With permission, Mr. Speaker, I would like to make a statement about the Dunfermline building society. I hope that the House will understand that an announcement had to be made as soon as possible this morning to provide certainty to the Dunfermline’s customers when branches opened this morning. I have previously disclosed to the Treasury permanent secretary, and it is appropriate that I draw to the House’s attention, the fact that I hold savings accounts on behalf of my children at the Dunfermline building society.

Most of the society’s core member business was transferred to the Nationwide building society this morning. Under the terms of the agreement, it will be business as usual for customers and Dunfermline’s deposit business will continue to operate normally. Branches and telephone banking will continue to be open and customers can access their accounts in the usual way. Savers can be assured that their money is safe. Loan and mortgage customers can continue to contact the Dunfermline in the usual way and to make repayments as normal. All the Dunfermline building society’s staff have been transferred to the Nationwide building society.

The decision to transfer the Dunfermline’s main business to Nationwide was made to protect depositors and safeguard financial stability, as well as to protect the interest of the taxpayers. I would like to set out the background to the decision and the options looked at by the Financial Services Authority, the Bank of England and the Treasury, in order to find a long-term solution to the society’s problems. The Dunfermline building society has 34 branches, employs about 500 people and has around 300,000 members, making it the 12th largest building society in Britain. The decision was necessary because of a significant deterioration in the society’s financial position in the past few months. That culminated in the decision by the FSA on Saturday that the Dunfermline building society was likely to fail to meet the FSA’s conditions to remain open for business and that it was not reasonably likely that action could be taken by the society to enable it to satisfy these conditions.

The Dunfermline’s problems were caused by a range of factors. The society has engaged in substantial commercial property lending, in excess of £650 million, making many of those loans in 2005 and 2006, when prices were at their highest. It is now losing money on many of those loans. In 2006 and 2007, the society also purchased more than £150 million of high-risk, self-certified mortgages from two American firms, GMAC and a subsidiary of Lehman Brothers, just before the global market for such loans completely collapsed. Those decisions, together with the need to write off £10 million from the purchase of a £31 million IT system, contributed to the society making an expected loss of more than £24 million last year.

The FSA has been in constant touch with the society since November, as is properly the case, as the FSA is its lead supervisor. It has been clear for some time that the society needed additional capital to continue operating. It was also clear that the society could not raise the amount of capital that it required in the markets and that it would need support from public funds. Under the Banking Act 2009, the Government have to take into account three objectives in particular when deciding whether to intervene in the financial sector: the need to protect depositors; ensuring stability and confidence in the financial system; and safeguarding the interest of the taxpayers.

To meet these objectives, the FSA, the Bank of England and the Treasury had two options. The first was for the Government to inject more capital into the society, possibly alongside the Building Societies Association and the Scottish Government. The FSA advised that a minimum of £60 million was required just to allow the society to continue trading. This, however, would not have provided the Dunfermline with a long-term solution. First, it was the judgment of the Bank of England, the FSA and the Treasury that even with an injection of £60 million, the society would have been very unlikely to have an independent long-term future, and that it would have needed to come back for more. Secondly, the society would not have been able to service or repay this amount of new capital; in the past few years it has never made an annual profit of more than £6 million. Thirdly, that course of action would not have dealt with the commercial property loans and the high-risk mortgages, totalling some £800 million, held by the society.

The second option was to find a long-term solution for the Dunfermline building society, in which it had sufficient backing from a larger society and in which the riskier assets were separated out. It was therefore decided, after the Bank of England had invited offers over the weekend, that as a result of that process, core parts of the Dunfermline would be transferred to the Nationwide building society. The Dunfermline’s retail and wholesale deposits, its 34 branches, its head office and its residential mortgages have been transferred. Savers who are retail depositors with the Dunfermline and with the Nationwide will continue to benefit from separate Financial Services Compensation Scheme limits—that is, £50,000 per person per institution.

The Nationwide already has more than 40 branches in Scotland, where it has been operating for many years. It has the strength to provide financial support for the Dunfermline building society. It has said that it will maintain the Dunfermline building society brand, and that there will be no compulsory redundancies in branches for the next three years. The social housing loans of Dunfermline’s customers have been transferred temporarily to a bridge bank owned by the Bank of England. This will continue to provide support for the Dunfermline’s social housing commitments while the Government talk to a number of other parties, including the Scottish Government, about securing a long-term future.

The remainder of the Dunfermline’s assets and liabilities—including commercial loans, high-risk mortgages and subordinated debt—have been put into administration. These assets will be managed and wound down over a period of time. In this way, the return for the taxpayer can be maximised as conditions improve. Any losses associated with these assets will be met in the first instance by the remaining capital in the society, and by the Financial Services Compensation Scheme, leaving a small residual exposure for the Government.

In line with previous resolutions of this kind—such as that involving Bradford & Bingley—because the retail deposits have been transferred in full, the assets to back them had to be provided in the short term by the Treasury. Therefore, following normal practice in such cases, the overall net financing provided by the Treasury to the Nationwide is around £1.6 billion. Included in this amount is a sum of £69 million, an amount broadly equivalent to the capital reserves belonging to the Dunfermline’s members. Again following normal practice, this is being transferred along with the rest of the business, and will support prime residential mortgage lending. The Treasury will reclaim the money from the wind-down of the assets outside the transfer and from the Financial Services Compensation Scheme.

The Dunfermline building society has provided services for many years. However, we had to find a long-term solution for it, in order to protect savers, to protect the taxpayer and to give its members a more stable future. We will continue to deal with the impact of the global banking crisis on the banking system, ensuring stability and rebuilding confidence, which is an important precondition to economic recovery. I commend this statement to the House.

I thank the Chancellor for his statement. Of course, it is sad that the 140-year history of the independent Dunfermline building society should have come to such an end. It is depressing to see yet another pillar of the Scottish banking system fall in this way. I note that the Chancellor has for the first time made use of the special resolution regime passed in the Banking Act to deal with this troubled institution. Of course we called for such a regime 18 months ago, and we now know that the Governor of the Bank of England was calling for one five years ago. However, it is good to see that it is now in place and being put to use.

The absolute priority for the Dunfermline, as the Chancellor has said, is to protect the depositors, and their transfer to the Nationwide will do that. I have spoken to my colleagues in the Scottish Parliament, and we agree that we should all be concerned about the future of the 500 staff who work in the branches and the head office. This will be an anxious time for them and their families. In his statement, the Chancellor provided some reassurance for the 245 employees in the branches, but he said nothing about the remaining 289 people who work in the head office. Perhaps he will do so when he responds to my questions.

Indeed, it would be good moment, if the Chancellor felt able, to say something about the total job losses both in Scotland and in the rest of the UK resulting from the problems at HBOS, Royal Bank of Scotland, Bradford & Bingley, Northern Rock and now Dunfermline, and to clarify whether the Government are able to provide specific help to unemployed bank staff, with their particular clerical and IT skills, in finding the new jobs they are looking for.

Specifically on Dunfermline, will the Chancellor answer these questions? First, he says that the Treasury has provided £1.6 billion of net financing to Nationwide, so what is the maximum possible loss for the taxpayer? He mentioned in his statement a small residual exposure. How small is it, and what is the maximum exposure? Can he give us the figures today? What is the risk from holding £500 million of social housing loans, and how quickly does he expect to find a buyer for them? What is the maximum loss for the Financial Services Compensation Scheme—a scheme designed, of course, to protect customer deposits, but now burdened with the liabilities of Dunfermline, and Bradford & Bingley? What will be the impact on the levy charged to other banks and building societies, and no doubt passed on to customers? Indeed, is the Chancellor confident that the additional costs can be met by the rest of the industry, given the weak state that much of it is in?

Secondly, when was the FSA first aware that Dunfermline was purchasing UK buy-to-let mortgages from the likes of Lehman Brothers and GMAC, and increasing its exposure to commercial property by £500 million—an increase of more than 400 per cent. in the last three years alone? These are British loans, to British households and British companies, that have gone bad, and they are further evidence of what we have been saying all along—that not all the banking problems have blown in from America. Did our financial regulator ever ask whether this was a sensible business model for a medium-sized building society to pursue? Were any doubts ever expressed or any questions ever raised or any warnings ever issued—and if not, why not? Will the Chancellor now instruct the FSA to publish a full account of its dealings with Dunfermline, as he did with Northern Rock, so that we know the whole truth, rather than it just dribbling out over the coming months? Of course the management at Dunfermline must bear the primary responsibility for taking a safe and—dare I say it?—quite boring building society and turning it into a high-risk property speculator, but why did the FSA let it do that?

Is the Chancellor satisfied with the way in which the Treasury has conducted itself throughout the negotiations? The Government’s decision to pull the plug on Dunfermline was, of course, never going to be popular with the management, but could not more of an effort have been made to explain that decision? The chairman of the society, Mr. Faulds, says he is “astounded” that senior Treasury officials would not speak to the society, and that the only contact with Ministers was a cup of tea with Lord Myners. Why did the Chancellor not feel it necessary to meet the management himself, and at least hear its alternatives? Is it really the case that Dunfermline staff learned of their fate only through a Treasury leak to the media, and does that not show insensitivity to bank clerks on modest incomes who now face losing their jobs?

Finally, will the Chancellor say something about his relationship and dealings with the Scottish Government? He mentioned in his statement that he was going to talk to the Scottish Government about the future of some aspects of this deal. Does not the handling of the Dunfermline building society highlight the fractious and unhelpful relationship between a Labour Government in London and a nationalist Government in Edinburgh? Given that we have a Chancellor of the Exchequer who comes from Edinburgh and a Prime Minister who used to be the MP for Dunfermline, should they not try harder at least at their side of the relationship? The financial industry is so important to Scotland, and the problems have been so great, that the Scottish people are entitled to expect a bit more co-operation and a bit less confrontation between those elected to govern them in Edinburgh and in London.

Let me answer the hon. Gentleman’s questions, and let me start by saying that I agree with him that it is a real shame that the Dunfermline building society has got into this position—and many people who have used its services over many years will be very sad about that.

The hon. Gentleman asked a number of questions, and I am going to start with the last one. I strongly believe that, no matter what the political differences may be between the Administration in Holyrood and the Government here in Westminster, we should work together. I had an extremely constructive and, in my opinion, friendly meeting with the First Minister last Wednesday. I also spoke to him on Saturday morning, shortly before the FSA contacted him in Dunfermline to explain the position to him.

I believe that the offer made by the Scottish Government in an effort to resolve the problem was made in good faith. I spoke to the First Minister about that. The problem was that, as I said in my statement, we believed—and the regulator believed—that even if we had put all that money in, it would not have been enough. Given that the society has never made more than about £6 million in any year, how would it had served us if all that additional capital had been put in? There was also the whole question of the now bad assets to which the hon. Gentleman referred.

I consider the co-operation between the Administrations north and south of the border to have been extremely constructive. Both the First Minister and I fully understood the building society’s problems, and both of us wanted to work towards a solution. The hon. Member for Tatton (Mr. Osborne) also mentioned contact between the society, the regulator and the Treasury. I understand that the Treasury first spoke to the officials in November, once it was becoming apparent that there were difficulties. The representatives of the Dunfermline have also met the Secretary of State for Scotland, and Lord Myners in my Department.

I must point out to the hon. Gentleman that it is not surprising that most of the contact—and there has been a lot of it—has been between the FSA and the Dunfermline, because the FSA is the regulator. It is the body that must decide whether, at end of the day, institutions can continue to receive deposits.

The hon. Gentleman raised a number of other points. He asked about the special resolution regime and the 2009 Act. I can confirm that this is the first time that the regime has been used. As he seemed to want to make a political point, let me also say to him that it was foreshadowed in the Banking (Special Provisions) Act 2008, which he did not support. Be that as it may, however, we both agree that the Bank, the FSA and the Treasury need powers of this sort, especially in the current environment.

The hon. Gentleman asked about jobs, which are clearly very important. I spoke to the chief executive of the Nationwide building society this morning. He said that the Nationwide would guarantee that there would be no compulsory redundancies in the branches, but he also explained to me that, over the next few weeks, it would need to meet people in the headquarters in the Dunfermline and then decide what the requirement is. As the Government have now taken over the commercial loans, that work will not need to be done. Let me also say—anticipating future questions—that it is almost certain that even had the Dunfermline carried on, with support, there would have been reductions in the number of jobs available. I think that that would have been inevitable, given the Dunfermline’s present position.

I want to make it very clear that Jobcentre Plus will be ready to help in Dunfermline, just as it has helped in the case of other banks where there have been job losses. Many people who are very skilled and dedicated have put in years of hard work, and would make first-class employees elsewhere. It is important for us to do all we can to turn such people’s lives around if they lose their jobs. That is why we put more money into Jobcentre Plus at the end of last year.

The hon. Gentleman asked about the social housing loan. I hope that the discussions about that will begin in the next few weeks, because I want to secure some certainty. The Scottish Government clearly have an interest in the issue, because much of Scotland’s housing was being financed by the Dunfermline.

The hon. Gentleman wanted to know how all this arose in the first place. I think that there are two answers to that question. The hon. Gentleman is right: I am afraid that the management in this building society, like management in other institutions that have got into difficulty, are primarily responsible. However, I have asked the chairman of the FSA to let me know what happened, and of course I will keep the House informed.

Let me begin by paying tribute to the people—particularly members of the Building Societies Association and my hon. Friend the Member for Dunfermline and West Fife (Willie Rennie)—who have tried to rescue the situation and take account of the interests of the 310,000 customers, the work force and, of course, the taxpayer.

As for the Secretary of State’s statement, I shall start with the last part of his reply to the hon. Member for Tatton (Mr. Osborne), which dealt with how this failure occurred. It is clear that there was disastrous management and a failure of oversight on the part of the directors. This morning I was sent a copy of some details of the kind of business that the building society was transacting almost two years ago. It refers to a loan of £10 million to a company based in Lancashire called In-House plc—described as a company that was loss-making and insolvent, which had never filed any properly audited accounts. Substantial numbers of loans of that kind were taking place, and I repeat the point that the Conservative shadow Chancellor has already made: is this not a gross failure of regulation by the FSA? It is very difficult to see how that could have happened under the old building society regulator, who kept a much closer eye on the conduct of societies.

As for the outcome, it is clear that there have been some positive results. It is positive that the savings and deposits business and the mortgage lending will continue within the mutual movement with the Nationwide, and there is a reasonably positive outcome for the labour force. But I would like to pursue a question that has already been raised with the Chancellor: why could the potential offer from the Building Societies Association not be taken up? Presumably, when the BSA offered to put in £30 million of its own members’ money, it made a pretty hard-headed calculation of what the Dunfermline could service and repay. It is difficult to understand why it came to a radically different conclusion from that reached by the Government. As the BSA was willing to step up to the plate itself, why did the Government not feel able to match its contribution? Is one of the reasons why the Government were not able to do so a rigid application by the FSA of its capital adequacy rules? We have heard a great deal about the future of counter-cyclical regulation, but do we not here have a case of the 8 per cent. rule for capital being so rigidly applied as to make it very difficult to deal with situations of this kind?

I have previously raised my final point not with the Chancellor, but with his Ministers. It is to do with the contributions made to the deposit protection scheme, and the fact that that weighs disproportionately heavily on the building societies, because it is based on the level of deposits, rather than loan exposure. Building societies such as the Nationwide that are very prudent in their operation and maintain a very high level of deposit savings in relation to their lending are therefore paying a much heavier contribution than the banks. Not only is that storing up trouble for the future, but it seems very unfair, and it has, of course, affected the calculations in this particular case. Will the Government take a fresh look at this matter, which all the building societies feel very strongly about?

The hon. Gentleman raised three questions. On supervision, we are both in agreement that the primary responsibility for management decisions always has to rest with management. The management in this case took the decision over a number of years to go into areas where the building society had not previously gone. The hon. Gentleman referred to the IT system. Ironically, the In-House organisation he mentioned was proposing to sell its expertise in IT, whereas in fact £10 million—I think that is the sum—had to be written off in respect of the IT system. That was clearly primarily a management decision. However, as I said to the shadow Chancellor, there are lessons to be learned here, and we need to look at them.

On the point about the Building Societies Association, we looked at the idea very seriously. If it had worked, and all that was necessary was a capital injection from either the Government or the BSA—and, possibly, the Scottish Government as well—there would have been attractions in that, such as that it would have been relatively simple to do. Our problem was that the FSA—which is, at the end of the day, the regulator—came to the view that although that might buy time, it was almost certain that, as I said in my statement, the society would have to come back for more. That was the difficulty. It also has to be said that when we spoke to the BSA, there were certainly some who were proposing to contribute to what would have been a pooled amount—it would have come from about half a dozen larger BSA members—but some of them were sceptical as to whether that would fix the problem. As the hon. Gentleman knows, one of the lessons that has to be drawn from other parts of the world—indeed, arguably, from nearer to home—is that if we are going to try to fix the problem and recapitalise banks, we need to do it properly. The Japanese experience was that if we keep coming back and back, it prolongs the problem rather than resolves it.

On the deposit protection scheme, the hon. Gentleman raises a perfectly good point and I know that it is something that the FSA will be examining; it obviously needs to consider both the distribution and the treatment of the building societies’ contributions and the banks’ contributions. I will ensure that on that, and on other matters, I will keep the House informed.

In Dunfermline this morning, the feeling was a mixture of depression, anger and confusion as to why such a fine Scottish institution had come to this. I am bitterly disappointed that more could not have been done to save such an institution, which has been a trusted friend to many people in the community in Scotland over 140 years. Could the Chancellor of the Exchequer please explain why more was not done to save this institution? I have heard many of the explanations here, but many, including the Scottish Government, the rest of the mutual sector and others, were willing to rally around to come to the rescue of the building society. What has happened will do tremendous damage to the mutual sector as a whole, which is trusted by many in the community throughout the country. The Government had a responsibility to do more to save the institution, and in Dunfermline this morning, people were feeling that it was a sad day when such a fine institution had come to this.

I am well aware of the affection that many people in Dunfermline have for the building society. The society has, over many years, enjoyed a very good reputation, not only in the town of Dunfermline but in Scotland as a whole, and I think it is a great pity that it has come to this. The hon. Gentleman asked why it had happened. As I said in my statement, the reason is that the management of the society decided to go into quite large-scale commercial lending, and they did so at the top of the market. These loans are now, in many cases, not being repaid. The management also acquired property mortgages from two American companies just before that particular market collapsed, and they also encountered the problems with the big IT project that I mentioned. We tried everything that we possibly could to reach a solution.

The hon. Gentleman rightly refers to the contribution that was considered from us, from the BSA and, possibly, from the Scottish Government. The problem was that it would not have fixed the problem; we might well have been back in a few months’ time, or in a year’s time, facing exactly the same problem. We needed to find a long-term resolution for the members of that society, and to do the best we could in relation to jobs and financial stability. I am glad that we were able to transfer the building society to another building society. He is right to say that there is a lot of affection for the building society. I, like many others, am very sorry that the decisions taken by its management meant that it got into those difficulties. We have had to do what we believe is right to secure the long-term interests of the people who have their money in that building society.

The chairman of the Dunfermline building society, Jim Faulds, has made his views known today; he has made some severely adverse comments about the decision that the Government have taken, going as far as to say that this action was not necessary. Is my right hon. Friend in a position to pass comment on some of those views that have been put into the public domain?

I know that, like many people, all of us here deeply regret that the decisions taken by the management of the Dunfermline building society have meant that we have had to intervene and take measures to make sure that it is put on a long-term stable footing within the Nationwide building society. I believe that the action that we have taken was necessary, as a result of the judgments that were made, and that it is the right thing to do, both to protect people who have money in that building society and for the long-term financial stability of the industry as a whole.

My hon. Friend the shadow Chancellor asked the Chancellor of the Exchequer a specific question about the maximum taxpayer exposure as a result of what has happened. I should be grateful if the Chancellor could either explain why he will not answer that question, or answer it now.

The answer is that it will depend over time as to what extent we are able to realise the assets that we now hold, including the commercial property. I hope that we will be able to recover all the money that we have had to put in—otherwise the Government will have a call on the capital of the building society and in relation to the FSCS—but the position is very similar to that of the Bradford & Bingley bank, where we had to step in and take similar action last year.

I very much welcome the action that has been taken by the Nationwide, part of whose headquarters is in my constituency. It has always been an important and stable financial institution. My right hon. Friend referred to some real weaknesses in the UK mortgage market, such as the self-certified mortgages, although we have always assumed that we did not have a sub-prime issue here. Is he working with the FSA to look closely at the weaknesses in the UK mortgage market and to identify any other problems that might be developing, especially in the mutual sector?

We do not have the same problems as the US market, partly because our mortgage market was much more tightly regulated. The US sub-prime problem was caused largely by people who took out loans on properties that were not worth very much, who did not have very much in the way of income, and who were never going to be able to repay when interest rates went up.

The problem that we have in this country tends to centre on self-certification and buy-to-let property. It is those mortgages that the Dunfermline bought off GMAC and a subsidiary of Lehman Brothers, and that is part of the reason for its difficulties. It all points to the need to ensure that the mortgage market, and the wider financial services industry, is properly supervised and regulated. It is worth remembering that even as late as 2007 some people were calling for the complete deregulation of the selling of mortgages, which would be absolute madness.

Is it not extraordinary that the provision of another £1.6 billion of public money to rescue another failed institution no longer seems extraordinary? Can the Chancellor explain why the regulator allowed the Dunfermline building society to over-commit itself so recklessly in 2006 and 2007 in commercial property and sub-prime?

The hon. Gentleman is right, in that the action that Governments are taking all over the world simply would not have been contemplated three or four years ago. He asks a pertinent question about supervision, and I said earlier that I want to get a report on that, because there probably are lessons to be learned. The issue comes back to a point that has come up time and again with Bradford & Bingley, HBOS and RBS: what were the management doing? What questions were being asked? When the money was coming in, surely someone was asking how and on what basis it was coming in. We have to tackle the management weaknesses, which fundamentally led to the problems, and we have to learn the lessons in relation to supervision and regulation of such institutions.

On that very point, surely the directors of the Dunfermline owed a fiduciary duty to the members of the society. If the directors behaved recklessly, as described by the hon. Member for Sevenoaks (Mr. Fallon), surely there must be some come-back against them. My Friend said that the Dunfermline is the 12th largest building society out of 55 in this country: are any of the others similarly exposed or is this a one-off?

The FSA is responsible for the conduct of directors and the supervision of all building societies and other financial institutions in this country. Part of its job is to keep a close eye on developments in every institution.

The end result is that the taxpayer will have the bad bits of the society while the Nationwide gets the residential mortgage book, the deposit-taking business and the society’s reserves. It will also get £1.6 billion of net financing. The general public will be perplexed as to why £1.6 billion of net financing represents better value for money than £60 million of recapitalisation, so may I ask the Chancellor whether, if the Dunfermline had been recapitalised to the £60 million suggested by the FSA, it would have met the capital adequacy rules and have been eligible for or entitled to other liquidity funding?

The FSA believed that even though an injection of £60 million might have bought time, it would have been necessary to return to the problems faced by the Dunfermline within a short period. In other words, that would not have provided a long-term solution. The hon. Gentleman asks about the £1.6 billion. I had the benefit, if I can put it that way, of seeing him on Sky television earlier this afternoon, so I had some inkling of what he might say. Perhaps I can explain the position. We have transferred the deposits of the Dunfermline to the Nationwide, and the Nationwide therefore has a liability to pay out those deposits. If the hon. Gentleman thinks about it, most of a deposit of £10,000 with the Dunfermline or any other building society would be lent out in order to get a return, but the liability for the full amount remains. Therefore, the Government have to provide financing—that is the £1.6 billion; it is different from providing working capital. With respect, the hon. Gentleman is not comparing like with like.

Let me make it clear that I understand fully that it does not matter where Members represent: all of us will be sorry that a building society that has done well over many years has got itself into such a position, through judgments that clearly went wrong. We have had to step in to try to resolve that, to provide security for depositors and to provide a long-term future. What we have done is absolutely right and I am afraid that it was unavoidable.

Why have the loans to housing associations, which are a good credit risk, not been transferred over to the Nationwide along with all the other residential mortgages, some of which will be a lot riskier? How confident is the Chancellor that this is the last time that he will need to make a statement of this nature?

When we looked at what the Nationwide was proposing, we felt that on balance the better value for money would be to see whether there was another way of dealing with the housing loans. They are important. The Dunfermline provided a lot of money for social housing in Scotland and it is important that whatever we do we provide the best value for money.

More generally, I think that over the past two years I have made more statements than any other Chancellor of the Exchequer, by a long chalk. At the moment, I cannot tell the right hon. Gentleman that I expect that situation to change.

I think that the Chancellor will agree that the Nationwide building society is increasingly proving to be a life-saver. I say that because I have a constituency interest. My own Cheshire building society, as well as the Derbyshire building society, is now under the safety of the umbrella of the Nationwide, because the Cheshire indulged in issuing highly speculative commercial property loans, which it should not have done. Will the regulatory body take control, at last, and prevent building societies from indulging in such activities and involving themselves in matters about which they know too little?

There is some force in what the hon. Gentleman says. As Adair Turner, the chairman of the FSA, has said, lessons need to be learned not just from this case but from other cases too, and supervision and regulation need to be far more intrusive than they were in the past. We had a similar problem with Northern Rock when that bank became over-exposed and reliant on one source of funding. When that funding dried up, the bank had nowhere else to go. The hon. Gentleman is right that it is very important that we learn those lessons, but I must tell him that it was not so long ago that people were calling for not more regulation but less regulation, even in respect of the selling of mortgages. I think that that would have been the wrong way to go.

May I forecast that this will not be the last time that the Chancellor of the Exchequer comes to the House to make a statement of this nature? Can we be absolutely clear that this crisis is not a failure of capitalism or markets? It is a failure of governmental regulation. It is a failure to control profligate borrowing and profligate lending. Markets are punishing Governments, regulators and countries for failing to supervise the capitalist system properly.

I assure the hon. Gentleman that this is not the last occasion that I will come to the House. I proposed to come to the House tomorrow afternoon to take part in the economic debate, which, I am sure, we are absolutely looking forward to.

On the hon. Gentleman’s wider point, this is not the occasion to dwell on the future of capitalism, but the one thing that I would say is that he cannot leave out the conduct of the boards of management of some of those institutions, where there is no doubt that huge mistakes were made. Yes, there are lessons for the regulators, for Government and for everyone else, but we also need to ask ourselves, as should the people who are charged with running those financial institutions, whether they did the right thing. I am afraid that the answer in too many cases is no they did not.

Further to the Chancellor’s last comments, yesterday on BBC radio the chairman of Dunfermline building society was very scathing of both the Chancellor and the Secretary of State for Scotland, accusing them of misleading the country about the mortgages that were bought and suggesting that the Chancellor had said that they were sub-prime American mortgages, when, in fact, all the mortgages were British. Can the Chancellor confirm that it is true that they were British mortgages? Were those mortgages transferred to the Nationwide?

I have just said in my statement that the Dunfermline had bought those mortgages from two American companies—GMAC and a subsidiary of Lehman Brothers—and that is precisely what I have been saying since the problem first became apparent.

On a point of order, Madam Deputy Speaker. Might you consider asking Mr. Speaker for a report on the proceedings and conduct of the Committee that considered the Apprenticeships, Skills, Children and Learning Bill? From Thursday to Friday afternoon, it sat overnight for a total of 17 hours and serious disrespect was shown to the Chairman by the Government. It sat through the night, even though the programme motion still allowed for another day’s sitting, and the House had to remain staffed for the whole period, at short notice and considerable expense. That has cost the taxpayer a lot of money, just because of vindictive management by Labour Whips, as punishment to their own Ministers and Members, who failed to turn up at all on the Thursday morning. May I ask you to find out whether there can be a proper investigation into that?

Further to that point of order, Madam Deputy Speaker. As my hon. Friend the Member for Rutland and Melton (Alan Duncan) has just said, on Thursday we spent more than 17 hours in Committee, not finishing until midday on Friday, because the Government refused to adjourn the Committee until every clause of the Bill had been finished, despite the fact that we had available in the programme motion five and a half hours of time in Committee tomorrow, Tuesday 31 March. The reason the Government Whips Office did that was to punish Labour Back Benchers for failing to turn up on Thursday morning, as a consequence of which the Government lost three votes on their own amendments. Can you advise me how much that petulant fit of pique has cost the taxpayer in staff overtime, taxi fares and other House of Commons costs that would not have been incurred if we had used the time available in Committee tomorrow? Can you advise me whether that approach to managing a Bill is the most effective way to organise the scrutiny of legislation?

Hon. Members have raised the question of proceedings in a Committee. I inform them that such proceedings are matters for the Chairman of a Committee and not for the occupant of the Chair to rule on.

I beg to move,

That this House has considered the matter of Africa.

We have called this debate to reaffirm our support for Africa at a time when the economic crisis is bringing acute challenges, and to set out our priorities for the next year. I am sorry that, due to the state dinner for the President of Mexico, I will miss the winding-up speeches later tonight, although if the debate goes on for 17 hours, I will, happily, be able to return tomorrow morning for the conclusion.

Africa has been at the top of the Government’s foreign policy agenda for the past 12 years. The personal commitment of successive Prime Ministers has enabled the UK to be part of a mass-mobilisation behind ambitious objectives. The millennium goals were agreed in New York in 2000 to eradicate extreme poverty and hunger, and improve education, health and the environment. In Gleneagles, during the UK presidency of the G8, further commitments were made: to double aid by 2010; to give at least 0.7 per cent. of gross domestic product to development; to write off debts of 43 of the world’s poorest countries, most of which are in Africa; to ensure that children have access to good-quality, free and compulsory education and free basic health care; and to provide an extra 25,000 trained peacekeeping troops, helping the African Union better to respond to security challenges. The UK has backed up those ambitions by increasing the development budget for Africa from £300 million in 1997 to £1.3 billion this year. In that work, the Department for International Development has established a reputation for global leadership in aid effectiveness.

I am grateful to the Secretary of State for giving way, especially so early on in his speech. May I congratulate the Government on the action that they have taken over a number of years to tackle malaria in Africa, which particularly affects and kills children under five years of age? I ask the Government during this economic crisis not to be tempted in any way to take the focus off tackling malaria through research and prevention.

The hon. Gentleman anticipates some of the points that I will try to make in the course of my speech. The economic crisis does pose a challenge, and that challenge will not be met if we retreat from the ambitious goals that have been set.

rose—

I will bring in my hon. Friend, and then I will try to make a bit of progress.

The Secretary of State spoke about Gleneagles, at which there was a very useful meeting. Will he say a little about the other side of the coin—about good governance, what Africa’s responsibility was, and what has been achieved, as regards its side of the bargain?

My hon. Friend makes a really good point. I do not want to give a preview of my speech, but after dealing with the economic crisis I want to deal with what I think are the four critical themes of development policy: governance, wealth creation, conflict and climate change. That will give us a chance to look in some detail at the issues that she raises.

rose—

My hon. Friend makes it impossible for me to turn down her entreaties, but then I will make some progress.

I am grateful to my right hon. Friend. He rightly pointed out the importance of our commitment to the millennium development goals, but will he reflect on the particular problems to do with the infant and maternal mortality MDGs, and on the fact that there is serious underperformance on those goals in sub-Saharan Africa? Will he reflect, in particular, on the importance of tackling the HIV and AIDS crisis, which particularly affects women and children, especially orphans and vulnerable children?

My hon. Friend makes a very important point. Of course, the fact that we are off track to achieve the millennium development goals was the reason for the call to action that the Prime Minister issued in 2007, and for the special emergency meeting of the UN General Assembly last September. One of the goals on which the world is off track is that relating to maternal mortality. It is invidious in some ways to pick out one organisation rather than another, but I know that the White Ribbon Alliance for Safe Motherhood is an organisation that has support right across the political spectrum. In this country, it is sponsored by the Prime Minister’s wife, who plays a very important role in it. It is trying both to raise consciousness about the issues, and to make practical changes on the ground.

Before we plunge into the difficulties that Africa faces, it is important to recognise that between 1999 and 2006 Africa had made significant progress. The number of armed conflicts was down; economic growth was up; the number of children in school was up by about 30 million; immunisation rates were also up; and more than 3 million Africans are now on life-saving antiretrovirals, which were mentioned earlier. Today, it is right to recognise that Africa faces a new set of pressures, in addition to the historical burdens that it brings forward. Less investment, lower commodity prices, lower demand for African exports and, importantly, reduced remittances from Africans living abroad all mean that Africa and its people face a new set of pressures.

The impact will vary, but right hon. and hon. Members will have seen some of the estimates. Cuts in growth rates will be widespread, but some of the numbers are very stark indeed. GDP growth in Angola has already fallen from 15 per cent. to minus 7 per cent. Botswana is feeling the effects of a 90 per cent. cut in demand for exports, as they account for 50 per cent. of Government revenue. Zambia is suffering from copper prices falling by a third. Meanwhile, in the Democratic Republic of the Congo, export earnings are projected to be 27 per cent. lower this year than last year, and there is a cash-flow crisis projected for the DRC Government; that crisis is probably felt not only in that country.

The wrong response is clear—to scale back our commitments on development, to abandon the Doha trade round, or to reduce our ambition on climate change. Each will harm Africa more than any other continent. That is why the London summit is dedicated to taking concrete actions to protect the poor and vulnerable: to support free trade, promote investment and reform the international financial institutions. The United Kingdom will support the creation of a vulnerable financing facility managed by the World Bank and a global vulnerability monitor led by the UN to manage the impact of the crisis and increase international accountability to the poorest people in the poorest countries.

It is important to recognise that in addition to the economic and environmental imbalances that lie at the heart of the crisis, there is a political imbalance, which is represented in all the major international institutions whose representation is skewed towards the old powers. That is why I hope there is support right across the House for the Prime Minister’s drive to include the whole world in the debate in London this week. There are 20 countries representing 85 per cent. of global gross domestic product, but, significantly, there was outreach to African leaders in the meeting two weeks ago with representatives from 10 African countries, so that their issues and needs are fully on the agenda.

Last week I was in Tanzania with the International Development Committee. I had the opportunity to speak at some length with the IMF country representative and the IMF director for Africa from Washington DC. The IMF recognises the need for a country such as Tanzania to increase public spending modestly by 2 or 3 per cent. in order to try to generate domestic demand to take up the slack caused by loss of export orders. Although that does not apply to all African countries—all their circumstances are different—it applies to several. Will the IMF have sufficient resources to extend loans to African countries that need them in the downturn, and will that be discussed at the summit this week?

My hon. Friend speaks with much experience as well as expertise on these matters. He is right to point to the need not just for a change in political representation in the IMF, but for increased resources for the IMF, not least because several east European countries are asking for IMF support, so Africa needs to ensure that it has got its place. I am very encouraged by the fact that Japan has committed significant sums—I think I am right in saying $100 billion—to the IMF, and the European Union has done the same. I hope that that will be added to by the time of the final summit communiqué on Thursday. The issue of IMF resources is an important one, and the IMF must ensure that some of the old stigma that was associated with it is reduced and that it is able to meet the needs that undoubtedly exist.

My question follows on from that. The president of the World Bank, Bob Zoellick, will be in London this week. What pressure will be brought to bear so that the World Bank becomes much more representative, not just of the donors but of the recipient countries? I know that the Secretary of State for International Development has called for that, but what prospect does the right hon. Gentleman think we have of achieving such reform?

One always has to be cautious in predicting institutional reform in bodies that embody all sorts of vested interests, but I think the fundamental political imbalance in international institutions—the financial ones such as the World Bank, as well as others, such as the Financial Stability Forum—has come home to people very strongly. So I am certainly more confident than I would have been a year ago about the prospects. It is important to try to achieve a timetable for reform, so that that does not become an endless process.

While the right hon. Gentleman is talking about institutions and taking interventions, may I put it to him my view that the coalition Put People First, which is taking a major role in the public concern about the G20, has an honest but mistaken view of Doha. Among its aims, it is urging the Government not to press for a rapid conclusion to the Doha talks, because it fears that they are all about economic liberalisation and so on. Will the right hon. Gentleman restate that the liberalisation of services acts in the interests of people around the world, that the stricture imposed by well-meaning people is wrong, and that the Government will press for a successful conclusion to Doha as soon as is appropriate?

Yes. The hon. Gentleman follows these issues carefully and knows that the Government have been stout not only in their defence of the Doha process, but in trying to advance that process. It is important that some of the good words issued in Washington about the deficiencies of protectionism should be followed up with proper monitoring mechanisms to make sure that the poorest people in the poorest countries do not suffer the most.

rose—

I ask the hon. Gentleman to contain himself.

rose—

Can my hon. Friend let me make a little progress?

I want to intervene on this particular point.

I give way on this particular point.

I was interested in what the Foreign Secretary said about the International Monetary Fund and the World Bank and their poor reputation in the past. Will he assure us that during this difficult period there will be no return to the conditionality of privatisation and that there will be support for the development of localised industries and local supportive economies in Africa, rather than for the failed policies that the IMF imposed on many poor countries in the past?

There is a longer debate to be had about the successes and failures of IMF “reforms”, including in the 1990s, to which I think my hon. Friend is referring. Anyone who follows these issues will know that a lot of experience has been gained from what happened in the 1990s. My hon. Friend the Member for City of York (Hugh Bayley) made the point that African countries are different from each other and should not be lumped together, and that applies to all the countries in which the IMF operates. One of the lessons of the 1990s is that a single transferable model is not necessarily appropriate in all circumstances. There needs to be proper flexibility.

Will the right hon. Gentleman give way?

No. After I have made some progress, I will be happy to take further interventions.

On this point?

No. I am sure that the hon. Gentleman will find a way to get his point in. I trust that he has sufficient ingenuity to find a way to ask me a question about this issue later.

Our relationship with African countries is much broader than development assistance, but that assistance is important—not least the commitment to the target of 0.7 per cent. as a share of GDP, to which this and many other countries have committed, but which very few have reached. Beyond development assistance, we need to tackle the root causes of poverty and insecurity, some of which were raised earlier: poor governance, conflict, lack of access to trade and climate change. I would like to go through all four, with some specific examples.

The first issue is governance. People in Africa are demanding that their states be more accountable to their citizens. There have been 60 multi-party elections in the past five years. Those in Ghana in December and in Sierra Leone in 2007 demonstrate real commitment to democracy. Parliamentary elections in Angola last year were an important step forward in consolidating peace and strengthening democracy. The UK was the biggest bilateral donor to the ground-breaking election in the Democratic Republic of the Congo in 2006. However, there is more to democratic governance than elections. Functioning democracies rely on an active civil society, a vibrant media, improved social conditions and tackling corruption. That is why throughout Africa we are working to build the institutions that can support democracy—not only in the DRC, but in places such as Malawi.

I am glad that it is not beneath the Foreign Secretary to take an intervention from one of the smaller parties.

There have been four coups in the past six months in Africa, and eight of the worst dictators are in sub-Saharan Africa. Governments are desperately abusing the state apparatus to stay in power. Does the Foreign Secretary think that there is a crisis in multi-party democracy in Africa and what is he doing to try to challenge and address that?

I was about to come to the fact that there has been increasing disregard of constitutional rule, most recently evident in Madagascar, in the coups in Mauritania and Guinea-Conakry and in the murder of the President of Guinea-Bissau. All those issues speak to a disregard for democratic norms that is very worrying. Two things are important. First, it is significant that the African Union should have been so alarmed by those changes; the way in which it has spoken up has been important. Secondly, we need to make our position clear in each such case, and that is what we seek to do—not least in respect of the case that for many in the House is the greatest affront to democratic norms: the situation in Zimbabwe.

Nowhere is the challenge of promoting democracy more evident than in Zimbabwe. The whole House is desperate to see an end to the suffering of Zimbabweans achieved through governance that restores economic and civil rights to its people; more importantly, so are the people of Zimbabwe. For years, the country has been led on a path of economic ruin and human suffering. Turning that around is a formidable challenge. It needs the Movement for Democratic Change to be allowed genuine power within the new Government. We all hope that Morgan Tsvangirai’s appointment as Prime Minister offers the change that Zimbabwe needs. We commit to working with him to support stabilisation and recovery. That is why we have increased our humanitarian assistance and will spend £50 million this year to help to feed Zimbabwe’s people, combat cholera, and improve access to clean water and sanitation. But the international community could do so much more if we knew that our assistance would be well used. We need to see that the new Government will be allowed by ZANU-PF to take the measures necessary to end the suffering of the Zimbabwean people. There are some important signs of progress. For instance, public sector workers have recently been paid; and Deputy Minister Bennett has been released. However, there is an enormous task ahead: to stabilise the economy, to restore the rule of law, and to restate and re-enact commitments to human rights and democratic processes.

Today I spoke to our high commissioner in Harare in advance of this debate. The political situation in Zimbabwe remains very delicate. Yet the meeting of donors in Washington last Friday brought the international community together to focus on humanitarian issues. The next step, after the humanitarian assistance and the improvements in governance that we hope to see, is to develop a thorough-going reconstruction partnership with the Government of Zimbabwe when we are confident that all money will be used for the right purposes—above all, for the benefit of the Zimbabwean people.

We are also concerned about British nationals in Zimbabwe—a concern that I know will be shared across the House. The UK Government recently launched a package offering assistance to elderly and vulnerable British people to resettle in the UK. These are Britons who are no longer able to support themselves in Zimbabwe because of the severe economic, social and health care problems that affect all who live there—something that the new Government have barely begun to address.

The second area that I want to focus on is conflict, which still scars the continent, causing huge human suffering. The long-term challenge is to build Africa’s capacity to address its conflicts through the African Union. That is why the UK has trained 12,000 African peacekeepers since 2004-05, and we continue to support the development of the African peace and security architecture, in particular the African standby force, whose eastern brigade the UK supports through a dedicated British peace support training team in Nairobi. The UK is also helping to build AU diplomatic and early warning capacity through support for a new network of AU political offices.

We are also, of course, actively engaged in trying to make our contribution to the resolution of the worst conflicts. Following my visit to the great lakes with French Foreign Minister Kouchner last November, we urged regional leaders, led by President Kikwete, to launch a process whereby African mediators helped to restore peace and stability. Thankfully, under UN auspices former President Obasanjo has helped to promote significant change—remarkable change in many ways. Co-ordination between the DRC and Rwanda has led to significant improvements in the situation in the Kivus. However, although joint military action against the FDLR—Democratic Forces for the Liberation of Rwanda—militias is to be welcomed, the risk of reprisals remains. Hundreds of thousands of people continue to live in fear of disease and violence.

I very much welcome what my right hon. Friend is saying about conflict prevention. Does he agree that we cannot solve the problems of countries such as Angola and the DRC, which are very rich in mineral and diamond resources and so on, unless the wealth is properly shared—as we on the Labour Benches would rightly say—not for the few but for the many?

My right hon. Friend has taken a lifelong interest in these issues and speaks of them not only with huge moral force but with practical and political experience. He makes an absolutely fundamental point. The issues of resources cannot be divorced from the issues of conflict and suffering that exist in places such as the eastern DRC. However, he will be the first to say that it is easier said than done to break the link between resources, criminality and corruption and create a different kind of circle in which those resources are used for the benefit of local people. The foundation of doing that must be the sort of security arrangements that he strongly supports. I am about to say something about the work of MONUC—the UN mission in the DRC. He is absolutely right to point to this matter as being an important part of the solution. The terrible tragedy is that some parts of the world with the greatest wealth buried in them are also home to the greatest numbers of poor people.

Does my right hon. Friend agree that part of the problem faced by very poor countries that may have considerable resources is the lack of the technical capacity within ministerial ranks to draft legislation, and to produce contracts as a result of that legislation, that protects that country’s interests?

My hon. Friend raises an important point. It is not the part of development work that gets the most media attention, but that back-office support and building of institutional capacity are vital to any sort of sustainable development in those countries. She is right to raise that point.

I was pleased that the right hon. Gentleman mentioned Sierra Leone. It is a rather poor nation, unfortunately not as blessed with resources as others. To what extent should we be concerned about the recent conflict between the All People’s Congress and the Sierra Leone People’s Party supporters in Freetown? In such circumstances, to what extent is the responsibility on us as the former colonial power or, as he suggested earlier, on other African nations to provide support for democracy in that country?

All friends of Sierra Leone, in all parts of this House, should be concerned about the situation there. The Under-Secretary of State for International Development, my hon. Friend the Member for Bury, South (Mr. Lewis), will be travelling to Sierra Leone tomorrow, and I know that this question will be high on his agenda. Throughout government and in civil society, there are profound links between Britain and Sierra Leone and we all want to see progress there. I am sure that my hon. Friend will report back to the House after his visit.

Right hon. and hon. Members took a lot of interest in the situation in Kenya, and I shall address that, given the focus on conflict. We remain concerned for the country’s future. There are signs that the reform process begun 15 months ago might be losing momentum. Insufficient efforts have been made to end the climate of impunity, and the failure of the Kenyan Parliament to agree the formation of a special tribunal was a setback for efforts to secure justice for victims of the post-election violence. Corruption and mismanagement are still significant problems; recent allegations underline why Kenyans are calling for their Government to show that they are accountable and transparent, and to uphold the rule of law. Unless the pace of political reform picks up, the outlook is bleak. We want progress on the national accord in order to prevent a repeat of last year’s violence.

Elsewhere, it is clear that a strong international role is needed. In Sudan, the UK is a strong supporter of the Darfur political process and the African Union-United Nations chief mediator, Djibril Bassolé. We will continue to support efforts to reach a lasting political settlement with security established and civil society engaged. We shall work for a lasting political accommodation between Khartoum and Juba that ensures full implementation of the comprehensive peace agreement.

I want to say a little about the International Criminal Court. Sudan’s response to the ICC’s issue of an arrest warrant for President Bashir is no excuse to derail the objectives of securing long-term peace. I urged the Government of Sudan to engage fully with the court, reiterating the UK’s consistent support for the ICC, and calling on all parties to avoid escalation. That raises the question of humanitarian support in that country, given the announcements by President Bashir.

The UK pledged £330 million for Sudan for 2008 to 2011 at the Sudan consortium of international donors in May 2008. The immediate concern is the human suffering created by the dismissal of international non-governmental organisations. Initial estimates suggest that those non-governmental organisations provided 50 per cent. of the current humanitarian relief effort in Darfur alone. Their expulsion could result in 1 million people losing access to clean water and sanitation, up to 1.5 million losing access to primary health care and disruption to food distribution for up to 1.1 million people. We will continue to urge the Government of Sudan to reverse their decision and are working closely with the UN and NGOs on contingency measures to get aid to the most vulnerable. That will continue throughout April, when key decisions will have to be taken in Khartoum by the Government of Sudan, and any response by the international community, whether in New York or elsewhere, will have to be forthcoming, including issues to be considered by the African Union, based in Addis Ababa, and the Arab League.

I am grateful for my right hon. Friend’s indulgence. On Kenya, will he say a few words about the role of the Kenyan Government in the trial of pirates who were recently captured on the seas off the east coast of Somalia?

I would be delighted to say something about that. I liaised with the Kenyan authorities and asked them if they were willing to allow their legal processes to be used for the trial of some of these alleged pirates, and they were extremely forthcoming. That is what will happen for the first tranche of those involved. That is an important step forward and a good contribution by the Kenyan authorities to tackling that international problem.

The whole House will support what the Foreign Secretary has said and what the Government are doing in relation to Darfur, but does he not find it somewhat disappointing that the international community as a whole—this is no criticism of the UK Government—has not yet managed to find a single helicopter to support the UN peacekeeping mission there? The General Assembly of the UN will soon consider the Secretary-General’s report on the responsibility to protect. If the international community is not willing to provide any lift capacity, the responsibility to protect will become a pretty hollow concept.

I know that the hon. Gentleman takes a deep interest in these issues, and he raises a very important point. There are too many signs of buyer’s remorse about the responsibility to protect. Some of those who signed up in 2005 are now beginning to realise what they were letting themselves in for and are much less keen on the consequences. That poses a threat to the impetus that was provided by the responsibility to protect. It is important to emphasise that that was not a licence or mandate for “the west” to go marching around the world imposing its own values. It was first a responsibility on Governments not to abuse their own people and secondly a responsibility on the international community to intervene in the most extreme circumstances when countries failed in their responsibilities to their own people. The responsibility to protect lies in the first instance with a sovereign Government. It is only when that responsibility is broken that our responsibilities come into play.

The hon. Gentleman makes an important point about helicopters, and he will know that we debate helicopter capacity in debates on subjects from Afghanistan onwards. Too often, helicopters for development come at the bottom of the queue. I think that I am right in saying that the UK and France have been active together in trying to push the issue, but he is right that we have a long way to go before we can show people that we have made real progress.

My right hon. Friend referred earlier to conflict prevention. Does he share my concern that because of the pressures that the Foreign and Commonwealth Office’s budget is under, it has had to reallocate resources for paying international subscriptions? That includes reducing the resources available for conflict prevention in Africa, as well as in other parts of the world. I understand the problems that he has, but does he agree that the Government as a whole should pick up the consequences of changes in exchange rates and not put the pressure on the FCO’s budget?

If the House will allow me, I am happy to give my hon. Friend’s question the detailed response that it requires. First, it is not actually just our budget; it is a joint budget of the FCO, the Ministry of Defence and the Department for International Development. Secondly, he is right that the budget for stabilisation and conflict prevention is under huge pressure. That is partly because of exchange rates, but more significantly—I think that this will interest the House—because of the big rise in the amount of UN and EU peacekeeping around the world, notably in Africa. Many Members will say that that is a good thing, but the UK ends up having to pay a significant share of the bill. That means that we have less money in the pot for discretionary interventions for conflict prevention.

The rise in our assessed contributions—our compulsory contributions to UN and EU missions—will be greater than the fall in our discretionary contributions to Africa, but my hon. Friend is none the less right that there is significant pressure on that part of the Government budget. He uses the term “international subscriptions”, which makes it sound as though we were subscribing to a set of journals or magazines, but we are paying for troops on the ground. He is nevertheless right that those contributions to international peacekeeping efforts drain money from a limited pot. The rise in our compulsory contributions to Africa, however, will outstrip the unfortunate fall in our discretionary contributions.

Before speaking about trade, I want to say something about Somalia, which has suffered conflict and ineffective government for nearly 20 years. Significant changes have occurred there, even since I attended the UN Security Council in December, where the issue was debated. Since President Sharif’s election, his effort to establish a more inclusive Government offers the best chance for many years to address the country’s problems. In support of the political process, we are underpinning the African Union Mission in Somalia—AMISOM. This year, we have pledged a further £4.9 million directly to the AU and £10 million to the UN trust fund. Political progress is important in Somalia, because although AMISOM, which focuses on three parts of Mogadishu, can do some good, a political process is ultimately needed. President Sharif’s start is therefore significant. Following the departure of Ethiopian troops in January, the country did not descend into chaos. President Sharif has made an impressive start.

I was asked earlier about trade and I am happy to continue to reassert the Government’s commitment to open trade as a basis for sustained progress for some of the poorest countries. Those seeking the dignity of making their own way through selling their produce should get our support. The UK is working to ensure that the economic partnership agreements reflect the development needs of African states and provide new trading opportunities, with Europe and regionally. Through infrastructure and policy development, aid for trade allows countries to build capacity and integrate regionally and globally. The UK is on track to exceed our pledge to increase aid for trade by 50 per cent. to $750 million by 2010. The recent pre-London summit Africa outreach meeting, which the Prime Minister hosted, agreed on the need for improved access to resources and markets for African nations, argued that protectionism should be resisted, and encouraged countries to sign up to the Doha round.

I am grateful to the Foreign Secretary for giving way and I welcome his comments. Given that Benin, Burkina Faso, Mali and Chad depend for somewhere between 30 and 40 per cent. of their export earnings on cotton, but that the United States spends somewhere between $3 billion and $4 billion a year on subsidising 25,000 high cost, inefficient but politically influential cotton producers, is not it about time we tried to persuade President Obama to take a more progressive view of the matter than his predecessor, in the interests of west and central African development?

I, in turn, am grateful for the hon. Gentleman’s question. However, to say, “It’s about time” in respect of President Obama on day 70 or 71 of his tenure suggests an impatience that I do not associate with the hon. Gentleman’s approach. He knows as well as I do why the Doha talks broke down. It is important at a time of economic crisis to reassert the fundamental importance of open trade. I know that that will be discussed with President Obama.

Africa’s prosperity, security and development are all threatened by climate change, which will exacerbate existing tensions over scarce resources and create mass migration. The most recent report by the Intergovernmental Panel on Climate Change warns that climate change could produce a 50 per cent. drop in food production in sub-Saharan Africa. An ambitious deal at Copenhagen this year is therefore critical to Africa’s future. As part of that, we need to improve access to carbon finance to enable African countries to move directly to low-carbon development, and we need to support adaptation to the climate change that is already in train.

In addition to our enhanced bilateral effort in Africa, on which I have concentrated so far, we are also increasingly working through the EU to provide assistance to Africa. The EU now provides significant support for African action on conflict. For example, the Africa Peace Facility, which was created in 2004, remains the only African-owned, predictable source of donor funding for AU peacekeeping. For 2008-2010, €300 million is available to be released at the request of the AU.

My hon. Friend the Member for Buckingham (John Bercow), perhaps slightly unfairly, attacked President Obama. Could we put our own house in order by reforming the common agricultural policy, thereby lowering some of the restrictionist barriers that exist?

Of course. The continuing reforms of the CAP are important. The hon. Gentleman knows that, as a result of the CAP health check that has been taking place, some relatively minor moves on, for example, milk quotas, will happen. However, there is far further to go.

The hon. Gentleman will also know that the next reforming round for the EU’s common agricultural policy will be critical, as we look to the period between 2013 and 2020. In my view, the vision for CAP reform that the Government set out in 2005 remains the only way forward. It essentially means that the first pillar of the CAP—the direct support pillar—will be massively reduced by 2020. Where there is to be support for agricultural areas, it should be given with a much broader view, to support land management and other factors, rather than distorting the trade basis for agriculture. I am glad to hear that the hon. Gentleman supports that.

The EU also provides direct assistance, through civilian and military ESDP—European security and defence policy—missions in Africa. Currently, Operation Atalanta is providing a counter-piracy mission in the gulf of Aden to protect World Food Programme shipping and, on a case-by-case basis, other vulnerable shipping. The EU also has three civilian missions in Africa. When it comes to development assistance and humanitarian aid, the EU is Africa’s biggest donor. In 2005, the EU pledged to channel 50 per cent. of collective aid increased to Africa. If all member states manage to keep their commitments, the EU may provide more than 90 per cent. of the G8’s $25 billion pledge for Africa over the period 2004 to 2010, increasing aid in real terms by more than €18 billion a year. That would, on any measure, be a significant achievement.

Britain has a long history in Africa. Today we are partners, not masters, of Governments, businesses and trade unions, seeking to build a decent future there. We cannot change everything, but we do make a difference, every day, to people who need our help. I look forward to this debate and to listening to the voice of experience and expertise that exists across the House.