolutely nothing has changed in relation to that. That means, for example, that Scotland—as well as Wales and Northern Ireland—also got its Barnett share of the expenditure on Crossrail. Although Crossrail is largely a railway line and tunnel in the middle of London, Scotland got the Barnett consequentials of it.

I would have thought that the nationalists—whose own policy would mean that the sums would not be available, because of all the disruption that would be caused to Scotland by tearing it away from the rest of the United Kingdom—would be able to see that, on any view, the settlement is very good, especially when they consider the amount of public spending per head of population in Scotland compared with that in the rest of the United Kingdom.

I shall say one other thing. As an Edinburgh MP, I follow closely what is happening in the Scottish Executive. It is increasingly clear to me that the reason why the nationalists are blustering and complaining so much is that they cannot afford, and are not able to deliver on, the promises that they made earlier this year.

Can my right hon. Friend comment on the plight of some of my constituents who are former council house tenants? They are having the greatest difficulty in getting the trust to do any repairs or improvements to their properties. Is there anything in the report that might help those constituents?

There is certainly more funding available, and I have made a change to the treatment of repairs for VAT purposes. However, if my hon. Friend sees me or drops me a note, I shall be interested to learn from her what the particular problem is. It may be a problem with money in the past, or some other problem. We have certainly made money available overall; perhaps the change in relation to VAT that I have made today will help.

Can the Chancellor tell us the current total borrowing figure for the public sector, adding in all the off balance sheet obligations under PFI/PPP, the guaranteed loans in parts of the public sector and the unfunded pension liabilities? I know that he is a strong admirer of transparency, and expects such accounting from the private sector.

As I said earlier, borrowing this year is lower than we expected. On public expenditure generally, and borrowing and PFI, the borrowing figures are set out in the Red Book, as I said. However, I wonder about this: one of the things that I thought good about the report that the right hon. Gentleman commissioned for his leader was his commitment to the necessary public investment in transport, for example.

We can deliver on our commitments, not only for transport but for health and education, only because we have been prepared to finance that partly directly by Government and partly through PFI. I have never understood the enthusiasm of Conservative Members who speak about PFI as if they wanted to see it end. I think that both that investment and the way in which we have financed it are absolutely justified; otherwise, we would never get the investment that the right hon. Gentleman himself called for in his report.

Does my right hon. Friend agree that the resilience of the British economy in the face of international problems, such as when the dotcom bubble burst a few years back, the soaring prices of oil and raw materials and, more latterly, the collapse of the sub-prime market in the USA, is due in no small part to sound public finances and the robust economic model that the Treasury has pursued in this country? Will my right hon. Friend undertake to ensure that that is maintained as a priority? Secondly, in light of the additional investment being put into our public services in spite of the international difficulties, will he ensure that we also look at productivity gains to add value to the extra money that we are still able to put in?

I agree with my hon. Friend that it is important to increase productivity in both the private and the public sector, and that the expenditure that I have been able to announce today is possible only because we can pay for it. We can do that because we have been careful to balance what we promise to spend with the money that we think that we can gather in—something that cannot be said of the Opposition.

The Chancellor tells the House that the economy is sound, but will he remind us of the last time the savings ratio was so low? In how many other European countries is household indebtedness at British levels, and in which other countries has there been a run on a bank recently?

I am sure that the hon. Gentleman knows that, both here and in other countries, the savings ratio falls when the economy is growing and inflation is low—but that is not to say that we do not need to do more to encourage people to save more. As for personal debt, it is true that some people have borrowed quite a lot of money to finance things, but the overall level of household assets exceeds the level of indebtedness by a considerable margin. Finally, on the subject of the strength and resilience of our economy, I think that the hon. Member for Canterbury (Mr. Brazier) will find that our economy is much stronger and more resilient now than it was when he was sitting on the Government side of the House.

Point of Order

On a point of order, Madam Deputy Speaker. During Foreign Office questions, the Foreign Secretary said that he had placed papers in the Library—and also in the offices of the European Scrutiny Committee and the Foreign Affairs Committee—that supposedly gave sustenance to his argument that the so-called red lines have remained as the Government interprets them. However, I have made inquiries of all the offices involved and have discovered that no such text has been received. Furthermore, even though the Foreign Affairs Committee is sitting tomorrow, there is no indication that the Government’s assertions—which run contrary to yesterday’s report from the European Scrutiny Committee—have been justified by any legal experts, whether external or otherwise.

The hon. Gentleman is an experienced Member of the House, and will no doubt know what I am about to say—that that is not a point of order for the Chair. However, his remarks will have been heard on the Treasury Bench, and I shall certainly make sure that some inquiries are made.

Ports (Regulation)

I beg to move,

That leave be given to bring in a Bill to regulate the activities which can be undertaken in UK ports; to place certain duties on harbour authorities; and for connected purposes.

Colleagues will know that this is certainly a complex issue. I have raised it in the House on many occasions, but it has become increasingly clear that UK regulations that comply with the habitats directive need to be put in place. Under such regulations, the implications—and, if necessary, the public-interest arguments—of the firth of Forth scheme and similar proposals could be fully considered.

The seas around the UK currently have no legal protection. That means that some of Scotland’s most precious wildlife, from sea birds to seahorses, is at risk from human impacts such as shipping, marine developments, fishing and pollution. Currently, 85 different pieces of legislation govern activities in Scotland’s seas. That legislation needs to be consolidated and brought up to date if we are to protect our marine wildlife and our coastal communities.

In my constituency, the biggest threat at present is the proposal to allow ship-to-ship oil transfers in the firth of Forth, and my Bill is designed to address the lack of any appropriate regulation or framework. At present, ship-to-ship oil transfers can be carried out within a harbour authority area if that harbour authority has in place an approved oil spill contingency plan that covers such activities. The underlying principle is that ship-to-ship transfers in harbour authority areas should take place only where there is a fully worked-up oil spill contingency plan, with trained personnel—and the necessary equipment for responding to a spill—close at hand.

Many hon. Members will know that my constituency of East Lothian has one of the finest coastlines in the UK. It attracts 2.5 million visitors every year, with all the obvious advantages for local communities, including the employment of up to 3,500 people in the tourist industry. The coastline stretches from Cockburnspath north to Musselburgh, and its beauty is valued by locals and visitors alike. The coastline also has nine designated bathing waters from Seton Sands down to Thornton loch, and anyone travelling on the east coast main line will see its breathtaking beauty at first hand.

The East Lothian coastline is one of outstanding natural heritage. Ninety per cent. of the coastline is classified as a Forth special protection area. Over the recess, I have collated evidence from across the constituency of the determination of my constituents to oppose the proposal. I have a petition with hundreds of signatures; I have thousands of postcards that constituents have signed and returned confirming that they wish me to oppose the proposal, which would see 7.8 million tonnes of crude oil transferred in the firth of Forth.

My constituents and I do not wish to consider the consequences of an oil spill in our beautiful waters, whether there are contingency plans in place or not. In recent years, public money has delivered major improvements to the coastline and beaches of East Lothian, and that investment should never be put at risk. Hon. Members might ask whether there is a genuine risk from the proposal for ship-to-ship transfer of oil. The answer is absolutely yes. The potential hazards include oil spills, vessel collision, fire and explosion, environmental emissions, damage to coastal and sea bed habitats, damage to tourism and damage to fishing. It is an accident waiting to happen. I, for one, do not want to trust and hope that, if such an oil spill were to occur in the firth of Forth, the contingency plans would preserve the integrity of the coastline and nature conservation sites. I am introducing this ten-minute Bill because I remain of the view that the current legislation has the balance right between protecting the environment and allowing the port authorities to facilitate commercial and economic activity.

There is some provision to regulate and, if necessary, prevent ship-to-ship transfers in the Forth. Those functions are vested in Forth Ports, which has power under byelaws enacted under local legislation to regulate whether vessels can anchor to transfer cargo. As a competent port authority under the Conservation (Natural Habitats, &c.) Regulations 1994, Forth Ports must have regard to the requirements of the habitats directive. The amendments to the habitats regulations in Scotland are very good, and adequate to deal with the European wildlife sites dimension of projects in the Forth. They were passed with all-party support in the Scottish Parliament. The detailed process for consent to plans and projects set out by the current regulations does not deal specifically with, or apply to, oil transfers, however. Unlike other types of port development, programmes of ship-to-ship transfers are not subject to environmental impact assessment regulations either in Scotland or in the rest of the UK, regardless of their frequency or volume.

The missing link in the legislative framework is a sensible set of UK regulations controlling ship-to-ship transfers in UK waters. The absence of clear national consenting mechanisms for marine plans or projects and for ship-to-ship cargo transfers in particular has led the firth of Forth to a highly unsatisfactory default position. The consent for a major oil handling project must be determined by the board of directors of a public limited company, the share price of which seems inevitably to be affected by that decision. That seems an invidious position for Forth Ports plc. Meanwhile, UK and Scottish Ministers have no power of veto. Ship-to-ship transfer as an activity slips through the net and the public are denied a voice.

No wonder there exists a widely and strongly held perception of a conflict of interest on the part of statutory harbour authorities when they are also by nature public limited companies with duties to their shareholders. Surely this is at odds with the need for impartial regulation and with the spirit, if not the letter, of the habitats regulations.

In East Lothian, for instance, there is a perception of a reluctance on the part of the harbour authority to address the legitimate concerns of local communities and others, and that has resulted in an unfortunate amount of mistrust and ill feeling. The mistrust is exacerbated by the difficulty experienced by members of the public in gaining access to environmental information gathered by the harbour authority. This fuels accusations of secrecy and questions the impartiality of the harbour authority. How can a body that may benefit financially from granting consent be seen to regulate the activity transparently and without prejudice? These issues could be addressed by incorporating into new regulations for ship-to-ship transfers a clear process to be followed by harbour authorities. The authority to consider that falls wholly within Westminster.

The Bill seeks, by regulating the activities that can be undertaken in UK ports, the provision for transfers to be prohibited or consented to only subject to strict conditions. Regulation of the activities that can be undertaken in UK ports under the Bill should avoid the potential conflicts of interest for bodies that currently act both as the competent authorities and the financial beneficiaries of such transfers. The Bill would ensure that harbour authorities are more clearly accountable to the public for their environmental responsibilities and in carrying out their statutory functions. The decision-making process in relation to ports’ development is complex and often less than transparent. There must be scope for simplification and regulation in particular if the habitats directive does not fully meet the requirement to protect our waters from the impact of such proposals.

A common approach from the Government and the devolved Administration to work with the industry and other interested parties to simplify and rationalise the procedures is now required. Successive Governments have sought to separate regulation from those with a commercial interest in consents. For example, the water industry is regulated by the Scottish Environment Protection Agency and the forestry industry by the Forestry Commission, and town and country planning proposals in which the local planning authority stands to benefit may be called in by Ministers.

The Bill seeks to ensure that clear habitats directive compliant procedures are followed by harbour authorities in consenting to ship-to-ship proposals and would give call-in power to Ministers to avoid apparent conflicts of interests.

Question put and agreed to.

Bill ordered to be brought in by Anne Moffat, Jim Sheridan, Mr. Jim McGovern, Mr. David Hamilton, Mr. John MacDougall, Mr. David Anderson, Mark Lazarowicz, Mr. Jim Devine, Dr. Gavin Strang and Nigel Griffiths.

Ports (regulation)

Anne Moffat accordingly presented a Bill to regulate the activities which can be undertaken in UK ports; to place certain duties on harbour authorities; and for connected purposes: And the same was read the First time; and ordered to be read a Second time on Friday 19 October, and to be printed [Bill 154].

Defence Procurement

Motion made, and Question proposed, That this House do now adjourn.—[Mr. Michael Foster.]

I am pleased to open this debate—my first as the Minister of State for the Armed Forces. It is a fantastic privilege to be given the opportunity to associate with, and to serve, the men and women who defend our nation. During my now three months in office, I have met many of them both at home and abroad, including in Iraq and Afghanistan, and I have heard first hand their views about their equipment and the way in which it is supported. Everywhere that I have been, I have been immensely impressed and inspired by their dedication and bravery and by the professionalism of our personnel. Although the debate is about procurement, the House need not be told that our equipment is only as good as the people who use it and that those people still make the difference. We are very fortunate to have the people that we have in our armed forces.

If the hon. Gentleman will give me just a moment. I have not spoken in the House for four years given the position that I had and I have been speaking for about 40 seconds, but he is trying to intervene already. If he allows me a bit of scope, I will give way to one or two Members in a little while.

The House knows that direct responsibility for defence acquisition lies with my noble Friend the Minister for Defence Equipment and Support and I should like to pay tribute to the tremendous commitment that he has brought to the role. In December 2005, he launched the defence industrial strategy. It has been a success. For the first time, it provides a framework for how the Government and industry together should meet the needs of the front line.

The strategy set a challenge to the Ministry of Defence. It has driven change within the Department, not least through the merger of the Defence Logistics Organisation and the Defence Procurement Agency into Defence Equipment and Support earlier this year. That new organisation provides a unified approach to our procurement and support functions. It will deliver better value and greater effectiveness for the £16 billion that we spend each year. The defence industrial strategy also set industry a challenge to transform itself. A good example of how industry is rising to that challenge is shown in VT and BAE Systems; they are forming a joint venture for future shipbuilding and support.

I will give way in a moment, perhaps even to my hon. Friend.

I have seen the effect that the strategy has had further down the supply network. NP Aerospace in my constituency in Coventry puts together the Mastiff-protected vehicle and supplies life-saving body armour for our troops. We ask a lot from industry, particularly from small firms such as NP Aerospace. We want them to embrace change, and to be innovative and flexible. In turn, we need to understand the problems that they face, to be as clear as possible about what we need, to provide reassurance and to understand their concerns. When, by taking risks, they deliver on our requirements, we must reward them for taking those risks.

What discussions has the Minister had with the Department for Environment, Food and Rural Affairs about increasing from just 3 per cent. the amount of British lamb that our forces are allowed to eat? Is he not aware that lamb prices are at rock bottom because of Government policy on foot and mouth and the crisis that it created? Introducing more British lamb through the procurement process would be good for the taxpayer, good for the farmers on whose land our troops train and, most of all, good for our troops, because British lamb is so delicious.

The hon. Gentleman raises a fair point. I have not looked into that—there were one or two other things going on over the summer—but I will do so. I will talk about it and see whether we ought to address that point.

I have waited four years and five minutes to intervene on the Minister, and I thank him for giving way. May I say how grateful my constituency and I are for the award of the aircraft carrier some months ago? However, I want him to clarify what exactly he has done for me recently, because it is rumoured that the MARS—military afloat reach and sustainability—contract will be offered for award outside the United Kingdom through the Official Journal of the European Union. That would allow external suppliers to bid, and it would disrupt the relationship that has been agreed with industry on shipbuilding. It would also destroy the relationship with the supply chain that the defence industrial strategy has been so keen to build. In the second intervention that the Minister has taken in four years, will he agree to reverse Government policy on that matter?

My hon. Friend knows that he and I have had one or two conversations over the past four years, even if they have not taken place at the Dispatch Box. I have tried to do him many favours, but he has never really appreciated what I have tried to do for him over that period. There is no thanks from him; he gets an aircraft carrier, and within a couple of months he is complaining that he wants something else. The MARS project is still in the development stage. It is too early to make the accusations that he makes. He knows that we are embarking on a huge shipbuilding project in the coming years, and his constituency will be heavily involved in that. MARS acquisition has to fit into that and into the thinking. My noble Friend the Minister for Defence Equipment and Support will look into the matter and will be prepared to talk to people, possibly even to my hon. Friend, about that proposal.

My right hon. Friend is generous in accepting so many interventions early in his speech. I thank him for his commitment on the two aircraft carriers. We must thank the Government for that commitment, as it involves a huge amount of money, and it protects many yards. However, will he ensure that that is the biggest shipbuilding programme that we have seen, that help and assistance will be available, and that some of the work will go to the Vickers yard at Barrow? It is important that the BAE yard at Barrow receives a share of the work, and does not rely purely on money. Of course, we must touch on our favourite subject—what will operate from those two carriers, and the need to ensure that the North West Aerospace Alliance will benefit.

The aim of the defence industrial strategy is to look not only at the needs of our people but at the capability of our industry, and to do so strategically. I do not think that my hon. Friend need have any doubts about our desire to do exactly what he would want us to do, but we must look at how that fits in with the way in which we make progress and maintain capability and the skills base in the UK, as well as—and this is of primary importance—delivering first-class equipment to our people at the front. That is exactly what we are about and it is what we are trying to achieve.

As the Minister appears to be soliciting thanks from some of us, may I thank him and Lord Drayson, who has ministerial responsibility for procurement, for coming to Yeovil a year ago and signing the first partnering agreement for the Future Lynx helicopter? Will he confirm that Future Lynx and the partnering concept will remain fundamental to his Department’s strategy in future?

Mr. Ainsworth: We are still working on the proposals, as the hon. Gentleman knows, and I hope that we can confirm exactly where we are with Future Lynx and the progress that has been made. I will keep the House informed about that over the coming months.

May I make some progress, having giving way a few times?

Effective procurement needs strong front-line input, and I am pleased that military personnel, including those with recent operational experience, have a strong say in decisions on future and in-service equipment at all levels. We must listen to people who are on operations. During my visits, I heard a great deal of praise for the improvements in combat clothing, personal equipment and weapons such as the Javelin anti-armour missile. The new protected personnel vehicles such as Bulldog and Mastiff are particularly welcomed, as is the provision of Apache attack helicopters. As my right hon. Friend the Prime Minister announced yesterday in the House, we are going to place an order for an additional 140 Mastiff patrol vehicles. We are getting those improvements right, because we take the views of our people into account in deciding what to buy, using their knowledge to make sure that they get what they need, whether it is 360° vision for Mastiff, or fitting a machine gun to the side of a Lynx helicopter. While technology is a big help—and we must always exploit it—it does not, and it never will, have all the answers. It takes the brains of our people to give the equipment the extra edge. We must make absolutely certain that we input that knowledge at every stage in the procurement process.

The Minister will know that yesterday I welcomed the extra Mastiffs, which are extremely popular vehicles. If someone is on patrol, they would rather go out in one of those than in anything else. Now that that announcement has been made, when will the order be placed, what is the delivery date, and is the Ministry of Defence considering medium protected patrol vehicles as well, which are very much needed, particularly in Afghanistan? Will he give the House some information on that?

Later in my speech, I shall talk about the vehicles that we use. The hon. Lady is right to say that Mastiff is held in high regard by the people out in Afghanistan and Iraq, but it is not always the vehicle for the job. I am sure that she appreciates that there must be a range of vehicles suitable for all occasions and available for commanders to use as and when they need to do so. The additional Mastiffs, with those that we are already bringing on board, will help in that regard.

I am coming to the subject of vehicles, and I am sure that the hon. Lady will want to intervene then.

Nowhere is providing equipment for force protection more important than on the front line. Since the start of military operations in Iraq and Afghanistan, we have approved more than £1 billion for force protection equipment, from new helmets to better surveillance equipment and electronic counter-measures. Osprey body armour and the heavier Kestrel armour for more exposed tasks have helped to save lives in both Iraq and Afghanistan, but let me make the point that I have just made to the hon. Lady. I know that many in the House understand this, but others do not. Equipment alone can never provide full protection. Tactics and training are every bit as important as protective equipment in keeping our people alive and safe.

A key part of force protection is providing the right battlefield mobility. In March, my right hon. Friend the Secretary of State for Defence announced that 14 more support helicopters are to be made available for operational theatres—eight Chinook mark 3 and six Merlins. We expect all six Merlins to be operational next year.

I shall give way again in a while, but may I make a little more progress?

Much of the force protection equipment has been acquired through the urgent operational requirement—the UOR—process. This provides equipment to meet new and emerging threats, and for the particular environmental conditions of an operational theatre. Since 2003, we have spent more than £2 billion on UORs. All this money from the reserve is additional to the defence budget. One of the key strengths of the UOR process is its speed. For example, we were able to get Mastiff into service within 23 weeks of the decision to proceed.

Other UORs include the new mobility weapons mounted installation kit—or M-WMIK—vehicles, being provided by Devonport Management Ltd, which will enter service early next year. The existing WMIK Land Rover has been a big success. The new vehicles, based on a new SUPACAT chassis, will be better still. They will have a longer range, more firepower, greater mobility and higher speed.

I give way to my hon. Friend the Member for Norwich, North (Dr. Gibson).

I thank my right hon. Friend for giving way. Although I have expressed support for the capital investment and for paying the troops fighting the causes in Iraq and Afghanistan, with reference to the estimates published in spring and winter, does he consider that there is proper parliamentary scrutiny of and debate about that investment? Such debate could mean that more, rather than less, goes in, so one should not be frightened of an open debate about the matter. That would be welcome. Select Committees have been frustrated in the past about getting into the details of equipment such as he is describing. Welcome as what he says is, an overall picture would be much more gratifying.

I am not aware of a problem with the Defence Committee. I am new in the job and so far I have spoken to the Committee only about operations in Iraq. Procurement is not my direct responsibility, but that of my noble Friend the Minister for Defence Equipment and Support. The Defence Committee appears to do a thorough job. I hope members of the Committee will have the input and the opportunities that my hon. Friend expects them to have, in order to help us to get things right in the way that he describes.

I belatedly congratulate the Minister on his appointment and on this debut. He made it clear that all the UOR funding is coming from the reserve, but when he talked about the protective equipment he said that more than £1 billion had been spent, much of it through the UOR scheme. The implication is that that which has not been acquired through the UOR scheme is coming out of the defence budget. Will he give us the figures? If he does not have them to hand, will he write to me?

I have given the hon. Gentleman the figures on UORs. He understands the process, because he is well versed in it and he follows defence issues. Of course, some force protection equipment has been provided on an ongoing basis through the defence budget. We are fighting in two theatres that are difficult not only because of the enemy and the tactics that need to be deployed to deal with it, but because of the weather. That obviously throws up issues that have not been anticipated, not because of any weakness in the defence procurement methodology but because the threat changes and the tactics change. On such occasions, the UOR process is ideal and essential so that we can manoeuvre and get more money into the system to meet the changing threat. That is where the two streams of money come together. Of course, some force protection is paid for through the core budget and a lot of it is provided, as and when it is needed, through the UOR process.

Before I move off the issue of vehicles, I shall reply to the hon. Member for Congleton (Ann Winterton). We have set aside £100 million for the 140 extra Mastiffs announced by the Prime Minister. I anticipate that they will be deployed on operations within the next 18 months, but I cannot provide more concrete detail than that. We are still in the process of providing the vehicles that we are procuring. These vehicles will add to the end of the production line, and we obviously want to try to get them into theatre as quickly as possible.