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Commons Chamber

Volume 485: debated on Thursday 18 December 2008

House of Commons

Thursday 18 December 2008

The House met at half-past Ten o’clock

Prayers

[Mr. Speaker in the Chair]

Oral Answers to Questions

Treasury

The Chancellor of the Exchequer was asked—

Banks (Rescue Package)

1. How much the Government have committed to the banking rescue package; and what assessment he has made of the package's outcome to date. (244629)

The measures that I announced in October have stabilised the banking system, and inter-bank lending rates have fallen. The three-month LIBOR rate halved to just over 3 per cent. this week.

In the present circumstances, a Government who intervene are far better than one who would sit on their hands, and the Government have been right to rescue the banks, get funds to small businesses and bring forward capital spending. Will they now consider creating more public sector jobs, providing funding for partnerships between public authorities and businesses, and taking a public stakeholding in businesses that need it and have a viability beyond the current downturn?

I agree that it is important for public expenditure to support the economy at this stage. As my hon. Friend says, we have brought forward spending in relation to housing, transport and other matters, and we will continue to do whatever is necessary to support our economy. The difference between the Government and the Opposition is that we believe that Government have a role here. We are prepared to increase expenditure to support the economy, as I announced in the pre-Budget report, and we will continue to do that.

Given the deputy governor’s warning yesterday and the evidence that credit is continuing to contract, will the Chancellor look again at the capital requirements applying to banks, and indeed the terms of his October rescue package for the Scottish banks, to ensure that spending really is getting through? Will he inject some urgency into this process to prevent hundreds of thousands of jobs from being lost unnecessarily?

The hon. Gentleman raises a very real issue relating to bank recapitalisation. In October, the Financial Services Authority, along with the Bank and ourselves, agreed that it was necessary to recapitalise the largest banks in the country. The FSA is considering that level of capitalisation, and, as part of the Basel process, it is also, along with others, considering the effect of the requirements of capitalisation in relation to the current economic circumstances—the procyclicality, as it is described. I agree with the hon. Gentleman that the issue needs to be looked at.

As for the two banks in which we have shareholdings, the House will know that there is a requirement for them to maintain the availability of lending at 2007 levels. Since the announcement, RBS in particular has said it will ensure that it treats its small business customers far better than in the past, and that they will benefit from the interest rates being offered.

There is a lot more to be done. The hon. Gentleman is right to speak of urgency, given the situation that we face at present. We—the Government, the FSA or the Bank—will continue to do what is necessary to help to ensure that sufficient lending comes into the economy, while at the same time ensuring that the banks are resilient enough for the future.

Is the Treasury tracking the behaviour of banks in Northern Ireland, including Ulster bank, a wholly owned subsidiary of the RBS, which is not offering business customers the standards, terms and rates offered by the RBS here? Can the Chancellor assure small businesses that they will not be caught in a vice between tax demanded and money unavailable for borrowing next month, which marks the beginning of a new VAT and PAYE quarter and the deadline for tax returns from those who are self-employed?

We monitor the lending of banks in every part of the United Kingdom. If the hon. Gentleman knows of specific instances in relation to the Ulster bank, I should be grateful if he would tell me about them. We have a lending panel that examines the concerns of small businesses, which is regularly chaired by my noble Friend the Secretary of State for Business, Enterprise and Regulatory Reform.

As for the problems relating to payment of tax, the hon. Gentleman will recall my announcement in the pre-Budget report that Her Majesty’s Revenue and Customs was introducing a scheme that would give people time to pay not just VAT, but corporation tax and income tax—indeed, all taxes. That facility is now available, enabling people to pay their bills over an extended period, and I am glad to say that it is being well used. We are aware of the problems that would otherwise be caused to small businesses’ cash flow.

Does it remain the Chancellor’s policy that it is better to use public resources to get the banks lending again than to use them to give direct support or subsidy to particular industries?

I do not favour what is sometimes termed a one-club approach. I think that it was right for us to use public money to recapitalise the banks where that was necessary—some of them had raised money privately—and we will continue to do that. As for direct lending, in the pre-Budget report I announced the provision of £1 billion to help small and medium-sized enterprises specifically. I also said that we would think about how we could implement the Crosby report and support mortgage lending.

A variety of measures are needed, but they are all doing the same thing: they are all aimed at supporting different parts of the economy. I must tell the hon. Gentleman, however, that if we are to do any of these things, it is also necessary to be prepared actually to spend the money. Otherwise this will become merely an empty promise, like the promises being made by his Front-Bench colleagues.

Does the Chancellor agree that one of the quickest ways to get people back into work is through the construction industry, and is he aware that a number of local authorities are ready, willing and able—and have got the land—to start building council houses again? Bolsover district council, for example, has made representations to replace some old bungalows and to build some more as well. Will he encourage these local authorities—Labour controlled—to get moving again?

I agree with my hon. Friend that it is important that the public sector supports the construction industry; if public money were not going into housing, and into schools, hospitals and other construction projects, the industry would be in a far worse position than it is in even now. That is why we have brought forward permission for local authorities and other public bodies to spend money. That is very important, and if councils are not doing that, people should ask them why not, because we have made it clear that we are prepared to allow spending to be brought forward in all parts of the country. We have also made it clear to the devolved Administrations that they, too, can bring forward their proposals, and we look forward to receiving them.

The Chancellor said he will do what is necessary to help the British economy, but it is now clear that we will have the worst recession of all the G7 countries. Does the Chancellor feel that it might be necessary to visit the IMF and ask for a financial bail-out?

Because of the sheer size of the financial services sector in this country and because the financial services sector is affected by a global recession right across the world, we are, of course, bound to be affected by that, but, as I said to the House at the time of the pre-Budget report, I am confident we will get through this. I have set out how I believe we can do that, and it involves the Government being prepared not just to borrow to support what are known as the automatic stabilisers—the rising benefit payments and so forth that we get in any downturn—but to do more than that by putting £20 billion more into the economy, as that is the right thing to do to support the economy and therefore to support jobs.

Following the revelation only this week that taxpayer-supported and guaranteed banks lost hundreds of millions of pounds in a pyramid selling scheme, I want to ask the Chancellor about curbing gambling activities. There is a certain amount of emotional appeal in the Conservative leader’s proposal that bankers should be rounded up and put behind bars, but is not a more practical and immediately useful suggestion that the banks should be required to divest themselves of their high-risk investment banking operations and concentrate on mainstream lending to British households and firms currently being deprived of credit?

I agree with the hon. Gentleman that there are serious questions to be asked in the United States about the particular matter to which he refers, and I think I am right in saying that the chairman of the American Securities and Exchange Commission has indicated that there needs to be a thorough investigation there. However, I also think it is important that all banks—the boards of all companies, in fact—should know and understand the risks to which they might become exposed. The evidence of the last year is that far too many banks were not fully aware of those risks or did not make sufficient provision against those risks turning bad. The hon. Gentleman is right that we need to learn the lessons of what has happened in the past, which is why I said I wanted to bring forward proposals in the spring to look at aspects of our regulatory system, but that must also be done across the world. The G20 group of leaders and Finance Ministers discussed that at the meeting in Washington in November, and we will discuss it again when we reconvene in London in April.

Now that the Government have accepted the recommendation that we have been making for some time to reduce the cost of inter-bank guarantees offered by the Government, will the Chancellor also now accept our advice to reduce the cost of the preference share capital offered to the banks?

In relation to the cost of the scheme, I said when we made the announcement that we would keep all the terms and conditions under review. We were the first into the field. Since then, other countries have come up with schemes of their own, and it is right that we keep these matters under review. As I said in the House when asked about preference shares on Monday, we will look at that, but I want to make sure that we balance the need to ensure that the banks lend to the business community and individuals with the fact that the taxpayer must get a fair deal. The Conservative Front Bench raised that in October, and it is right to do so again now as that concern has not gone away.

Government Borrowing/Debt

2. What his most recent estimate is of the levels of Government borrowing and debt; and if he will make a statement. (244630)

I note the Chancellor’s comments. Given the responses that we have had from him, the future looks bleak indeed. Does he agree with the German Finance Minister’s view that this Government’s policies will saddle the country with debt

“that will take a…generation to work off”?

No, I do not. I wish to say three things on that. First, Peer Steinbrück is an extremely charming man and I enjoy working with him very much. Secondly, I fully supported him when he introduced a fiscal stimulus into the German economy of about 1 per cent.—that is almost exactly the same as what we have done—some time ago. Thirdly, our debt levels are lower than Germany’s.

The business community in my constituency has emphasised to me that the Government’s priority must be to have measures to sustain our manufacturing base, so as to maintain our tax base for the future. Can my right hon. Friend assure me that he will not listen to the scaremongering and siren voices from Opposition Members, and that he will ensure that support for business is maintained as the Government’s priority during this economic downturn?

I agree with my hon. Friend that it is important that the Government support business. That can be done in a variety of ways, both indirectly and directly, as appropriate. Of course, we need to balance that with a need to ensure that we have proper regard to the public finances and the interests of the taxpayer. He is right to say that at a time such as this all the measures that the Government are examining are designed to help businesses get through what is undoubtedly a difficult period.

Despite the record levels of debt that the Chancellor is predicting for the next five years and beyond, he continues to assert that Britain is uniquely well placed to deal with this downturn. On what basis has he come to that conclusion?

The hon. Gentleman is right to say that our debt levels will rise over the next period. That is partly because it is inevitable in any downturn such as this that the Government’s revenues will fall and the unemployment benefit payments that we have to make will rise. The operation of the automatic stabilisers, to which I have referred, is supported on both sides of the House—indeed, the Leader of the Opposition said that he supported it—and it accounts for the major increase in the Government’s expenditure. As I said, it is also necessary for us to put more money into the economy. If we look ahead, we will see that during the next year we will have low interest rates and far lower inflation than in the past, and energy prices will continue to fall, which will help in relation to what people pay at the pump and must also affect the amount that people pay for gas and electricity. Of course, in addition, we reduced the amount of debt from the level that we inherited when we took office in 1997, and we will continue to do everything we can to support the economy.

Is this not rich coming from the Conservatives, who, as my right hon. Friend has said, support the automatic stabilisers, which account for the vast majority of the increase in debt and borrowing, and who have two major recessions behind them? Is it not outrageous that, as the official Opposition, the Conservative party is the only one in this House that does not support—

Order. The Chancellor has enough to do without worrying about what the policies of the other party are. I think that he can answer.

I agree with my hon. Friend. The difference is that whereas during this downturn we are prepared to take action to help people and businesses, that simply did not happen in the 1980s and 1990s, and the country paid a very heavy price.

As the hon. Gentleman knows perfectly well, the market for trading in Government debt is pretty thin and it really cannot be compared with the trading of Government debt in relation to companies.

Although there is a great deal of risk in not doing anything, there is a certain amount of risk in what is taking place. Does my right hon. Friend agree that even a 1 per cent. financial stimulus in the economy may not be enough? Will he comment on the possibility of considering further financial stimulus in the new year because of the level of the global economic downturn and its effect in constituencies across this country?

The announcements that we made in the pre-Budget report were right. As my hon. Friend says, the risk of not doing anything was far outweighed by the advantages of taking action. In the current climate, there is no Government in the world who are not looking every day at what else they need to do, but while it is right to allow borrowing to rise now, we must ensure that we take the right action to ensure that borrowing falls and that we come back into current balance within a reasonable period. That is what I said in the pre-Budget report and that remains the Government’s position.

The Chancellor plans to increase taxes by £40 billion to reduce Government borrowing, but will not the planned £5 billion tax hike on jobs hamper our recovery? Does he not realise how much damage this borrow now, pay later policy will cause?

Assuming that the hon. Gentleman agrees with his party’s leader, he supports the decision to allow borrowing to rise through the operation of the automatic stabilisers, and that accounts for about £60 billion of the borrowing. I know that he does not agree that we should go further, but his approach is just plain wrong. We need to ensure that as the economy comes out of this period—as it recovers and starts to grow—we bring our borrowing back down. It is better that we should do that and I set out in the pre-Budget report a fair way of doing so.

Small Businesses

3. What assessment he has made of the likely effect on small businesses of the measures announced in the pre-Budget report. (244631)

The impact will be very strongly positive. The package addresses small businesses’ cash-flow problems, their access to credit and management of their tax liability. The fiscal stimulus will be crucial in encouraging economic recovery.

My constituency has a fair number of large multi-storey former cotton mills, the basements and upper floors of which are difficult to let. How temporary will the 70 per cent. relief on non-domestic properties be, and how will it affect a business man who owns one of those mills, pays the business rates and then sub-lets to a multitude of other smaller businesses?

My hon. Friend is right to draw attention to the benefits of this measure. It is a temporary increase, to £15,000, for next year only—2009-10—in the threshold at which empty property becomes liable for business rates. As he says, some 70 per cent. of empty properties will pay no rates next year as a result. He asked about subdivided properties. Their position will depend on the nature of the division and whether the property constitutes a separate, self-contained hereditament for ratings purposes. A landlord who is concerned should check the liability with the Valuation Office Agency.

Does the Minister accept that for small businesses this is a relatively small package compared with the overwhelming effect of the unwillingness of many banks to lend to them? Does he also accept that the Government mis-structured their huge package in such a way that the banks have an incentive to pay it off as quickly as possible and to get their loan books down rather than up? It is that circumstance that is driving the recession more than anything else.

No, that is not the case at all and the PBR package directly addresses those concerns. That is why the chairman of the Federation of Small Businesses said:

“This Pre-Budget Report is a sign of the importance of small businesses to the UK economy.”

It fully addresses their needs and that is why the package includes a £1 billion small business finance scheme, to encourage bank lending to small and medium enterprises, and an additional £1 billion facility to help smaller exporters. The range of measures is accurately targeted at the problems that small businesses are facing at the moment.

If the Government are to pump further taxpayers’ money through the banking system, can my right hon. Friend give the House an undertaking that that will be limited to the nationalised banking sector and specifically tied to extending loans to small and medium businesses?

My right hon. Friend will know that conditions addressing exactly that point have been attached to the Government recapitalisation contributions to the two major banks that have received them. We will of course continue to keep the position under review.

Will the Minister tell the House when he expects small businesses to be able to access the £1 billion fund? Many are in dire need at this moment at time.

Yes, I certainly do expect them to be able to access it. The full details of the new scheme will be set out at the beginning of the new year by my noble Friend the Secretary of State for Business, Enterprise and Regulatory Reform. Other measures that we have put in place are already effective, such as the small business support service for firms with a tax bill due that are facing temporary financial difficulty. They have been able for some weeks now to call up the HMRC hotline on 0845 302 1435, which is available seven days a week.

As well as Marston’s brewery, in my constituency there are many small businesses called pubs. They are extremely concerned about measures in the pre-Budget report relating to alcohol excise duty and the alcohol duty escalator. Would my right hon. Friend and his ministerial colleagues reconsider those measures because they are hurting pubs, which are vital to our communities?

The change in the VAT rate has been offset in the way that my hon. Friend describes. The position for the coming year is as my right hon. Friend the Chancellor has set out, and of course we will look at the future rates of alcohol duty in future Budgets in the normal way.

For the 1,500 people losing their jobs and the 60 small businesses going bust every single day, the Government are not tackling the recession. The Government’s small business loan guarantee scheme will not even be up and running until mid-January and even then it will not cover 99 per cent. of loans to companies. Does not the Minister agree that that is too little, too late, that he should get on with our national loan guarantee scheme and that Britain is facing the deepest recession of any G7 country because we have the most incompetent, ineffective Government?

The hon. Lady should have a word with some of her colleagues on her Front Bench. I agree with her that it is right for the Government to address these problems, but that contrasts with the policies of those on her Front Bench, which are the policies of do nothing. Those were the policies that we saw in the catastrophic recessions under the last Conservative Government and they are being repeated by Conservative Front Benchers now. The policies that we are putting in place are directly addressing precisely the challenges that small businesses are facing, and that is why such an ambitious and effective package was set out at the time of the pre-Budget report.

I have listened to my right hon. Friend’s response and to the questions from other hon. Members, but I want to inject a slightly more positive note into the discussion by flagging up the work of the Springboard Fund, an offshoot of Business Link based in Devon and Cornwall that resulted from the sale of Business Link. The fund has just had its 100th inquiry in the short time since it has been set up from a group of people who want to set up new businesses. There is real interest in setting up new businesses, despite the downturn. People are going to the Springboard Fund because the banks are not opening their doors—

Like my hon. Friend, I welcome and support the measures that the Government have in place and that the regional development agencies are supporting to encourage new enterprise. She is absolutely right that there are some very attractive opportunities for new businesses, even at this very difficult time. It is quite right that we should be working with those who are encouraging entrepreneurs to come forward and make a success of new businesses.

Economic Recovery

4. Which sector of the economy he expects to lead economic recovery following the economic downturn; and when he expects such a recovery to begin. (244633)

There was not much Christmas cheer in that answer from the Chancellor. In just over 180 days, according to the pre-Budget report, growth is supposed to resume in the UK economy. Given the mounting and ever-greater tide of difficult news about the economy and even the prospect of deflation, does the Chancellor stand by the statement he gave in his answer? Secondly, can he cite anybody outside the Treasury who actually agrees with what he has just said?

Yes, and the forecasts that we set out were broadly the same as the Bank of England’s, which are entirely independent of ours. This country has a choice: we can either let the recession take its course, which is the policy that the Conservative party seems to advocate, or we can decide to take action to help people and businesses. That is the path that we have chosen.

Does my right hon. Friend agree that, although sterling’s depreciation against the euro in particular will result in an increase in some input costs, overall it should provide an environment for a substantial increase in agricultural production? That will result in increased investment in food processing and manufacturing, creating more jobs and displacing imports, which we will need in the next few years.

My right hon. Friend is right that depreciation can help our exporters, but we must ensure as well that countries right across the world also take action to support their economies so that there are markets to sell into. That is why I welcome what France, Germany and other European Governments have done to support their economies, as their actions will create the right conditions to encourage and support our exporters.

Does the Chancellor agree with his Cabinet colleague the Olympics Minister, who said this week that this is the worst recession that any of us have ever experienced?

It is true that, right across the world, we are facing conditions that we have not seen for generations. The IMF has forecast that, for the first time since the second world war, all the major economies will move into recession in 2009. That is why it is all the more necessary for every country in the world to do everything that they can to support their economies. That is what underpinned my approach to the pre-Budget report, and I am sorry that the Conservatives do not share that view.

Does my right hon. Friend agree that a strong manufacturing sector will be vital when the economic recovery comes, and that the motor industry will be central to that? In addition to the welcome moves being made by the European Investment Bank, a number of European countries are offering additional lines of support to their motor industries. Will my right hon. Friend say what further plans he has for the British motor industry, to ensure that lines of credit and liquidity are kept open?

My hon. Friend knows more than many Members of the House the importance of the motor industry to this country. It is worth noting that, even in 2007, our automotive industry produced almost as many cars and vans as it did in the heyday of British car manufacturing in the 1970s, so there are many good success stories that we can point to.

The automotive industry is being affected by the downturn, as is to be expected. As my hon. Friend knows, my noble Friend the Secretary of State for Business, Enterprise and Regulatory Reform has been having discussions with some manufacturers. We will do everything we reasonably can to support the industry, but there are two things that I should like to say. First, the primary responsibility for financing a company lies with those who own it, and we must also be mindful, not only of the difficulties in the motor industry, but that other industries will be affected by the downturn. Secondly, we also have to have regard to the interests of the taxpayer. That is of critical importance, and people need to understand that.

In his answers, the Chancellor has quite rightly emphasised the economy’s exposure to the financial sector, and the role that that plays. Does he concur with the comments ascribed to Deputy Governor Bean on the front of the Financial Times today that there is a very high expectation of further capitalisation being required for the banks?

I did see the front of today’s Financial Times, and I read the full transcript of what the deputy governor said. He was musing on a number of different matters, and in the current climate it is sensible to keep under review the circumstances of the banks all the time, just as other countries are doing. The key thing is to make sure that the banks are strong enough to resume lending, and that we get them to make that lending. There has been huge public support for the recapitalisation of the banks, and for the guarantees on lending and the special liquidity scheme. That support is very substantial.

As I said earlier, we keep these matters under review all the time. I will continue to do whatever is necessary to maintain the banking system, because it is central to supporting the wider economy.

This recession is global and whenever the recovery occurs, a skilled work force will be extremely important. Will my right hon. Friend therefore keep under consideration the Train to Gain budget to ensure that our skills base has not been eroded when the recovery comes?

My hon. Friend is right about that. As we come through the recession and start to see growth and recovery, there will be tremendous opportunities, but most of them will go to countries that have highly skilled and motivated work forces. We lost out badly in the 1980s and 1990s because, when the economy slowed, the reaction of the then Government was to cut back on a lot of skills and training. There are now more apprenticeships, more people with skills, and more people going to universities. We are investing heavily in science, and in many other areas we are taking the right action to ensure that we have the right skills for the future. The World Bank estimates that the world economy will double in the next 20 years, and we need to be ready to take full advantage of that when it happens.

Income Support Mortgage Interest

5. What discussions his Department has had on the criteria to be used in determining how to calculate income support mortgage interest after May 2009. (244635)

The standard interest rate for support for mortgage interest has been frozen for six months at 6.08 per cent., rather than falling in line with Bank of England base rates as would normally be the case. We will review the position and consider what arrangements should apply beyond May 2009.

I thank the Minister and the Chancellor for the action taken on this issue in the pre-Budget report, but can she give me any assurances today that the help that the 62 per cent. of mortgage holders on fixed rate deals will get from the Government from May, if they lose their job, will reflect the amounts that they have to pay rather than be linked to the Bank of England base rate?

The hon. Gentleman has raised this important point before. The standard approach would be for the standard rate to fall with bank rates as bank rates are cut. However, we know that a lot of people are on fixed rates, and many have mortgages with banks that have not yet passed on the full rate cuts. Many have seen a reduction of about £100 per month in their mortgage payment as a result of base rate cuts, but others are not benefiting. We will certainly take those issues into account, but the hon. Gentleman will appreciate that it is hard to predict at this stage where base rates will be in May and where individual mortgage rates will be.

Labour has done a great deal for pensioners in recent years, but in these very difficult times, does the Minister have any plans to review the calculation that results in a 10 per cent. notional rate of interest being placed on pensioners’ savings before they can qualify for benefit? Pensioners find that difficult to understand, and I must say it is difficult for anyone to understand.

I know that my hon. Friend has raised this issue with the Department for Work and Pensions and he will also know that we are clear about the importance of supporting pensioners through difficult times. That is exactly why, as part of our fiscal stimulus, we are providing an extra £60 to every pensioner in the new year. That is the right thing to do. It is funded by additional borrowing to help support the economy, and sadly it is something that the Conservative party has opposed.

May I take the Minister back to the original question? What increase does she expect to see in income support mortgage interest relief as a result of the current bust?

We are both freezing the rate and expanding eligibility, and we believe that that is the right approach to take, because by that means we are making relief available to those who have lost their job and been out of work for more than 13 weeks rather than for the full 39 weeks to which the relief used to apply. That is the right thing to do and the relief will apply to more people. We have set out costings as part of the approach to the pre-Budget report. It is certainly clear that this is about providing more support to people at a difficult time.

European Investment Bank

6. What assessment he has made of the availability of European Investment Bank funding to businesses through UK banks. (244636)

British small businesses should be able to benefit from around £4 billion of lending from the EIB between 2008 and 2011. As announced in the pre-Budget report last month, after negotiations between UK banks and the EIB, £1 billion of EIB funds will be available to British small firms by the end of the year. This has now been approved by the EIB.

I am grateful to my hon. Friend. Business people in Stafford are coming to me with ideas for modern, innovative new projects. When they ask the banks for funding, it is not that the banks say no; they just freeze and make no decision at all. Given that entrepreneurial spirit is the lifeblood of the country, and all the more vital in these difficult times, can I go back to those businesses and say that now they can go to their bank and get access to EIB funding?

Yes, he can. Loans are already being made by UK banks using EIB funds. I refer my hon. Friend to media coverage only yesterday; Barclays bank has been making funding available to companies through the European Investment Bank. The question now is for UK banks to disburse quickly and efficiently and pass on the full benefits associated with EIB funds to the small businesses that my hon. Friend was talking about—that are innovative and need those funds to help them to stabilise and grow for the future. That is exactly what is happening and more will be coming in the future.

The Minister has just said that this money is available in 2008, so as of today—18 December 2008—can he tell us just how much money has been forthcoming through the European Investment Bank?

As I explained, since the pre-Budget report and our agreement with the banks, approval processes have been going through the European Investment Bank. If the hon. Lady reads yesterday’s edition of The Daily Telegraph she will see that Barclays bank has £300 million available for lending to businesses. I encourage all small businesses to look to their bank managers and engage in conversation with them, and to make application for funding that is there at the moment and will continue to be available for the future. On top of that, early in the new year the small business finance scheme will also be available. That is real action being taken by the Government, not the gesturing of the Conservative party.

Balance of Payments

The pre-Budget report forecast the current account deficit of the UK balance of payments to narrow in the second half of 2008 and in 2009, with net trade forecast to add three quarters of a percentage point to gross domestic product growth next year.

Is that not an incredibly complacent reply? Is the Financial Secretary not ashamed that having inherited a trade surplus in 1997, our deficit last year was the worst since records began—when William of Orange was on the throne? Is it not a disgrace that the trade deficit in manufactured goods has grown from £7 billion in 1997 to a staggering £59 billion last year? Why do the right hon. Gentleman and the Chancellor never talk about the balance of trade? Is it any wonder that the pound is falling so sharply?

I remind the hon. Gentleman that there have actually been quite a few occasions in the past when the current account deficit was higher than it is now. To give him one example, it was 3.8 per cent. in the third quarter of 2007, but it was 4.9 per cent. in 1989 and it is more than 5 per cent. now in the United States. Our strategy is to ensure strong competition in every UK market by promoting openness to free trade, minimising product market regulation and ensuring that there are world-class competition authorities. That is the strategy we are pursuing and we will do so successfully.

The Minister is right: for the first time in a number of years the trade deficit will narrow to about £50 billion for each of the next three years and there will be a net benefit to GDP growth rather than the 0.25 to 0.5 per cent. suppression that we seen since 2000. However, the forecasts in the pre-Budget report were made before the continuing collapse of sterling which makes imports much more expensive. Will the Treasury commit to give a new assessment early in the new year based on the current sterling situation?

Of course we will constantly monitor developments in the economy, as my right hon. Friend the Chancellor emphasised, but we stand by the forecasts we set out in the PBR and our strategy is absolutely the right one.

Government Finance

We have received representations covering a wide range of issues, including discussions with a series of national and international institutions which support the case for higher borrowing to support the economy.

Does the Chief Secretary accept a representation from me that, by the Treasury’s own figures, the national debt is set to double by 2012, to £1 trillion? Will she confirm that, for next year, Government borrowing as a proportion of our national income will be higher than when Denis Healey went to the International Monetary Fund?

I should perhaps point out to the hon. Gentleman that borrowing as a proportion of gross domestic product will be not dissimilar to the level that it reached in the early 1990s, when, in fact, the Conservative party doubled the national debt in the space of just five years in response to a home-grown recession, when it did not have an international, world financial crisis to deal with on a scale that we have not seen for many generations. We think that the right thing to do is to increase borrowing right now to support the economy, so that we can come through this faster and stronger.

The German Finance Minister, in talking about the borrowing that the Government are proposing, described the result as a complete failure of Labour policy. Will the Chief Secretary perhaps explain in what way that was an internal political comment in the German context?

As my right hon. Friend the Chancellor has already explained, the Germans have in fact increased their support for the economy with a fiscal stimulus earlier this year. We think that they were right to do that, and we will judge them on what they do, rather than on what they say. It is rather amusing that Conservative Members are now taking to quoting Europeans whom they would never have quoted before in support of their economic strategy, and they continue to be isolated—not just in Europe, but right across the world—in their opposition to action to help people through this and to support the economy right now.

Topical Questions

Figures released yesterday show that unemployment has risen to its highest level since 1997, with a 7 per cent. increase in the past three months in the Yorkshire and Humber region alone—devastating news for people just before Christmas, as well as a huge burden on the taxpayer. The economist, George Buckley, has said that, because unemployment is normally a lagging indicator,

“to see so many job losses this early in the economic cycle is extremely worrying.”

Does the Chancellor agree with that? If he does, is the Government’s rescue package therefore simply not good enough?

No. I believe that it is necessary, though, for us to do everything that we can to help people who lose their jobs. That is why, in the pre-Budget report, I set aside a further £1.3 billion to help the Department for Work and Pensions and Jobcentre Plus in particular, so that if people lose their jobs, we can help to match them with vacancies. It is worth bearing in mind that, even during the past month, more than 200,000 people went into work—they found new jobs—and we need to ensure that we match those people who may lose their jobs with the vacancies currently in the economy. We are taking action, but, of course, the other action that we have taken to stabilise the banking system and provide wider support for business will help as well, but I am determined to do everything that we possibly can to ensure that we help people who lose their jobs.

T7. Once crimes are committed, heavy costs fall to the criminal justice system, whereas the costs of prevention largely fall to other bodies and organisations. I am thinking of mental health, education and skills and community engagement. Will the Chancellor give fresh thought when making allocations to disbursing funds in ways that reward those organisations, bodies and agencies that work co-operatively and help the process of preventing crime and penalise those who insist on staying within their own silos? (244662)

My right hon. Friend is right that we have far more effective results not only if we work on prevention, rather than on simply ameliorating the problems later on, but if we can get better co-ordination between agencies. That is why we have been supporting the local area agreements between councils, the police and other local organisations and doing that more widely as well. We are keen to do more to ensure that funding works in that way and supports the kind of partnership action that can, as he says, deliver results.

The director general of the CBI has just sent a letter to all his members that says:

“Until this underlying issue—getting credit flowing around our economy—is resolved, economic activity cannot begin to recover”,

that the Government have failed to

“address the root of the problem”

and that, until they do,

“other government initiatives to mitigate the recession will be ineffective and expensive failures”.

When will the Prime Minister and the Chancellor swallow their pride, accept that the bank recapitalisation plan has not rescued the economy and introduce a national loan guarantee scheme, which we have proposed and which this country needs?

The purpose of the recapitalisation scheme, which was clearly stated when I set out the proposals in October, was to ensure that the banking system remained viable and to rescue it from imminent collapse. We did that, and other countries right across the world did the same. I said at the time, and I say again today, that we will continue to look at that scheme to see how it can be improved and further strengthened. The director general of the CBI, to whom I spoke last night, is quite right to say that we need to do more to ensure that banks lend in the wider economy. It is important that we ensure that banks are sufficiently strong to do that, but it is also important to make sure that lending takes place.

As for the hon. Gentleman’s proposal, it is an empty promise. He talks about a national scheme, yet he has quite explicitly said that the Conservative party would spend no more money; it would do absolutely nothing, so the promise that he makes is empty. Instead, he should perhaps pay greater heed to what the chairman of the CBI said—that although there might be a cost to the fiscal stimulus, the cost would be far greater if we did nothing.

The national loan guarantee scheme is supported by every single business organisation. It is exactly equivalent to the inter-bank guarantees that the Government have put in place, but does not add to public expenditure. It is consistent with what the Governor and deputy governor of the Bank of England have said this week. Is not the truth that the country has been in recession for six months, and Labour’s policies are not working? The Government said that they would get recapitalisation going to help start lending again, and lending is contracting. They said that their stamp duty holiday would restart the housing market, and it is plummeting. They said that they would pay bills to small businesses more quickly, and a survey today says that the situation is actually getting worse. They said that their massively expensive VAT cut would stimulate the economy, but their own former Minister, the right hon. Member for Birkenhead (Mr. Field), says that it is

“like spitting in the face of an economic hurricane.”—[Official Report, 17 December 2008; Vol. 485, c. 1139.]

Meanwhile, unemployment is soaring early in the cycle, and a Cabinet Minister says that Britain is facing the worst recession that we have ever known. Could the Chancellor explain why it is that all Labour Governments leave office with unemployment higher than when they entered office?

What the hon. Gentleman says might have more strength if he was prepared to do something to help the economy, businesses and people; he is not prepared to do so. He talks about a scheme for national lending, yet he has quite explicitly said that there will be no more money to support it. That is an empty promise. We are supporting the economy and are helping people. We have recapitalised the banks, which has prevented many banks from collapsing. We are taking steps to extend lending. The measures that we have taken in relation to VAT, to cutting income tax for basic rate taxpayers, and to helping businesses will all help in the face of a global downturn, the like of which we have not seen for generations. The Conservative party is making it quite clear that if it were in office, the choice that it would make is to do absolutely nothing to help people. [Interruption.] That is what the Conservatives did in the 1980s and the 1990s. They can shout and bawl all they like, but the fact remains that the Conservatives’ approach is wrong, muddled and would not help the British economy or the people of this country.

Earlier, the Chancellor said that the US regulatory authorities have some questions to answer about the Madoff $50 billion fraud, but at least over there they prosecute their fraudsters. Madoff was prosecuted, as was Conrad Black and the chief of Enron. The City of London has a lamentable record when it comes to investigating, prosecuting and convicting City fraudsters. Will the Chancellor or other Ministers look into that, and improve the situation, so that those associated with fraudulent activities that have led to the credit crunch here in the UK are prosecuted?

Earlier this year, in the summer, I set out proposals to strengthen the powers available to the Financial Services Authority, so that if there is wrongdoing in markets it can take action and, if necessary, make criminal prosecutions.

T2. In the pre-Budget report, the Government announced value-for-money savings of £5 billion. Is the Chancellor aware, however, that this week the Public Accounts Committee found that a cost-saving initiative at the Department for Transport cost one and a half times the sum of money that it was trying to save? On that basis, the savings initiative will cost taxpayers £7 billion. Does that not prove that this is a say-anything, achieve-nothing Government? (244655)

As the hon. Gentleman will know, and as the Public Accounts Committee will be aware, the Government have in fact achieved more than the original targets for the Gershon savings, which were more than £20 billion; there has been considerable independent examination of that. Furthermore, we are on course to deliver more than £30 billion in efficiency savings as part of the comprehensive spending review, and we have set these further targets now as part of the pre-Budget report. That contrasts with the approach of the hon. Gentleman’s party; his party leader said:

“It cannot and must not simply be about ‘efficiency savings’”—

presumably, his party prefers service cuts.

T3. The economic downturn is hitting East Dunbartonshire hard. Flexible Ducting has announced the closure of its Milngavie plant with the loss of 85 jobs, and unemployment has risen by 36 per cent. in the past year. Instead of tinkering, with a VAT cut, surely the Chancellor should invest the money to kick-start the economy by investing in green initiatives to create jobs, cut energy bills and tackle climate change. (244658)

I agree with the hon. Lady that we want to keep investing to support green jobs. That is a great opportunity for us for the future; it is certainly an issue on which the new Department is working hard. We need to continue to invest in things such as the capital projects. That is why a major part of the fiscal stimulus was bringing forward capital programmes to support jobs. However, it is also right to put money into people’s pockets right now, very quickly, to help support the economy. Hon. Members on both sides should recognise that the scale of the economic challenges that face every single country in the world means that we have to take a whole range of measures. That is the best way to get the kind of action that we need and to help us come through this situation faster.

Despite the Chancellor’s efforts to recapitalise the banks—and he has done everything that he can in that direction—is it not the case that banks must not enter into a reckless round of lending, but look for good companies, which will be around at the other side of this recession, to take advantage of his generosity at this point? Is it not also the case that banks rightly recognise that too many boardrooms are stuffed with old Etonians who have no idea of how to deal with modern business, but allow themselves to be fooled by greed and avarice and go into schemes that lose billions for their country?

I do think that it is important—[Interruption.] Mr. Speaker, you have only to look at the behaviour of those on the Opposition Front Bench to see how fit they are to run anything. I agree with my hon. Friend. Although we want to encourage banks to lend into the wider economy, banks need to be certain that they engage in responsible lending and do not end up lending money to people who cannot repay the loans that they take out.

T4. This week, the Public Accounts Committee has alerted us to the fact that the Department for Transport’s initiative on shared services is to cost the taxpayer £81 million. In the same week, the Department for Environment, Food and Rural Affairs has been fined £75 million because of its failure to deliver on the Rural Payments Agency. What steps is the Chief Secretary to the Treasury taking to make certain that those Departments bear proper responsibility for that profligate waste of the public’s money? Who is going to resign, and what will she do to prevent such things from happening in future? (244659)

It is exactly because it is important to make sure that we pursue every avenue in tackling waste and inefficiencies that we have the Public Accounts Committee, the National Audit Office and the Audit Commission. It is right that there should be all those organisations and that they should do their jobs in pursuing such matters. It is also right that Departments need to take greater action to root out waste wherever they find it. That is why we have set the further target of another £5 billion of efficiency savings in 2010.

T6. Way back in July, the parliamentary ombudsman published a telling report on Equitable Life. That was immediately followed by a promise from the Leader of the House that the Government would respond with a statement from the Dispatch Box in the autumn. That did not happen, and during the Queen’s Speech debate the Prime Minister clearly and twice repeated that there would be a statement before Christmas. Why is the Chancellor defying his Prime Minister? (244661)

I had hoped that we would be able to make a statement on Equitable Life before the recess, and it is a matter of regret to me that we have not been able to do so. I apologise to the House and to the Prime Minister for the fact that it has taken a little bit longer than I would have liked to get the policy options to a stage where we can make a firm decision and issue a statement. My right hon. and learned Friend the Leader of the House has announced that a statement will be made when we come back after the Christmas recess, and I am sure that that will be the case.

T8. People in the highlands and islands want to see all levels of government working together to tackle the economic crisis. Will the Chancellor therefore join me in condemning the Scottish Government’s decision to cut nearly £100 million from the budget of Highlands and Islands Enterprise over the next three years, at a time when that organisation should be helping the local economy? Will he work with the Highland council to help it to bring forward measures to boost the local housing market, particularly through construction, so that we can help to create jobs in a sector where there have been huge job losses in my area over the past few months? (244663)

I agree with the hon. Gentleman. We need to ensure that we support jobs in all parts of the country, including the highlands and islands of Scotland. The nationalist Administration could do far more than they are doing. For example, we have said that we want to bring forward public investment; they have said in principle that they are prepared to do that but have yet to come up with specific proposals. Moreover, their reforms of the private finance initiative have meant, in effect, that a lot of investment has been sterilised. It is high time that they realised the importance of getting on with supporting the whole Scottish economy as well as that of the highlands and islands.

Iraq

With permission, Mr. Speaker, following my visit to Baghdad and Basra yesterday, I shall make a statement about the future of British troops in Iraq, the timetables, our legal agreements and our force numbers.

Let me begin by asking the whole House to join me in paying tribute to the heroism of all our armed forces and to their service and sacrifice in Iraq and, of course, in Afghanistan and in peacemaking missions around the globe. Let me pay particular tribute to those who have given their lives in the service of our country—military and civilian personnel. We salute their courage and will honour their achievements. Today we remember in particular Lieutenant Aaron Lewis, 29 Commando Royal Artillery, killed in Afghanistan on Monday, and the soldier from 1st Battalion The Rifles killed in Afghanistan yesterday. At the time of Christmas their families are uppermost in our thoughts.

On 22 July, I set out to the House the key remaining tasks for the UK’s mission in Iraq, and I can today report progress on all these tasks. Taken together, the tasks that we set ourselves reflect our underlying priorities: security for the region, democracy in Iraq, and reconstruction to help the Iraqi people—security against terrorists, strengthening democracy in place of dictatorship, and reconstruction to give Iraq’s people a stake in the future.

First, on security, our aim has been to entrench security improvements by putting Iraqis in charge of their own defence and policing for the future. Our most recent contribution has been to help with training thousands of new Iraqi forces and policemen and women. In total, the UK has helped to train more than 20,000 troops and more than 22,000 police. In total across Iraq, 500,000 troops and police have been trained by the Americans, the UK and other forces. In addition, we have already mentored three brigades of 14th Division, with 9,000 troops, to become combat-ready—the very troops that have repeatedly mounted successful independent operations making Basra now safer for its citizens. As a result, in the past year violence and criminality in the Basra region have fallen dramatically. Yesterday, I met the commander of the Iraqi 14th Division and Iraqi security forces and their embedded British training teams working with them in Basra. I can tell the House that our commanders judge that training is making good progress and is now nearing completion.

Our second task is to strengthen Iraqis’ emerging democracy. At the heart of embedding democracy is the most immediate task of ensuring successful local provincial elections. Provincial elections are now scheduled for 31 January 2009. Conditions are in place nationwide for a high turnout under a UN-supervised process, with security led by Iraqis’ own security forces.

Thirdly, there is reconstruction and our aim to give the Iraqi people an economic stake in the future. That has meant restoring economic activity and building basic services in the Basra area.

Recent proposals for new investment in the Basra area now amount to $9 billion-worth of projects. With assistance from Mr. Michael Wareing, whom I thank, the Department for International Development has helped arrange 18 investment missions in the past few months. Following our London and Kuwait investment conferences, the new Basra investment commission, which we helped establish, is holding a major investment conference today in Istanbul. In addition, the Basra development commission has launched a youth employment scheme, which already works with nearly 100 employers to give work experience and training to potentially thousands of young Iraqi people.

We have helped rebuild the economic infrastructure. Since 2003, we have spent £100 million on giving more than 1 million people improved access to clean water and power. Basra airport, which is central to future economic development, is now under effective Iraqi civilian control, delivering on the commitment that I outlined to the House in July. That includes air traffic control and management of the airport terminal—now under the control of the Iraqi authorities—and we expect to complete formal handover arrangements at the turn of the year.

Since criminal gangs were driven out of the port of Umm Qasr by the Operation Charge of the Knights Brigade, there are now plans for major port expansion. New investor proposals and contracts, including from British companies, offer the potential to make Basra once again the major trading hub in the region.

On 1 January 2009, with the expiry of United Nations resolution 1790, Iraq will regain its full sovereignty. Yesterday in Baghdad, I told Prime Minister Maliki, and he agreed, that British forces in Iraq should have time to finish the missions that I have just outlined. In the past three weeks, concluding with our talks yesterday, we have made substantial progress with the Government of Iraq. We have defined: first, the tasks that need to completed; secondly, the authorisations needed to complete them; and thirdly, a way to provide a firm legal basis for our forces. At all times, we have worked closely with President Bush and the Americans, and our other coalition partners.

On 16 December, the Iraqi Council of Ministers agreed to submit to the Council of Representatives a short draft law to give the presence of UK forces a legal basis after 1 January. The law is now going through the Iraqi Council of Representatives; it had its first reading yesterday and is scheduled to have its second reading on 20 December. We expect the process to be complete before UN resolution 1790 expires. In the event of the process not being complete, the Iraqis have told us that Coalition Provisional Authority order 17, which confers protection on coalition troops, will remain in place. Our troops will therefore have the legal basis that they need for the future.

Once we have completed our four tasks, including training for the headquarters and specialists of 14th Division—with the precise timing of its completion decided by commanders on the ground—the fundamental change of mission that I described in the House last summer will take place by 31 May 2009 at the latest. At that point, we will begin a rapid withdrawal of our troops, taking the total from just under 4,100 to under 400 by 31 July. The majority of the remaining troops will be dedicated to naval training.

Yesterday, Mr. Maliki and I agreed that Britain’s future role will focus on continuing protection against attack of Iraqi oil platforms in the northern Gulf, together with long-term training of the Iraqi navy—work that I saw for myself at the port—and support for training the officers of the Iraqi armed forces. In other words, that is the realisation of a normal defence relationship, similar to those we have with our other key partners in the region, which I agreed with Mr. Maliki in July was our joint objective for 2009.

Of course, that relationship will be one strand of a broader, enduring relationship with democratic Iraq, which I also discussed yesterday with the Prime Minister. Our future relationship will be one of partnership. We agreed to continue the shift of focus to economic, commercial, cultural and educational relationships. We will maintain a large embassy headed by a senior ambassador in Baghdad and maintain small missions in Basra and Erbil. The embassy in Baghdad will expand its commercial office and the Department for International Development will expand its programme of economic advice in Baghdad. We have discussed a plan with Prime Minister Maliki for British companies to provide expertise to the Iraqi Ministry of Oil, and Britain can help Iraq’s plans to give 10,000 Iraqi students scholarships overseas.

In the past five and a half years, Iraq has faced great challenges and endured dark days, but it has also made significant progress. We can be proud of the way in which our forces carried out their mission in the most difficult times, and we can be proud of what they have accomplished. In my discussions with Prime Minister Maliki, the two vice-presidents, the Basra governor and the army leadership, I was assured of Iraq’s continuing gratitude for Britain’s role in freeing Iraq from tyranny. The UK’s new relationship with the new Iraq is one that has been justly earned by the efforts and sacrifices of our forces, and by our contributions to Iraq’s peace and reconstruction.

Iraq has many challenges to confront in the days to come. No road that it takes will be easy, but today’s levels of violence across the whole of Iraq are at their lowest for five years, economic growth this year is almost 10 per cent., and yesterday, in Basra, I was told that for just 35 seats being contested in the provincial assembly elections in January, there are more than 1,270 candidates, with 53 different party labels, standing for election. So, as Iraq approaches its second free provincial elections, democracy is clearly growing.

In supporting and protecting the progress that we have made, the British campaign has endured great hardship and sacrifice. Yesterday, I stood with the Chief of the Defence Staff, the head of the Iraqi army in Basra and members of our own forces outside our headquarters in Basra, in front of the memorial wall naming and commemorating every single one of the 178 British servicemen and women who have lost their lives in Iraq in the service of our country. It was a fitting and moving tribute to men and women whom we must never forget. Because remembrance is vitally important, the Defence Secretary and I have decided, after consultation, that we shall bring that memorial wall now standing in Basra home to a fitting resting place of its own in our own country. We will do so when, at the end of July, the last of our combat troops leave Basra. It is a memorial now for ever to be in Britain. I commend this statement to the House.

May I particularly welcome what the Prime Minister has just said about the wall in Basra? I think that that is absolutely right. I join him in paying tribute to the soldier from 1st Battalion The Rifles who was killed in Afghanistan yesterday, and to Lieutenant Aaron Lewis, who was also killed. Our thoughts should be with their families and friends, particularly at this time of Christmas.

Everyone, and not least the families of those still serving in Iraq, will welcome today’s announcement on troop withdrawal. As I have seen for myself in Iraq and elsewhere, our forces always carry out the tasks that are assigned to them with professionalism and courage, and they are a credit to this country. We should also recognise that, as well as the Army, the Navy and the RAF have both served superbly in Iraq. Today of all days, we must remember the fallen in Iraq and the many who have been wounded. Since March 2003, 178 have lost their lives. Their friends and families are in our thoughts and prayers at this time. I should also like to pay tribute to the local Iraqi interpreters, some of whom took unbelievable risks on our behalf. They deserve not only our thanks but our sanctuary.

On the legal basis for our troops, of which the Prime Minister gave a full explanation, will he confirm that, in the first half of next year, they will have exactly the same legal protection as the Americans, under their status of forces agreement, particularly if they need to defend themselves using force? Can he also tell us what the terms of the legal agreement will be between May and July next year—that is, after the end of the mission but before a number of our troops have returned?

Three key issues arise from the statement: first, the achievements of the last six years; secondly, the handover next year; and thirdly, the lessons that we must learn for elsewhere, especially Afghanistan. First, on the last six years, does the Prime Minister agree that, like all of us who supported the action in Iraq, he needs to strike a realistic tone about what has, and has not, been achieved? Security has undoubtedly improved over the past few months. The Maliki Government can now take the lead in upholding order and, crucially, as the Prime Minister said, the people of Iraq have at least seen a potential democratic way forward. Does he accept, however, that the economic conditions and the state of basic services mean that the daily reality for many Iraqi citizens remains dire? Given that women are being attacked in Basra for not wearing the hijab, and that many Christians are still being persecuted, does he agree that serious human rights abuses remain?

That brings me to the second issue—the handover. Clearly, Iraqi forces will still have help from US forces. What is the Prime Minister’s assessment of the ability of the Iraqi security forces and the police to maintain security in the medium term? It is clearly in all our interests that Iraq remains a united sovereign country, so can the Prime Minister provide an assessment of the current role of Iran in southern Iraq? Does the Prime Minister agree that, as part of being a sovereign united country, it is essential that Iraq enjoys normal relations with all its neighbours? Can he tell us what steps he is taking to encourage all Arab countries to send ambassadors and fully staffed embassies to Baghdad?

In terms of the economy, Iraq has a large fiscal surplus. Can the Prime Minister tell us more about the steps he is taking to ensure that British firms benefit from that and from reconstruction projects? Can he confirm specifically that, until recently, there was no permanent representative of the Department for Business, Enterprise and Regulatory Reform in our embassy and can he tell us whether that has been put right?

The third issue is the lessons for elsewhere, and particularly for Afghanistan. Does the Prime Minister agree that Iraq has taught us some tough lessons in the need for such missions to be carefully planned not just in the war fighting, but in the post-conflict phase? Does he agree that they must have clear and specific objectives and must be properly resourced from the outset? Does he accept that the mission in Iraq was deficient in all those respects and that it is essential that we do not perpetuate those mistakes in the continuing mission in Afghanistan? Does he agree that, crucially, an important lesson is that any increases in armed forces will succeed only if they are accompanied by genuine political progress? Is it not the case that in Iraq it was only when key sections of the population decided to lend support to the Government and not the insurgency that the real breakthrough was made? Does he agree that that will be equally important in Afghanistan?

With the need to learn all these lessons in mind, will the Prime Minister tell us why he has not today announced a full-scale independent inquiry? Should we not be clear about the purpose of such an inquiry, which is not simply to rework exhaustively the decision to go to war, important though that is, but to examine the mistakes made in its conduct and planning? Does the Prime Minister accept that if we do not learn from the mistakes of the past, we are more likely to make them again in the future? Surely we do not have to wait until all the troops have been withdrawn, as inquiries have been held before when our troops have been deployed. After all, with 400 British troops remaining in Iraq into the future, if we follow the Prime Minister’s logic, there will be no inquiry for many, many years.

What we surely need is a robust, independent inquiry with powers and membership comparable to the Franks inquiry into the Falklands war. Should it not examine the origins and conduct of the war in their entirety and be able to question Ministers, including all the members of the War Cabinet? Will the Prime Minister give a commitment today to set up such an inquiry so that we can learn from the mistakes that were made? Does he not agree with me that that is just one of the many things that we owe to our brave armed forces?

We are in total agreement about the contribution that our forces have made, about the help that we have been given by Iraqi citizens and about the need for economic development and political advances in democracy always to complement what is done militarily. Where I part company with the right hon. Gentleman is that I do not believe that Iraq is an exact parallel to Afghanistan—[Interruption.] Well, Afghanistan was a country held by the Taliban, but it was virtually ungovernable and had very little economic development. Iraq is confronted by a number of problems, including divisions within the country between different groupings as it deals with the legacy of Saddam Hussein. As the right hon. Gentleman rightly says, it also has the presence of Iran as a threat on its border. I believe that we have to look at some of the things we have done in Iraq as quite different from what we are doing in Afghanistan.

As to the right hon. Gentleman’s questions about what will happen over the next few months, I am satisfied that the overwatch we have carried out over the last period of time, in which Iraqis themselves have been involved in combat and we have been training them, sometimes while embedded among them, for future purposes, means that as we leave, the Iraqi forces are strong enough both to maintain order in the Basra area and to have policing services that, although not ideal, are sufficient for the task.

Of course, there are very difficult days ahead for Iraq. It still has a great deal of work to do, as the right hon. Gentleman said, on rebuilding its economy, but I believe that we have made a very significant contribution to that. Iraq still has a lot of work to do in improving its democracy, and the local government elections will be important to it. Of course, there is still far more to do to train its navy. That is one of the reasons why, as I saw yesterday, a great deal of British work will now involve helping the navy to do what it has to do to be a strong navy in the area.

The right hon. Gentleman asked about the agreement between our forces and the Iraqi Government. The agreement provides the conditions under which, following the expiry of the UN resolutions, our forces can be protected while in the country. I will place in the Library the document that is going to the Iraqi provisional assembly, the Council of Representatives. It contains means by which, if there are disputes on these matters, they can be resolved, and it maintains that if a case came up, any person concerned would remain in British detention, not Iraqi detention, during the period of the investigation. It is similar but not entirely similar to the United States’ agreement. We should remember that the United States’ presence will be longer. It is engaged more than we are in combat operations, and the discussions with the Iraqi authorities were different from the very special discussions that we had with the Iraqi authorities.

May I add one point about the economic situation? We have a large number of people helping the Iraqis to develop their economy. Michael Wareing has done a huge amount of work and is holding the investment conference today. I have met the Basra development commission on a number of occasions. The Secretary of State for International Development and the Foreign Secretary have been deeply involved in helping it.

I was asked about the involvement of the Department for Business, Enterprise and Regulatory Reform. There will be a UK Trade & Investment presence, which is a joint Foreign Office-Business Department operation, and the Secretary of State for Business, Enterprise and Regulatory Reform will visit Basra and the area at the start of the year. I was also asked about embassies. The United Arab Emirates recently set up an embassy in Baghdad, and we are encouraging other countries to do so.

Equipment is an issue that often comes up in relation to lessons that we must learn. I can say today that the Secretary of State for Defence is announcing that the Ministry of Defence has signed a contract worth more than £150 million to buy more than 100 new tracked all-terrain vehicles, which will be known as Warthog and will provide improved protection for our forces, while retaining the all-terrain capability of Viking vehicles, which have proved invaluable over the past two years in the terrain of Iraq and Afghanistan. Whenever money has been required for new equipment, armour or helicopters, we have been prepared to provide it.

As for the right hon. Gentleman’s last point about an inquiry, I should say to him that the Franks inquiry dealt only with the causes leading up to the Falklands war, not the war itself. I presume that what he is proposing is different, not the same as the Franks inquiry, but I have always said that this is a matter that we will consider once our troops have come home. We are not in that position at present, so it is not right to open the question now. That is the course of action that the Foreign Secretary, I and others have stated to the House on many occasions.

I would obviously like to add my own expressions of sympathy and condolence to the family and friends of the unnamed soldier from 1st Battalion The Rifles and Lieutenant Aaron Lewis, who tragically lost their lives in Afghanistan. Their deaths are reminders of the sacrifice and bravery of all British servicemen and servicewomen who have lost their lives over the past year.

Let me be clear: I passionately believe that it was a mistake to invade Iraq, but I am second to none in my admiration for the professionalism, dedication and courage of British servicemen and servicewomen. That is why I share their relief and the relief of their long-suffering families that they will finally be coming home soon. We should all be proud of them. But are the Government not ashamed of what they have asked them to do, and are the Conservatives not ashamed that they cheered the Government on? Listening to the Prime Minister’s extraordinarily rosy account of Iraq, one would have been forgiven for thinking that nothing had ever gone wrong.

Is the Prime Minister not ashamed that he and the Conservatives sent our brave servicemen and servicewomen into an illegal war? When will the Prime Minister apologise for what he did, signing the cheques for George Bush’s invasion? Is not the true scandal today, as we look back at that fateful decision to send our troops into battle in Iraq, the single worst foreign policy decision in the past 50 years, that not one of the men and women on the Government Benches and on the Conservative Benches will apologise for what they did? Is it not time for the Government and the Conservatives to hold up their hands and say sorry to the British people for Iraq?

I am proud to be speaking from the Liberal Democrat Benches today and leading the only party that was steadfast in its opposition to this illegal war. Does the Prime Minister remember that when my party voted—every single Liberal Democrat MP voted to stop the war—his party and the Conservatives booed and jeered? President-elect Obama called the Iraq invasion a “dumb war”. Obama was right; they were wrong.

We have paid a huge cost for the Government’s decision to cover George Bush’s back, following him, no questions asked, into an unethical, unjustified and illegal invasion—a human cost, the cost to our own standing in the world and to the rule of law and good government here at home, the cost of increased radicalisation and instability in the Arab world and beyond, and an immense cost to British taxpayers, at £4 million every day, and counting. Does the Prime Minister now accept Joseph Stiglitz’s estimate that the Iraq war will have cost us £20 billion? That is equivalent to about 800 of the Chinook helicopters that our troops desperately need in Afghanistan.

Will the Prime Minister commit himself to a full inquiry? Unlike the Franks inquiry, it should be open. It should be held in public, because it is the public who need to see and hear that lessons really are being learned. The Government must not end this war as they started it—in secret, unaccountable and behind closed doors. Does the Prime Minister agree—[Interruption.]

Of course hon. Members do not want to be reminded of the past. They refuse to learn the lessons for the future.

Does the Prime Minister agree that we do not need an inquiry to know who bears the heavy responsibility for invading Iraq five and a half years ago? It is on the record in the votes of the House, because for all the shouting and heckling that we hear today from those on both the Conservative and Labour Benches, they know that they were the ones who let this happen. They know that their votes signed us up to George Bush’s war. They had the choice; they let Britain down.

I appreciated what the right hon. Gentleman said right at the beginning—that he, too, welcomed the contribution and the sacrifice that had been made by our troops in Iraq, just as they make sacrifices and serve us with distinction every day in Afghanistan and in every other part of the world where they are fighting.

I should remind the right hon. Gentleman that the war in Iraq was not a secret war, as it was voted for in the House by a majority of the House; that Iraq was a dictatorship and is now a democracy; that Iraq had persistently defied international law; and that Iraq is now in line, as a democracy, with the laws of the rest of the world. As for everything else he says, people can be proud today that Iraq is in a far better position than it was five years ago.

I welcome my right hon. Friend’s statement today, and in particular his announcement at the end of his statement that the Basra memorial wall will be brought to this country. Will the Government find a suitable opportunity, when all our troops are back, to allow the people of this country to demonstrate publicly their admiration and affection for the brave men and women of our armed forces?

We will look at the circumstances in which the memorial wall is returned to Britain and what can be done. Of course, there is also a permanent memorial to all those who have given their lives in the service of Britain since the second world war. That was established last year. We will consider what my right hon. Friend says.

Does the Prime Minister agree that the democracy in Iraq is not perfect, but it is improving; that the security situation in Iraq is very far from perfect, but it, too, is improving; that Iraq no longer poses a threat to its own population, to the region and to the world; and that now is the time to pay an enormous tribute to the soldiers of the United States, of the United Kingdom and of our allies for their enormous sacrifices and for their huge achievements?

I am grateful for the right hon. Gentleman’s words, which I think will command great support in the House. I pay tribute not only to the British and American forces, and the forces from other countries, that contributed to the effort in Iraq, but to the Iraqi people, who—sometimes under huge provocation and huge persecution—have contributed to the building of their democracy.

I am very proud that this country helped to free Iraq from the tyranny of Saddam Hussein. Anyone who has followed the history of Iraq will know that we did the right thing at that particular time.

I am glad that the Prime Minister has reaffirmed that the withdrawal of our military efforts does not mean an end to our commitment to the people of Iraq, and that they will continue to benefit from our ongoing support for civil society and particularly for human rights. He will be interested to know that at a very successful conference that I chaired at the Foreign Office this week, attended by three Iraqi Ministers and 50 outside participants, the universal view was that that kind of British involvement would be essential in the future, which was very welcome.

I pay tribute to the work that my right hon. Friend has done as a special envoy to Iraq, the work that she has done with the Kurdish population of Iraq, and the work that she continues to do to bring about reconciliation between the different communities of Iraq. She is absolutely right that the relationship between Iraq and Britain will be strengthened at a cultural, economic, educational and social level, and I discussed that with Prime Minister Maliki yesterday. We will invite Iraqi students to come to Britain with scholarships that the Iraqi Government wish to provide; we now have a history of economic engagement with the Iraqi people in helping to rebuild their economy; we are helping young people to obtain jobs in circumstances in which otherwise they would be without work; and in every part of Iraq, not just in Basra, we want to build long-term connections with the Iraqi people.

Withdrawal from Iraq will doubtless lead to increased pressure to deploy further United Kingdom troops in Afghanistan. Does the Prime Minister agree that we should not do so unless other major NATO countries are prepared to deploy troops in a combat role in Helmand province? Will he tell the House what conversations he has had with other major NATO countries—at the European Council last week, or since then—about their willingness to do that, and what their response was? The House is entitled to a clear and unambiguous answer.

I am grateful to the right hon. and learned Gentleman for asking questions to which I can give clear answers.

We will look at the situation in Afghanistan—as we do now—on its own merits, and in the light of what needs to be done because of what is happening in Afghanistan itself. To that extent, it is unrelated to any decisions that we make in Iraq. At the same time, we have already announced the deployment of additional forces in Afghanistan on two occasions in the past year, most recently earlier this week, and, as the right hon. and learned Gentleman knows, we are making a substantial contribution to the 41-member coalition in Afghanistan.

It is right to emphasise the need for burden-sharing, whether it applies to troops, equipment or the financing of some of the operations in Afghanistan. I said on Monday that that would be a major theme of the NATO summit which will take place on 3 and 4 April. Burden-sharing is essential if we are to defeat the Taliban and retain Afghanistan as a democracy playing its proper role in the world. Obviously we continue to discuss the issue with Germany, France and other countries, but the right hon. and learned Gentleman should not fail to note that a substantial additional number of troops have been brought in by, for example, the French in the past few months.

I welcome the Prime Minister’s visit yesterday and his statement today. As he knows, 300 Iraqi interpreters have been killed so far. He also knows that last year the Government made an honourable statement that they would allow an immigration concession enabling those people to settle in the United Kingdom. How many have now settled in the United Kingdom, and how many remain to be processed? Will he assure the House that the process will have been completed by the time the last of our troops returns home?

As my right hon. Friend knows, this is a difficult and complex issue. We wish to thank the Iraqis who risked their lives and their safety to be of assistance to us. I believe that the policy we announced on 9 and 30 October 2007 strikes the right balance between what we must do to protect those people and how we can at the same time maintain the levels of expenditure in our country that are necessary to finance it.

So far, more than 300 staff have chosen and received the financial package that we offered, and 72 staff and dependants have been resettled in the United Kingdom. A further 100 will arrive in the coming months. We are on track to meet our target of 300 approved for admission to the United Kingdom this year under the gateway refugee resettlement programme. Given the number of Iraqis who have worked for Her Majesty’s Government and the armed forces in some capacity since 2003, it is absolutely right to focus assistance on those who have had the closest and most sustained association with us. That can be done through the objective eligibility criteria that we have set, based on length of service and job profile, so we are well on the way to implementing the policy that we announced last year.

While the Prime Minister was correct to speak of the plans to bring home the remembrance memorial for the 178 personnel whom this country lost in Iraq—let us hope that that total is not added to over the next six months—was there not something fundamentally remiss about his statement? It made no reference whatever to the last memorial that we leave behind of the vast number of innocent Iraqis—men, women and children, young and old alike—who perished during all this. Most shamefully in terms of history, the Americans and ourselves did not even bother to count the tally. Will the Prime Minister acknowledge that while those people may be lost to history, they are not lost in the hearts of their families and communities, and that that bitterness and legacy of hatred will now go on for generations? Is there anything arising from today’s statement that he and his American counterparts will endeavour to do to redress the grotesque oversight of no body count and no names?

I acknowledge the sufferings of the Iraqi people. It is precisely to protect and support the Iraqi people that we have been trying to provide better facilities, jobs and help in the area of Basra where we have been most active. I think the right hon. Gentleman will find that, according to opinion surveys, the Iraqi people believe that the presence of British troops has made a difference to the quality of their lives. He must not forget the violence practised against the Iraqi people by Saddam Hussein, and we must not forget that we were dealing with a dictatorship and that we now have a democracy.

The whole country will strongly welcome my right hon. Friend’s statement, and will recognise his commitment to strengthening not just the security situation but the economic and political institutions that underlie it. However, the world has a disconcerting habit of moving on from a crisis once that crisis disappears from the headlines. My right hon. Friend’s own commitment guarantees a bilateral relationship, but how can we guarantee that the rest of the world remains engaged? It is in Britain’s and Iraq’s vital interests that those institutions continue to be strengthened.

It is important to recognise that countries that were not part of the coalition in Iraq are now part of the engagement with Iraq that is taking place with a view to the future. I am impressed by the number of Arab countries that are now prepared to place their embassies in Baghdad, and when I was in Kuwait last night I was impressed by the co-operation that it now wants with Iraq on both economic and political matters.

My hon. Friend is right: we must not forget that Iraq has serious difficulties to overcome. It has a long and hard path to travel towards full democracy and full security for its people. It has massive oil reserves, but it has not been able to benefit from them because of the inefficiency of its oil system. Iraq has a long way to go, but it is part of our determination to work with it at an economic and cultural level in the future, and I believe that a growing number of countries share that view.

Does the Prime Minister agree that for all the terrible difficulties that have been faced in Iraq—not least by our own armed forces during our time there—history is likely to judge the removal of Saddam Hussein as the right thing to do and as a success, and that our armed forces will be seen to have played a decisive role in that? Does he understand, however, the sense of unease felt by many in the armed forces and others that we are snatching defeat from the jaws of victory? If now is the right time for the British to leave, why are the Americans taking over so much of the role that we are abandoning? Is it not just the case that we have run out of military capacity and political will, and that we are, in effect, being asked to leave because we cannot effectively contribute anything further with what we have available to us?

I agree very much with the first part of the hon. Gentleman’s remarks—that the removal of Saddam Hussein will be seen in history as a decisive act that made possible a democracy in Iraq—but I do not agree with his final comments, as the role that we have played in Iraq is in many cases now being taken over by the Iraqi forces and people. Whereas we used to be the organisers of any combat action in Basra, any interventions that had to be made in the town of Basra and the protection of the area, that is now being done by the Iraqi army and police. We have trained them to a point at which our commanders are satisfied that they have the ability and capacity to do that job. It is Iraqi servicemen who are doing the work previously done by British servicemen, and I would have thought that the hon. Gentleman would have applauded that.

Whatever the mistakes—some of them absolutely disastrous—particularly by the United States in the occupation arising from the invasion of Iraq, does my right hon. Friend not agree that the vast majority of victims referred to by the former leader of the Liberal party, the right hon. Member for Ross, Skye and Lochaber (Mr. Kennedy), died as a result of sectarian violence? That violence against totally innocent people must be recognised as a crime, but that crime was committed not by the British or Americans, but by those totally opposed to the democratic process in Iraq, and we should say so clearly and loudly.

People understand that that is the case. The internal violence in Iraq is something British and American forces have had to deal with, but I should also make the point that while Saddam Hussein was in power, violence—and in one case genocide—was practised against the Iraqi people.

At least I agree with the Prime Minister on one thing—his tribute to our armed forces, whose valour, distinction and professionalism are unique. In return, will he agree with me on one thing: when we invaded Iraq in March 2003, she did not possess weapons of mass destruction available to be deployed against British interests in 45 minutes?

That issue has been raised over and over, and there have been a number of inquiries. I do not think that the hon. Gentleman expects me to add to that today.

Does the Prime Minister agree that one of the measures of the progress of democracy in Iraq is the fact that its own citizens, and, indeed, its journalists, can protest against their own leaders and world leaders—as happened with President Bush—without the fear of death, while under the previous Administration of Saddam Hussein anyone who made a protest suffered torture and a violent death, as did their families?

Iraq has a free press and, as we saw yesterday, a Council of Representatives that is not predictable in everything that it does. So far as shoes are concerned, I must say that the House of Commons is often less well behaved than an Iraqi press conference.

I join hon. Members on both sides of the House in praising the exceptional success of British troops in Iraq. At this time of year, we should also remember their families, who have been so steadfast for so long. Will the Prime Minister reflect on the fact that British troops have through the war-fighting phase and into the peacekeeping phase exhibited a range of skills almost unmatched by any other armed forces anywhere in the world, and that those skills are sustained, at the same time as we are fighting in Afghanistan only by a considerable investment in defence training? Will the Prime Minister bear that in mind when those very great demands come to be made?

I agree about the importance of equipment, and I also agree with what the hon. Gentleman said about the families of servicemen and women. I was in Basra yesterday, where I met large numbers of people who will be spending Christmas away from their families. One of the things that they want to thank the British people for is the large number of unsolicited gifts, presents and cards that have been sent directly to the forces in Baghdad. They said to me that they have never seen such a level of support in any of the previous years they have been in Baghdad. Donations and presents to remember them at Christmas have come from a large number of people in all parts of the country.

On equipment, we have provided £4 billion for urgent operational requirements in the past few years. I have announced today new spending of £150 million to buy more than 100 new Warthog tractor all-terrain vehicles. We have always tried to respond to requests, such as for helicopters, better night equipment or better vehicles, and we will continue to do so. The hon. Gentleman has taken a huge interest in defence over many years, and I have great respect for him on those matters. I say to him that he must ask his own Conservative Front Benchers about those issues, because their decision to cut public spending from 2010 means that they cannot support the defence forces in the way in which we can.

May I add to the comments of my right hon. Friend the Member for Cynon Valley (Ann Clwyd)? I also welcome today’s statement. While my right hon. Friend the Prime Minister rightly focused on the security situation and the economic development of Iraq, will he say a little more about the development of civil society in Iraq, and in particular about the way in which the Department for International Development, British development non-governmental organisations and possibly even British volunteers in future may help to contribute to social cohesion and an effective civil society in Iraq?

My hon. Friend has taken a long-term interest in that. DFID has worked mainly in the Basra area over the past few years. It has set up the Basra development commission and worked with a number of business men to bring jobs and industries to Basra. One very interesting project is being run on the model of the Prince’s Trust in Britain, where young unemployed people are taken on through individual firms. I think that everybody welcomes that, and it could be applied to the rest of Iraq. That is why DFID’s interest and the work in terms of civil society will now move from Basra to other parts of Iraq to seek to build better institutions for the future and give new hope of jobs and prosperity to people in all parts of Iraq.

The Prime Minister’s predecessor once referred to the blood price that would be necessary as a result of the war in Iraq. Given the huge scale of the human cost—the hundreds of thousands of Iraqi, British and American lives lost—can the Prime Minister in all conscience say that that was a price worth paying?

Making decisions about war is very difficult indeed, but this House considered all the factors involved, made its decision and then implemented that decision. I can also say to the hon. Gentleman that we should be proud that 100,000 troops in all have at one time or another given service in Iraq, and they have done their duty by the country. At one point, we had 46,000 troops in Iraq; we now have 4,000, and we are now bringing the number down as we finish our mission at the end of May. I believe that we should say to our troops that we are proud of what they have done.

The Prime Minister has made a number of announcements that are welcome today and that will be even more welcome when they happen. Obviously, we wish safety to those deployed in the meantime and in the future. Those of us in Northern Ireland parties have had some engagement with the budding parliamentarians of Iraq, and we wish them and their people well in the opportunities and challenges that they face, including coming to terms with the toll of their loss, not just over the past five and a half years, but before. Will the Prime Minister tell us to what extent the prospect of troop withdrawal has been ensured by regime change in America, and will he also acknowledge that many democrats in this country are still sincerely scandalised by a war that was waged on false premises, with dodgy legal advice given in this Chamber, and under false assumptions?

So that the hon. Gentleman understands the sequence of the decisions, let me remind him that last July I said, and the Defence Secretary said to the House, that we had four specific objectives that we wanted to achieve in Iraq and that once we had achieved them there would be a fundamental change of mission. These objectives included greater security by training the Iraqi forces, making the holding of local elections possible, and moves, which we are now taking and working on, to improve the economic development of Iraq, so that people have a stake in the future. It is on the basis of these objectives that we now make our decision that our mission will end by 31 May next year at the latest. I believe that we have followed through the tasks that we set last July in a way that shows that there has been real progress, and that is why I hope that the hon. Gentleman agrees that the motive for today’s decision is that we have completed the tasks we set.

I am sure the Prime Minister will agree that despite the large number of American troops left in the Basra area, the withdrawal of British troops will create a power vacuum. Will he outline the contingency plans for the re-engagement of British troops? That assumes, of course, that the extra numbers relieved from there have not been sent to Afghanistan.

We have moved on from our previous operation, where we had combat troops on the ground every day in the front line in Basra and the surrounding areas. We have moved from that position of combat to one of overwatch over the past year. We have moved successfully to that position, and the number of incidents taking place in Basra has, of course, been cut very substantially since the operation that was also organised by Prime Minister al-Maliki took place in Iraq. There has been a very big reduction in violence. I am satisfied that the Iraqi troops are in a position to keep order themselves, but, of course, this is now a matter for the Iraqis. The agreement says that the relevant Iraqi Minister could come back to us to ask for further assistance, if he chooses to do so, and that is a matter for him. I hope that the hon. Gentleman will agree that whereas a year ago the situation in Basra was full of violence and incidents against British troops took place almost every day, we now have a situation where there is at least a minimum amount of security and Iraqi forces can take charge of the job themselves. That is what we hope to continue in the future.

I welcome today’s announcement and the confirmation that we will continue to play a role in Iraqi life, particularly in economic development and promoting democracy. Will the Prime Minister assure us that the role of women in Iraqi society will be a central theme of our work there, particularly access to educational opportunities, involvement in economic life and representation in parliamentary democracy?

My hon. Friend is right to raise that question. We have continued to discuss with the Iraqis the position and representation of women in national life in Iraq. I think she will agree that the best guarantee of the future representation and freedom of women in Iraq is the strongest possible democracy in Iraq.

When Her Majesty’s forces return home, will the Prime Minister ensure that each and every one of our servicemen and women is made aware of the support services available to them both when they get home and for the rest of their lives, and of the fact that they have won the right to priority treatment in the national health service? Will he ensure that the Secretary of State for Health issues a circular making it clear that it is Government policy that for the rest of their lives servicemen and women have priority?

I am glad that the hon. Gentleman has allowed me to mention the paper that was produced by the Defence Secretary on the range of services that should be available to servicemen and women and ex-servicemen and women. Those were set out in the paper that we published a few months ago. Such services include: better access to education—for example, the chance for someone to study once they have left one of the armed forces; better access to doctors and to health services, particularly for people who have to move between different areas of the country and often find themselves relegated down the list; and better help for people who have problems that have to be dealt with after a long period of service. I assure the hon. Gentleman that the Defence Secretary is putting more money into this service, and particularly so when a large number of people will be coming home, finally, from Iraq.

I congratulate the Prime Minister and welcome today’s statement. As he knows, I did not agree with our going to war in the first place, but I must admit that a great deal of progress has been made and that it would have been wrong to withdraw our troops in view of the initial problems. I particularly welcome the progress that has been made, but he must acknowledge that regime change was not one of the options on the table as we went to war in 2003. I agree that this is a mature time, when we must learn the lessons, and I am sure that the Prime Minister knows there is a danger of the same sort of thing happening in Afghanistan. Will he reassure me and the House that things have been carefully thought through, so that we have an exit strategy from Afghanistan and we will not be spending the next few decades trying to sort out that problem, too?

My hon. Friend has raised the question of Afghanistan, which involves one major difference: a 41-nation coalition is involved in Afghanistan and is committed to the success of Afghan democracy. We are reviewing what we can do together to make for better outcomes in Iraq. What I am certain of is that we must complement the military strategy in Afghanistan with what we can do to train up Afghan army and police forces to bring economic development to those areas that are dependent on narcotics when they could be dependent on other crops and other farming ways of life and to build up the local institutions, working with the tribes and an efficient central Government in Afghanistan. The nature of that new strategy will also have to take into account the relationship between Afghanistan and Pakistan, so that we can stop the flow of terrorists from one country to another.

I, too, pay tribute to the many who served their country in Iraq and to those who died doing so. I pay particular tribute to the hundreds from Northern Ireland who served in the Royal Irish Regiment and other regiments during the past six years. On a recent visit to Basra, I was particularly impressed by how professional, proud and passionate those who are serving there are about the role that we are playing. Much work still needs to be done to train the police, to secure the area against destabilisation by insurgents from Iran, to build the infrastructure in the poorer areas of Basra and to protect minorities, especially the Christians. Will the Prime Minister tell us what plans have been put in place to ensure that the outstanding tasks are completed and not left undone?

I am pleased that the hon. Gentleman was able to visit our troops in Iraq, and, in particular, in the Basra area; they will be pleased to hear what he has said. He pays a particular tribute to the troops from Northern Ireland, as I do. They are very much part of the exercise in Iraq, and I met some of them yesterday. I agree with him that the social conditions in Basra have to improve, which is why, for example, we have built two water towers in the poorest areas, and why we are continuing to contribute to the building of schools and hospitals, as well as to the provision of jobs. He talks about the police forces. Yesterday, I met the policemen who have come from Britain to help train the police forces in Iraq—they are, and feel that they are, making a difference. The important message that we should send our troops in Iraq this Christmas is that they are making a difference—they are making real improvements to the lives of Iraqi citizens. Whatever differences there were over the causes and outbreak of the Iraqi war, it is important to recognise that all our troops have made a significant difference to this civilisation of Iraq.

Will the Prime Minister confirm that more Labour MPs than Liberal ones voted against the war? Given that more than 1 million Iraqis have died, that there are 4.7 million refugees, that there is mass unemployment and that their economy has been devastated and replaced by one that has been privatised and put in the control of overseas corporations, will the Prime Minister give an honest assessment of why the occupation failed to win the hearts and minds of the majority of Iraqis?

If my hon. Friend were to visit today, he would see a different picture from the one that he describes. Yesterday, I was at the port of Basra, which had been completely unable to function under Saddam Hussein—it was unable to have any trade successfully going through it and wrecks in the port made it impossible for other ships to enter. As a result of British and other action, that situation has been changed and the port is now in a position to be a thriving port for the future. People will then get jobs and that will enable them to build their livelihoods, international trade will form around Basra, and, of course, given its history of oil production—five sixths of Iraq’s oil is produced in the south—Basra will be able to be a very prosperous place in the future. I do not think that anybody can tell us that the individual population of Iraq benefited from Saddam Hussein’s reign.

The Prime Minister just alluded to the fact that the Americans, with some assistance from us, are reassessing the campaign in Afghanistan from top to bottom. I urge him to think again about initiating an inquiry into lessons from Iraq. There are obvious historical precedents—for example, the Mesopotamia inquiry in the first world war, which helped the conclusion of the campaign in 1917-18. The Americans are very open about this, so why aren’t we?

I think that the hon. Gentleman is conflating Iraq and Afghanistan in a way that, on reflection, he would not wish to do. The Afghanistan war is being fought by a coalition of 41. There is a review taking place of how we can best detach the Taliban from the people of Afghanistan. That is a totally different position from where we are in Iraq, and he should recognise that. We have put more troops into Afghanistan because of the danger of the guerrilla warfare being managed by the Taliban, and we continue to look at that particular problem. Generally, our strategy in Afghanistan is to complement our military action with measures that will increase the Afghans’ ability to run their own country. The review in Afghanistan is completely different from what he is talking about in Iraq.

The Prime Minister has never detailed what the Government believe to be the number of civilian deaths in Iraq. Much work has been done on that, and the lower estimates are around 100,000. If the Prime Minister cannot give details today of his estimate, will he confirm that the Government will do some work on it, so that we can know the answer to the question?

It is not a matter for the British Government: it is for the Iraqi Government to examine what has happened in their country. Only they will be in the position to obtain the full information. I cannot see how from here or from just Basra the British Government could conduct such a survey. However, I acknowledge the loss of life and the suffering of the Iraqi people, and British forces are trying to improve the Iraqi people’s conditions of life and standard of living.

Business of the House

With permission, I shall make a statement about the business for the week commencing 12 January:

Monday 12 January—Second Reading of the Business Rate Supplements Bill.

Tuesday 13 January—Second Reading of the Saving Gateway Accounts Bill.

Wednesday 14 January—General debate on Iraq: future strategic relationship.

Thursday 15 January—Topical debate: subject to be announced, followed by a general debate on armed forces personnel.

The provisional business for the week commencing 19 January will include:

Monday 19 January—Second Reading of the Policing and Crime Bill.

Tuesday 20 January—Motion to approve European documents relating to a European framework for action and European economic recovery plan, followed by a motion to approve European documents relating to financial management, followed by a motion to approve European documents relating to EU-Russia Relations.

Wednesday 21 January—Opposition Day [1st Allotted Day]. There will be a debate on an Opposition motion, subject to be announced.

Thursday 22 January—Topical debate: subject to be announced, followed by a general debate, subject to be announced.

Through you, Mr. Speaker, may I also offer my best wishes for Christmas and the new year to all hon. Members and, on behalf of all hon. Members, may I offer all our best wishes for Christmas and the new year to the Clerks of the House, the Officers of the House, the catering team, the cleaners, the police, the Doorkeepers and all who keep the House running smoothly? Everyone deserves a good Christmas.

I thank the Leader of the House for her statement. She is here fresh from her performance at Prime Minister’s questions yesterday. As this is the season of good will, I thought that it might be helpful if I were to point out a few mistakes that she made. First, she said that the Conservative party

“opposed our action to recapitalise the banks.”—[Official Report, 17 December 2008; Vol. 485, c. 1090.]

As my right hon. Friend the Member for Richmond, Yorks (Mr. Hague) pointed out, that is categorically not the case.

Secondly, the Leader of the House claimed, in column 1095, that we opposed the right to request flexible working for parents with children under six, but the official record of the debates on flexible working shows that my hon. Friend the Member for Runnymede and Weybridge (Mr. Hammond) said from the Front Bench:

“I would like to place on the record my support for flexible working.”––[Official Report, Employment Public Bill Committee, 24 January 2002; c. 602.]

The right hon. and learned Lady’s third error was to claim that the Conservative national loan guarantee scheme

“is not a guarantee of anything to anybody.” —[Official Report, 17 December 2008; Vol. 485, c. 1090.]

Well, that is a different view to that taken by the Federation of Small Businesses, which said that it

“welcomes plans by the Conservative Party to guarantee billions of pounds worth of business lending through this tough credit climate.”

I am sure that the Leader of the House, not wishing inadvertently to mislead anyone, will be keen to correct the Hansard record on these points as soon as possible.

The Leader of the House has confirmed that on 17 January there will be a general debate on armed forces personnel. Last week, when I asked why the Defence Secretary had not made an oral statement on the delay in the procurement of two aircraft carriers, the Leader of the House said:

“There will be a debate on that in the week in which we return from the recess.”—[Official Report, 11 December 2008; Vol. 485, c. 677.]

It would normally be out of order to discuss procurement in a debate on personnel so will she now change the title of that debate to include procurement?

Yesterday, on a point of order, my hon. Friend the Member for Totnes (Mr. Steen) said he had learned that the Government were set to ratify the Council of Europe convention against human trafficking. No statement has been made to the House and he was not informed, although he is chairman of the all-party parliamentary group on trafficking. Can the Leader of the House confirm whether the convention has now been ratified and explain why that welcome news was not given in a statement to the House?

Last week, I raised the fact that the Housing Minister had cancelled provisions allowing sellers to put their homes on the market before a home information pack had been completed. Yet days after she condemned home owners for exploiting that loophole, her own Department did exactly that when advertising the ex-Home Secretary’s former grace and favour home. If the Government are going to insist on measures that will do nothing to help our ailing housing market, they should at least have the decency to adhere to them themselves. May we have a debate on double standards in Government?

Finally, as this will be a difficult Christmas for many families as they tighten their purse strings, they must be galled to see the Government wasting taxpayers’ money. The Department for Transport introduced an efficiency programme that was supposed to save £57 million but has cost £81million. The Ministry of Justice has spent £130 million on refurbishing an old office block, at a cost of £915 per square metre—18 times more than a standard refurbishment. I can only assume the current Lord Chancellor has been taking design advice from Lord Irvine of Lairg. Finally, we hear that the taxpayer is paying for training for the Culture Secretary to improve his public speaking, for the Home Secretary to boost her confidence and for Lord Mandelson to learn how to use a BlackBerry. I suppose that he is more used to issuing instructions than to taking them. May we have a debate on Government profligacy?

I jumped the gun somewhat last week, but as this is definitely the last business questions before Christmas, may I take this opportunity to wish you, Mr. Speaker, and all the Officers and staff of the House and all right hon. and hon. Members a very happy Christmas and new year?

The right hon. Lady is right this time as this is the last business questions before Christmas, although she is still lacking somewhat in Christmas spirit. She made several points about what I said yesterday. If she wants to challenge what I say at Prime Minister’s questions, she should make her party let her do them. When the Prime Minister is not available for questions, she should stand in for the Opposition, instead of being left to answer the questions on Thursday. As it is panto season, let me say that at least I got to play the principal boy yesterday. Like Cinderella, she had to sit in the shadows.

The right hon. Lady suggested that we have debates on double standards in Government and Government profligacy. They sound more like Opposition day debates than Government debates and I suggest that she choose them. She also suggested that we broaden the terms of the debate on armed services personnel. I said last time that procurement issues are vital for armed services personnel, but I will consider her request.

The right hon. Lady asked about human trafficking, and I will write to her and set out all the work that is being done across Government on that issue. What is really important is what is done in the voluntary sector, to tackle advertisements in newspapers, by the police, by the prosecution service and by the courts. A wide range of work is being done on the issue and I shall write to her with the details. I thank her for her support on that issue.

May I start by associating myself and my colleagues with the wishes expressed through you, Mr. Deputy Speaker, to Mr. Speaker and to you and your colleagues and all the staff of the House for the coming Christmas?

On a sober note, I know that I reflect the views of the House when I say that our thoughts are not only with the families of the servicemen and women who have died in this last year. In London in particular, we have had a year when far too many young people have died from knife and gun crime or have suffered other violent deaths. Our thoughts are with their families, too. We realise that they will have a very difficult Christmas, but I hope that they will have the support of the communities in which they live and that they will continue to get that support.

I thought that the Leader of the House did rather well yesterday, and I was not going to make any rude comments about her. I will therefore associate myself with only one little request that was made by the right hon. Member for Maidenhead (Mrs. May), which is that the debate on defence in the new year should be on the wider subject of personnel and procurement. That is the only way in which to ensure that we have a debate that covers not only the commissioning of aircraft carriers and the rest, which is a matter of huge interest, but the wider matters of training and the whole set of armed forces and defence issues that will arise in the new year.

In the past six months, we have been told that 320,000 people have lost their jobs. The latest unemployment figures show that 1.86 million people are now out of work and there are further announcements to come. For example, Woolworths has announced that 26,000 people are likely to be out of work in the first part of the new year. On 3 October, the Prime Minister announced the setting up of the National Economic Council. Rather than frustrating requests and Government responses on the subject of when we are going to have debates about the economic difficulties that the nation is in, may I suggest that in the new year the Prime Minister or the Chancellor should come to the House every month to make a statement on the reports or activities of the National Economic Council and that we should have monthly debates on the state of the British economy? Sadly, the economy will be the top issue in people’s concerns for the whole of next year. Will the Leader of the House reflect on a proper way of managing the reporting back of the Government’s responses to the economic crisis?

I know that yesterday there was a short Adjournment debate on the Israeli settlements in Palestine, but at this time of year, above all, thoughts in this country and around the world turn to the Holy Land. Can one of the slots that are not yet filled in the first couple of weeks in the new year be given to a debate on the Government’s efforts and international efforts to ensure that there is freedom of movement around Palestine for Palestinians of all faiths—Muslims, Christians and those who hold other beliefs—not just at Christmas and Eid but all year round? People in that part of the world cannot travel freely, whether they want to travel for faith or family reasons, for study or for work. Until that freedom of movement is given to people in the Holy Land, there cannot be any hope for peace and progress.

Nearer to home, the Leader of the House knows that our borough and three neighbouring boroughs are being asked to pick up the £4 million tab for the de Menezes inquest. Questions have been asked of her colleagues about that matter in the House. Can we have a debate early in the new year, before she introduces the planned police and coroners Bill, to ensure that we can sort out the issue? Inquests of London or national importance should not just be the financial responsibility of one or four local authorities and the cost should be shared much more fairly.

Lastly, let me return to an issue that I often come back to. The Leader of the House has announced three Government Bills to be debated in the first few weeks of the new year. Yesterday, in the Consolidated Fund Bill, we agreed without debate the allocation of £32 billion of additional public money for this financial year and £194 billion for the next financial year. May I suggest a new year’s resolution to the Leader of the House on behalf of the Government? Can we have a year in which we see much more progress in handing power from the Government to Parliament? That would mean that Bills introduced by the Government would have adequate time for debate and amendment by colleagues from all parties on Report and that we could have a proper way of holding the Government to account not just for the taxes they raise but for the money they spend—

Order. The hon. Gentleman has well exceeded the normal ration of time that is allocated to him at this point. I hope that he has now made his points, and the Leader of the House can answer him.

The hon. Gentleman asked about the financial implications of the de Menezes inquest. When a particularly expensive inquest falls on one area, arrangements and adjustments are made. For example, extra resources were available for the coroner service in Oxfordshire because of the returning military who arrived at the airport there. Arrangements are made to adjust resources and that will have been the case in relation to the de Menezes inquest.

The hon. Gentleman followed up the point made by the shadow Leader of the House about the defence debate. As he will know, there are set piece defence debates throughout the year. One is always on personnel, one is on defence in the world and one deals with procurement. Generally speaking, without wanting to trespass on the discretion of the Chair, it is possible to raise issues that cross the boundaries in those general debates in quite a substantial way. Procurement issues are very important to the operational ability of our armed services personnel and I am sure that hon. Members who want to raise questions of procurement will be able to do so and will get a response from the Minister in the debate when we return in January.

The hon. Gentleman mentioned the question of accountability to the House for the work of the Government in tackling the global economic crisis. There are, of course, Treasury questions and there have been numerous statements. We want to be sure that at all times the House is kept up to date with information and that there is also a chance to question Ministers. Since the economic crisis hit towards the end of this year, that has happened more regularly than just every month and we expect that to continue to be the case. The economy is a No. 1 priority for the Government and we know that it is a No. 1 priority for the House. We do not expect the House not to have the opportunity to hold the Government to account and to debate economic issues in the future.

The hon. Gentleman raised the question of the middle east. Without expecting the terms of reference of the debate to go too broadly, there will be an opportunity to raise the question of the middle east in the debate on Iraq and related strategic issues.

The hon. Gentleman also mentioned job losses and the National Economic Council. Let me take this opportunity to say that the Government have the utmost concern for those who are faced with losing their jobs at Woolworths. Every possible arrangement will be made to help them to ensure that they can get another job as quickly as possible as soon as they lose their job at Woolworths.

Order. I should mention to the House that since Mr. Speaker placed a 15-minute time limit on speeches in the Christmas Adjournment debate, the number of hon. Members wishing to contribute has swollen considerably, so we may be struggling for time later. I hope, therefore, in a festive spirit, that it will be understood if I adopt a Scrooge-like attitude to the length of supplementary questions now.

In the spirit of Christmas I refer to the fact that the Secretary of State for Transport decided to defer the decision on the expansion of Heathrow until January. My right hon. and learned Friend may have seen this morning that in early-day motion 339 more than 100 Members from all parties are now calling for a vote on that matter on the Floor of the House of Commons.

[That this House notes the Government's commitment given in the 2003 Aviation White Paper, The Future of Air Transport to reduce noise impacts and to ensure that air quality and environmental standards are met before proceeding with a third runway at Heathrow Airport; further notes the assurance given by the Prime Minister on 12 November 2008 that support for a third runway at Heathrow is subject to strict environmental conditions; further notes that Heathrow Airport is already in breach of the European Air Quality Directive to be implemented by 2010; welcomes the statement by the Secretary of State for Environment, Food and Rural Affairs that these environmental commitments should be honoured; supports the Chairman of the Environment Agency’s decision to oppose the third runway on environmental grounds; and calls upon the Government not to proceed with the third Heathrow runway or mixed-mode and to put the matter to a vote on the floor of the House.]

All we want for Christmas is a vote. Will she pass that on to her right hon. Friend the Secretary of State?

The Secretary of State for Transport will make his decision on Heathrow known in the new year.

May I draw the Leader of the House’s attention to the growing number of written answers in Hansard that are only partially answered by the Minister, although they are accepted by the Department, with the rest of the information to be conveyed by private letter to the Member? In some cases, valuable information could be gained from those letters. Would it be possible to consider that more of them might be placed in the Library so there might be greater access to them—

I agree that as much as possible should be put in Hansard. A Minister being held to account for an answer is not a private matter: that is public information, and I shall set my deputy on to it.

May I wish a merry Christmas and a good new year to all?

When we in Britain talk about every child mattering we must not forget about children abroad, especially at this time of year. I hope that my right hon. and learned Friend will forgive me for labouring the point, but I want to ask once again for a debate about the so-called “witch” children in Nigeria. They are being killed, buried alive and tortured and, if their parents cannot afford to hire someone to exorcise them, they get taken away and we do not know what happens to them. The programme “Dispatches”—

Order. I really did not need that help, but the point is—[Interruption.] Order. The hon. Lady is exceeding her ration. Can she please bring her question to a swift end?

I will look into the possibilities of having a debate on the important issues that my hon. Friend raises.

May we have a debate on the Equality and Human Rights Commission? A recent answer to a parliamentary question that I tabled showed that, on average, the commission pays men more than women, white people more than those from ethnic minorities, and non-disabled people more than disabled people. What on earth is the point of a politically correct organisation—it is given huge quantities of taxpayer’s money to give lectures around the country on equal pay —that does not even practise what it preaches?

The hon. Gentleman shows how important it is to have transparency. We must ensure that all organisations publish information about pay gaps between genders and ethnicities, and about how many disabled people they employ. That is not just important for the EHRC, because we need that transparency in the whole public sector—and in the private sector too.

We spend a lot of time in this House passing legislation to sort out previous legislation that has not worked out. Given that this will be the shortest parliamentary Session for many years—and that the Queen’s Speech was also the shortest for many years—may we please have two days devoted to the Report stage of Bills more frequently?

I know that there is a long-standing concern that we should have enough time to debate issues on Report. We always look to do that, and I hope that my hon. Friend will support the post-legislative scrutiny arrangements that we are introducing. They will enable us to look back and make sure that legislation does the job that we thought that it would. Also, he does not know yet that this will be the shortest Session ever, as we have not yet determined when it will end.

Will the Leader of the House consider introducing an annual debate on tourism? It is our fifth biggest industry, worth £90 billion a year and the fact that the Olympics are coming to the UK gives us a great opportunity to harness its potential, in London and elsewhere.

That is something that can be debated when we consider the report of the relevant Select Committee.

Can we have a debate on double standards in public life? My right hon. and learned Friend may be aware of recent reports that senior managers in BBC Scotland shared a bonus of £100,000, while other workers lost their jobs. The trade unions wanted to know who had received the bonus, but they were refused that information on the grounds that it would cause distress to those concerned. Given that the BBC is obsessed with this House and hon. Members’ expenses and salaries, does she agree that that smacks of double standards?

I think that that is something for which the BBC ought to be responsible to licence payers, and perhaps the trade unions should refer their request to the relevant organisation.

May we have an urgent debate early in the new year on job losses in the retail sector? The Leader of the House has mentioned that already, but we already have a well-established way of at least helping to mitigate major job losses in the manufacturing sector. When a manufacturing company closes down, a taskforce involving local authorities and Jobcentre Plus, among others, will be sent in, but we do not have a similar mechanism for large retailers with small numbers of employees spread across the country. Can we see whether we can establish a mechanism that will provide similar support for people who sadly lose their jobs in the retail sector, such as has happened with the closure of Woolworths?

The hon. Gentleman makes a very good proposal and it is one that we are considering. Even though the many thousands of job losses involved in the closure of Woolworths are not concentrated in one geographical area, we need something akin to the taskforce approach to make sure that the help that we bring to bear is working.

The Secretary of State for Northern Ireland has issued a short written statement today to the effect that the Prime Minister has received Sir Peter Gibson’s review of the intelligence material about the Omagh bombing that was available to the security and intelligence agencies. It suggests that a statement will be made to the House when the Government have completed their consideration of the review. How long will that consideration take, when will the statement be made, and will it be an oral statement with the opportunity for appropriate questions?

I am making the assumption that it will be an oral statement, but I cannot give the timing. I shall ask the Secretary of State to have a word with the hon. Gentleman and give him a rough idea of when he can expect it. After Equitable Life, I am a bit reluctant to give any firm commitment from the Dispatch Box.

Unemployment in north Northamptonshire has risen by 50 per cent. in the past 12 months. There are now 5,300 people without work, compared with 4,000 in 1997. With unemployment set to be the dominant political issue of 2009, may we have an debate on the Floor of the House early in the new year so that we can discuss an issue that is going to affect so many millions of our citizens?

We have had a statement on tackling unemployment in the past week or so, and I have no doubt that we will return to the issue in January, when we will discuss the action that the Government are taking to prevent unemployment and to help support people who lose their jobs back into work.

Will my right hon. and learned Friend pass on my sincere and profound thanks to the Home Secretary for her decision to look again at ways of making local policing more accountable to those being policed? Will she ensure that hon. Members have the maximum opportunity to propose and explore different models of good practice in effective and accountable community policing at street, estate and ward levels? I do not expect that process to be finished by the 19 January Second Reading of the Policing and Crime Bill, but perhaps it is not necessary to have a rigid model that is applicable all over the country.

I thank my hon. Friend for his welcome for the provisions in that Bill, and it is very important that we have proper accountability to the local community at all levels of the police. I am sure that he will see something to that effect in the Bill.

If the Leader of the House had been at Treasury questions, she would have heard the Economic Secretary, in front of the Prime Minister, apologise fulsomely but rather tactfully to him and to hon. Members for the Government’s failure to produce a statement on Equitable Life before the House rose for the Christmas recess. The right hon. and learned Lady assured the House that we would have a statement in the autumn, but January 2009 is not the autumn. Will she therefore be kind enough to follow suit and apologise to the House for her statement?

I am sorry that the statement was not available when I said that it would be, but it was not complete. My announcement to the House was contingent on the statement being finished. The point that I want to make is that it is not as though it is complete and the Government are sitting on it. As I said at the last business questions, the Treasury is dotting the i’s and crossing the t’s and the statement will be brought to the House as soon as it is ready. We are very well aware of the importance of this issue.