House of Commons
Monday 30 March 2009
The House met at half-past Two o’clock
[Mr. Speaker in the Chair]
Oral Answers to Questions
The Secretary of State was asked—
Air Trooping Arrangements
The capacity and reliability of our air trooping arrangements are kept under constant review. Our capacity is sufficient to support the force levels currently committed to operational deployments. Some 92 per cent. of all UK trooping aircraft to and from Iraq and Afghanistan now arrive within six hours of their scheduled time.
I am grateful to the Secretary of State for that reply. Despite having committed us to two wars, the Government have failed miserably to ensure that our troops have proper aircraft to be able to do their jobs safely and efficiently. Will he kindly inform the House what plans he has to rectify the failing?
I do not accept the premise on which the hon. Gentleman’s question rests. We have made significant investment: last year, we purchased two new C-17 aircraft to support these arrangements, and we have plans for significant additional procurement of aircraft to sustain them into the future. Given that we are fighting on two fronts, it is obviously important to have sufficient capacity to support troops who are fighting in our name in those two theatres—and we do. The draw-down of forces in Iraq, along with other measures that we are taking, will also significantly contribute to easing the pressure on the air bridge.
Members of the armed forces would be very surprised at the Secretary of State’s response so far. It is a fact that other parts of the armed forces blame the Royal Air Force for delays and breakdowns in the air bridge, but is not the real truth of the matter that it is the Government’s fault for not providing sufficient modern aircraft? Would he like to take this opportunity to apologise to the brave men and women of the RAF for the Government’s incompetence?
Once again, I do not accept anything that the hon. Gentleman has said. It is quite unfair for blame to be attached to the Royal Air Force, which does an outstanding job in supplying our troops in Iraq and Afghanistan with the kit and capabilities that they need to do their job properly. We have made a very significant investment in new aircraft, and we are committed to making further substantial improvements to ensure that we have the aircraft, and therefore the supply lines into Iraq and Afghanistan, that our troops need.
NATO’s 60th anniversary summit will take place in Strasbourg this week, and it seems probable that President Obama may ask Britain to participate in his planned surge by allocating a further 2,000 troops, thus taking our number to 10,000. How convinced is the Secretary of State that the present trooping arrangements are sufficiently robust, flexible and reliable to handle any such request in a smooth and effective fashion?
I am grateful to my hon. Friend for that question. We do keep force levels in Afghanistan under careful review. We have not yet received any request from anyone to supplement existing levels of UK forces in Afghanistan but, as I have said, we keep an open mind about all these matters.
Some real problems have been faced by returning service personnel who have had long onward journeys home from recent visits to Iraq and Afghanistan—constituents of mine from Buckie, Elgin and Forres have all said that this is a live issue. Will the Ministry of Defence look closely at the problems faced by returning service personnel who have long onward journeys and at the subsequent loss of their home leave? That leave is obviously very precious.
Yes, we will obviously do that. I am not standing here to say that there are no improvements that can be made—of course, there are some. We work very closely with the services to try to ensure that we make improvements where we can. I accept absolutely the concerns that the hon. Gentleman has raised—we are alert and alive to them, and we are trying to work our way through those problems.
Given the reported four-year delay in the delivery of the A400M, is now not the time to start rethinking our entire policy on transport aircraft? We could extend the life of the C-130Ks, we could buy some more C-17s and, above all, we could keep them at RAF Lyneham.
Again, I think that we need to keep all the options open. The delay in the A400M is a matter of extreme regret and it poses very serious questions about the sustainability of our air logistics services—we will not compromise on those. We are having discussions with the partner nations to the A400M contract and with Airbus Military. We have to find a pretty rapid solution to the problem that has presented itself to us, but one thing I can say to the House is that we will not be content with a gap in capabilities.
The Secretary of State will be aware that a fortnight ago I was with my old battalion, the Worcestershire and Sherwood Foresters Regiment, as it deployed to Afghanistan. The worries of the families clearly revolved around the possible death or injury of their husbands, boyfriends and so on, but, above and beyond that, on the regiment’s previous tour they deeply resented the delays caused to rest and recuperation flights back from Afghanistan and to the final trooping flight when the battalion returned from there. I cannot overestimate the resentment that this caused, so will the Secretary of State assure me that will not happen again to the battalion?
Sadly I cannot give a 100 per cent. assurance. When there are interruptions in the air trooping arrangements, the mistake that many people make is to assume that they are because the aircraft are not capable of flying, or there is some other problem, when the problems are often to do with the operational effectiveness of the defensive aid suites that are fitted to the aircraft. They are complicated systems and we will not compromise on safety. If something is not functioning in the defensive aid suites, the flights will be delayed until that can be rectified. I fully acknowledge the frustration that that causes for servicemen and women and their families, and I assure the hon. Gentleman and the House that we do everything that we possibly can to minimise disruptions. But we will not compromise on safety.
I went to Afghanistan in February, courtesy of the MOD, and I thank the Secretary of State for an interesting and valuable—albeit short—visit. In my experience—borne out when we went to Afghanistan—the RAF air bridge does not work well. The delay was not important for Members of Parliament, but for the soldiers, some of whom we met at Brize Norton and who had been waiting for three days. Part of the problem was aircraft and part of it was weather, but overall it was poor organisation—and the Secretary of State should look into that.
I understand that the problem with the hon. Gentleman’s flight was weather, and it was delayed for several hours. I referred in my original answer to the figures on punctuality, and I accept that punctuality is an important issue. We all understand the consequences of serious delay, and the effect that it can have on morale and families. We do everything that we can to minimise that. Sometimes, unfortunately and for a variety of reasons, there will be delays, but 92 per cent. of flights arrive within six hours of their scheduled arrival time.
Is not the truth that the main problem is simply that the TriStars we are using are clapped out, with only 44 per cent. of the fleet fit for purpose? The future strategic tanker aircraft, which is the replacement aircraft for both troop transport and the re-fuelling tanker, was supposed to be in service in 2007 initially: we are now told that it will be at least 2011. On top of the Nimrod delay of 92 months, the Astute submarine delay of 47 months and the Type 45 destroyer delay of 42 months, is not defence procurement another fine mess Labour has got us into?
No, and the hon. Gentleman should be very careful citing those examples, because those were all contracts let by the former Government. They were not let on proper terms, and that is especially true for the Astute contract—and he should know that. We do supplement with commercial scheduled flights where we can, and that has taken some of the pressure off the air bridge, but we continue to look very carefully at ways in which we can improve the service that we provide to our servicemen and women.
Is not the prevarication that we have seen exactly what we are now seeing with the A400M military transport fiasco? If that project is cancelled, and we are the last to pull out, we may be at the end of the queue to buy the necessary alternative capabilities—losers yet again. Thomas Enders, the chief executive of Airbus, said:
“It is better to put an end to the horror than have horror without end.”
Leaving aside the obvious political parallels with this Government, when will Ministers make a decision?
We will come to a decision on the A400M in July.
Joint Strike Fighter
The UK remains fully committed to the joint strike fighter programme. Two weeks ago I announced that the UK would procure three instrumented test aircraft and associated support equipment to enable UK participation in the operational test and evaluation of the joint strike fighter air system.
While I am grateful to the Secretary of State for confirming the purchase of three aircraft, his answer was bereft of any mention of the question of operational sovereignty. Is it wise to have bought three aircraft at this stage without having a cast-iron agreement with the United States that the UK will have operational sovereignty for the aircraft both now and in the future?
I know that the right hon. Gentleman takes a close interest in these matters. He will be aware of the memorandum of understanding that we have with the US. The whole point of the procurement of the aircraft is to ensure UK operational sovereignty and, without the purchase of the three test aircraft, that would not be possible.
The technology transfer is, of course, very important to the future of the aircraft. Can we ensure that those negotiations will continue; that we will have the capability of assembly and full maintenance; and that the research and developments jobs in the north-west will continue and we will not lose those skills, because they are second to none?
I can absolutely give my hon. Friend that assurance. Up to 100 British companies stand to gain from the joint strike fighter aircraft and that fact is a very important part of our considerations as we take the project forward.
I do not think they are very serious.
The porous nature of the border between Afghanistan and Pakistan is a major concern. The UK, along with our coalition partners, is working closely with the authorities in both Afghanistan and Pakistan to achieve the necessary improvements in security.
The porous border has been an issue for a number of years, as the border people in that area do not even recognise the border. For some time, too, there has been a shortage of troops to secure the area. What assurances and commitments have we had from our NATO allies to commit more troops to the region, and when will we commit troops ourselves?
We have not yet had any commitments from European Union or NATO forces. We are looking at our own force levels, as I said earlier in response to my hon. Friend the Member for North-West Leicestershire (David Taylor). The United States has decided to deploy significant additional forces to the south and east of Afghanistan, which I hope will contribute to greater security on the Afghan side of the border. There need to be improvements in security on the Pakistan side, too. We have had a number of discussions with senior military figures in Pakistan and we continue to work with the Pakistan military to improve their capabilities and capacity to improve border security on their side of the Durand line. I do not envisage that there will be any instantaneous improvement in border security. It will take us time to achieve that, but the UK is working very closely with Pakistan to improve its capabilities.
Will my right hon. Friend assure us that he will not withdraw from our relationship with Pakistan at this very difficult time? There are people who argue that we should withdraw diplomatic relations. It should be remembered that Pakistan is losing far more troops than anyone else in trying to secure that border, so will he give assurances that he will maintain that relationship?
Yes, we will certainly do that. Pakistan is not the culprit but the victim of this type of violent extremism. The Pakistani security forces up in the federally administered tribal areas, down in Waziristan and along the border have fought long and hard against the extremists, who are a real threat to the democracy of Pakistan, too. We will continue to work with Pakistan. They are our friends and allies and share a common assessment of the menace posed by such extremism.
Does the Secretary of State accept that the events in Lahore today show that instability in Afghanistan and Pakistan extends far beyond the border region? While we have troops in Afghanistan, we do not have them in Pakistan. Is the Secretary of State, along with the United States, rethinking his entire strategy for the region? Will he make a statement and perhaps allow a debate and possibly even a vote in this House about that?
Yes, we are looking very carefully at all these matters. I am sure that there will be an opportunity to have a proper debate in this place in the usual way, either on a statement or in another way. It is very important not just for the security of our operation in Afghanistan but for the security of the UK as a whole that we develop an approach that encompasses the security challenge that Afghanistan poses as well as the growing threat of instability and extremism in Pakistan. We very much welcome President Obama’s new strategy, which was published last week. It has the prospect of significantly improving the situation in that very troubled region and we stand ready to play our part.
Is my right hon. Friend satisfied that our relationship with the Pakistani intelligence service, the ISI, is in good enough shape to ensure that we deliver effective operations on the border between Afghanistan and Pakistan?
No, not entirely. We continue to exert whatever positive influence that we can, but the situation is very complicated. I cannot really confirm or deny very much about the nature of some of the more recent stories in the newspapers, but we know that there is a problem and it has to be addressed. Efforts are being made to address the problem, but we cannot have covert support being given either to al-Qaeda or to the Taliban in Pakistan. Not only is that a risk to our troops, whom we protect absolutely as a premium, but it is a direct threat to the stability of Pakistan.
Is the Secretary of State aware that the Afghan Taliban have recently been successful in persuading the Pakistani Taliban to defer some of their operations in Pakistan and to join their Afghan colleagues to help to try to deal with the expected American surge? If the Afghan and Pakistani Taliban can get their act together, is it not about time that the Afghan and Pakistani Governments were also able to do so? Will the Secretary of State speak to his Pakistani colleague and impress upon him that the security of Afghanistan is crucial to the security of Pakistan itself?
I agree very strongly with the right hon. and learned Gentleman. I have already had those conversations with the Pakistani Minister of Defence, and I have had those conversations regularly with the Afghan Minister of Defence as well. I agree with the right hon. and learned Gentleman 100 per cent., and we are focused very clearly on doing exactly what he has just said.
The Secretary of State acknowledged that it is a porous border. It is also a very contested border. The long-term solution will involve strengthening the capabilities of Afghan forces. To what extent is he working more with the Afghan army, which is making good progress, but also with the Afghan police, where I gather that progress is less satisfactory than with the army?
We have made some significant progress in training the Afghan army. There are now nearly 70,000 trained personnel in the Afghan forces, but that simply is not enough; significant further increases are needed. However, there is a lot more work to be done in training the Afghan police, who are simply not in a proper state, I am afraid, at the moment to contribute to dealing with the problems on the border. We are working with the Afghan security forces, the Interior Ministry and the Ministry of Defence in Kabul, to improve capabilities there. The recent announcement of very significant additional US forces, with a specific training and mentoring role, will again offer prospects in the year ahead, so that we can make significant further progress, but this remains a fundamental concern. There is a weakness in the quality and capabilities of Afghan security forces, and it must be addressed.
There are persistent reports that the Treasury would veto any attempt to deploy further British troops to Afghanistan. Can it possibly be the case that the strategy of the right hon. Gentleman’s Department is being determined by the Treasury?
I think that the facts speak for themselves—[Interruption]—although perhaps not in the way that Opposition Members think. If one looks at the facts, we see that the British mission in Afghanistan has increased significantly in the past three years—from an initial deployment of 2,000 or 3,000, up now nearly to 8,500 and beyond—and that has been properly and fully resourced by the Treasury. So there is no substance in the right hon. and learned Gentleman’s point.
The Secretary of State mentions that the coalition of forces provides security in the region. Will he comment on the contribution made by the smaller nations within NATO—countries such as Estonia, with a population of just over 1 million, which supplies 150 troops at present in Afghanistan? Would he like to send a message to those countries?
Yes, I certainly would. The Estonian contingent in Helmand has done an absolutely superb job, and many hon. Members will have seen those troops serving alongside British soldiers; they are literally shoulder to shoulder. They are superb fighters, and they have done a fantastic job. I was in Copenhagen last week to express on behalf, I hope, of the whole House our respect and admiration for the Danish forces that are also fighting in Gereshk in central Helmand. Those forces, too, have done an absolutely superb job. We are lucky and fortunate to have those allies in Helmand, but we could do with more.
Given his Department’s acceptance that Britain’s armed forces are
“continuing to operate above the overall level of concurrent operations which they are resourced and structured to sustain over time”,
where does Secretary of State expect to find the troops for any increase in Britain’s presence in Afghanistan if that is what he decides to do? Pursuant to the question asked by the right hon. and learned Member for North-East Fife (Sir Menzies Campbell), will the Secretary of State give the House an unequivocal undertaking that any such increase will be fully funded in year by the Treasury?
On the first part of the hon. Gentleman’s question, I do not want to identify particular units or do anything like that today—that would be wrong—but the draw-down in Operation Telic will create an operational breathing space, and it might be possible to find additional resources in that way if a decision was made to deploy additional forces. That is at least a partial answer to his question.
On the money issue, as I have said, the Treasury has always supported to the full our contingent operations in Afghanistan, and that will continue to be the case.
Warship Construction Programme
This is an historic and momentous programme, and it continues to make progress. It involves the new Type 45 destroyers, the Astute class submarine, the two new carriers and, following on from them, the future surface combatant. The result of the programme will be that in decades to come, the Royal Navy will continue to be one of the world’s most powerful maritime forces.
I am not sure what progress has been made, because the Government’s 1998 strategic defence review stated that the Royal Navy needed 32 frigates and destroyers to meet our national security objectives. Astonishingly, there are only 22. Will the Minister explain to the House what has happened to the overall objectives of that review? Have they been abandoned? If not, how will the Government meet them?
The answer lies partially in changes to the threat in the world, and partially in the increased capability of the ships that we are building. The Type 45 destroyer, for example, is vastly more capable than the Type 42 that she is replacing.
As that programme is clearly not wholly affordable, what steps does the hon. Gentleman intend to take to bring it into a more affordable position? In addition, none of the warships will be able to operate without a new fleet support operation. On what date will the new MARS—military afloat reach and sustainability fleet—concept come into full operation?
The programme is indeed affordable, and we recently confirmed that in the equipment examination that my right hon. Friend the Secretary of State announced in a statement in this House in December. As for the MARS programme, we are focused on it and will make announcements in due course.
I do not know whether the latter point is correct, but I am quite convinced that the Type 23 frigates will continue to be able to meet their current out-of-service dates. They will be replaced, in due course, by the future surface combatant; it is my intention that they should begin being built in the yards as soon as the second carrier has been launched.
On 12 January, the Secretary of State said in an oral answer:
“As regards naval construction, we have the largest programme under way since the end of the first world war.”—[Official Report, 12 January 2009; Vol. 486, c. 16.]
The Under-Secretary of State for Defence, the hon. Member for Grantham and Stamford (Mr. Davies), said in a written answer on the same day:
“We are currently engaged in the most substantial peacetime naval shipbuilding programme since the first world war.”—[Official Report, 12 January 2009; Vol. 486, c. 71W.]
Given that over the past 11 years, the frigate and destroyer fleet has been cut from 35 to 23, or possibly 22, the attack submarine fleet from 12 to eight—it is heading for seven—and the new destroyer building programme from 12 to only six, and that the start date for the two carriers has been delayed, and whereas in the 11 years to 1939 we constructed six aircraft carriers, five battleships, 54 submarines—
First, I think that the hon. Gentleman may have prepared his extremely long question before he heard the answer that I gave to the hon. Member for Southend, West (Mr. Amess) about the present programme. If I may respectfully say so, the question asked by the hon. Member for New Forest, East (Dr. Lewis) also confuses the issue of current numbers and the issue of the current construction programme. I repeat that the current construction programme is the largest that we have engaged in, in terms of capability and tonnage; the 65,000-tonne carriers will be the largest ships ever built by the Royal Navy in her history. The hon. Gentleman would do well to reflect on that, and to consider the fact that that is a decision taken by this Government. I shudder to think what might happen under a future Conservative Government, if there were one, to our naval shipbuilding programme, or to our procurement programme, because the Conservatives still have not told us how they would finance the three new battalions.
Vanguard Class Nuclear Submarine Reactors
We announced on 2 March the award of a contract to Babcock Marine to complete the overhaul of HMS Vigilant. This is the third of four planned overhauls, following the completion of those for HMS Vanguard and HMS Victorious. The overhaul for HMS Vengeance will follow HMS Vigilant’s.
The question concerned reactors, and I heard nothing about reactors in that answer. The Minister will know that there was a fairly large public consultation on the storage of old reactors from the T-class submarines, but that did not include the Vanguard class. There is concern that that plant will also be stored in Devonport, which is wholly against the purpose of the public consultation. It was about the temporary storage of T-class submarine reactors. It did not include the storage of any Vanguard reactors, which will now, apparently, take place.
The hon. Gentleman may be interested to know that the current overhaul includes refuelling the reactor with a new core, core H, which will fuel her for the remainder of her operational life. On the storage of reactors, it has always been our policy to store reactors in situ, in this case in Devonport, until the ISOLUS—interim storage of laid-up submarines—programme comes into force, under which we will put forward a new policy for dealing with the long-term future of these nuclear reactors. We will make an announcement on that subject next year, after the strategic environmental assessment, which will take place later this year.
Can my hon. Friend confirm that the work referred to by the hon. Member for South-East Cornwall (Mr. Breed) has been accepted by the Environment Agency as in line with the licence that was granted when the work was extended to those submarines? Can he also confirm that the skilled work involved in the submarines is the anchor for ensuring that Plymouth will remain an important centre of naval engineering excellence in the future?
I can confirm my hon. Friend’s suppositions on both fronts. It is right that all the work we do on nuclear reactors in Devonport is under the regulation of the Environment Agency, the Health and Safety Executive and our own defence nuclear regulator, so she can be reassured about that. The future of Devonport is bright, and I cannot conceive of any scenario in which her assumptions would not be correct.
NATO Military Structure (France)
My right hon. Friend the Secretary of State for Defence has had a number of discussions with the French Defence Minister in recent months. These discussions covered a range of issues, including NATO, and more specifically, the French return to the military structure of NATO.
Now that France has taken the historic step of joining the NATO command structure, what are the Government doing to ensure that the wider concerns shared by our Government, France and our allies in the EU, such as Cyprus/Turkey, security on our eastern Mediterranean border and our commitments in Afghanistan, are met?
We try to co-operate in every way we can to assist the French. We welcome their return to the NATO command structure. That in itself will not sort out long-standing problems such as Cyprus, which are a huge challenge to co-operation between the European Union and NATO, as the hon. Gentleman knows. We are hopeful that the process of reconciliation in Cyprus will go forward. There are optimistic signs, although the problem has gone on for a long time, and nobody can bank on an early solution. The French will now join in the planning of arrangements for the security of other NATO countries and our operations in Afghanistan.
When the Secretary of State meets his French counterpart later this week, will he take him to one side and tell him that it is vital that the larger nations of NATO, among which France is extremely crucial, play a full and fuller part in Afghanistan? Perhaps the Secretary of State could take the French Secretary of State along to congratulate the Estonians.
My right hon. Friend will speak to his French counterpart later today, although I do not know what the subject of the conversation will be.
Burden sharing in Afghanistan is of course important, and we raise the issue all the time, but let us not write off the contributions that other nations make. The French have about 3,000 troops in Afghanistan. If they could make a bigger contribution we would welcome that. We encourage all our NATO allies, large and small, to participate in the burden sharing necessary to ensure that NATO tasks in Afghanistan and elsewhere are carried out equitably.
Given the challenges facing the defence budget in the coming years, what further plans do Ministers have for increasing co-operation with the French? Does the Minister agree with the late and much-missed Lord Garden that the question is not so much about politics as arithmetic? Without compromising sovereignty over core defence roles, what potential does the Minister see for sharing our research and development work, co-ordinating our procurement timetables and possibly even considering more joint defence roles in future?
Co-operation and interoperability are vital. Equally, sovereign control over our armed forces and their deployment is vital and will be maintained. The only thing I would say to the hon. Gentleman about pressures on the defence budget is that they would not be any less if his party were in government; actually, they would probably be a darn sight worse.
Will the Minister resist the Euro-zealotry of the Liberal Democrats and welcome the long-overdue repositioning of France away from a creeping EU defence identity towards its natural home, NATO? Will he take the opportunity next week in Strasbourg to discuss with France the delineation of security responsibility between NATO and the EU in accordance with Madeleine Albright’s “three D” doctrine: no duplication, no disengagement from north America and no discrimination against non-EU NATO members—particularly Turkey, given current French antipathy?
The hon. Gentleman’s antipathy to the European Union in all its forms is pretty well known. Clearly, he has not listened to the French President’s pronouncements on the issue of late; I do not know whether the hon. Gentleman’s prejudice has stood in the way of that. The French President has said, in terms, that the EU and NATO should be complementary to each other and not duplicate each other’s efforts and capability.
It has been the policy of successive Governments that special commemorations are initiated by the Ministry of Defence only for key anniversaries and centennials of events of the greatest national significance; other anniversaries do not receive MOD sponsorship at public expense.
On 26 March, I met representatives of the Normandy Veterans Association to discuss the support that the MOD might offer with the 65th anniversary. It was agreed that the MOD would assist the association with specific administrative tasks, including applying to the Big Lottery Fund for financial support to attend commemorative events in the UK and overseas, and that it would explore the possibility of a church service on 21 June 2009.
May I ask the Minister to look again at this issue? It is outrageous that 500 people who fought for us in Normandy may not, for financial reasons, be able to go to the 65th anniversary celebration—the last celebration. It is no good the Government funding a 100th anniversary celebration—the veterans will all be dead by then. Let us look at this issue now. It is very important, and the general public and veterans are angry that the Government are not doing more.
Every year, the MOD puts substantial support into events on the Normandy beaches. On the last significant occasion—the 60th anniversary in 2004—large sums were given, and the Normandy Veterans Association formally announced that that would be last time it would parade. Since last year, there has been support—some £178,000—from the national lottery. Let me reiterate that the significance of these events was supported by the previous Conservative Government as well.
We published our initial estimate of the costs for the possible refurbishment or replacement of the warhead for our future nuclear deterrent capability in the December 2006 nuclear White Paper. This is in the range of £2 billion to £3 billion at 2006-07 prices. We have not yet made a decision to develop a new UK nuclear warhead. However, work is being undertaken to inform decisions, likely to be taken in the next Parliament, on whether and how we might need to refurbish or replace our current warhead.
Will the Secretary of State assure the House that there will be no expenditure on developing a new warhead without the specific approval of the House of Commons, and that he is satisfied that the development of a whole new warhead system is legal within the terms of the nuclear non-proliferation treaty, which comes up for review in 2010?
Yes, I believe that it certainly would be within the framework of the non-proliferation treaty. The NPT did not require unilateral disarmament on the part of the United Kingdom, and we are able to maintain very properly within the terms of the NPT our minimum nuclear deterrent; and, yes, I believe that there should be a vote in this House before such a decision was taken.
The opposition of the hon. Member for Islington, North (Jeremy Corbyn) to this policy is well known. The Secretary of State has made it very clear that renewing our current system is within the terms of the NPT, and that we are able to do that. He, like us, supports a multilateral disarmament approach. Can he give the House any idea about the time scales, not only for the development of the submarines, but about how well they are meshed in with the development of the warhead system?
We have made it clear that we believe that the replacements for the Vanguard class submarines would be needed for 2024. An extensive time is needed to design, construct, build, test and operate the new submarines, which potentially will be very capable, and I think that that will take us up to 2024. As I said in my answer to my hon. Friend the Member for Islington, North (Jeremy Corbyn), a decision to renew the warhead will have to be taken by the House of Commons during the next Parliament. I believe that the programme that we set out in the 2006 White Paper is coherent and joined up.
Military Covenant (Mental Health Services)
The MOD has a number of programmes to support our people—those in service and veterans. These include, for veterans, six mental health pilot projects and the medical assessment project run at St. Thomas’s hospital by Dr. Ian Palmer. For service personnel in theatre, we have dedicated mental health teams of doctors and nurses who are all trained to spot the signs of mental health difficulties. In the UK, South Staffordshire and Shropshire is leading a consortium of seven NHS mental health trusts to provide in-patient care for service personnel. The Healthcare Commission assessed the MOD’s department of community mental health as part of its review of the Defence Medical Services clinical governance process, which was published earlier this month.
In a recent Royal British Legion survey, it was discovered that of 500 GPs in England and Wales, 85 per cent. knew nothing about the reservists mental health project and 71 per cent. knew nothing about the MOD’s medical assessment programme. What are the Government going to do better to inform GPs, as well as reservists, about these programmes?
Two things. First, I am considering a system whereby when people, including reservists, leave the armed forces, that can be flagged up on their NHS medical records, which will give individuals who have had military service broader visibility to GPs. Secondly, there is an onus on us all to promote the six continuing mental health pilots and the project at St. Thomas’s hospital. For the information of Members, anyone who wants to go to the Jubilee Room this afternoon will find that the Service Personnel and Veterans Agency is holding an open day to explain the services it provides for veterans in the UK.
During last Thursday’s debate, my hon. Friend the Minister indicated that the Department is
“working with service charities and other sectors on the welfare pathway, which will be announced later this year.”—[Official Report, 26 March 2009; Vol. 490, c. 542.]
Will he expand on that statement, particularly in respect of the work being undertaken in different parts of the country?
I initiated the welfare pathway to ensure that we not only support our men and women when they are in service, but look after them in transition, and through life. I am working with other Departments, the Ministry of Defence and service charities; I have a meeting next week, and scoping work is going on. I hope to pull all the work together and announce the final piece of work in July.
The Royal Navy currently contributes vessels to maritime taskforces in the Persian gulf as part of Operation Telic. The Royal Navy’s capacity in the Persian gulf is appropriate to the threat, but kept under constant review.
Alongside an extensive range of other commitments in the region, the Royal Navy has done some important work with the transition team alongside the Iraqi navy, which is in the middle of an ambitious programme to expand in size by 2010. How will the draw-down of British forces in Iraq affect that naval team, and will the Royal Navy be able to continue working with the Iraqi navy for the duration of the programme?
We are discussing with the Iraqi Government what they would like us to do as part of our ongoing relationship since the combat mission of Operation Telic began in 2003. Although the talks have not concluded yet, the continued training of the Iraqi navy will be an important part of the process. That idea is certainly on the table and is being actively discussed, and we will make an announcement to the House as soon as we reach a conclusion with the Iraqi Government.
We have to be mindful of the threat, no matter where it comes from. We have more available than just our forces at the top end of the Persian gulf. There is an existing and long-standing mine threat to international shipping, so the threat in the Persian gulf is complex and we must be mindful of it, no matter where it may come from.
My departmental responsibility is to ensure that our country is properly defended now and in the future and that our service personnel have the right equipment and training to allow them to succeed in the military tasks in which they are engaged, either at home or abroad.
The original hope was that the A400M would replace the C-130 and C-160 aircraft, and its initial brief was to operate in many configurations, including cargo transport, troop transport, medevac, aerial refuelling and electronic surveillance. Given today’s reports that the German Government intend to pull out of the consortium because of cost and delivery overruns, how does the Secretary of State respond to the charge that this programme has become a show horse for experimental new technologies, which has led to it being exorbitantly expensive, utterly unreliable and lamentably late?
There is truth in a lot of what my hon. Friend says. We are discussing all those issues with our partner nations in the A400M contract, and, as I said earlier, with Airbus Military. I hope that those discussions will conclude by July, and that we will be able to make a decision about the right course of action to take. As I have said many times, in this House and on other occasions, this delay is unacceptable. It poses a threat to the sustainability of our logistical operations, which is not acceptable, and we must make an important decision during the next three months about how, and in what way, we can proceed with this important contract.
We will be making an announcement on service pay, as on other matters, in the very near future.
I believe that my hon. Friend knows that we will re-let the cut and sew contract over the course of the next few months. I think that the target date for us to sign a new contract is September—I do not yet know whether we can do it a little earlier in practice. In response to his point about the source of suppliers we are not, and under EU law are unable to be, protectionist. We have to get the best deal for the taxpayer. He understands these matters, and I will be very happy to meet him again if he wishes to go into them in greater detail.
Yesterday was not the first time that we have acknowledged responsibility for the fatal crash of the Nimrod XV230—the previous Secretary of State did so in the House a long time ago. That, of course, was repeated in court as we had made a commitment to the families that we would not resist the matter of responsibility.
With regard to some of the criticisms that we have had from coroners, not only about Nimrod but about other matters, we have to keep on working as hard as we can to make certain that the systems that we have in the MOD are as complete as they need to be, so that we can learn all the lessons from the various bits of information that come from a very complicated organisation. We can then minimise the threats and danger to our people. There is commitment from the military, civil service and political heads of the MOD to do precisely that over time.
It is not a provocative system, it is a self-defence system, so I reject the argument that it is a provocation. Discussions are going on among the various interested parties, and we should let them unfold.
I think that the memorandum of understanding deals with the substance of operational sovereignty.
That is the case, I can assure the right hon. Gentleman. The purchase of the three aircraft is designed to ensure UK operational sovereignty. Without our involvement in the testing and evaluation stage, I doubt whether that could be achieved. We currently have no further procurement plans. We are obviously committed to introducing the joint strike fighter into service as soon as possible, but the fundamental purpose and rationale behind our participation at this early stage is to ensure UK operational sovereignty.
I am grateful for my hon. Friend’s acknowledgement of the value of the maritime new build strategy—that is important for us as the customer, as it is for suppliers and employment. As I said in answer to an earlier question, our priority when the carriers have been launched will be to start construction of the future surface combatant—which must be built in this country.
If the hon. Gentleman wants to look at the record, he will find that many families in inquests on military deaths get support. We are supported in only a minority of cases. There is a serious issue that affects not only the Ministry of Defence but the whole Government: do we want to change the nature of the coroners’ courts? If we accept that everybody should be legally represented in every single instance—that does not currently happen now—we will do precisely that. Today, I met a couple of coroners who would be worried if we went in that direction.
Members of all parties will have read remarkable reports of sporting activity and adventure training, including skiing, to help maximise the recovery of service personnel who have been injured on and off the battlefield. Will my hon. Friends join me in congratulating those in the triservice Battle Back and in the Navy’s Project Fortitude on their amazing work?
I congratulate both organisations. Having met some of the individuals who are taking part—some are members of my hon. Friend’s constituency—I know that they are remarkable individuals. We should give full support to not only individuals but the two organisations and other service charities that also hope to get amputees and those injured in Afghanistan and Iraq involved in competitive sport.
May I revert to NATO and Afghanistan? Does the Secretary of State agree that, unless NATO deploys in much larger numbers and in a combat role, its authority and the support for it, and our prospects for success in Afghanistan will be much diminished? What is the Secretary of State doing to encourage NATO allies, other than the United States, Canada and so on, to produce more troops in a combat role?
I agree with the right hon. and learned Gentleman that it would be very helpful if there were such additional forces in Afghanistan. Indeed, the strong argument that we have had over a number of years with our allies in NATO has been about making those sorts of deployments. It is not fair for the burden to fall on a few when there are many others who are capable of shouldering it. I can assure the right hon. and learned Gentleman that those discussions are continuing.
In an earlier response, the Under-Secretary, my hon. Friend the Member for North Durham (Mr. Jones), indicated that medical records would be made available to local practitioners. As health comes under a different perspective for the devolved Parliaments, will he ensure that he speaks to them to ensure continuity?
I am grateful to my hon. Friend for raising that matter. He is always an advocate for ensuring that we do not forget about the devolved Administrations. I am meeting colleagues in Wales and Scotland with regard to all the issues in the Command Paper, of which that issue forms a part.
Will not the decision to be announced in July by the Secretary of State about the ill-fated A400M most likely leave the United Kingdom with a disastrous lack of airlift capacity? Can he therefore assure the House that suitable conversations have been taking place to ensure that the situation is rectified?
I can assure the hon. Lady that those discussions are indeed taking place. We will not allow a situation to develop where our air logistics are affected in any way by the current delays in the A400M.
Dunfermline Building Society
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 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?
Points of Order
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?
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 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.
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.
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.
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 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.
Order. Mr. Speaker had imposed a time limit of 12 minutes on Back-Bench contributions. Since that time three hon. Members have withdrawn their requests to make a contribution to the debate, so I am in the rather happy position of being able to say that the time limit on Back-Bench speeches will be 14 minutes.
You have brought joy to many colleagues, Madam Deputy Speaker. I should begin by saying that my right hon. Friend the Member for Richmond, Yorks (Mr. Hague) sends his apologies. He is in Paris for meetings with the French Foreign Minister and members of President Sarkozy’s team.
This is a landmark—[Interruption.] I wish that the people in the cheap seats on the Labour Benches could contain themselves just for a little while here in the palace of varieties. This is a landmark debate as well as an overdue one. The House has debated Africa as a whole only once since 1992, in 2005, when the then Secretary of State for International Development led a debate on poverty in Africa. We on the Conservative Benches therefore welcome the fact that the Government initiated today’s debate and hope that it signals their intention to pursue a comprehensive Foreign Office-led approach to the continent, which is simultaneously the source of much conflict and suffering, as well as opportunity and hope in equal measure. We also urge the Government to hold such debates more regularly in future. The interest shown by hon. Members in all parts of the House demonstrates that doing so would be welcome.
The hon. Gentleman appears to be chiding the Government for a lack of consistency in having debates about Africa. Did the Opposition call for a debate on Africa in their own time at any point in the period that he mentioned?
We are indeed the Opposition, and we have had debates in Westminster Hall. I am talking about the fact that the Foreign Secretary has taken great pride in the importance of having a debate on Africa and about the emphasis placed on it by the current Prime Minister and the previous Prime Minister. I am merely pointing out the facts. I am looking forward to the contribution that the hon. Gentleman will presumably be making in this debate—he will be making a contribution, I trust.
Excellent. I am very pleased to hear that.
We also welcome the opportunity to discuss Africa in the run-up to the G20 summit later this week. The whole House will agree that the developing world must be engaged in efforts to reform the financial order and that African countries have a stake in the outcome of the summit. As the Foreign Secretary has emphasised, that is particularly true as the world’s poorest countries are the most vulnerable to what is being called the third wave of the global crisis and as they have the fewest resources available to deal with the consequences of the downturn.
The World Bank and other organisations are warning of reduced tourism earnings in Africa, dwindling remittances from overseas workers, a tapering of foreign investment, falling export earnings and squeezed Government revenues owing to lower commodity prices. Action Aid has calculated that, by the end of this year, Africa will have suffered a real drop in income of some $50 billion since the beginning of the crisis.
Lower economic growth rates in Africa will have a significant impact on efforts to lift people out of poverty, condemning millions to remain living on less than a dollar a day and setting back efforts to reduce infant mortality and to meet the millennium development goals, particularly if donor countries struggle to meet their commitments to international aid programmes. The recent revelation by the Foreign Secretary that the UK has to scale back its peacekeeping commitments due to rising costs—a subject to which I will return—is a worrying development, and we expect the Government to keep the House fully informed on that matter. Across parts of Africa, the financial crisis will therefore become a human crisis, particularly in those countries that are still locked in conflict or teetering on the brink of conflict—in other words, the countries least able to weather the financial storm.
The impact of the economic downturn is already being felt in many African countries. In Tanzania last week, members of the International Development Committee had the opportunity to meet the Minister for Finance, Mustafa Mkulo. He took the view that African countries such as Tanzania needed more fiscal space to generate demand for local products such as coffee, but he also spoke in favour of a fiscal loosening in developed countries such as ours, because he felt that that would encourage greater exports to our countries. Would the hon. Gentleman also support such a policy?