With your permission, Mr. Speaker, I will make a statement on the appalling situation in Gaza. As the House will know, the fighting continues, but the bald statistics of the rising death toll do justice neither to the scale of the suffering nor to the ramifications of the conflict. I said at the United Nations last Tuesday that the crisis was an indictment of the international community’s collective failure, over years and decades rather than just months, to bring about the two-state solution that offers the only prospect of lasting peace in the middle east. However, there are more proximate causes of the current conflict.

The Gaza truce of June to December 2008 was less than a ceasefire. More than 300 rockets were fired into Israel, 18 Palestinians were killed in Israeli military incursions into Gaza, the humanitarian situation in Gaza went from bad to worse as the Israeli Government restricted the supply of goods, fuel and aid to Gaza, and the political negotiations for a viable Palestinian state proceeded too slowly. However, the immediate trigger for Israeli military action on 27 December was the end of the truce. Hamas refused to extend the lull and instead fired almost 300 rockets into Israel between 19 and 27 December. Those rockets, and the hundreds fired since, were a cruel choice by Hamas to target Israeli civilians and to reject again the fragile peace negotiations that had been taking place between the Palestinian Authority and the Israeli Government since the Annapolis conference in late 2007.

Whatever the trigger, however, the immediate consequence of the Israeli military action over the past fortnight is very clear indeed: more than 800 dead, many of them civilians and apparently more than 250 of them children—the most terrible statistic of all—and thousands injured. It is the horror of war on top of months of deprivation. The Quartet envoy, Tony Blair, went so far as to call the situation in Gaza “hell”. The shortages of food, fuel and medicine are acute. The United Nations Relief and Works Agency had to suspend its activities, which have fortunately been restarted. The Swedish Foreign Minister told me yesterday that a church-run medical centre had been bombed. The scale of the suffering that is already evident, before the full entry of journalists and other personnel, is immense.

Today, I met a group of leading independent non-governmental organisations that are active in delivering humanitarian aid in Gaza. Every day, those NGOs have to decide whether it is safe for staff to work there. Tragically, several have been killed or injured. The concerns of those NGOs bear reporting to the House. Sixty trucks a day are currently entering Gaza—less than one sixth of the 400 deemed the minimum necessary. The current three-hour daily pause in fighting, although better than nothing, is deeply flawed in its practical effect. The blockages on people leaving Gaza for medical attention are profound.

Extremely serious allegations about the conduct of both sides during the conflict have been made by the International Committee of the Red Cross and others, and they must be properly investigated. Since the beginning of Israeli military action in Gaza, both the Prime Minister and I have called publicly and privately for an immediate ceasefire. On the first day of the conflict, the UN Security Council, with the support of the British Government, called for an

“immediate halt to the fighting”.

The EU presidency also called for

“an immediate end to hostilities”

and described the use of force as “disproportionate”. The British Government support that view. The emergency meeting of EU Foreign Ministers called, with my support, on 30 December for an immediate and permanent ceasefire, urgent humanitarian steps, including opening crossings, and action on the illegal traffic in arms and their components into Gaza.

On 3 January, we said that the escalation of the conflict to include a ground offensive would cause alarm and dismay—as well as more death and destruction. Those issues were at the heart of three days of negotiations last week at the United Nations. Our priority was for a loud, clear and unified message to come from the Security Council. That was significantly achieved in resolution 1860, introduced in Britain’s name, and the product of intensive unified work by Secretary Rice, French Foreign Minister Kouchner and myself, working to find common ground with the Arab League delegation led by His Royal Highness Prince Saud of Saudi Arabia.

Security Council resolution 1860 is clear in its call for an

“immediate, durable and fully respected ceasefire”

leading to full Israeli withdrawal from Gaza. It also denounces all acts of terrorism. It summarises well the British Government’s agenda of action in the search for a ceasefire and sets out authoritatively what the international community expects to be implemented. The Prime Minister and I have been working on that over the weekend and will continue to focus on it this week.

First, relief is needed for the desperate humanitarian situation in Gaza. Emergency aid is essential, and Britain has added $10 million to its aid contribution since the conflict began. We will continue to support the United Nations, the International Red Cross and Red Crescent and other international agencies, which have the infrastructure and expertise to lead the humanitarian response in Gaza. But international aid agencies need the wholehearted support of the Israeli Government, and I urge the Israeli Government to provide it. However, in truth only a ceasefire and opening the crossings on the basis of the 2005 Israel-Palestinian Authority agreement can deliver sustained progress.

Secondly, there need to be security improvements—above all a curb on the trafficking of illegal arms into Gaza. Those armaments are the source of fear for hundreds of thousands of Israelis, some of whom I talked to in Sderot in November. They are also a threat to any prospect of Palestinian reconciliation, designed as they are to entrench the power of Hamas in Gaza in defiance of President Abbas’s call for

“One Authority, one source of security”.

I spoke twice yesterday to Egyptian Foreign Minister Aboul Gheit on the issue, and commend Egyptian efforts to develop further action on that front, and urge that the direct talks between Egypt and Israel are brought to a conclusion as soon as possible.

Finally, there is a political imperative to re-establish the unity of the Palestinian people under the leadership of the PA. I continue to be convinced that the division of Palestinian political authority needs to be addressed. Egypt and the Arab League continue to mediate between Fatah, Hamas, and the other Palestinian factions. The aim must be a strong Palestinian Authority, speaking for all Palestinians, committed to the two-state end and peaceful means upheld by the vast majority of Palestinians.

The United Nations resolution is clear, but so was the response. The passage of the resolution on Thursday night, New York time, was followed within hours by its rejection by both sides to the conflict. The resolution calls on all states in the region to support peace efforts. The Prime Minister and I have been in close touch with the Israeli Government since the onset of the crisis. The Israeli Prime Minister, Foreign Minister and Defence Minister argued strongly against any UN resolution. Their argument is that there can be no equivalence between a democratic state and a terrorist organisation.

There is and can be no equivalence. Hamas has shown itself over a number of years ready to be murderous in word and deed. Its motif is “resistance” and its method includes terrorism. Israel is, meanwhile, a thriving, democratic state with an independent judiciary. However, one consequence of the distinction between a democratic Government and a terrorist organisation is that democratic Governments are held to significantly higher standards, notably by their own people. That is one reason why we supported resolution 1860—to uphold the standards on which Israel and the rest of us depend. As a beacon of democracy in the middle east, Israel’s best defence is to show leadership in finding a political solution to the crisis and comply with the standards of international humanitarian law.

A week before the onset of a new American presidency, immediate issues of life and death need to be addressed. We are working with Egypt, the US, European partners, Saudi Arabia, Turkey, Lebanon and Syria, all of which are playing a role in talking to various of the parties. The UN Secretary-General is in the region today. The focus of all our efforts is to implement the resolution.

Over the past 40 years in the middle east, the immediate has become the long term. Short-term conflict has become long-term division. So while the current hostilities require urgent attention and action, so too do the medium and long term, and war cannot address that. The Government stand four-square behind UN Security Council resolutions 1850 and 1860, which call for renewed and urgent efforts by the parties and the international community to achieve a comprehensive peace.

Security and justice for a Palestinian state depend on a political settlement that defends its existence and cherishes its rights. Security and justice for Israel depend on the same political settlement that cherishes its existence and defends its rights. Our vision must be of two democratic states, Israel and Palestine, living side by side in peace, with secure and recognised borders. As that vision comes under threat, it bears repeating.

The Arab peace initiative, which offers Israel recognition by, and normalisation of relations with, the 22 Arab League states, and to which Israel’s leaders had started at the end of last year to respond favourably, provides the right regional comprehensive vision for progress. However, at a time of war on the current scale, those words can seem worthless. It is the war that pushes them out of reach; and that is one further reason why the current war needs to be brought to an end, before further loss of life renders the vision unattainable, as those committed to necessary compromise are marginalised.

Mr. Speaker, I hope that you will let me conclude on the following point. Peace benefits Israelis and Palestinians; war kills both. They are destined to live next door to each other. They can do so either as combatants or as neighbours. We are committed to help them do the latter. That is what Israelis need and what Palestinians need; it is also what we need, before it is too late.

May I thank the Foreign Secretary for his statement? In common with him, we on the Conservative Benches deeply regret the loss of life on both sides in Gaza, in particular among civilian populations. The situation for Gaza’s civilians is clearly desperate, particularly for the 3,000 injured, for the families of the 257 children who have lost their lives, to whom the Foreign Secretary referred, and for the many people in Gaza who may not even support Hamas and who simply want to live in peace, but who find that rockets are being launched from inside their neighbourhoods, which are then targeted by Israeli military operations. We therefore concur with the Foreign Secretary’s description of the situation for them and with his calls for action.

It is also a fearful time, we must not forget, for many Israeli civilians, who live under the threat of ever-longer-range rocket attacks that are expressly intended to kill them. We as the Opposition support the international community’s demands and the Government’s demands for a ceasefire on both sides. We welcome the passage of UN Security Council resolution 1860, Britain’s sponsorship of that resolution and the $10 million in aid that Britain has promised for Gaza.

The immediate trigger for this crisis, as the Foreign Secretary has described, was the barrage of hundreds of rocket attacks against Israel on the expiry of the ceasefire or truce. Does that not underline the utter tragedy of Gaza in recent years, which has slid further into isolation and poverty, just when the first steps towards greater stability and economic activity are being witnessed on the west bank? I am sure that the Foreign Secretary will agree that whenever we discuss Hamas we should remind ourselves that it has made no progress towards the Quartet principles of recognising Israel, renouncing violence and accepting previous peace agreements, and that it must do so before it can be accepted as a negotiating partner.

Does the Foreign Secretary agree that it is nevertheless not in Israel’s interests that this conflict should continue for a long time, because it risks escalating the situation on other borders, such as that with Lebanon, because it may allow Hamas to declare victory simply by surviving the onslaught, and because it risks damaging the whole middle east peace process? Bringing the conflict to an end clearly requires a ceasefire on both sides. It is surely right that Egypt is looking in its mediation for a ceasefire that involves not only an end to military operations, but the effective prevention of arms smuggling into Gaza, in particular if the crossings are to be reopened.

Given that the Security Council resolution has failed to bring a stop to the violence, despite all the international efforts, and that the Foreign Secretary rightly urged that talks between Egypt and Israel come to a conclusion as soon as possible, does he have any indication that that might happen in the coming hours or days? Will he say a little more about the initiatives taken by Turkey and whether he expects those to bear fruit in the coming days?

The Foreign Secretary spoke of acute shortages of medicine. Can he tell us whether any international aid is getting into Gaza’s hospitals at all? Can he also say what assessment has been made by the UN of the damage in Gaza and of the steps needed to restore its electricity and water supply, and supply shelter for those whose homes have been destroyed? Can he say more about the potential for a mechanism to prevent the smuggling of arms into Gaza? What exactly might that involve, and what role could be envisaged for Britain in that mechanism?

Does the Foreign Secretary expect any ceasefire agreement to provide for the opening of Gaza’s borders? This is a question not simply of aid but of trade and of the movement of people, so that the people of Gaza can hope for a better life. Can he say whether steps are being considered to resume the EU’s border monitoring mission at the Rafah crossing into Gaza, and under what conditions that might happen?

The immediate priority must be to achieve a ceasefire and to address the humanitarian crisis, but we must not lose sight of the need to push the middle east peace process forward urgently when those things are in place, in order to break the vicious cycle of ceasefires and violence, and to achieve a peace settlement that will deliver a Palestinian state. We all look to a new US Administration to provide the sustained leadership and impetus needed if all sides are to make the necessary compromises, including on the part of Israel with regard to settlements on the west bank.

Does the Foreign Secretary agree that the long-term security of Israel will depend on its readiness to be as bold in seeking peace as it has been in using military force? We hope that the Government will take every opportunity to urge the new US Administration, supported by their allies, to place the middle east peace process among their top foreign policy priorities, so that, out of the terrible bloodshed of the past two and a half weeks, some hope for the future might at last emerge.

Let me address some of the right hon. Gentleman’s questions. First, in respect of Hamas, it is important to recognise that talks did take place, sponsored by Egypt, on a so-called reconciliation between the Palestinian Authority, led by President Abbas, and the Hamas leadership in Gaza. Those talks were due to conclude in November at a meeting which Hamas decided not to attend or to participate in. The hopes for a so-called technocratic government—or even a national unity government—for 2009 were therefore dashed. That is obviously a significant part of the split that currently exists, and does no good at all to the Palestinian cause or, I would argue, to Israel’s search for a proper partner to negotiate a peace process.

The right hon. Gentleman wondered whether the current conflict was in Israel’s interest. It is obvious from the fact that we have been calling for an immediate ceasefire, as has he, that we think that it is in Israel’s interest as well as in the interest of the Palestinians who are under fire that the war needs to end as soon as possible—immediately. I think that he asked for a prediction on whether it would end in a matter of hours or days, but I am sure that he will understand if I say that it would be foolish to make such a prediction. I can tell him, however, that the two conversations that I had yesterday with the Egyptian Foreign Minister suggested that, while there is a degree of urgency—representatives of Hamas were in Egypt yesterday—there are also fundamental issues that need to be overcome if the two sides, which are currently saying that they do not want a ceasefire, are to embrace one.

In regard to the situation on the ground in Gaza, some aid and medical equipment are getting in. In my meeting with the non-governmental organisations today, it was important to note that they are fully focused on the need to get aid in while the crisis continues as well as on planning for the post-conflict efforts. At some level, it must seem absurd to be talking about humanitarian aid in a condition of war, but of course, for some people, that can mean the difference between life and death. It is therefore important that we support it, and that is also why I believe that the Israeli Government should co-operate with the NGOs. In regard to a UN assessment, I think that we shall have to wait, in the short term, for the Secretary-General’s report after his visit this week. However, it will take longer for more people to be able to get in and make a proper assessment.

In respect of the smuggling of arms, the right hon. Gentleman will know that the estimate of the number of tunnels is now above 200. Their presence is incentivised not least by the fact that the closure of the crossings means that even non-arms trade has to go through the tunnels. That is why the issues of smuggling and of the tunnels go together. Action needs to be taken on the smuggling simultaneously with the opening of the crossings. Unless the crossings are open, we will not be able to crack down on the smuggling, which is getting flour, never mind arms, into Gaza.

There is technical support that can be offered to the Egyptian Government, however, and that is being done. Also, under the 1979 Egypt-Israel peace treaty, a multinational force of observers is posted in Sinai, providing some international presence. The right hon. Gentleman will know that, as well as the issue of tunnelling from Egypt into Gaza, there is the matter of traffic through Sinai and Negev and working with the Bedouin on that.

The right hon. Gentleman asked about the European presence. European observers ready to man or provide a European presence at the crossings are in the middle east now, but they have not been able to deploy because the crossings are closed. The presence is ready to deploy as soon as the crossings are open, and it is certainly our view that they should be opened as part of a ceasefire deal.

The right hon. Gentleman talked in passing about the west bank. I want to say a word about this, as many people will have been deeply concerned at the prospect of a call by Hamas for a third intifada on the west bank creating a further source and scene of carnage in the middle of this crisis. It is hugely to the credit of the Palestinian Authority—of President Abbas, Prime Minister Fayyad and their security forces—that no such intifada has taken place. That is partly a product of security, but it is also a product of the economic and political leadership that has been significant over the past year. The right hon. Gentleman is, of course, right that if a final settlement is to create the viable Palestinian state that we believe is necessary not just for the Palestinians but for the security of Israel, it needs to be based on the 1967 borders.

I welcome the Foreign Secretary’s measured and comprehensive statement and pay tribute to the role that he and our diplomats in New York played in the adoption of Security Council resolution 1860. Does my right hon. Friend agree, however, that it is not just regrettable but deplorable that both Hamas and the Government of Israel summarily rejected that resolution? Is it not also deplorable that the United States Administration, having said that they supported the resolution, could not bring themselves to vote for it? Did that not send the wrong signal from the US Government to hard-line elements in the coalition in Israel, and thus produce the wrong result?

The Foreign Secretary said that the Arab League and Egypt are engaged in dialogue with Hamas. In the process of getting a conclusion to this conflict and the beginnings of the necessary settlement, is it not time that the Quartet allowed its representative, Tony Blair, and other representatives to engage directly with Hamas, too, in order to move them to the Quartet principles of non-violence, recognition of the state of Israel and abiding by previous agreements?

In respect of the US abstention, we would of course have much preferred to see US support for the resolution, as the middle east depends on strong United States engagement and leadership. However, the fact that Condoleezza Rice should say in the explanation of vote that she supported the objectives and contents of the resolution is significant. My hon. Friend is none the less right that the middle east needs strong American leadership if progress is to be made.

It is important to say that a lot of people are talking to Hamas. Egypt is talking to Hamas—mandated by the Arab League to speak on its behalf. Turkey, Syria and Qatar are speaking to Hamas, and Norway has made it clear that it speaks to Hamas as well. So there is no shortage of people speaking to Hamas. In respect of the ceasefire, it is vital that they do speak to Hamas. In respect of any negotiation on a Palestinian state, it is important to take our lead from the elected leader of the Palestinian people, President Abbas, who is seeking unification of the Palestinians under legitimate leadership that is committed to peaceful ends and, in negotiations on a two-state solution, to recognising the state of Israel, which seems to me to be a precondition for effective negotiations.

I thank the Foreign Secretary for his statement and welcome the fact that the UK Government have shown some leadership on this issue by drafting Security Council resolution 1860, calling for a ceasefire and the withdrawal of Israeli troops from Gaza. I welcome his criticism of the Bush Administration for their abstention. In our view, that was a diplomatic disaster.

The Foreign Secretary must be aware that many in this House and across Britain believe that the UK and the international community have failed the people of Gaza over the past two weeks. In trying to be balanced and rightly condemning Hamas for the rocket attacks, the Prime Minister and the Foreign Secretary have at times seemed unbalanced in the face of a truly unacceptable level of Israeli military might. Indeed, in trying to be balanced the British Government have at times fallen off the tightrope of truth—when the Foreign Secretary initially refused, unlike the French President, to call this Israeli action disproportionate.

I welcome the Foreign Secretary’s statement that serious allegations about the conduct of both sides should be investigated. Will he press at the UN Security Council for an independent fact-finding mission to lead that investigation into all allegations of breaches of international law by all sides? He is aware of the danger of the Gazan conflict’s creating tensions between communities here in the UK. Surely a call for such an investigation would help to calm that situation.

As for actions to persuade the Israelis and Hamas to desist the fighting and rocket attacks, why have neither the UK nor the EU implemented an arms embargo against Israel, just as the Conservative Government did in 1982 in response to Lebanon? No one in 1982 expected an arms embargo to stop the Israeli tanks in their tracks, but it was a powerful international symbol and we need that now. The Foreign Secretary’s predecessor, the right hon. Member for Derby, South (Margaret Beckett), assured this House that the Government would keep a close eye on the use of British arms by Israel. Government policy is that

“no weapons, equipment or components which could be deployed aggressively in the Occupied Territories would be licensed”

for export. Can he assure the House that none of the weapons or weapons components used by the Israel defence forces in Gaza came from Britain, and if he cannot, have the Government changed their policy on arms to Israel?

As for Hamas, has the Foreign Secretary used his newly improved relations with Damascus to get Syria to urge Hamas to end their rocket attacks? What help has been offered to the Egyptians to stop the smuggling of weapons into Gaza?

One of the many tragedies is that the Israeli attack was never and is never going to bring the peace and security that Israel rightly should have. The truth is that this Israeli action may hurt Hamas militarily, but it will strengthen them politically. I fear that Israel is driving moderate Palestinians into the arms of the extremists, and that will be a disastrous strategic defeat for Israel, whatever the ceasefire terms eventually agreed.

I am sorry about some of the things that the hon. Gentleman said, given that we actually agree that the only way for Israel to guarantee its security and to provide justice for its own people—never mind for the Palestinians to provide security and justice for themselves—is to negotiate a political solution and to empower precisely the moderate forces in Palestine that are so important. I am sorry, for example, that he insists on saying that we did not support the European Union statement that the Israeli action was disproportionate. We did, when it was proposed, and out it has come and I have repeated that today. [Interruption.] I am sorry; the hon. Gentleman says “not initially”, and that is not true. If we had not supported it, it would not have gone out, because it requires the support of all sides.

The hon. Gentleman raised an important question in respect of the arms embargo, and I want to confirm that our position remains exactly as described. No arms exports are granted where there is a clear risk that those arms could be used for internal repression or external aggression, and that is surveyed very closely. Also, we have no evidence of any of the exports that he has pointed to being used in this operation. As for some of the allegations that are around—for example, in The Guardian on Friday, which the hon. Gentleman did not repeat, but it might help the House if I make this point clear—there is no truth in the suggestion that those exports are used by the IDF or are being used by the IDF in this operation. I assure him that the criteria that we use remain very strict, and they were recently examined in judicial review to confirm the way that they operate.

On Syria, I have indeed twice spoken to the Syrian Foreign Minister Muallem to urge on him that if he does want to advance the Palestinian cause, he needs to argue for the ceasefire that is so desperately needed.

I note the rather cosy consensus between the Foreign Secretary and the right hon. Member for Richmond, Yorks (Mr. Hague), but I can assure the Foreign Secretary that it is not shared by all of us. On armaments for Israel, he said just a moment ago that he would very much like to see the prevention of arms going to terrorist organisations. That is the case for everybody in this House, and on the basis of what we have just heard and what he himself just said, will he undertake to ensure that no arms at all go to Israel at the moment, given that it is guilty in many people’s eyes of state-sponsored terrorism with its activities in the Gaza strip?

As I said in my statement, I do not think that it is right or appropriate to compare a democratic state with a terrorist organisation or an organisation that uses terrorist means, and I hope that, on reflection, my hon. Friend will agree with that. On arms sales to Israel, I wish to emphasise that if there is a clear risk that armaments would be used for internal repression or external aggression, those exports do not take place, and those rules are, in my view, right.

Even at this dark hour, when the situation is clearly desperate, is there not the faint sign of a glimmer of hope on the horizon? Is it not the case that only the President of the United States has the means to secure the concessions from both sides that are necessary to achieve a viable Palestinian state and a lasting settlement? Is it not therefore welcome that President-elect Obama has said that despite all the many other challenges he faces, he will make this region an immediate issue of priority for him, in sharp contrast to the neglect of the current American Administration?

I am worried about any suggestion that there would be a cosy consensus, but it might be more welcome to have a consensus on the point that the right hon. and learned Gentleman has made. He is, of course, right to say that the current crisis in Gaza is, in part, an indictment of a delay in engagement by the international community, including the United States, in resolving this issue. He is also right to say that the issue cannot be resolved without the United States. My own sense is that, in many ways, this crisis, this war, this conflict makes the job of the Obama Administration more difficult, but it makes their early engagement more necessary. I believe that there are people at the top of the Obama Administration, led by the President-elect himself, who recognise that this is not just a regional issue, but a global one. It concerns us all and I very much look forward to the engagement from day one, which the right hon. and learned Gentleman and I agree is necessary, of the new Administration on the issue.

I support all efforts to bring about a speedy and peaceful solution to this dreadful conflict. Does the Foreign Secretary agree that to do that, he must address the responsibility of Hamas for this dreadful situation? That includes the statements in Hamas’s charter that propose to make Israel the subject of an Islamic Waqf for ever, that promote jihad and the cult of death and extol martyrdom, as well as Hamas’s practice of callously booby-trapping civilian areas and deliberately encouraging the deaths of civilians in Gaza today.

Certainly many statements by Hamas are grotesque and chilling, and it is essential that Hamas plays its part in achieving, at least in the short term, the ceasefire that is necessary and, in the longer term, the Palestinian reconciliation that will be essential to provide some leadership for the Palestinian people which can negotiate with Israel. The centrality of the conflict goes to the heart of the fact that for a Palestinian state to be viable it must include Gaza and the west bank—there are 1.5 million Palestinians in Gaza. At stake in this conflict is the viability of that future Palestinian state, which is essential for Israel’s security as well as for justice for the Palestinians. That is why the stakes are so high and why all must play their part. It was precisely that point that I made late at night in New York when the resolution was adopted; I talked about the responsibilities that there are on all sides—not just on Israel, Hamas and the regional players, but on the wider international community—if this running sore is to be addressed.

In agreeing particularly with what the right hon. Gentleman has just said, may I ask that after he leaves the House and goes back to the Foreign Office he will summon the Israeli ambassador and say to him calmly but clearly that many of us who have been in this House for a very long time and who have been proud to call ourselves friends of Israel now feel ashamed because Israel is not behaving as a civilised state should behave?

I am sure that even if the Government of Israel and their ambassador are not watching this statement and discussion, they will be following its contents later in the day. We are in close touch not only with the ambassador of Israel but, directly, with the Prime Minister, Foreign Minister and Defence Minister of Israel. It is very important that this does not become an argument about whether or not one is pro or anti-Israel or pro or anti-Palestinian; the peace about which all hon. Members have spoken needs to be peace both for Israelis and Palestinians—that is at the heart of this issue.

In welcoming the genuine efforts that my right hon. Friend has made to bring about a ceasefire and the emphasis that he has put on the need for rocket attacks on southern Israel to cease, will he agree that at a time when the UN has estimated that the death toll stands at 884 people dead in Gaza, 275 of them children, we should now say to Israel that abiding by international law is not an optional extra to be implemented at a time that it finds convenient, but a requirement on it? Will my right hon. Friend confirm that, as a high contracting party to the fourth Geneva convention, Britain has a responsibility to ensure the protection of civilians in time of war? Finally, when there are rumours of an international force being deployed in Gaza or on its borders, can he assure me that such a force, if deployed, will have a remit that includes the protection of Palestinian civilians just as much as of Israeli civilians, and the ensuring of access into Gaza just as much as preventing the smuggling of arms into Gaza?

It is important to condemn all loss of innocent life, whether Israeli or Palestinian. It is also important, to reiterate what I said in my statement, that member states of the UN and democratic states are deliberately held to higher standards. They should certainly adhere to the various conventions to which they have appended their signatures. That is why I referred in my statement to the importance of international humanitarian law.

In respect of a force in Gaza, it would be premature to pre-empt some of the discussions that are going on, and some of the very difficult issues that are associated with them, but certainly any observer or other force would need to ensure that it defended civilians without fear or favour. It is premature to talk about that at this stage, given the emphasis on opening the crossings and the smuggling issue. However, I hear what my hon. Friend says.

But is not the blunt truth that while we discuss this the Israeli Government persist in disproportionate military action, using F-15s, F-16s, Apache helicopters and tanks at a terrible cost to human life? If any other democratic state were behaving in that way, would we not by now be considering what other economic and diplomatic steps were available to us? Are the Government considering any such steps?

We do not believe that economic sanctions on Israel are the way to engage or to influence Israel—[Hon. Members: “Why not?”] We do not believe that the isolation of Israel is the way to achieve influence with it. We should give the same clear message in public and in private, as the Prime Minister and I—and every other representative of the Government—have done over the past three weeks. Of course, the right hon. and learned Gentleman is right that the scale of the killing has put this issue on the global agenda in a way that is, even in the middle east, unprecedented in the nature of its coverage. That is why everything must be done to deliver the ceasefire that we all agree needs to happen immediately.

I was present some years ago in Jenin, during the siege of Jenin. I saw then the refusal of the Israelis to allow humanitarian aid to be provided to those who were injured and sick. Now we see that yet again. It is an absolute disgrace that any country that calls itself a democracy refuses to allow the humanitarian agencies to deliver aid to those who are desperately in need.

I also think that the exclusion of journalists from the area is totally unacceptable. Were it not for al-Jazeera, we would see no pictures on television of the suffering and destruction taking place in Gaza at present. Will my right hon. Friend make the point that it is essential to allow journalists access?

I agree on both points with my right hon. Friend—the entry of journalists, to which I referred in my statement, and the essential nature of the humanitarian obligations that Israel needs to follow. The points that the humanitarian NGOs made today—not only about the medical situation, but about food and fuel—deserve not just to be heard, but to be acted on.

Would the Foreign Secretary not agree that those who so vigorously criticise Israel would carry greater credibility if they had made similar criticisms over the years of the suicide bombings and rocket attacks deliberately aimed at civilians in Israel? I completely agree with him that we need to see a two-state solution, but may I urge him to recognise that if we are to achieve such a solution it will be achieved largely with the leverage of the United States not through the United Nations, the Quartet or the European Union? With a new United States Administration there is really a chance, and I urge the Foreign Secretary to use whatever influence he has with them to get their full commitment. We very nearly got there in 2001 at the end of the Clinton Administration at Camp David and then at Taba. Those positions could now be built on because they are endorsed by most of the Arab countries in the Arab peace initiative. There truly is an opportunity for Mr. Obama.

The whole House can be in no doubt that that will be at the top of our agenda when I meet and talk to Mrs. Clinton straight after 20 January.

In congratulating my right hon. Friend on steering resolution 1860 through the United Nations Security Council, may I ask him what the international reaction would be if Hamas had slaughtered nearly 900 Israelis and subjected nearly 1.5 million Israelis to degradation and deprivation? Is it not an incontrovertible fact that Olmert, Livni and Barak are mass-murderers and war criminals—[Interruption.] Yes. And they bring shame on the Jewish people whose star of David they use as a flag in Gaza, but whose ethos and morals go completely against what this Israeli Government are doing.

I think that the history and origins of the state of Israel make this conflict especially acute, especially distressing and especially painful. However, Israel should be held to the same standards as other nation states. The Jewish people have suffered enough for their history and deserve to be held to the same standards as every other nation state. I believe that the obligations that they have need to be fully implemented without fear. They need to be addressed as a matter of urgency. The democracy that Israel rightly treasures, which is rightly seen as a beacon throughout the world, needs to ensure that the actions of its Government fully adhere to the country’s obligations.

Has the Foreign Secretary warned the Government of Israel that despite the very grave provocation they have suffered, they are acting contrary to the laws of war?

I have not given Israel any legal position of that kind, but at all stages I have stressed the importance of the commitments that all member states of the United Nations have, both in advance of the conflict and during it. It is right, therefore, that we say that any abuse should be properly investigated promptly and expeditiously.

Would my right hon. Friend agree that any ceasefire must involve both sides and, in particular, an end to rocketing by Hamas and the smuggling of arms? Would he also confirm that the Foreign Ministry of Egypt, which also has a closed border with Gaza, warned Hamas immediately before the Israeli action that it should cease the rocketing when it fired 60 rockets at Israel immediately before the visit of the Foreign Minister of Israel to Egypt to try to broker peace?

My hon. Friend is right that leaders across the Arab world had been warning Hamas for some time not to provoke Israel. Equally, they had been warning Israel not to respond to the provocation.

Will the Foreign Secretary agree that Hamas appears to love Palestine more than it loves the Palestinians, given its willingness, as far as we can understand, to put rocket launchers and other military assets in the vicinity of mosques, schools and other civilian institutions? Will the Foreign Secretary indicate whether the information available to him confirms that that has been part of Hamas’s tactics in the recent past?

I would put nothing past Hamas. It is important to remember that there is not only a Hamas leadership in Gaza but a Hamas leadership in Damascus, which is rather a long way removed from the conflict and is participating in all the talks while perhaps suffering less of the immediate pressure that the Hamas leadership in Gaza is under. Gaza, as everyone has read in their newspapers over the past few weeks is, quote, unquote, the most densely populated place in the world. I have no direct evidence of the sort that the right hon. and learned Gentleman provides but it is obvious to anyone who wants to look that Hamas makes at a minimum no effort to shield its civilians. There is a pretty good suggestion that it is quite happy to see the distinction between the interests of Palestinians and the notion of Palestine for which it claims to speak to which the right hon. and learned Gentleman referred.

Will my right hon. Friend accept that condemnation has brought no relief to the people of Gaza? The killing goes on. Is it not time for stronger action? Is it not time that we expelled the ambassador of Israel and brought our ambassador back from Israel? Is it not time that we called for international sanctions against Israel?

My hon. Friend is right to say that there has been a collective failure, because the internationally expressed will of the community of nations has not been followed either by Hamas or by Israel. However, I do not agree that a policy of isolation would help either Britain’s influence or the prospects of peace in the middle east. It is very important that we continue to speak without fear or favour on these issues—that we speak publicly, using occasions such as this, but that we use the opportunity to speak privately as well.

If and when the terrible bombing of Gaza ever finishes, what hope does the Foreign Secretary have for the reconstruction of Gaza? It is all very well international Governments pledging aid to the Palestinian people, but if there is still an embargo on concrete and construction materials crossing from Israel to Gaza, we shall not be able to do the rebuilding that those people desperately need.

That is precisely why the opening of the crossings on the 2005 basis is so important. However, it would be the height of complacency to stand here watching the conflict and talk about hopes for peaceful post-conflict reconstruction. The truth is that none of us yet knows the full scale of the devastation that has taken place or the extent to which the infrastructure has been destroyed, but I can tell the hon. Lady that aid agencies as well as Governments are thinking about both the immediate and the medium term, which we desperately need to do. However, political infrastructure as well as concrete infrastructure will be important if the people of Gaza are ever to be relieved from their current suffering.

Would the Foreign Secretary agree that the terrible horror unleashed in and around Gaza represents an epic failure of foreign policy on all sides and that we need a new approach? The messages coming from President-elect Obama’s team, reported at the end of last week—making direct contact with opponents, including Hamas and seeking to negotiate an end to the conflict—stand a much better prospect of succeeding, because in the end we do not solve conflicts such as this by military means, as we learned in Northern Ireland. We solve them politically.

We do indeed solve them politically and I believe a new approach is on the table. It is a comprehensive approach to the problems of the middle east, recognising that while the Israel-Palestine conflict is the core of the middle east problems, issues in respect of Syria and of Lebanon and the Golan heights and the Shebbaa farms are also part of the picture, as is the fundamental fact that in the end security for Israel does not come from the Palestinian state alone—it comes from the normalisation of relations with the whole of the Arab world. That is why before the Christmas break we were talking in the House about the importance not just of a two-state solution but of a 23-state solution. I believe that new approach will be essential, more akin to the approach of the Madrid negotiations than the Annapolis negotiations.

The Foreign Secretary is not in favour of the isolation of Israel but he was in favour of the isolation of the Government elected in Palestine, in the only free parliamentary election ever held in any Arab country, because the people voted the wrong way. He joined the siege of the Hamas Government and helped create the desperation that led to the barrage of rockets—largely ineffectual, as he has conceded. Action speaks louder than words. The resolution he boasts of drafting is an ineffectual section 6—

Order. I must stop the hon. Gentleman. He must ask a question. He is up there making a speech but he has not asked a question. He knows the rules of the House well enough. Ask a question.

I will, Mr. Speaker. Why will the Government not recall our ambassador from Tel Aviv, ask the Israeli ambassador to leave, and, above all, stop selling British weapons to the mass-murderers who are taking so many lives and limbs in Palestine today?

The hon. Gentleman has no evidence at all of British arms being used to take lives and limbs in Gaza. Withdrawing our ambassador from Israel, or kicking the Israeli ambassador out of London, may be the sort of gesture politics that the hon. Gentleman thinks is effective, but I do not think that it would achieve anything when it comes to making the sort of progress that all of us in this House want to see in the middle east.

That there are two sides to the escalation of the conflict is beyond doubt, but the appalling disproportion in the civilian casualties demonstrates that there is collective punishment of the civilian population of Gaza; that is what is shocking people around the world. My right hon. Friend rightly stressed the importance of a unified voice for the Palestinian people, but does he agree—and can he convey the fact—that that has been fatally undermined by the failure to ensure that the Palestinian people are incentivised and rewarded for pragmatic negotiation? In particular, illegal settlement building has been a major contributory factor. Can he convey that message to the Israeli Government?

Well, yes. I not only can convey it, but think that the Prime Minister and I have been conveying it. It is precisely that point that the Prime Minister addressed in his speech to the Knesset. Settlement building is not just an encroachment on the future Palestinian state; it is also illegal and a massive block on the work of, and the appeal made by, the peaceful, committed, moderate leadership of the Palestinian people, so there is a double or triple tragedy at the heart of the settlement process. My hon. Friend is absolutely right to highlight the fact that the issue of the settlements, and what they do to the prospect of a Palestinian state based on 1967 lines, must be at the heart of any discussion that goes beyond the immediate crisis. I spent a lot of last year saying that the window of opportunity for a two-state solution is closing. That is in part because the longer settlement building goes on, the harder it will be to draw up, conceive and then deliver the Palestinian state that will be essential for any sort of stability in the middle east.

Following on from the question of the right hon. Member for Neath (Mr. Hain), does the Foreign Secretary agree that achieving a lasting, as opposed to short-term, ceasefire will in the end require dialogue between Israel and Hamas, either direct or indirect, however difficult that may be, in order to agree the terms of any such ceasefire? What role does he think that he or the British Government can play in bringing about that dialogue?

Obviously, the answer is yes; indirect talks are happening now, precisely on the subject of the ceasefire—long-term, not just short-term—that the right hon. and learned Gentleman talks about. It is important to go back to the point that the Arab League has mandated Egypt to engage with Hamas, on its behalf and on behalf of the international community, on the issue of Palestinian reconciliation and the ceasefire, and I think that that is the right approach. The truth is that the door is open to Hamas, if it is willing to recognise the fact that an Israeli state has to be part of the solution. That is what is set out in resolution 1850, passed three or four weeks ago, in its references to the Quartet principles and the Arab peace initiative. However, Hamas needs to recognise its negotiating partner. I know that the right hon. and learned Gentleman feels strongly about the subject, but it is important to point out that people talk about Hamas being the representatives of Palestinians, without recognising that there is an elected leader of all the Palestinians—a President of the Palestinian Authority, elected in 2004 by all Palestinians to represent them. A further President will be elected this year or next year. That is a vital part of the issue, and we should not fall into the trap of allowing Hamas’s leadership in Gaza to claim that it represents all the Palestinians.

Would my right hon. Friend accept that the reason why there is such strong emotion in the House of Commons today is that, in the past week, the Israelis have shown total indifference to the suffering and lives of Palestinian civilians, and that some of the Israelis’ actions amount to war crimes against humanity? In those circumstances, is it not clear that a stronger approach is required by Britain, and that it should tell the Israelis that what they are doing is totally unacceptable and an affront to humanity?

My hon. Friend’s diagnosis is right: that is why there is such passion in the House, allied to the fact that the repercussions of conflict in the middle east echo around the world. The truth is that the easiest recruiting sergeant for extremism anywhere in the world is the absence of a Palestinian state, so for those two reasons the issue reverberates around the world. If words brought peace, they would have done so a long time ago, not just in this conflict but in the wider middle east, but I can assure my hon. Friend that we will continue to speak loud and clear, publicly and privately.

In the early hours of the morning of 30 December, the Gibraltar cargo ship, the Dignity, was rammed by an Israeli gunboat. It was carrying aid and three doctors to Gaza, one of whom was my constituent, David Halpin, who has a proud record of trying to take aid to those beleaguered people. In response to that attack, a Foreign Office spokesman said that

“we told the Israeli Government that we take the safety of our nationals seriously”.

Can the Secretary of State say what that means, and what action he will take to ensure that a ship sailing under British protection is protected? Will he make sure that that crime on the high seas is brought firmly to the attention of the Israeli ambassador?

The first action I will take is find the details of the case and write to the hon. Gentleman as a matter of urgency. I will make sure that I place a copy of that letter in the Library of the House.

Has not the time come to recognise that neither the British Government nor other EU Governments have any serious influence at all over the Israelis? We should recognise, as other Members have suggested, that these are war crimes that we are witnessing in Gaza, and start talking with our EU allies about organising sanctions and, at the very least, stop selling weapons to the Israelis, and perhaps talk about the withdrawal of our ambassador, because those are the only things that will make any impression on the people currently running Israel.

We have covered some of those issues in the course of our discussions, and I take seriously my hon. Friend’s views, although he will know from my earlier answers that I do not agree with him on all those points. However, in respect of allegations of war crimes, any such allegation or any breach of international humanitarian law must, of course, be investigated.

These are war crimes.

Well, in that case, they must be investigated. The right thing to do with any allegations of such seriousness is to investigate them, find out if they are true and, if they are, take appropriate action. That is what should happen.

In view of the fact that the Foreign Secretary is in touch with the Israeli Government and the Prime Minister—I have just returned from Israel and saw for myself what has been talked about in the House—is he aware that, as far as I was told, the Israeli Government would stop their attack on Gaza, the shelling and all the devastation if the rockets stopped coming from Gaza tonight? Is that correct?

I am certainly aware of all the statements that have been made, on both the Israeli and the Hamas sides. There must be simultaneous cessations—that is the only way in which this will be finished, and that is what we are working for.

As this brutal and utterly disproportionate blood letting continues, will my right hon. Friend use all his influence in the EU as part of the Quartet to try to ensure that, whatever ceasefire agreement is finally reached, it is firmly linked to a further, wider process of negotiation aimed at securing a comprehensive peace treaty between the Arab states and Israel, as the Saudis themselves proposed in 2002; the withdrawal of all Israeli forces to pre-1967 borders; and the creation of a viable Palestinian state, without which there will be no end to this century-long conflict between the Arab states and Israel? What contact has my right hon. Friend had with President-elect Obama or his team to secure those ends?

I obviously agree that any ceasefire must be swiftly followed by precisely the sort of development of the vision of a lasting, comprehensive peace that my right hon. Friend described. He talked about linking the ceasefire to such a programme. The ceasefire will be hard enough to get in and of itself, but I certainly agree that it must be swiftly followed. In respect of President-elect Obama, it is important to say that it is not just a public line that the Americans are saying that there is one President at a time and one Secretary of State at a time; that is the reality. However, I can assure my right hon. Friend of my confidence that the issue will be high on the agenda of the Administration come five minutes past 12 on 20 January.

Does the Foreign Secretary accept that while most of life is a matter of varying shades of grey, it is a black and white matter that Hamas is a terrorist organisation which sets out to kill civilians? My right hon. and learned Friend the Member for Folkestone and Hythe (Mr. Howard) talked about “a glimmer of hope”. Is there any glimmer of hope that Hamas could be persuaded to stop its rockets for good, in which case Israel would be able to do what it dearly would like to do—namely, leave Gaza for good?

The right hon. Gentleman is right that Hamas uses terrorism to further its ends and some of its commitments in its charter that were referred to by my hon. Friend the Member for Liverpool, Riverside (Mrs. Ellman) are utterly grotesque. It would be wrong to start saying that there are glimmers of hope here or there. What I can say, and what I believe, is that there are some people in Hamas who recognise that there needs to be a politically negotiated solution to the conflict. That is an important part of the equation. However, the truth is that they are not the majority in Hamas, and that is the tragedy at present.

rose—

Order. We now come to the main business.

On a point of order, Mr. Speaker. You will have seen the large number of Members wanting to take part in the discussion about Gaza. Have you had any representations from the Government to allow a debate in Government time immediately or as urgently as possible on the situation facing the people of Gaza and the Palestinian people as a whole?

I have not had any communication from the Government, but I will let the hon. Gentleman know if I do.

I have to inform the House that I have selected the amendment in the name of the Leader of the Opposition.

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

We are living through a time of great economic upheaval and uncertainty, global in its origins but local in its impact on businesses and communities right across Britain. We in Government are committed to doing what we can to help people through these tough times and to prepare for the upturn that will follow. Actions such as recapitalising the banks, targeted tax cuts, loan guarantees, programmes of public spending and support for jobs are necessary measures for the present. But even as we take action to cushion the blows of recession, we are also looking to the future. We do not want to make the mistakes of previous recessions by not continuing investment in major projects, in skills and in business support and by not putting in place policies that may help local areas to recover more rapidly and take more advantage of the upturn when it comes.

The Bill is part of the policy framework needed to prepare for the other side of the downturn. Let me be clear with the House from the outset. We are not imposing a new business tax, but introducing a new power to allow local authorities—with strong safeguards for business—to raise some of the money needed to boost local business and the local economy in the longer term.

The Minister is aware that there are many very good councils, but there are some councils that do not listen and do not consult properly even their residents, let alone businesses, which do not have a vote. Can he give an undertaking that businesses will have a vote on all levies, at whatever level they are proposed by the councils?

I will not give that undertaking, but I will give a fuller outline and an explanation a little later, and they will set out the circumstances and the principal case in which businesses would and should get a vote. The hon. Gentleman may wish to consult the leader of his local county council for his view on the issue; he is an innovative council leader interested in the fact that this power could allow Essex to raise more than £12 million each year with the 2p business rate supplement. That money could be used in his county for all sorts of economic development projects.

Will the Minister tell the House how much he thinks this measure might raise in the full year once it is up and running? It is, in practice, a tax on business.

As I have just explained, we are not imposing a tax on business but putting in place a power through which local authorities can, with safeguards for local business, decide to introduce such a levy. We reckon that a supplementary business rate in London, which is likely to be where this is first put to the test, would raise perhaps £170 million a year. The right hon. Gentleman will know that that is an essential element of the funding package to support Crossrail. It will allow the Tory Mayor and the London assembly to discharge their commitments and responsibilities to contribute to that funding package precisely because it is a major economic project that could bring great benefit to businesses across London. Therein lies the principal case for such a power and for that power being available in other parts of the country.

The Minister said that Crossrail will bring benefits to businesses across London. My constituency is the southernmost in London, and I assure the Minister that a small business in Coulsdon will derive no benefit whatever from Crossrail. Where on earth is the equity? Where is the fairness in having the Greater London authority impose a business rate for Crossrail which hits businesses that derive no benefit from it whatever?

If the hon. Gentleman reads the Bill, he will see that we are proposing the power for all the upper-tier, top-level authorities. He knows as well as anyone that in London the democratic and electoral arrangements are different from those in the rest of the country: the upper-tier, elected authority is the Greater London authority. If there is a problem with businesses in Coulsdon, or if businesses tell him that the power will not bring benefits to them, I suggest he take the issue up with the Mayor. I will come on to explain the significant safeguards in the Bill which will in all likelihood mean that as many as nine in 10 businesses would not be liable to pay a business rate supplement if it were introduced in their area.

rose—

rose—

I shall first give way to the hon. Member for Croydon, Central (Mr. Pelling), a compatriot of the hon. Member for Croydon, South (Richard Ottaway); then I will give way to the hon. Member for Cities of London and Westminster (Mr. Field).

I want to support the hon. Member for Croydon, South (Richard Ottaway). Does the Minister not accept that it is a facet of London politics that a London authority inevitably means a transfer of resources away from rather poor suburbs such as Croydon to projects in the centre or east of London? Would the Minister be willing to follow the Select Committee’s recommendation that boroughs should have some kind of veto so that they can address the issue of the continued transfer of money away from south London to other parts of London, which further taxation through the GLA will inevitably involve?

The hon. Gentleman will find that the limitations to liability set out in the Bill will help to safeguard areas that are relatively poor in terms of high rateable value businesses.

rose—

I now give way to the hon. Gentleman’s former hon. Friend, who represents areas in which a more significant number of businesses will be above the threshold than in Croydon.

I will not be speaking on behalf of Croydon, which is well looked after—at least on this side of the House. The hon. Member for Croydon, Central (Mr. Pelling) may have had in mind my constituency as a part of the central London area that is to benefit.

I wanted to ask about the Minister’s earlier statement about the top tier. Does he not recognise that we have an entirely different system in London compared with other parts of the country, where that top tier would be a county council? The GLA’s role is purely advisory and scrutinising in respect of the Mayor. It is therefore wrong for this power to be geared towards the GLA rather than the constituent 33 boroughs of London.

I think the hon. Gentleman and I will have to disagree. Where we have local government that is not unitary, as in London and in some county areas, it is right that this applies to the upper-level authority, not least because it is much more likely to be leading the long-term strategic planning that will be part of preparing some of the big investment and infrastructure projects that are likely to underpin the performance of the local economy and the prosperity of local businesses for the future. Therein lies the argument for saying that the upper-level authority should have this power, although some have argued that we should allow districts in two-tier areas to have the same. In our view, however, there should be one business rate supplement for businesses in an area, without the risk that a county and a district might separately choose to take this power, which therefore will not be available to those lower-level authorities under the Bill.

May I urge my right hon. Friend to take a robust view on this issue? The Conservatives appear to be advocating an approach that would make it impossible for Crossrail to be funded. If individual London boroughs opted out and power was taken away from the Mayor of London—who is a Conservative but is wholly supportive of the supplementary business rate in order to support Crossrail funding—that would be the death knell for Crossrail, which is crucial to the economic success of our city. I sincerely hope that the Government will remain robust on this.

I welcome the support of my right hon. Friend, as a ministerial predecessor and as a London MP, because he understands the challenges of trying to put in place such a power and the challenges that then face local authorities, in consultation with local businesses, in deciding whether it may be appropriate for their area.

As I have tried to explain, London is the leading example of this principle in the Bill and the leading example of the new power in the Bill. The new power will allow the Mayor of London to make good his commitment to funding a key part of the Crossrail package and to supporting economic recovery and the long-term growth of London. That is why he said last month:

“Crossrail is vital to London and the UK, providing an enormous boost to the economy and, in the tough economic times ahead, creating thousands of jobs linked to its construction.”

That is why the GLA briefing for this debate declares that the business rate supplement

“is a key part of the funding package for Crossrail... the successful passage of the BRS Bill is therefore crucial to the construction of Crossrail.”

Some argue that such investment opportunities should only be allowed to London; indeed, that is suggested in the Opposition’s reasoned amendment. I have to say to their Front Benchers that I see that as the traditional and typical Tory view that nothing matters beyond the country’s capital. They would deny other cities, significant county councils and other local authorities the power to develop with their local businesses new plans to support economies outside London. It is therefore right that we do not place a limit on the Bill so that only London may benefit from its provisions. Instead, we ensure in the Bill that all areas of England and Wales have the chance to use this power if and when it is right for them to do so. This legislation for long-term investment and the upturn should not be stalled by short-term concerns; nor should the interests of London be placed ahead of those of other parts of England and Wales.

Some fear that businesses may be seen as a passive cash cow; that is also suggested in the Opposition’s amendment. However, the Bill requires, on the contrary, that companies be active participants in debates and decisions on a business rate supplement and on the role that it may have in contributing to the future prosperity of their areas. Again, London is the leading example of that principle, and the GLA and the Mayor have consulted widely with business on Crossrail and its funding. That is why Sir Michael Snyder of the City of London Corporation said last month:

“Crossrail is critical to the future of London's economy and it is essential that we continue to make major improvements to our transport infrastructure during these challenging times. Crossrail is absolutely crucial in keeping London and the UK globally competitive and for this reason we are delighted to support the funding of this vitally important new railway.”

Crossrail is supported by the wider business community in London, which, by doing so, accepts the funding package of which the business rate supplement is an essential element—an explicit part of the Crossrail deal.

It was noticeable that the Minister claimed support from business, particularly in London, but pretty much all the bodies representing business have said that the rate is an extra tax, and another cash cow for local government. They are totally opposed to it. How does he equate that with the statement that he just made?

In two ways. First, the picture that the hon. Gentleman paints does not represent the view of the many business organisations in London that accept the case for Crossrail, and which accept that a funding package needs to be put in place if we are credibly to pursue the ambition to build it. They accept the business rate supplement, which the GLA and the Mayor back, as part of that package. The hon. Gentleman talked about other business organisations, but the CBI is not opposed in principle to a business rate supplement, although it wants much stronger safeguards for business than we have in the Bill.

The question is twofold: is there a case, in any given area, for the sort of economic development and investment that would not otherwise happen? If so, do the benefits to business, jobs and prosperity in the long term support the case for introducing a business rate supplement? That is essentially the framework of policy and powers that the Bill sets out.

The Minister cites the CBI. Will he give it what it asked for in its briefing to all Members: a ballot on every proposal?

No, and I will explain why later. I note that that is an element of the Opposition’s reasoned amendment.

At a time when businesses are suffering the most for decades and bankruptcies are increasing, the Minister has said that he will not give businesses a vote in every case. Will he include a clause in the Bill saying that before any such scheme is considered, the economic conditions of businesses affected have to be taken into account? We are beginning to see empty sites up and down the high streets of this country, in prosperous places such as Putney. If such a scheme were proposed in Putney at this moment, a fragile trading condition could be made even more fragile.

Whether or not there will be a vote on a business rate supplement, depending on the contribution required for any proposed project, there will be compulsory consultation, which will need to take into account the sort of things suggested by the hon. Gentleman.

Has my right hon. Friend reflected, during his consideration leading to the introduction of the Bill, on the fact that the contribution to local government finance from the business rate has systematically declined as a proportion of the total amount of revenue coming in because of clauses in the original council tax legislation? Rises in the business rate are restricted to the rate of RPI inflation, so the contribution as a percentage of total income has declined over the years. Has he calculated what that effect has been, and what effect the business rate proposals may have on the total contribution by businesses to council tax revenue?

I can give my hon. Friend the figures that he seeks. In 1997-98, business rates formed 25 per cent. of the money that was given to and spent by local government. Last year they formed 20 per cent. The reason is that we have been keen to restrict the annual increase in the small business non-domestic rate to the rate of inflation. At a time when significantly above-inflation Government grants have been given to local authorities, that proportion has therefore fallen. We do not propose to change that policy approach, and any business rate supplement levied in a local area or a combination of areas will be entirely in addition to the core commitment of the business rate take as a whole rising in line with inflation. That commitment will remain.

The present economic circumstances underline the need for active government and an active public sector to protect the poorest, to correct flaws in the market and to exert the leverage needed to secure the proper role and contribution from our private sector. The alternative is to let the recession run its course and leave the upturn to the market—precisely the approach that was taken during the recessions in the 1990s and 1980s. We are determined not to repeat that approach.

Against that background, how does the Minister justify the slashing of funding for the local authority business growth incentive scheme?

The hon. Gentleman will know that that is a three-year scheme, and was only ever introduced as such. This is the final year, and so far we have paid out £833 million to local authorities as a reward for the business growth in their areas. That is entirely additional to the core Government grant, and entirely without strings attached to how local authorities spend it. Having trialled it by proxy as a grant, now is the time to build it in more systematically as a feature of the business rates system. That is what we propose to do from next year.

The Bill is part of what is needed to put in place the foundations of an upturn. It is not easy, because in these difficult financial times there is a risk that major projects and policy reforms will be sidelined because of short-term concerns. There is also a risk that we will retreat to centralism, removing local discretion and flexibility when there are tough choices to be made. We will not do that, because we in the Labour party believe in greater devolution to local government. That is why the Bill is the latest in a series of powers and freedoms that the Government have given to local authorities in recent years. Those powers are essential at the moment, as authorities do more to deal with the downturn at local level and to face the new challenges ahead.

rose—

I shall give way to the hon. Gentleman, and then—[Interruption.] Then perhaps I shall run through several of the powers and freedoms that we have devolved and placed in the hands of local government in recent years. There is obviously an appetite among Tory Front Benchers to hear about that.

The Minister is coming to one of the problems with the Bill, which is that it is neither confined to the funding of Crossrail, about which we have heard much already, nor a fundamental review of local accountability and how money is raised and spent locally. Such a review is much in demand and would enable far more involvement of local communities, whether through the localisation of business rates or through a review of how residential taxes are raised. The Bill is tacked on to Crossrail, which is unfortunate and means that it is neither one thing nor the other.

I perceive it as an advantage that the Bill does not introduce a local income tax, and as a strength—not a weakness—that it is not confined to powers for London. It continues the series of greater powers and freedoms that we have given to local authorities in recent years, when we have introduced a general power of competence. It allows local authorities to do anything they choose, except raise taxes, to improve the economic, social and environmental well-being of their area.

A moment ago, I mentioned the three-year business growth incentive scheme. So far, £833 million has been paid to local authorities to reward their efforts to encourage business growth in their areas. Under the local enterprise growth incentive scheme, 20 local authority areas receive £280 million to boost enterprise, inward investment and work. The new power to introduce a community infrastructure levy in the recent Planning Bill gives councils the ability to raise money for vital infrastructure to support more sustainable growth and development.

Local area agreements are struck between the top-level councils in the country and national Government, and designed so that councils can set the priorities for their areas. In all but one of the 150 local area agreements, those councils have set at least one economic priority and target in their plan for the future. In business improvement districts, local businesses join forces with local councils and also invest in their own future.

The murmurings from Tory Front Benchers might suggest otherwise, but I think that members of all parties recognise that local authorities can have an important influence on the economic prosperity and development of their areas. Councils throughout the country, with leaders from all parties, support that view. Sir Michael Lyons emphasised that point in his inquiry into local government. It was a central principle of the sub-national review, which I outlined to the House in summer 2007, and it is also contained in the Local Democracy, Economic Development and Construction Bill, which is starting its passage in the other place.

Local government, across the parties, has welcomed the new powers and funding that we have offered to support economic development work.

Does the Minister agree that, in the business improvement districts to which he referred, businesses have engaged with local councils and voted in favour of extra revenue going towards improving their areas, and that that is true democracy?

I recognise the success of business improvement districts—67 are up and running. They are in diverse areas, such as Liverpool, Leicester, Worthing, Croydon—

Ilford, North.

Indeed. The 67 areas are diverse and led by different political parties, but work with their local businesses, normally in a very localised area, often to improve safety and environmental quality, and partly to boost business prospects. In many ways, the House and the hon. Gentleman might perceive the business rate supplement as building on that success—applying the approach of the business improvement districts to larger areas and potentially raising money to make lasting change through big projects, such as Crossrail in London.

Will the Minister give way?