Skip to main content

Commons Chamber

Volume 485: debated on Wednesday 17 December 2008

House of Commons

Wednesday 17 December 2008

The House met at half-past Eleven o’clock


[Mr. Speaker in the Chair]

Oral Answers to Questions

International Development

The Secretary of State was asked—

UN Conference (Poznan)

Among the outcomes from Poznan were further agreement to tackle deforestation and the provision of resources to support it; secondly, the launch of an adaptation fund to help developing countries begin to deal directly with the impact of climate change; and thirdly, agreement that serious negotiations to agree a post-Kyoto framework should now begin in earnest in the run-up to next year’s Copenhagen summit.

I am grateful to the Minister for his reply. Given that the outcome of the Poznan conference represents a watering down of the commitment by European countries to prevent global warming or contributions to it from CO2 and yet the impact of any global warming—we can see this even if we are not climate alarmist, which I am certainly not—will fall most severely on the poorest countries, which have contributed least to the problem, does that not mean that our obligation to help them to adapt to change is increased? Does the Minister agree that the adaptation fund of some €60 million agreed at Poznan was inadequate to the scale of the problem and the obligation we have to the poorest countries?

I agree with much of the right hon. Gentleman’s analysis, but not all of it. I do not think that Poznan represents a watering down of Europe’s commitment. Indeed, the 2020 package agreed by Europe has helped to encourage a willingness among some of the larger developing nations, and indeed allies in other OECD countries, to negotiate seriously in the run-up to Copenhagen. The adaptation fund is just one part of the response that we need to help developing countries. I agree with him that more is needed, which is one of the reasons why, along with a number of other countries, we have commissioned a much broader piece of work in order to understand just how much additional finance, whether it be from the private or public sector, is necessary to help developing countries to adapt.

Although I do not completely share the analysis of the right hon. Member for Hitchin and Harpenden (Mr. Lilley) on climate change, I agree that it is important that we play a leading role in ensuring that the developing countries that receive Department for International Development funding see it targeted at sustainable development. Does the Minister agree that programmes such as using hydrogen fuel cells for microgeneration are important for developing local projects in areas where there is no access to electricity in other forms? Will he ensure that every aspect of the work of the Government and the Department is sustainable in the long term to allow those countries to skip a generation in respect of such schemes?

I agree with my hon. Friend about the huge potential that hydrogen fuel cells offer not only the British economy, but the global economy—including the developing countries, too. I recognise the particular expertise in my hon. Friend’s constituency on the development of new renewable technologies. I say to him, however, that fuel cells are some way off providing a more immediate solution to developing countries, and there are a range of other renewable technologies that we can help developing countries to deploy. That is one reason why my right hon. Friends the Prime Minister and the Secretary of State have made available some £800 million, housed in the World Bank, leveraging other donor sources of financing to build climate investment funds to help developing countries to move on to a low-carbon path.

Given that 2008 represents the halfway point towards meeting the millennium development goals, why was there no discussion of that issue? We should bear in mind that according to the World Bank, the first millennium development goal—eradicating extreme poverty and hunger in the world’s poorest countries—would cost an estimated £30 billion. That is a great deal of money, but it is about the same amount that Wall street and City bankers awarded themselves in bonuses last year. How does the Minister reflect on the abject failure of the United Nations to achieve the first of the millennium development goals?

With all due respect to the hon. Gentleman, we are still some seven years away from the target date for achieving the millennium development goals and there are encouraging signs in many parts of the world that we will achieve both the top-line millennium development goal and a number of others. We are off track on a number of the goals. That is very true, but it is one reason why my right hon. Friend the Prime Minister initiated a high-level event at the UN in September to focus on what else we need to do to get back on track to meet the millennium development goals. The impact of climate change was very much part of that discussion.

What effect will the UN climate change conference have on the provision of electricity to Afghanistan, bearing in mind that its one renewable resource, hydro power, cannot be fully utilised because the transmission lines cannot be protected?

The hon. Lady raises a very good question about the general need to support developing countries in getting better access to energy in the first place—it is a real challenge to help people get connected to electricity and other sources of energy—and in accessing low-carbon sources of energy. On her specific question about Afghanistan, we are in discussions with the Afghan Government about how we can help support them to develop more access to electricity and to other sources of energy.

Oxfam has said that the Poznan conference

“exposed a shameful lack of progress”

on climate change. It is not entirely clear how much irony was intended by the Secretary of State for Energy and Climate Change in yesterday’s written statement, in which he cited as the main achievement of the conference an agreement

“to accelerate the pace of negotiations”.—[Official Report, 16 December 2008; Vol. 485, c. 107WS.]

Given the dismal experience of the Doha trade negotiations, does the Minister agree that a pattern has emerged of a lack of political will among the rich countries of the world, the cost of which is being borne by the poorest people in the world? Is he satisfied by the amount of progress made at Poznan, and if not, what will his Department do now to ensure that we get to Copenhagen and get a deal?

I do not share the doom-laden scenario that the hon. Gentleman has peddled. I think that significant progress was made at Poznan. When the talks were launched in Bali 12 months ago everyone was certain that it would be at least two years before a deal was reached on climate change, but we have seen some of the key building blocks for tackling its impact in developing countries begin to be put in place, such as the adaptation fund that I mentioned earlier and action to tackle deforestation. The Secretaries of State for International Development and for Energy and Climate Change have announced a £100 million contribution to help tackle deforestation and to help with taking a series of additional steps in that regard. What the Government as a whole will do now is work with a range of partners, including G20 colleagues, to establish what further action we can take to increase appetite for the deal at Copenhagen that we all want to see, and build progress towards it.

When I attended the Poznan conference last week, I was struck by the visible differences in negotiating capacity between the world’s richest and poorest countries. Will the Minister examine ways of strengthening the ability of the poorest developing countries to participate in these vital but complex negotiations?

The hon. Gentleman has made an important point about the need for the voice of developing countries to be heard in the negotiations. We are already helping them to ensure that their voice is heard, in the same way as we have during trade negotiations, and we will continue to provide that support. Through our country offices we are working closely with a range of developing countries, both on their domestic programmes to adapt to climate change and on their engagement in the actual negotiations.

I thank the Minister for his answer, but does he not agree that Britain could do more to help, for example through the Commonwealth? Will he consider again the advocacy fund suggested by my right hon. and learned Friend the Member for Folkestone and Hythe (Mr. Howard), which would help the poorest countries to fight their corner in these crucial negotiations?

As I have already told the hon. Gentleman, we are holding discussions with a range of developing countries about how we can help them to engage in the negotiations. We will have further talks with them through the Commonwealth and a range of other organisations. I would take his question a little more seriously if his party had not just announced its commitment to slashing public spending. That would potentially have very serious consequences for developing countries, not least in respect of their ability to adapt to climate change.


2. What recent assessment he has made of the humanitarian situation in Zimbabwe; and if he will make a statement. (244086)

6. What assessment he has made of the humanitarian situation in Zimbabwe; and if he will make a statement. (244090)

The humanitarian situation in Zimbabwe continues to deteriorate. Thousands have been hit by cholera and hundreds have died. Basic services have collapsed, and the health services can respond only because of the help that we and others are giving. Five million people need food aid, and more disease outbreaks could be on the way.

Contrary to the delusional statements of Robert Mugabe, there is a real and ferocious cholera epidemic in Zimbabwe which is killing children and entire families at this moment. What steps is the Secretary of State taking to ensure that genuinely independent non-governmental organisations receive additional resources so that they can provide urgently needed humanitarian assistance? Will he also ensure that no British taxpayers’ money goes into Robert Mugabe’s corrupt central bank? Contrary to assurances given at the last International Development questions, United Kingdom taxpayers are supporting the Zimbabwean Government via the global fund.

There is unanimity throughout the House about the scale of the outbreak. There are about 20,000 suspected cases of cholera, and there have been about 1,000 deaths. I have announced a package of support worth up to £10 million specifically to deal with cholera. We predicted that, tragically, this was a likely consequence of Mugabe’s grotesque misrule of the country, and we had therefore already worked with other international agencies to stockpile the necessary resources on the borders of Zimbabwe. We continue to work with the United Nations and UN organisations including the World Food Programme, and I can assure the hon. Gentleman that those efforts to address the great humanitarian need are unstinting.

The Secretary of State will know that extreme hunger and malnutrition are gripping that country. Save the Children estimates that it is feeding 700,000 people, and as the Secretary of State has said, 5 million people are starving. Cholera is spreading, democracy is dead and violence is now endemic in that country. Will the Secretary of State seek to persuade the Leader of the House to provide a debate in Government time on this crisis, so that Members on both sides of the House can express their views and say what action they believe the United Kingdom must take?

I am always happy to pass on Members’ concerns to the Leader of the House, and I will do so on this occasion. Of course, we recently had a foreign affairs debate in the Chamber, in which I understand that a number of Members raised the very real concerns felt in all parts of the House on Zimbabwe. The hon. Gentleman is right in recognising the scale of the hunger crisis now afflicting Zimbabwe. The estimate is that by the end of this month about 5.1 million people will be reliant on external food aid—this is in a country that has historically been seen as the bread basket of Africa. That figure alone should challenge not only the international community to continue its humanitarian efforts, but those within Zimbabwe who regard the current position as sustainable. We have been at the forefront of international efforts in calling for the will of the Zimbabwean people to be reflected in their Government, and we continue to make that case.

How much of the humanitarian assistance being offered by the UK Government is available through partnership working with the Foreign and Commonwealth Office?

I can assure the House that we are working very closely with both our diplomatic representatives in Zimbabwe and with colleagues in government. In recent days, I have chaired a Cabinet Sub-Committee, which both the noble Lord Malloch-Brown and the Foreign Secretary attended. Lord Malloch-Brown was in South Africa on Friday, holding talks with the President of the Republic of South Africa; the Foreign Secretary was in New York on Monday, engaged in further discussions at the Security Council; and I can assure the House that there is constant daily contact between the Foreign Office and the Department for International Development, as together we do what we can to address what is a dreadful situation in Zimbabwe.

What Christmas message can my right hon. Friend send to the people of Zimbabwe who are starving and dying of cholera?

The message is that the British Government will continue to provide food, drugs and any assistance we can to address the crisis afflicting their country, but that we also recognise that humanitarian support is not enough. Whether in the councils of the European Union, the Security Council or our discussions with regional partners, we will continue to make the case that the people of Zimbabwe need and deserve a Government who represent their will.

Does the Secretary of State share my disappointment that so many of the leaders and so much of the media in southern Africa seem to regard the collapse of Zimbabwe and the outbreak of cholera as some kind of European plot, even though the situation is spilling over into their own economies? What can he do to ensure that they understand that resolving the crisis in Zimbabwe is essential not only for the people of Zimbabwe, but for the development of the entire region of southern Africa?

As is so often the case, the right hon. Gentleman brings great authority to his observation on the regional consequences of the crisis that is contemporary Zimbabwe. It is the case that Robert Mugabe has repeatedly sought to portray this as some kind of conspiracy of neo-colonialism, when nothing could be further from the truth. The responsibility for the grotesque misrule of Zimbabwe rests squarely at the door of Robert Mugabe and those in his Government. We in the international community are clear that the strongest voices that can be raised for change are those of the people of Zimbabwe in alliance with regional partners. The cholera outbreak alone gives credence to the claim that if this issue is not addressed the regional consequences will be dire, and that is why we have been working so closely to encourage South Africa to speak up, as well as other regional partners, such as Botswana and other neighbours of Zimbabwe. We will continue to make that case to regional partners.

Sadly, it seems clear that any end of the counterfeit President’s rule in Zimbabwe will not come about through a negotiated process, and that it will probably come about through a sudden and dramatic event leading to chaos. Is the Secretary of State reassured that if that happens, contingency aid is ready to go to Zimbabwe immediately, because the people of that country will need help and support within hours, not days or weeks?

First, it is, of course, a matter for the Movement for Democratic Change, which bravely stood up against the intimidation and thuggery that it faced in the elections on 29 March, to judge what is the best strategy to take forward. The possibility of a negotiated way forward was established in September, but tragically it appears once again as if ZANU-PF and Mugabe have rejected that way forward for their country. We continue to talk to regional partners and those within Zimbabwe who have the best interests of the people of Zimbabwe at heart, but we also have contingency plans in place so that if there is a credible prospect of recovery, we and other members of the international community will assist in that endeavour.

The recent cholera outbreak is only the latest humanitarian tragedy to strike Zimbabwe and its people. Does the Secretary of State agree that the greatest single positive action that would bring the greatest benefit to Zimbabwe would be for the curtain finally to be brought down on the years of the Mugabe regime and on its systematic rape of its own country and impoverishment of its own people?

The British Government have been forthright in their view of the unwillingness of Robert Mugabe to allow the will of the people of Zimbabwe to be expressed in government. If I appear circumspect, it is for the reason that I gave earlier: that nothing would suit Robert Mugabe more than to be able to ignore the voices of his own people and others within Africa and somehow suggest that this was a British plot. That is frankly not the case; the people of Zimbabwe have spoken, including in the elections earlier this year. It is now for Robert Mugabe to recognise the clear voice that was raised for change within Zimbabwe.

What hope does the Secretary of State have that help in dealing with cholera can get to those communities, both urban and rural, that are regarded by the Mugabe regime as most hostile to it? Would not the President’s insistence that there is no cholera rank in most countries as a basis on which he should be removed from office and probably certified?

First, on the scale of the cholera outbreak, it is affecting almost every part of Zimbabwe now. Tragically, there is no distinction between urban or rural communities; they are all increasingly affected. We are working closely with the World Health Organisation, and I can assure the right hon. Gentleman that the international community is doing the best it can to ensure that the response is being dictated by the epidemiology and the needs of responding to the disease, rather than by any political partiality of the regime in power at the moment.

Overseas Projects (Joint Strategic Priorities)

3. If he will hold discussions with the Secretary of State for Foreign and Commonwealth Affairs to agree joint strategic priorities for his Department’s overseas projects. (244087)

Whether in relation to international poverty reduction, conflict or climate change, the Department for International Development works closely with the Foreign and Commonwealth Office and other Departments. We also co-operate closely in implementing our strategies and delivering our programmes, particularly in fragile states and insecure environments.

At a time when the Foreign Secretary is talking about peace and reconciliation in the middle east, why is the Department for International Development still funding some teachers in the Palestinian territories who do nothing more than teach discord, rather than harmony?

In the past week, we have welcomed Prime Minister Olmert and Prime Minister Fayyad of the Palestinian Authority to the United Kingdom. Our continued support for the Palestinian Authority reflects the fact that in our dialogue with the Israelis and others there is a clear recognition that if the Annapolis process is to be taken forward, there needs to be a credible negotiating partner with whom the Israeli Government can negotiate. At the same time, we are keen to see basic services provided to what is often an impoverished population within the Palestinian Authority areas.

In his discussions with other Departments, will the Secretary of State ensure that in the strategic priorities, the devaluing of sterling is taken into account, because it is in danger of undermining what has been an enhanced and immensely successful international programme? It is estimated that the value could be reduced by 25 per cent., and it is obviously crucial that the poorest in the world do not pay the highest price for the current economic crisis.

Changes in levels of different currencies are only one of the aspects of the global financial crisis that are affecting developing countries. Those countries have also been vulnerable to changes in oil prices, in the availability of credit and in basic food supply. That is why we are working so hard to ensure that we reflect the contemporary vulnerabilities of developing countries and why we are committed to meeting the pledges that we have made in relation to international development spending.

To what extent does the Minister believe that the International Development Act 2002 has led to a misalignment of our overseas development effort with our overarching foreign policy goals? For example, he may be aware that the FCO dispenses aid to tackle the radicalisation of young men in Pakistan and Afghanistan, but that DFID refuses to get involved on the grounds that that does not constitute development.

I believe that the 2002 Act enshrined in law changes that have been vital to the establishment of global leadership by this Government in the field of international development. I can assure the hon. Gentleman that we are working closely with our colleagues in the Foreign Office and in Afghanistan and other areas of the world, but if he is proposing that his party will tie the aid that was untied by this Government, break our commitments or change DFID from being a separate Cabinet-level Department, he might wish to discuss that with his Front-Bench colleagues.

At a recent Downing street reception, the Prime Minister mentioned that in these difficult economic times we have to consider the people in the developing world. Will the Secretary of State reaffirm our commitment to the UN aid target of 0.7 per cent. of GDP and its maintenance through these difficult times?

As recently as September, the Prime Minister reaffirmed his commitment to the goals that we have set in relation to international development. The World Bank has estimated that in the course of the last year 100 million more people have been pushed into poverty by the global economic crisis. That is why it is important not only for the British Government but for other international partners to meet their aid commitments. Given the slashing of public expenditure that the Opposition now anticipate, I hope that they will at least join us in making this commitment.

The stabilisation aid fund was set up to help to deliver strategic projects in Iraq and Afghanistan. Despite the Secretary of State’s commitment to transparency, his Department appears either unwilling or unable to give details of projects completed to date. Can he reassure the House and set out the principles under which funds are allocated to projects from the SAF?

The stabilisation aid fund is obviously reflective of its joint ownership by DFID, the FCO and the Ministry of Defence. It reports directly to the National Security Committee, chaired by the Prime Minister. In assessing applications to the fund, we work in close harmony with other Departments, and it is on that basis that allocations have been made. [Interruption.]

South Africa (HIV/AIDS)

4. What assessment he has made of the effect of recent political developments in South Africa on policy to tackle HIV/AIDS in southern Africa. (244088)

There has been a marked change in language on policy to tackle HIV/AIDS in South Africa since the appointment of Barbara Hogan as the new Health Minister. We welcome in particular the launch of a major public awareness campaign on 1 December and the announcement of plans to scale up prevention of mother-to-child transmission services.

No doubt responsibility for the 10 wasted years of HIV denial, and its effect on some 1.5 million orphans, lies squarely on the shoulders of the South African Government, but what is the Minister’s judgment on the Department’s influence, given its significant presence in South Africa during those years and given that in other so-called middle income countries such as Brazil, Botswana and India the Foreign Office has taken the lead in the light of their epidemic HIV incidence? Are the prospects of influence better or worse?

I agree with the hon. Gentleman to the extent that Barbara Hogan represents a breath of fresh air in South Africa. We are seeing an end to the culture of denial about HIV and AIDS in South Africa that is extremely welcome. We have sought to get behind the public awareness campaign that Barbara Hogan has launched, and the scaling up of mother-to-child transmission prevention services, by committing some £15 million in a new programme announced by the Under-Secretary of State for International Development, my hon. Friend the Member for Bury, South (Mr. Lewis), in a recent visit to South Africa.

Thirty-three million people in the world have HIV, yet only one in three has access to the medicines they need to keep them alive. The Minister knows well that one of the biggest problems is the cost of medicines. What progress has he made regarding discussions on the concept of the patent pool, whereby pharmaceutical companies would create generic copies and be paid a fair royalty so that people could access the medicines that they desperately need?

The hon. Gentleman may know that under the TRIPS—trade-related aspects of intellectual property rights—agreement of 2003 there are arrangements for developing countries to access generic copies of drugs. We have sought to encourage that process. We need to see better access not only to first-line anti-retroviral drugs but to second-line and third-line anti-retroviral drugs to deal with the more complex strains that occur when people are developing a resistance to the drugs. We will continue to work with pharmaceutical companies and a range of other players to achieve that end.

Prime Minister

The Prime Minister was asked—


I have been asked to reply. As the House will be aware, my right hon. Friend the Prime Minister is in Iraq today. He will make a statement to this House on his return.

I am sure that the whole House will wish to join me in sending our profound condolences to the family and friends of Lieutenant Aaron Lewis, of 29 Commando Regiment Royal Artillery, who was killed in Afghanistan on Monday. To those who never shy away from danger and who never shirk from their duty, to the families who will be apart from our troops this Christmas and to those who have died in the service of their country, we owe an enormous debt of gratitude.

I thank my right hon. and learned Friend, and may I associate myself with those condolences?

At a time when the price of a barrel of oil has sunk like a stone, why are the energy companies charging the price that that they are for fuel? Surely it is time for more to be done by the Government and those associated with us to bring down the price. Will my right hon. and learned Friend assure me that she can make it possible for me to go back to my constituency and give the assurance that the Government are doing all they can to bring about lower energy prices?

I absolutely agree with my hon. Friend. The energy companies must pass on the price cuts to consumers, both businesses and families. They must also treat all consumers fairly. If they do not, it will not just be Ofgem and the Competition Commission that they will have to worry about—we will change the law to force them to do it.

I join the Leader of the House in paying tribute to Lieutenant Aaron Lewis, who was killed in Afghanistan on Monday. As she said, our thoughts are with his family at this desperately sad time.

We look forward to the Prime Minister’s statement tomorrow about the withdrawal of British troops from Iraq, although we were surprised that since that news relating to national security was leaked by the Government last week no one has been arrested. Across the House, we salute the work of the British forces in Iraq. They will have been there for more than six years, which is a deployment longer than the entire second world war. As we welcome the end of that deployment, is it not now finally time for the Government to establish what the whole nation expects to see—a full-scale independent inquiry into the origins and conduct of the war?

I agree with the right hon. Gentleman’s supportive words for the work of our troops in Iraq. We have had a number of inquiries into Iraq and the Prime Minister has said that there will be no further inquiries until our troops are all returning home. The Prime Minister will make a further statement to the House tomorrow.

Well, the troops are now going to be returning home and it is time for the announcement to be made. The Government have delayed for years the establishment of an inquiry. The learning of lessons that may be relevant to Afghanistan and elsewhere can no longer be delayed.

New figures this morning show a further rise in unemployment of 137,000. It is now at its highest level for 10 years and is obviously set to rise further. We have been pointing out that the big problem is that even viable businesses cannot get the loans that they need. Last week, we asked the Government to look again at the bank rescue package. The Chancellor announced on Monday one of the measures that we have been calling for. Will the Government now accept the urgent need to get money into the hands of the businesses of this country?

I want to reinforce to the right hon. Gentleman that there is no delay in an inquiry. We have made it clear that, while our troops are still in Iraq, which they are, and doing their duty, we will not have a full inquiry into how they went in; we will not have that until after they return. We have to respect the fact that our fighting forces are still in Iraq. There is no delay.

As far as unemployment is concerned, it is always a terrible blow for a person to lose their job. That is why we are stepping up Government action with a £1.3 billion package to protect people who become unemployed. The package will help them to obtain the skills to get new jobs and it will also make sure that they do not lose their homes.

The right hon. Gentleman is right that small businesses are the lifeblood of enterprise and employment in this country. That is why we recapitalised the banks to stabilise the banking system, and that is why in January we will set up a new small business loan guarantee scheme. Although the figures are starting to show increasing lending to small businesses, some businesses are still having problems. That is why the national lending panel has been established.

But things are getting harder for households and businesses that want to borrow, not easier. This country has now been in recession for six months, and a leading Minister said this week that we are

“facing a recession deeper than any that we have known”.

Is it not clear that the Government’s policies have failed so far? People are losing their jobs by the hour, and the small business guarantee scheme to which the right hon. and learned Lady referred covers only one fifth of 1 per cent. of business loans. Do we not now need a national loan guarantee scheme of the kind that we have advocated, before more businesses go to the wall and many more tens of thousands of people are made unemployed?

We are taking action to protect people who become unemployed. Do the Opposition back the £1.3 billion extra that we are putting into jobcentres? No. They have said that they will cut public spending, and they opposed our action to recapitalise the banks.

As far as unemployment is concerned, we agree that losing one’s job is a terrible blow for every individual. That is why we are taking the action necessary—although unemployment is still about 600,000 lower than it was when we first came into office.

The Opposition’s so-called national loan guarantee scheme is not a guarantee of anything to anybody. If it is not backed up by public money, it is not worth the paper that it has been press-released on.

This side of the House did not oppose the recapitalisation of the banks, so let us put that straight.

Will the right hon. and learned Lady confirm that, of the £158 million announced today to help unemployed people, £58 million has been taken from another programme that is already supposed to help train people? The other £100 million is exactly what she announced two months ago, the last time that she and I did Prime Minister’s questions. That money has been announced before, which means that this is a reannouncement of a reannouncement—at Christmas time we are not meant to get only repeats, but that is all that we are getting from the Government today.

The Governor of the Bank of England himself said on Monday that there has been a

“further tightening in the supply of credit to households and businesses which is likely to continue…Additional measures…will probably be required to underpin lending to households.”

This House will not sit for nearly a month. How many more people will lose their jobs while the Government dither about introducing the scheme? Why does the right hon. and learned Lady not tell the Chancellor to pull his finger out and introduce it?

But the Conservatives would not back the £1.3 billion extra that we are putting into jobcentres to help people with retraining and job advice or, crucially, the money that we are putting in to back people up if they become unemployed so that they do not fear that they could lose their home. Not only are the Conservatives failing to back the action that we are taking to support people who become unemployed, but last week they announced a policy that would make matters worse. They said that at this crucial time they would cut public spending. If they cut vital public investment it will be devastating for the construction industry, jobs and the infrastructure of our country. First they said, “No action” and now they are suggesting action that would make matters even worse.

We are calling on the Government to take action; this is a say anything, spin anything, achieve nothing Government and we are calling on them to take action. The director general of the CBI said:

“Getting the credit markets working properly is much more important than the fiscal boost.”

The CBI survey of distributive trades, released in the last hour, which is the key indicator of activity in the retail sector, and includes the 10 days after the VAT cut, shows the worst downturn in retail activity since records began—a massive thumbs down from the consumer. Is it not time for the Government to concede that the temporary reduction in VAT, universally derided at home and abroad, has not been the answer, and that getting credit moving to businesses would be part of the answer to this recession?

I think that there are two responses that we should have to the very difficult economic circumstances. The first is not to talk down confidence and not to talk down the economy. The second is to ensure that as well as interest rate cuts we have a fiscal boost to the economy. Since we are talking about retail, that is why we are taking forward a cut in VAT and we urge the right hon. Gentleman to vote for it. That is why we are bringing forward extra cash help for pensioners from the beginning of next year. That is why we are bringing forward extra child benefit, to put more money in people’s pockets, and why we will have a tax rebate to help 22 million people. We take action while all the Conservatives do is carp and criticise. For the right hon. Gentleman to face these big economic circumstances and say, “It is only down to interest rate cuts and we would put no extra money in the economy” would make a difficult circumstance a disaster.

What we are calling on the Government to do is to get the money to the businesses of the country. We cannot have lectures about talking down confidence from the Cabinet, one of whose members said this week that we are

“facing a recession deeper than any that we have known”.

What is that if it is not talking down confidence? This country has been in recession for six months. The Government have achieved nothing except to let unemployment get worse and debt go up. We now have soaring unemployment, rocketing debt, good businesses going to the wall and heavy tax rises on the way. If this is the Prime Minister saving the world, God help us when he moves on to the rest of the solar system. How many people will have to lose their jobs before the Prime Minister justifiably loses his?

When it comes to party leadership, I happened to be having a look at the right hon. Gentleman’s website, and I suggest that other hon. Members look at it. On, it just says:

“William Hague…Leader of the Conservative Party.”

The country faces unprecedented economic circumstances. There are uncharted waters ahead and there is economic uncertainty, but one thing I want everybody to be in no uncertainty about is that we will take the action necessary to stabilise the economy, to support small business, to support jobs and to protect people against repossession. Unlike the Conservatives, who simply say “No action” and then propose a bogus scheme, we will never say that unemployment is a price worth paying.

Q10. Last Sunday marked 90 years since women first voted in UK elections on 14 December 1918. Will my right hon. and learned Friend ask the Prime Minister to join us at the new permanent exhibition on the suffragette struggle, off Central Lobby, and so give a lead to other hon. Members to take their constituents and visitors, particularly school parties, and to stress to young women the importance of exercising their hard-won, democratic right to vote? (244078)

I will recommend my hon. Friend’s request to the Prime Minister, and I congratulate her on the work that she has done to bring the exhibition to the House. The important thing is not only to have more women in the House of Commons, but that we change the face and the agenda of the House of Commons, and we have done that with new Sure Start centres, with maternity pay and leave and with new laws to tackle domestic violence. She is part of making sure that we deliver for women in this country. We are not complacent; there is more to be done.

May I add my condolences to the family of the brave serviceman who died in Afghanistan?

When the Leader of the House last stood in at Prime Minister’s questions, I asked her about the vicious spiral that was developing in the economy, with rising unemployment and a collapsing housing sector. Since then, it has been confirmed that housing starts this year are at the lowest level since Ramsay MacDonald led a Labour Administration in 1924.

Labour Members ought to remember, because they are in danger of repeating that history. The Leader of the House may not be aware either that, a few days ago, the regulator of the housing associations warned that six of the leading associations are in grave financial difficulty and in danger of collapse. What are the Government proposing to do about it?

We are very concerned about the housing situation, and that is why we will bring forward capital investment, rather than cut it or postpone it. We will be backing up the Housing Corporation, and for those people who fear that a temporary fall in their incomes will cause them to risk losing their homes, we are making arrangements for them to be able to defer their mortgage interest payments, and those who lose their jobs will not have to wait 39 weeks to get their mortgage interest paid; they will be able to get it paid after 13 weeks. We are very concerned about housing, and we will do everything that we can to protect the housing market.

Basically, that was a complacent answer—does the Leader of the House not realise that the investment is not happening, because the housing associations are bust and the Treasury is imposing a crippling funding formula on them? The housing repossession policy is reaching fewer than one in 10 of people in housing arrears. Will she now give the same attention to the financial crisis in the housing associations as the Government are giving to the banks? Will she tell us which of them are in grave difficulty and what the Government are going to do to rescue them and to ensure that the public sector can play a role in kick-starting the moribund housing activity?

We agree that the public sector has an important role to play in capital investment in the construction industry in the housing market. We took the action that we did on the banks so that they can be in a position to start lending again into the mortgage market and to stabilise the housing market for the future.

Q2. Recently, a small group of people with learning disabilities and their support workers went to a karaoke night at the Bull and Butcher pub, Whetstone. The manager was hostile, made it clear that he did not want them there and harassed them until they left in distress. Does my right hon. and learned Friend agree that such an appalling case of discrimination and infringement of human rights demonstrates the need for both the UN disability rights convention and the Human Rights Act 1998, and the need to build on its protections, not to repeal it, as the Conservative party would do? (244070)

I agree with my hon. Friend that discrimination against anyone is unacceptable and discrimination against disabled people has no place in our modern society. He is right to bring that matter to the attention of the House. I know that as an avid champion of human rights, he will ensure that justice is done for his constituents, and I can confirm that we remain proud of the Human Rights Act and stand by it.

Q14. Many pensioners will bear the brunt of this recession, but with interest rates heading towards zero, will the Leader of the House do something to tackle the nonsense whereby pensioners are assumed to earn 10 per cent. on their savings when it comes to calculating their entitlement to benefit? (244083)

We are paying extra money to pensioners, with an extra Christmas bonus—[Interruption.] Well, I think that the extra winter fuel payment is important, the extra Christmas bonus is important, and bringing forward the increase in the state retirement pension to the beginning of the year is important. While we are in no way complacent about people’s income in retirement, the single group of people who have benefited most in terms of their increased standard of living since Labour came into government has been pensioners, particularly single older pensioners.

Q3. What does my right hon. and learned Friend think of the decision of Crawley borough—a Conservative-controlled authority—to reject the free swimming offer for young and older people? With the Olympics looming, and with a focus on health and well-being, does she believe that that decision is wrong? Santa will not be coming to Crawley this year. (244071)

That is just another example of how the Tories do not believe in public services, even important public services. They should be jumping at the chance of free swimming, which is important for people of all ages, not only for leisure but for public health. I hope that Crawley council will take my hon. Friend’s advice and think again.

Given that the troops have been in Afghanistan for more than seven years, and looking at the current situation, including the deeply entrenched forces around Kabul, would the Leader of the House care to speculate on whether the military battle is being won, and crucially, when does she anticipate that the all-important battle for hearts and minds will commence?

We have always said that there is a development strategy, a political strategy and a military strategy. In that military strategy, as well as paying tribute to our troops fighting in the most dangerous circumstances in Helmand province, we recognise that this is a multinational force operating in Afghanistan. Of course, we recognise the political and development strategies as well as the military one.

Q4. May I ask my right hon. and learned Friend to pass on my thanks, and the thanks of many in this House and in our country, to everyone involved in last week’s announcement on the upgrading of the armed forces compensation scheme? She will realise that that will make a massive difference to the quality of life for service personnel and their families. However, can she assure me that everything is being done with regard to the fixtures and adaptations that service personnel need to make a smooth transition when they return home from rehabilitation? (244072)

I support my hon. Friend’s welcome for the increase in compensation for those who have suffered injuries in service to their country—an increase of up to £590,000. In addition, that will be backdated to those who have been injured since 2005, and instead of waiting for them to contact the compensation scheme they will be contacted for their compensation level to be reviewed. He mentions the important question of adaptation. Those who are returning home will have high priority for adaptations in their homes.

Q5. This week, the Government abandoned their planned inquiry into the use of Snatch Land Rovers in Afghanistan and Iraq. Given the increasing number of improvised explosive device attacks, why are the Government still unprepared to give our armed forces the level of protection that they need, want and deserve? (244073)

We are committed to doing exactly that. The Secretary of State for Defence has said that he will listen to and be advised by the military chiefs so that they have the full range of equipment that they need to support our troops in the field.

Q6. Many of my constituents in Cardiff, North, have benefited from the opportunity to work flexibly that was introduced by this Government, who have recognised the stresses and strains of bringing up a family while having to go to work—something that has not always been recognised by the Opposition. Will the Leader of the House tell us when that opportunity will be more widely extended, and what the timetable is for doing so? (244074)

I pay tribute to my hon. Friend, who has long championed the cause of families, and who has pressed for support for families who juggle going to work, bringing up children and caring for older relatives. People want to be able to earn a living and support their family, and that is why we introduced a right to flexible working—unfortunately, the Opposition opposed it—for families with children up to the age of six. I can confirm that from April, we will be increasing that right to request flexible working, extending it to all families with children up to the age of 16.

Statutory arrangements for the improvement of the governance of the National Audit Office were to have been included in the constitutional renewal Bill, but as the future of that legislation is currently unclear, does the right hon. and learned Lady agree with the right hon. Member for Swansea, West (Mr. Williams), who has written to the Prime Minister on the issue, that it might be simpler and more sensible to have a separate, stand-alone Bill, that makes sure that the future of the National Audit Office is safeguarded? Will she talk to the Prime Minister—and to herself, in her capacity as Leader of the House—about that?

I agree with the hon. Gentleman about the important work of the National Audit Office. He will know that in the Queen’s Speech, we said that we would continue discussions and consideration of how we can improve and modernise the constitution.

Q7. Some years ago, I was able to persuade the then Minister to refuse support for a damaging open-cast mining project in Cossall in my constituency. Constituents there were extremely pleased with the move away from the Conservative policy of doing nothing and letting the project happen. I want to ask my right hon. and learned Friend whether it remains the Labour Government’s policy to refuse support for open-cast mining where it would have a disproportionate impact on the environment. (244075)

I can reassure my hon. Friend that there has been no policy change on open-cast mining, and I am sure that he will pass that message on to his constituents, who will continue to be happy with his work as their MP.

Q8. In his speech to the Labour party conference in 1996, the Prime Minister said: “we will not build the new Jerusalem on a mountain of debt”.Why have the Government changed their mind? (244076)

One of the biggest misapprehensions that the Opposition have been peddling is on the question of debt, and I want to address that. When we came into government, our debt as a percentage of gross domestic product, according to the International Monetary Fund figures, was 43 per cent. We paid that off year by year, taking it down to 37 per cent. We acknowledge that now we need debt to rise; we do not resile from that. If debt is not allowed to rise, and we cannot take the action that is necessary to back up the economy, there will be even more debt in the longer term, as a result of the bills for failure and for unemployment benefit. How can the hon. Gentleman’s party put forward proposals for a so-called national loan guarantee scheme while saying that it would cut public spending and not allow debt to rise? It simply does not add up.

Q9. Will my right hon. and learned Friend make sure that pressure is exerted on private water companies, which are imposing new surface water charges on churches, and treating them as if they were businesses? If those companies are not prevented from applying those unfair charges, which amount to thousands of pounds per church, they will be responsible for the closure of places of worship across England and Wales. (244077)

My hon. Friend raises a point that has been made by a number of hon. Members; indeed, the matter has been raised with the Church Commissioners. I know that my right hon. Friend the Secretary of State for Environment, Food and Rural Affairs is reviewing the situation, and I will ask him to write to my hon. Friend, as well as to the Church Commissioners.

Q12. In west Didsbury, Lancastrian school is to lose its secondary provision, and Ewing school, which has won awards for inclusion, is earmarked for closure. Those schools provide top-quality teaching and learning for children with physical incapacities and speech and language disorders, who cannot be educated in the mainstream. Will the Leader of the House join parents, teachers, local residents and me in urging the council to reject those unpopular and unnecessary plans? (244080)

The question of local school organisation is a matter for the local education authority, but I will draw the hon. Gentleman’s comments to the attention of the Secretary of State for Children, Schools and Families. I hope that the hon. Gentleman will welcome the fact that in his area there has been a very big investment in teaching and in school buildings.

Q11. The Building Schools for the Future programme is vital for improving the educational prospects of young people in my constituency and for sustaining and maintaining the construction industry at an extremely difficult time. Can my right hon. and learned Friend tell me what steps are being taken to accelerate that programme? (244079)

My hon. Friend makes a fundamental point that the refurbishment and rebuilding of schools is not only important for education, but vital to keep jobs flowing in the construction industry. To cut back Building Schools for the Future now would deprive local communities of the improved schools, as well as being a devastating blow to the construction industry. That is why, far from doing that, we will bring it forward.

Speaker’s Statement

Several right hon. and hon. Members have raised with me the matter of the search of a Member’s office. The House has recently come to a decision that the matter should be considered by a specially appointed Committee. The House has also determined that the Committee must not in any way prejudice any police inquiry or any potential criminal proceedings. There is, therefore, not yet a basis on which to nominate that Committee, since consideration of criminal proceedings is still under way.

Pitt Report

With permission, I shall make a statement on the Government’s response to Sir Michael Pitt’s final report on the floods of summer 2007.

Last weekend’s flooding in the south-west, in which two people sadly died, reminds us of the ever-present risk that we face, and of the importance of Sir Michael’s comprehensive and impressive report. In his 92 recommendations published in June, Sir Michael identified a need to clarify who is responsible for what; to ensure that the public have all the information and guidance they need; to work with essential services to assess risk and protect critical infrastructure; to have a clear recovery plan right from the start of any major emergency; and to establish the right legislative framework to tackle flooding. I can tell the House that the Government’s action plan being published today supports changes in response to all his recommendations, but before setting out those changes I want to acknowledge the continuing effects of the flooding, as a second Christmas approaches.

The fact that most people are now back home, thanks to a great deal of hard work, will be of little comfort to those families who are still out of their homes, or who are living upstairs in them. Our thoughts are with them, and their plight reminds us of the toll that flooding takes not just on people’s lives, but on their emotions, and just how difficult it can be to get things going again. That is why, working with local authorities and the insurance industry, we will continue to do all we can to help. My right hon. Friend the Minister for Local Government, to whom I pay tribute for the extraordinary amount of work that he has done to help people affected, announced last month further help for those families.

We have taken action in the 18 months since the 2007 floods. The Environment Agency has spent £5 million on repairing defences that were damaged. Forty-nine flood defence schemes have been completed, protecting 37,000 homes, from Selby in Yorkshire to St. Ives in Cornwall and from West Bridgford in Nottingham to Worcester and Hexham, the town whose newly built defences successfully protected it from significant flooding in September this year.

Since summer 2007, more than 78,000 more people have registered with the Environment Agency’s telephone flood warning system; the total is now 280,000. All local resilience forums have been briefed on critical national infrastructure in their areas, and we have brought forward to 2009-10 £20 million of flood defence spending. That will mean an earlier start on those schemes, which, when completed, will protect more than 27,000 homes from flooding and coastal erosion. In total, our £2.15 billion investment in flood defence over the three years to 2010-11 will protect an additional 145,000 homes across England.

The further steps that I am announcing today draw both on the £34.5 million that I set aside to implement Sir Michael’s report and on funding from other existing budgets. We are creating a new national flood forecasting centre, bringing together staff from the Environment Agency and the Met Office. That will start operating in April and will improve our ability to respond quickly, by providing better information and more detailed warnings directly to emergency responders.

Having previously decided that the Environment Agency will take on a strategic overview for all forms of flooding, I am today announcing that local authorities will be responsible for ensuring that arrangements are in place to assess and manage local flood risk from all sources, including surface water. In two-tier council areas, that responsibility will rest with county councils, but we will encourage them to work closely with districts, internal drainage boards and others. I am increasing funding to local authorities by £15 million to allow authorities where the risk is greatest to take on that new role straight away. Part of that will be for the development of surface-water management plans. I can announce that the first six local areas that have successfully bid for the funds are Hull, Gloucestershire, Leeds, Warrington, Richmond upon Thames and West Berkshire.

In addition, I am establishing a £5 million grant scheme, for which local authorities can bid to help people better protect their homes from the risk of flooding—for example, through fitting flood boards and air-brick covers. That help will be available where it is not possible to provide protection through community-level defences. I am also providing funding to help the Environment Agency improve flood warnings, including moving to an opt-out system for ex-directory numbers. Furthermore, I am putting money into improving our flood rescue capability, so that we can make the best use of the skilled personnel and boats available.

The national flood framework will help to ensure that all the organisations involved in responding to floods, including those responsible for critical national infrastructure, understand—and are fully prepared for—what they have to do. An outline framework has already been published and the consultation that we are launching will enable us to complete the job. Meanwhile, organisations are already taking action to identify and protect infrastructure.

On reservoir safety, we are doubling funding for inundation maps for all the country’s larger reservoirs and we are providing support for local resilience forums to prepare reservoir emergency plans. We will be publishing a draft floods and water Bill for pre-legislative scrutiny in spring next year to deal with those of Sir Michael’s recommendations, including clearer roles and responsibilities and strengthening reservoir safety, that require primary legislation.

On Monday, I informed the House that we intend to transfer to water and sewerage companies private sewers and lateral drains that connect to the public system. That was welcomed by Sir Michael, and it will release many householders from a liability that they often do not know they have until something goes wrong and they face a hefty bill to sort it out. The transfer will take place from April 2011. Finally, we are establishing a Cabinet Committee to oversee work on flooding. Sir Michael will continue to be involved in reviewing progress.

The House knows that we can never eliminate the risk of flooding, particularly as climate change takes hold, but we are all determined to learn the lessons from what has happened and to be better prepared in future. All of us—the Government, local authorities, emergency and other services, local communities and individuals—must take flood risk seriously. This report, and the steps that we are taking, will help us to do so and I commend them to the House.

I thank the Secretary of State for his statement and repeat my thanks to Sir Michael Pitt and his team for the excellent work that they have done. I also commend the work of the Environment, Food and Rural Affairs Committee, chaired by my right hon. Friend the Member for Fylde (Mr. Jack), who has made a useful contribution on these issues.

The Secretary of State is entirely right to acknowledge the human cost of flooding. I am sure that the whole House will wish to send condolences to the family and friends of those two people who tragically lost their lives over the weekend. Anyone who has met people whose homes and businesses have been destroyed by floods knows only too well that there is often a lasting, less visible, but none the less real, emotional impact on top of the physical disruption that people suffer. Some things, such as personal possessions, simply cannot be replaced by insurance. Can the Secretary of State confirm that hundreds of people are facing a second Christmas out of their homes as a result of the floods of 2007? Why have the Government not published monthly summaries of the number of households displaced, as Pitt recommended? Is it because they are embarrassed about the rate of progress?

There are, of course, aspects of this statement which we welcome, particularly the establishment of the national flood forecasting centre, which seems an eminently sensible way to proceed. I cannot help but observe, however, that progress in this area is glacially slow. After three years of announcements and statements of good intentions, our country is still acutely vulnerable to flood risk. The number of homes at risk from flooding has increased by 20 per cent. in the space of a few years. Some 43 per cent. of flood defence projects have been delayed, and more than half are not in their target condition. Additionally, 6 per cent. of hospitals, 15 per cent. of ambulance and fire stations and 15 per cent. of power stations are at risk from flooding. When will the natural hazards team, which is responsible for identifying risks to national infrastructure, complete its assessment? Is it not extraordinary in view of the risks involved that that work has not already been done?

I have to say that the Government’s approach to this issue has been lackadaisical. In 2005, the Government knew that there was a problem and promised to put it right. Then they announced that the Environment Agency needed to have the strategic overview of flooding. Today it seems that local authorities will be made responsible. There is still uncertainty about who is in charge. We know the gravity of the risk, and have a wealth of recommendations on how to move forward. Pitt called for strong national leadership if his recommendations were to be implemented. Since when was dithering a feature of strong national leadership?

Can the Secretary of State confirm that all of Pitt’s urgent recommendations have been implemented? Does he agree that his statement is no substitute for legislation? The Pitt report called for a “rapid implementation” of the floods and water Bill. Will he confirm that, as a result of his announcement today, there is no real chance that the floods and water Bill will make it on to the statute books before the next general election?

There is a sense that the Government are shunting the problem away, beyond the next election, on to local authorities. I note, however, that the Secretary of State has announced additional funding for local authorities, which must be welcome. Can he confirm where that money is coming from? Climate change will only increase the frequency and severity of flooding. As the Stern review pointed out:

“Adaptation is the only response available for the impacts that will occur over the next several decades before mitigation measures can have an effect.”

My chief concern today is the slow progress that the Government are making in their response to these urgent issues.

Finally, some 2.3 million homes are at risk of flooding. It is essential that we do not add to that number, so will the Secretary of State join me in calling for a clear presumption against building on floodplains?

I echo the words that the hon. Gentleman expressed about the impact on individuals and businesses. When flooding happens, it is devastating. I can tell him that about 1,000 households are either out of their homes or living upstairs, and of those, 118 are living in caravans. The number is coming down by about 100 a week. We make an assessment every two months.

I fundamentally disagree with the hon. Gentleman’s assessment of what has happened in the past 18 months. Protecting 37,000 homes since summer 2007 cannot, under any measure, be described as “glacially slow” progress. As he is pressing for faster progress and given that Her Majesty’s Opposition have indicated that from 2010-11 they will not be committed to the Government’s spending plans, a lot of people would like to know—he might not be able to say today—what their stance is on flood defence investment, because we are all waiting to hear.

Next, there is no uncertainty, because the steps that I have announced today and the action that we have already taken are all about people getting on with the task in hand, without waiting for the floods and water Bill, which we will publish in draft form, as I have indicated. Saying, “That’s what you’ve got to do,” to the Environment Agency and, “This is what you’ve got to do to deal with the problem of surface water,” to the six local authorities that will start the mapping in the areas that were affected is not about waiting to change the law to require that action; it is about getting on with the job now. Then we will look at the changes that are needed subsequently. The same applies to the mapping of the risk from reservoirs. We are getting on with the job. We are not waiting, but we will change the law as necessary.

As I indicated to the House when I made my statement in the summer, we have made good progress on implementing the urgent recommendations. Incidentally, the latest figures for people out of their homes are from mid-November, so there will have been further progress and a reduction in the numbers since then.

The funding that I am making available is from funding that I set aside and which I told the House about in the summer for implementing Pitt’s recommendations. As for not adding to the problem, I agree with the hon. Gentleman, which is why the Government have strengthened the planning guidance not once, but twice. PPS25 is absolutely clear about the responsibility on local authorities when they take decisions to grant or not grant planning applications; and, at a practical level, we have already implemented changes to the planning rules on paving and concreting over front gardens.

I welcome my right hon. Friend’s commitment to ensuring that Gloucestershire is part of the pilot project on surface water. That will be welcomed by residents in Barton and Tredworth in my constituency, which were flooded at the weekend. May I also urge him to continue the work on flooding with my right hon. Friend the Minister for Local Government? We know that removing Whaddon, which lies in the constituency of my hon. Friend the Member for Stroud (Mr. Drew), from the regional spatial strategy, which is likely to be published in the coming days, will make a huge difference to surface water in Gloucester. That surface water has to go somewhere and at the moment it largely goes to that area in Whaddon.

I pay tribute to my hon. Friend for the huge amount of work that he did, as did many hon. Members in all parts of the House, in the wake of the flooding. I remember the conversations that we had at the time. The whole purpose of the surface water management plans is to get all the people who have responsibility for the water—where it goes and where it ends up—to see how they can better deal with it when large amounts of rain fall and to ensure that it can be taken elsewhere. That means dealing with a legacy of 200 years of drains and culverts that were not designed for the kind of rainfall that we have seen and for the climate change that is coming—the hon. Member for East Surrey (Mr. Ainsworth) is right about that—and planning who is going to do what as a result, and, at the same time, taking the right decisions on planning and providing places where the water can go when new developments are made. Designing sustainable drainage systems into development is a way of avoiding adding to the problem.

I wish Gloucestershire all the best in that work. May I commend Gloucestershire on the excellent booklet that has been published for residents? It is full of the most useful guidance and information. It is a model of its kind and I hope that other local authorities will follow it.

I pay tribute to all those who have worked so hard to prevent flooding, mitigate its effects and provide support to those affected, not just in the summer of 2007, but in the 18 months since, and express solidarity with those who continue to suffer as a consequence of flooding.

In thanking the Secretary of State for his statement, I welcome the announcement of the action plan and the national flood forecasting centre, and the announcement that the Environment Agency will take on strategic overview responsibilities. Also, the announcement earlier this week that liability for private sewers will be passed to water companies is extremely welcome.

However, as we receive the statement on learning the lessons from the 2007 floods, many of us are working alongside our constituents who are still picking up the pieces following the floods of autumn 2008. That raises the question why the Secretary of State has taken so long to come to the House to give us a statement on a report that called for immediate action six months ago. Many incidences of flooding could have been avoided, had there been clarity about who was responsible for flood risk management at different levels. How many people have been adversely affected in the six months since the report was published, during which time the Government have failed to act? How many households and businesses have suffered this year because of the Government’s failure to implement the recommendations more quickly?

Furthermore, recommendation 86 in the report proposed the immediate establishment of a Cabinet Committee. We welcome the announcement today that that is going to happen, but will the Secretary of State tell us whether he thinks that waiting six months constitutes immediate action? As Scotland already has its own Flood Risk Management (Scotland) Bill in progress, why is this House being offered only a draft Bill, with subsequent legislation some way off?

Will the Secretary of State tell the House how many of the 92 recommendations in the Pitt report he has already been able to implement? Will he expand on his plans for the establishment of a national flood forecasting centre? Will he also confirm that many instances of flooding this autumn have occurred because the lines of communication have still not been corrected? Is not that further evidence that the Government’s casual approach to the implementation of the report has cost many people dear? Does he accept that even a small improvement in the lines of communication could make a huge difference to those on the front line? Even half an hour’s advance warning of a serious flood risk could allow householders and businesses to take vital action to safeguard their property and protect themselves.

Will the Secretary of State also comment on the backlog in flood relief works in many parts of the country? Can he give assurances to residents and businesses, such as those in the Windermere road area of Grange in my constituency, that the long-awaited flood relief scheme planned for their area will actually come into being in the near future? Does he agree that there is now a strong argument for front-loading investment in flood relief schemes?

Will the Secretary of State comment on the continuing granting of planning permission for building in high-risk areas, despite Pitt’s recommendation for a strong presumption against such development, and will he now support a review of PPS25, to examine whether it is fit for purpose? Will he also take to task the insurance industry, which promised at the time of the floods that no one would go uninsured as a result of the flooding? Now that insurance policies are coming up for renewal, many insurers are refusing to cover flood risk. Will he also take action to ensure that speedy payments are made by insurance companies to householders and businesses?

Finally, will the Secretary of State comment on the concerns that many of us have about the regionalisation of fire control centres, given that that is highly likely to undermine the responsiveness of local fire crews to developing local situations?

I think that this is the first opportunity that I have had to welcome the hon. Gentleman to his new post from the Dispatch Box. I thank him for a little bit of what he said, but I must express sorrow that he did not seem to have listened to what I was saying or, more importantly, to have noticed the action we have been taking since the summer of 2007.

The hon. Gentleman raised a point about lines of communication in recent instances of flooding. If he, or any other hon. Member, has an example of something that did not go right or that they are worried about, will they draw it to my attention? I am determined that we should learn the lessons and try to get things right.

On early warning, one thing that has happened is the piloting of the extreme rainfall alert service, which I did not have time to mention earlier because there are quite a lot of things that we have done. When the hon. Gentleman has a chance to read the action plan that I am publishing today, he will see the answer to his question on that point. I should like to give the House an example. On 5 September, the Met Office forecast thunder storms and heavy showers in the south-west, and it put out one of those alerts. We have subsequently heard from Cornwall county council that the alert enabled it to pre-deploy the fire service, which, as a result, was able to rescue someone from their car at a time when the flood waters were rising by 1 ft every 20 minutes. That is a practical example of the measures that we have put in place, helping the emergency services to do a better job of protecting the public in those circumstances.

The hon. Gentleman mentioned bringing forward flood defence schemes, but he has just heard me say that we have already brought forward £20 million-worth. We are indeed front-loading flood defence.

On the insurance industry, the hon. Gentleman will be aware that we have worked hard with the Association of British Insurers on agreeing a new statement of principles to ensure that there continues to be insurance cover. That has been very important, although I recognise that, in some cases, premiums and excesses have gone up. However, it is as a result of our efforts that we have that agreement, and the principal factor that made that possible was the significant increase in flood defence expenditure.

I thank the Secretary of State for the work that he has done on this matter, for the welcome statement today and, in particular, for the surface water management funds for Leeds, which was hard hit. In the heart of my constituency is the Farnley balancing reservoir, but it cannot cope. Every time there is a deluge, it overwhelms the local Farnley beck, which then floods all the homes around. In assessing the risk, we need to consider not only the mopping up but the underlying causes. I accept that they go back some years, but we will continue to have problems if we do not do that. Will those funds help to address that systemic problem?

They are intended to do that. I am aware of the case that my right hon. Friend has raised, and I understand that there is some dispute between Yorkshire Water and Leeds city council over who should take responsibility. However, the fact that Leeds will be one of the six local authorities to produce the first of the surface water management plans will mean that such issues can be resolved and that there can be clarity over who is responsible for doing what.

I should also like to say to the hon. Member for Westmorland and Lonsdale (Tim Farron) that we will review PPS25 early next year.

The Secretary of State’s statement rightly underscored the crucial role of local authorities in co-ordinating a response to surface water flooding. That was a key finding in the Committee’s report and in Sir Michael’s inquiry. However, given that the weather events that led to the flooding that gave rise to Sir Michael’s inquiry were of an unpredictable nature, how quickly will the remaining local authorities—besides the six mentioned in the statement—be able to take on those responsibilities? If Sir Michael’s report is to be fully implemented, all local authorities should be co-ordinating their responses now, not waiting until some point in the future.

I want to acknowledge the excellence of the work done by the Environment, Food and Rural Affairs Select Committee in looking at this matter. This is a job for all of us to work on. I have announced the first six authorities today. The plan is to fund another 44 or so to complete that work over the next couple of years. We are going to do that in order, depending on where the risk is greatest. However, I take the right hon. Gentleman’s point about the increasing unpredictability of the weather. In agreeing with Sir Michael’s recommendations, we are saying clearly today that this is a responsibility for all of us, everywhere. All local authorities need to think about what they would do in such circumstances. During the summer, and subsequently, we saw the benefit of advance planning and of the emergency rescue services. By and large, those arrangements worked pretty well over the summer of 2007, and that was because people had got organised and because the Gold Command system worked.

As my right hon. Friend will be aware, in January 2005, there was severe flooding in Carlisle. The flood defences are now being built, however, thanks to the good efforts of my right hon. Friend the Member for Scunthorpe (Mr. Morley), who I see is just leaving the Chamber. Is the Secretary of State sure that the private utilities are prepared and that they have learned the lessons? They had not done so after Carlisle, and there were also problems in the west country with losing water. Furthermore, once the flood defences are built, will my right hon. Friend put pressure on the insurance companies to bring down the premiums in the areas that have been defended?

My hon. Friend and his constituents know all about the devastating impact of flooding. He has been able to demonstrate how we have responded, and how we are trying to prevent further flooding in Carlisle. I want to give the House some practical examples in relation to the critical infrastructure. The National Grid has bought 1.2 km of temporary flood defences, which it is storing at a number of locations around the country. In the event of flood warnings being given, it will be able to use those defences to protect its assets. Indeed, defences have already been put around Walham and Castle Mead sub-stations. We have also issued new guidance to Ofwat, requiring water companies to consider vulnerability, and about £1 billion of investment is being proposed by companies in their draft business plans to increase resilience. Plans for protecting all national critical sites will be in place by the end of 2009.

We will continue our discussions with the insurance companies, because it is important that people are able to avail themselves of the cover.

I speak with experience, having been caught in my car in a flash flood on Saturday morning. Happily, my daughter and I escaped unharmed; we were luckier than Mr. Henry Collier, who sadly died in similar circumstances in Martock on Saturday.

Will the Secretary of State confirm whether the money available to authorities that face regular flooding, such as Somerset, will be given on a needs basis or will it be distributed according to a formula, which will almost certainly disadvantage a county such as Somerset? Secondly, has the right hon. Gentleman been in contact with his colleagues in the Department for Children, Schools and Families about these issues? The Countess Gytha school in Queen Camel in my constituency was flooded again on Saturday and it is a regular occurrence for that school. It seems to me that extra money is needed either to make schools like the Countess Gytha safe for the future or to reposition them somewhere where floods cannot reach.

May I also express my condolences to Mr. Collier’s family? On money for local authorities, under the current year’s revenue support grant, £87 million was already in the system for dealing with flood risk, although I gather that local authorities spent slightly more than that. The £15 million I have announced today will be allocated in order of priority to authorities where we believe the risk is greatest, particularly in respect of surface water management. The hon. Gentleman raises an important point about schools. If he would be kind enough to give me the details of the particular school he mentioned, I will indeed follow it up with my right hon. Friend the Secretary of State for Children, Schools and Families.

May I thank my right hon. Friend for his announcement on private sewers, which will be most welcome in my constituency. He will know that parts of my constituency have suffered from chronic flooding problems—particularly the village of Cubbington, which has flooded about half a dozen times in the past few years. We have established a local flood forum to ascertain why it happens and who needs to fix it. It has made some progress, but it has stalled on the issue of who is responsible for remedying surface water problems. In his statement, my right hon. Friend referred to local authorities having responsibility for assessing and managing surface water, but is he clear that local authorities are also responsible for remedying surface water problems?

I am sorry to hear about the problems that my hon. Friend’s constituents have had to face. In the end, given that there is a two-tier system in some places, we have to make it absolutely clear who has the lead responsibility, which is why we decided that upper-tier authorities should be primarily responsible. Councils need to talk to each other, as they do, and they need to work out how to allocate the responsibility, albeit that the upper-tier authority has the prime responsibility to ensure that allocation. It is about getting together all the people who have responsibility for all the different bits and pieces—including some private owners, as people do not always know who owns a culvert that might cause a problem if it is blocked and there is a lot of rain—and sorting the problems out. We want to make it clear that local authorities have a lead responsibility for sorting them out; that is what people want.

The Secretary of State will be aware that on 30 October the small town of Ottery St. Mary and many surrounding villages in my constituency were flooded at 2 in the morning, with 4 in of rain coming down in an hour and 3 ft of hail, which was still sitting there two days later. My own home and those of my neighbours were flooded for the second time in 11 years; we all hope to be back in by Easter. It is the most appalling experience to go through.

May I ask the Secretary of State about flooding in rural areas? Experience has shown that it is often minor watercourses, not necessarily the main river that flows through towns, that behave in ways that no one expected and often cause the damage, turning lanes and roads into rivers. As well as looking into the run-off from buildings, has the right hon. Gentleman had a chance to study run-off from land and consider farming practices, for example? The relevant boxes that need to be ticked are often left unticked in rural areas because only small clusters of properties are affected, so has he thought of anything further that can be done to mitigate flooding problems in rural areas?

The hon. Lady raises an important point, and I am sorry to hear about what she and her constituents have experienced. I discussed this particular event with the head of the Met Office, as even with the extreme rainfall alert system in place, this event was so specific and localised that, as the hon. Lady will know, it was not picked up by it. We could perhaps use the hon. Lady’s particular example as a test case, and if she comes to see me with further details, we can look to see whether the present structure will be able to pick up that sort of problem. I am conscious that when everybody thought about surface water flooding in the summer of 2007, they thought of Hull because so many people were affected. The hon. Lady, however, is absolutely right that it happens on a much more localised basis in many parts of the country. That provides another argument for getting all those with responsibilities, including landowners, together to see what they can do to reduce the risks in those circumstances.

May I say that my constituents will think it a bit rich to hear Conservative spokesmen complaining about building on the floodplains when it was the Conservative county council that tried to build over Kennet meadows in south-west Reading? I applaud the Secretary of State’s decision to sort out the archaic system of private drains and sewers, which causes so many problems for residents of the Haddock estate in my constituency. I also welcome the additional funding for the West Berkshire council, which desperately needs help to sort out the management of surface water because that was what caused the vast majority of the flooding in my area in 2007.

I am grateful to my hon. Friend for his kind words. What we have done on the sewer transfer is effectively to create a sort of national insurance scheme. Individual householders, as Members will be aware from specific cases, can often suddenly realise, “Heavens, I did not realise that I was responsible for that”. It is a sensible step to have taken. We looked at West Berkshire’s proposals and decided that we would fund them. Local authorities have the responsibility to deal with surface water flooding, including from minor watercourses.

If the heavy rain of July last year had fallen slightly further south, the Somerset levels, which are prone to flooding in any case, would have been catastrophically affected. There was severe local flooding last week. Is the Secretary of State aware that a contributory cause of this vulnerability is the failure of the Environment Agency properly to maintain the rivers for which it is responsible in Somerset? Will he have a word with the Environment Agency to make sure that it carries out proper and regular dredging and removes potential obstructions? Will he ensure that the agency’s discharge of its environmental responsibilities is not at the expense of its drainage responsibilities?

I am grateful to the right hon. Gentleman for raising this case, which I know engenders a great deal of debate in many parts of the country. The Environment Agency is acutely aware of its responsibilities for dealing with flooding. Sometimes, however, clearing out a channel and making it even wider may speed up the rate at which the water ends up in another place, so the operation is not always as straightforward as it might appear in the first instance. If the right hon. Gentleman would be kind enough to drop me a line with further details, I would be happy to take up his particular case and pursue it with the Environment Agency.

It has been a long campaign to get private sewers adopted, and I am delighted that the Secretary of State has taken that decision. The real work now is to ensure that things happen on the ground after 2011. Secretaries of State can be assured that Nottinghamshire county council will work with district councils in the county to tackle surface water draining problems—but they will need resources to sort out problems in villages such as Woodborough, Lowdham and Lambley.

I am very glad to hear from my hon. Friend that this work will be done and that the council will pursue it with great vigour. I wish him and all others working on the project every success.

I appreciate much of the Secretary of State’s statement, particularly where it relates to householder liabilities for private drainage and the review of planning policy statement 25, which is very welcome. I hope that the right hon. Gentleman tells the planning inspectorate that that document is now up for review. I appreciate the funding that has followed the right hon. Gentleman’s interest in Cheltenham and the work on flood alleviation schemes in my constituency. However, at a time when it is difficult enough for people to sell their homes and sustain their businesses, will the Government make an absolute commitment to prevent insurance companies from offering cover but then excluding flood risk—even when people have paid for flood resilience work on their properties—or imposing wholly unreasonably premiums, sometimes running to tens of thousands of pounds? In my book, that is not really insurance.

If that is what is going on, we will take it up with the insurance companies.

The hon. Gentleman mentioned people having flood resilience work done on their homes. It seems to me very sensible to have such work done when a home has been flooded, as part of the restoration. It may cost the insurance company a little more, but fitting flood boards, air brick covers and so forth will reduce the likelihood of a further claim. It is important for us to take action to help ourselves to protect our properties, and I can understand why householders with insurance policies would be more than a little miffed if, having taken such action, they could not obtain cover.

I thank my right hon. Friend for what he had to say, and particularly for the financial help that we shall be getting in Gloucestershire. As my hon. Friend the Member for Gloucester (Mr. Dhanda) said, we thought that we were going there again last Saturday, because there was quite serious flooding. With that in mind, will my right hon. Friend consider innovative solutions which, in many instances, will involve community self-help? The problem in my constituency is what I would call diffused flooding: the areas that are hit are randomly distributed, but they are hit very regularly. Dealing with it will involve money, but it will also involve considering how communities can come together to do a number of things to help themselves. I hope that that is one of the measures that my right hon. Friend will encourage.

I am happy to encourage all efforts to deal with the problem that anyone is prepared to make. The fact that my hon. Friend has described community self-help as part of the solution is very much in keeping with what Sir Michael Pitt said in his report. One of his most striking observations was that, although Government, local authorities, the Environment Agency and others should act, ultimately this was also a matter for individual responsibility, because we can all be affected and we do not know when flooding may come. I applaud the approach that my hon. Friend has advocated, and I hope to see more of it around the country.

I am grateful for the Secretary of State’s kind words about the excellent work that Gloucestershire county council has been doing in informing residents about how they can protect themselves. I shall ensure that it is fed back to the leader of the council.

The right hon. Gentleman mentioned surface water management plans. Obviously it is good that local authorities have that responsibility, but, given the number of different bodies involved—not just local authorities but water companies and private owners—one of the problems is getting them all to accept the responsibility. Can the Secretary of State confirm that until the floods and water Bill has become legislation, local authorities can draw up plans, but do not have power to enforce behaviour by those other bodies? Having such power would make the process of drawing up plans much more effective.

I agree, but we are not waiting for the powers that are needed to get on with trying to deal with the problem. Even in the absence of a formal power to require, it is possible to get members of the local community together in a room and say “A particular problem is this culvert here, and that is the person responsible.” As Members will know only too well, there are many ways of encouraging change in the absence of legislation, and I am sure that Members will employ them in order to look after their constituents.

I, too, warmly welcome my right hon. Friend’s statement and, in particular, the money for Leeds, which is one of the trial areas for the surface water management.

As my right hon. Friend will know, residents of the Wellhouses in my constituency are regularly flooded because of the overflow of Gledhow beck, which, further downstream, will affect his constituents as well. Can he confirm that, after 2011, Gledhow beck will be one of the areas transferred to public responsibility, and Leeds city council will be able to take over responsibility for it? Residents often have no idea when they move to the area that they are responsible for maintaining its banks.

Will my right hon. Friend also put pressure on Leeds city council to do something about the balancing lake at Roundhay park, which is often the cause of the huge amount of flooding in the Wellhouses?

I shall need to check whether Gledhow will be covered by the transfer arrangements. I think it will depend on the definitions, but I will pursue the point. As for my hon. Friend’s second question, that is exactly what the council’s surface water management plans are intended to identify.

I pay tribute to the work of the staff of Leeds city council. I think it fair to say that the council has a pretty good national reputation for its work on flooding. Following the efforts to protect the people who have been affected by the flooding of Wyke beck three or four times over the past four years, they have certainly noticed a difference. For instance, one of the pilot schemes involved the introduction of flood guards and other flood protection, which has helped to prevent their houses from being damaged in future.

May I remind the Secretary of State that a great many people in Northumberland are still out of their houses following this year’s floods, and many more feel that their houses are vulnerable and will remain so unless the Environment Agency agrees to changes in river management? Will he use his good offices to ensure that his own Department deals with the serious damage to the harbour at Amble, and also to persuade the Minister of State, Department for Environment, Food and Rural Affairs, the right hon. Member for Liverpool, Wavertree (Jane Kennedy) to deal with the issue of funding for the district, county and unitary authorities?

I believe that the new chair of the Environment Agency will visit the region tomorrow to see how matters have been progressing, and I shall be happy to take up the issues raised by the right hon. Gentleman with the agency.

I welcome the money provided for Leeds city council to draw up a surface water management plan. Will the Secretary of State use his considerable influence in our city to ensure that the Liberal-Conservative-controlled council speaks to people like me so that we can raise the issues affecting people living beside Kippax and Collingham becks, people in Methley living by the River Aire, and people in West Garforth? Will he assure me that he will use that power to ensure that they speak to me, and to other councillors?

It is very kind of my hon. Friend to say that I have the power to make that happen, but I hope that all local authorities—including Leeds city council—always talk to all Members of Parliament in their areas.

The floods in the summer of 2007 affected four rivers in Chesterfield: the Rother, the Hipper, the Whitting and the Holmebrook. The Environment Agency moved quickly to draw up plans to prevent the worst two offenders, the Rother and the Hipper, from flooding again by introducing upriver catchment areas, but the Environment Agency has warned my constituents in the affected areas that it will be at least five to 10 years before Government money will be available to enable them to be built. Can the Secretary of State offer any hope of more urgent action, or is the Government’s response to residents of areas such as Alma street in my constituency, and many others, that they should simply cross their fingers and hope that it does not rain for another 10 years, because otherwise they will be flooded again?

I have great sympathy with the hon. Gentleman’s constituents who have suffered in the way that he has described. The Government’s job is to ensure that we play our part by providing more funding for the Environment Agency for flood defence work, and that is exactly what we are doing. I think I had been in the job for about a week when I stood at this Dispatch Box and announced an increase of £200 million over the three years to 2010-11. It is because we have been putting in more money that we have been able to protect an additional 37,000 homes since the summer of 2007, and 145,000 homes will be protected by the end of 2010-11. We all have a responsibility to ensure that we argue the case for further investment in flood defence, because that is the only way in which we shall be able to help the hon. Gentleman’s constituents.

Following the comments of my hon. Friend the Member for Stroud (Mr. Drew), may I refer particularly to recommendation 45 of the report? It states:

“The Government should be encouraging more local communities to promote innovative schemes, including contributing towards the costs”.

That has been done in the village of Elvington in my constituency, and there is a prospect of its being done in the village of Saxton. Should it perhaps be more of a priority for the Environment Agency, where possible, to provide technical advice and support for such schemes, as it is beginning to do in Yorkshire and the Humber?

That is a very sensible suggestion. I think it inevitable that communities and others will increasingly wish to participate in the carrying out of works, and in some cases contribute to the cost, on top of what is provided by Government expenditure.

My hon. Friend will be well aware of the benefits of big flood service schemes. Only yesterday, I saw a photograph of him sitting atop the defences at Selby that have been protecting his constituents.

When homes and businesses are flooded, very often the first help comes from the fire and rescue services—I speak from experience as the cellar of my constituency office was flooded last summer—but I am told that the funding formula for the fire and rescue services does not include any flood work or the resources to do that work. The Secretary of State said in his statement that he was also putting money into improving our flood rescue capability. Does that mean that the fire and rescue services will now get real support for the work that they do, which is so valued during times of flooding?

I agree with the hon. Gentleman about the skill, expertise and, in some cases, bravery of our fire and rescue services in helping people when flooding strikes, and I am sure all Members would wish to applaud them for that. The fact is that a considerable number of fire and rescue services have built up their capability; they have bought boats and undertaken training, for example. The additional money I am now providing is to help ensure we make the best use of the assets, because there are quite a lot of boats around from various sources and we must ensure both that they are in the right place when they are needed and that there is the personnel with the training to use them. That is what we should focus our efforts on. Most people not unreasonably think that if they are in danger because of rising water and they ring 999, they can expect the fire and rescue service to come and help. That is what the fire and rescue service does—its overriding responsibility is to help people in trouble.

First, may I welcome my right hon. Friend’s statement? It will give a lot of hope to those of my constituents who have had some very nasty experiences with flooding over the past few years. We have been working extremely hard to try to tackle the flooding that has taken place in my constituency, particularly in Great Sankey and Penketh, which has caused horrible experiences, sometimes for vulnerable people. That flooding has been caused by two things: in some cases, ineffective management of current water systems; and also the extensive building growth in Warrington over the past 20 years. Will my right hon. Friend make sure that there is effective information sharing and communication between the local authority, the Environment Agency and the utilities companies so that they can both manage current situations and plan for the continued housing growth that is due to take place in Warrington, as a designated housing growth area, over the next few years?

The single most important step we have taken to deal with the problem that my hon. Friend identifies is PPS25, because it clearly lays the responsibility with local authorities to take full account of flood risk in taking decisions. It gives the Environment Agency a statutory responsibility to be consulted—the agency is, after all, the expert. The experiences of my hon. Friend’s constituents, and of the many other constituents who have been talked about today by other Members, reinforce the importance of people getting themselves on to the flood warning system and of the practical change we are making to get more telephone numbers on the system, because if people get the phone call, the text or the e-mail—whichever they have asked for—they might be able to take upstairs the kinds of valuable possessions that have been mentioned, and they will not suffer quite as much as when they have been completely unprepared. We have a responsibility to get on that system; the number is 08459881188. If anyone is not on it, they should get on it, so they can get a warning if flooding threatens.

The source of the River Severn is in my constituency and settlements such as Llandrinio, Crew Green, Meifod, Bettws, Tregynon and Caersws have always lived with flooding. However, these communities are concerned that they could be deliberately flooded more often in order to protect larger conurbations downstream. Can the Secretary of State confirm that rural communities will not be sacrificed for the sake of towns and cities, and that we will instead find creative solutions that work for town and country alike?

We certainly do need to find ways of dealing with the problem in order to protect as many people as possible, but, as Members are only too well aware, in the end water is going to find somewhere to go. That is why understanding the likely path of that water and looking at the options for dealing with it is part of the process that we have now started and the responsibility that local authorities and others will take on.

I warmly welcome my right hon. Friend’s statement. I am sure he will recall that last year in both Barnsley and Doncaster in my constituency 5,000 homes were affected as a direct consequence of the bursting of the banks of the Rivers Dove, Dearne and Don. I certainly welcome the greater role local authorities will now play in flood alleviation, in the hope that they will be able to provide a more rapid response. However, will my right hon. Friend also look at trying to tap into the willing support from parish and town councils for their bigger metropolitan district councils in terms of methods of flood alleviation, even if it is only to provide more flood warnings?

I certainly would encourage the parish and town councils to get involved. The truth is that this is a job for everyone; and the sooner everyone gets on with it, the better we will be able to deal with it.

My constituents in Kidlington, west Oxford, South Hinksey, north Abingdon and south Abingdon have been flooded by five or six tributaries of the Thames, and the Secretary of State was kind enough to visit some of those communities last year. Some of them have been flooded four times in the past nine years, and they are terrified each time that it rains that it might happen again. Therefore, can the right hon. Gentleman explain why the timetable for the adoption of private sewers appears to have slipped to 2011, and might it be possible to front-load some of the funding in the spending plan, which would enable extra schemes that cannot otherwise pass the threshold to be started now and also give a boost, as part of the fiscal stimulus, to the construction industry, which could usefully do some of the work next year, rather than in two years’ time when some engineering firms may be out of business?

I do not think that the transfer of the private sewers will help the hon. Gentleman’s constituents; it depends on the source of the flooding, and it will take time to deal with that. Some of the houses I visited when I came to his constituency would certainly benefit from some of the flood resilience works—we saw some homemade versions as we walked around on that occasion. We have, indeed, brought forward expenditure. The £20 million identified in the pre-Budget report is in addition to the increase in expenditure we had already put in place, and it will allow more schemes to start earlier so that protection is provided faster than would otherwise be the case.

Points of Order

On a point of order, Mr. Speaker. You responded yesterday to the letter written to you last week, signed by my right hon. and learned Friend the Member for Rushcliffe (Mr. Clarke), the right hon. and learned Member for North-East Fife (Sir Menzies Campbell), the right hon. Member for Birkenhead (Mr. Field) and me. In that letter, we asked you to give precedence to our complaint of breach of privilege in respect of the arrest of my hon. Friend the Member for Ashford (Damian Green). You have declined that request, which means the House does not have the opportunity to consider whether the matter should be referred to the Standards and Privileges Committee. I wonder, Mr. Speaker, whether you will be prepared to give the House this afternoon your reasons for declining that request?

No. The right hon. and learned Gentleman knows well that I do not give my reasons. I have declined the invitation from him and his parliamentary colleagues, but I do not give reasons.

Further to that point of order, Mr. Speaker. Am I right in saying that nothing you said in your statement earlier today implies that the entry and search in the precincts of the House by the Metropolitan police was lawful, as asserted by them, or that the Police and Criminal Evidence Act 1984 overrides article 9 of the Bill of Rights, which protects our constituents’ confidential information, the national interest and freedom of speech in this House? To help to get to the bottom of all this and to protect those rights, I ask you, Mr. Speaker, to insist on the production of the Johnston report and that it be placed in the Library of the House. In order to avoid confusion on the question of criminal proceedings, will you be kind enough to do that?

The hon. Gentleman knows that last night I explained to him that I only got word of this matter when I came downstairs. I promised to come back to him and to the hon. Member for South Norfolk (Mr. Bacon). That I have done, through a statement that I made less than an hour ago. I have made my position clear, and I cannot expand on that.

Further to that point of order, Mr. Speaker. This is a separate point, but it is linked to both of your statements, which I heard and for which I am grateful, and to the points of order raised by the right hon. and learned Member for Folkestone and Hythe (Mr. Howard) and the hon. Member for Stone (Mr. Cash). You have made the position clear about the Committee and about giving your permission for a motion on standards and privileges, but there is the remaining ring-fenced issue of the report to consider. I understand that the report, which the Met police commissioned from another police force, the British Transport police, has either been completed or is in draft and is about to be completed. Irrespective of procedures that have been decided on by two of our Select Committees or that may happen later in this House, may we ask you whether you would be willing at least to request before we break for the Christmas recess that the British Transport police chief constable or the acting commissioner of the Met police furnish us with that report, so that all those in this House who have jobs to do to inquire into what happened when the office of the hon. Member for Ashford (Damian Green) was invaded by the police can have the facts, as discovered and assessed by the chief constable of the British Transport police?

This is not a matter before the House; this is a report that has gone from one chief constable to another. There is nothing to prevent the hon. Gentleman from requesting—

The hon. Gentleman does well on his own, without seeking assistance from me. I have set out what he should do. If he or any other hon. Member wants that report, they should ask the chief constable to produce it.

Further to that point of order, Mr. Speaker. Your ruling in respect of the Standards and Privileges Committee is, of course, entirely in accordance with the practice of the House; you have declined the request and, under your practices, you do not give your reasons. But I am sure you appreciate that it leaves us in an unusual situation, because there is a complaint, essentially, of a breach of privilege relating to the police entering these premises and the office of my hon. Friend the Member for Ashford (Damian Green). The Government have tried to set up one Committee of the House, which they have not, so far, been able to establish, and several Select Committees are inquiring into the matter, but the Standards and Privileges Committee is not empowered to discuss a rather serious matter of privilege. I wonder whether you would perhaps consider whether we should examine our practices and think of some other route by which the obvious Committee to consider this might, of its own volition, decide to conduct an investigation. It seems to me that the House is looking into this matter by every conceivable route apart from the obvious one, for which the Standards and Privileges Committee exists.

There is nothing to stop the right hon. and learned Gentleman raising that matter with the Procedure Committee, because it is the one that would look at the points he raises. Let us cast our minds back to the situation on 3 December. I made a statement and the House then made a decision on the Monday following. I stated that I wanted a Committee to investigate the matter and to look into all the circumstances, but then the House came along and made a decision. I know the arguments about the fact that there was a small majority, but there have been smaller majorities in this House. But I serve the House and the House has made a decision—I am bound by that decision, as long as the criminal proceedings go on.

Business without Debate

Delegated Legislation

Motion made, and Question put forthwith (Standing Order No. 118(6)),

Social Security

That the draft Christmas Bonus (Specified Sum) Order 2008, which was laid before this House on 26 November, in the previous Session of Parliament, be approved.—(Chris Mole.)

Question agreed to.

Motion made, and Question put forthwith (Standing Order No. 118(6)),

That the draft Child Benefit (Rates) (Amendment) Regulations 2008, which were laid before this House on 25 November, in the previous Session of Parliament, be approved.—(Chris Mole.)

Question agreed to.

Motion made, and Question put forthwith (Standing Order No. 118(6)),

Tribunals and Inquiries

That the draft Transfer of Tribunal Functions and Revenue and Customs Appeals Order 2009, which was laid before this House on 26 November, in the previous Session of Parliament, be approved.—(Chris Mole.)

Question agreed to.

Consolidated Fund Bill

Motion made, and Question put forthwith (Standing Order No. 56), That the Bill be now read a Second time.

Question agreed to.

Bill accordingly read a Second time.

Question put forthwith (Standing Order No. 56), That the Bill be now read the Third time.

Question agreed to.

Bill accordingly read the Third time and passed.

Banking Bill (Programme) (No. 3)


That the following provisions shall apply to the Banking Bill for the purpose of supplementing the Orders of 14 October 2008 and 26 November 2008 (Banking Bill (Programme) and Banking Bill (Programme) (No. 2)):

Proceedings on Third Reading shall (so far as not previously concluded) be brought to a conclusion one hour after the commencement of proceedings on the Motion for this Order.—(Chris Mole.)

Banking Bill

Third Reading

I beg to move, That the Bill be now read the Third time.

We had an interesting debate on Report last month, and I am grateful to everyone who took part in it and to the Members of all parties who have contributed to the debate as the Bill has passed through this House. We very much appreciate the continuing cross-party support for this crucial legislation, and I am grateful for the help and co-operation from all parts of the House in achieving the challenging timetable imposed on this Bill by the sunsetting of the Banking (Special Provisions) Act 2008 in February of next year. In particular, I thank those Members who served on the Public Bill Committee, and I am grateful for the good spirit and constructive approach that all sides took to those sittings. The Government have listened to a number of the arguments made, and I believe the Bill has been improved as a result.

These are challenging times for financial markets and economies across the world, and I believe that the Bill is a timely package of reforms to improve the UK’s framework for ensuring financial stability and protecting depositors. The Government have taken decisive action to protect the UK’s financial stability during this turbulent period, including measures to recapitalise and strengthen the UK’s banking sector and provide support to institutions facing difficulties, but the need for a permanent strengthening of the legislative framework in this area has been clear.

As we have debated at length during the past few months, this legislation will provide the authorities with the tools they need to resolve effectively failing banks while protecting financial stability, depositors and taxpayers, and minimising the disruption to the wider economy. Other measures in the Bill will enable the Financial Services Compensation Scheme to make faster and more efficient compensation payments and will strengthen the Bank of England’s role in financial stability, with a new objective for financial stability and enhanced tools for pursuing it.

The Minister refers to the bank rescue package. When the Chancellor came before the House, he said that the implications on the public finances of that package were mostly temporary. Could the Minister set out for us which of those arrangements will have a non-temporary—a more permanent—impact on the public finances, so that the House is clear on that?

I agree entirely with what the Chancellor said to the House. The hon. Gentleman will be aware of the statement that the Chancellor made and the information that is available in government, which, if he looks at it, he will find provides him with the answers he seeks to the question he raises.

At this point, I should briefly mention the two additions to the Bill that my right hon. Friend the Chancellor signalled in his recent pre-Budget report. They will increase the legislation’s effectiveness in allowing the authorities to deal with risks to financial stability and to safeguard London’s competitiveness as a global financial centre. First, they will extend the Treasury’s powers under the special resolution regime to allow it to take bank holding companies into temporary public ownership in cases where the resolution of only the deposit taker or deposit takers within a banking group would not, by itself, be sufficient to prevent a serious risk to financial stability, public funds, or both.

The second addition is a response to the experience of the administration of the UK subsidiary of the failed US investment bank, Lehman Brothers—Lehman Brothers International (Europe). The Government propose to take a power in the Banking Bill to introduce, by secondary legislation and after a formal review, a new special insolvency procedure for investment firms that hold client assets or client money. The expert liaison group, which I set up earlier this year, will help the Government in this area. Lord Myners, the Financial Services Secretary, intends to table these amendments for discussion in Committee in the other place.

On 26 November, the Government Chief Whip in the other place set out how we intended to proceed with the Banking Bill in the current Session, with the support and agreement of the usual channels. The No. 2 Bill that was introduced in the other place yesterday is identical in every respect to the Banking Bill that we are considering today, and the procedure allows the other place an additional fortnight to consider the Bill, which I am sure hon. Members will agree is entirely to the benefit of all concerned.

As the House will be aware, the Banking Bill was carried over to the current Session and, if hon. Members consent today, it will complete its passage in this House and go to the other place tomorrow. At that point, the No. 2 Bill will be dropped and all further consideration in the other place will be on the Bill sent from this House today.

Although the aims of the Bill are laudable, I wonder whether the Minister is sure that it will do enough. He may not have had the chance to listen to Sir Victor Blank on the radio this lunchtime talking about the Government bail-out. He said that the recapitalisation scheme was highly necessary—and we all support it—but he also pointed out the problem that the banks now have with regard to lending because of the Government’s new capital requirements. Does the Minister agree that those requirements are preventing the banks from lending the money that businesses need?

I was in meetings so I was not able to hear what Victor Blank said. He is obviously a serious figure in the business community and we will want to take due account of his views. We meet him on a regular basis, and Ministers and officials are well aware of his and his company’s position on these issues. From what the hon. Lady says, his comments would not appear to refer directly to legislation appropriate under the long title of the Bill, but she raises an important point.

The whole House has appreciated the action taken by the Government to recapitalise the banks to avoid the potential systemic risk to the financial services in this country. We need to continue to do all that we sensibly can in these difficult times, and that is one of the reasons why we have been considering whether further action is needed. I indicated the two areas in the pre-Budget report that suggested how the Bill could be strengthened in the other place, and I think that we have broad support from both sides of the House for those sensible measures. However, they will of course need to be thoroughly scrutinised in this House and in the other place.

I am aware that there are some areas where Opposition Members may still have some concerns, but we went some way towards resolving those in Committee and in amendments on Report. I would like to take this opportunity to provide an update on progress in some of those areas.

As hon. Members will be aware, clause 75—the power to change law—attracted significant interest in Committee and on Report. It will provide the Treasury with a power to amend legislation to enable the powers of the special resolution regime to be used more effectively. As we discussed in Committee, this is not a general power to amend legislation; it is targeted and limited. It may only be used in order to facilitate a resolution and, in using it, the Treasury must have regard to the special resolution objectives set out in clause 4.

In Committee, I agreed that I would ask the expert liaison group to consider whether the amendments brought forward on Report—particularly the explicit exclusion from the scope of the power of the provisions of the Bill and underlying secondary legislation—would help to reduce the possible impact of the existence of this power on legal certainty in relation to financial contracts. The hon. Members for Fareham (Mr. Hoban) and for South-East Cornwall (Mr. Breed) and I are at one in recognising the importance of legal certainty in relation to contracts. I am pleased to report that when the expert liaison group met earlier this week, it agreed that this amendment would indeed do this. We are continuing to engage with the group on this issue, and of course the power will also be scrutinised carefully in the other place, not least by the Committee on Delegated Powers and Regulatory Reform.

I appreciate the need for flexibility in these difficult financial times. Will that clause or any other give the Government the power to set up a bank in an emergency that can take over bad debts from other banks to provide a possible solution to a financial crisis?

I know that the hon. Gentleman has raised that issue before on several occasions. Clause 75 would not do what he suggests. As I say, the clause provides a targeted and limited use of power to change law to make the special resolution regime work as effectively as possible. He will be aware, from the special resolution regime detailed in part 1 of the Bill, of the exact procedures necessary—who pulls the trigger, who operates the special resolution regime, and how the parties work together. We believe strongly that the range of measures that we have in place are a substantial improvement on the Banking (Special Provisions) Act 2008, and that is one of the reasons why we want to ensure that they reach the statute book in a timely manner, given the fact that the Act is sunsetted in February.

The Minister may remember new clause 2, which I tabled on Report, with the support of my hon. Friends the Members for Stroud (Mr. Drew) and for West Bromwich, West (Mr. Bailey). It addressed the remutualisation of failed former building societies. Every building society that was privatised in the 1980s and 1990s has failed in the past few months of this crisis. When I was asked by the Minister not to press the new clause to a Division, he said that the existing legislation would provide sufficient powers for financial institutions that emerge from the present crisis to become mutually oriented if that was desired at the time. Will he meet us to discuss that point, because mutualism provides a robustness and responsiveness that other financial structures do not, as we have seen in the past nine months?

It certainly remains my understanding that the legislation is sufficient to take into account those issues, but I would be more than happy to meet my hon. Friends to discuss that in more detail.

I now turn to the issue of partial transfers and the safeguards that the Government will put in place to protect creditors, and particularly to reduce disruption to set-off and netting agreements and security interests. I know this issue was of great interest to members of the Committee, and rightly so. Again, I can report that, when the expert liaison group met earlier this week with officials from the Treasury, the Bank and the Financial Services Authority, they continued to make good progress towards providing for safeguards that will maintain the right balance between ensuring that the authorities have the necessary flexibility to ensure an effective resolution, while protecting creditors’ and counterparties’ interests.

We are continuing to work closely with the group on refining the safeguards and, of course, we are conducting a wider public consultation. We aim to be in a position to report back, including on the results of the consultation, early in the new year. I repeat the commitment that I have made on previous occasions—I see the process of producing the secondary legislation as being one of co-production. We want to work in detail with the industry to ensure that we get the secondary legislation absolutely right and that there are sufficient safeguards to protect creditors’ and counterparties’ interests. We understand the importance of that for the industry.

The Bill represents the Government’s considered response to some of the key lessons learned during this period of financial instability. It provides a permanent addition to the country’s system for financial stability and depositor protection, and these arrangements will provide the UK authorities with a refined and proportionate set of tools to deal with difficulties in the banking sector that can affect depositors and the wider economy. It is vital to get the proposals right and to ensure that the UK’s framework is sufficiently robust to deal with future as well as current challenges. So I am grateful for the thoughtful and constructive scrutiny that the House has given to the Bill, especially in the Public Bill Committee but also on Second Reading and on Report. I am sure that that constructive spirit will continue during this debate.

The Bill is a vital piece of legislation that will enhance the ability of the authorities to secure the financial stability of the UK both now and in the future, and I commend it to the House.

I am grateful to the Minister for his explanation of the Banking (No.2) Bill procedure, as it seemed rather odd to be giving this Bill a Third Reading when a Bill that was identical to it except for the title was given a Second Reading in the other place yesterday. That was a sign of the way in which we have sought to co-operate with the Government to ensure that the Bill reaches the statute book before the Banking (Special Provisions) Act 2008 expires in February next year. As the Minister said, we have sought to engage constructively as the Bill has passed through the House. We have not always agreed on some of its provisions, but we have sought to ensure a full discussion and full scrutiny.

I am grateful to my hon. Friends the Members for South-West Hertfordshire (Mr. Gauke), for Braintree (Mr. Newmark), for Gosport (Sir Peter Viggers) and for Wellingborough (Mr. Bone) for their contributions in Committee. My hon. Friend the Member for Gosport was one of four members of the Select Committee on Treasury who served on the Public Bill Committee, along with the hon. Member for South-East Cornwall (Mr. Breed). The deliberations of the Treasury Committee in the aftermath of Northern Rock and financial instability contributed a great deal to our consideration of the Bill in the Public Bill Committee.

We supported the Bill on Second Reading and we do not intend to oppose it on Third Reading. That does not mean that it is perfect, and, as the Minister said, there are and have been some significant concerns about it. Those concerns were particularly evident when it was first published. We welcome the fact that the Government listened not just to the concerns that we expressed in Committee but to the wider concerns of the financial services sector. We teased out some of the sector’s concerns in Committee, particularly when its representatives gave evidence to the Committee. The Minister has sought to respond to those concerns. We welcome the amendments to the Henry VIII powers in clause 75, as well as the establishment on a statutory footing of the banking liaison panel in clause 10. The Minister referred to the work of the panel.

We also welcome the fact that the Minister sought to consult widely on the secondary legislation and the code of practice. The Bill gives the tripartite authorities—the Treasury, the Bank of England and the FSA—quite extensive powers. Safeguards over the use of the powers are included in the secondary legislation that flows from the Bill and in the code of practice. Only when the legislation is seen as that package will outside bodies take comfort from the shape it is in.

It is worth remembering that the Bill has a very narrow focus. In the context of the current financial crisis, it deals principally with measures to tackle the problems associated with a failing bank. Its provisions do not address the re-opening of credit facilities to bank customers. Although it gives the Bank of England new statutory responsibilities for financial stability and gives it oversight of the payments system, it does not address issues such as the macro-prudential regulation of the banking system, a topic that has provoked considerable debate both in Parliament and outside.

Even on the issue of which banks are included, the Bill is narrowly focused. Clause 2 describes a bank as

“a UK institution which has permission under Part 4 of the Financial Services and Markets Act 2000 to carry on the regulated activity of accepting deposits”.

That means that bodies such as Icesave are excluded. Icesave was a branch of an Icelandic bank, and branches are excluded from the Bill. None of the provisions in the Bill would have helped the depositors of Icesave who, in some respects, are still waiting for compensation following the collapse of the Icelandic banking system.

A point that we raised in Committee, which the Minister sought to address, was that the Bill covers only deposit takers and does not take into account institutions that are fundamental to the stability of the banking system and do not accept deposits. We therefore welcome the amendments that the Government propose to table in the other place to deal with institutions that accept client assets and trade. In Committee, we discussed Lehman Brothers, where there have been significant problems with the administration arrangements because the tools are not in place to do the job. We welcome the move to amend the Bill, but I am sure that my noble Friends in the Lords will look very carefully at the amendments that the Government propose to table.

At the heart of the Bill are the increased powers being given to the tripartite authorities to intervene when a bank is failing and powers through the special resolution regime to enable them to resolve the problems of a failing bank. Part 1 sets out the special resolution regime and establishes the framework for putting a bank in the special resolution regime and the powers that can be used by the Bank of England or, where appropriate, the Treasury to deal with a failing bank. We talked extensively in Committee about the objectives of the special resolution regime. I do not particularly want to dwell on those subjects at this point, although I want to come back to the issue of financial stability later on.

Although the Bill does not rank the objectives given, it has been clear from our debates that one of the most important objectives is the protection of depositors and particularly of retail depositors. Effective arrangements to protect deposits are important if we are to ensure confidence in the banking system. We saw in the context of Northern Rock the close relationship between confidence in the banking system and the moves by depositors to withdraw their funds.

The decision to put a bank into the special resolution regime rests with the FSA, as set out in clause 7. The Bill states that a bank will be subject to the special resolution regime when it has breached the FSA’s threshold conditions, which are defined in the Financial Services and Markets Act 2000 and defined more closely in the FSA’s rule book. As currently drafted, the threshold conditions are quite broad. The Minister and I discussed the location of the head office, for example, as a threshold condition, and there are other conditions that apply to insurance companies, for example. I was grateful for the Minister’s assurance in Committee that the FSA is considering the threshold conditions.

We need to see increased clarity about what will constitute a breach of the threshold conditions. The FSA determined that the recent bank failures at Bradford & Bingley, Heritable and Kaupthing had breached the threshold conditions but, two and a half months later, we are no clearer about how they breached those conditions.

We did not make as much progress in Committee as I had hoped on the question of ensuring transparency about the use to which the Bill’s powers will be put. That transparency also applies to the threshold conditions, and I hope that the FSA will bear that in mind when it looks at the issue.

The special resolution regime established three stabilisation options—a private-sector purchaser, a bridge bank and temporary public ownership. They will be implemented through the stabilisation powers and the transfer of shares and property. The most controversial aspect of the stabilisation regime is the bridge bank, which is the vehicle that permits the partial transfer of assets and liabilities. That proposal caused the most contention between the Bill as originally drafted and as it stands now.

We have seen a form of the bridge bank in operation already, with the dismemberment of Bradford & Bingley. Its depositors and other assets were sold to Banco Santander, while the rump of the business has effectively been nationalised by being left to the taxpayer.

Some hon. Members present today did not attend the Committee stage of the Bill, so it is worth pointing out that the controversy stems from the fact that the partial transfers were regarded as a way to allow creditors’ traditional rights to be unpicked by Government action. The rights included the arrangements governing how transactions are settled in the City. Certain types of transactions are covered by agreements that enable deals to be settled on a net basis, according to their balance at the end of the day, rather than on a gross basis.

Regulatory capital is determined on the same basis, so there was widespread concern that the lack of proper safeguards could mean that there was no legal certainty that in-default transactions could be netted off. That legal uncertainty would have made London a more expensive place to do business and undermined our competitive position. That was one source of the comments made by the financial services sector when the Bill received its Second Reading.

The Government have taken on board those comments, and their moves in respect of netting off are very helpful. In principle, they are saying that we should follow the path of netting off and then considering exceptions, rather than setting out the qualifying financial contracts at the start. That change has been greeted positively by the financial services sector, and we look forward to the outcome of the consultation process in January.

Investors have also been reassured by clause 60, which provides mandatory compensation to third parties where there has been a partial transfer. It adopts the principle that no creditors should be worse off than they would have been if the bank had gone into administration or liquidation. Although that is relatively easy to say, it may be difficult to implement in practice, as the process involves a great deal of judgment by the valuer, but it gives creditors some reassurance that their rights will be properly valued.

We have touched already on the banking liaison panel set out in clause 10, which will include representatives from the tripartite authorities, the FSCS and the financial services sector, as well as people with a particular knowledge of insolvency and financial services law. I have spoken to people in the City over recent weeks and my sense is that they welcome the panel as an effective way to look at the secondary legislation that will be introduced.

As I said, the Bill is a package: in addition to the secondary legislation that will follow, it sets out in clause 5 a code of practice that will give guidance on the exercise of stabilisation powers and the bank administration and insolvency procedures set out in parts 2 and 3. We saw an early draft of the code while the Bill was in Committee, and I am sure that a further draft will be available to Members in the other place once the consultation process is completed next month.

The code is important because it sets out the circumstances in which the powers will be used. The greater the clarity about how the powers will be used, the more confidence there will be in the operation of the overall regime, but that also means that there should be much greater transparency about why powers have been exercised.

I repeat that two and a half months have passed since Bradford & Bingley was subject to a bridge-bank type process, while Kaupthing and Heritable were put into administration at the beginning of October. However, there has not been that much in the way of greater transparency about the process through which the FSA and the Government went to get to that outcome. The financial services sector will learn a great deal from the explanation that is given about the exercise of those powers at that time, and that will enable it to predict more carefully how the powers in this Bill will be used in the future.

We have touched already on the Henry VIII clause in clause 75, and the feedback that the Minister gave on the comments from the banking liaison group was very helpful. Clearly, however, those in the other place will look at those powers, as that is an area about which they are especially concerned.

Another part of the Bill that is important in terms of the overall structure of protection for depositors deals with the changes to the FSCS. The scheme is one of the principal means by which we can protect depositors, as it gives them confidence that they will be compensated if their bank goes into administration. That needs to be thought about very carefully as the Bill proceeds through the other place, but part of the problem is that some of the detail about how deposits are to be protected will be dealt with in reforms introduced by the FSA. That is more work in progress, and it shows how difficult these matters are.

I have spent some time looking at this Bill over the past few months, and I could talk for hours about it. On this occasion, however, I shall desist from going into more detail, although I will say that more work will be done in the other place to streamline and strengthen it. The Bill is important because it should strengthen people’s confidence in the banking sector and in London as a place to do business, but it is only one of the measures needed in that regard. Other moves need to be made to restore confidence in the banking sector as a whole.

I shall be brief, as I know that other hon. Members want to contribute to this relatively short debate.

It seems a long time since we were in the midst of the Northern Rock debacle, but there has been a very considerable amount of water under the bridge and to some extent the Bill’s provisions have been overtaken recently by other events. Nevertheless, the Bill is important and the Minister knows that we support it.

I do not want to say much on that, save that there are some very welcome aspects. The banking liaison group is a very positive innovation that will be helpful both now and in the future. It also cements the sort of relationship that we need with the City in respect of matters that at times can be very delicate. If we do not get our response right, the consequences could be very profound, and it is important that we bear that in mind.

The Bill does not cover important issues such as bank liquidity and capital, the appointment and qualification of directors, risk committees and so on, but they will have to be considered fairly soon. Therefore, to a certain extent this Banking Bill is just the first chapter of a continuing work in progress that we will have to keep looking at over the next few months. However, because there is a sunset clause in the Banking (Special Provisions) Act 2008, we have to put something on the stocks and the Bill can do that.

Inevitably, there are still some concerns about exactly how the provisions will work, and the hon. Member for Fareham (Mr. Hoban) has outlined them. We must hope that many of the provisions will not actually be required. If they are, we could be in a lot more difficulty. The Bill is a bit like bolting the stable door after the horse has gone, but it is extremely important nevertheless that it is on the stocks, although if we have to use some of its provisions we shall be looking at some stark situations.

We debated the amount for the Financial Services Compensation Fund in Committee and there was some disagreement about whether there should be pre-funding, which is, rightly, not on the agenda at present—clearly, the banks need all the capital they can get. One element that we did not much explore was public opinion. We have to recognise that public opinion is not particularly disposed to the provision of significantly more bail-out money. Although there are some objections to pre-funding, and even about its practicality, the industry has to realise that the idea that it can regularly come back for public bail-outs at much cost will not be sympathetically considered.

The Bill sets out protection for depositors, which is important. That security, with timely payouts, is right. It was a great shame that the vast majority of the depositors in the Northern Rock queues were already protected under the deposit fund so they did not actually need to worry. They did not know that, because the fund was not particularly well known or advertised, so we need to do some real education following the Bill to make depositors aware of their protections and of what they can expect to happen. We need to give them confidence, so that if there are some ripples they will have a clearer understanding that they are protected, and that they do not have to whiz-round suddenly and take out a few thousand pounds of their hard-earned savings.

Banks are undoubtedly one of the most capital-hungry businesses—they are always seeking capital. I have concerns that the provisions may set up some hurdles to the capital-raising exercises that will be important. Even if there are no hurdles, the process will be much more expensive than in the past, which will have an effect on the cost of money generally. We need to recognise that there will be genuine costs if banks are unable to amass or attract the capital they will need both for their own stability and also to operate effectively for themselves and for the economy.

Mention has been made of the significant powers that have been given to the FSA and the Treasury, and there are inevitably concerns about them. The Minister has given us some reassurance, at least in respect of the Treasury powers, which is helpful, although there will always be concern about whether the FSA will use its triggers appropriately. We shall have to see. Overall, the situation is satisfactory. The thresholds for the safeguards may be a little low, but all such assessments are subjective, so it is difficult to prove one thing or the other.

Our debates on Report were truncated because of the need to prorogue. If we had had the full time, we might have reached the amendment that my hon. Friends and I tabled to deal with the necessity for a sunset clause. Just as the Banking (Special Provisions) Act was sunsetted, we shall need to revisit some of the Banking Bill’s provisions in more peaceful times, given that we have been considering it during a crisis-type situation. I hope that at some stage the Government will give our proposal some thought.

I thank the Minister and other members of the Committee. The Minister was courteous and good humoured in sometimes difficult circumstances. Overall, we support the Bill. We hope that it will be further scrutinised in the other place and that it will reach the statute book before the previous measure expires.

I remind the House of my business interest recorded in the register.

I, too, welcome the Bill, and I do so for two reasons. First, it begins to put the Bank of England back at the centre of our financial system, which the Treasury Committee recommended in its major report on the Northern Rock crisis. Some of the Committee’s recommendations have found their way into the Bill; for example, streamlining the court of directors and giving the Bank more explicit power over financial stability. I hope that the Government will follow up those changes by giving the new deputy governor, Paul Tucker—whose appointment I welcome—the resources he needs to rebuild the Bank’s ability to understand what is happening in the banking markets and to monitor the financial system much more thoroughly. That is an important and long overdue change. Those powers and that ability should never have been taken away from the Bank of England.

Secondly, the Bill makes improvements to depositor protection, as the hon. Member for South-East Cornwall (Mr. Breed) said. I am not quite clear how the arrangements that the Economic Secretary proposes will be superseded by what was agreed in Brussels earlier this month. Perhaps the hon. Gentleman could clarify that. If he does not have time to answer me today, perhaps he could write to me. I understand that there will be an overarching European Union framework for the number of days before depositors are fully refunded, which may be even more leisurely than the arrangements canvassed in the UK. I should be grateful for some clarity.

We hear constant references to temporary public ownership. What is missing from the Bill is any understanding that the arrangements being made for the ownership or part-ownership of five of our major banks will not be temporary; they will be with us for a very long time. Further legislation may be required, but I should have liked the Government to make an attempt in the Bill to set out some rules about how those public stakes are to be managed—my hon. Friend the Member for Fareham (Mr. Hoban) referred to that point. We have heard that the shareholding is to be directed by UK Financial Investments, which is to be set up as an arm’s length body, but it is not clear whether the company will require statutory approval. It is not clear how UKFI will be accountable, although I certainly hope that it will be accountable to the Select Committee. We should all understand that, although the Government keep calling this stuff temporary, it is likely to be with us for a long time, so issues such as competition policy—suspended for the nationalisation of the two Scottish banks—will need to be readdressed if we are ever again to have sufficient and proper competition in the banking system.

I have now twice said—on 17 October and during the Queen’s Speech debate—that the various measures produced to tackle the financial crisis have been necessary but are not yet sufficient. More will need to be done to get banking flowing again so that money can reach our home owners and businesses. I welcome the extension of the credit guarantee scheme earlier this week and the Treasury’s admission that it will last for five years, not three—nothing temporary about that. It could be a very permanent feature of our financial landscape. However, I suspect and fear that even those measures will not be sufficient and the Government may have to revisit some of the features of that desperately short weekend when the Scottish banks were nationalised. Of course, the due diligence was rushed, as I have already pointed out, but some of the terms set out over that weekend may have to be looked at again, because the money and the credit are not yet flowing, which everybody wants to happen.

That said, I welcome the Bill and hope that it makes it to the statute book in reasonable time, although even if it gets there in February, it will still be 18 months after the collapse of Northern Rock, which is fairly leisurely progress for a legislature that should have responded much more quickly and an Executive who are constantly behind the curve. However, I welcome the passage of the Bill today.

I, too, will keep my remarks brief. As the Economic Secretary knows, Opposition Members wholeheartedly support the Bill’s aims and have been calling on the Government to produce such a Bill for some time, and we therefore wish it a very fair and speedy passage. Of course, we want it on the statute book by February, but in the light of the Governor of the Bank of England’s remarks earlier this week, when he set out a rather worrying picture for the future of our banking industry, the best option would be for that to happen as soon as possible. It was somewhat surprising for someone in his position to make things quite so worryingly clear.

I want to make a few remarks about the Bill. As my hon. Friend the Member for Fareham (Mr. Hoban) said, we should remember how all this started, with Northern Rock some 18 months ago, when our banking system began teetering on the edge, as it has continued to do ever since. One of the reasons why the Northern Rock fiasco—crisis—came about was that, under the old rules of banking legislation, when the Bank of England offered emergency liquidity, it had to make that known. That was, in itself, a recipe for the disaster that followed.

In future, under the Bill’s miscellaneous provisions, which seems a minor section in which to put an important provision, such emergency liquidity offered by the Bank of England can remain secret. Clearly, although transparency is something to be desired, in a situation that can cause a run on a bank, as happened with Northern Rock, the new rules are much better, and I am glad that the Government have learned the error of their ways, inasmuch as a rescue will be attempted before the public take fright and start to queue around the block at various branches of whichever bank might be in trouble. I welcome that important provision.

I agree with my hon. Friend the Member for Sevenoaks (Mr. Fallon) that, although it is nice to see the Bank of England taking more of the centre stage in the regulation of our banking industry, there is more to be done in that respect. There are still problems with regard to the powers of the FSA and the Bank of England. Clarity of decision making is very important in what we now know to be such a crucial part of our economy. We are not letting banks fail—they are just too important—and someone therefore needs to be exclusively in charge. I hope that that role will be considered in future banking legislation.

Finally, my hon. Friend the Member for Fareham, who speaks from the Front Bench, has played a much bigger role in considering the Bill than I have, and I am very glad about that because he has clearly gone into the detail. I was encouraged when he said that there is now broad agreement that the Government have got largely right their provisions for the SRR and that there is much more happiness in the banking industry and among Conservative Members about how that would take place. If I have one concern about this crisis, it is that when it is over—it will be over, eventually—the City of London remains an important institution for UK plc. Although we are very angry with the banking industry for the trouble that it has led us into, we must be careful in any future legislation to ensure that it remains an important part of our economy in future. We must ensure that the City is open for business and is the most attractive place to do so. It is very tempting to penalise the banking industry for how it has behaved and for what it has done, but, although we obviously have to put right what has gone wrong in our banking industry and give people confidence in it in the future, we must keep sight of the broader picture for the UK. We have a lot of jobs in the financial sector, and we want to continue to attract banks to London with fair and rational provisions that govern how any such similar situation will be dealt with.

These are, as the Economic Secretary pointed out, momentous times for this country’s banking and financial services industry, which has, as my hon. Friend the Member for Bromsgrove (Miss Kirkbride) has just said, become an increasingly important element of the UK economy over the past two decades. It had importance before, but its status, and, indeed, the knock-on effect of any problems for other important commercial cities and towns in this country, let alone the City of London, should not be underestimated.

I believe that in an ideal world—perhaps it is fair to say that we are not living in an entirely ideal world—it is important that any legislation is not over-rushed. I appreciate that there have been tumultuous events in the financial markets, and I suspect that that will be so for some months to come. However, in so far as anything is foreseeable—I accept that some eventualities are not—we should avoid putting our banking industry into too much of a straitjacket.

I am also the first to accept, however, that the days in which both I and, indeed, my hon. Friend the Member for Fareham (Mr. Hoban) perhaps talked easily about the idea of light-touch regulation are done—at least, for now. I confess that even relatively sophisticated high-net-worth individuals—we have seen what has happened to such investors in one of the world’s largest hedge funds in recent days—have to concede that those days will, I fear, come to an end.

As my hon. Friend the Member for Bromsgrove pointed out, the future for London’s financial centre will not be enhanced by low-regulation arbitrage, vis-à-vis other financial centres going forward. Clearly, that will not be the spirit of the age for some time to come. I must confess that I am also concerned about the City of London’s future role as a world financial capital. We must be entirely candid about the fact that some permanent damage has been done by recent events—indeed, the same applies to Wall street—and the whole Anglo-American model of financial services will need to be shaken up.

Clearly, the Bill plays an important part in that process, but we must regard this as work in progress in the weeks, months and, indeed, years ahead. That can only be further undermined by some of the unfolding scandals, and I am sure, I fear, that we have not heard the last of them. Nevertheless, I hope that the Government will take some heed of the quiet concerns of many people in the banking world. Many representations have been made to the Government during the consideration of the Bill, but although they broadly express support for the workings of the Bill, there are some concerns about how the compensation system will work.

I should like to reiterate the concerns of my hon. Friend the Member for Sevenoaks (Mr. Fallon), who hit the nail on the head. We must look at the whole issue of competition law. Above all, as we have seen with the banking mergers that have taken place and the lack of independence for some banks, there is concern that competition considerations have been flung aside. We are living in tumultuous and difficult times that are bewildering for the public and for policy makers as well; but equally, we must remember that competition law is enacted not as an added layer of regulation but to protect the consumer.

The bigger concern of many people is that smaller banking organisations and small organisations in the financial services world run the risk not only of perhaps over-contributing to a compensation fund, but of exiting from a lot of markets in the financial services world, simply because of those competition concerns. All too often, enhanced and enlarged regulation is a big barrier to entry for new competitors in what should be a vibrant field, full of innovation and flair.

My hon. Friend the Member for Fareham rightly pointed out that some specifics will be considered in another place in January in relation to netting and set-off in the context of clause 48, but I should like to say finally that, although this is billed as temporary legislation, there is no doubt that, as my hon. Friend the Member for Sevenoaks said in his contribution, many of these measures will stay in place for quite some time. That means two things: first, we clearly need to give very great consideration to what we put on to the statute book at this stage—that has happened here and will happen in another place in the next few weeks of the parliamentary Session—but, more importantly, we recognise that this must be work in progress. I hope that the Government will pay great attention to what is being said in the banking and related industries to ensure that, where unforeseen problems arise in relation to the legislation, they are fully and properly dealt with.

I am grateful for the opportunity to speak in the debate on the Third Reading of this important Bill, which comes at an important time in this country’s financial history. I, too, am delighted that the Bill will put the Bank of England back at the centre of regulation. There is further to go, but I must confine my remarks to the contents of the Bill.

I note that the Bill proposes an increased regulatory role for the Financial Services Authority. There are still huge concerns among Conservative Members—and, I am sure, among Labour Members—about the suitability of the FSA to deliver on that enhanced role. The FSA seems to have missed all the warning signs leading up to the banking crisis and all the warning signs in the mortgage market, and there has been a simple loss of confidence in its ability to deliver on its important role. A few moments ago, I was talking to my hon. Friend the Member for Sevenoaks (Mr. Fallon) about the need to restore confidence in the regulatory regime. What happened at Northern Rock must not be allowed to happen again, and the Bill goes some way towards ensuring that it will not. My hon. Friend pointed out that the run on the bank happened because, despite assurances from the Government, the FSA and the Bank of England that there was nothing to fear about losing deposits and that those deposits were safe, the public quickly worked out that no one was in charge. As we move forward, we need someone who is seen to be in charge of regulation, so that the buck stops with him or her. I hope that the Bill sets those wheels in motion; if it does not, I am sure that we will revisit the subject in the very near future.

I wish to declare some of my interests. I hope that NatWest will continue to provide me with its overdraft. I am a Royal Bank of Scotland pensioner, prospectively, and I hope that it will be able to pay out on that pension. More importantly, I have an interest in the City, working for Tokai Tokyo Securities, which covers some borrowers in the markets, including, now, some of the UK banks.

When one sits down here in solitary at the end of the Chamber, there is a danger of having over-profound thoughts, but I want first to make some more fundamental remarks about the implications of the Bill. Over time, the Government undertook an excellent preparation for the Bill as regards the consultation that went with it. That was a useful process that means that it will be robust in terms of dealing with the crises that will come next year. We would all hope that it will not be necessary to employ this legislation, but it is inevitable that there will be further nationalisations with the oncoming second leg of the financial crisis after Christmas.

The Bill gives additional powers to the Bank of England. It has to be asked, bearing in mind the significant failures in recent years, whether that is the right route to take. I appreciate that we have to work with the institutions that we have, and that there is only so much progress to be made by criticising the Bank and the FSA. However, the Bill represented an opportunity to give the Bank responsibilities for asset prices; obviously, that concern will now be on the downward side rather than on the upward side. The Bill should also have given more support to maintaining the banking department of the Bank of England, which is being wound down, rather extraordinarily at this time of a banking crisis. An opportunity should have been taken—

Order. I remind the hon. Gentleman that passing reference to what is not in the Bill is allowed, but he must now concentrate on what is in it.

I think that I will take this opportunity to desist, Madam Deputy Speaker, because colleagues look keen to move on to the next business of the House.

In conclusion, good work has been done in the Bill to provide the basis of speedy intervention in any future banking crisis. However, I hope that the Government will consider the introduction of the means to set up a bad bank—a solution that could deal with the crises that will be upcoming in the next two months.

Question put and agreed to.

Bill accordingly read the Third time and passed.

On a point of order, Madam Deputy Speaker. I do not want to try the patience of the Chair, but over the past few weeks I have received many cards from people saying “Season’s Greetings”. Can you confirm that this House is rising for the Christmas recess, not a seasonal recess, and will you join me in wishing all hon. Members a very happy Christmas, as we would wish them happy Diwali, happy Hanukkah, or happy Eid?

The hon. Gentleman is correct in as much as this House will be adjourning tomorrow for the Christmas recess. I thank him for his kind remarks on my behalf and on behalf of the other occupants of the Chair.

Value Added Tax

I beg to move,

That an humble Address be presented to Her Majesty, praying that the Value Added Tax (Change of Rate) Order 2008 (S.I., 2008, No. 3020), dated 24 November 2008, a copy of which was laid before this House on 24 November, in the previous Session of Parliament, be annulled.

Let me move on from the end of term spirit to a very serious issue, which is the motion to annul statutory instrument No. 3020 relating to value added tax. There are two reasons to be concerned about the VAT change, and we want to register that fact from the Opposition Benches. Some people do not believe that there should be a fiscal stimulus or think that it would be damaging; I expect the Conservatives to make that case in due course. My approach and that of my colleagues is somewhat different: we have no objection to the principle of a fiscal stimulus, but we think that this is a bad one that is not likely to be effective even on its own terms.

Perhaps I should start with the Chancellor’s own language in the pre-Budget report, when he declared:

“I have decided that the best and the fairest approach is a measure which will help everyone”—[Official Report, 24 November 2008; Vol. 495, c. 483.]

and said that he proposed to give back some £12.5 billion to consumers. Our view is that that is not the best and fairest approach, that it will not help everyone, and that it certainly will not give £12.5 billion back to consumers. That is not to say that it is completely hopeless. There is a case for providing a fiscal stimulus through this measure that does not rely on “best” or “fairest” or consumer stimulus. It is a somewhat mechanical approach. What will happen—we can already see it happening—is that this measure will be absorbed in increased retail margins for everything from small shops to Sainsbury’s, Asda and Tesco. Of course, that is putting money into the economy; no doubt if Tesco earns a little bit more profit as a result, that will be reflected in its share price and feed through into pension funds. If the Government had been honest with us and said, “Actually, this has got nothing to do with helping the consumer—it’s all about putting £12.5 billion into the economy in the quickest way we can think of, and it’s marginally better than dropping money from helicopters”, we would find it difficult to quarrel with the logic. However, they have not done that—they have grossly overstated their case, and so we need to have a look at it and at its weaknesses.

The policy makes extraordinarily optimistic assumptions about the course of the economy. It assumes, as was said in the pre-Budget report, that we expect a recovery in 13 months from now. Because of that very optimistic view of the course of the British economy, this measure could have some perverse and negative consequences that were clearly not thought through in the Treasury. As we approach the end of next year, most people will have to look forward to an increase in VAT that may be greater than a return to 17.5 per cent.—to reopen the whole issue of what the Government really intended—as well as an increase in income tax, although it is called national insurance. Most rational consumers will calculate that they face a reduction in real income and adjust their budgets and spending patterns accordingly.

There is another, more subtle effect at work. Most economic forecasters now expect that next year we will see something that we have not seen for decades, possibly generations—namely deflation, whereby prices fall as they did in the 1930s and at various times in the 19th century. That is now factored into the assumptions of some of the money markets, so the Americans talk about it quite openly.

In a deflationary world, prices fall. When consumers see prices falling, they hold back from spending, so the VAT cut has the perverse effect of encouraging deflationary expectations. That encourages people to spend less, rather than more. Those are two possible perverse consequences of the measure. I am not predicting that that would happen, but before we glibly assume that the VAT cut is simply an injection of consumer spending, I am pointing out factors that could work in the opposite direction.

Secondly, on the impact of consumer behaviour, we need to take into account the fact that we are talking about a very small change. Mr. Steinbrück, the German Finance Minister who has often been quoted in the Chamber in the past few weeks, chose a singularly unhelpful example: he asked, rhetorically, whether people would respond to a change in the price of a DVD from £39.90 to £39.10. That is quite a good example, and I can give others: one that I have quoted in the past is the £5 off the £220 flat-screen TV from China. There is also the example of 60p off a £25 meal. One can question how much that is likely to influence the behaviour of a rational consumer.

Will the hon. Gentleman explain why he is opposed to giving a typical household in his constituency a tax break of £300 next year? That is what the VAT reduction does.

I shall go on to explain that we would provide the tax cut in a better, fairer and more effective way. My colleagues and I are not opposed to cutting taxes for our constituents; we just think that the tax cut could be done more intelligently and in a more targeted way.

There is another cost factor related to the smallness of the cuts. Many shops are discounting aggressively. In an environment in which shops are cutting prices by 20, 25 or 30 per cent., the effect of the change in VAT is invisible and therefore likely to have very little impact. Before I leave that point, there are a couple of issues that I would like the Government to address. The first is a very specific but important point raised by the British Retail Consortium, which has been thinking ahead and worrying about the effect that the change will have at the end of next year. It has said:

“Retailers are extremely concerned at the Government’s intention to end the temporary VAT reduction on 31 December 2009. This would fall in the middle of the post-Christmas sales, one of the most important times of year for the retail industry…We believe that Government should reconsider the end date with a view to extending it by at least a month.”

Whatever general arguments we make about the retailing impact, that is a specific technical point that I hope the Government will have taken on board. Of course, the change that the British Retail Consortium suggests would not affect the overall arithmetic.

On that specific technical point, has the hon. Gentleman noticed that the order that we are debating has an end date of 30 November 2009? The Government are relying on other legislation, not yet laid before the House, to extend the VAT reduction until 31 December.

I hope that that is a sign that the Government have an open mind about when the boom is due to occur. That is a helpful intervention, and it points to some of the inconsistencies involved.

I have a final point to make about consumer impact. One particular sector concerned about how the tax change will feed through is road hauliers, who can of course get relief from value added tax but who will be paying increased duty on their fuel. The issue is of particular concern to hauliers operating in rural areas, and the retailers who depend on them for their supply. I wonder whether the Government have thought about the cost implications of the fact that the combination of changes to VAT and to vehicle excise duty will particularly affect rural distribution. That is of concern to many of my colleagues and to people in other parts of the country.