With permission, Mr. Speaker, I would like to make a statement on this morning’s announcement about the implementation of the proposals that I announced to the House last week. Again, I hope that the House will understand that it was necessary for me to issue a market notice this morning ahead of the opening of the markets.

In my statement to the House last Wednesday, I outlined the principles of the Government’s proposals to restore confidence in the banking system and put banks on a stronger footing, which are essential steps in helping the people and businesses of the country and supporting the economy as a whole. Since then, there have been intensive discussions with UK banks and institutions, and I can today tell the House how the principles set out last Wednesday are now being applied.

I shall first remind the House of the three key elements of the measures that I outlined last week: first, to inject sufficient liquidity into the financial system now; secondly, to make available at least £50 billion of capital, should it be required, to recapitalise the UK banking system, and thirdly, to provide a guarantee on eligible new debt to support medium-term lending between banks. Those measures are aimed at unblocking the inter-bank lending system and strengthening UK institutions, so that banks can start lending to people again. That is necessary both to stabilise the banking system and to support the wider economy.

No country alone can solve this global problem. At the weekend, at both the G7 Finance Ministers meeting and the International Monetary Fund, it was clear that the three elements of last week’s proposals will be essential parts of a global recovery plan. Yesterday, my right hon. Friend the Prime Minister had discussions with European Union leaders, and they too agreed that this was the right way to stabilise and rebuild the banking system. Today—indeed, in the last hour or so—many European Union Governments have announced how they plan to support their financial systems. It is increasingly clear that the measures that I am announcing today form the basis of an international consensus on the right response to events.

I shall set out to the House the detail of today’s announcement, which covers both liquidity and capital. I turn first to the funding of the banking system, or liquidity. The Bank of England will continue to supply sufficient short-term funds, which from today will include unlimited dollar funds available to banks to be swapped for sterling funds, and continued loan operations through the special liquidity scheme.

Additionally, I have announced today the details of the Government guarantee scheme for new lending between banks, an essential part of banks’ resuming lending to people and businesses. The guarantee under the scheme will be provided by Her Majesty’s Treasury directly. It will be temporary, covering new lending issued during a six-month period, but that period is renewable. It will be priced on commercial terms, which can be varied at the Treasury’s discretion but will initially be set at a premium of 50 basis points above the recent average cost of default insurance for each of the participating banks. In other words, it is risk based.

The guarantee scheme will be available only to those banks and institutions that participate in the Government’s recapitalisation scheme, as I made clear last week. The banks taking part in the scheme are given the option of raising capital in the open market, in the usual way, or through the Government’s bank reconstruction scheme. When raising capital through the reconstruction fund, the participating banks receive an investment from the Government in return for shares.

Let me outline, in turn, the position of each of the eight major UK banks and building societies that agreed to the recapitalisation proposals last week. Santander has agreed to transfer £1 billion of capital to its UK operations. Barclays will raise more than £10 billion by next spring through a combination of preference and ordinary shares raised from private sources and other measures. HSBC announced last Friday that it will raise £750 million of new capital for its UK operation in the open market. Standard Chartered has announced that it has already met its agreed capital requirements, and Nationwide building society has announced that it will increase its capital base by £500 million.

Let me now outline how HBOS, Lloyds TSB and RBS will be recapitalised through the bank reconstruction fund. Subject to take-up by existing shareholders, the Government will take significant shareholdings in these banks—in one case, a majority stake—and in line with normal commercial practices, the Government, on behalf of taxpayers, will have appropriate representation on their boards. These shareholdings will be managed on a fully commercial basis by an arm’s length body with a precisely defined remit to act in the interests of taxpayers. Government support in respect of these three banks is tied to conditions covering executive pay and dividend policies, and conditions have also been agreed with them on the level of lending to small businesses and home buyers. We are making it clear that there will need to be a strong focus at these recapitalised banks on making available lending for small businesses and home buyers. These conditions are set out in the individual agreements with the banks, copies of which will be placed in the Library.

In the case of Lloyds TSB and HBOS, the Government will purchase both ordinary and preference shares once the merger is complete. HBOS will receive up to an £8.5 billion investment in newly issued ordinary shares on completion of the merger. The Government will also invest up to £4.5 billion in newly issued ordinary shares of Lloyds TSB at completion. At the same time, we will invest up to an additional £4 billion in preference shares in the merged institution, with £3 billion of which being invested in HBOS and £1 billion in Lloyds TSB. In return for this investment, which potentially represents around 44 per cent. of the proposed merged bank, the Government will appoint two independent board members. No cash bonuses will be paid to any board member this year. Directors in HBOS will be asked to relinquish their rights to bonuses, and directors in Lloyds TSB will receive restricted stock instead of cash for any 2008 bonus entitlements. The availability of lending to home owners and small businesses will be maintained at at least 2007 levels, and greater support will be given to people experiencing difficulties with their mortgage payments to help them stay in their homes.

For RBS, the Government will take up to £15 billion of ordinary shares and £5 billion of preference shares. This potentially represents a 63 per cent. interest in the bank, in return for which the Government will appoint three independent board members. Again, no bonus will be awarded to any board member this year, and any bonus paid next year will be in stock and linked to long-term growth in the bank. Mortgage and small and medium-sized business lending availability will be maintained at 2007 levels for the benefit of people up and down the country. These steps will help to put RBS on a stronger footing and allow it to build on its core retail banking operation.

These announcements represent a total recapitalisation of just under £50 billion for the eight major banks, in line with my announcement last Wednesday, and, as I said then, more capital is available to smaller institutions should they need it. The Government do not want to run Britain’s banks—we want to rebuild them. The long-term future of UK banks lies in the private sector, and we will aim to sell the public share in the participating banks as soon as is feasibly possible, but our objective today is to stabilise and rebuild, and we will maintain our stake for as long as it takes to do that.

I want to say a few words about the Icelandic banks. I met the Icelandic Finance Minister in Washington at the weekend, and I made it very clear that it is imperative that we work together to resolve the position of creditors in this country. Our authorities have set up an arrangement, agreed in principle, for an accelerated pay-out to depositors, and we are also working with the Icelandic authorities to facilitate claims by UK charities and local authorities on their deposits held at these Icelandic banks. In addition, the Bank of England is today providing a short-term secured loan of up to £100 million to Landsbanki, to help maximise returns to UK creditors.

All the operations of the bank reconstruction fund will give the Government a capital stake—an investment—so that money we borrow is exchanged for valuable assets, and because some of these shares are purchased on preferential terms the Government are better protected and get a better return. The Government guarantee to support new lending between banks will be charged on full commercial terms, ensuring that the taxpayer is appropriately rewarded. The injections of liquidity through the special liquidity scheme and other operations simply allow banks to swap securities with the Bank of England, so that the risk remains with the banks and not the taxpayer—in other words, we get the money back. So, any additional borrowing and debt incurred by the Government as a result of these proposals will be in return for assets, charged at commercial rates or in the form of a temporary loan to the banks. Therefore, as with the temporary nationalisation of Northern Rock, the most appropriate measures of Government borrowing and debt to judge the position of the public finances will be those that exclude the Government’s stake in the banking sector.

The principles that I announced last week are now being adopted across the major world economies, and it is essential that Governments work together, decisively and quickly, to stabilise the system today and to take action to prevent these problems from happening again in future. That is why we must work together to improve international supervision. Tomorrow, the House will debate the Second Reading of the Banking Bill, which is a further step towards making our system more robust.

Today’s announcement is necessary, and it is a significant step towards restoring confidence in the banking system and making it resilient in future. These proposals fully respect the rights of existing shareholders, and, despite current market conditions, the UK banking sector can have confidence in its future. These are very turbulent times in financial markets, but I believe that these measures are essential to stabilise the financial system and help the UK economy. We are committed to doing whatever it takes to stabilise the banking system, protect savers and taxpayers and support the wider economy, and I commend this statement to the House.

Once again, I thank the Chancellor for his statement. Given that the banking system has been on the verge of collapse, rescuing the banks and stepping in is the only option available to the country. We said that recapitalisation might be necessary, and we continue to offer to work constructively with the Government on solving this financial crisis and on the Banking Bill tomorrow.

But, of course, the scale of what the taxpayer is on the hook for is only just starting to dawn on the British people: this is the biggest bail out in the world so far, paid for by the biggest increase in debt by any peacetime Government and funded by the £11,000 of extra borrowing that will now be heaped on every family in the country. The British people are therefore in no mood to celebrate. They want to know how their taxpayer money will be protected, how quickly they can get it back and how on earth they ended up footing the bill for this painful end to the age of irresponsibility.

On the details of the deal, why, over the past week, does the Chancellor seem to have gone from favouring taking preference stock to deciding also to take huge ordinary share stakes in some banks? I know that last week he told us that he was “prepared to consider” underwriting share issues, but why has that now become the main option? What is his realistic assessment of how much of that shareholder offering will be taken up by existing shareholders and other private investors, rather than by the Government? Will he confirm that the preference shares he talks about do not come with warrants to give taxpayers more of the upside? Will he explain that?

The Chancellor also seems to have rethought his position on taking seats on the boards of the banks we now part-own. Last week, at the Dispatch Box, he said:

“In relation to Government nominees sitting in boardrooms, I never thought that a particularly useful course of action to follow”.—[Official Report, 8 October 2008; Vol. 480, c. 286.]

He has just told us that he is appointing five members to two different bank boards. Why does he now believe that that is a useful course of action? I happen to agree that it is, but I want to know why—[Interruption.]

Order. Hon. Members must allow the shadow Chancellor to be heard.

I want to know why the Chancellor did not agree with himself a week ago.

I welcome the statement that senior bank executives will not get cash bonuses. Last week, the Prime Minister dismissed that suggestion when it was made by the Leader of the Opposition, and he now appears to agree with it.

May I press the Chancellor on the bonuses paid in stock that he talked about? I suspect that that will be an important matter of debate in the coming year. Given that two thirds of the bonuses paid to the RBS chief executive last year were in shares, not in cash, will that arrangement still be possible under the terms that the Chancellor has set out?

As we said last week, the purpose of rescuing the banks is rescuing the economy. That means extending small business loans and getting families the remortgages they need, but it must not mean a return to irresponsible lending. The Chancellor did not say much in his statement about the lending conditions, but he said this morning that the banks have agreed to keep the availability of loans to homeowners and small businesses at 2007 levels. What exactly does he mean by “availability” in that context, given that the Royal Bank of Scotland issued a statement today saying that it was going to accelerate the de-leveraging? The Council of Mortgage Lenders has also said today that a return to 2007 levels would be neither “prudent or desirable”.

Finally, has the Chancellor had time to reflect on how a decade of Government economic policies has led us into this massive bail-out? The Prime Minister said today that, in future,

“you have got to lay aside more for the possibility that there will be contraction.”

Is that another way of saying that he should have fixed the roof when the sun was shining? Is the Chancellor being straight with people about the potential risks to the public purse? He says that in effect he wants to suspend the borrowing rules and fiddle the figures so that these huge additional debts are not counted on the balance sheet. What sort of example does that set the rest of the economy? Will the Office for National Statistics agree with his decision not to count that as national debt?

The chairman of the Financial Services Authority, Adair Turner, gave us his candid views on the lunchtime news today, saying that

“many lessons have to be learned over what has gone on in the last ten years…we probably allowed a boom to go on for too long.”

Britain knows exactly who is to blame for that. We will support today’s actions because, faced with the collapse of the banking system, the Government had no other option. However, this is no moment of triumph for the Government, because the British people have now been landed with the bill for the boom that turned to bust.

I notice that the shadow Chancellor is finding it increasingly difficult to maintain his stance of bipartisanship. In the course of the last year, I have noticed that he finds it impossible to avoid quickly getting into a situation where he seems more concerned with scoring points than with addressing what I think is quite a serious matter.

The hon. Gentleman asked a number of questions, which I would like to answer. His first point was about the cost, and he appeared to be critical of the fact that we are making available substantial funds, although he accepts that that is necessary. A person either supports such a scheme or does not, and should do it properly, not in half measures. Indeed, if people have learned anything over the past year, it is that action should be taken decisively and quickly to ensure that the banks are properly capitalised.

The hon. Gentleman also asked about the accounting. I said that accounting is a matter for the ONS—Northern Rock is classified with the public sector and the ONS will make its judgment in relation to RBS, HBOS and Lloyds TSB. It would be ludicrous, in reaching a judgment about the Government’s fiscal position, to say that having to take such action with banks would distort decisions made about the economy in general. I would have thought that most people accept that as a sensible thing.

The hon. Gentleman asked a couple of technical questions about preference and ordinary shares, and I would have thought that he is aware of this. I said last week that we wanted to take preference shares to secure the Government’s interest and I also said that we would be prepared to take ordinary shares. Given the scale of what is necessary—particularly in relation to RBS, HBOS and Lloyds TSB—the balance has to be struck in a way that is workable. The advantage of preference shares is that we are repaid first, but if too many preference shares were put into an organisation it would impede its ability to get through this period and recover, so, acting on proper advice, we have sought the right balance between preference shares and ordinary shares.

In relation to ordinary shares, we will get a dividend when dividends are payable, and when we sell our shares the money will come back to the taxpayer. We have put in place a perfectly sensible way of restructuring the banks because our objective is to help them get through this difficult period and in due course to sell on the shares.

In relation to bonuses, yes, some board members and, indeed, other members of staff are paid in shares. I would have thought that the shadow Chancellor welcomes that because anything that ties the interests of senior management to the long-term health of a company must be a good thing. Indeed, we are trying to stop irresponsible remuneration, whereby people are encouraged to do something that damages the banks and, therefore, the rest of the financial system. What we are suggesting means that in future the rewards will be tied to the long-term interests of the bank.

The hon. Gentleman asked about lending. I said today, and I said in the statement, that we want the availability of lending to be the same as it was in 2007, but of course that applies only to two particular institutions—RBS and Lloyds TSB-HBOS—because they are the only two using the bank reconstruction fund. That is where the conditionality attaches. We said that availability levels need to be the same, but it will of course be up to those banks to judge each application for a loan on its merits. We do not want to return to the irresponsible problems and difficulties we have had in the past.

The Council of Mortgage Lenders put out a statement earlier today in which it had clearly misunderstood the position, but I understand that it is now correcting what it said in the light of what is actually the case rather than what it imagined was the case. The hon. Gentleman might like to follow that course of action on occasion, as well. However, I, too, am anxious to maintain the bipartisan approach that has worked with at least some success over the past few weeks. I think that the House and the wider country will recognise that, although it is difficult at times for people fully to understand what is going on, they understand that we had to take action, and that we had to do so decisively and in sufficient measure to make it work. There is more turbulence along the way, I am sure, but I believe that the measure is significant; it is a necessary measure and it will be seen not just in this country but across the world as entirely the right thing to do.

Last week, from the Liberal Democrat Benches, I indicated our support for the broad outlines of the Government’s approach. I particularly welcome what the Chancellor said about small business lending, stemming repossessions and bonuses.

I share some of the concerns of the Conservative spokesman, which the Chancellor has partly answered, about the commitment to 2007 lending, even if it applies only to those three banks. It was the case that 2007 was the very peak of irresponsible lending, when mortgage lending was fuelling the unsustainable boom in house prices, and it clearly cannot continue.

I welcome the Chancellor’s modesty about the Government’s ability to manage banks, but bankers were not very good at managing banks either, so now that Stalin in No. 10 has rediscovered his confidence I wonder whether this might be the time for a Beria in No. 11 to launch a purge of irresponsible bankers. The Chancellor might want to draft in some of the experienced, mutually governed building societies, which have not been seduced by the bright lights and profits of the City, to run some of those banking institutions.

I welcome the return of sanity and co-operation among the developed countries after the chaos of last week and the beggar-my-neighbour policies they were starting to pursue. Now that the Government have demonstrated their influence with eurozone Finance Ministers, how will that influence be sustained, as the Chancellor is not a regular member of that group?

In relation to the Group of Seven, why are the Chinese not involved, given that they are absolutely central to the issue, both as lenders of last resort to the United States and as a main source of growth? Were they not invited, or did they decline the invitation?

Finally, I hope and suspect that we are in the darkest hour before the dawn, as regards this crisis, but I hope that the Government will not be carried along, as they have been before, by hubris and excessive self-confidence, and that they will recognise that we are entering a period of recession. There must be as much sensitivity to the needs of the large numbers of people who will be hurt by it as has been shown to the banks in recent days.

I am grateful to the hon. Gentleman. He is right that we need to proceed with caution. I said that I thought that the step that we are taking is essential, because stabilising the banking system is a precondition of helping the very people whom he talks about. After all, we are helping people and businesses in this country and, through them, the whole economy. That is why we are taking this step.

Last week, Members on both sides of the House said that one of the things that they wanted was the freeing up of lending to businesses and mortgage payers. Indeed, the shadow Chancellor mentioned that issue specifically. That is precisely what we have sought to achieve with the institutions with which we have these agreements. We are not saying that they should simply lend, willy-nilly, to anyone who turns up; that would be ludicrous. They must assess how much someone can afford to borrow, and whether there is adequate security. Banks have got to ensure that their lending is prudent and properly thought out, and the availability of funds will help. That is what Members on both sides of the House want, but nobody wants a return to the more irresponsible practices of the past.

The hon. Gentleman asked about board membership. It is important that we nominate people who have the relevant experience and can bring their influence to bear. I have made this point before: the boards are the first line of defence, not just in preventing banks from getting into difficulties, but in the wider system.

I agree with the hon. Gentleman on co-operation among countries. We had extensive discussions at the G7 meeting in Washington over the weekend, and at the IMF. He asked about China; it is, of course, a member of the G20, which we will chair in the coming year. The governor of the Chinese central bank was present at the IMF discussions and, I think, at the G20 meeting.

The hon. Gentleman made a point about the eurozone. Of course, we are not members of that group, but my right hon. Friend the Prime Minister addressed it yesterday, because it was recognised that Britain is an extremely important part of not just the European financial system, but the global financial system. It is quite right that our views are taken into account, and equally right that if we are to convince people that we need to act together, we need to be involved at every level. That is another advantage to our being fully involved in the European Union; I think that that is very important.

I welcome the Chancellor’s statement. The Treasury Committee has just returned from speaking to the Japanese authorities about what to do, and what not to do, in a crisis, in the light of their problems in the 1990s. Two clear messages emerged: first, clear and decisive action about investments is necessary, on which the Government are therefore to be congratulated today; and, secondly, early communication is essential if the public are to accept this investment in the banks, for their sake and that of the country. Will the Chancellor and his colleagues who represent the tripartite authorities accept my invitation to appear before the Committee and give more detail about the initiative, so that we can communicate it to the public, and it can therefore be accepted?

Lastly, on recapitalisation, it is undoubtedly essential that the relationship between banks and the public as customers changes, and that banks face up to their new responsibilities. Does the Chancellor agree with that?

I do, and all of us know full well that people in this country, some of whom are finding times hard and have to count the pennies, are asking what is going on in the banking system. The problem is that if we do not have a banking system that works effectively, every one of us will suffer. A test that we have to apply to any measure is to ask what would happen if we did not take a particular course of action. If we had not taken the course of action that I set out last week, and that we have implemented today, it would have exacerbated an already difficult position, so my right hon. Friend is quite right about communications. As for his invitation to attend the Treasury Committee, I am always happy to do that, and no doubt we can discuss in the next few days when it might be best to do so.

Given that the three banks in which the Government are considering taking a public stake have combined assets and risks on their balance sheets of £3 trillion—twice our national income, and five times our tax revenue—does the Chancellor agree that it is very much in the taxpayer’s interest that all men and women of good will should work to get the maximum amount of share capital and other sources of money from the private sector into those banks, to limit taxpayer risk?

I fully agree with the right hon. Gentleman. He is absolutely right: we do need to work together, and that is something that I want to encourage.

May take this opportunity—the first time that I have spoken from the Back Benches in many years—to congratulate my right hon. Friend the Chancellor on the calm, assured way in which he not only delivered his statement today but, together with my right hon. Friend the Prime Minister, has worked on the financial crisis over the past few weeks? I very much welcome his commitment in the statement to make sure that his intention was to stabilise the banking system and, in the long run, return to a well functioning, properly capitalised private banking system. Will he assure me and the House not only that he has been working on a strategy to inject capital into the banking system, but that he will turn his mind to a strategy to withdraw taxpayers’ support over the longer term from the banking system?

I am grateful to my right hon. Friend for her support, and I am sure that there are many of us on this side of the House who look forward to a time when she chooses to return to the Front Bench. In the meantime, I agree that it is important that we focus on the immediate step of ensuring that the banking system is stabilised. However, she is quite right that, in the long term, the banks are better off in the private sector, and that is something that we will need to manage. However, at the moment the key is to make sure that the banks are properly capitalised, get through this period and rebuild their strength, because that is the best way of ensuring stability.

Lloyds bank and HBOS have to make some difficult commercial decisions if the proposed merger goes through. Can we have an assurance that those will be taken on the basis of what is best for the bank and its customers, without any Government intervention?

The decision in relation to the merger was taken jointly by the boards of HBOS and Lloyds TSB. That remains the position. I have set out our view and the steps that we are taking in relation to the competition issue, but the decision to merge is a matter for those two boards and, ultimately, for their shareholders.

The Chancellor and the Government have acted with clarity and decisiveness of action in the midst of this crisis, which is a sign of reassuring stability to the whole nation. As this is a wide, deep and ongoing problem, may I ask him whether he will continue to build alliances of that nature at home and abroad? Will he do so abroad with Governments of all different persuasions, and domestically with everyone inside and outside the Chamber who wants a solution to this problem? While I regret very much the fact that the Opposition spokesman appears to have lapsed from a consensual approach into a partisan one today, may I express the hope that that is temporary? Notwithstanding that, will the Chancellor continue to try to work with everyone on both sides of the House?

I agree with my right hon. Friend. It is important, on such an issue, and at a time like this, that we work together, both inside the Chamber and with everyone who has an interest in making sure that we get through an unprecedented period of instability. I also agree with him that it is important that the Government continue to work with people outside the House. Importantly, as many Members have said, we should remember first and foremost why we are doing so—to help the people and the businesses of this country.

Will the Chancellor confirm that Swedish taxpayers still own part of their bank 17 years after it was nationalised, so these things sometimes take a little longer than originally forecast? Will he also explain what degree of due diligence there is on behalf of the taxpayer in return for this very considerable investment?

The hon. Gentleman is correct in saying that it will inevitably take time to work through this. What happened in Sweden, of course, is largely in relation to that particular country; this problem, however, has affected the whole world. Our objective needs to be clearly stated in relation to our long-term intentions. On due diligence, I should say that over the last few days we and our advisers have been in intensive discussions with the two banks concerned. As I think I said this morning, the FSA has taken what it regards as a cautious view, having regard to the difficulties faced in the economy now, as to what the liabilities of the banks might be. That is one of the reasons why the sums in relation to those two banks are higher than might have been anticipated.

There is still a vast amount of toxic debt around. Will the banks not have to declare that on the balance sheet before total trust can be restored?

Banks here and all over the world are engaged in that process at the moment. As I have said on many occasions, one of the things that will help get us through this is when people have absolute confidence as to where everybody stands.

The Chancellor indicated that some of the package will be paid for by borrowing. What is his assessment of the appetite of the markets for gilts and the level of interest that the taxpayer will have to offer to shift the gilts?

I did indeed indicate that some of what I am announcing today will be met by borrowing. The Government raise that money through their normal operations, and continue to be able to do so.

When my right hon. Friend was having discussions with the bankers, was there any mention of the protection of pension funds? I hope that they were part of the discussions.

If my hon. Friend is referring to the staff employed by the banks, I should say that the banks themselves are responsible for that issue. The capitalisation that the Government are able to make available will enable the banks to continue. Obviously, they will have to make decisions themselves on how they restructure their business and proceed in future.

I thank the Chancellor for his statement and advance notice of it. I repeat what we said last week: the whole House should have the right to hope and expect that the package will deliver confidence and stability and unfreeze the banking system. Many others have made the point that the Chancellor expects lending to small and medium-sized enterprises and mortgage lending to be at 2007 levels. Does he mean that on a cash basis or on a loan and mortgage application basis? More importantly, because we are now in a recession, demand may be reduced. Should there be a failure to meet the 2007 targets, can the Chancellor make it clear to the House and the financial markets that in no way would that be a measure of failure for the recovery plan?

As I said earlier, the agreement with those banks is that the availability of support for mortgage holders and small and medium-sized enterprises will remain at 2007 levels. I am grateful to the hon. Gentleman for his support for the package and hope that he will acknowledge that it is the very strength of the United Kingdom Government that has enabled us to take this action.

Does the Chancellor agree that one of the most remarkable things in this time of adversity is that in the past few weeks it has become pretty clear that Governments around the world—left, right and sky-blue-pink—have come round to supporting this measure? Today, the Nobel prize winner Krugman said that the Brown Government have pointed the way for the rest of the world. Is that not in sharp contrast to the people opposite, who have come armed only with a “cunning plan”? Baldrick could have done better.

My hon. Friend makes a very good point.

May I remind the Chancellor, since to him it might seem a long time ago, that last Monday I urged him to cut interest rates as a supplementary measure to dealing with the problem of the under-capitalisation of our banks? He clearly agreed with me, because last Wednesday it happened. I put it to him that although all the measures that he has taken so far will obviously lead to serious inflation in the long run, in the short run the problem that we face is likely to be deflation. Will he therefore not just rest on his laurels with regard to interest rates? In 1931—when, by an unhappy coincidence, there was also a Labour Chancellor in charge, Philip Snowden—the decision was taken to reduce interest rates to 2 per cent., where they remained for nearly a decade and contributed in a major way to the recovery of our economy after that. Will the Chancellor go for really severe cuts in interest rates straight away?

I do remember what the hon. Gentleman said a month or so ago. I am sure that the decision taken by the Monetary Policy Committee of the Bank of England was welcomed here, as was the co-ordinated decision right across the world, but that decision was of course taken by the independent Bank of England, and rightly so.

I was a Labour councillor in 1992, when the Bank of Credit and Commerce International went bust and the Government of the day left us to flounder. May I urge my right hon. Friend to ensure that this Labour Government do a better job in protecting Tory councils than that Tory Government did in protecting Labour councils?

I think that my hon. Friend is referring to the problems that have arisen as a result of the collapse of the Icelandic banks. As I said in my statement, and I think I said last week, we are having discussions with the Icelandic Government. I met the Icelandic Finance Minister at the weekend to try to resolve this matter. Today we have taken action through one particular branch of the bank to try to help businesses, and we will continue to do what we can. Last week representatives of the local authorities met my hon. Friend the Minister for Local Government to discuss these things.

I wholeheartedly agree with the Chancellor’s remark in response to an earlier question—that the principal lesson of the past year is that delay and indecision undermine the impact of measures when they are eventually introduced. Is not that even more true of a lack of detail? Will he issue to this House a detailed paper on all the decisions that have been taken and let us know, for example, what interest rate—what dividend rate as a percentage—he is charging on the preference shares for these banks?

As I said in my statement, I will arrange for copies of the agreements to be put in the Libraries of both Houses in the usual way.

I welcome my right hon. Friend’s statement and the decisive action that the Government have taken. Does he agree that some longer-term issues are coming out of this that are international in their dimension, and that we will need to see banks with strong capitalisation, less leveraging and increased transparency? Does he think that the right international institutions are in place to help us to achieve that, or must we do some additional work on that architecture?

Yes, we must. My right hon. Friend the Prime Minister has argued for the best part of 10 years that we need to ensure that the international institutions—the International Monetary Fund, for example—are reorganised to reflect properly the demands of the early part of the 21st century. They were brought into being at the end of the second world war when world leaders then realised that the IMF would be necessary. However, its role, while still very necessary, needs to adapt, and I think that it can play a greater role in relation to early warnings and greater supervision of problems that arise in the financial system. That is not the only thing that we need to do. We need to ensure that our regulatory bodies co-operate through the colleges of regulators that are now being set up, and other reforms will be necessary as well. We will face considerable difficulties if we do not recognise that in a global economy, a problem that in the past might have been confined to one state or one small part of the world can now spread to the entire world in a matter of weeks. That is why we need that international co-operation, which is so important.

The Chancellor spoke of the in-principle arrangement that had been agreed in relation to depositors and the accelerated payout. He gave no such detail for local authority deposits. Can he please give us a bit more detail about how close he is to an agreement with the Icelandic authorities? What are the terms and time scale of any agreement that he is pursuing?

Discussions are continuing with the Icelandic authorities, but part of the situation will depend on what Iceland proposes to do, given its current problems. It needs to resolve the overall problems before it can deal with the particular ones, but that process is under way, and we have people engaged in discussions in Iceland at the moment.

Everyone recognises that the Government are leading the world in their recovery plan to get us out of this mess. Could I ask the Chancellor to lead the world by putting in place an inquiry into the sort of reckless global financial system that has got us into this mess in the first place?

I have said for some time that we need to learn the lessons of what happened. Whether or not one can accomplish that in a single inquiry, I do not know, given that—of necessity—we would have to look at what was happening in just about every country in the world. There are perfectly obvious lessons that we can act on now. One of them relates to the beefing up of the supervisory regime, and the other, which is very clear, is that Governments can achieve an awful lot more when they act together quickly and decisively. That is what I hope we are in the process of achieving at the moment.

Can we cut through the rhetoric and some of the political consensus? Can I tell the Chancellor how furious my constituents are at the moment? They have been led up the garden path by bankers, the regulators and this Government, and sooner or later, the right hon. Gentleman and the Prime Minister are going to have to say sorry. A lot of good, decent, ordinary people are hurting as a result of the actions and failure of this Government.

I agree with the hon. Gentleman to the extent that every one of us represents people who see what is going on and find it hard to understand how on earth some of the banks have got themselves into their current position. But what they expect the Government to do, and what they expect us as Members of this House to do, is to act together to sort things out, rather than engage in the usual Punch and Judy show, which does no credit to anyone in this House.

I congratulate my right hon. Friend on the action he has taken today. May I remind him of the old adage that when times are good, investment bankers take too much out, and when times are bad, they put absolutely nothing back in? One example is that of Mr. Bob Diamond, who heads Barclays investment banking division. He took £6.5 million as a performance bonus in cash last year, and more than £11 million in shares. I used to work for Barclays bank; it is not taking taxpayers’ support today but may do so in future. It has also bought Lehman Brothers and a ring-fenced bonus pool on Wall street. Could I therefore ask the Chancellor to make sure that where bankers have taken out huge bonuses, they are encouraged to put them back in as fundraising, as an example to ordinary shareholders and the taxpayer? On the example of Barclays, would he agree that it would be obscene to pay out huge bonuses on Wall street when it has cancelled a £2 billion dividend that would have gone into the pension funds of many ordinary people?

As my hon. Friend says, Barclays has not taken funds from the bank reconstruction fund, so it would not be affected by the agreements to which I referred. However, Barclays will no doubt have heard what he said.

The next Conservative Government are looking forward to selling back these shareholdings at a considerable profit. One of the things that might endanger that is a return to 2007 levels of mortgage lending. The Chancellor said that that applied only to RBS, HBOS and Lloyds, but those first two were the two worst offenders. I do not know whether the Chancellor is still a monetarist, but that year was the peak year of broad money growth at around 13 per cent., and if we return to that rate, these problems will return. I hope that he does not quite mean what he said in the press release.

As I have said on a number of occasions this afternoon, we want to ensure that the availability is there. But of course, we have to ensure that banks do not return to lending money when the person borrowing it has no prospect of meeting the payments or where the security will never be able to meet the value of the loan. Responsible lending is absolutely key to the institutions in question if they are to get through this period, and everyone knows that.

Will our three board members at the Royal Bank of Scotland have the power of veto? Will we know when their views diverge from those of other members of the board?

Any director of any bank has exactly the same powers and responsibilities.

Will the Chancellor acknowledge that the demutualisation of many building societies and insurance companies in recent years has reduced the diversity of our financial institutions, causing many of them to overreach themselves? Given that the Scottish banking system is now majority-owned by the Government, will the Chancellor use his influence to keep HBOS and Lloyds TSB as separate institutions in order to maintain diversity, and to find new ways of building financial institutions that will not make the mistakes of the past?

No; I do not entirely agree with the right hon. Gentleman. I do think that it is unfortunate, but I think I am right in saying that every building society that demutualised now either belongs to or has merged with someone else, or is not around any more. On the other hand, it has to be said that, if we look back to even a short time ago, the number of products available and the competition in the system were far greater than in the past. It is important that we have a proper, competitive mortgage market, but I do not agree with what the right hon. Gentleman says about Lloyds TSB and HBOS. That is a decision that the boards of those two companies have taken, and that is the right way to proceed. They need to take commercial decisions. Of course we will have directors on the boards, because of our very substantial financial stake, but people have tried in the past to ensure that the structure of the market and the number of people in it do not change, and it simply does not work.

Surely the purpose of taking public control of a bank should not merely be to stabilise it before returning it to the private sector? Should it not also be to tackle the fundamental causes of the present turmoil by changing the banking system’s approach to speculative trading and to the use of hedge funds, derivatives, offshore accounting and securitisation, as well as to the obscure reporting of corporate risk and sometimes dodgy auditing? Will my right hon. Friend confirm that the £50 billion of taxpayers’ money will not be used purely to fund the bankers, and that it will be used to change the malign banking practices that have brought us to this pass?

The problems to which my right hon. Friend refers need to be addressed by the regulatory system, but it is regulatory reform that will do that, rather than the role of the individual directors of two banks. I agree with him, however, that many issues need to be addressed.

I welcome the Chancellor’s statement on the accelerated payouts to depositors in Icelandic banks. Will he try to put some kind of time scale on when British citizens might be able to get access to their individual savings in those banks?

There are two issues here. In relation to the financial services compensation scheme: yes, we have said that we will stand in the place of the Icelandic authorities for the retail depositors who will be covered by the scheme, and I would like to ensure that those payouts take place as quickly as possible. In relation to a broader resolution with the Icelandic Government: yes, I would like that to be resolved quickly too, but that will also involve the Icelandic Government addressing some of the fundamental problems that Iceland now faces.

I congratulate my right hon. Friend on the prompt action that he took following the collapse of Northern Rock, in passing the Banking (Special Provisions) Act 2008. That gave him the powers that have enabled him to introduce this rescue package for the banks. I wonder what has given him the greatest sense of relief: the fact that the House passed that legislation in the face of opposition from the Conservatives, or the respect and support that he has received from the Leader of the Opposition and his shadow Chancellor.

My hon. Friend is right. Without the Banking (Special Provisions) Act, which the House passed in February, we would have been in an extremely difficult position, because we would not have been able to bring about many of the solutions that we have put in place over the past few weeks. That is why I very much welcome cross-party co-operation. There are lessons to be drawn from February. Of course there is a place for proper scrutiny and constructive criticism, but I hope that, in relation to the Banking Bill, we will get that cross-party support, not least because we need the legislation to be on the statute book by the time the Banking (Special Provisions) Act lapses in mid-February next year. I very much welcome the offer of support that has been given—I am quite convinced that that was done in good faith—by those who speak for the Opposition parties.

Does the Chancellor agree that the nearest parallel to the present situation is that of Lloyd’s of London in the 1990s, when a cycle of inter-trading by dealers resulted in all the assets being regarded as suspect and tainted? Is he aware that Lloyd’s of London resolved the problem by identifying and isolating the so-called tainted assets so that the purged body could move on, and that it is in such a purged body that new investment would best be made?

I do remember the problems at Lloyd’s in the early 1990s, and I know that they were the subject of much debate in the House at the time. I also know what solution was pursued. The problems then applied to Lloyd’s of London, but today’s problems are much more widespread, so the scale of the problem is much greater. The measures on capitalisation that we are proposing address the problem, albeit in a different way.

Has my right hon. Friend made an assessment not just of the innovative deal that is allowing the country to move forward with its banking, but also of the Government’s adoption of a leadership role in the world? What benefits will that give to hard-pressed mortgage payers and our business community, which is struggling to act? Will he explain how our leadership role will help to stabilise our communities?

The answer is, as everyone knows, that this problem is affecting every part of the world. The problem started in the American sub-prime market last year; it spread within weeks to this country and it has subsequently affected every other country. Even countries that believed that they did not have a problem can now see that they are being affected by it. A global problem needs a global solution, but we will play our part here in the UK. We have been anxious to take action, together with other countries. There has been no reluctance on the part of others. At the weekend, I was struck by the fact that many Ministers recognised that they, too, needed to take action. In some ways, the challenge for everyone is to make sure that we stay ahead of all this. Some things that might have been unthinkable even a month ago, and certainly six months ago, need to be thought about now because they may actually provide a way through.

The Chancellor is obviously very unhappy about how banks have allowed domestic debt to rise over the last decade or so to exceed £1 trillion. Is he equally unhappy about the fact that his predecessor did nothing about it?

I am always intrigued at the line that the Conservatives take on this. If they want to restrict personal debt, there are two ways of doing so: one is to ensure that loans are priced at such a level that people cannot get them, and the other is rationing. I know that the Conservative party is much more interventionist now than it was just a few weeks ago, but that strikes me as odd. There are two other points to bear in mind. Yes, people did borrow more, not only because rates were lower but because their assets had increased in value. The central point is surely this: do we not need to ensure that whatever lending takes place is sensible, prudent and sustainable from both the borrowers’ and the lenders’ point of view?

Does the Chancellor accept that because of the banking crisis, many of my constituents are deeply anxious about their financial future? They say to me, “Sir Nicholas, I hope that those who are responsible within the banking system will not benefit from the rescue package.” They also tell me that they hope that the world, let alone this Chamber, the House of Commons, will be united in what needs to be done until the financial crisis is ended and stability and confidence are restored. Does the Chancellor agree?

I am glad that the hon. Gentleman commands such respect and affection in his constituency—and I agree with what he says.

I very much agree with bodies such as the Engineering Employers Federation that the Government have taken bold and decisive action in dealing not only with the financial system, but with industry and manufacturing industry in particular. I ask the Chancellor to keep a close eye on the need of some manufacturing sectors, particularly capital-intensive sectors such as steel, for funds to be available for essential investment.

I listened carefully to my right hon. Friend’s comments on the Icelandic situation—I very much support the steps that he is taking—but my own council, North Lincolnshire, is one of those affected. He will understand that there is great concern about the £5.5 million, which it cannot access.

My right hon. Friend has raised that matter with me and quite rightly he is concerned about the position that his council faces. I refer him to what I have said a couple of times this afternoon: we need to resolve this matter, and I hope that we can make some progress. The discussions that I had with Iceland’s Finance Minister were constructive. That is the best way to resolve the problem, so that we can ensure that people in the UK are not cut off from whatever Iceland’s Government are doing within their own borders.

On the general points made by my right hon. Friend, I come back to a point that has been raised many times this afternoon. Yes, we want to try to get back to a situation in which businesses can borrow from banks and banks feel confident to lend to them. Two things are necessary: we have to get through the blocking up of lending, which is what today’s measures are designed to help with—it will take time, but it is an essential step—and we must ensure that we support the economy at this time, which we fully intend to do.

Our economy has grown strongly for the past few years. Obviously, like the economies of other countries, our economy is slowing down, but we want to get through this period because that is the best way to support businesses, including the steel industry, in the longer term.

Over Thursday and Friday, I talked with a number of small businesses in my constituency. Many businesses that historically have never had lines of credit need them now because their customers are paying late, but those businesses know that they will not be attractive to the banks as customers. Will the Chancellor please give the banks a kick up the backside to ensure that they help companies of that kind, which are in difficulty only because of a situation generated by the banks themselves?

I said last week that I hoped that banks would remember that, just as in the good times, when they go out trying to get as many customers as possible, they need to be good to their customers when times are more difficult.

Well, it is Baroness Margaret Thatcher’s birthday today and Labour is nationalising banks—oh happy days! My understanding is that, this morning, the Royal Bank of Scotland was worth considerably less than £20 billion. Can my right hon. Friend explain why the Government are paying £20 billion for 63 per cent. of something that was worth a lot less than £20 billion?

First, the share price of banks and companies varies from day to day. We believe that this level of recapitalisation is necessary and that it is the right thing to do. I am determined to see it through.

rose—

Order. I call Mr. John Maples.

On a point of order, Mr. Speaker. Documents published this weekend under the Freedom of Information Act 2000 show that my hon. Friend the Member for Mid-Worcestershire (Peter Luff) and I were deliberately misled in the House in November 1997 by the then Prime Minister about the Ecclestone affair. The documents show that the Prime Minister had decided on 16 October of that year to seek a derogation for Formula 1 from the tobacco advertising ban. That was immediately after he had met Mr. Ecclestone. In answer to us, the former Prime Minister stated that no decision had been made on 16 October.

The House must assert its right to truth from Ministers. Can you, Mr. Speaker, tell me how we can amend our rules to achieve that? I urge you to give us a lead in this matter so that we can insist on full and truthful answers from Ministers and a sanction against those who mislead us.

Further to that point of order, Mr. Speaker. You will understand that my hon. Friend the Member for Stratford-on-Avon (Mr. Maples) and I would know what to do were the gentleman in question still a Member of the House. That is not the case, so it is all the more important that the record be corrected. Even if you cannot rule in detail today on how we can go about that, will you please set up a review of the rules to ensure that errors of this kind made by former Members of the House, probably deliberately, can be corrected? This is a matter of the utmost importance.

I have been advised often that the content of a reply is not a matter for the Chair, but I am deeply concerned that two hon. Members have said that they were deliberately misled, albeit that the person concerned is out of the House. I suggest that, to pursue the matter, both hon. Members write to me and I will ask my officials to look into the content of the letter.

I beg to move,

That this House has considered the matter of promoting democracy and human rights.

Foreign policy has traditionally been associated with the peace, security and prosperity of this country. It is about all those things, but the title of today’s debate reminds us that it is also about people. Much of the work done by the Foreign and Commonwealth Office, and the Department for International Development and the Ministry of Defence, our partners in foreign policy, is about improving the lot of people, wherever they are in the world. Our work to promote democracy and to further human rights goes to the heart of that. It is quite a challenge. We need to change the minds and behaviour of other Governments, and we need to challenge the most intimate political relationship—that between a state and its people.

We do this because a democratic rules-based world will benefit Britain and British people as they go about their daily lives, whether in business, on holiday or simply as taxpayers financing our contributions to military and development missions abroad. We can do that work bilaterally, and we do. In many cases, our human rights work is fundamental to achieving our departmental priority, whether it is climate security or stopping arms proliferation, but—and this is unique in today’s era—we also have the ability to work with international partners, so a crucial part of our strategy is to make international institutions work better.

As Minister for Europe, I want to start with the European Union. I know that my predecessor, along with many other Members, has spent months thinking about the institutional questions facing the European Union. I hope that, during my time as Europe Minister, we can move on from that to concentrate on how the European Union can improve not just the lives of its own citizens, but those of the many millions on the borders of the EU who do not yet enjoy the standards, rules and rights—the simple democracy—that we have here.

Does the Minister think it is democratic for Ministers to meet behind closed doors and agree laws that are then binding on the House, and for the House to have no right to amend or negate them?

I think that one aspect of the Lisbon treaty is how it improves the role of Parliaments in playing a constructive part in the laws that support all of us who live in the European Union. I think that part of our task is to ensure that those accountability networks work well, that there is more transparency and, of course, that people, in whichever EU country they reside, understand the added value—on top of our national endeavours—that supports their needs.

I entirely agree with what the Minister is saying. Does she think that it is now a good idea for us to have a referendum on the Lisbon treaty, so that we have full transparency in this country?

I believe that the Lisbon treaty is good for the United Kingdom and good for Europe. This Parliament approved the European Union (Amendment) Act 2008, which implements the Lisbon treaty in UK law, after detailed debates that took place over 25 days. Twenty-three countries have now completed their parliamentary approval of Lisbon. I know that there is more to be done, but in the meantime there is much relating to democracy and human rights on which we continue to work and make progress.

rose—

rose—

I will give way once more on this point. I should like the debate to be about more than just the Lisbon treaty. I give way—

rose—

No. I am sorry. I give way to the hon. Member for Shrewsbury and Atcham (Daniel Kawczynski).

The Minister is absolutely right to say that there needs to be more accountability and transparency on the part of the European Union, but does she not agree that part of the problem is the way in which Members of the European Parliament are elected, under the proportional representation system? The fact that they look after huge regions makes them less relevant and less accountable to their constituents.

The task of all elected representatives—councillors, Members of Parliament and MEPs—is to find different ways to connect with their constituents and electorate. That is something that we must work towards. However, part of what we can also achieve is ensuring that the institutions of the European Union are simpler and more streamlined. I believe that that will help all of us who represent constituents in one way or another to make a better case for many of the achievements with which the European Union is enabling us to make progress for the families and individuals whom we represent.

For all the scrutiny and pressure that we rightly put on the EU to deliver, we should not forget that we are lucky to live in a political space that routinely respects our human rights and welcomes our diversity. We take Europe’s rule of law, its thriving civil society and the accountability of its Governments for granted, but many millions around the world do not. People on the edges of the EU are clamouring to get in.

rose—

I will make a little progress, and then I will give way to the hon. Gentleman.

In countries further afield, people can see the attraction of the EU: a rich, prosperous area where states’ powers are controlled, people can live their lives freely and people’s rights are respected. I think that the EU is a powerful illustration of the fact that life is better in a democracy.

The Minister will be aware that the Lisbon treaty proposes that, instead of having one commissioner in charge of foreign affairs and another in charge of international development, there should be only one commissioner, dealing with both foreign affairs and international development. Does she not agree that that will subordinate the interests of international development, because whenever there is a crisis, the one commissioner will give preference to international and foreign affairs, rather than the international humanitarian need

With the greatest respect to the hon. Gentleman, I said that I did not want this debate to be dominated by the Lisbon treaty, given the many hours that the House and the other place have spent on it. However, I would say this in response to his point. As I have said, the Lisbon treaty provides a simpler, more streamlined EU. There will also be a new system of voting that is more strongly based on population size, and the UK’s share of votes in the Council of Ministers will increase by 50 per cent. As we develop in respect of enlargement, of course we have to look at the different structures and at how they operate, but I think that the Lisbon treaty takes us some steps forward.

Will the Minister give way?

I am not going to give way to the hon. Gentleman.

Most Governments in the world want something out of the EU: better access to the world’s largest market, or a bigger slice of the world’s largest development budget. Those can be powerful levers to start a human rights dialogue. The EU’s flagship policy to promote democracy is enlargement, which holds the perhaps unique distinction of being the only EU policy that the House has consistently supported. I hope and am confident that that support will remain. The EU is the only international organisation with the ability to transform its own neighbourhood. I would like to highlight some successes of enlargement.

The House is well aware that enlargement has been an economic success, creating more jobs and high growth in both old and new member countries. Enlargement has increased our weight in the world and helps us to deal with the challenges of globalisation, from climate change to the current economic crisis. Enlargement is our most powerful tool for supporting democracy and respect for human rights across Europe. The Mediterranean accessions in the 1980s successfully anchored then fragile democracies in Greece, Spain and Portugal. The last enlargement reunited a Europe that had been divided by the cold war, and supported the growth of democracy from the ashes of totalitarian states, some with a truly dreadful human rights record. Today, the prospect of enlargement is a powerful incentive to improve human rights and governance in those countries that want to join the EU.

I am grateful to the Minister for giving way. On the point about post-Soviet states, can she reassure the House that the brutal regime of President Lukashenko in Belarus will not be rewarded for an election that has yet again not returned any opposition member of parliament, and that there will be a clear and unequivocal message from Her Majesty’s Government that bad behaviour in Belarus will not be rewarded?

I will come to Belarus later in my speech. I will deal with that point then, if I may.

As I said, the prospect of enlargement is a powerful incentive. Turkey is making progress. The death penalty has been abolished. Access to Kurdish language media has improved, including programming by the state broadcaster. Concerns over freedom of expression have started to be addressed by reform of the penal code. A zero-tolerance approach to torture has been adopted,. The number of women in the Turkish Parliament doubled in the 2007 elections.

Thanks to EU pressure, the victims of Srebrenica have finally seen Radovan Karadzic arrive in The Hague, with the UK at the forefront of those who called for progress on accession to be linked to co-operation with the international tribunal.

Of course challenges remain in the Balkans and in Turkey. In Turkey, the EU has made it clear that reforms are still needed to consolidate progress on basic freedoms such as freedom of expression as well as minority, ethnic and religious rights, but those issues will be addressed because those Governments know that there is a real prospect of EU membership.

The Minister cites the improved human rights record of countries such as Turkey and other countries in eastern Europe. Does she not acknowledge that much of that improvement stems from their membership of the Council of Europe and that the prospects of their joining the EU in the foreseeable future are pretty slim? On enlargement, does she agree that the Council of Europe's neighbourhood policy is the most effective way of monitoring the human rights record of applicant countries, not anything done in Brussels?

I respect what the hon. Gentleman has said, and I shall refer to the Council of Europe later. I commend it on its work—particularly, to cite one example, regarding the abolition of the death penalty in many countries. I hope that he agrees that this is not a competition with other organisations, but is about how we can best work together from our own vantage point to get the best value possible out of promoting a democratic and human rights agenda. He is absolutely right to commend the Council of Europe, but there are other organisations that also play their role.

My friend has been speaking about Turkey. There are 44 majority-Muslim countries in the world, and yet only a handful—maybe three or four—are functioning democracies as we would understand that term. Why is that the case?

There are many different reasons, as my hon. Friend is aware. All I have to say in response is that we make sure these issues are raised with each and every individual country with which we engage on human rights, and we look for different ways in which we can influence those countries to make progress. There is no one blueprint; we have to acknowledge the situations we find ourselves in with these countries, and their alliances, but importantly we never give up on trying further to progress a human rights agenda. That is at the heart of what we do; it is not an add-on or an either/or in the work we carry out.

Progress on Turkey’s EU accession is also highly dependent on progress on a Cyprus settlement. I was therefore delighted to be able to signal the UK’s commitment to a united and indivisible Cyprus by visiting the island in my first few days in this job last week, and to encourage both leaders to make progress. I have heard this afternoon—I am not making any claims on this—that, as well as agreeing a helpfully ambitious timetable for the next round of talks, both leaders have announced the cancellation of the regular military exercises and parades that were due to take place later this month and in November. I hope that the House will agree that this is a very positive development that shows what can be achieved through trust and co-operation. I encourage the leaders to continue to conduct their negotiations in the same constructive manner.

Is my right hon. Friend aware that Turkey is the only member of the Council of Europe where crimes of honour—forced marriages and so forth—take place within the indigenous community? In all the other Council of Europe member states, they usually take place within immigrant communities. Will she talk about the eradication of forced marriages and other crimes of honour in this country?

I commend my hon. Friend on the work she has done in relation to forced marriages and crimes of honour. I am keen to look at all these areas in my post as Minister for Europe, and also to address them with my other colleagues who work in these important areas. There are different examples of progress having been made, such as the understanding by our postings overseas of how important these issues are. As well as looking to domestic policy, we must look at our opportunities on the global stage to deal with such actions, which go against the basic human rights that women in particular should have access to.

In July, the EU launched an initiative for a union of the Mediterranean to strengthen our support for reform in the region, and last month the European Council recognised that, in response to recent events, the EU needed to step up its relations with our eastern neighbours. Throughout the region, people share our values and aspire to our model of democracy. Ukraine is making the fastest progress. The traditions of democracy are building strong roots with every election. As the Foreign Secretary set out in August in Kiev, we believe Ukraine should be able to become a full member of the EU when it meets the criteria, but we also need to embed, outside elections, democratic processes in the fullest sense.

This autumn, the Commission will make recommendations for a new eastern partnership. We want that to be ambitious and to recognise the European aspirations of our neighbours, and to strengthen our practical support for democratic and economic reform. These actions are a sign that the EU is becoming less preoccupied with its own structures and more interested in the outside world—a stance the UK has shaped and supported.

The EU is also supporting new democracies and helping to construct civil societies in countries that have little tradition of dialogue. In Georgia, EU monitors have been deployed to support the peace agreement, and the Russian troops have moved back. Many EU missions help develop the rule of law, which is vital for sustainable security and economic growth. In Kosovo, the EU has more than 2,000 experts working with local police, customs and justice professionals.

The neighbourhood is the first step, but not the only one. The EU’s foreign policy is what we can make it. For example, in the past year we have pushed the EU to take strong stances against the repressive regimes in Zimbabwe and Burma. I want it to be more decisive, able to act more quickly and more proactive in spotting potential human rights concerns before they become full-scale problems.

Of course, we should not forget the impact that the EU can have on the world’s development through trade. The crippling slowness of the Doha round is preventing many of the world’s citizens from gaining access to global markets and the benefits that that can bring their development. The EU, the world’s largest trading bloc, must push to break the deadlock and secure an ambitious outcome to the talks.

The EU has at its heart a commitment to democracy and human rights. I hope that we will have the scope and opportunity in the House and in Brussels to debate the EU’s role as a champion of human rights and to encourage stronger action in that direction. However, the EU is not the only international organisation. The 60th anniversary of the United Nations declaration of human rights will take place in December. It is a reminder that some values and aspirations are universal and that states can come together and agree a set of common standards. Those standards, in turn, have been codified into a series of legally binding obligations. “Obligation” is a serious word, meaning something more than an aim or aspiration. The older UN texts, such as the convention on torture and the international human rights covenants, and the newer texts are binding on the states that have ratified them. That means that all of us, the UK included, must respect them.

Of course, it is tempting to set out in this debate the large raft of legislation flowing from our international commitments that is before us in the UK at any one time, but this is a debate on foreign policy so I shall stick to the rest of the world. Another hugely significant aspect of the legal framework set out in the UN and other places is that it opens each of us to the scrutiny of other states party to the treaties. Without that scrutiny, the many pages of promises would be worthless. We in the UK support more action to monitor countries’ performance on human rights, for example in the UN Human Rights Council and the General Assembly. Unfortunately, that work can be undermined if it is seen simply as a process of recrimination and of putting country X in the dock. Sometimes that may be necessary, but rarely. The vast bulk of countries, the UK included, benefit from discussion about the merits of their domestic legislation and, importantly, their actions.

May I be the first Labour Member to welcome my right hon. Friend to her post? She referred to the UN Human Rights Council. Does she agree that progress in that organisation has been very disappointing? A bloc of countries seems to be operating as an “axis of sovereignty”, as some people have called it, and blocking the universal implementation of the international human rights standards. In the 60th anniversary year of the universal declaration, it is deplorable that a number of countries, including some democratic countries, are not prepared to adopt those universal standards.

I take this opportunity to commend my hon. Friend for his work on the Select Committee on Foreign Affairs. The United Nations does a great deal that is good, but it must also be open to scrutiny and reform. That is why the monitoring and scrutiny of individual countries, including our own, in relation to the conventions and treaties that we sign up to, is an important part of maintaining pressure to turn signatures into action. That commends the organisation and gives it a lease of life in the 21st century that is appropriate to the challenges and difficulties that we face today.

The hon. Member for Ilford, South (Mike Gapes) made an important point, to which the Minister has not fully responded, about the performance of the new UN Human Rights Council. It was supposed to be a fresh start for the UN in tackling human rights abuses, but so far it has shown all the signs of replicating the bad old ways of the old UN Commission on Human Rights. What can the Minister say to reassure the House that she has some clear ideas about how to improve the effectiveness of that new UN body?

A week into the job, I am on a learning and listening exercise, but we are committed to enabling the Human Rights Council to work well. We are one of its 47 members, and we are active in all other areas of the UN that deal with human rights. We welcome the appointment of the UN High Commissioner for Human Rights, Navi Pillay, and we actively support such work, but we have to look at how this works in practice. The UN and the EU are different organisations, and I and other Ministers will continue to look at them to see how best we can make sure that the various structures work as well as they possibly can.

We often need to remember that human rights work involves more than the few very badly performing states; it is as important to focus on the countries that are in transition and committed to the rule of law, but which need assistance to get there. Building democracy is a slow, painstaking process, but we have had some successes. In Bangladesh, for example, the Department for International Development contributed to a project to create a state-of-the-art register for 80 million people, complete with photos and fingerprints. We did that in just 15 months, so I say well done to all those involved. The result is that in August, there were peaceful and successful local elections with a turnout of some 80 per cent; importantly, that included a high turnout of women and minorities within the community.

The frameworks, conventions and declarations on human rights therefore form the backbone of the international system. It is the responsibility of our generation to ensure that they are more than pieces of paper, and that they are genuine commitments backed up with action—a point reflected in the interventions today. We also need to ensure that the UN General Assembly is more than a talking shop. When the UN works it is a powerful instrument for good, as the recent success on the arms trade shows—how many lives will be saved because of this piece of paper?—but these successes must become more frequent and more assured. We want to reform the international system to ensure that the words are matched with actions.

Does the Minister agree that although it is one thing to bring about more democracy in countries that require it, it is also important that we concentrate on those that might start going backwards? We should consider the recent example in Kenya. We have to be vigilant and ensure that, where the torch of democracy is lit, it does not die away.