House of Commons
Monday 21 January 2008
The House met at half-past Two o’clock
[Mr. Speaker in the Chair]
Oral Answers to Questions
The Secretary of State was asked—
Ex-service Personnel (Housing)
With your permission, Mr. Speaker, before I answer my hon. Friend’s question, I am sure that the whole House will join me in sending our profound condolences to the family and friends of the soldier from the Royal Electrical and Mechanical Engineers who was killed in southern Afghanistan yesterday. His tragic death reminds us of the debt of gratitude that we owe those who have lost their lives in the service of our country and those still serving in Afghanistan and Iraq.
On 28 December, my right hon. Friend the Minister for Housing announced that we are taking action, as part of the Housing and Regeneration Bill laid before the House, to ensure that service personnel are treated fairly when applying to councils for social housing or homelessness assistance. We are amending the law so that service personnel will acquire a connection with the area in which they are stationed or living, which will put them on an equal footing with their civilian counterparts.
I endorse my hon. Friend’s comments. To take him a little further in the debate about council housing, we know that, if action is taken early, we can reduce the numbers leaving our services and becoming homeless in our areas. Are discussions taking place between local authorities and the armed forces to ensure that those brave people obtain houses?
My hon. Friend makes an important point. Bases and the armed forces have regular discussions with a range of people about housing, including not only local authorities, but charities. The resettlement package that we have put together is quite extensive in terms of providing housing advice, too. The latest figures from the research that has been undertaken show that around 6 or 7 per cent. of the homeless are ex-forces. We have a number of partnerships, working with people to provide accommodation for former service personnel who have become homeless. Last year I visited the Sir Oswald Stoll Foundation in East Acton, which has an excellent scheme. Project Compass in London is another fantastic charity providing hope and support, particularly for ex-service personnel, not just on housing but on education and work.
Does the Minister agree that that point is important, and that a particularly heavy burden falls on those towns that have substantial service garrisons within them? Service personnel leaving the armed forces while living in those garrison towns will naturally look first to that town, rather than to their local authority of origin. Will he also look at the burden on the local authority of origin, which is particularly important when armed services personnel happen to leave prematurely and unexpectedly?
The hon. Gentleman makes an important point. Of course there is a lot of pressure on local housing in garrison towns. Our joint service housing advice office is important for service personnel. As I mentioned earlier, the resettlement package that we have put together includes housing advice. Working with local authorities is an important part of that. I will take the hon. Gentleman’s comments on board next time I discuss the issue with officials.
Why cannot there be a national scheme that recognises that every local authority has national obligations? Why cannot every local authority be required to top-slice, in order to put a small percentage of voids at the disposal of ex-service personnel, which would maximise the choice to retiring service personnel and be fair to all local authorities rather than to some? Surely that is the answer. Why is it beyond the wit of men and women to organise such a scheme?
My hon. Friend raises an issue that has perplexed many of us: why do local authorities not give priority to ex-service personnel? Many local authorities in fact do so, and they should be praised. We have regular discussions with my right hon. Friend the Minister for Housing and the Department for Communities and Local Government about such issues, and we will continue to do so. As I said in my opening answer, I am pleased by the announcement about the local connection, but I assure my hon. Friend that we will take such matters up.
Is the Minister aware that of the 4,500 people on the housing waiting list in the borough of Rushmoor, which includes the garrison town of Aldershot, some 600 are service personnel and that an increasing number of those are non-UK citizens who have enlisted in the Army? What action is being taken to warn overseas recruits, particularly those who serve for a short period of time, that there is a severe housing shortage in the United Kingdom?
If I may crave your indulgence as the Member of Parliament for Aldershot, Mr. Speaker, I should also like to seize this opportunity to pay tribute to the Army and to Rushmoor council for last week being selected by the British Olympic Association as the pre-Olympics training base for Britain’s athletes. This may be the most depressing day of the year for the Government, but there is great rejoicing in Aldershot.
I add my congratulations to Aldershot on its being chosen. I am sure that it will help to add to our medal total in the Olympic games. The hon. Gentleman makes an important point on housing. I accept that we need to do all that we can to assist with housing and advice, but if we look back to the time when his party was in government, we will remember the amount of house building that took place and the amount of cuts that it made in social housing. This Government have plans to increase the amount of housing provided in this country.
The security situation in Iraq varies from province to province. Levels of violence are still unacceptably high, but there has been significant improvement nationwide over the course of 2007. In and around Baghdad, for example, following action by Iraqi and coalition forces, security has been enhanced. In the south, the security situation remains relatively stable. The increasing capability of the Iraqi security forces, under the leadership of Generals Mohan and Jalil, enabled the successful handover of security responsibility for Basra province to the Iraqi civilian authorities on 16 December. The Iraqi security forces have shown themselves able to deal effectively with security incidents that have occurred since then, such as the disturbances in Basra and Nasiriyah during last week’s Ashura festival.
Senior elements in the Iraqi army say that they have enough people in Basra but that they are dangerously short of equipment. Will the Secretary of State impress upon the Iraqi Government that British efforts will have been wasted if the Iraqi army is unable to procure the relevant equipment quickly?
I am aware of the need to ensure that the Iraqi army is properly equipped to carry out the task that is expected of it. Of course, our focus is not only on training troops but on ensuring that the Iraqi Ministry of Defence is able, through its procurement process, which we support specifically by the deployment of support to the Ministry in Baghdad, to spend the increasing levels of income that the Iraqi Government are able to achieve from the sale of oil. We are making significant progress in that regard, and that equipment is improving day by day. I spoke to General Mohan when he visited last week, and I know that he has expressed some frustration about the pace at which that is happening, but that is a result of a number of different things and we are keeping a close eye on the situation. Procurement is improving.
As I have said to my hon. Friend on a number of occasions, we keep these matters under review. We are clear about the progress that we have been able to make, particularly over the past 18 months, with regard to the reduction of our troops in Iraq. I have never been prepared to put a date on when we will remove the last of our troops from Iraq—and I am not prepared to do so now—but it will be a function of the conditions on the ground and the ability of the Iraqi security forces to provide security for their own people.
Reverting to the question put by my hon. Friend the Member for Northampton, South (Mr. Binley), one concern about the Iraqi Ministry of Defence’s procurement processes is that some factions within Iraq might be trying to keep the Iraqi army unnecessarily weak. What can we, the British, do about that? General Mohan is short of machine guns and mortars, and he needs a speedy answer to that problem.
I know that the right hon. Gentleman met General Mohan when he was here last week. I am sure that he was impressed, as I was, by the general’s professionalism and dedication to the job. We are all delighted that he has continued in the job beyond the date of his first appointment. He displayed commendable and professional energy and commitment. He did not raise that specific issue with me but I am sure that he raised comprehensively all the issues that he intended to raise with those whom he met. I am grateful to the right hon. Gentleman for raising that point, but I must point out that, last year, the Iraqi Ministry of Defence was very successful in spending its procurement budget, to the extent of 85 per cent. We believe that the figure will also be about 85 per cent. this year.
My own observations on the restrictions on spending arise from the cumbersome conditions that have been imposed by the coalition authority to prevent corruption. The need for them is understandable, but the Iraqis are sometimes wary of working through them. I have not heard specific comments from any source about ethnic division in relation to procurement, but I can understand why people might think that such an issue might exist. I shall ensure that that does not become a manifest problem in Iraq in the months to come.
Last week, I asked the Prime Minister about the security situation in Basra and he told the House that violence there was down by 90 per cent. Today, a member of the public from York wrote to me to say:
“He, the Prime Minister, chose not to mention that this”—
the decline in violence—
“is due entirely to the oppressive methods used by the police force. They impose extreme forms of Islam on the people. Women are unable to venture out in public unless their dress conforms to the extreme Islamic rules”—
Let me point out to the hon. Gentleman that the 90 per cent. figure used by the Prime Minister has been used regularly in the House. It relates to the reduction in violence and it is due substantially to the fact that about 80 per cent. of violence in Basra was directed at our troops when they were based there.
I have no way of knowing the provenance of the information that the hon. Gentleman presented to the House. He is perfectly entitled to put his constituent’s observations to us, but unless we know the factual basis of that constituent’s opinion, we have no way of evaluating it. I asked for and was provided with about 45 minutes of candid footage of the centre of Basra a couple of weeks ago. I saw obvious evidence of women moving around in the town’s markets and they were not dressed as the hon. Gentleman described. I was struck by that because of the assertions that many people had made. It seemed to be a bustling city in many respects. There is violence and I understand that, but Generals Mohan and Jalil—and the army and the police force generally—are improving their ability to deal with it. There is still some way to go—no one ever represents the position differently—but from my own observation of candid footage of the centre of the city, it is not capable of being described as the hon. Gentleman put it.
Although Colchester has been identified as a potential super-garrison, it is too early for any firm decision on that. Regardless of that, the Ministry of Defence and Essex local authority officials continue to discuss schooling for the children of Colchester garrison. Paragraphs 6 and 7 of the Government response to the Select Committee on Defence inquiry responded to recommendation 5 and made our position clear.
I wonder whether the Minister would kindly write to me, and put the letter in the Library, to provide the precise dates when those discussions, and any subsequent ones, commenced. The first the Colchester garrison knew about the proposal to close Alderman Blaxill secondary school, where between 20 and 25 per cent. of pupils are children of military personnel, was when it appeared in Colchester’s Evening Gazette. When did those discussions start and how do they comply with the spirit of the Defence Committee’s recommendations?
I know that the hon. Gentleman feels strongly about the matter and I am happy to meet him to discuss it in further detail. Discussions with the education authority are ongoing and I am assured that MOD officials are content with their involvement in them. I believe that the result of those discussions will be the provision of the best possible education for our service children. As I say, I would be happy to update him at a meeting.
We believe educational support for children from service families, whether they are in the UK or overseas, is very important. Last year, investment in service schools through the Service Children’s Education agency, in the continuity of education allowance to support children at boarding schools, and in our highly regarded Children’s Education Advisory Service, was more than £230 million. Ministry of Defence officials regularly meet colleagues from the Department for Children, Schools and Families and from devolved Administration Departments to discuss measures to support service children’s education.
I thank the Minister for that answer. My late father served in the Royal Navy for 25 years, so I sampled many different schools around the country. I have to say that the provision today is far superior to what it was when I was travelling up and down Britain. However, will the Minister allude to what is being done for younger children? I appreciate what he is saying about schools, but what about child care for young children, including the issue of vouchers?
I pay tribute to the service of my hon. Friend’s father, of whom I know she is very proud. Our Children’s Education Advisory Service considers regularly the range of education issues and has discussions with local education authorities. Of course, our own education service also provides schools, for example in Germany. Our results are in the top 25 of 150 local education authorities, which is laudable.
My hon. Friend will know that from 10 December 2007 all members of the UK armed forces have had access to the new armed forces child care voucher. They can choose to receive between £30 and £243 per month in child care vouchers instead of cash with salary from the MOD. That is a major step forward. It has been welcomed by the service families federations, and I am sure that it will be well taken up.
Will the Minister bear in mind that across the country about 2 per cent. of children in schools overall, but more than 4 per cent. of service children, have special educational needs? That is down largely to general disruption rather than to any other factor, but it has severe funding implications. Will he draw that to the attention of his colleagues in Government to see whether they can find equitable funding to cope with the tremendous churn in those schools—there are many in my constituency and others—that have a high proportion of service children?
The hon. Gentleman makes a vital point about education for the children of our service families. As he will know from his time on the Defence Committee, our Children’s Education Advisory Service is working hard on the issue, as the Committee has acknowledged. We continue to talk to our colleagues in the Department for Children, Schools and Families and local authorities to ensure that proper support is given. As I am sure that he recognises, the advisory service that we have is first-class and works hard to ensure that support is put in place.
My hon. Friend is aware that the Defence Committee drew attention to the fact that while a lot of good work is being done throughout the UK, we must distinguish between different areas: Scotland, for example, has a different education system from England. In evidence sessions, we found that that was not adequately recognised. When children come from abroad to the UK, it is important that they are made aware of the different education systems. It might be an idea for the education authorities of each of the countries to meet perhaps on a six-monthly basis under the auspices of the Ministry of Defence, to try to collate some of the work that might be done.
The Minister will understand how important it is, in fulfilling our obligations under the military covenant, to ensure that service children are educated as well as possible. Does he agree that it would be helpful if the pupil level annual school census were able to identify service children? What measures is he taking to ensure that service children who join and leave within the academic year, and are therefore not counted, are enumerated for funding purposes?
The Government have introduced a service indicator in the annual school census to gather evidence of any further issues and to fine-tune support for children, which is important. Our Children’s Education Advisory Service is considering the issues of funding and service personnel moving around, and I continue to discuss those issues with colleagues throughout Government. The Command Paper that my right hon. Friend the Secretary of State announced recently will consider what more can be done on a range of issues, including education.
The development of super-garrisons will provide great opportunities for stability for service families, and for stability in the education of their children. In response to the hon. Member for Colchester (Bob Russell), the Minister told the House that his officials have meetings with local authorities about education. Will he assure me, however, that those meetings are meaningful, and that the necessary planning is taking place not just of what is needed for those super-garrisons, but of the funding that local authorities will need to ensure that education is provided around those new super-garrisons?
My hon. Friend has identified the importance of stability for service families, and one of the benefits of the super-garrisons is that they will increase that stability. A key problem experienced by service personnel is the number of times they have to move, and the effect of that on their children’s education. I have given officials a clear direction that planning must include real involvement and detailed discussions about the impact of super-garrisons on a range of services, including health and, in particular, education. I can give my hon. Friend an absolute assurance that we take the issue very seriously and will continue to focus on it strongly.
While the defence programme is kept under regular review, the only planned change in the number of major surface warships in the Royal Navy over the next three years will be the reduction to two aircraft carriers when HMS Invincible is finally withdrawn from service in 2010. However, the number of destroyers in service at any one time may vary as the Type 45 destroyer steadily replaces the Type 42. As previously announced, our fleet of attack submarines will be reduced from nine to eight at the end of this year.
Given the great reluctance with which the Royal Navy accepted the cut in frigate and destroyer totals from 35 to 32 in 1998, and the fact that the Government subsequently cut the number from 32 to 25, will the Minister guarantee that there will be no further cuts?
The hon. Gentleman tries desperately—as do some of his hon. Friends—to give the impression that the Royal Navy is losing capability, although he knows that the new aircraft carriers that have been ordered will be the biggest ships ever run by the Navy, and that the Type 45 destroyer has a capability well beyond that of the ships that it is replacing. We intend to maintain the Royal Navy as one of the most powerful navies in the world, just as we intend to maintain the capability to build those ships for the Royal Navy.
That reply, and the earlier replies, will interest people who work in the dockyard and the naval base in Plymouth. I thank my right hon. Friend for agreeing to meet a delegation of trade unionists later this week to discuss the work that will be available to the dockyard in the next few years particularly, but may I ask him to tell the House, for the record, of the importance that he attaches to Plymouth dockyard’s ability to carry out not just submarine work but refitting and maintenance of surface ships?
My hon. Friend continues to be assiduous in the interests of her constituency, but she will know that the naval base review has decided that all three naval bases will continue to be needed. We must not only commit ourselves to the continuing use of those bases, but ensure that we preserve the skill base in the areas involved. That applies to Plymouth, as it applies to the Clyde and to Portsmouth. I am pleased to be able to meet my hon. Friend and her delegation—tomorrow, I believe.
We welcome the new aircraft carriers that are due to be commissioned from Rosyth dockyard, but does the Minister understand the frustration felt by my constituents and those of the Prime Minister over constant reports of delays? Can he make a clear statement that there will be no delays, or, if there are to be delays, can he explain how the skills will be maintained in yards throughout the country in the meantime?
There are always rumours in these circumstances, but there is no delay to the in-service dates of the aircraft carriers. We are working with the companies, and progress is being made in establishing the joint venture that is needed to ensure their timely build for the Royal Navy.
I thank the Minister for his responses so far, but for the benefit of this House and of the Opposition party, who are sending out their leaflets in my constituency, will he—
Will the Minister confirm that the Government’s commitment to building new, modern ships with a modern capability enables the Royal Navy to discharge its operations both at home and overseas and has contributed to securing Portsmouth naval base’s future?
As my hon. Friend knows, I have visited Portsmouth and seen the good work going on there and its warship build capability. The naval base review is complete and Portsmouth’s position is secure within that. Of course we must look at how we maintain that capability and I am sure my hon. Friend will continue to represent her constituency as she has done over the past year during the review. Portsmouth has not only a fantastic Royal Navy history, but a fantastic Navy future as well.
As the Minister knows, however heroically the Navy tries—it does try heroically—its capabilities have been degraded because of the number of its ships and its inevitable inability to carry out the declared tasks that it handled when it had many more ships. How many escorts does the Minister anticipate one of the new carriers will require when it goes to sea?
There will be sufficient escorts for the carrier task fleets and that will be in line with the defence strategy as laid out to the House. We will make sure that the task fleets are fully capable in every aspect of the work that they need to do in order to give the Royal Navy the kind of power projection it must continue to have in future generations.
I shall resist the temptation to describe the Minister’s reply to the very specific questions of my hon. Friend the Member for Buckingham (John Bercow) in the terms that he has recently made famous, although I point out that the price of the Hansard on eBay is currently £77. Instead, I remind him that it was made clear in written answers on 9 and 29 October that, on current plans, the amount of attack submarines will go down to seven and the number of frigates and destroyers will go down to 23 unless more orders are placed. Will he now give us a guarantee that the orders will be placed, so that we do not have fewer than the eight attack submarines and the 25 frigates and destroyers promised by the Government in 2004?
We will make announcements to the House as and when we are ready to do so. The hon. Gentleman continues to try to say that the Royal Navy’s capability is not as is needed when he knows that the situation is otherwise. The Type 45 destroyer is one of the most powerful ships afloat, and the carriers will be the biggest ships afloat. The Government have put a considerable amount of shipbuilding into our yards over recent years and will continue to do so in the future. The hon. Gentleman knows that to be the case.
We take the protection of our servicemen and women very seriously. Since 2003, we have approved over £2 billion of spending on force protection and have delivered Mastiff heavy-protected patrol vehicles to Iraq and Mastiff and Vector light-protected patrol vehicles to Afghanistan. In addition, we are procuring 150 Ridgback medium-protected patrol vehicles, which will be available for deployment to Afghanistan.
My hon. Friend is right to say that protected patrol vehicles, which have, rightly, gained a lot of attention, are at the limit of what we need to provide to protect our troops. Over the spending period that I addressed in my original answer, we have developed and improved a range of capabilities: not only protected patrol vehicles; but new body armour, which we continue to develop and consider how it can be improved; communications and surveillance equipment, particularly unmanned aerial vehicles; night-vision equipment, which has been improved significantly; electronic countermeasures for our vehicles and other transport; and, of course, base security. I am sure that the House will understand that I do not want to go into the details of the security measures because I do not want our enemies to know them. I repeat the offer that I consistently make in this House; if Members wish to receive a confidential briefing on those issues, I am happy to give one in the Ministry of Defence.
Given the Secretary of State’s remarks to the Sunday Mail a couple of Sundays ago, and those of Sir Sherard Cowper-Coles about the length of time that our forces are likely to remain in Afghanistan, should not our procurement policy now be carried out on the assumption that we are there until further notice?
The hon. Gentleman makes a good point. I have consistently said in this House—before the Defence Committee and from this Dispatch Box—and on other opportunities for communication beyond the House that our commitment to Afghanistan is a long-term one. I do not believe that we will be war fighting in the long term, but I do believe that deployable forces requiring the sort of protection and equipment that we have been developing and deploying over the past few years in particular will be the norm for our forces in the future. We intend to take just that approach. We have made progress in readjusting our procurement processes so that they have the agility and ability to respond to the changing environments in which we deploy our troops. We have had considerable success in that regard, particularly over the past couple of years.
European Security and Defence Policy
I meet my European defence ministerial colleagues regularly, both bilaterally and at meetings of EU Defence Ministers. The most recent meeting of EU Defence Ministers was held in Brussels on 19 November, when we discussed a range of issues including Operation Althea and military capabilities, Chad and the European Defence Agency.
The new Lisbon treaty contains various unhelpful developments on defence and security policy. For example, the new high representative for the common foreign and security policy will become a vice-chairman of the Commission and will chair the foreign policy aspect of the Council of Ministers; the EU Commissioner for Enterprise and Industry; is calling for a single market in the defence industry and the new solidarity clause has emerged. Will the Secretary of State tell us specifically what assessment he has made of new treaty provisions that are judiciable by the European Court of Justice?
First, the House should know that the new reform treaty text states that NATO
“remains the foundation of their”
“collective defence and the forum for its implementation.”
My assessment of the treaty—I understand that it is widely held to be the correct interpretation, including by some eminent legal authorities—is that it in no way affects current UK military operations. Such operations will not be affected, and decisions about troop deployment will still need to be made unanimously. For the first time, the Lisbon treaty expressly excludes jurisdiction from common foreign and security policy provisions and the Acts adopted under them. So the answer to his question is none.
During those discussions, was there any talk about what might be required on Kosovo? Should time be given for a consensual agreement or arrangement to be reached on Kosovo’s status?
Kosovo engages the discussions of European Defence Ministers every time we meet and has done so consistently in my experience. The EU stands ready to provide, and is providing, support for training in Kosovo, particularly for the police. The EU’s assessment has to be on the basis of what is realistically likely to happen in Kosovo and it is commonly viewed that something approaching the Ahtisaari recommendations is likely to be what will happen on the ground in Kosovo. When that happens—because it is on our doorstep—the EU is required to stand ready to support peace and stability in the country, and will do so.
Because of our high level of commitment to Iraq and to NATO in Afghanistan, the Government told us that we would have minimal commitment to the French-inspired EU military mission to Chad. We are sending only two officers to Chad, yet we are spending £5.9 million on the mission. Can the Secretary of State tell us what on earth we are spending that money on?
We are making a contribution to stability in that important part of Africa, and the hon. Gentleman should welcome that. He knows that although the mission is to Chad, it is important to try to sustain some degree of stability in Sudan to support peace and the peace talks there. That is our contribution. Other parts of Government are making significant contributions to that part of Africa and it would seem distinctly inappropriate were we not to make a contribution that reinforces those wider and greater contributions, financial and otherwise.
Is not the truth that under Athena we are required to make a financial commitment to the EU operation, and that some of our EU and NATO partners are more willing to fund their EU commitments than their NATO commitments? The UK, the US, the Dutch and the Canadians carry the bulk of the military and financial burden in southern Afghanistan. The US has 15,000 troops and we have almost 8,000, but Spain, for example, has fewer than 800 and Portugal has 163. Is not it clear that the EU’s drive towards a common security policy threatens to undermine NATO? With defence, Britain cannot have two best friends; it cannot be both the EU and the United States through NATO.
The hon. Gentleman asked what the money was for and I told him. He may have been disappointed that the answer was so specific. The mechanism by which the money is paid is not what the money is for, and he asked what the money was for. He tempts me to agree that the EU has no contribution to make to nation building and stability across the world. I do not agree. What NATO offers ought to be at the heart of our military alliance and commitment to peace and security across the world, and our own security. But working with our EU partners comprehensively, we have an opportunity to bring to bear capabilities that NATO does not have and is unlikely ever to have.
The Government are publishing in the spring the first ever cross-Government strategy setting out our vision for supporting service personnel, their families and veterans. Since we announced it, I have been encouraged by the response. The Department of Health has introduced an extension of priority medical treatment to all veterans with a service-attributable condition and, with the MOD, a mental health community pilot scheme. The Department for Communities and Local Government has extended the open market home-buy scheme to members of the armed forces to help make home ownership more achievable in all regions of England, and we intend to remove local connection legislation to ensure fairness for our armed forces in housing allocations.
My right hon. Friend will be aware of the British Legion’s Honour the Covenant campaign, which among other things emphasises the need to provide priority medical support for servicemen and their families, and ex-servicemen. Can he tell me what progress is being made?
The Royal British Legion is part of the group that we are consulting with regard to the Command Paper and it is free to raise whatever issues that it wishes within that process. Additionally, the Under-Secretary of State for Defence, my hon. Friend the Member for Halton (Derek Twigg) has regular meetings with the Royal British Legion and others to chase up issues and to ensure that we respond appropriately to the needs of our armed forces personnel, as well as to those of the veterans’ community.
Procurement of the Mastiff protected patrol vehicle has been a huge success. Just 23 weeks after the decision to procure was taken, Mastiff had been built, upgraded, tested and shipped out to theatre, along with a developed support package. It has proven itself in the field as highly capable and is hugely popular with troops on the ground, providing vital protection with effective mobility.
With respect to the hon. Lady, I am withholding further information on vehicle availability, as the disclosure of this information would or would be likely to prejudice the security and operational effectiveness of our armed forces, but I extend to her the offer that I have made to her regularly; if she wants to know the detail of that information, I am happy to provide it on a confidential basis in a personal briefing.
I am grateful to the Secretary of State for that answer. He is aware that one of the reasons why the Mastiff vehicle is so popular with our troops and has proved such a success is that enhanced security was designed into the vehicle from the outset in its V-shaped hull. It is built from commercial components, so that if it is, by any chance, hit by a mine, replacements can be easily bolted back on to the vehicle, to ensure that it returns to action in double-quick time. Will the Secretary of State give an assurance that the future rapid effect system vehicle will exhibit those admirable attributes, which save the lives of British servicemen day by day?
The hon. Lady is consistent in her questioning and in her interest. She has substantial knowledge of the capabilities of protected vehicles, and I commend her for being so consistent and well informed in that regard. I assure her that she is no less informed in relation to these matters than those who have to make the decision about FRES, not least senior officers in the Army.
My departmental responsibilities are to make and execute defence policy, to provide the armed forces with the capabilities that they need to achieve success in the military tasks in which they are engaged at home and abroad and to ensure that they are ready to respond to the tasks that might arise in the future.
When I asked the Secretary of State how many RAF personnel there were at RAF Feltwell, the answer was none. When I asked why, I was told that there was no requirement for any RAF personnel at RAF Feltwell. Is it not time that we acknowledged the reality and started calling such bases US bases? Is it not symptomatic of British defence policy that we pretend to be in control, when we are little more than the back end of a penny-farthing to President Bush?
I am not entirely sure whether the hon. Gentleman has struck an important point for the defence of the realm in the question that he asked. I will consider the point that he makes about the naming of RAF Feltwell, but I suspect that I will come to the conclusion that we will continue to call it RAF Feltwell.
There is no question about the independence of our defence policy. However, we are part of the most successful military and political alliance that the world has known in NATO. The Americans are a very valued ally and I make no apology to the House for working closely with them. Among other things, I am proud to say that because of our discussions with the Americans, they will deploy significant additional resources to southern Afghanistan in support of our troops and those of the other countries present there. That is the sort of support that the Americans give us and I am proud of the fact that they are prepared to do it.
The hon. Gentleman refers to part of a project announced in a written statement to the House on 11 July 2006. Just under 1,300 pensioners have been awarded increases to their pension and 98 cases were reported in the media today. We are making the case for a write-off to the Treasury, and I will not pre-empt its decision.
My hon. Friend is honorary colonel of the Durham Army cadet force, which is a privileged position. I thank her for her long-standing support; I know that she takes a significant interest in the cadets. I believe that it is the best youth movement in the country by a mile. I am always delighted to talk to cadets; on a tri-service basis, of course. As she may recall, we announced last year that new combined cadet forces will be set up at six schools. I believe that cadet forces will continue to thrive. They give young people a fantastic experience and many opportunities to do things that they would not normally do. As I say, I think that it is the best youth service in the country.
What assessment have the Government made of the new Polish Government’s attitude to ballistic missile defence, particularly since the Russians sent a visitor to Warsaw warning of the implications of such a scheme? Also, what assessment have the Government made of changing opinion in the Czech Republic? In the light of those developments, is it not time that we had a debate on the subject in the House?
As I understand it, the Polish Government’s position on ballistic missile defence is that they are discussing the possibility of basing some missiles on their soil, under an agreement with the United States of America. I am not, and would not be expected to be, in a position to report the detail of those discussions to the House. The hon. Gentleman will have to wait, along with the rest of us, to see how those discussions take place and what their outcome is. As for holding a debate in the House on ballistic missile defence, we have regular debates on defence issues. I had some research done and, to my knowledge, since I have been Secretary of State for Defence, on only one occasion has someone made a contribution on the subject of ballistic missile defence in one of those debates. That is how much demand there is for such a debate, despite the posturing of members of his party outside the House.
The hon. Gentleman asks an appropriate and specific question. If he and the House will excuse me, I would prefer to put the answer in writing, because it raises a number of issues of some complexity. I am conscious of all the issues that he mentioned and when we make decisions on utility vehicles, their procurement and deployment, and the sharing of information, we will take them all into account.
My hon. Friend raises an important issue regarding the involvement of ex-service personnel in Skill Force and the excellent work that they do. In fact, a year or so ago, not long after I was appointed to my post, I went to Knowsley and Skelmersdale to see the work that the organisation does and I was extremely impressed. I cannot comment on his proposal that the MOD sponsor an academy, but there have been discussions with the Department for Children, Schools and Families about the general issue of academy sponsorship. As he knows, however, there is an important opportunity, particularly for cadet forces, so I can assure him that we will continue to have discussions with my colleagues in that Department on the issue.
I refute the assertion that our servicemen are not treated well either in or after service. I do not demur from my responsibility to meet the challenge of increased expectations in the 21st century, particularly those resulting from the deployments in which we have asked our servicemen and women to take part. We have made significant improvements, day by day, week by week, year by year, in that regard.
As for specific numbers, there is a constant assertion, often fed by politicians, that information about troop numbers in Iraq is erroneous. It is not. Troop numbers were reduced to about 4,500 before the turn of the year. Indeed, only last week there were 4,330 troops in Iraq, but that number fluctuates because of rest and recuperation, and sometimes because of temporary troop deployments. It is of no help to families who have to live with those concerns to suggest that information is inaccurate, as that is not the case. They are general figures, but the trend is for a reduction. We will meet the reduction that we announced in the House and when appropriate we will make another statement about a reduction in numbers.
I am happy to deal with the issue that the hon. Gentleman raised, in relation to the facts, not in relation to speculation or rumour. I will be in touch with him and I will put a copy of the letter in the House setting out our understanding of the position on the joint strike fighter in relation to the American programme.
My hon. Friend the Member for Crawley (Laura Moffatt) referred earlier to ex-service personnel and their relationship with local authorities. Will the Minister tell the House what steps he has taken to ensure that serving personnel are made aware of their key worker status when applying for housing?
We are going to use all the methods available to us, including internal communications, service publications, websites and any other method we can use, to make sure that our service personnel are aware of their eligibility in that regard.
As we always say in relation to these issues, when there is an announcement to be made we will make it to the House of Commons. When there is a further announcement to be made about Eurofighter, we will make it here. I do not think that it serves anyone to feed speculation by putting numbers into the public domain for consideration prior to our making a decision. When a decision is made, we will say it here.
This year is the Territorial Army’s centenary. I am sure that Ministers would like to congratulate it on its past, present and future service, and on the commitment that it has shown, and continues to show, in support of the regular forces. Will they ensure that the TA does not suffer the cuts that have been proposed, so that that organisation, which is second to none, can continue?
We need to look at the role that our reserve forces—not only the Territorial Army, but other reserves as well—play in our armed forces. They have made a tremendous contribution and we need to make sure that our planning properly reflects their capability.
I do not accept that the combat units serving in Iraq are seriously undertrained; in fact, the opposite is the case. We specifically ensure that the forces deployed into the operational theatres are appropriately trained for their operations. That may mean on some occasions that the training needs to take place partly here and partly in the operational theatre. However, I do not accept that the forces being deployed are undertrained for what they are being asked to do.
With your permission, Mr. Speaker, I should like to make a statement on Northern Rock. The House will understand that it was necessary to issue a statement to the markets with our proposals before the start of trading this morning in the usual way. Copies of that statement and the accompanying Treasury press release are available in the Vote Office.
Next week, I shall publish proposals for strengthening depositor protection and the supervision of banks, but today let me set out how we intend to meet the previously stated objectives of the Government, the Financial Services Authority and the Bank of England with regard to Northern Rock, as well as the background against which we make our proposals.
The proposal that I set out today for a solution to Northern Rock, which is underpinned by Government support, is one that best meets our objectives of protecting taxpayers and depositors and maintaining financial stability. I will set out the reasons for that in greater detail. In the meantime, I can confirm that the existing Government guarantee arrangements to depositors will remain in place. Savers’ money, therefore, remains safe and secure.
The House will recall that at the end of last summer, following the problems in the US mortgage market, Northern Rock found it increasingly difficult and then impossible to raise the billions of pounds that it needed to finance its business. It was completely exposed; it had no plan B. Northern Rock was therefore forced to ask the Bank of England for support to allow it to continue to operate. The Government agreed to that support because, in the then prevailing conditions, there was a serious risk that other parts of the banking system would be destabilised. That support was successful and prevented further contagion, and the decision was wholeheartedly supported by right hon. and hon. Members of this House.
As the House knows, the Government have announced guarantee arrangements for depositors’ money saved with Northern Rock. In October and December, we also provided further guarantees and funding arrangements to give the company the time that it needed to try to find a solution to its problems. At that time, I said that I would ask Northern Rock to come back with proposals no later than mid-February this year. Those guarantee arrangements, including the extension in December, have not been called and there has therefore been no cost to the taxpayer. However, the arrangements remain necessary and will be in place for the time being.
Equally, Bank of England lending is secured against Northern Rock’s assets such as high quality mortgages, assessed by the Financial Services Authority as being of good quality. Again, there has therefore been no cost to the taxpayer. Let me make it clear that the Government’s position, which I reiterated most recently during the Treasury Committee sitting on 10 January, is that a private sector solution for Northern Rock is the preferable route for meeting our three objectives, but that that cannot be at any cost. If it does not prove possible to secure a proposal that meets our stated objectives and conditions, it will be necessary to take Northern Rock into temporary public ownership. For that reason, it would be irresponsible to rule that out.
Despite intensive efforts over the last few months, and as a result of uncertain market conditions across the world, it has proved impossible for Northern Rock to find a purely commercial solution. In the autumn, market conditions were such that banks became increasingly reluctant to lend on terms that would have been acceptable. As the House will be aware, banks right across the world are having to make substantial provisions. While conditions are better now than they were before Christmas, they remain difficult, and the Government’s financial advisers believe that there is no chance of achieving a private sector deal backed entirely with private finance in the near future.
Before I turn to my proposal, let me first deal with the question of putting the company into administration, as some have suggested. Administration would mean that control would immediately pass to an administrator who would look to realise the value of the company’s assets, which, under current market conditions, would amount to a fire sale. It could also exacerbate current market turbulence, and costs would be significant. I have therefore rejected such a proposal.
My proposal today is one in which Northern Rock is owned and run in the private sector as a commercial bank, and where the Government provide a backstop guarantee to make private financing possible in the current market conditions. I believe that this company should be managed within private sector disciplines and management, provided that we can do so on terms that properly protect taxpayers’ interests.
Let me now set out in greater detail how this proposal will meet our objectives of protecting the taxpayer, protecting consumers and promoting financial stability. Northern Rock would raise the funds that it needs from investors by selling assets. The Treasury would guarantee payment to those investors in the event that the assets were insufficient to meet its obligations, for which Northern Rock would pay the Treasury a fee. In this arrangement, shareholders and other providers of capital in Northern Rock accept the first risk, with the Government acting as a backstop. According to the Financial Services Authority, Northern Rock has a good quality loan book. In normal market conditions, such a guarantee would be unnecessary. However, in the current circumstances, to attract a wide range of investors on acceptable terms that protect the public interest, a guarantee is necessary. If this proposal is accepted, it would mean that all of the Bank of England’s current loan facilities for the company are repaid in full, with interest, up front, upon completion of the transaction.
Our willingness to put this support in place depends entirely on the terms on which a deal can be struck. I will authorise support for the private sector only if the public interest will be better served than through taking the company into temporary public ownership. In addition to this, any acceptable proposal would need to comply with clear conditions. The company will need to demonstrate how it can operate sustainably in future without Government support, and we will favour proposals that reach that point quickly. New private sector capital will be needed, so that the private sector—not the taxpayer—takes the burden of risk for commercial success or failure. So long as the Government continue to provide a backstop guarantee, we will require restrictions on any sale of the company and on dividend payments.
To allow this financing structure to be explored, the Treasury and the Bank of England will make arrangements to extend the Bank of England’s loan facility until 17 March, by which time we must submit a restructuring plan to the European Commission. The proposals would involve private sector participation in the financing of Northern Rock and would also provide the taxpayer with the ability to share in the potential upside returns, as business conditions improve, in return for the financial support provided to the company.
The Government will make their decision as to which proposal we can, as provider of support, accept, and with the Bank of England and the FSA, we will consider proposals received by 4 February from potential interested parties, including the company itself. Any proposals, either as a result of this support or public ownership, are highly likely to need state aid clearance and will therefore be dependent on approval by the European Commission.
The Government have already started discussions with the company and with the two parties that have publicly stated an interest in the company. The Government are also ready to have discussions with any other interested parties.
Let me make it clear that if the solution I have outlined proves not to be possible on terms that protect the public interest, then a temporary period of public ownership will be necessary. Legislation is being prepared, should it be necessary, and would make provision for an independent valuer to decide on the level of compensation to be made to shareholders. The principles for assessing that compensation would be based on the company’s not receiving public support and on all specific financial assistance from the Bank of England or Government having come to an end. This is set out more fully in the statement to the markets issued earlier today.
It is for the independent Office for National Statistics to determine whether Northern Rock is classified to the public sector in the national accounts. Any liabilities classified to the public sector would be temporary and backed by significant assets, and do not represent any meaningful measure of fiscal sustainability. The code for fiscal stability, underpinned by legislation passed by this House, provides for such situations. We would also address the future of the Northern Rock Foundation in the event of temporary public ownership.
The proposal that I have outlined today meets our stated objectives of protecting the taxpayer, protecting depositors and maintaining financial stability.
Northern Rock got into the difficulties it faced because of global market conditions. The Government agreed to Bank of England support for Northern Rock because of the destabilising risk to the rest of the financial system and also provided guarantees to protect depositors. Both of those objectives have been met. We now need to reach a solution that leaves the greatest risk with the company, yet will allow taxpayers to profit from any future sale.
Ideally, the best solution would have been a private sector one without any Government support, but in the current uncertain market conditions, that is not possible. Administration, with the resulting fire sale of the company’s assets, would not be in the public interest. Temporary public ownership—nationalisation—remains an option, however even those who advocate it now see it as a stepping-stone to the return of Northern Rock to the private sector, which would involve Government support. In the meantime, the company would require continuing financial support, which would leave the public sector bearing all of the risk.
The proposal I have outlined today is the right one. It provides a Government guarantee that enables a commercial solution in which the private sector raises finance and bears risk. It also offers the prospect of withdrawing Government support more quickly and is therefore most likely to meet our stated objectives and conditions. I commend this statement to the House.
May I thank the Chancellor for finally telling Parliament what the Prime Minister told his press pack, and apparently Richard Branson, on his way to China last Friday? Nothing of substance that the Chancellor said today is not already plastered over this morning’s newspapers and blogs, once again reminding us of how marginal a figure the Chancellor now cuts in this process. Let us also remind ourselves of the huge damage that the first bank run for 140 years has done to Britain. The Chancellor prayed in aid in his statement the advice of his financial advisers, Goldman Sachs. This is what Goldman Sachs is advising its other clients:
“The Northern Rock factor has badly dented the UK’s reputation for being the world’s pre-eminent financial centre”.
I welcome the fact that the right hon. Gentleman now implicitly agrees with me that full nationalisation would destroy that reputation altogether. To use his own language, I am glad that what looked like the Chancellor’s plan A just a week ago has, after Prime Minister’s questions, become the Government’s plan B.
The Chancellor should be more straight with people about the real consequences of his latest attempt to get out of the mess created by Labour’s economic incompetence—[Interruption.] Can he confirm that he wants the taxpayers of Britain to provide—[Interruption.]
Can the Chancellor confirm that he wants the taxpayers of Britain to provide a £25 billion mortgage to Northern Rock for years to come? Add in the guarantees to depositors and that figure comes to £55 billion. That is £2,000 for every family in the country: a second mortgage on every home to rescue the reputation of this Government. No British Government have ever provided taxpayers’ support on this scale to a private company. It is bigger than British Leyland, bigger than British Steel—this is back to the 1970s. Life in Brown’s Britain is like an episode of “Life On Mars”.
Can the Chancellor answer questions on these three specific issues? First, will he stop pretending that this is, as he said in the final paragraph of his statement, a commercial solution? In truth, it is a part-nationalisation because the Government take the bulk of the risk and the private sector takes the bulk of the upside. Alliance and Leicester has gone into the market and borrowed at 7 per cent., but thanks to the taxpayer, Northern Rock’s new owners will be borrowing at Government rates. If it goes under, of course, it will be the British taxpayer who pays the price. It is no wonder that Northern Rock’s shares have soared 40 per cent. on a day on which the stock market has fallen.
The second issue I want to press the Chancellor on is the growing risk to the taxpayer that this deal represents. Will he confirm that the difference in the cost of capital means that Northern Rock will be getting an effective Government subsidy for years to come? Some estimate that the subsidy is worth more than £1 billion in total. That is more than 20 times the cost of funding this year’s police pay settlement in full. What is his estimate? How much will the fee that he mentioned recoup of that £1 billion subsidy? Will he confirm that buried away in his statement is the proposal that the bonds issued by the Government can be used not just to repay the Bank of England loan, but to provide adequate liquidity for the company? How much could that cost?
What does this whole deal mean for public finances? We already have the worst budget deficit in Europe, and we have learned from today’s dismal public finance figures that the Treasury has borrowed £44 billion so far this year, exceeding the estimates given by the Chancellor to this House. Will he confirm, as he admits, that if the ONS treats the Government as the true economic owner of the liabilities, he will shatter the sustainable investment rule? He says that the measure is only temporary, but the whole point of the deal is that it could be permanent. As ever, the Government’s answer to every economic problem is further debt.
The third and final issue for the Chancellor to consider is how long the Northern Rock saga will go on. The right hon. Gentleman’s statement made no mention of the length of term of the bonds, yet the press have been briefed by the Prime Minister’s travelling entourage that they will last for five years. Which is it? Will the Chancellor tell Parliament what someone else is telling the press on the other side of the world? What will the time scale be?
In September, the Chancellor said that he was providing a little short-term support to help Northern Rock get through its difficulties. Since then, we have had five months of dithering. Today, the taxpayer could possibly be in hock for five years. The Government could have secured a private sale before the bank run. They could have done today’s deal back in September, if they were so keen on it, at a much cheaper price. They could have passed legislation to protect retail depositors, as we proposed, back in October. They could have considered the options of a Bank of England-led reconstruction. Labour Members dismissed that, but when the Chancellor unveils his plans next week he will suggest that in future crises the FSA has the powers to take organisations such as Northern Rock into an effective form of administration. Labour Members will all be voting for that in a couple of weeks’ time.
Of course, the Chancellor did none of those things. He dithered and delayed. The result is that the British taxpayer is being asked to lend billions of pounds for years to come to salvage the reputation of the Prime Minister and his Chancellor. Labour is saddling everyone in Britain with a second mortgage, and that is the price that we are all now paying for its economic incompetence.
Listening to the shadow Chancellor, it is clear that he has not a clue what he would do. He has no constructive policies to offer. At least the hon. Member for Twickenham (Dr. Cable), who speaks for the Liberal Democrats, has a statable case and a policy. The principal Opposition party has no policy whatsoever. Indeed, ever since Northern Rock got into these difficulties, it has been clear that the official Opposition’s position has been completely incoherent and inconsistent.
Last September, when we offered Bank of England support to Northern Rock, the Leader of the Opposition said that he wholeheartedly supported it. Two days later, he said that he backed the guarantees and supported the Bank of England action. However, all last autumn, at every opportunity, the official Opposition sought to run away from the consequences of making that decision. Even last weekend, the Leader of the Opposition said that he ruled out nationalisation, but on Monday, when he was asked about nationalisation and administration, he said that he needed to consider both options. Far from ruling out negotiation, he was ready to consider both options.
On the subject of administration, it is interesting that last week we heard day after day that the Conservatives had two policies. The first was that the Governor of the Bank of England should restructure the bank—by the way, the bank would have to be nationalised to allow the Bank of England to have the necessary control to do that. The alternative policy was to put the bank into administration—in other words, to bankrupt the thing. It is interesting that the shadow Chancellor should talk about administration last week, because two months earlier he said:
“The winding up of the bank would pose a significant risk to the tax payers money”.
That was his position in November, but it is completely different today.
On the subject of the shadow Chancellor’s questions, I have set out my proposals, which will form the basis of negotiations in the discussions with both the bidders who have expressed an interest in acquiring the bank or in being part of its future as well as with the board. Obviously the terms and conditions clearly need to be discussed and negotiated. I shall continue to report to the House to ensure that it is kept fully informed.
I have to tell the shadow Chancellor—I appreciate that he is starting from a position where he has no position—that it would be ideal if we could find a purely commercial solution to the problem. However, in the current conditions, there is no way that that will be possible in the foreseeable future. One could put the bank into administration, but that would happen at a considerable cost and could exacerbate market conditions.
One could take the bank into temporary public ownership, but, during that period, the Government would continue to be at risk and public support would be needed to get the bank out of temporary nationalisation into a commercial future.
Alternatively, we could pursue a chance of getting commercial money, whereby people can invest in the bank and bear the first risk and the taxpayer can gain when market conditions improve. I believe that that is the right thing to do, and that my position is properly thought out and worth exploring. The Opposition have shown that they are bereft of ideas.
Unlike the shadow Chancellor, the people of the north-east of England recognise that, first, the Government’s first responsibility is for the stability of our financial markets in this country and, secondly, the long-term interests of Northern Rock and the consequential jobs are also key issues. Contrary to the views that are likely to be expressed by Liberal Democrat Members, people in the north-east do not perceive premature nationalisation as a way forward that will meet either principal objective.
Will my right hon. Friend agree to meet a delegation of workers’ representatives from the bank so that they can express their concerns and hear more about the Government’s proposals?
I am grateful to my hon. Friend. Of course, I would be happy to meet him and representatives of the bank’s work force. I fully understand that it is an uncertain time for them. I therefore hope that the Government’s proposals today will enable an acceptable solution to be found. As I said to hon. Members, there are many difficulties to overcome and we must proceed cautiously, but I believe that we are doing the right thing.
My hon. Friend is also right that the Government’s objective throughout has been to ensure stability. In the past 10 years, there has been sustained growth in the wider economy, with historically low interest—and, therefore, mortgage—rates, and record numbers of people in work. That has been reflected in the financial markets. We had to respond to difficult circumstances, which started in the United States sub-prime market and have affected markets throughout the world. As all hon. Members concede, we are going through a difficult period. Everything we do should be geared towards greater stability. The Conservative party’s proposals would not add to that.
I congratulate the Chancellor on brilliant originality. The Government, through their bond guarantees, are solemnly undertaking to repay the Government. The taxpayer is standing behind the taxpayer and we have a private sector solution without private money as well as nationalisation of liabilities and losses and privatisation of profits. It requires a special sort of genius to dream up such an idea and I hope that the Government’s financial advisers have been well rewarded.
I am tempted to recall the Danish economist, Hans Christian Andersen, who told the story of the two conmen who visited a particularly credulous king to sell him an imaginary suit of gold to cover his nakedness. We have a naked King Gordon, desperately trying to cover his embarrassment over the “n” word “nationalisation”.
It was said this morning in the City that the financial value in the insurance markets of the guarantee of the bonds was £2 billion. Since the private buyers are not providing that money, where will it come from? Are we talking about a guarantee of a guarantee? How else will it be funded?
The Chancellor said that there would be a profit-sharing arrangement between taxpayers and the private owner, but no numbers were given. Is it true, as the Financial Times reported this morning, that the proposal is likely to be for a 5 to 10 per cent. Government equity stake, with 95 to 90 per cent. of the uplift going to the private owner? If the proposal is of that order of magnitude, what is the position, if there is to be profit sharing, of the Northern Rock Foundation? The Chancellor mentioned it in the context not of profit sharing but of nationalisation.
Since we have heard from the north-east of England, the Chancellor will know that the Treasury’s private sale document made not a single, solitary reference to jobs or the future of the region, so what is its role under the proposals?
This morning, the BBC’s political correspondent described Mr. Branson as the “cat what got the cream”. I do not know what that is, but Mr. Branson appears to be the Government’s preferred bidder. Can the Chancellor tell us what Mr. Branson is going to contribute? My understanding is that he is proposing to put in £250 million in kind, not cash, to acquire a bank worth £100 billion, or 40 times that value. He has never run a bank, and I believe that the profits will be routed through a Caribbean tax haven, so what benefit does the taxpayer derive from his participation?
Finally, as the Conservative spokesman has already noted, Northern Rock shares have soared, while the British and other international stock markets have fallen. The only cheerful faces this morning were those of the two equity fund investors who made a speculative punt on Northern Rock a few months ago and have now recouped their investment. Meanwhile, the taxpayer in being taken for a very big ride. That will continue until the Government adopt the honest, transparent solution of taking the bank into public ownership.
As I said earlier, the hon. Gentleman has argued for the nationalisation of Northern Rock for some time, but he would accept that if the Government do that, many of the issues that he has raised still come into play. He has said on a number of occasions that he does not think that the long-term future of the bank lies in being publicly owned. He sees nationalisation as a temporary step back into the public sector, and I agree that if it came to that, that would be precisely the position that we should adopt, because the long-term future of the bank cannot lie with being run by the Government.
The hon. Gentleman must accept, therefore, that if the bank is nationalised, the risks to which he referred will remain with the Government, and that money from the private sector investors does not come immediately into the bank, so the Government will have to fund that. In any event, if the bank is subsequently transferred into the private sector, which he and I agree would be the right thing to do, under current market conditions it is likely that similar Government guarantees to those that I am proposing today would have to apply then, too.
The difference between the hon. Gentleman and me is that he wants to nationalise today. I believe that the better option, if we can do this on the right terms and conditions—the hon. Gentleman raises some very fair points about this—is to explore whether we can bring those private investors into Northern Rock now, which would enable the Bank of England’s lending to be repaid with interest, which is one of the demands that has been made time and time again in the House, and rightly so.
The hon. Gentleman raised a number of points about profit sharing and the financing details, which can be resolved only during the course of negotiation. As I said to the shadow Chancellor, I will of course keep the House informed about that. In relation to the prospective bidders, two have publicly expressed an interest and the Government are talking to both of them, while the company’s existing board is also considering proposals. All those will be considered, along with any others that are made in the next few days.
It has been suggested that Mr. Branson is putting £250 million of his own money into the company by selling Virgin Money to Northern Rock, but estimates in the City indicate that that company is worth about £50 million. I would not like to think that Richard Branson was getting that £250 million from what Northern Rock was paying him for a company that is worth only £50 million, so transparency is of the utmost importance for the Government and others. I would encourage the Chancellor to have other companies coming in before 4 February, so that we can have a vibrant exchange and a vibrant sale.
On 19 November, the Chancellor told me that he would seek to pursue the interests of the taxpayer, promote financial stability and safeguard consumers. Is he satisfied that today’s new proposal gives equal weight to those three objectives? If he is, will he say how he will ensure that?
As I said in my statement just a few moments ago, what I am proposing today is consistent with the statement of principles that I published on 19 November—that is, to protect the taxpayer’s interest, which is extremely important; to look after the interests of the depositors, which has always been a concern; and to achieve wider stability. All the proposals that are currently available—that is, the board’s proposal and the Virgin and Olivant bids—involve those companies raising money from investors. In other words, they will have to put money into the company to ensure that it can continue to operate. The proposal that I have set out today will also mean that the Bank of England’s money that has been lent to Northern Rock can be repaid with interest, which is precisely what we wanted to achieve.
My right hon. Friend mentioned the final proposal, but we have not got to that stage yet. That is something that needs to be discussed, which is why negotiations are taking place. I made a point of saying in my statement that all options need to remain on the table, including that of a temporary period of public ownership, because there are conditions in relation to what I am proposing today. We need to ensure that we look after the interests of taxpayers as well as ensuring wider stability and continuing to look after the depositors. These are difficult times, and the conditions are not ideal, but I believe that what I am suggesting is the best way possible to proceed, and that the proposals ought to be supported on that basis.
Does the Chancellor agree that, a few months ago, it was obvious that, in order to protect financial stability, it would be necessary to give guarantees to depositors and to achieve a quick, orderly work-out of the situation at minimum risk to taxpayers, in circumstances in which it has long been obvious that no purely private sector or commercial solution was going to be remotely possible? After five months of delay, are we not now being offered a proposal that will be of benefit to the shareholders in Northern Rock, including hedge funds, who will find that their shares have been given a value by this statement that they would not otherwise have had, and to future investors in Northern Rock, whoever they might be, who will find that the Government and the taxpayer are taking on an open-ended commitment to take all the principal risk involved? This is surely the result of dithering and delay, and of political considerations getting in the way of the speedy decision making and the orderly work-out that could have been achieved even before Christmas.
I agree with the first part of what the right hon. and learned Gentleman said. It was necessary for the Bank of England to intervene, and it was right to offer guarantees on the depositors’ money. We have common ground on those points. Throughout last autumn, considerable efforts were made to find a solution to the problems at Northern Rock, either by merger or by acquisition or through other proposals. Some interest was initially expressed by other banks and financial institutions but, as the financial markets tightened last autumn, it became increasingly obvious that that solution was not going to be possible. In the late autumn, interest was expressed by Virgin, by Olivant and then by another private equity group which subsequently withdrew. It became obvious to us that, without some degree of Government support, nothing was going to happen. That is why we commissioned Goldman Sachs to advise us.
I agree with the right hon. and learned Gentleman that, had it been possible to get a quick sale in the autumn, that option would have been highly desirable. Unfortunately, the conditions in the financial markets made that totally impossible. It would have been far more preferable, as I said in my statement, if we could have found a purely commercial solution. However, that is not going to be possible in the foreseeable future, as I am sure he recognises.
Whoever the future owner of Northern Rock might be, will the Chancellor assure me and the people of the north-east that he is in this for the long haul and that he will prevent the dumping of its assets—its workers and its mortgage book—into a falling market, where they will be bound to fetch far less than they are worth?
That is precisely what would happen if the company were to be put into administration as the shadow Chancellor has suggested. In the current conditions, which are there for all to see, if the administrator were required to start realising the company’s assets, there would undoubtedly be a loss, given the present mortgage conditions and today’s market. That was recognised by the shadow Chancellor himself only two months ago. He has changed his tune now, and we shall wait with great interest to see what his policy will be tomorrow morning. I do not expect that he has any more idea about that than I do.
The Chancellor was reminded by my hon. Friend the Member for Twickenham (Dr. Cable) of the importance of the Northern Rock Foundation, which is of immense value to communities throughout the region. What assessment has he made of the potential impact of his current proposals on the Northern Rock Foundation and its share of profits?
The Northern Rock Foundation is very important not just to the north-east of England but to the north-west as well. The proposed bidders in the company are well aware of this issue and how greatly the foundation is valued. I cannot today say precisely what will happen, but I can tell the right hon. Gentleman that we take this matter extremely seriously. The Northern Rock Foundation derived a great deal of income from Northern Rock plc, so for very obvious reasons there is bound to be a difference in the future. I recognise the foundation’s importance and it has already had meetings with Treasury officials; those discussions will continue.
I welcome the Chancellor’s statement. Many others in the north-east as well as myself believe that this is a practical, realistic and imaginative solution to a problem that is not the making of anyone in the House but whose consequences we face in the financial markets. It secures the objective of protecting the taxpayer and offers real hope of long-term viability for a company that is very important for the north-east. Those of us who represent north-east constituencies will have many thousands of constituents who work for the company. I welcome the proposal; above all, it will end the damaging uncertainty that the company has faced—[Interruption.] I am asked what is the question. Does the Chancellor agree that ending the uncertainty is the most important consideration because it has been a critical factor in causing the damage? The Chancellor’s deadline is welcome, so let us hope that we can get a private buyer in place by then.
On the last point, I said in my statement at the beginning of October, when guarantee arrangements were put in place, that I wanted the company to come back by mid-February at the latest. We have a deadline in respect of state aid approvals of the middle of March, so matters do need to be brought to a head. As I said in response to the right hon. and learned Member for Rushcliffe (Mr. Clarke), market conditions over the last few months have been extremely difficult. While they are better now, a great deal of uncertainty remains. I agree with my hon. Friend about the importance of Northern Rock to the north-east of England. Not just the foundation, but the bank itself is an important employer. We still have a lot of ground to cover with difficult negotiations ahead. That is why I say that all options remain on the table. I will not rule out the option of a temporary period of public ownership, but I greatly take to heart what my hon. Friend said.
Is the Chancellor aware that the Swedish taxpayer still owns 20 per cent. of Sweden’s largest bank 16 years after the Government stepped in there? He told the exchange this morning that he expects Northern Rock to operate without Government support “in due course”. How would he define “in due course”?
As I said to the shadow Chancellor, and in my statement, I want to bring about a position whereby the company can stand on its own feet as quickly as possible. I cannot today—these discussions are continuing—set out a specific timetable, but it is important for the Government to provide backstop back-up to the bank’s proposals. I would have a great deal more sympathy and listen with greater interest to the hon. Gentleman and his colleagues if they actually had a solution themselves, but it is becoming increasingly clear that they have no idea what they would do. I do have a plan.
It was perfectly appropriate for the Chancellor to refer in his statement to uncertain financial conditions throughout the world, which are enduring, long-lasting and perturbing the markets to this day. It is also perfectly right to defend the taxpayer and depositors. Building on the questions put by my hon. Friends the Members for Newcastle upon Tyne, North (Mr. Henderson), for Houghton and Washington, East (Mr. Kemp) and for Newcastle upon Tyne, Central (Jim Cousins), when the Chancellor meets representatives of the work force, will he tell them that his patient approach to solving this difficult problem is also in their interests?
As I have said on several occasions, having taken the difficult decision to provide support to Northern Rock in the first place last September, we must have the conviction to see it through. I am therefore disappointed that, having received wholehearted support from the Leader of the Opposition—he has now departed from the Chamber, but I am sure that he will remember those words—he is now running away from it.
Does the Chancellor appreciate the irony that the present world credit crisis is largely due to excessive securitisation of loans—a bankers’ ramp, which he is now joining? Does he hope that the Chinese will start buying his loans to Northern Rock when he has securitised them into bonds?
Not exactly, no. The difficulties in the US sub-prime market, which started the present problems, were primarily caused by the fact that, it would appear, too many lenders did not know whom they had lent to and had no idea of the true value of the assets on which those loans were secured. Securitisation in itself is not a bad thing, as I am sure the hon. Gentleman would agree. What matters is whether lenders know what they are doing. If only some of those who had lent to householders in America over the past few years had realised that those borrowers did not have enough income to support the loan repayments, and their houses were not worth anything like what was claimed, we might not be in the difficulties that we are in today.
I am sure that the 1,100 Northern Rock employees based in my constituency will welcome the Chancellor’s statement today. May I press him a little further, however, on the future of the Northern Rock Foundation? In his statement, he says that he will address it, “in the event of temporary public ownership”. However, many people in the north-east, especially those voluntary organisations that are dependent on the help that they receive from the Northern Rock Foundation, will want him to press the interests of the foundation regardless of whom the owner is. Please will he clarify that point?
Yes, we will. I said earlier to the right hon. Member for Berwick-upon-Tweed (Mr. Beith) that I recognise the importance of the foundation. My point was that in the event that we had to take the bank into a period of public ownership, we would have to provide for that. If the proposals as set out today come to fruition, I know that the company and the bidders are acutely aware of the importance of the foundation and will want to do what they can to help. This is one of the many problems that need to be sorted out and addressed, but I assure my hon. Friend and other Members who represent north-east constituencies that we are well aware of the problem and will do whatever we can to help. These are, however, difficult decisions and difficult times.
I cannot tell you, Mr. Speaker, how much more confident we feel now that we know Chancellor Baldrick has a cunning plan. Does the Chancellor not think that allowing one of the potential bidders for Northern Rock to go on a visit to China and have an unminuted discussion about Northern Rock with the Prime Minister smacks of impropriety at almost any level?
Is my right hon. Friend aware that he can safely ignore the opportunism of those on the Conservative Front Bench and particularly their irresponsible attitude to administration? As he nears the final stage of the complex and difficult negotiations in which he is involved, will he take it from us that we look to him to get the best possible deal for the public sector in those negotiations, and that the position that he has taken on a temporary period of nationalisation will greatly strengthen his hand in doing so?
I am grateful to my hon. Friend for his support. I agree with his comments about administration. I also agree that our proposals today represent an opportunity to try to resolve the matter. As I said, however, many matters still need to be discussed, and I hope that we can get on with that over the next few weeks.
When £25 billion was first advanced by the Bank of England, it did not appear that the usual banking disciplines over how and when the money would be repaid were put in place. Now the Chancellor says that he can get the money back with interest, which is welcome, but at the expense of a guarantee. Will he now put in place proper banking disciplines so that the guarantees can be run off quickly, as the market will allow, and taxpayers do not have the guarantee hanging around their heads in perpetuity?
As I said a few moments ago, I hope that the guarantees can be lifted as soon as is appropriate. That will be one of the subjects under discussion.
I agree wholeheartedly with what the right hon. Gentleman said on 15 January:
“Putting Northern Rock into administration could lead to a fire sale of assets, and might result in taxpayers not getting all our money back.”
I could not have put it better myself. The right hon. Gentleman might like to have a word with his colleague.
Given that the consequences of the sub-prime market fiasco which brought down Gord—Northern Rock—
Brought down Gordon Brown!
Given that those consequences have now spread more deeply across the economy with the undermining of the bond insurers, when will my right hon. Friend tackle the real underlying causes of the debacle, namely the use of securitisation with no proper risk management and no cross-border supervision, weak and inadequate banking regulation, the widespread use of exotic financial derivatives which are frankly designed to deceive, and an auditing system that involves far too cosy a relationship with the banks themselves?
As I said in my statement, I will publish proposals for strengthening the banking supervisory system next week, but as I told the hon. Member for Louth and Horncastle (Sir Peter Tapsell) a few moments ago, I do not think that securitisation in itself is a problem. The problem arises when institutions do not know what they are doing: when they are lending money and do not know the true value of the asset against which they are lending, and when they cannot be confident that repayments will be made. Those problems need to be tackled at national level, but—as I have also said on a number of occasions—they need to be tackled at international level as well. That is why we have made proposals to the International Monetary Fund and to the Financial Stability Forum, which we will discuss at the G7 in Tokyo in about three weeks’ time.
The run on Northern Rock— although not the reason for it—coincided with the Bank of England’s not increasing liquidity last September, a month after the Government knew of Northern Rock’s liquidity difficulties and after the European Central Bank and the United States Federal Reserve had increased liquidity. Since that period, the Government have announced new powers for the Financial Services Authority and consulted on protection of depositors’ savings.
The Chancellor told us today that he would make a statement on some of those matters next week. May I ask him whether the necessary changes to protect depositors’ savings—the changes to the tripartite arrangement, with new powers for the FSA and clear rules for liquidity—will be in place before an acquisition or a nationalisation? It would be perverse if £50 billion of taxpayers’ money continued to be used to guarantee liabilities in one form or another, and the changes that the Government wish to see were not in place before a takeover or nationalisation.
The proposals that I will publish next week will require primary legislation. As the hon. Gentleman will know, that will inevitably take a few months, but I told the Treasury Committee that I wanted the legislation to be on the statute book before the end of the current parliamentary Session. I do not want to hold up any solution in relation to Northern Rock until all that is done. If the proposals I have outlined today bore fruit, the money lent by the Bank of England would be repaid in full; but I think we should proceed on the basis that we will get the legislation on the statute book during this Session if we can, and I hope that we will have all-party support for that.
The shadow Chancellor has accused my right hon. Friend the Chancellor of dithering. Let me tell my right hon. Friend that I welcome the calm and considered way in which he has gone about his decision making, in stark contrast to the flip-flopping, contradictory, incompetent positions adopted by the Conservatives. Can he give an indication of the disruption that would be experienced by home owners with Northern Rock mortgages if Northern Rock went into administration, as was advocated by the shadow Chancellor as recently as last week?
The Chancellor repeatedly reassured the House that Northern Rock has a good quality loan book. I have no doubt that most of its old loans are well secured, but is it entirely credible that a company that increased its loan book by 50 per cent. at the top of the market in the year before banks stopped lending to it, did so without hoovering up some sub-prime mortgages as well as prime mortgages? Given that bad mortgages cannot be secured against good mortgages, does the Chancellor accept that he is accepting, on behalf of the taxpayer, the risk of all the bad mortgages in that loan book?
Is the Chancellor aware that, along with many others, I am pleased that he has not ruled out public ownership? Way back when Ted Heath was the Prime Minister, the Tories had a cunning plan: they decided to take over Rolls-Royce. It turned out to be the wise thing to do, and we supported him in the Lobby—in fact, we ran in there. Then, in 1975, the Labour Government had to intervene to save Burmah Oil. Some of us would much rather see public ownership than the handing over of large sums of money to Mr. Goody Two-Shoes Branson, because we might not get it back.
My hon. Friend’s position does not entirely surprise me. I was in school when Rolls-Royce was nationalised in, I think, 1971. I have set out my position. A limited period of public ownership must remain on the table, but what I am proposing could, if we can get the right terms and conditions, prove a better deal in the long term.
I very much welcome the approach that my right hon. Friend has set out, which has both protected people’s savings and jobs and prevented the contagion spreading from Northern Rock to other banks, which was a genuine risk last autumn. When my right hon. Friend comes forward with proposals for tighter supervision and regulation, will he also look at the rating agencies, which have a major role in assessing the risks posed to different investors?
Yes. The Financial Stability Forum is looking at rating agencies. I discussed a range of matters with my French, German and Italian counterparts when we met in Paris last week; one of them was what further changes might be made to credit rating agencies. I have always regarded them as an aid to decision making. When a bank or any other financial institution makes a decision as to whether to lend, it should certainly take a credit rating agency’s advice into account, but it should also exercise its own judgment and not rely totally on what the credit rating agency says. There are other issues in relation to possible conflicts of interest which also need to be looked at.
We have just come through one of the tightest comprehensive spending reviews since this Government came to office. One of the reasons for that is the current strain on public finances. Will the borrowing rules be relaxed to allow borrowing above planned borrowing for next year in order to finance this deal, or will there be a reduction in planned borrowing for infrastructure projects—and if so, which Departments does the Chancellor intend to delve into in order to finance this?
The Chancellor emphasised in his statement the importance of taxpayers being able to share in the upside returns. Will he confirm that that would require the Government to take a shareholding in Northern Rock, and if so will he say what his minimum requirements would be in relation to such equity participation?
It would not require it, but one of the things that we will need to discuss over the next few weeks is what mechanisms would best ensure that if the company were sold and there were an upside return, the taxpayer could benefit to reflect the fact that we are providing backstop guarantees.
As I have said on a number of occasions, the management of a company is a matter for its shareholders—its owners. The Government have never been in a position to say to a privately run company that so-and-so should be a director or manager and so-and-so should not. But I am clear about the fact that whatever changes occur, part of the restructuring will involve ensuring that we put in place a strong management who know what they are doing.
The Chancellor said that the Bank of England’s lending will be repaid in full, but at what point does he propose to authorise it to publish full details of that lending?
Again, I have said on a number of occasions that I will consider that when it is appropriate to do so. What I want to avoid is providing a running commentary on Bank of England support. I look forward to hearing what the Treasury Committee has to say, but I think that some sympathy exists for that approach. If we are successfully to allow for Bank of England intervention, we need to be able to act in a way that does not immediately draw attention to a bank and cause the very difficulties that we are trying to avoid.
I think I am right in saying that some 50 business men and women accompanied the Prime Minister on his visit to China and India. The discussions with the Virgin group, Olivant and the board started today, once the statement had been issued to the stock exchange. Of course we had to tell the board on Friday night what we were proposing, because of its obligations to the market. The discussions with the two bidders could not start until after that.
Does the Chancellor agree with the assessment of the BBC’s business editor that the arrangements that he has announced this afternoon amount to a public “subsidy” of £1 billion for Northern Rock? If not, what figure would he put upon it?
As I have explained on a number of occasions this afternoon, the discussions that will now follow from my publication of proposals will determine to what extent, at what rate and how much the Government will provide backstop finance. Once those discussions have concluded, I will be able to report to the House.
MOD (Data Loss)
Mr. Speaker, with your permission, I should like to inform the House about the theft of laptop computers from Ministry of Defence vehicles and premises. The MOD has clear policies, systems and procedures in place to protect the security of information, both personal data and classified information. We have software protection through encryption and a formal information security process through which individual IT systems and the databases they contain must be accredited by the appropriate MOD authorities. Our internal investigations following this theft reveal that those procedures were not followed. That was a breach of MOD security regulations.
As police investigations of the theft are at an active stage, I am limited in what I can say about the incident. It occurred on the night of Wednesday 9 January in Edgbaston, Birmingham. The laptop was left in a car that had been parked overnight and was unattended. That was a breach of security regulations. The stolen laptop contains personal information on about 600,000 people, the majority of whom had simply expressed an interest in joining the Royal Navy, the Royal Marines or the Royal Air Force.
We have no reason to believe that the theft was specifically targeted against the officer, or to acquire the laptop for the data held on it, but we cannot wholly discount that. Early in the morning after the laptop was left in the unattended car, as soon as the theft was discovered, it was reported to the local police and the relevant authorities in the MOD.
It is not clear to me why recruiting officers routinely carry with them information on such a large number of people—or, indeed, why the database retains such information at all. The information held is not the same for every individual. In some cases the record may be no more than a name, but I am advised that for about 153,000 people who progressed as far as submitting an application form to join the forces, more extensive personal data are held, including passport details, national insurance numbers, driver’s licence details, family details, doctors’ addresses and national health service numbers; for about 3,700 people, banking details were also included. The records largely date back to 2003, although some records may date back as far as 1997.
Ministers were informed of the loss of the laptop on Friday 11 January, although at that point it was believed that the data were fully encrypted. That is relevant because the level of encryption used by the Ministry of Defence on its computers is stronger than that used for commercial applications, and our IT authorities judge that a significant amount of time, resources and, in particular, expertise would be needed to access such data in a readable format.
The fact that the data were not encrypted was reported to Ministers on Monday 14 January. Subsequently, the Information Commissioner and the police authorities were informed, and as an immediate precaution all similar laptops were recalled from their users and secured. That was completed by 18 January. The theft is being investigated by the West Midlands police, assisted by the Ministry of Defence police. After consultation with the police about the impact on the investigation were the theft to become public knowledge, I decided not to make a statement to Parliament last Thursday—although I was ready to do so. Unfortunately, news of the theft of the laptop was reported in the media on Friday evening and the MOD was obliged to issue a brief statement setting out the facts of the incident, as they were being reported inaccurately.
I discussed the need to issue a brief statement on Friday with Mr. Speaker and the hon. Members for Woodspring (Dr. Fox) and for North Devon (Nick Harvey). I also attempted to speak to the right hon. Member for North-East Hampshire (Mr. Arbuthnot) and my hon. Friend the Member for Cannock Chase (Dr. Wright), without success, although I have spoken to them both today. However, steps were taken to keep the Information Commissioner fully informed and to alert the Association for Payment Clearing Services so that banks could monitor the bank accounts listed in the database to prevent unauthorised access.
The intelligence services were also informed, and asked to assess whether the incident could lead to an increased threat to our personnel. Their view, understandably, was that the risk would depend on whether the information fell into the hands of extremists, but that there was no indication that had happened. Of course, we are keeping the matter under constant review.
Letters have been sent to all 3,700 people whose bank details were included in the database, and are being sent to the 153,000 people who applied to join the Royal Navy, the Royal Marines or the Royal Air Force during the relevant periods. We have set up a free telephone helpline, an e-mail address and an address for correspondence for use by anyone who is concerned about the implications of the data loss and wishes to seek further information.
As soon as the theft was reported, the Royal Navy began an internal investigation into the incident itself, which has now been completed. Steps are being taken by the Navy to prevent a recurrence, and the chain of command is considering appropriate action against the officer concerned.
An internal investigation is also under way by the MOD’s head of security into the wider security issues raised by the loss of the data. In the time available, the investigation has established that in addition to the laptop stolen on 9 January, two further laptops potentially containing similar data have been stolen. A Royal Navy laptop similar to that stolen on 9 January was stolen from a car in Manchester in October 2006, and an Army recruiting laptop, containing details of about 500 individuals, was stolen from a careers office in Edinburgh in December 2005.
These incidents were reported at the time to the local police and to the chain of command, although neither theft was reported to Ministers. Those involved believed that the data were protected by encryption and so no steps were taken to inform those whose records were potentially at risk. That is now being done in the same manner as I have described for those affected by the most recent loss. Nor was the Information Commissioner informed, but that has now been done. There is nothing to suggest that the earlier thefts have been exploited for criminal purposes or any other purpose in the intervening period.
As I said, our internal investigation has identified weaknesses in the application of MOD security procedures to the database, which is managed by the Army recruiting and training division on behalf of all three services.
In the time available, it has not been possible to establish all the facts, but it is clear that the database files were unencrypted, in breach of MoD procedures, and that there were shortcomings in security training and awareness among the relevant staff. Further, although the MOD was a full participant in the Cabinet Office-led review following the loss of data by Her Majesty’s Revenue and Customs, the thefts and the failure to comply with agreed MOD procedures for the system were not highlighted by those responsible for the system during the first phase of that review.
Accordingly, following consultation with the Information Commissioner, I have invited Sir Edmund Burton to undertake a full investigation into how these weaknesses came about, including responsibility for any breach of security and accreditation procedures, and to review the steps that we have taken to prevent any recurrence. Sir Edmund is chairman of the Information Assurance Advisory Council and supports the Cabinet Office in the implementation of the Government’s information assurance strategy. He is also a former chairman of the Police Information Technology Organisation and former commandant of the Royal Military College of Science.
Sir Edmund will work closely with those in the Cabinet Office who have been reviewing procedures across Government, following the HMRC loss of data. His report will enable us to answer the questions that still need to be answered. The Information Commissioner has confirmed in particular that the review will be wide enough to address the questions that he has raised, including why a database of this size was thought necessary for field recruitment staff. It will also enable the chain of command to identify where responsibility lies and whether anyone needs to face action as a result. Sir Edmund’s full report will be made available to the Information Commissioner.
I take this theft of personal data extremely seriously. I am also keenly aware of the risks if the data had fallen into the wrong hands, although I emphasise that there is no evidence that they have done so. As with all parts of Government, those who have dealings with the armed forces have a right to expect that their data will be properly protected. I very much regret that that has not happened. I am determined that we should identify exactly what went wrong and learn lessons. This must never happen again, and I will keep the House informed of the outcome of the various investigations to which I have referred.
I am grateful to the Secretary of State and his permanent secretary for providing me with information in relation to the incident. I am afraid that it all adds up to a damning picture of MOD incompetence, mismanagement and poor practice. In many ways, it is worse than the loss of the child benefit records, because we know that the information fell into criminal hands as it was stolen by a criminal. As the Secretary of State says, it could be used for identity theft or, worse, for terrorism.
It is clear that the MOD did not follow its own procedures for the protection of databases. Its procedure can hardly be described as robust. It is clear that the Cabinet Office review was ignored or simply not implemented. It is clear that two similar cases occurred, but Ministers were not informed. Why not? The Secretary of State does not know why his own recruiting officers routinely carry such information, so can he at least tell us how many of them carry it? He must know by now. Why are all those categories of information needed—for example, the religion of recruits, which can be very sensitive information and could prejudice several minorities in the armed forces?
It is clear that Ministers believed that information was encrypted, but they did not know, which raises the question of whether the item was an MOD laptop—or was the information kept on the officer’s personal laptop? If so, how often has that occurred? Are Ministers sure that the other two laptops that went missing have encrypted data, and what back-up is kept to enable checks to be made when things go wrong?
Clearly, we do not know what risks will be faced by those on the database—it depends entirely on whose hands it has fallen into—but putting our troops at risk in such a way is unforgivable, because it seems as though there has been systemic failure, rather than a single act of incompetence or irresponsibility. We now know that 68 MOD laptops were stolen in 2007, 66 in 2006, 40 in 2005, and 173 in 2004. What on earth is going on? How much information on our service personnel is floating around out there? Most importantly, why has nothing been done about such incidents, when they have occurred regularly for a number of years?
Can the Secretary of State tell the House how many of the computers that have been stolen since 1998 had a classification of “confidential” or higher? What was the security classification of the laptop stolen most recently? What is his Department’s policy on classifying and storing sensitive information on MOD computers in general? More importantly, what role does he have in determining what information is classified and at what level, and who has access to that information? Will he list and publish in the Library all the departmental rules, regulations and protocols that were broken, leading to this catastrophic loss of information?
Lately, it has been shown that the Government take a cavalier approach to the confidential details of UK citizens, but in the case that we are considering, the security aspects make things worse. There will be a damaging effect on the confidence and morale of our forces, which will do nothing to solve the crisis in retention and recruitment that we face. It is a dreadful mess that the Secretary of State has outlined to the House today, and it will require total commitment to put the matter right. At this stage, even he must realise that this is no job for a part-timer.
The hon. Gentleman is right to say that this is an extremely serious matter, and I am well aware of the implications. I see that there are Members from Northern Ireland present; I am conscious of the important implications that there were on the occasions when information was stolen in Northern Ireland from various agencies, and of the effect that that had on the morale of those serving in our armed forces there, particularly those of them who lived in Northern Ireland. As I served as a Minister at the Northern Ireland Office, I am very conscious of that. That is why the MOD has such clear, strict procedures and systems in place, and they ought to be not only respected but observed meticulously. He is right to identify failure to do that as a matter of the utmost seriousness, and that is how I treat it.
Over and above that, I have to say that the MOD has a good record on maintaining security for a wide range of sensitive information through its procedures. From the information that I have, I have no reason to believe than the issue goes any wider than the handling of the database in question, but that is serious enough. I accept that there needs to be a robust, clear explanation of why such an amount of information had to be carried. I am far from satisfied that there can be such an explanation, but I am not prepared to prejudge the conclusions of the robust investigation that I have set up.
The hon. Gentleman asks about rules, regulations and protocols. I will consider doing as he requests, to the degree that that is consistent with our shared wider objectives relating to the security of those who serve our nation, and those who support them. In any event, I am absolutely certain that the investigation will need to look into all those rules, regulations and protocols. So far, I am satisfied that if they had been observed, the problems would not have happened on any of the three occasions. On his specific question on encryption, I thought that I made it clear that the data on none of the three laptops were encrypted.
The hon. Gentleman asks what provision we make for the support of the people who have to do the work. We provide them with laptops that have a facility for encryption. There were about 300 of those laptops in existence. They were all brought in and secured as of 18 January, whether or not the information on them was encrypted. I shall consider the other questions that the hon. Gentleman posed, and if I believe that any of them require an answer, in the interests of clarity and in support of the investigation, I shall ensure that they are answered in another fashion.
My right hon. Friend has appointed an extremely competent official to undertake the investigation. I have worked with Sir Edmund Burton in the Information Assurance Advisory Council on a number of subjects, so I know that his presence is a big plus. I am deeply concerned, however, that the lack of reporting to which my right hon. Friend referred may constitute a breaking of the law by officials as a result of their failure to handle matters properly within the data protection legislation. While Sir Edmund conducts the investigation, will my right hon. Friend make sure that he takes every possible step to ensure that anyone in his Department who handles personal data has undertaken proper training under the Data Protection Act before being allowed to handle any more sensitive information?
My hon. Friend is right to identify the fact that Sir Edmund Burton is well qualified to do this job. Those who know him, and his fierce reputation as an independent advocate in this area, know that he is well qualified to undertake the investigation. I have set out in short the remit for Sir Edmund’s wide-ranging investigation, and I am satisfied that, as agreed with the Information Commissioner, it addresses all the necessary questions and gives Sir Edmund the flexibility that he needs. If it transpires that there has been a breach of the law—and whatever law is breached—those who are responsible will have to live with the consequences, because they are accountable.
I thank the Secretary of State for his statement, and for calling me on Friday to brief me about this matter. Everyone would accept that the primary responsibility lies with the individual whose foolishness led to the laptop being stolen. However, the House is less ready to accept the Secretary of State’s assertion that the MOD has robust policies, systems and procedures to stop that sort of thing happening. Sir Edmund Burton may reflect on policies and procedures, but the Secretary of State will accept that the systems and controls to stop that sort of thing happening simply have not worked—if, indeed, they exist. As we have heard, this is not the first case—there have been others in recent years—so we need a fundamental rethink about the way in which data are protected in the Department.
In the light of the well-known shortages in manpower in all three of the armed forces, I suppose it is reassuring that 600,000 people wish to volunteer and join the forces. I hope that the confidence of would-be recruits is not shaken by this regrettable incident. Will the Secretary of State reflect on the comments this morning of the Information Commissioner, who said that we have further to go to understand
“the potency of personal information in a database world”?
The Secretary of State told us candidly—and I sympathise with his predicament—that he did not know why that information was kept in one place and put on to a laptop. That is the sort of thing that we have to sort out and understand. The public would be shocked to think that their records were stored in such a way, without knowing how long they were stored and who had access to them. Does he accept that we have to treat the protection of personal information as seriously as we treat official secrets, military intelligence, and, indeed, large sums of money? Is it not clear that a change of culture across Whitehall is needed, and that, as the Justice Committee has suggested, there should be a new crime of recklessly divulging data, and a new power for the Information Commissioner to perform spot checks on data controllers?
The hon. Gentleman referred to the conversation that I had with him on Friday night. In case it is not clear, I should say that I had intended, and was ready, to make this statement on Thursday. After discussions with the police, and for reasons to do with the stage of the police investigation, I made the judgment that it would be better to wait. Unfortunately, however, the media broke the story on Friday. I deeply regret that I had to put a statement into the public domain without speaking in the House about it first, but the story running in the media was wrong, and I could not leave it wrong over the weekend. I am grateful to the hon. Gentleman, the hon. Member for Woodspring and Mr. Speaker for their understanding when I contacted them on Friday night to explain what I was doing. I trust that the House will accept that my judgment was right.
The fundamental point made by the hon. Member for North Devon is right—but I did not say that the MOD had “robust” policies, systems and procedures; I said that we had clear policies, systems and procedures. The hon. Gentleman pointed to a draft of the statement—[Interruption.] I make this point advisedly. The hon. Gentleman has pointed to a draft of my statement—to be checked against delivery—that we gave him. When I was given the final draft of the statement, immediately after Defence questions, I changed that word.
The hon. Gentleman is right: the robustness of the policies and procedures depends on their being observed. The failure to observe those procedures will be the focus of the investigation that I have set up. That failure caused the need for my statement today, and the potential release of the information into the hands of people who should not have it. I deeply regret that, and I am determined to find out why it happened. I cannot give the House an explanation why information relating to 600,000 people needed to be on a laptop; frankly, and without wishing to prejudge the investigation, I do not believe that it needed to be.
I listened with care to the Information Commissioner on the radio this morning. I listened to the questions that he posed; all those questions need to be answered. I have deliberately framed the remit of the investigation so that they will be answered. I have the comfort of knowing that my senior officials spoke to him about the issue, and I understand that he is of the same view. The hon. Gentleman can be satisfied that I am taking the matter appropriately seriously. If there are consequences for individuals, those individuals will have to live with them, whatever they may be. I am not in a position to deliver such a judgment; that is for the chain of command.
Not to my knowledge.
The right hon. Gentleman has told the House what steps he has taken to prevent a future blunder of this kind. He will know about the loss of Child Support Agency data at the back end of last year. Will he say what steps he and other Ministers personally took then to ensure that no blunder of the kind that has just occurred was perpetrated by his Department?
As the right hon. and learned Gentleman would expect, I made it clear to the permanent under-secretary that we should co-operate fully and comprehensively with the review that was being set up at the centre of Government. I said that we were to ensure that what might well have been at the heart of the Revenue and Customs problem—a culture had appeared to grow up that, at least in some regard, did not treat such information as being as valuable as it is, and people had not been observing the systems and procedures in place—was not the case in our Department.
As I said in my statement, the interim report that I received on the part of the review that my permanent under-secretary carried out on this particular issue did not identify the problem or the circumstances that I believe, and that I think the investigation will reveal, led to what we have to deal with today. Had I known, I would have taken other steps, but it was not reported to me.
My right hon. Friend has been let down by his Department. This has turned out to be not what we thought it was—the isolated action of a foolish individual—but a section of his Department failing to take elementary precautions about data protection. When he was asked about its systems by the Cabinet Secretary’s review, he was presumably given an assurance, notwithstanding the fact that there had been previous incidents, that those systems were in order. If I were him, I would be very cross about this, and want to do something about it.
I can hardly say that I am delighted about it, but there does not seem to be any point in getting angry in this job. I am often asked if I am angry or frustrated about things, but it seems to me that those are wasted emotions. My job is to get on and ensure that this never happens again—to find out exactly what happened, and to ensure that those who need to be properly trained are properly trained, and that those who were responsible for ensuring that those systems and procedures were properly applied are made properly accountable for their failure to do so.
Given the series of incredible and repeated scandals involving child benefit discs, Department for Work and Pensions data in binbags, and military laptops, has not the time come for an analysis of the problems of data protection that is more extensive, comprehensive and independent than anything that the Government have initiated so far? Should not that also cover information that they deliberately make public, which, in the case of the Land Registry information, has resulted in tens of millions of pounds of people’s freehold property being robbed? And should not the lessons of all this be learned before we proceed with identity cards?
The right hon. Gentleman tempts me into discussing the Land Registry, an area where, because of my professional experience, I may have some limited but now dated expertise—but that is not my responsibility. I accept his point. It is very important that the Government and the Government’s employees take responsibility for complying with the data protection standards for which we have legislated in this House, but it is equally important that the independent Information Commissioner’s Office can properly keep accountable all those who hold information, including the Government. That independent regulation is the right construction, and we have to ensure that it is robust enough. However, at the heart of this is the point, which has already been made, that there needs to be a cultural understanding that such data and information, particularly when it relates to individuals, is as valuable as any other property that the Government or any other institution might have, and it is obvious that that culture is not there across substantial parts of the public sector.
The Secretary of State said that he would not prejudge the very thorough investigation that he has put in hand. However, does he understand the incomprehension and fury felt by people in defence communities such as Plymouth, who think that common sense, rather than rocket science, should have stopped this sort of thing happening? Can he give the House a greater sense of how the cultural change to which he referred can be put in hand before we receive the report—and when we will receive it?
I am grateful to my hon. Friend, who speaks with justifiable passion for those whom she represents—some of whom, I have no doubt, will be receiving letters from us in the near future, and will have a degree of concern. We will endeavour, by our response to those who get in touch with us, to support them through this. It will be a vulnerable time for them; I accept that. I am not in a position to tell my hon. Friend exactly when the report will be available, because, with respect, Sir Edmund has not yet started on his work, but as soon as I am in a position to give the House some indication of when the work will be completed and how I will keep the House informed, I will tell it specifically what I plan to do. I also intend to have further conversations with the right hon. Member for North-East Hampshire (Mr. Arbuthnot) and my hon. Friend the Member for Cannock Chase (Dr. Wright), in their capacity as Chairs of the Defence Committee and the Public Administration Committee respectively, to ensure that they are kept fully informed. I am sure that both their Committees will be interested in inquiring further not only into the circumstances of this loss of data but into what we do.
I cannot make it any plainer than that. I am taking this matter with the utmost seriousness, and I intend to get to the bottom of what happened. If there is a reason, even if it is not a justification, for why that amount of information was being carried on a laptop, I will find out what it was. I intend to take the steps necessary to ensure that nothing like this ever happens again in the MOD.
Four Departments have now been responsible for losing data. Does the Secretary of State understand the serious damage done with regard to the community’s view of the Government’s competence in the protection of public records? Surely every instance of such loss reinforces the argument against ID cards.
The Secretary of State mentioned that he was sensitive to the concerns of Northern Ireland. I therefore wonder why my right hon. Friend the Member for North Antrim (Rev. Ian Paisley), the leader of my party, was not informed about this matter by the Secretary of State. Did any of the details contained in the stolen laptops refer to Army service recruits in Northern Ireland? The Secretary of State knows that there is an increased threat to security forces personnel in Northern Ireland, so it would be important to inform them if any of their names were on that laptop.
I am very aware of the issues the hon. Gentleman raises, and I cannot make it any clearer how seriously I take this matter. He knows how seriously I take such issues, from the time that I served as a Minister in Northern Ireland, when I dealt with him, his party colleagues and others in relation to similar matters. I am well aware of the potential security implications.
It is clear that the protection of data is relevant to the identity cards scheme, but as the hon. Gentleman is probably aware, the scheme is underpinned by biometric data that will protect people’s identities from being taken and/or used. That is the fundamental problem with loss of data, although there is a specific personal security problem in relation to the data in this case, which I understand. I do not think that the read-across that people constantly suggest with ID cards is robust.
I understand how important the issues that the hon. Gentleman raises are and I give him my word that I will do everything to ensure that they are taken seriously. As far as those who may be living and/or serving in Northern Ireland are concerned, I am not in a position to answer his question at this stage, but I am certain that some of the people concerned must be in Northern Ireland, and if they are exposed to any degree of risk, they will receive a letter from us, just as others involved will.
Most hon. and right hon. Members find it mind-boggling that 600,000 names were on a laptop in the back of a car in Birmingham. My hon. Friend the Member for Cannock Chase (Dr. Wright) raised the point that we are not looking at the actions of just one individual, but a systemic failure in procedures. Will my right hon. Friend assure me that the lowly naval recruitment officer concerned will not be made a scapegoat for this mistake, and that those further up who are responsible for the systems in question will take responsibility for this incident as well?
My hon. Friend makes some good points. Wherever responsibility, or any part of it, falls, that is where responsibility should be taken. Clearly, the person responsible for the immediate security of the laptop was in breach of regulations in leaving it where he did. I accept that he is not wholly responsible for the circumstances, but whatever the Navy chooses to do to him through its disciplinary procedures will be a matter for its chain of command, and the same applies to everyone else involved. I have no intention of protecting anyone from the consequences of the decisions that they have taken, if they were in breach of regulations.
It is completely unacceptable for the Secretary of State to inform only some parties in the House about major events and to overlook others, especially parties of Government in Scotland, Wales and Northern Ireland. He has been able to give a breakdown of some of the data, so will he tell the House how many of the people in question are domiciled in Scotland, Wales and Northern Ireland? What notice was given about the data loss, and when, to the devolved Administrations of Scotland, Wales and Northern Ireland?
This is the United Kingdom and we are the Government of the United Kingdom. It may well have escaped the notice of the hon. Gentleman during his obsession of the past few months, but our writ runs across the whole United Kingdom. We are perfectly capable of communicating with the citizens of the United Kingdom, whatever part of the United Kingdom they are in, via Royal Mail and other methods. [Interruption.] Let me just deal with that issue; I apologise for not doing so earlier.
The story was running on Friday night. I had to get this statement out, because I could not let the story run dishonestly, as it were—in terms of the facts—for very long. I set out to speak to certain people, and had then to get the statement out. I accept that I did not speak to representatives of every party in this House. I regret that I was not able to, but I had to correct the misinformation that was running in the public domain.
Having used the Front-Bench spokespersons and Mr. Speaker as a test of the mood of the House on the subject, I took the decision and took responsibility for that. Thereafter, I determined that I would not put any other information anywhere else until I was able to come to the House to give a statement. That is the decision I took. I suspect that that will not cause offence to the people of Scotland, but the hon. Member for Moray (Angus Robertson) can rest assured that if I think that any issue requires the engagement of the devolved Administrations, including the minority Administration in Scotland, they will be told. At the moment, my Department and the UK Government are perfectly capable of dealing with the matter.
If the press reports are right, the theft occurred at institutions where the MOD works together with the NHS, which takes us to a wider issue that does not concern only the systematic protection of MOD data. When the MOD has to work with other institutions, such as the NHS, the Secretary of State ought to look carefully at the sheer extent of access to the databases with which they work and the systemic structures when one Department has access to another’s large database. Will he take that as part of the review’s remit?
The information that I have—I have not physically and personally checked the database—is that this is our stand-alone database. I have no information to suggest that it is in any way connected with the database of any other organisation. I am quite surprised that my hon. Friend raises that issue. If it arises from the physical proximity of the work, then to be candid with my hon. Friend I am saying the minimum possible in the public domain about the circumstances of the theft. The ongoing police investigation is at a critical point and I do not want to put any information into the public domain that might interfere with or degrade it.
The Secretary of State’s statement paints a picture of blatant disregard and breach of not only MOD procedures but Data Protection Act principles, too. That is most notable in the size of the database that has been created. Obviously, that is of concern to not only the Secretary of State but the Information Commissioner. The Secretary of State said that other laptops had been secured. What analysis of those laptops has been undertaken to see whether they, too, contain unencrypted databases of such a size and nature? Are any other officers or personnel subject to disciplinary proceedings as a consequence of such actions?
The hon. Gentleman asks a good question, to which the good answer is that securing the laptops was the principal objective. I am not in a position today—although I trust that Sir Edmund’s investigation will reveal the detail—to say how many of the approximately 300 laptops that we have secured had such unencrypted data on them. I am sure that some did and, to the extent that they did, that is a breach of regulations. It is for the chain of command to investigate that and determine whether the existence of those laptops in that state supports any disciplinary action. However, as the hon. Gentleman will understand, it is not for me as Secretary of State to tell disciplined organisations, which have their own structure and, indeed, law how to conduct their affairs. They have procedures for conducting them and I am confident that they will.
May I express a small measure of sympathy for the Secretary of State? He is in an embarrassing position today as a result of a culture among public servants that frankly lacks the proper respect for our personal information. With that in mind, will the review consider not only why the information was held on a database but why it was obtained in the first place? Will the Department operate in future on a presumption that the information obtained should be the minimum amount, held for the shortest possible time?
I am grateful for the hon. Gentleman’s sympathy but I do not seek it, certainly not for some of the more difficult things that I have had to do in my job. It is my job to get on with the matter and resolve the problems robustly, if possible.
The information gathered should be considered carefully and the necessity for holding each item should be tested. I understand why, at the point of recruitment, it is appropriate to gather specific and detailed information about recruits for transfer to the unit where they are posted or the relevant training organisation. However, after recruitment, the reason for the recruitment authority’s keeping the information once it has been transferred to those who are responsible for the individuals defeats me. The question needs to be asked—and it needs to be answered compellingly for me to accept the answer.
Following the comments of the hon. Member for Pendle (Mr. Prentice) that no officer or individual has been disciplined for previous losses, and given that it is and always has been an offence under section 8 of the Official Secrets Act to fail to take care to prevent the unauthorised disclosure of similar information, will the Secretary of State give an undertaking that, should the officers concerned be found to be in breach of the Act, they will be charged with an offence? Only then will the House believe that the Department is taking data protection seriously.
That is a false test for my Department. There is a constitutional principle in this country that decisions about whether people are prosecuted for criminal offences are made independently of politicians. I would go to some length to honour that. I am not, therefore, prepared to give the hon. Gentleman the undertaking that he seeks. However, I am prepared to give an undertaking that, so far as it is in my power to do so, the matter will be exhaustively investigated. If reports have to go to another authority to determine whether a prosecution is needed beyond the actions that the chain of command of a particular service may take, that will be done. However, I cannot promise that anybody will be prosecuted—no Executive Minister should ever do that.
Of the 347 laptop computers lost or stolen from the Ministry of Defence in the past three years, how many have been recovered? If the Secretary of State does not have that figure at his fingertips, will he write to me and place a copy of his reply in the Library of the House?
The hon. Gentleman properly predicts that I do not have that information—to be honest, I do not know whether it exists. However, I shall endeavour to the best of my ability to find it. If that is in the bounds of reasonable expense, I will write to him and make the letter available to all hon. Members.
Had the database been on paper, we would be considering approximately 1 million sheets of paper weighing about 5 tonnes—not so easy to steal. Large databases are easy to copy and they come with large risks. Does the Secretary of State accept that the Government need to review seriously the holding of and access to large databases?
I accept that, and as I far as I understand it, that is exactly the review that the Cabinet Office is conducting. Hon. Members have asked today whether that review needs a more robust, independent element to it. That is a matter that I shall consider.
Points of Order
On a point of order, Mr. Deputy Speaker. You will be aware that it was promised that Command Papers 3710 and 3711, which were supposed to inform today’s Second Reading debate, would be available to hon. Members last Thursday, but that they were not available until 11.45 am today, so hon. Members now cannot make properly informed contributions to the debate. What action can you take to correct this situation? Would it be right to delay the vote on Second Reading, for instance, so that we can have an informed debate?
It is for the Government to ensure that the documents necessary to inform the debates on the European Union (Amendment) Bill are available to all hon. Members. I was not aware of the precise timing in the Vote Office, but at least the papers are available to all hon. Members now.
Further to that point of order, Mr. Deputy Speaker. I listened to your ruling, but the situation is more serious than that, because protocol No. 9 of the existing treaties, under the heading “On the Role of National Parliaments in the European Union”, requires documents to be provided to member states in good time for deliberation on those documents. That has not been done, so the Government are in breach of the existing treaties, not just the future treaty. Would you therefore reprimand the Government, Mr. Deputy Speaker, and, through Mr. Speaker, look favourably on further amendments to the treaty, if we get that far, to strengthen the role of national Parliaments further and require national Governments to abide by undertakings that they have freely entered into?
I am not responsible for the instructions to which the right hon. Gentleman has referred. As far as the Chair is concerned, the Vote Office has copies of all papers published by the Government relating to the Lisbon treaty and previous treaties. It also has available copies of official EU publications, including a consolidated text in English of EU treaties prior to Lisbon. I think that we now have sufficient papers before us to deal with the debate. I suggest that the sensible thing to do is move on to that debate, if that is the feeling of the House.
Further to that point of order, Mr. Deputy Speaker. I wonder whether you would be kind enough to refresh your memory of the answer that I received from Mr. Speaker on a similar occasion, when we failed to have enough copies of the important White Paper on transport. He took the view that that was not acceptable for the House. It really is not acceptable to have material that we cannot physically read between the time it arrives and the time we have the debate.
The right hon. Gentleman is simply reinforcing the point that the House should clearly have available to it all the papers necessary for the appropriate debate in the right amount of time. The House is agreed on that, and I am sure that Mr. Speaker would agree, too.
Orders of the Day
European Union (Amendment) Bill
[Relevant document: The Third Report from the Foreign Affairs Committee, Session 2007-08, on Foreign Policy Aspects of the Lisbon Treaty (House of Commons Paper No. 120-I).]