With permission, I would like to make a statement about the European Council held in Brussels on 14 December. It focused on two major concerns: first, the reforms that Europe must make to meet and master the global challenges we face with competitiveness, employment, secure energy and climate change; and, secondly, issues of security, in particular in Kosovo, Iran and Burma, that we must confront together.

I start with the most immediate concern facing the summit: the best way to bring about a satisfactory resolution to the status of Kosovo. Kosovo is the last remaining unresolved issue from the violent break-up of the former Yugoslavia, and in the light of recent failures by the parties in the Troika process to find a negotiated way forward, the European Council accepted its responsibility for joint European action and agreed the importance of urgently moving towards a settlement. It is to the credit of all parties in the dispute that, even when faced with conflicting positions, the region remains at peace. As the European Council conclusions noted, it is essential that this commitment to peace is maintained.

The principles of our approach are, first, that Europe take seriously its special responsibility for the stability and security of the Balkans region. Indeed, it is also thanks to the sustained efforts of NATO troops and the diplomacy of the United Nations and the European Union that a safe and secure environment has been maintained. Secondly, however, we were agreed that the status quo is unsustainable and that we needed to move towards a settlement that ensures what the European Council called a “stable, democratic, multi-ethnic Kosovo committed to the rule of law, and to the protection of minorities and of cultural and religious heritage”.

Thirdly, after a detailed discussion at the Council, we were also wholly united in agreeing that European engagement should move to a new level. We agreed in principle and stated our readiness to deploy a European security and defence policy policing and rule-of-law mission to Kosovo. That will consist of a multinational mission of around 1,800 policemen and judicial officials, of whom I can confirm that the UK will contribute around 80, including its deputy head, Roy Reeve. European Foreign Ministers will confirm the detailed arrangements for this mission shortly.

Fourthly, we also reaffirmed that a stable and prosperous Serbia fully integrated into Europe is important for the stability of the region. The Council encouraged Serbia to meet the necessary conditions to allow signature of its stabilisation and association agreement with the EU and we expressed our confidence that Serbia has the capacity to make rapid progress subsequently towards candidate status. The conclusions of the meeting of European Foreign Ministers also reiterated the European Union’s support for enlargement more generally. We look forward to recognising the progress made by both Croatia and Turkey at this week’s accession conference in Brussels.

The UN Security Council will discuss the issue of Kosovo with representatives from both Belgrade and Pristina on 19 December. The aim is to give Russia an opportunity to accept a consensus on the way forward. If that proves impossible, we—Britain—have always been clear that the comprehensive proposal put forward by the UN special envoy, based on supervised independence for Kosovo, represents the best way forward. While we are rightly focused on the immediate priority of bringing the status process through to completion in an orderly and managed way, the European Council also agreed that it is important that we address the long-term challenge of ensuring Kosovo’s future economic and political viability. I welcome the commitment made by the European Union, to assist Kosovo’s economic and political development, for a donors conference to follow shortly after a status settlement.

The Council also discussed Iran. There was agreement on a united European approach. Again, the power we wield working together with all the European Union is greater than if we act on our own.

I have made it clear repeatedly that Iran remains in breach of its international obligations. In September, Foreign Ministers agreed that unless there were positive outcomes from Solana and the International Atomic Energy Agency’s discussions with Iran, we would seek tougher sanctions at the UN. The latest assessment is that sufficient progress has not been made.

The European Council conclusions call on Iran to provide full, clear and credible answers to the IAEA, and to resolve all questions concerning its nuclear activities. We reiterated our support for a new UN resolution as soon as possible, and agreed to decide on new measures that the EU might have to take to resolve the situation at the January meeting of Foreign Ministers. Those should complement UN measures, and not substitute for them if the Security Council cannot reach agreement.

Iran has a choice: confrontation with the international community leading to a tightening of sanctions; or, if it changes its approach, a transformed relationship with the world from which all would benefit.

The EU also reaffirmed its deep concern about the unacceptable situation in Burma, and made it clear that if there is no change in the Burmese regime’s approach to political negotiations and basic political freedoms, we stand ready to review, amend and—if necessary—further reinforce restrictive measures against the Burmese Government. We also reaffirmed the important role of China, India and the Association of South East Asian Nations in actively supporting the UN’s efforts to establish an inclusive political process leading to genuine national reconciliation.

For our part we believe that the forthcoming visit of Professor Gambari, the UN envoy, is critical. It is essential that the Burmese Government meet the demands set out in the UN Security Council statement: to release all political prisoners; to create the conditions for political dialogue, including relaxation of restrictions on Aung San Suu Kyi; to allow full co-operation with Gambari; to address human rights concerns; and to begin a genuine and inclusive process of dialogue and national reconciliation with the opposition. In particular, the regime should respond to the constructive statement of Aung San Suu Kyi on 8 November and open a meaningful dialogue with the opposition and the country’s ethnic groups.

The Council also agreed that a key part of the EU’s external agenda is how we can, by working together, maximise our influence in tackling global poverty. The European Commission should report by April next year—halfway to the 2015 millennium goals date—on how the EU is meeting its commitments to those goals, and how we can accelerate further progress.

In addition to those issues of international security and development, the Council conclusions and the special declaration on globalisation set out the challenges that the European Union must address on globalisation. We agreed to maintain our focus on economic reform, with a renewed focus on modernising the single market so that it enhances Europe’s ability to compete in the global economy. We must have full implementation of the services directive by 2009. We must continue to work towards further liberalisation in energy, post and telecoms, where market opening could generate between €75 billion and €95 billion of extra benefits and contribute 360,000 jobs. Investment in research, innovation and education—and removing barriers to enterprise—are also essential.

We reaffirmed our commitment to free trade and openness, and the priority of securing a successful Doha world trade round, which would lead to benefits approaching $200 billion, bringing significant benefits to rich and poor countries alike. We will also propose and support better EU-USA trade links.

We agreed, too, to do more to develop mechanisms for co-operation within the EU to tackle issues such as security challenges in relation to terrorism, illegal immigration and organised crime. We renewed our commitment to the EU counter-terrorism strategy and to co-operation on counter-radicalisation work. We will work together to deliver our commitments to tackling climate change, including the target of a reduction in emissions. Building on the significant progress made in Bali last week—an agreement on which the Secretary of State for Environment, Food and Rural Affairs will report to the House tomorrow—we must help to negotiate an ambitious post-2012 international climate change agreement. We agreed that Europe must also step up funding, including funding through the World Bank, to help the developing world to shift to lower carbon growth and adapt to climate change.

It was agreed at the last Council meeting that the presidency would propose the establishment of a new reflection group. That was announced in October. At this later meeting, the Council invited Mr. Felipe Gonzalez Marquez, assisted by two vice-chairs, Mrs. Vaira Vike-Freiberga and Mr. Jorma Ollila, Chairman of Shell and Nokia, to

“identify the key issues and developments which the Union is likely to face in 2020 or 2030 and to analyse how these might be addressed”.

The remit states specifically that

“it shall not discuss institutional matters. Nor should its analysis constitute a review of current policies or address the Union's next financial framework”.

The group will report back to the Council, which will decide how to follow its recommendations.

I can also tell the House that today we are publishing the European Union (Amendment) Bill, which contains the institutional changes to accommodate a Europe of 27 members, and will include the safeguards that we have negotiated to protect the British national interest. They consist of the legally binding protocol which ensures that nothing in the charter of fundamental rights challenges or undermines the rights already set out in UK law, and that nothing in the charter extends the ability of any court, European or national, to strike down UK law; legally binding protocols which prescribe in detail our sovereign right to opt in on individual justice and home affairs measures when we consider doing so to be in the British interest, but alternatively to remain outside if that is in our interests; a declaration that expressly states that nothing in the new treaty affects the existing powers of member states to formulate and conduct their foreign policy, and that the basis of foreign and security policy will remain intergovernmental, a matter for Governments to decide on the basis of unanimity; and an effective power of veto on any proposals for important changes on social security, so that when we—Britain—determine that any proposal would have an impact on an important aspect of our social security system, including its scope, cost or financial structure, we can insist on taking any proposal to the European Council under the unanimity provision.

With the publication of the Bill, Parliament will now have an opportunity to debate this amending treaty in detail and decide whether to implement it. We will ensure that there is sufficient time for debate on the Floor of the House, so that the Bill can be examined in the fullest detail and all points of view can be heard. That will give the House the fullest possible opportunity to consider the treaty, and the deal secured for the UK, before ratification.

In addition, I can tell the House that we have built into the legislation further safeguards to ensure that there is proper parliamentary oversight and accountability. So that no Government can agree without Parliament's approval to any changes in European rules that could in any way alter the constitutional balance of power between Britain and the European Union, there is a provision in the Bill that any proposal to activate the mechanisms in the treaty which provide for further moves to qualified majority voting but which require unanimity—the so-called passerelles—will have to be subject to a prior vote by the House. In the event of a negative vote, the Government would refuse to allow the use of the passerelle. The Bill also includes a statutory obligation that any future amendments to the treaty, including amendments that provided for any increase in the EU's competence, would have to be ratified through an Act of Parliament; so Parliament would have absolute security that no future change could be made against its wishes.

I said in October that we would oppose any further institutional change in the relationship between the EU and its member states, not just for this Parliament but for the next, and I stand by that commitment. This is now also the settled consensus of the EU. All 27 member states agreed at the Council—and it was expressly set out in the conclusions—that this amending treaty provides the Union with a stable and lasting institutional framework, and that it completes the process of institutional reform for the foreseeable future. The conclusions of the Council state specifically that the amending treaty

“provides the Union with a stable and lasting institutional framework. We expect no change in the foreseeable future”.

Let me conclude with the discussion on the most immediate of economic issues discussed: concerns about the economic consequences of the global financial turbulence that started in America in August. The Government's first priority in the coming weeks is to ensure the stability of the economy and to have the strength to take the difficult long-term decisions necessary. The Council agreed that the whole of the EU must now turn its attention to both the immediate measures necessary and the long-term strengthening of international capacity to secure greater financial stability. The announcement earlier this week by central banks in the major financial centres that they will provide liquidity to ease tension in the financial markets must now be built upon.

As we agreed, supervisory authorities in different countries need to co-operate effectively across borders in exchanging information and in the management of contagion. The European Council conclusions emphasised that macro-economic fundamentals in the EU are strong and that sustained economic growth is expected, but we concluded that continued monitoring of financial markets and the economy is crucial, as uncertainties remain. The Council underlined the importance of work being taken forward both within the EU and with our international partners to improve transparency for investors, markets and regulators; to improve valuation standards; to improve the prudential framework, risk management and supervision in the financial sector; and to review the functioning of markets, including the role of credit rating agencies.

The European Council will discuss these issues at its spring 2008 meeting on the basis of a progress report from the Council of Finance Ministers and the financial stability forum. As agreed by Chancellor Merkel, President Sarkozy and I in October, the progress report should examine whether regulatory or other action is necessary. I have invited Chancellor Merkel and President Sarkozy to London so that we can discuss the proposals in the paper we agreed and issued a few weeks ago—measures important to strengthening the international community's role in addressing financial turbulence, showing the importance we attach to taking the long-term decisions to ensure in testing times the stability of the economy.

The conclusions of the Council state specifically that in the institutional framework we expect no change “for the foreseeable future”. The protections that have been agreed in the amending treaty defend the British national interest. In the Bill introduced today, we are legislating for new protections and new procedures to lock in our protection of these interests. Europe is now moving to a new agenda, one that focuses on the changes needed to meet the challenges of the global era. I commend the statement to the House.

I thank the Prime Minister for his statement on the European Council in Brussels. I note that he could not bring himself to mention his visit to Lisbon.

I am delighted that the Government have finally adopted our position of saying that Europe should focus on the real issues and not on institutional reform. However, the whole country will ask how he can possibly say that, having just signed up to an all-encompassing constitution that transfers powers from Westminster to Brussels and when he will not even put the constitution, with its massive institutional changes, to the British people in a referendum.

Before turning to the constitution, let me ask about those areas where decisive action is needed: the Balkans, Iran and Darfur. On Burma, I very much agree with what the Prime Minister said. On the Balkans, clear signals are needed. Kosovo should not be left in limbo, no other border should be reopened and military reserves should be deployed to demonstrate Europe’s resolve. In terms of sending out these clear signals, does the Prime Minister agree that if Serbia wants to join the EU, she should co-operate fully with the war crimes tribunal, which means arresting Mladic and Karadzic and getting them to The Hague?

On Iran, what is needed is a combination of engagement and sanctions. We have consistently argued that although the United States needs to do more in terms of engagement, Europe needs to do much more in terms of sanctions. What progress was made in Brussels in persuading other European countries that new export credits should be banned and that access for certain Iranian banks to the European financial system should be restricted?

On Darfur, which I do not think he mentioned, the Prime Minister said three months ago that more than 20,000 troops and police were necessary. I agree. Today there are still fewer than 10,000. When will that shortfall be made up?

Turning to the constitution, I have to say to the Prime Minister that the key issue is the referendum. Is it not the case that he simply will not restore trust in politics unless he keeps his promise to hold one? Labour Members of Parliament—staggeringly few of them are here today—put that commitment to a referendum in their election addresses, trade unionists voted for it in the TUC, and every opinion poll shows that it is what people want. This issue is not going to go away. In trying to justify breaking his promise, the Prime Minister says that this treaty is not the constitution, but does he not understand that that simply will not wash? The German Chancellor, the Irish Prime Minister and the Spanish Foreign Minister all completely undermine what the Prime Minister says by saying that the treaty is pretty much the same as the constitution, and the author of the constitution, Giscard d’Estaing, said last month that the constitution’s

“essential points…reappear word for word in the new project. Not a comma has changed!”

The Prime Minister’s argument has simply collapsed. Does he not see that it is this sort of approach that makes him look shifty and untrustworthy? Does he not see that far from getting him out of his troubles, denying people a referendum is digging him in deeper? This treaty obviously is the constitution. It contains an EU President, a Foreign Minister and an EU diplomatic service, and it gets rid of the veto in 60 areas and contains a new ratchet clause which allows even more vetoes to be scrapped without a new intergovernmental conference. When I put that point to the Prime Minister last October, he claimed the measure was already there in the Single European Act. It was not. The new clause for the first time allows virtually any veto to be scrapped in any area. That measure was not in the Single European Act, nor in any treaty before this one. Once again, the Prime Minister is treating people like fools.

So the Prime Minister has not been straight about the constitution, and that was only made worse by his frankly bizarre performance in Lisbon last week. Was he going or was he not going? Was he going to sign the treaty or was he not going to sign the treaty? Were the cameras going to record it or not? He could not summon up the courage to decide.

Is this not all a pattern for this Prime Minister? We get troop withdrawals that have already happened, the election that never was, and now the signing ceremony that would not take place. There was not a word in the statement about actually signing the treaty. I expect that Macavity hopes we have forgotten about it already. Did not a senior diplomat get it right when he said of the Prime Minister’s dithering that

“he’s ended up with the worst of all worlds...If he wants to send a Euro-signal that he’s indecisive, he’s just sent it”?

As for the Foreign Secretary, in all the past centuries of British Foreign Secretaries representing this country overseas, has there ever been a more ludicrous moment than this Foreign Secretary being so isolated and alone that the only person whose hand he could find to shake was the usher who had handed him the pen? Is it not the case that European leaders now see the Prime Minister in the same light as do the British people: not as the strong leader he posed as in July, but as a Prime Minister who has turned out to be weak, dithering—second-rate would be a bonus with him—and not straight with people? Does he not recognise that the best chance he has got to redeem himself is to hold that referendum he promised?

In the spirit of Christmas, let us find where we do agree. We agree on Kosovo, where our aim, too, is supervised independence, the arrest of the Serbian criminals, and to ensure that there is a proper civilian as well as military presence from both the EU and NATO on the ground. We agree on Iran: obviously, the right hon. Gentleman agrees with me that because the issue is enriched uranium, sanctions are necessary. We agree on Darfur, and I thank him for mentioning that as it gives me the chance to say that we are ready to step up both sanctions and activity in relation to Darfur if we do not get the co-operation of the Government there.

As the right hon. Gentleman said, we also agree on Burma. However, I am surprised that when we are debating the issues that arose from the European Council—and I rather suspect he wrote his contribution before he looked at its conclusions—he does not mention the declaration on globalisation, the commitment to economic reform, what we have done on the environment together, and what we continue to do on the financial stability issues, none of which he seems to think important, because the only issue that obsesses the Conservative party is the European amending treaty. I have to ask him this question, then: if the Conservative party thinks that a referendum is so important, does it agree that even after ratification there would be a referendum? Some of the party think that there should be, but others think there should not. Will he tell us what his position is, because until he does so we will rightly say that he is all slogans and absolutely no substance?

When it comes to the wording in the Bill that I have laid before the House today, I should correct the right hon. Gentleman. On passerelles, there will be a parliamentary vote on whether there should be any move from unanimity to qualified majority voting, and the Government will not be able to sign up to a passerelle change without the approval of the House of Commons. However, I have to tell him on the referendum issue that not one other country—except the Irish Republic, which is constitutionally bound to have a referendum—is proposing to have that referendum. The Dutch and the Danish have rejected it. The right hon. Gentleman has only two supporters in the European Union as he tries to find a new group. The Bulgarian party has now deserted him, and the Czech party has said only in the last few days that it wants to sign the treaty. It is not a constitutional treaty in their view, and if they did not sign the treaty it would lead, they said, to the international isolation of the Czech Republic.

That is the view of the right hon. Gentleman’s best ally in Europe; and perhaps I should repeat to him what the chairman of his democracy commission has said about this matter—that a European referendum would be “crackpot”, “dotty” and “frankly absurd”. Is it not about time that the Conservatives faced up to the big issues in Europe; that they accepted they we are trying to move Europe to a new agenda; that they joined that new agenda, which is about the environment, the economy and security; and that they stopped their obsession with the issues of the past?

I too welcome the statement, particularly the Prime Minister’s comments on Kosovo, Iran and Burma, and his support for economic reform and free trade. I start by referring to the meetings that he did not attend, before getting on to the one that he did. He was absolutely right not to attend the EU-Africa summit. The European Union has a travel ban on Mugabe, and the Prime Minister was absolutely right to take a principled stand on that. The only doubt that I am left with is why, given his strong position on human rights, he did not take a comparably strong position on the King of Saudi Arabia. I suspect that Mr. Mugabe will be wondering whether the only way to get on the right side of the Prime Minister’s principled view of foreign policy is to have some oil.

The other meeting that the Prime Minister did not attend, of course, was the signing ceremony, and I am puzzled about the reasons for that. Either he could not organise his diary, which would be incompetent, or he could not make the effort, which would be discourteous. Alternatively, he was trying to send the conflicting signal that he did not like the treaty that he had agreed to. Whether it was duplicity, incompetence or discourtesy, it reflected badly not just on him but on the country as a whole.

There is one way for the Prime Minister to redeem himself, which is to call a referendum: not, of course, on the narrow issue of the treaty, but on the broader question of whether Britain should remain a full member of the European Union—an issue on which nobody under the age of 50 has yet had an opportunity to vote. Perhaps I might remind the Prime Minister of what happened when we had a vote in the House of Commons on 14 November. His party and mine were united—on opposite sides of the argument. The Conservatives voted 149 against the referendum and six in favour, with 31 abstaining. If high principle does not appeal to him, perhaps low politics will, and he will come round to the idea of a referendum.

On the specifics of the Prime Minister’s statement, he was right to draw attention to the progress made on Kyoto and climate change, but can he clarify exactly what this means for the commitments of the United Kingdom? I tackled him at Prime Minister’s questions a few weeks ago on the UK commitment to a 20 per cent. renewables use by 2020, and he replied by saying that that was not a commitment for the UK, but for the European Union as a whole. Somewhat earlier, on 1 March, his Foreign Secretary, who was then the Environment Secretary, said quite explicitly that this was a commitment for the United Kingdom specifically. Can the Prime Minister clarify: is that the Government’s view, or was his statement in Parliament the correct view?

On Kosovo, the Prime Minister is absolutely right to stress the danger of this situation. Several countries in the area could be sucked into it—Serbia, Montenegro, Macedonia and Bosnia—and we could well be faced with flights of refugees, as we have had in the past. The UK may well be called upon to play a role in a peacekeeping capacity.

The question I have for him is: what is the ability of the British Government to play a role in a peacekeeping capacity when British armed forces are so overstretched? Is not the answer to this dilemma to withdraw the remaining few thousand troops in Basra, who are impotent in the face of the militias running amok there?

Finally, may I ask the Prime Minister about the commitment of Finance Ministers and Prime Ministers to support additional liquidity in the world economy? There is a simple point: if £30 billion cannot save one small regional bank in Britain, what is the prospect of £50 billion saving the world economy?

I am pleased that the hon. Gentleman is making his appearance here as the acting leader of the Liberal party; it will elect a new leader tomorrow. I see that three former leaders of the Liberal party are with us today. He says that he has a new position on the referendum—but some members of his party want a referendum on the amending treaty, whereas others do not. So what has his party done? It has retreated to the position of 35 years ago whereby the party will have a referendum on whether we should be in the European Union at all. I suggest to him that that issue was resolved in 1975; it is in no need of being resolved again in this country.

I turn to the hon. Gentleman’s points about the specifics of the discussions. On Zimbabwe, it is right that we are agreed that it was wrong for Britain to be present at prime ministerial or Foreign Secretary level at the EU-Africa conference. However, if there is a change in Administration in Zimbabwe and in the respect for human rights, we stand ready to do what we can to help rebuild that country.

On Kosovo, I agree with the hon. Gentleman that we need a military and civilian presence, but I do not agree with him that Britain cannot play its part with the small but important numbers that we are putting in both in civilian and military presence.

On the renewables issue, I think the hon. Gentleman knows what our position is: I made it clear in the House of Commons. The EU is committed to a 20 per cent. renewables target. Discussion is taking place around the EU about what individual contributions will be made by the member states. We await the outcome of that discussion, and we will then receive a target that we will implement. This is the right way forward, and I hope that all parties in the House of Commons will provide support for dealing with renewables.

Finally, the hon. Gentleman mentioned the European financial situation in the face of global turbulence. I hope that we will see co-operation across Europe to deal with what have been very difficult problems arising from events in America, where there has already been central bank co-operation. We are prepared to argue for more co-operation, which is why I have invited Chancellor Merkel and President Sarkozy to London to discuss the paper that we have already put forward for reform of the international financial institutions.

Does the Prime Minister agree that the Portuguese presidency deserves enormous credit for all the achievements during its six months, and that the outcome of this meeting in Brussels, too, is a reflection of a lot of the preparatory work that it has done? He made reference to Kosovo. Did any discussion take place about a co-ordinated EU and United States recognition of an independent Kosovo, so that no precipitate and unwieldy approach to these matters is taken over the next two months and we get the smoothest possible international agreement of recognition at the same time?

I am grateful to my hon. Friend, who takes a big interest in these matters as Chairman of the Foreign Affairs Committee. As far as Kosovo is concerned, we should applaud the restraint that has been shown so far by both sides. A meeting will take place at the UN—Russia will also be involved there—to see whether we can reach agreement. If we cannot do so, the EU will debate its presence in Kosovo in the next few weeks. The final decisions will be made by the Foreign Ministers. Our position is that we would then move to supervised independence of Kosovo, but we await the discussions that are taking place in the United Nations.

My hon. Friend is also right to praise the Portuguese presidency: it was responsible for getting the final decisions on the amending treaty; it organised the EU-Brazil summit and the EU-Africa summit; it has moved ahead with action on Kosovo; and it put forward the declaration on globalisation, which sets a new agenda for the European Union for future years. So, I have nothing but praise for the Portuguese presidency.

The Prime Minister says that he prides himself on letting Parliament have its say. Given that he has now made it clear that he and his Front Benchers will not stand by their commitment to have a referendum on the treaty, does he acknowledge that many of his Back Benchers stood on a manifesto commitment to do so? Should an amendment to hold a referendum be tabled during proceedings on the treaty, would he allow his Back Benchers a free vote, so that they could stand by their commitment?

That is not the way forward, because the constitutional treaty was abandoned. The first line of the Brussels declaration last summer was that the constitutional concept had been abandoned. In particular, Britain won all the red lines that we set out before we went to the Brussels summit. It is for the Conservatives now to tell us whether they are in favour of a referendum in principle, in which case they will support it even after ratification—or are they simply opportunist, in saying that they want a referendum now?

As a member of the Liaison Committee, I can tell the Prime Minister that the Committee was grateful for, and appreciated, his attendance last Thursday. The whole House should appreciate the respect that he has shown Parliament.

In relation to the signing of the amending treaty, has the Prime Minister remarked on the confluence of the events in Lisbon and in Bali, where the entire European Union spoke as one? Is not that an example of how the Union can work together in the interests of all the people of the Union, and will not the amending treaty advance that cause in the future?

As I said in my statement, the Secretary of State for Environment, Food and Rural Affairs will make a statement to the House tomorrow about the success at Bali, in which, to his credit, he was directly involved in persuading the rest of the world to sign an agreement that moves the environmental negotiations forward and makes us believe that a post-2012 agreement similar to Kyoto will involve all countries, not just some. I agree with my hon. Friend that the environmental issues that are being addressed make the case for co-operation across the European Union. It is precisely because the EU was prepared to agree a common position that it had such influence in Bali. By working together, we can achieve more than if we work in isolation, and the Conservatives—if they seriously believe in the importance of environmental co-operation—should accept the lesson that we should co-operate across Europe in bringing forward proposals for a better environment.

The Prime Minister’s idea of Christmas on this matter is about as cheerful as Jacob Marley’s. Why is he in breach of the resolution of the House of Commons of November 1998, in respect of the European Scrutiny Committee’s refusal to clear the IGC opinion on the treaty? Will he, therefore, in accordance with that resolution—and given his much vaunted enthusiasm in his “Governance of Britain” Green Paper for giving full account to Parliament—appear before the Committee and explain why he thinks that this treaty is not substantially equivalent to the constitutional treaty?

We are not in breach of the 1998 decision. This was a report on the IGC process, not on the treaty itself. Therefore I do not accept the presumption in the hon. Gentleman’s question.

The Council is right to be concerned about the position in Iran. The rhetoric coming from Tehran is dreadful, and equalled perhaps only by the wilder sources in Washington. However, does my right hon. Friend understand that the present sanctions are not hurting the big British, American and European companies in Iran, who are sourcing their goods through the Gulf countries, but smaller businesses and people in Iran? That is being used by Ahmadinejad to wind up the Iranian people against the west. Will my right hon. Friend use his best efforts to ensure that diplomacy is the way forward, including contact with the bodies in Tehran?

It is diplomacy that we want to be the way forward, but we have to face up to the fact that in enriching uranium with no civil nuclear power process at work, the Iranian Government are in breach of the non-proliferation treaty and of all the commitments that they have made to the international community. I cannot agree with my hon. Friend that the sanctions are purely on small businesses. We are prepared to move forward oil and gas sanctions, and sanctions in the financial community, and it is those that will have an impact on the Iranian economy.

On Kosovo, I am very glad that the Prime Minister has recognised that the best future is independence in Europe. That is something that the Scottish National party wholeheartedly supports. Independence is the appropriate status for all normal countries within the European Union.

Moving on to the EU reform treaty, the Prime Minister has chosen to overlook the concerns of the Scottish Government regarding the exclusive competence of fisheries, which he has signed up to. Therefore, will he take this opportunity to inform the House what advantages his signing up to this measure will bring?

The treaty does not change competence in relation to fisheries at all. The fact of the matter is that the hon. Gentleman has got this wrong in asserting that it does.

On the hon. Gentleman’s first point about independence, I say to him that the latest survey shows that two thirds of Scottish people are against independence. They do not want it.

I welcome the Prime Minister’s announcement that he is publishing the Bill that will amend the European Communities Act. He also said that this will give Parliament an opportunity to debate it and make a decision. In the light of that, does he not think that it is either extraordinarily presumptuous and arrogant or incredibly dismissive of the role of national Parliaments that the Commission has seen fit to appoint the first EU ambassador to deal with Africa well before the treaty establishes the diplomatic service?

My hon. Friend will be part of the debate on the amending treaty when it comes before the House of Commons, but in the light of the EU-Africa summit, I should have thought that people would want closer contact between the African Union and the European Union.

I shall vote for the treaty, which I think is a perfectly sensible and balanced response to enlargement. But if there is one person who could make me change my mind, it is the Prime Minister with his clumsy, ill-judged and surly performance in Lisbon towards the European Union as a whole. Does he not realise that a Prime Minister who cannot even decide which gallery he is playing to merely incurs the enmity of the Eurosceptics, the contempt of the pro-Europeans and the bafflement of almost everybody else?

It is the British Government who led the way to the globalisation declaration that happened on Friday; it is we who are pushing the global agenda on Europe; it is we who are saying that we must forward that agenda because it is in the interests of all the countries of Europe to have a more global perspective; and, of course on the environment, we are pushing ahead with other countries in Europe. We are playing our full part in Europe and will continue to do so.

Was there any discussion last week of EU relations with Russia? It seems clear that the recent elections to the Duma were wholly unfair and far from free; there is systematic use of torture throughout the criminal justice system in Russia; every single independent television network has been closed down; and now the British Council offices outside Moscow in Russia will be closed as well. Is it not time that Europe spoke clearly and with one voice to make sure that Russia does not again become a totalitarian state?

I agree with my hon. Friend about what has happened to the British Council offices. It is completely unacceptable, and in our view the treatment meted out to people doing a good job both in Russia and to promote global understanding is illegal. We believe that it is not only unjustifiable, but should cease. I hope that there will be a statement from the presidency of the European Union on these matters, because the voice of 27 members of the EU against what is happening is better than the voice of simply one. I believe that all members of the EU are appalled by the behaviour of Russia in this regard.

The Prime Minister mentioned competitiveness, and he will be aware that the British labour market is under threat from measures opposed by the Government on temporary workers and changes to the working time directive. However, is he aware that the new so-called reform treaty mandates new and additional measures in harmonising employment practices across Europe? Is he aware of those articles and can he tell the House whether he read all 257 pages of the treaty before he signed it?

If the right hon. Gentleman is referring to the charter, it does not affect employment law. I see nothing in the treaty that justifies the assertions that he is putting forward. I have to remind him that he was the deputy Chief Whip when the Maastricht Bill was going through the House of Commons under a Conservative Government.

Can the Prime Minister confirm that the treaty of Maastricht—the biggest sharing of power with our European partners—was signed by the most junior Foreign Office Minister on the Tory payroll at the time? So all this froth is just that. May I say how much I disagreed with the Prime Minister when he said in his reply to the Leader of the Opposition that he hoped that the Conservative party would start to become sensible and engaged on Europe? I want the Conservatives to stay exactly where they are, because then they will never be elected to power. In his statement, he said, that now

“we can, by working together, maximise our influence”.

That is the European Union—utterly opposed to the isolationism of the Conservative party.

My right hon. Friend is absolutely right. The Conservative party refused to answer the single most important question that it has to address: is it in favour of a referendum after ratification or not? Some 47 Conservative Members of Parliament have signed a motion calling for it. Two shadow Ministers have called for it. The shadow Foreign Secretary wants it. What is the position of the Conservative party? Unless the Conservatives can tell us, everything else is froth and has no substance at all.

I welcome the eventual UK signature on the draft treaty, however clumsily we got there, but does the Prime Minister acknowledge that, as we move into ratification scrutiny here, it is not just going to be a matter of winning votes in Parliament? Those of us who support the treaty and Britain’s future in Europe are going to have to start winning the argument in the country. Towards that end, may I make the following plea to him, and through him, to all his Ministers? They are not going to persuade the British public about the long-term merits of Europe by using Eurosceptical language to justify the treaty they have just signed. The Prime Minister was at it again this afternoon, saying, “We have safeguarded this,” “We have defended that,” and, “We have seen off the following.” Why does he not say, “The status quo that we have today, and what we have just put our names to as a country on your behalf, is an improvement”? That is what he believes—is it not?

It is what I said: the co-operation across Europe on the environment, security and the economy, and what we decided at the Council, are to the benefit of not just this country but the whole world, and we should push forward with them. But it is also right for me to point out the inaccuracies in the statements that have been made from the Opposition Benches about what the amending treaty tries to achieve. As far as the charter of rights is concerned, it is not justiciable in British law. As far as foreign policy is concerned, it is still intergovernmental. As far as justice and home affairs are concerned, we have an opt-in and, in certain circumstances, an opt-out. As far as national security is concerned, it is not considered in the amending treaty. On social security, we have an emergency brake. It is right that we point out, against those who allege the opposite, what is happening. I agree with the right hon. Gentleman that there should be a campaign in the country to show people the benefits of the amending treaty and membership of the European Union, and we will work together on that.

The Prime Minister mentioned that there had been discussions about relations with Turkey during the Council meeting. What concerns were expressed about the rights of Kurdish people in south-east Turkey, the growing militarisation of that part of the country and the incursions by Turkish forces into Iraq at present? What meetings are being sought with the Turkish Government to try to reduce tensions and bring about peace and cultural respect in that area?

While Turkey was not discussed in detail at the Council, it was the subject of discussion at previous Councils. I can assure my hon. Friend that it is a modern, reforming Turkey that we wish to be part of the discussions to join the European Union, and I hope that he would support me in that.

I wonder whether the Prime Minister can assist me. Where do I find the basis for his claimed mandate not only to sign the European treaty last Thursday, but to seek ratification from this Parliament without the consent of the British people? I revisited his manifesto from the last election and I cannot find any trace of such a mandate being sought. Have I missed something?

I should remind the Opposition that, in the case of the old treaty, which was rejected, nine countries proposed to have a referendum. Only one now proposes to have a referendum: Ireland. The reason why the Dutch, the Danish, the French and others have rejected a referendum is that the constitutional concept was abandoned.

Do not the gathering storm in Kosovo and its possible implications for our stretched armed services mean that there is an even more urgent reason to re-examine not our general commitment in Afghanistan, but the particular commitment in Helmand province, which is failing to meet all its original objectives, at a grievous cost in human lives?

I do not accept what my hon. Friend says. Last week, I made it absolutely clear that the process in which we are involved in Afghanistan is one of moving towards greater Afghan control of security by building up Afghanistan’s military and policing forces, and having a programme of economic, social and political development that can benefit the Afghan people. I believe that there is wide support for that among the coalition. Yes, it is true that the purpose of being in Afghanistan was to remove the Taliban and to prevent al-Qaeda from getting control. However, it is also true that now that Afghanistan is a democracy, we must bolster it and help its economic, social and political development.

In relation to the European treaty, the Prime Minister referred to legally binding protocols. Given that there is a growing political view in Northern Ireland, Scotland and Wales that the people of those parts of the UK should be able to express a view on the treaty through a referendum, will he ensure that all the people of all the United Kingdom can cast their vote on this issue in a referendum?

The United Kingdom Government sign treaties on behalf of the United Kingdom and I believe that that is the right course of action. I have answered the point about a referendum. The constitutional concept was abandoned, and no country except Ireland is having a referendum. Having won in the negotiations the red lines that we suggested were necessary, there is no reason why we need a referendum, because there is no fundamental constitutional change.

May I welcome the decisions of the Council, as expressed in paragraph 27 of the conclusions, concerning police and judicial co-operation? Is the Prime Minister content with the timetable for the full establishment of Europol, which will be in June 2008? What steps does he propose to take with our EU partners to ensure that we work with them in the fight against terrorism?

My right hon. Friend, as Chairman of the Home Affairs Committee, will agree that when there is crime and a need for judicial co-operation across borders, that is the right thing to do—it is what the treaty is about. In these areas we have opt-ins and, in some cases, opt-outs.

If the Prime Minister, not having offered the House a vote on the treaty before he signed it, finds that either the Lords or Commons votes to amend any part of the implementing legislation, what will he do?

I remember that the right hon. Gentleman expressed exactly the same fears when he said that the Amsterdam treaty would abolish Britain. Britain is still here.

Although I disagree with the Prime Minister’s decision not to give the people a referendum, I congratulate him on his principled stand of staying away from the summit with Africa. In his discussions with European leaders at the margins of the Council, did any of them profess, even secretly, that they felt that their judgment in allowing Mugabe to be there was wrong? Did he get any movement on his desire to have an EU envoy sent to Zimbabwe?

The important thing is that a message is sent to Mugabe and his supporters that the whole European Union is against the abuse of human rights in Zimbabwe and the damage that is being inflicted on that country, when there are 4 million refugees in South Africa, when 80 per cent. of the population is in poverty, when inflation is running into thousands of per cent., and when there is real suffering. I believe that there is a common view across Europe that we should support the people of Zimbabwe. If there is a move towards human and democratic rights in that country and a change of Government there, I believe that the whole European Union will join us in helping the reconstruction activities of the people of Zimbabwe.

As the Prime Minister has once again promised full debate on the treaty in Parliament, will he promise the House that there will be no timetable, and that if Parliament amends the treaty, he will listen?

That is a matter for the usual channels in the House. Many days will be allocated to the debate on this important amending treaty.

Is the Prime Minister in favour of a common defence? If not, is it advisable to sign up to a process leading to it?

The role of NATO, and the importance that we attach to NATO, is safeguarded in the decisions that were made in discussions on the amending treaty. Whatever co-operation takes place within Europe is in the context of the important role of NATO.

With your permission, Mr. Speaker, I should like to make a statement on the progress report by Kieran Poynter, chairman and senior partner of PricewaterhouseCoopers, on the loss of child benefit records at Her Majesty’s Revenue and Customs. Before I turn to that, I can confirm that the police investigation continues, and although the searches are drawing to a close, their inquiry is not yet complete. However, the police have reiterated that they have no information or intelligence that the data have fallen into the wrong hands. They will keep that under review. The banks, too, say that they have found no evidence of any activities suggesting fraud arising from the incident, but they continue to monitor closely the accounts concerned, so they can see immediately if there is any unusual or irregular activity. As I told the House previously, the majority of accounts into which child benefit is paid are with a small number of banks, and those banks have checked the accounts back to 18 October—the date on which the missing data were posted. There are no reports of any activities suggesting increased fraud attempts deriving from the incident.

I deliberately gave Mr. Poynter wide-ranging terms of reference because of the seriousness of the loss and my concern about previous losses of data, to which I referred in my statement on 20 November. Mr. Poynter started his review on 23 November, just three weeks ago, and as he says, his work is far from complete and his conclusions will develop as his work progresses. Inevitably, therefore, the report is short, but I said last month that I would return to the House when it became available. A copy has been placed in the Vote Office in the usual way.

Kieran Poynter sets out the work that he has put in hand. He says that he has given priority to the immediate steps that Revenue and Customs must take to protect data security. It has already put in place a number of measures. Mr. Poynter says that they are measures that he would have recommended, and they are set out in his report. Mr. Dave Hartnett, the acting head of Revenue and Customs, said to the Treasury Committee on 5 December that the measures include the imposition of a complete ban on the transfer of bulk data without adequate security protection, such as encryption, as well as measures to prevent the downloading of data without adequate security safeguards. In addition, Revenue and Customs disabled all the personal and laptop computers it uses to prevent the downloading of data on to removable media; they will be reactivated only with the approval of a senior manager, and for a specific business-critical purpose.

Mr. Poynter has also started his investigation into exactly what happened in relation to the loss, but he makes the point that there are more inquiries to be made and more interviews to be carried out, and there is to be greater examination of the evidence available. As he says, it would be wholly inappropriate for him to draw final conclusions until his work is completed.

Mr. Poynter also draws attention to the responsibilities and accountability in Her Majesty’s Revenue and Customs generally. Those issues are also referred to in the capability review of Revenue and Customs, carried out by an independent panel overseen by the Cabinet Secretary. The House will be aware that the review was commissioned as part of a general review of the strengths and weaknesses of all Government Departments, and was announced in July 2006. The review of Revenue and Customs is published today, along with the Treasury’s review, and updates for four Departments. I am also publishing Revenue and Customs’ autumn performance report.

The capability review identifies a number of important strengths of Revenue and Customs, including a proven ability to bring in money to fund public services while driving down its own costs and delivering greater efficiency. It refers to committed people with honesty and integrity, and with a clear desire to transform and improve. The review also highlights a number of areas where improvements are needed; it mentions the need to set up a simpler structure, the need for clearer accountability, and the need to improve confidence and strengthen management information. The acting chairman agrees, and is announcing proposals to put in place a simpler organisational structure with clearer accountabilities. As Mr. Poynter says, that will make it easier to implement recommendations on data security as his review progresses.

I said in my statement that the Prime Minister had asked the Cabinet Secretary to ensure that every Government Department checked its procedures for the storage and use of data, and to make recommendations on how to improve data handling procedures across government. His interim report is also published today, alongside a written ministerial statement by the Minister for the Cabinet Office. The Prime Minister has already announced that the Information Commissioner will have the power to conduct spot-checks on departments. There will also be new sanctions under the Data Protection Act 1998 for the most serious breaches of its principles. These will take account of the need not only to provide high levels of data security, but to ensure that sensible data-sharing practices can be conducted with legal certainty. We will consult early in the new year on how this can best be done. There is also a range of other measures, which are set out in the report.

Revenue and Customs, and before that the Inland Revenue and HM Customs and Excise, have served successive Governments well. Their staff are dedicated and hard-working. However, the loss of these data was extremely serious and should not have happened, and again, I apologise to everyone who has been affected. As I told the House in November, the loss of these data, together with losses in previous incidents, means that a wide-ranging review was necessary so that lessons could be learned, procedures tightened and security improved. Mr. Poynter tells me that he expects to conclude his work in the first half of next year, and I shall report back to the House when I have his final report. I commend this statement to the House.

First, I want to reiterate to the Chancellor the sense of anger and betrayal felt by millions of people at the loss of their children’s data and their own data.

Today the Chancellor has to explain HMRC’s responsibility for the most catastrophic data security breach in British history, against a backdrop of its responsibility for the loss of confiscated drugs, money, passports and perhaps weapons, not to mention £5.7 billion of overpaid tax credits. In a few minutes another Cabinet Minister will bob up to admit to yet another serious data breach of security. What we and the public want is simple—a concrete assurance that such a catastrophic failure of data security will not happen again. As with every Treasury disaster, whether it is a failed bank or a lost disc, the starting point must be to establish exactly what happened and how it was allowed to happen. That is what the Poynter review was set up to do.

The Chancellor told the House on 20 November that responsibility lay with a junior official who had broken the rules. That line started to unravel almost immediately. First, the National Audit Office produced e-mails that established the involvement of senior HMRC officials in an earlier decision not to filter data in response to NAO requests, which is confirmed at paragraph 16 of the Poynter interim report.

Then data experts confirmed that the ability to download such a large volume of sensitive data to disc without authorisation signalled the absence of the most basic protections that should be built into any data-handling system. Finally, in the face of the mounting evidence, the acting chief of HMRC admitted that a systemic failure had occurred in that vast and unwieldy department cobbled together by the Prime Minister when he was Chancellor of the Exchequer.

We will obviously study the Poynter interim report with great care and we look forward to the final report. We welcome the ban on transfers of bulk data and the disabling of computers to prevent downloading to disc, but why on earth was that simple precaution not already in place? We welcome, too, the publication of the long delayed capability review, recognising HMRC’s need to rebuild its reputation with the public.

Can the Chancellor answer the following specific questions? Can he confirm that it was the practice that passwords were included on a note enclosed with data discs, and did that happen on this occasion? Who was the most senior official to be made aware of the decision routinely to send unfiltered databases to NAO in order to save cost? At what level was the downloading of the data to disc authorised in this particular case, and if it was not authorised, how was it physically possible? Finally, now that he has had time to think about it, can the Chancellor answer the question that was put to him on 20 November: why were police not informed for four days after he personally was aware of the loss, and the banks not informed for six days?

The question is not who put the discs in an envelope and dropped them in an unregistered mailbag. In any large organisation, stupid mistakes occur. That is why well-run, functional organisations have data security systems in place—systems to ensure that sensitive data are filtered out of files, systems to ensure that large volumes of data cannot be downloaded to disc, systems to encrypt personal information, systems to track important material when it is sent off the premises, and systems to make sure of a swift and appropriate response, rather than dither and delay, when something goes wrong. We have a term for when such systems do not work: we call it systemic failure. Responsibility for systemic failure lies not with junior staff, but at the very top. Two long months ago, the Chancellor said on the BBC that what people

“look to us to do is to deal with things that come up unexpectedly, and deal with that competently”.

They do indeed, and the Government have failed them. In the face of the overwhelming evidence of the systemic failure behind this disaster, the statement today can be described only as a wholly inadequate response from a wholly inadequate Chancellor.

First, I am grateful to the shadow Chancellor for taking the trouble to write to me to explain why he could not be here this afternoon; I quite understand his reasons. However, it is clear that his deputy had nothing in particular to say.

I asked Mr. Poynter to look into the facts and circumstances surrounding the loss of the data. He started doing so three weeks ago and, as he says, it is far too early for him to draw conclusions. As I have said on a number of occasions, we need to find out what happened and why, and to learn the lessons. When we have the final report next year, we can get the conclusions and implement them.

The hon. Member for Runnymede and Weybridge (Mr. Hammond) referred to paragraph 16 of Mr. Poynter’s report, but if he was going to quote it, he might as well have quoted it all. Mr. Poynter makes the point that he has seen the e-mail in question but that it does not “on its own” prove that the official took the decision referred to. In other words, further investigations need to take place.

The hon. Gentleman asked about the capability review, which was not held up, but was completed last week; I thought it appropriate to publish it today, alongside the interim report. The hon. Gentleman also asked a number of specific questions that are precisely the ones that I have asked Mr. Poynter to address. I suggest that we should get Mr. Poynter’s report and draw our conclusions after that.

When he appeared before the Treasury Committee, Dave Hartnett, the acting head of Revenue and Customs, left open the question whether there were systemic flaws. No doubt in the coming weeks we will question both him and the National Audit Office. The NAO is very much involved in the situation, as evidenced by its letter of 9 November to Revenue and Customs offering an apology.

As we take the issue forward, can the Chancellor give us reassurance that both on the Gershon efficiencies and on the reduction of staff numbers he will be sympathetic to Revenue and Customs, which is a young organisation that has brought two different departments with two different cultures together? Such sympathy and sensitivity from the Government is essential. Will the Chancellor give us that reassurance?

I agree with much of what my right hon. Friend has said. I certainly agree that, as I said in my statement, all of us should acknowledge the hard work and dedication of staff at Revenue and Customs. It is a major exercise to bring together two major departments. Perhaps I should remind the hon. Member for Runnymede and Weybridge (Mr. Hammond) that despite his complaint about Revenue and Customs, the Conservatives supported the bringing together of the organisations at the time, as did just about every other Member.

However, my right hon. Friend is right: in merging two organisations, issues clearly have to be tackled. We need to learn from the problems that may have arisen and put them right. Indeed, Dave Hartnett, the acting chairman, has already made announcements about changing the management system and that will provide for clearer accountabilities.

On the National Audit Office, I said in my original statement on 20 November that Sir John Bourn had rightly decided to mount his own inquiry and that there would be close co-operation between the NAO inquiry and that conducted by Kieran Poynter. It is absolutely essential that we learn all the lessons, which will include how the request for the information for audit came to be made in the first place, at what level it was made and how it was dealt with by HMRC. All those facts need to be determined by Mr. Poynter, but we do not yet have them.

May I thank the Chancellor for his courtesy in bringing us up to date? I hope that he appreciates the damage that has been done to public confidence by this episode, compounded by the events in Coventry and the report on the Driver and Vehicle Licensing Agency about which we shall hear shortly. If data and valuable information are consistently lost, stolen or abused, the public completely lose confidence in government in general at all levels. It is difficult to see how we can have confidence in the Government’s proceeding with much more ambitious initiatives not only the compulsory—identity card scheme, but the DNA database and the NHS spine.

The Chancellor exchanged comments with the Conservative spokesman on the specific issue of the distinction between systemic and procedural failure, with systemic failure being the responsibility of Ministers and procedural failure being that of officials. That is a subtle semantic distinction of which St. Thomas Aquinas would be proud, but surely the fundamental point is that good systems produce good procedures and bad systems produce bad procedures. In this episode, we have had bad systems and bad procedures.

I welcome what the Chancellor said about the ban on the transfer of data without encryption. That is clearly the way forward. Has he secured the full agreement of the IT companies to use outside encryption specialists to enable that work to proceed? More generally, has he now agreed that it would be completely inappropriate to try, as he has been doing, to block through the courts the publication of the gateway reviews on the way in which the IT companies manage their affairs in Government Departments?

In terms of the Chancellor’s comments about the integration of the work of the Poynter study and the wider 2006 study of Government Departments, what is the significance of the work that David Varney, the former head of the HMRC, is doing on so-called transformational government? Is not the purpose of the study to break down barriers in data transfer between Government Departments? Is there not a danger that if that proceeds without proper safeguards it will merely compound the danger of the kind of error that we have already experienced?

Finally, I want to ask two or three specific and narrow questions. The Government have been asked some parliamentary written questions, not least by my hon. Friend the Member for Falmouth and Camborne (Julia Goldsworthy), about whether there are protocols that govern data transfer within government. None of those questions has been answered, including those asked of the Chancellor’s own Department. Are we to infer from that that there are no protocols? Is that what that obfuscation is designed to achieve?

When the Government sent out their letter of apology, they sent out millions of letters containing large amounts of personal data that far exceeded what was necessary to communicate an apology to their recipients. Since, according to information from the Courts Service, it seems that 8 per cent. of all official letters go astray, have not the Government compounded the original disaster by putting out large amounts of personal data that will simply finish up in the wrong hands?

On the hon. Gentleman’s last point, I have some sympathy for what he says. I think that HMRC’s intention was to apologise to all those who receive child benefit, but I do not think that it was ever intended that that letter, too, would be accompanied by information that, as far as I can see, did not need to be sent. I agree with the wider point that the hon. Gentleman raised in that respect.

The Government, of necessity, hold a great deal of information on behalf of citizens of this country and we need to be careful to reconcile two things. First, we must maintain people’s privacy, by ensuring that we do not send out information that might fall into the hands of people who are not entitled to receive it and might cause difficulties for people’s security or general privacy. At the same time, as the hon. Gentleman rightly says, we must accept the fact that in health services, for example, there might be good reasons for different hospitals, GPs and others to be able to obtain information to provide a better service for patients. It suggests to me that in government, as well as in the private sector, we need to ensure that procedures are far tighter, that people are aware of them, and that they are properly enforced. The Poynter review, as well as other work that is being carried out, will achieve that.

Finally, if we are not answering parliamentary questions on these matters, I will look into that when I get back to the office and try to answer the hon. Gentleman as soon as I can.

May I welcome the Poynter report, particularly when it refers to committed people with honesty and integrity? I also thank the Chancellor for his comments about the dedicated and hard-working staff. Does he agree that, given all that has gone on in recent weeks at HMRC in Washington, the staff have shown great fortitude despite inaccurate attacks on their town and attacks on their ability to deliver child benefit—which has been massively increased by this Government—to millions of families? That benefit will be particularly welcome and important in the run-up to Christmas.

I agree with my hon. Friend. As I said in my statement—and as has been acknowledged in the capability review—there are many people working for HMRC who do a first-class job and who are dedicated to what they do. Many of them have worked for the service for many years. However, we owe it to them to ensure that we have the proper procedures in place so that they can do their job properly, in addition to meeting our principal objective of providing a first-class service to the public and ensuring that, when information is provided on a confidential basis, it remains confidential.

If the Chancellor is really arguing that seven serious breaches of security in the two and a half years since HMRC was founded do not constitute a systemic failure, how many does he think that it would take before the failures could be judged as systemic? Will he also confirm that there has now been an eighth breach of security, at the HMRC store at Coventry airport?

Yes, there was a breach of security at the weekend at an HMRC store. I say to the hon. Gentleman that I would prefer to draw my conclusions when I have the benefit of the facts established by Kieran Poynter. I appreciate, having listened to many Opposition Members, that the last thing that they want is the facts.

May I concur with my hon. Friend the Member for Houghton and Washington, East (Mr. Kemp)? Many of my constituents also work at the child benefit centre in Washington. Does my right hon. Friend the Chancellor agree that it is all very well to have procedures, but that they are useless unless people know about them? Would he care to comment on a story in The Guardian last week that clearly stated—possibly based on rumour—that many of the staff in the child benefit centre did not even know about the procedures that were already in place?

As I have said on many occasions, it is important to proceed on the basis of the facts to be established by Kieran Poynter, and then to draw our conclusions, rather than to proceed on the basis of what may or may not be in a newspaper.

Notwithstanding what Poynter may come up with, does the Chancellor recognise that, in years past, this event would have been seen as a serious problem or even a disaster? Right now, however, given the lack of public confidence in the banking system following Northern Rock and some of the huge write-downs that are likely to be announced over the next few months, does he not agree that the Government have a responsibility to make it clear to members of the public where the liability should lie, should any fraud take place? Will he tell us whether he believes that, in the case of fraud, liability should lie with the Government or with the banks?

I disagree with the right hon. Gentleman that the two issues can be conflated in the way that he suggests. The loss of data was caused primarily as a result of the two discs concerned being posted in an envelope that was not registered and that did not arrive at its destination. The present uncertainty in the financial markets arose from problems in the housing market in the United States. Yes, it has spread beyond that, but the two issues are not related.

My right hon. Friend is obviously responding correctly to a calamitous event for which he was not responsible. He is taking steps to find out exactly what happened, and to ensure that it does not happen again. May I ask him a question on a slightly wider point? The National Audit Office is concerned with matters of financial audit, but we do not have an equivalent body to deal with matters of administrative or performance audit. A proposal has been made by a former Cabinet Secretary that we need such a body. Do not recent events make the case for such a body even stronger?

I am grateful for what my hon. Friend said in the first part of his question. In relation to the second part, that is something that Kieran Poynter might suggest. I do not know; we shall have to wait for him to reach his conclusions. My hon. Friend makes the good point that if there are systems in place, we need to ensure that they work and that they are being operated on a daily basis. Ensuring that confidentiality is in with the bricks in any Government organisation—and, indeed, in any private sector organisation—is very important.

But some facts have emerged in recent weeks, have they not? We know now, for instance, that on 13 March the National Audit Office asked for the personal details to be stripped from the data. We know that it was a senior executive officer in HMRC who refused that request on cost grounds because of a contract with EDS—

indicated dissent.

Well, that is what I have been informed by the Comptroller and Auditor General, and we also know from that e-mail that that was copied to the senior process owner. Although we obviously have to await the final recommendations, some things are clear, so will the Chancellor now accept that there needs to be change at the very heart of HMRC, and that the privacy of taxpayers must be sacrosanct and cannot be compromised in any way because of a contract with EDS or cost-saving measures?

We do not know all those things, as I believe the hon. Gentleman well knows. The Poynter inquiry, and, indeed, the parallel inquiry of Sir John Bourn on behalf of the National Audit Office, were set up precisely because we need to find the facts before drawing our conclusions. I am not sure whether the hon. Gentleman has had an opportunity to view Mr. Poynter’s interim report, but it says that although the e-mail in respect of the first request in March was copied to the person responsible for the data:

“That email on its own does not prove that the official actually took the decision in relation to the manner in which HMRC should have responded to the request”.

What the hon. Gentleman said about that was quite wrong. In addition, I was not going to labour the point, but I should draw the House’s attention to the letter written by the second director at the National Audit Office to the same senior official in HMRC on 9 November, in which it is recognised that the way in which the request was communicated—let me put it this way—could have been better. An apology was given for what happened, but let us wait and establish the facts rather than rush to judgment, which the hon. Gentleman has been rather quick to do of late.

May I thank my right hon. Friend for keeping the House informed? Our constituents get sick and tired of being asked for the same information repeatedly by organisations—whether they be in the private or the public sector—particularly when they generally regard the Government as one undivided body, so will my right hon. Friend assure me that his Department will continue with the policy of “ask once, use many times”, while at the same time maintaining the highest standards of security and privacy for data?

I agree with my hon. Friend that people get fed up with being asked for the same information by what they perceive to be the same organisation. Perhaps that illustrates the point raised by the hon. Member for Twickenham (Dr. Cable)—that if information is to be transferred between Departments, we need to ensure that there are sufficient safeguards so that only the person who is supposed to get the information actually receives it. That is why the review set up by the Cabinet Secretary, Sir Gus O’Donnell, is important to ensure not so much that individual Departments have the right safeguards, but that if information is transferred, it is done in an appropriate way. We need to marry up the two requirements of ensuring confidentiality while also ensuring that when it is in the public interest and the interest of individuals for information to be shared between different organisations, that can happen on a proper footing.

After the data loss, the Government set up a helpline so that those affected could discuss their concerns. Will Mr. Poynter’s review be looking into the operation of that helpline to determine how many calls were made and also why the decision was made to use an 0845 number, particularly when it costs some mobile phone users 40p a minute to access it? Should those affected be paying through the nose to sort out the Government’s problem?

No, Mr. Poynter will not be looking into that. If the hon. Lady would care to table a parliamentary question on the number of people who contacted the hotline, I will certainly answer it. We were anxious to make sure that a helpline was available fairly quickly, which meant that all those things had to be organised in a matter of days and we did the best we could. It was quite heavily used on the first day or so, but I understand that usage tapered off after that. We tried to do our best to ensure that help was available, which meant that arrangements had to be made fairly quickly.

My 30 years’ experience in public sector IT suggests that a prerequisite for secure, stable and successful systems is close end-user involvement at the specification, design, development, testing and implementation stages. In the light of two decades of substantial contracting out of those processes to the private sector, does the Chancellor of the Exchequer expect that Kieran Poynter’s final report might question the logic of that continuing process, and urge that the Government try to restore the knowledge and ability within their own ranks so that they can once again be an intelligent client and not be allowed to be sold some duff systems that are utterly insecure in operational practice?

That is another case in which it would be best to get Mr. Poynter’s conclusions and findings and then decide how we are to proceed.

When we had the dreadful news about the mess-up over the loss of information, we were reassured that any financial losses, if they happened at all, would be monitored, and people were urged to be vigilant. May I ask what measures have been put in place to prevent inappropriate access to children whose data were included on the lost discs, in case people use that data to make contact inappropriately?

As I said in my statement, the banks are constantly monitoring the accounts, and the vast majority of child benefit payments are made through a fairly small number of banks. The banks have been able to check their records back to 18 October, when it is believed that the discs were posted, and have not found any evidence of irregular or unauthorised dealings. They will continue to do that, just as members of the public will be vigilant when they look at their bank statements. We have also been in touch with organisations representing children’s interests, and I have spoken to my right hon. Friend the Secretary of State for Children, Schools and Families to see what steps are appropriate. The hon. Lady raises an important point. We must put in place the right procedures and decide in due course whether, and to what extent, it is right to give any publicity to what we are doing in that regard.

I welcome the statement but I am not sure that the public will be reassured that their personal details are safe in Government hands, especially as there seems to be a new revelation of inept handling of data by Government Departments every week. Only last week, the Northern Ireland Assembly was informed that 7,000 vehicle owners in Northern Ireland had their details lost when data were sent unsecured through the post. Will the Chancellor assure me that the spot-checks to which he referred in his statement will extend to Government Departments under the control of devolved Administrations across the United Kingdom? In light of the weekly revelations, does he understand why people are increasingly concerned about the introduction of ID cards in the future?

I agree that it is important to put in place safeguards, not just for the United Kingdom Government but for the devolved Administrations, and Sir Gus O’Donnell’s report makes specific mention of that. I do not agree with the hon. Gentleman, however, about ID cards. As I said to the acting leader of the Liberal Democrats, the hon. Member for Twickenham, an increasing amount of information is held by Government Departments. In addition to that, those in the private sector, whether banks, supermarkets or organisations such as Google, have a remarkable amount of information and can build quite a detailed picture of what each and every one of us does. The point of ID cards is to ensure that that information is linked to the person who is supposed to get it. I see such a mechanism as a safeguard for me as an individual, because I can be far more confident that any information held about me, whether by the Government or the supermarket that I use, will only be released if I am happy for that to happen.

Many of us in the House who have experience of information technology will know that removing a column from a spreadsheet, or removing some data from even a large dataset, can take just a few seconds. Will the Chancellor tell us how much it would have cost to remove the sensitive data from the discs before they were sent?

As I said, the whole point of Kieran Poynter’s inquiry is to find out all this information, and that is what he is doing.

How long can it take Kieran Poynter to establish the answer to that simple question? Dave Hartnett, the HMRC’s acting chairman, said two weeks ago that that was one of the items that Kieran Poynter would consider. It would be a very simple matter to find out how much it would have cost to desensitise the data, which would have been easy to do and would have de-risked the whole operation.

I asked Kieran Poynter—with, I think, general support—to take a thorough look at what had happened, at the previous incidents, and at anything else that he considered relevant. Inevitably, coming to the House with an interim report that is only three weeks old leaves a number of entirely legitimate questions to be answered, and they will be answered in the final report. I told the House that I would come back when the interim report was ready, and that is why I have made my statement today, but, as Members well know, many of the questions that they are asking will be answered only when we have Kieran Poynter’s final report.

The Chancellor says that there is no evidence of attempts to commit fraud by means of the data. That may not be altogether surprising, given the immense publicity and increased awareness over the last couple of months, but do the data not give rise to the possibility of fraud for many years to come?

Has the Chancellor had any discussions with the banks about how long they will continue to monitor the affected accounts? Will he also tell us whether the data were sent out with a password or whether the password was sent separately?

I think that I said on 20 November, when I made my earlier statement, that the data were password-protected, but I also said that they needed to be encrypted in order to be protected more adequately. Monitoring will continue for the foreseeable future, but one of the things on which I want Kieran Poynter to advise us is what further steps we might take.

Since this problem occurred two months ago, millions of letters have been sent to families apologising for the fact that their details were given out, and thousands of hours of officials’ and police time have been spent on trying to resolve the problem. What, to date, is the total cost to the taxpayer of the clear-up operation?

It is not possible to answer that question at the moment. What I will say is that I think it entirely right that the police were called in, entirely right that HMRC has devoted considerable resources to trying recover the data, and entirely right that we should spend the appropriate amount of money in order to find out what happened and then put it right.

The whole House will be relieved to see that the Minister for the Cabinet Office is present, as he is responsible for information security. What discussions has the Chancellor had with the Minister? In particular, when did he brief him on the report that he received in February from Sir Edmund Burton, which said that there was a systemic problem affecting all Departments in relation to information security?