May I ask the Leader of the House to give us the future business of the House?

The business for next week will be as follows:

Monday 8 June—Motion to approve the seventh report from the Standards and Privileges Committee on Unauthorised Disclosure of Heads of Report from the Culture, Media and Sport Committee, followed by Second Reading of the Health Bill [Lords].

Tuesday 9 June—Opposition day [12th allotted day]. There will be a debate on youth crime followed by a debate on housing policy. Both debates will arise on an Opposition motion.

Wednesday 10 June—Consideration in Committee and remaining stages of the Geneva Conventions and United Nations Personnel (Protocols) Bill [Lords], followed by Opposition day [Unallotted half-day]. There will be a half-day debate on a motion relating to the Dissolution of Parliament in the name of the Scottish National party and Plaid Cymru.

Thursday 11 June—Topical debate: subject to be announced, followed by a general debate on social mobility and fair access to the professions.

Friday 12 June—Private Members’ Bills.

The provisional business for the week commencing 15 June will include:

Monday 15 June—Opposition day [13th allotted day]. There will be a debate on an Opposition motion: subject to be announced.

Tuesday 16 June—A general debate on European Affairs.

Wednesday 17 June—Mr. Speaker’s valedictory and tributes by the House, followed by consideration of Lords Amendments.

Thursday 18 June—Topical debate: subject to be announced—followed by general debate: subject to be announced.

Friday 19 June—Private Members’ Bills.

The provisional business for the week commencing 22 June will include:

Monday 22 June—The House will meet to elect a Speaker.

Tuesday 23 June—Second Reading of the Marine and Coastal Access Bill [Lords].

I should also like to inform the House that the business in Westminster Hall for 25 June and 2 July will be:

Thursday 25 June—A debate on the report from the Joint Committee on Human Rights entitled “A Bill of Rights for the UK?”

Thursday 2 July—A debate on the European Commission’s annual policy strategy.

I thank the Leader of the House for giving us the forthcoming business.

Although we recognise that the Government rather seem to have some other priorities at the moment, may I gently remind the right hon. and learned Lady that a Government are for governing? Will she therefore give us a statement on the whereabouts of the draft legislative programme? Last year it was published on 14 May, but so far this year there is no sign of it. Will she confirm that the concept of publishing the legislation in advance has been quietly scrapped, or is it perhaps just the case that this Government have run out of steam and have nothing left to offer?

Similarly, may we have a statement on the Business Secretary’s Postal Services Bill? It received a surprise—perhaps we could call it emergency—First Reading in this place on 21 May, only a day after its Third Reading in another place. Then we were given to understand from reports in the media that certain Cabinet Ministers—I am sure that neither the Labour Chief Whip nor the right hon. and learned Lady is among them—regard the Bill as “totally bonkers”. Now we learn from her statement that no Second Reading is planned in the next fortnight. Can she tell the House when that is going to happen?

May we have an urgent statement from the Department for Business, Enterprise and Regulatory Reform on the fate of Vauxhall and the jobs of more than 5,000 workers, which hang in the balance? There was a great flurry of activity on our TV screens earlier this week by the Business Secretary, who assured us about the future of the company. Yet while he has chosen not to give Parliament an update, reports today suggest that the Luton plant has now been classified as “at risk” by trade unions. At the risk of sounding churlish, may I point out that over the past 24 hours the Secretary of State for Business, Enterprise and Regulatory Reform has seemed rather more interested in saving the Prime Minister’s job than the jobs of British car workers. May we have a statement on that delicate situation as it affects the car industry in the United Kingdom?

On the subject of unemployment, may we have a statement from the Secretary of State for Work and Pensions on premium line telephone costs for Jobcentre Plus? As we have all feared, the number of people out of work has been steadily increasing over the past few months, but the Government are not making it any easier for those who are looking for work. They are being charged to dial in, hang on for ages and then often just get cut off. It ends up costing them a lot of money just to have an initial conversation on the phone. How does the right hon. and learned Lady justify charging people who have little income high rates—or even at all—for seeking advice on getting a job, particularly in the depths of one of the deepest recessions the country has seen?

May I request yet again an urgent debate on the Government’s handling of compensation for those who lost out from Equitable Life, another group of people whom the Government have so shamefully ignored? Twenty years ago, the then shadow Trade and Industry Secretary, who now happens to be Prime Minister, stood at this very Dispatch Box and spoke about Barlow Clowes and the ombudsman’s report on that. He condemned the

“fecklessness, gullibility and incompetence of the Government who, for months and years, ignored all the warnings”.—[Official Report, 19 December 1989; Vol. 164, c. 204-5.]

How can the Government dishonour their obligations to Equitable Life policyholders when their stance in Opposition was so different on such a similar issue?

Will the Leader of the House consider a debate on countries in the middle east and around that region that are at risk of failure, such as Somalia and particularly Yemen? I and many others fear that there is, once again, a danger of Yemen dividing between north and south and spreading instability in the area.

May we also have a debate on educational standards? It is noticeable in the public exchange of letters between the right hon. Member for Salford (Hazel Blears) and the Prime Minister that neither makes use of that basic staple of punctuation, the full stop. As one of Tony Blair’s former speech writers said in The Times today,

“New Labour began with no verbs and it ends with no punctuation.”

Is that another tacit admission that the Government have ground to a complete full stop?

Finally, may I say on this day that whatever our political differences and persuasions—and whatever difficulties Parliament has been experiencing—for the sake of democracy, let us join together across the Chamber in urging everyone to get out and vote, and to do it for positive reasons for a positive agenda for the future of the country?

I absolutely agree with the point that the shadow Leader of the House has just made about the importance of our democracy and of everybody getting out to vote.

The hon. Gentleman asked about the draft legislative programme. This will be the third year in which we publish the programme, instead of leaving it until the Queen’s Speech, by which time a programme is set in tablets of stone, the ink has dried and there is no opportunity for people to participate in discussions about what should be in it. We intend, for the third year running, to publish the draft legislative programme in advance. The elections on 4 June and the rules about the purdah that surrounds them mean that we have not been able to publish it in the six weeks immediately prior to them. Publication has therefore been delayed, but it will happen shortly.

The hon. Gentleman asked about the Postal Services Bill. I have announced the business for next week, and as he knows, the business for the following weeks is provisional.

The shadow Leader of the House mentioned Vauxhall and the car industry, which is very important. Indeed, the Prime Minister addressed the matter in Prime Minister’s questions yesterday, and it has been raised often in the House. We are very concerned about the car industry, particularly the plants at Luton and Ellesmere Port. We are concerned about not only those who work in those important plants but all those who supply the industry and the skill base that it supports. The hon. Gentleman knows that there has been big backing through Government loans under the automotive assistance scheme, in addition to the general help for business, and that the Business Secretary has held discussions to ensure that we do everything we can to secure those jobs, against the changing background for General Motors. It is important to appreciate that we do not believe in the recession taking its course, but in active Government intervention. We do not believe in cutting back, but in borrowing to back up loans to support business that is in difficulty. We also believe in working across Europe to ensure that we do well out of our work in co-operation with other European countries.

The hon. Gentleman raised an important point about help for the unemployed through phone lines, so that they can call jobcentres. I will raise that with the Secretary of State for Work and Pensions, but let me say two things now. If we are to help the unemployed who, through no fault of their own, have lost their jobs as a result of the global financial crisis, it is important that we put extra investment into jobcentres. That is why we have put £1.2 billion extra into jobcentres to help people. The extra resources going into jobcentres, which the hon. Gentleman’s party has opposed, should ensure that we can provide a good service, not only face to face but on telephone lines.

The hon. Gentleman asked about Equitable Life. He will know that the Economic Secretary to the Treasury updated the House in the debate in Westminster Hall on 19 May on the progress that Sir John Chadwick has made in looking into the compensation scheme for those who have lost out under Equitable Life.

The hon. Gentleman also raised an important point about the destabilisation in Yemen and Somalia. I will discuss that with my right hon. Friend the Foreign Secretary and see whether there will be an opportunity to update the House, whether by written or oral statement, or by way of a debate.

Can we have a debate on the responsibilities of householders when planting trees in their gardens which subsequently cause damage to the drains and foundations of neighbouring properties? I have talked to hon. Members across the House, and there seems to be a problem across the country, particularly when people plant ornamental trees such as ornamental eucalyptus. Insurance companies are increasingly including clauses that exclude householders from claiming when their properties suffer damage, yet those who plant the trees can walk away scot-free. Can we look into that, please?

I think that that matter comes under the auspices of the Department for Communities and Local Government. It is obviously a concern to my hon. Friend’s constituents, and it has also been raised with other hon. Members by their constituents, so it might be a matter on which she should seek a Westminster Hall debate.

I associate my party with the right hon. and learned Lady’s important remarks about everyone getting out there to vote today, both in the European elections and in the local elections—for people who live where those are taking place—and about the importance of taking part in our democracy.

The Leader of the House has given us the business for almost three weeks, which is a welcome new development that I hope will continue in future. The more the House can be informed of business far ahead of time, the more people outside this House will know how to influence that business. However, she also said that everything beyond next week was very provisional. Is that subject to the vote next Wednesday on the Dissolution of Parliament?

On the subject of that debate on the Dissolution, Prime Minister’s questions has been the only opportunity that the Prime Minister has had to deal with the question of why he does not want to have an election now. Often his answer seems to be because he would lose it, but he has not had the chance to expand on his reasons for not responding to the country’s wish for an election. To that end, will the Leader of the House ensure that the appropriate Minister replies to the debate next Wednesday—and obviously the Prime Minister would be the most appropriate Minister to reply to such a debate, so will she ensure that he comes and gives a full explanation, both to the House and to the country, of his views on that Dissolution motion?

Perhaps the reason why the Leader of the House said that the business was provisional is that she was tantalising us with the prospect of the Postal Services Bill appearing in the provisional business for the following week. It is vital for the future of the Post Office and Royal Mail that the Government should come forward with proper and effective means of getting investment into those companies. However, we also need a Bill that protects the Post Office and ensures that after all the upheaval in the post office network, it is not further damaged by the Government.

In engaging with the public, the Government are quite keen on the use of petitions in local government. Last year the Government agreed with the Procedure Committee that we should have a modern e-petitioning system for Parliament. When will the Government ensure that that agreement is delivered, so that Parliament can have a functioning e-petitioning system?

Finally, President Obama is making a major statement in the middle east today on relations with the Islamic world. Will the Leader of the House ensure that the Foreign Secretary comes to the House to make a statement on the implications for the UK’s policy in the middle east of what President Obama says today?

The question of who responds to the Opposition day debate next week is a matter for the Government—

You are the Government!

Quite so, but it is not a matter of House business. Therefore the Government will decide, and put forward the appropriate person.

The hon. Member for West Aberdeenshire and Kincardine (Sir Robert Smith) made a big point about the business for next week being announced whereas the business for the following weeks was provisional. Because he is standing in for the hon. Member for Somerton and Frome (Mr. Heath), and because he is new to business questions, perhaps he does not realise that we always announce the business for the next week firmly, and the business for any subsequent weeks is always provisional. In order to help the House we try, whenever possible, to give as much notice of the business as we can, and to announce the provisional business as far ahead as possible. None the less, the hon. Gentleman has raised an important point: if people outside the House know what the business is going to be, it enables them to engage in the debate.

One of the good outcomes of the awful scandal about the abuse of MPs’ allowances will be that we have an opportunity to look afresh at all the processes in the House. Included in that will be how, and how far ahead, we announce the business, what mechanism we use to decide on the business, and what we should do about e-petitions. This will be a good moment for us to look afresh at all those issues on a cross-party basis.

The hon. Gentleman asked how the House could be updated on the middle east. I will include that matter when I discuss the points raised by the shadow Leader of the House on Yemen and Somalia. He also asked about the Royal Mail. Of course we are determined to protect the Royal Mail, and to invest in and protect the post office network.

The Education Service in the House of Commons offers subsidised travel to schools wishing to visit Parliament. This is very popular with schools in Stockport, but the service is heavily oversubscribed, with the subsidy being allocated almost immediately on the day when applications open. Will my right hon. and learned Friend look into this to see whether more subsidy could be made available, so that schools such as Lark Hill and Alexandra Park can visit Parliament and enjoy the excellent educational tours offered in the House of Commons?

The opportunities for other people to come into the House and see the work that we do have improved massively over recent years, but there is an opportunity for us to review the situation. The more people understand about the work that their constituency MP does in the House of Commons the better, and providing schoolchildren with a better understanding of the House helps them to understand history as well as the modern processes of government. Enabling people from all parts of the United Kingdom not to be debarred from coming to the House on the ground of cost is something that we can look at on a cross-party basis.

The Prime Minister has been making much of his proposals for constitutional reform and for a code of conduct for hon. Members—but in forums other than this one. Are we to be favoured with a statement about these proposals, so that we can scrutinise them?

I made a statement about the proposals that came out of the meeting of the three party leaders, at which the Prime Minister suggested that we have a parliamentary standards authority to regulate the question of expenses. However, the hon. Gentleman is right to say that the House should have an opportunity, sooner rather than later, to engage in the debate on how we review and improve the processes of the House, as well as considering the wider constitutional questions. He will know that there is a Constitutional Renewal Bill in the legislative programme. It has already been considered in draft by a Committee of both Houses, and it will provide a vehicle for further debate and discussion. No doubt more issues will come before the House shortly.

I am sure that my right hon. and learned Friend—who is one of the calmer voices in the House—will be aware of calls from outside and within the House for a shorter summer recess this year. I hope that she will not mind my adding my voice to those calls. I would like to suggest that we come back here in September to hear an early Queen’s Speech proposing the Government’s next legislative programme—including a proportional representation Bill to be enacted in time for the next general election.

It is right that we have the opportunity to debate again our democracy and all the processes that underpin it. My hon. Friend talks about changing the dates to shorten the summer recess, but I think that it is very important that any changes we make in the House do nothing to undermine the constituency link—[Hon. Members: “Hear, hear!”] I am talking about the rootedness of Members of Parliament in their own constituencies. We need to scotch the idea—I am not saying that my hon. Friend was suggesting this; I know that he was not—that when we are not in the House, working in Committees or in the Chamber, we are all on holiday. At those times there is an opportunity—I would say an obligation—for Members to be in their constituencies working with their constituents. If we had shorter summer recesses, we would have more time in the House and less time in our constituencies. One of the things that we need to do is to make this clearer across the piece, so that our constituents can see the work that we do in our constituencies, as well as the work that we do in the House.

May I associate myself with the request that the hon. Member for Morley and Rothwell (Colin Challen) has just made?

Car parking charges at Stepping Hill hospital in Stockport, which serves my constituency and those of several other Members, have been dramatically increased, suddenly and without warning. They have gone up from £1.50 for three hours to £2 for two hours, £3 for two to four hours, and £5 for more than four hours. This is a problem not only for those who have to pay the charges; it is also bad news for those who live in the surrounding area, who are now suffering even more as people look for an alternative to those parking arrangements at the hospital. Is it not about time we had a debate on the scandal of car parking charges at our hospitals?

The hon. Gentleman has given an example of how a constituency Member of Parliament dealing with a foundation hospital can have a big impact through representing local people who want changes in the car park charging policy. I suggest that he take up this matter directly with the foundation hospital. He will no doubt be supported by other hon. Members whose constituents use the hospital.

Can we have a debate about the rise of the far right in Europe, and of those on the newly emerging fruitcake right who seem to believe that climate change is a myth, and homosexuality an illness? I am sure that my right hon. and learned Friend would have no truck with those parties, but the official Opposition seem determined to become a new ingredient in the fruitcake.

We will be having a debate prior to the European Council, and I am sure that my hon. Friend will take that opportunity to catch the Speaker’s eye and participate in that debate, and to make the point that we all need to work together in the interests of Britain’s economy, of the environment and of protecting ourselves against international crime. We have to work together in Europe, and siding with what my hon. Friend describes as a few fruitcake parties from the far right would not be in the interests of the people of this country.

May I warmly congratulate the Leader of the House on her remarks about the link between Members of Parliament and their respective constituencies? That link is vital to the parliamentary system in this country. Is she also aware that there have been calls today, not only from the Conservatives, for the more meaningful involvement of Back Benchers in the business of the House?

I refer particularly to the establishment of a business Committee, which could go much wider in representing the House than the current rather informal business committee. Will she give serious thought to that suggestion? Is it not an appropriate subject for an important debate? Could we not consider merging the Modernisation Committee, which she leads, with the Procedure Committee, which could achieve so many of the things that both she and the Prime Minister have talked about to improve democracy?

As I said in response to my hon. Friend the Member for Morley and Rothwell (Colin Challen), we should take the opportunity to look again at the mechanism for arranging House business. As Leader of the House, I would welcome the views of all parties on the matter.

Given the recent media interest in how public money is spent on the pay and allowances of those in public life, may we have a debate on the pay and other remuneration of BBC superstars and on the irony of the corporation’s use of the familiar pretext of the Data Protection Act to seek to prevent openness and transparency in public life? In such a debate, may we have the chance to say to the BBC, on the basis of some recent experience, that resisting the public’s legitimate right to know how their money is being used to remunerate all those in public life is likely to end in tears?

When public money is spent, the public are entitled to know about it, and salaries for presenters at the BBC are paid for out of public money. Now I have heard it argued that it would be invidious to publish those salaries because it would prompt competition from commercial organisations that might try to head-hunt those presenters. However, that risk applies to everyone in public service—the salaries of permanent secretaries, for example, are published and they, too, could be head-hunted by the private sector. However, many people work in the public sector because they believe in public service broadcasting or the important work of the public sector more widely. I do not buy the argument that salaries cannot be published because of commercial confidentiality because it seems to me that the issue goes further than the Data Protection Act. I believe that gagging clauses are drawn up to prevent BBC presenters from disclosing the salaries that they have negotiated, but the Equality Bill contains a clause to ban such gagging clauses because we do not think it appropriate for employers and employees to be bound not to reveal information about pay—not least because that might provide an opportunity for pay discrimination between men and women.

May we have a debate in Government time about “phoenixism”—in other words, going out of business one day and going back into business a few days later, doing almost exactly the same thing, leaving creditors unpaid and customers without the goods and services they have paid for? Does the Leader of the House agree that the House should discuss this matter particularly now, when this pernicious practice is resulting in many of our constituents being unable to recover money they can ill afford to lose?

When someone goes out of business, that affects other businesses in the supply chain, as the hon. Gentleman said. Perhaps he could raise this matter again in the debate immediately after business questions, which is about supporting business through these difficult times.

I return to President Obama’s highly significant speech in Cairo this morning. Bearing in mind that our country is still probably America’s closest ally and has huge interests in the middle east, and given that the Leader of the House has said that the topical debate for Thursday has not yet been decided, may I suggest that there could not be anything more topical than a debate on the middle east, particularly in view of the American President’s speech, and that it should be led by the Foreign Secretary, if he is available?

I will certainly take that as a constructive suggestion for next week’s topical debate.

May I push the Leader of the House again on the question of the timing of the Postal Services Bill? If the Government are intent on proceeding with the part-privatisation of the Royal Mail, they need to get on with it because the private sector partners cannot tolerate the uncertainty. If, on the other hand and as well-informed sources suggest, the Government have abandoned those plans, the Bill is still necessary in other respects, particularly to deal with regulatory issues surrounding the winding up of Postcomm and its merger into Ofcom. We still need the Bill and we need to get on with it very quickly.

As the hon. Gentleman will know, the Bill introduced in the other place has completed its passage there, so it is available to be brought before the House. It is not in next week’s business, so I am afraid that he will have to wait until next week’s business statement to see whether it is part of business for the future. I appreciate him making those comments—by saying that I may seem to be breaking the spirit of what I said to the hon. Member for West Aberdeenshire and Kincardine (Sir Robert Smith). I am aware of that paradox.

I have previously asked the right hon. and learned Lady whether we could have a debate on the impact assessment, or the cost-benefit analysis, of the Climate Change Act 2008. It showed that costs had doubled to £400 billion since the Act came into force and that the Secretary of State had accidentally mislaid £1 trillion of benefits. Thanks perhaps to the intervention of the Leader of the House, for which I am grateful, the Secretary of State has written to me saying that we could debate these issues in connection with statutory instruments on carbon budgets. Those have been debated in the other place, so will she tell us when they are going to be debated in this place? Can she assure us that they will be debated on the Floor of the House and can she tell us whether they result from the Climate Change Act 2008—and are therefore something that the House could reject in principle if it so wished—or, as the text of the statutory instrument suggests, they come instead from the European Union Climate and Energy Package? If so, the Government have produced a separate cost-benefit analysis for this package on that basis, which therefore means that although we could go through the charade of debating them, we could never reject them.

I will raise this issue with my colleagues in the relevant Department. I know that the right hon. Gentleman has raised the matter on a previous occasion. It might be necessary for him to meet the Deputy Leader of the House and the appropriate departmental Minister in order to sort out the process issues. I appreciate that the right hon. Gentleman is trying to ensure that the processes are right for dealing with the matter.

Whatever the turbulence in this place, 20 years ago in Tiananmen Square, according to the Chinese Red Cross, 2.500 young people had their lives snuffed out. Even this morning, journalists trying to enter Tiananmen Square were manhandled by the Chinese police. May we have a debate about human rights in China and how we can encourage the Chinese, who wish to become a modern country and a part of our modern society, to revise their internal policing and freedom policies?

Given that there are major human rights concerns that go beyond the roughly 30 people who, 20 years after the tragic events in Tiananmen Square, still remain in detention, it might be appropriate for a topical debate in the near future. Given the major human rights issues also arising in Burma, we might be able to combine the two and debate them together.

On 27 April, the new motorcycle driving test, including the controversial 50 kph swerve and stop aspect, was finally introduced. During the first three weeks of the test’s operation, there have been 11 incidents—10 involving injury—and three people have had to be admitted to hospital. Will the Secretary of State for Transport, whoever he or she may be by next week, make a statement so that Members can raise the questions that need to be asked about this particular disturbing problem?

I will raise the issue with Ministers in the Department for Transport and try to find out whether they believe a written ministerial statement or a letter to the hon. Gentleman would be the most appropriate means to deal with his request.

May we have a statement from the Leader of the House on the selection of topics to be debated on days when major elections, such as the European and county council elections today, are going on? She knows that I am a great admirer of the way she discharges her duty as Leader of the House and I cannot believe that she would have wanted the “Defence in the World” debate—the most important defence debate of the year—to be scheduled on a day like today. If she cannot resolve the problem herself, will she have a word with the leader of her party, whoever that may be, in the next few days?

All of us in the House believe in the importance of democracy, and we believe in it not just for the election of Members of the House, but for the election of local councillors and Members of the European Parliament. That is why there are so few Members in the House when local elections or elections to the European Parliament take place. Traditionally, that has been responded to by an effort to ensure that there is no controversial business and no need for a vote at the end of business. That means that we will be debating the important subject of the economy when few Members are in the House. There is an opportunity to look afresh at a lot of issues. If we think that there is no opportunity for serious debate in the House on election days such as this, perhaps the House should not be sitting. We need to consider that.

May we have a debate about Gibraltar following worrying news that Brussels has begun to recognise Spanish claims to the Rock in assigning to Spain territorial waters around Gibraltar as an environmental protection zone that Spain is apparently to police? This has already caused a stand-off—between the British patrol vessel HMS Sabre and the Spanish corvette Tarifa earlier this month. Some urgency is involved in the matter, yet we have heard nothing from the Government.

In the provisional business, I announced for 16 June a debate on European affairs. The hon. Gentleman might seek to catch Mr. Speaker’s eye to intervene in that debate and get a response from a Foreign Office Minister.

Amidst the furore over parliamentary expenses and allowances during the past four weeks, it has perhaps been forgotten that each and every day the Government are borrowing—not spending, but borrowing—£450 million.

May we have a debate in Government time on this country’s interdependence with a number of other nations, especially China, which my hon. Friend the Member for Lichfield (Michael Fabricant) referred to, and several nations in the middle east? We have such tremendous interdependence to ensure that our bonds and gilts can be sold in the international markets, and that borrowing is being funded by other nations that have an important ongoing economic relationship with us. Will the Government hold a debate in their own time on that important economic phenomenon?

The Prime Minister and other Ministers have led the way in recognising that the response to the global financial crisis needs to be global. That is why the G20 summit, which the Prime Minister hosted in London, was called. In support of the extra borrowing, I would say that it has been necessary for the purposes of backing up the car industry and providing extra investment to help those who are going to jobcentres, and to protect many of the issues that hon. Members have raised.

May we have a debate on organisations within the police force that undermine cohesion? We already have the deeply divisive National Black Police Association and West Yorkshire police has just announced that it is forming an association of Muslim police. I suggest to the Leader of the House that those organisations are extremely unhelpful, deeply divisive and do nothing to promote community cohesion and the principle of integration. May we have a debate on that issue, because many of my constituents and many people in my part of the world find such things entirely unacceptable?

It is important to ensure that there is proper policing that is as effective as it possibly can be, and that the public have confidence in and work in support of the police. That is only helped by having a police force that reflects and is part of the communities that it serves, which is why it is important to have more black, Asian and Muslim police. Therefore, those associations are important for increasing recruitment and diversity in our police services, whether in Yorkshire or in London.

I beg to move,

That this House has considered the matter of the economy: supporting business.

British businesses are fundamental to our success and prosperity as a nation and supporting businesses through these tough times has been, is and will continue to be a priority for the Government. As many commentators have said, what makes this downturn different from those seen in the past is the fact that it is not a domestic problem, or a problem restricted to a small number of countries, but global.

World gross domestic product is forecast to contract by around 1.25 per cent. this year—the first full-year shrinkage since the second world war—and many of our international partners are in recession. In the first quarter of this year, the UK economy shrank by 1.9 per cent. Across the EU, the fall was 2.4 per cent. Germany saw a contraction of twice that in the UK in the first quarter, and the Japanese economy contracted by 4 per cent.

This downturn is hurting people and businesses, but the Government are not ducking the hard questions. We led the world in taking action to stabilise the banking system. We have put in place a £20 billion fiscal stimulus package to boost the economy. We have introduced a range of targeted measures to provide real help to businesses, individuals and families.

As the International Monetary Fund noted in its annual statement on the UK economy, our response has been bold and wide ranging, and it has helped to contain the impact of the global crisis on the country. The fact that this downturn is global means that we need global action as well as action on the home front. That is why the Prime Minister and the Chancellor have worked with our international partners to ensure that we have a co-ordinated global response to the economic crisis.

In April at the G20 summit meeting in London, agreement was reached on collective action that is necessary to mitigate the risk of an even more severe downturn while reshaping the financial system, preserving the world trading system and laying the foundations for a sustainable recovery.

The London summit was an important step in the journey towards restored stability and economic growth globally, and the Government are committed to ensuring that further progress is made between now and the next meeting of leaders to be held in the US in September.

Here at home, we have taken decisive steps to support the UK’s financial system, given its fundamental importance to the basic functioning of our economy, and to provide real help for people and businesses.

I hope that the Minister will still be in post this time next week so that he can give evidence to my Committee on the automotive assistance programme. Is he aware of concern in the automotive supply chain that the French and German Governments are giving much more direct help to that supply chain to protect it? Will he tell the House what grants and sums have been disbursed under the automotive assistance programme, and how many companies have been assisted by it?

I will come to the automotive assistance programme in a moment as part of the wider context of measures that the Government are taking, but I want to make the point to the hon. Gentleman and to the House that, through the fiscal stimulus announced in the pre-Budget report and the actions we took in October and January to support the banking system, we are helping businesses by beginning to replace the lending capacity lost due to the withdrawal from the UK economy of foreign banks and other institutions.

This year’s Budget went further in providing a stimulus to the economy as a whole, and in total we will provide fiscal support worth 4 per cent. of GDP in 2009-10. All in all, the UK has one of the largest programmes of fiscal support in the G20 in 2009.

To help small businesses in particular, which are suffering a recession through no fault of their own, could not the Government take away, or at least suspend, some of the regulatory burdens to enable businesses to come out the other side? If they do not do that, they will be strangling those businesses, which will never have an opportunity to recover.

The Government have a strong track record in better regulation. At the moment, small businesses really want help with their cash flow, new customers and the economy to get moving again. The actions that the Government are taking are all designed to achieve that.

Taking the Minister back to his point about boosting lending, surely he must have seen the figures released earlier this week showing that lending to consumers and businesses in the economy is at a low not seen since 1997.

Let me come on to lending directly. Although we have taken action, which has been opposed by the Conservative party, at a macro-economic level to provide a stimulus to the economy, it takes time to have effect. In addition, the Bank of England has reduced interest rates to the lowest level in our history, at 0.5 per cent., £125 billion of quantitative easing has been provided, and the current sterling exchange rate is highly competitive internationally. Those measures take time to filter through to the real economy, which is why help is needed now.

If the hon. Gentleman wants to question me further about lending, I would be happy to take a further intervention. As he will be aware, a number of banks have announced plans to increase lending to households and businesses this year. HSBC will make £15 billion in mortgages available in 2009, and is allocating £1 billion in extra loans to small and medium-sized enterprises in the UK. Barclays recently said it would lend a further £5.5 billion to businesses this year, on top of a similar amount to individuals, and Northern Rock and several other lenders are following similar courses.

As the hon. Gentleman will be aware, we have ensured that banks that have received Government support commit to freeing up credit as part of the contractual terms. As part of their participation in the asset protection scheme, Lloyds Banking Group and RBS have been required to sign legally binding agreements. Lloyds will lend about £11 billion extra to businesses this year and next and RBS about £16 billion, at commercial terms. That represents a significant pool of new lending available to business.

The Minister is being most generous in giving way. A little earlier, he was claiming the credit for the independent Bank of England’s cut in interest rates, yet most businesses will not borrow at 0.5 per cent. on account of the continuing large credit spreads in the economy. What does he think about long-term interest rates at 4.5 per cent., which is nine times the short-term interest rates? The rates available for businesses to borrow at, assuming that they can find a bank willing to lend the money, are far higher than the 0.5 per cent. he quoted.

I was not seeking to take credit for the actions of the Bank of England, which, as the hon. Gentleman is aware, is independent from Government. I was merely noting that on top of the fiscal stimulus introduced by the Government, the aggressive actions taken by the Bank, and the level of interest rates, are all big macro-economic factors supporting the economy at the moment.

The hon. Gentleman is right to point out that interest rates are historically low, but small businesses in particular still find it difficult to access credit on terms that they find acceptable. We continue to have discussions with banks about not only the quantum of lending but the rates of interest charged. Banks must make commercial decisions according to their assessment of risk and creditworthiness, and a market adjustment has been occurring throughout the UK economy. I do not think what is going on in the UK economy is at all different from what is going on in other advanced nations currently.

I want to mention the European Investment Bank and the onward lending to the small business community successfully negotiated by the Government. The UK’s share of overall EIB lending to small and medium-sized enterprises has already increased from 2.2 per cent. in 2007 to 12.3 per cent. in 2008, as part of a four-year deal that has been negotiated. It is also worth noting the Government’s enterprise finance guarantee scheme, which a number of Opposition Members criticised for being slow to spend, is proving extremely popular with businesses, and we are confident that it will support about £1.3 billion of bank lending to smaller firms this year. The most recent figures I have suggest that about £420 million of eligible applications from more than 3,800 firms have been granted or are being processed or assessed. More than 2,650 businesses have been offered loans totalling more than £250 million. The scheme is therefore popular.

On top of that, the Government introduced the trade credit insurance scheme in the Budget. From May 2009 until the end of the year, suppliers are being given the chance to purchase six months’ top-up insurance from private insurers, who are providing it on the Government’s behalf up to an aggregate limit of £5 billion. That is real help being provided to business.

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If I may, I will mention the support for the automotive industry, which the hon. Gentleman raised. I will happily appear before the Business and Enterprise Committee next week to discuss the automotive assistance programme. As he will be aware, it has two parts, one of which is linked to guaranteeing loans from the European Investment Bank, and the other is a separate guarantee package. As he knows, Jaguar Land Rover has successfully applied to the European Investment Bank, and we will have discussions about the Government guarantee as part of that package. We are also in discussions with a number of automotive companies about assisting them through the automotive assistance programme. Given that the Government are providing guarantees, it is naturally up to the companies to reach agreements with the banks providing the loans, which the Government will guarantee. I hope to make announcements shortly about the AAP, but he will be aware that such deals can take a significant amount of time. When we are spending taxpayers’ money, it is right that we take precautions. The team in place in the Department for Business, Enterprise and Regulatory Reform is working hard with a number of companies in the supply chain, and we can make a real difference to some of those companies.

The Government have also recognised that many businesses are worried about being able to meet their tax, national insurance, VAT and other payments owed to Her Majesty’s Revenue and Customs. Those businesses can call the business payment support line that we have we set up. About 131,000 businesses have now been given the leeway to defer tax payments worth more than £2.3 billion, giving them a significant breathing space during difficult times. On top of that, the Government and their agencies, as major customers for good and services that UK businesses provide, have taken steps to help to ease the cash-flow problems of suppliers, by committing to pay bills within 10 days, bringing forward an extra £8 billion of payments on top of the £58 billion already paid within 10 days.

I think the Minister said he was worried about whether businesses would be able to meet their obligations to pay national insurance. Will he therefore tell us why he is hiking national insurance up by 0.5 per cent. from next year, for employers and those employees earning more than £19,000—a tax on the many, not the few?

The hon. Gentleman knows very well what we said in the Budget about the need to provide real help to businesses and the economy now, and to provide a fiscal stimulus, but also to take a sustainable approach to the public finances. That is why we have made announcements on national insurance, top rates of income tax and pensions. The Government must make a balanced judgment on the economy and its future and ensure that we put public finances on a sustainable path. That is what we did in the Budget: taking actions now that will help people and businesses get through difficult times, while ensuring a prudent and sustainable approach to the public finances over the medium term. That, Mr. Speaker, is exactly what you would expect Government to do.

We are also setting out a strategic vision about how to provide more support to companies in the future, through our White Paper, “New Industry, New Jobs” and our industrial activism approach. That is important. We will continue to develop it, and I commend it to the House.

What extraordinary scenes! The Government have called a debate on the economy, and the Chamber is practically empty. The Minister arrived only just in time to present the Government’s case. I thought for a moment that he might have packed his bags in anticipation of the official announcement, and taken part in the DIY reshuffle that seems to have started earlier in the week. There appear to be no other Labour Members present to contribute to the debate. The Labour Benches are almost entirely empty: I see only the Whip and the Minister. There is no sign of anyone else wishing to make a speech in support of the Government’s policy on the economy.

The debate takes place in unhappy circumstances. I commend in advance all the members of my own party who are hoping to speak today, but it cannot be right for the Government to try to meet the widespread demand, in the House and the country, for significant time in which we can debate the economy by presenting us with a debate lasting only an hour and a half on election day, when an empty Chamber can be almost guaranteed.

Would we not have been greatly assisted if this had been a substantive motion? The House could then have expressed its view, rather than merely debating the motion.

That would indeed have been very helpful. The Government have been running away from any debate of substance on the economy for many months. It was only a full Opposition day debate on the subject in March that finally prompted the Government to call their own debate in the week before Easter. Apart from allowing the usual scheduled debates on the Budget and the Finance Bill, the Government have been running away from being scrutinised on the economy for the past six months.

The Minister tried to talk about green shoots. It is true that the rate of decline in the UK economy appears to have abated in some areas. Manufacturing industry and the service sector are not as downbeat as they were a few months ago. Nevertheless, we have already experienced the longest recession in decades, and if there is joy at seeing light at the end of the tunnel, it is mainly because we have been underground for so long.

We welcome any signs of improvement in the economy. After four quarters of no growth or negative growth, we desperately need some signs that improvement will come. We have always thought and said that growth would return in 2009, although we have questioned, and continue to question, the Government’s growth forecasts for the years ahead. However, there are conflicting signs in the real economy. The Minister presented some of the highlights, which we welcome, but we should be realistic about the complete picture. Lending to companies and households fell in April for the first time since 1997. Earlier this week, the Financial Times commented:

“The slowdown in lending serves as a warning that while some ‘green shoots’ are emerging in the economy, constrained access to credit and weak demand for loans in the private sector could yet kill them off.’

Unemployment continues to rise inexorably, and at its fastest rate since the second world war. The Minister’s optimistic tone will not be echoed by the additional hundreds of thousands who are joining the dole queues each quarter. In March, the level of unemployment had already surpassed the forecasts for the whole of 2009 that had been made in the 2008 pre-Budget report. The Budget predicted that the claimant count would rise to 2.44 million by the end of 2010, a figure that had already exceeded by 1 million the one predicted only six months earlier in the pre-Budget report. The British Chambers of Commerce have predicted that it will reach 3.2 million by the end of 2010, and the CBI has made a similar prediction. It seems that the age-old adage—that all Labour Governments leave office with unemployment higher than when they took over—will prove to be true yet again.

If I were the Minister, I would go easy on trumpeting claims for the success of Government schemes to help people and businesses through the recession. It emerged earlier this week that just two home owners had been helped by the Government’s flagship initiative to help families avoid repossession. The mortgage rescue scheme has been running since January, during which time nearly 20,000 homes are thought to have been seized, but only two households have been helped.

Let us consider two of the Government’s schemes for business. I do not know whether the Government can provide more up-to-date figures, but the most recent publicly available figures suggest that the capital for enterprise fund announced in November 2008 has yet to invest a single pound in any business. Furthermore, according to the Minister for Employment Relations and Postal Affairs the £1.3 billion enterprise finance guarantee scheme has loaned just £92.6 million to industry, despite also being announced last November. That represents just 7 per cent. of the funds available. Meanwhile—and I hear this across the country—big Government rises in business rates continue to hurt.

One easy way of helping small and medium-sized enterprises would be to make small business rate relief automatic. Why did the Government oppose the private Member’s Bill presented recently by my hon. Friend the Member for Mid-Worcestershire (Peter Luff), which would have done precisely that? As I said earlier, however, the way in which the Government could really help business is by sorting out the public finances. Unfortunately for the Government and the country, the position is going from bad to worse. We are still deep in the tunnel, with no chinks of light to be seen. Government borrowing in April—in just one month—was an incredible £8.5 billion. That is a record, and it is five times as much as was borrowed in the same month last year.

Even according to the Government’s own highly questionable statistical basis, net debt has already risen from the mid-40s to 53.2 per cent. of GDP. It is at its highest level since the 53.8 per cent. that we saw when the country was shamefully bailed out by the IMF in 1976. The United Kingdom has been publicly downgraded by Standard and Poor’s for the first time ever, or at least since its credit was rated for the first time in 1978. Our credit prospects are negative. That will add yet further to our borrowing costs, especially the costs of any non-domestic borrowings. It will also shrink the investor base for our debt products, as some investors are not able to hold anything less than AAA-rated assets.

Thanks to the public finances, borrowing rates for businesses are far higher than they should be in this recession. As I said earlier, long-term interest rates are an incredible nine times higher than short-term interest rates. Credit spreads on variable-rate borrowings are still too wide. Whether we look at variable or fixed-rate funding, it is clear that the long-term funding needed by businesses is still far too expensive. Moreover, the Government are crowding out business borrowers from the capital markets with their huge gilt auctions

It seems that no one believes the Government’s forecasts of a trampoline recovery. We hope and expect there to be some growth in the economy before the end of the year, but it is difficult to share the Government’s optimism that there will be a 3.5 per cent. rate of growth next year. Of course we would love that to be true, but we suspect some political massaging of the figures. Indeed, I read that the Prime Minister wanted the figures to be even more fixed than those that I have cited. On Tuesday, The Times reported that

“the Prime Minister tried to upgrade the growth forecasts to make the economic outlook appear rosier than it was; the Chancellor refused.”

We urgently need to hear from the Minister what really happened. Are the growth forecasts in the Red Book from No. 10, or are they from the Treasury? Did the Prime Minister try to intervene, as The Times claimed? Perhaps he intervened successfully, and those growth forecasts are the result of his intervention.

It would also be helpful to hear the Minister’s response to the harsh criticisms of the Government’s quantitative easing programme made earlier this week by the German Chancellor, Angela Merkel. She said:

“What other central banks have been doing must be reversed. I am very sceptical about the extent of the Fed’s actions and the way the bank of England has carved its own little line in Europe”.

That is another extraordinary attack from a foreign leader on the Government’s economic policy. May I ask the Minister whether, at the G20 summit and at last month’s ECOFIN meeting, Germany raised its opposition to the quantitative easing programme with the Prime Minister or the Chancellor?

Although no Labour Members except the Minister are present for it, this may well end up being an historic debate. It may well be the last debate on the economy to take place while the Chancellor of the Exchequer, the right hon. Member for Edinburgh, South-West (Mr. Darling) is Chancellor. This could be how it all finished: a dead-end debate slot on European election day with virtually no one present to witness the end of it all. The Chancellor would be like a modern-day Eleanor Rigby.

Instead of coming here to talk about the economy, the Chancellor is somewhere else fighting for his political survival. Britain deserves better than this, and that is why we are calling for a general election. I thank my hon. Friends in advance for participating in this debate, but the whole Conservative party wants to debate the economy, and for longer than an hour and a half; we want a full, four-week debate in a general election campaign. Moreover, a general election is what the country wants and so desperately needs.

I do not know whether this is a dead-end debate slot, but I do know that I have only six minutes to say all that needs to be said about the economy and business, and I also know how strict you are, Mr. Deputy Speaker, in enforcing such time limits. Saying all that needs to be said in such a brief period presents something of a challenge because relatively little has been said recently in either this place or the media about the economy and business. Far more has been said about the home economics of MPs. We live in a strange world at present, where a £5 claim for an offertory is given as much precedence in terms of newspaper headlines as was the attack on the twin towers.

In a way, however, that might not be such a bad thing, because when the focus was on the economy, that led to a rush of Government headline-grabbing initiatives that were not well thought-through, and to the media ceaselessly attempting to pile on the misery, darken the gloom and depress optimism. Every statistical device known to man was used to illustrate that, when compared with the great depression of the 1930s, the black death and so forth, the severity of current circumstances was unrivalled.

I am not trying to pretend that the economy is not in serious difficulties and an unexpectedly bad state, but I drew attention to the media effect on confidence in an early-day motion that I tabled some time ago. I called for that to be studied, because is it not a strange coincidence that some slight signs of recovery—of bottoming out—are arising in a period of relative media neglect? While democratic institutions are taking a hammering, the ailing economy is enjoying something of a media respite.

I make this point because I was receiving a consistent message from my constituents a few months ago. They were saying, “Yes, business is in a fix, and we know that these are difficult, hard and tough times, but we could do without the media larding it on and exaggerating the extent of the depression.” The local media do not do that, because they do not want to depress confidence unduly as they recognise that they need advertisers and that those advertisers are local businesses.

Does the hon. Gentleman also recognise that when dealing with matters affecting our local economy, which is very important, the most important thing we can do is stand up for manufacturing industry and the people who really matter? We must protect their jobs and interests, and do everything we can to ensure that they can survive in the current difficult circumstances.

I do accept that, but I want to make the point that there is a big difference between how the whole issue has been treated from start to finish by the local media, which in a sense depend on local industry, and by national media, such as the BBC, which do not. I simply point that out. The effect of that may be marginal, but it is nevertheless real. Mark Vitner, senior economist of Wachovia, recently commented on the fragile recovery in business confidence in the US and warned that:

“People’s expectations were built on such things as newspaper headlines.”

Let me turn now to the main subject of our debate: the expectations of business. We are going through tough times, and there is an expectation that Government will help. In good times, good business does not need any help, but most businesses currently do. Genuine attempts to help have been made; the Minister listed some of them. The Government have pressured banks to lend and also to maintain credit, which is very important. They are also trying to create a more benign tax environment; there is some evidence of that in the current Finance Bill. They are spreading business rate payments, too, and increasing advice. More national and European grants are coming forward as well. However, much of the help is rushed, poorly communicated and, at times, ineffectual. It also does not address real and reasonable requests. One of them has already been mentioned: the automatic small business rate relief would not cost the Treasury anything, but it would be enormously beneficial to many local businesses.

Businesses also notice that the help they are being given is incommensurate with the help being given to banks, who were the authors of the general misfortune in the first place, and who still pressure viable businesses rather more than businesses that are likely to default. In other words, they put pressure on businesses that are doing reasonably well and tighten their access to credit, because they know that if they put pressure on businesses that are likely to fail, they themselves will be the losers.

Expectations are not being met, therefore, but then few expectations are being met these days. Few people expected the current economic mess, or the scale of it; few expert economists, global pundits or parliamentarians did so. However, that has not stopped everybody now rushing in to make further predictions with the same confidence as in the past. The best of the predictions do little more than encapsulate current trends. The CBI recently said:

“Although we were deep in recession, the rate of contraction is slowing markedly.”

That still augurs that we are going to have increased unemployment, more bankruptcies, more pressure on public finances and a painful clawing back to prosperity.

Fiscal stimulus, or natural retrenchment, may efficiently—or haphazardly—be working as an economic brake, although we recognise that there is a cost to that in terms of the public finances. The big problems, however, are structural, on both an international and a national, British, basis. China and the USA remain trapped in a Faustian pact whereby the productivity of one requires the indebtedness and refinancing of the other. The world financial system requires a remarkable revision, but it does not have the capacity to implement it. The British economy has similar major structural problems. Unlike Sweden and the Czech Republic, we have not learned to protect our manufacturing base. We are also grossly dependent on the footloose service and financial industries. We have not been filling the skills gap either, and there has not been any real attempt to square the circle, so to speak, of matching increased prosperity with diminishing social inequality. We are in a fix, and it is a structural fix. Unless we address these fundamental issues, we will find ourselves in a deeper fix still.

I am very pleased to have been called to contribute to this debate because during all the years that I have been a Member of Parliament I have fought for, campaigned for and promoted UK manufacturing—indeed, so much so that Members on both sides of the House have identified me as “Mr. Manufacturing Industry, MP.” I have stood up for manufacturing industry under successive Governments. During the 18 years of Conservative government, I formed the Manufacturing and Construction Industries Alliance, which was a partnership between big and small industry, trade unions and all who believed that manufacturing industry is one of the only sources of non-inflationary, sustainable economic growth. I believed that when I first entered the House, and I believe it today, and I also believe that, sadly, successive Governments have often sacrificed manufacturing industry in this country unnecessarily.

In my local area, I am at present deeply concerned that the largest employer, AstraZeneca, a world-renowned pharmaceutical company, is reducing its work force in both my constituency and that of my immediate neighbour and colleague, my hon. Friend the Member for Tatton (Mr. Osborne), by some 1,500 jobs over a three-year period. Those jobs are not disappearing entirely, but they are disappearing from Macclesfield—both at the Hurdsfield plant and the big research development plant at Alderley park—because the company is transferring the jobs to China and Mexico. Why is it doing that? One might say that it is doing that because it is a global company, but it is also doing it because the cost of those jobs is much less in China and Mexico. Over the years the company has also transferred jobs to India. One may say that there is a good reason for it to do so, but the message I am trying to get across to the Government is that they should not increase the cost of employment and of manufacturing industry unnecessarily.

The Government could take many steps at the moment to reduce the costs to manufacturing industry. It will see us come out of this recession, because things produced in this country at a competitive price and to a standard that people want, and delivered as such, are the real wealth creator, which should be encouraged. A smaller company in Poynton in my constituency, Aearo Ltd, owned by 3M, is sadly closing its plant there and transferring the jobs to Poland—again, because of the cost advantages of operating in that country. The Government should take these matters very seriously.

I turn to a matter relating to the Ministry of Defence. On the periphery of my constituency is the BAE Systems facility at Woodford, where the Nimrod aircraft, which is on order for the RAF, is produced. I pay a huge tribute to the trade unions there for the way in which, over recent years, they have worked in complete co-operation with the management in order to produce a good aircraft to the MOD’s delivery and specification requirements. Of course there have been problems in the past—about which industry would one say that there have been no difficulties between management and labour in the past?—but at this facility full co-operation has been given.

The MOD has ordered nine Nimrods—the initial order was very much larger and it has subsequently been cut—but it is now looking, under Project Helix, for another three aircraft. I believe that the MOD’s R1 mission system upgrade project could utilise the MRA4, and if it does so, that would extend the work force and the employment at Woodford for a further two years. However, the MOD is looking at the American Rivet Joint, which is a Boeing aircraft that is some 40 years old—these planes are currently lying in the desert, but I am sure that they are being properly maintained—and the thought is to lease three.

I have met the Under-Secretary of State for Defence, the hon. Member for Grantham and Stamford (Mr. Davies), who has responsibility for procurement, to discuss this matter. I have done so along with representatives of the Labour party and the Liberal Democrats, because we want to ensure that our expertise in aerospace continues. We believe that the MOD’s R1 mission system upgrade project could be properly fulfilled by the MRA platform and that there is therefore a Nimrod MRA4-based solution to what the MOD requires. The Government can help, so they should retain high-tech engineering jobs in this country, rather than go to another country for purchases that can be fulfilled within our own manufacturing sector.

Having made a plea on behalf of certain industries and companies in my constituency, may I say, as has been said from the Front Benches by my hon. Friend the Member for Hammersmith and Fulham (Mr. Hands) and the hon. Member for Southport (Dr. Pugh), who speaks for the Liberal Democrats, that despite receiving unprecedented valuable bail-outs from the taxpayer—the Treasury—the banks and other financial institutions are still providing little or inadequate help to hard-pressed businesses and individuals via increased lending?

I have an interest in the construction industry, because I worked in it before I came into this House, and I understand it pretty well. In my view, it is market forces that have constricted the housing market, and not the financial institutions per se. I am not sure whether the Minister agrees with that observation. My view is that falling house prices are mirroring the economy at any one time, and those will correct themselves gradually once the economy has recovered. However, I stress that the lending banks and institutions must do more to help stimulate this country’s housing market.

The plight of small to medium-sized businesses is serious. They are the powerhouse of the modern economy, yet the commercial banks are still refusing to lend to struggling businesses. One thing that greatly annoys and frustrates me is that HBOS, which is now part of the Lloyds Banking Group, is refusing to lend to a highly successful, long-standing company in my constituency. Like many companies, it is going through difficult times and has cash flow problems, and HBOS is refusing to honour commitments to it. Having received huge handouts from the taxpayer, the banks, rather than merely representing their own interests, should seek to represent the interests of the economy of this country.

As the Minister will be aware, small businesses often operate on their overdraft facilities, rather than on loans, which are aimed more at development and expansions. The Opposition have made some important proposals, which my hon. Friend the Member for Hammersmith and Fulham dealt with briefly, and called on the Government to act to assist industry in a more positive way than they are doing at the moment. One action could relate to our proposals to cut corporation tax and to cut payroll taxes for small companies; we have also called on the Government to cut national insurance contributions by a penny in the pound for small companies with fewer than five employees. I know that those are small measures, but they are all valuable. On insolvency, small and medium-sized enterprises should be able to apply for a short breathing space during which they would be able to come up with a restructuring plan, rather than go out of business. We want to save as many businesses as we can.

The Government have sought to act on prompt payment, and I give them credit for doing so. As the Minister knows, lots of small businesses provide goods and services to local authorities, with payment normally coming within 30 days. Some local authorities, appreciating the position of small businesses, have implemented a 20-day rule, and I warmly welcome that.

My hon. Friend will perhaps be excited to learn that Conservative-run Westminster city council has instituted a seven-day repayment rule. On his previous point, although much is said about the idea of trying to introduce a chapter 11-type pause in the insolvency regime, this country’s regime is extremely flexible and administration provides that opportunity, instead of companies having to go towards fully-fledged liquidation.

I very much respect the experience of my hon. Friend, who represents Cities of London and Westminster, which, of course, is home to the core of the financial services in this country. I know the very close relationship that he has with those in his constituency, who are the powerhouse of our economy.

As I was saying, some local authorities have implemented a 20-day rule on payments—I am delighted that Westminster city council has implemented a seven-day rule—and bearing in mind that local authorities are dealing with taxpayers’ money, I am sure that most taxpayers are very happy with that sort of policy and I hope that it can be followed by many other local authorities. Just a few days can make all the difference in terms of paying bills and staff, and helping businesses to survive, so I urge the Government to approach local authorities to get them to adopt the shortest possible payment period in order to help business at this time.

As I said in a question to the Prime Minister, there are currently 2.73 million manufacturing jobs in the UK, down 160,000 on the year and down from 4.5 million in 1997. Productivity in manufacturing was down 4.1 per cent. in the final quarter of last year on the previous quarter, and that compared to a 1.8 per cent. fall for the whole of the economy. The figures are from the Office for National Statistics. I hope that the Minister will recognise the true value of our manufacturing industries to the stability and future success of the United Kingdom. Will the Government seek to reverse the crippling £16 billion burden of constantly changing regulations and the £7 billion a year new taxes that they have introduced, which are a drag on manufacturing industry, making us less competitive?

The Minister mentioned France and Germany, and I agree that they have had severe problems, mainly—and this does go against my argument—because so much of their economies is manufacturing based. While they do produce manufactured goods, they have no market for them if the country to which they sell them does not have the money to pay for them. We must not force more of our manufacturers out of business or into relocating abroad. When the economy recovers—as an optimist I believe that it will—we will need manufacturing.

A new report out recently from Policy Exchange reveals how the Prime Minister’s second spending spree is set to reach 50 per cent. of GDP—a stark figure indeed—and that is not because of the recession. The report also calls for an emergency Budget and a spending freeze. Government spending is growing far more quickly than in other countries, and faster than in previous recessions. This perceptive and important report finds that the surge in spending is not being driven by the recession. At most, it says, only 6 per cent. of the increased spending is going on public works, and just over a third is due to the rising cost of social security or debt. Instead of “investment”, most of the increase is due to a decision to spend more on consumption.

The report also argues that all budgets, except social security, tax credits and debt interest, could be frozen at 2008-09 levels, resulting in savings of £87 billion on the Government’s current plans. I have considerable respect for the Minister—I know his background and I used to work in the area that he represents—so I say with some regret that the truth is that history has a habit of repeating itself, and yet again it is a Labour Government who have brought the UK to the brink of bankruptcy. As Chancellor of the Exchequer, the current Prime Minister squandered the growth that he inherited from the last Conservative Government and he now has to fix the problems that his Government have created.

History shows that successive Labour Governments, sadly, always leave the country deeper in debt. The present Government will have doubled the national debt to more than £1 trillion, so that anyone earning more than £20,000 will have to pay more tax. Rampant borrowing and tax rises will make the recession worse and the recovery more difficult, because they undermine the confidence in the future that is crucial to the recovery of economy.

I make a plea to the Government and, perhaps just as strongly, to my own party, which has not always been the best friend to manufacturing, although it does appreciate the role that manufacturing can play, to ensure that the measures that we introduce take fully into account the problems facing the manufacturing industry and the important role that it can play in the recovery of our economy.

Bill Clinton had a sign over his desk that said:

“It’s the economy, stupid”.

It was there to remind him that although people claimed that the electorate were interested in other matters, it was the economy that mattered most. It is the economy that matters most to the people in my constituency and, I suspect, in most other constituencies. Even the anger that has been experienced over allowances, and before that over bonuses for bankers, is fuelled by people’s fear and uncertainty about their own economic prospects, and we should not forget that.

The sad truth is that although the economy is the most important issue for this country and our constituents, the Government have chosen to have a one and a half hour debate on it on a day when the local and European elections are distracting our attention. Until a few moments ago, the Government had not even been able to persuade a single one of their Back Benchers to support their position here. That is an astonishing rejection by the Government and their supporters of the importance of the economy.

The title of the debate also refers to “supporting business”. The implication is that direct intervention by the Government can solve the problems of business. At the moment, the principal problem in this country and the rest of the world is a shortage of demand for all the resources and people available to produce goods and services. As long as the principal problem is that shortage of demand, merely switching an element of that demand through the tax system to be spent elsewhere will not alleviate the problem. Money can be spent on the automobile industry, but it will be at the expense of money spent elsewhere. That may receive support from people in the auto industry, but it destroys jobs elsewhere. It is only measures to restore the aggregate demand in the economy to employ all the resources available that will ultimately support industry.

We should be considering measures that will restore the growth of demand and thus the growth of economic output and employment. In my view, the key to that is money. It may be an old-fashioned view, but money is very important. If people have money in their pockets, they will be inclined to spend it. If they do not have money, they will not be able to spend it. If they have inadequate supplies of money, they will save and scrimp to try to build up their money balances. If one person saves money, less money goes to other people, and the total output of the economy is not altered.

I think that the Government had the right intention with quantitative easing. We need measures to boost the supply of money in the economy. People may think that that is an unusual thing for me to say. I am a longstanding monetarist, and many of my monetarist friends are suspicious about printing money, because it can be a cause of inflation—especially if too much is printed. However, if there is an insufficiency of money—the collapse of the banking system threatened to destroy money—more money must be created. That is why it was essential for the Government to prop up the banking system. If banks collapse they destroy money in the economy. In a developed economy, money normally comes from banks increasing their lending. That is what creates additional money.

If I were to lend my distinguished hon. Friend the Member for Cities of London and Westminster (Mr. Field) £100, I would be £100 worse off, he would be £100 better off and there would be no increase in the money supply. If he, however, were to go to the bank and say, “Can I increase my overdraft by £100?,” that would create £100. There would be £100 extra in the economy—and when he spent it, as I am sure he would in due course, that money would circulate through the economy. Banks create money, but when banks are retrenching on their lending they destroy money. They call in loans and do not replace them, and there is less money in the economy. That is why it was necessary and right for the Government to do something like quantitative easing to ensure that enough money was circulating in the economy. It takes a little time for that to happen, but I think that it will happen. It might be part of the reason why we are seeing at least a slow-down in the recession and even some signs that it is bottoming out, even if we are not yet seeing a resumption of growth.

My right hon. Friend rightly points out some of the concerns about the level of quantitative easing. Given the amount of money that has been printed by the Government, much of which to date is being hoarded by the banks, there is a potential inflationary problem. He says “provided that too much money is not printed.” How on earth can we possibly judge when that point is reached—when too much has been printed, or, indeed, is about to be unleashed into the economy at large?

My hon. Friend’s question could be rephrased, “How are we to know when too little money has been printed, when too little money is available or when too much money has been destroyed by the banks’ retrenching?” We have to make a judgment. The Bank of England spelled out what it thinks is necessary and it will do it in a series of tranches. It is not proposing a Zimbabwean type of inflation, but an increase of a few percentage points in the supply of money. In general, an economy needs to see the money supply growing by a few percentage points more than the real growth that one hopes to achieve. We need to get back to that, and as long as the Bank does not overdo it, that is sensible.

By contrast, reliance on a fiscal stimulus seems likely to be less effective, and there is less scope for it in the British economy than might be desirable. If we started from a position whereby the Government had a very low deficit, or a surplus, it would be worth a try. It would be worth the Government’s saying, “Let’s give a fiscal stimulus by borrowing to spend.” However, when a Government start with a huge deficit, any further increase in that deficit is likely to destroy confidence, and as a result, have a negative rather than a positive effect on the total level of demand in the economy.

That is not just a theoretical point. The European Central Bank and economists from the European Commission have both separately carried out analyses of all the studies that have been published of attempts to use fiscal stimulus, in Europe and elsewhere, to stimulate the economy in the post-war period. They both show that on a majority of occasions when Governments have attempted to use the Keynesian weapons of borrowing to boost demand, it has had the opposite effect to what simple-minded Keynesians might have predicted. On half the occasions when Governments have boosted borrowing, that has led to deflation. On other occasions when they have reduced borrowing, even in a recession, it has led to a resumption of growth.

That is not something that should be too unfamiliar to us in this country. We have had three major recessions since the late ’70s. In 1976, the Labour Government faced a terrible recession with a huge and burgeoning deficit. The Keynesians among them said, “Let’s add to it. Let’s borrow even more, spend even more and try to get out of this recession.” Unfortunately, there was a run on the pound and they had to call in the International Monetary Fund—the only time the IMF has ever been called in to a developed economy—and the IMF said, “Stuff that for a lark. Forget about Keynes. Just get your books balanced again, raise your taxes, reduce your spending and that will restore confidence and get things going.” And it worked. I went to a seminar recently at which someone who was one of the Government’s chief economic advisers at the time said that they were astonished at how rapidly it worked, and how rapidly the economy started recovering thereafter.

In 1980-81 the economy appeared to be in freefall, with a decline in output. At the same time, there was a terrible deficit. The then Chancellor, Geoffrey Howe, had the courage to say, “We’ve got to get the public finances back into order if we are to restore confidence and resume growth.” Then 364 economists, led by the man who taught me monetary economics—or tried to, as I am happy to say that I did not imbibe all his views—published an open letter to the Chancellor saying that there was no reason in theory or in past experience to believe that if he persisted with his policy it could lead to anything other than an intensification of the recession. If we plot what happened, we can see that the economy was in freefall until 13 March, the day that they published that letter. From then onwards, a V-shaped recovery began. They were completely factually wrong. We know from experience that it can sometimes be right to get a grip on the public finances. That restores confidence and leads to a resumption of growth. The same applied in 1992.

That, of course, is why the Government, despite all their rhetoric and talk about an additional fiscal stimulus, have not introduced an additional fiscal stimulus on top of what is already happening through the automatic stabilisers. They are right not to take that risk. On the other hand the German Government, which is in a much better position, ought to be increasing spending, borrowing and trying to get their economy going. Other economies that are in that happy position should do likewise.

As a simple-minded Keynesian speaking to a simple-minded monetarist, may I say that if the right hon. Gentleman looks at the pattern of fiscal support for the economy across Europe and the G8, he will see that, astonishingly, the support provided by the different Governments is very similar? The only variance is whether it takes place through automatic stabilisers or a separate fiscal stimulus. The pattern of support is very similar, and that blows a hole in much of his argument.

My argument was based on the fact of what has happened in the past rather than projections of what might be happening now. We shall see. It might provide an interesting test case if we come back in three or four years’ time and argue it out. The hon. Lady describes herself as a simple-minded Keynesian and me as a simple-minded monetarist, but if we are both simple-minded enough to say that we should look at the evidence, we will see that the evidence is clear. The evidence is not just what I have put forward; the evidence has been put forward by the European Central Bank in its study of studies and the European Commission in its study of studies, and the conclusion they have come to is that on a lot of occasions the Keynesian stimulus does not work and has a contrary effect.

I am relatively optimistic that a recovery might soon be under way, because we will see the normal inventory cycle reverse. When final demand for goods falls, as it fell after the Lehman effect with the collapse in confidence across the world, that is amplified as companies do not merely reduce their demand by the 10 per cent. fall-off in final demand but reduce their inventories, too. Back down the supply chain, the 10 per cent. decline in demand might become a 20 per cent. decline and then a 50 per cent. decline in demand for components. We have seen that across the world, and it is partly why the great manufacturing economies, despite the great strengths that my hon. Friend the Member for Macclesfield (Sir Nicholas Winterton) pointed out, suffer a particularly sharp downturn during that inventory cycle. It merely has to stop, in a sense, for it to reverse. When people stop reducing their inventories, that feeds back through the chain and produces a sharp rise in output, even if it does not go back to the level it was at before the crisis began. We may see that inventory cycle go through its normal process.

My worry is more for the longer term. Again, I just look at the evidence. What evidence have we for what happens when a modern developed economy experiences a banking crisis and a subsequent recession? The only such experience that we have is that of Japan. It did many of the things that we have done, but in a slightly different order, and some people say that it did not do them fast enough. It managed to avoid the worst of a recession, but it had 10 years of sluggish growth. My fear is that if we do not get rid of the overhang of both public and private debt as speedily as possible we, too, may first enjoy something of a recovery but then have quite a sustained period of sluggish growth.

That is why it is absolutely vital that the Government realise the supreme importance of getting a grip on the nation’s finances. We face the most enormous deficit; it is unbelievably large. Effectively, the Government are saying, “We will borrow to finance the entire military, education and law and order budgets, and much of the health budget, too.” If we closed down all the Departments concerned, it would just about eliminate the deficit, but I certainly hope that the Government will not close them down. We have to look for savings wherever and whenever we can find them.

I can tell the Economic Secretary to the Treasury that I have been responsible for the biggest-spending Department in Government, and I have seen the problems and pressures of trying to control public expenditure from within the Treasury. The single most important thing, and the first thing, that one must learn to do is to say no. Until we can stop inventing new ways of spending money, we will not get a grip on the total imbalance between our propensity to spend and our ability to raise revenue through taxation. The Government keep adding to the burdens. I get summoned, as Members do, to sit on little Delegated Legislation Committees. There was one the other day that proposed spending an extra £120 million on some benefit for expectant mothers. Even the Liberals, I am happy to say, thought that the measure was complete rubbish and voted against it, as did I. Nobody on the Committee thought that the benefit would do any good to anybody. I am generally in favour of feeding expectant mothers every kind of nutrient that they could need, but there was no support for the measure, and it was badly timed and badly focused. It was a pure gimmick—but it will cost £120 million. The deficit is made up of thousands of £120 millions, and we have to get a grip on them and stop giving the money away.

There is clear medical evidence that if we support women during pregnancy, particularly with food, for which they need money, the outcome for babies is improved. In particular, doing so tackles the problem of low-birthweight babies, which is a problem in some of our inner cities. That measure is a practical way of tackling that problem.

rose—

Order. Before the right hon. Gentleman responds, may I say that we are rapidly running out of time, and there are more hon. Members who want to speak? Perhaps he would bear that in mind.

I apologise for going on for so long. It was a mistake for me to bring up a detailed issue. There are clearly arguments in favour of the measure concerned, but at a time of national emergency we ought to be saying, “Not now.” We have done without it for the past 50 years; we can do without it for the next five years. Until the Government learn to say, “Not now. No new projects or programmes. Let’s get a grip on the ones that we have,” we will not avoid the prospect of 10 years of sluggish growth.

Despite the fact that Scarborough was recently voted the most enterprising town in Britain, and went on to the finals in Prague, where it was voted the most enterprising town in Europe, we have not managed to buck the trend of this Labour recession. Between April 2008 and April 2009, unemployment has gone up by 68.7 per cent.; that is 1,000 more people out of work.

The biggest shock to our local economy was the closure of the two Greaves printing works. On 9 April 2008, almost 200 jobs were lost at the gravure print works, and on 30 January 2009, 200 jobs were lost at the finishing works. On the day of the European elections, people ask, “What are the benefits of Europe?” and some might answer, “Structural funding has gone into the former coalfield areas and into the areas where heavy industry is in decline,” but ironically it is precisely because Polestar printing got a £6-million grant from the European Commission under objective 1 funding for its new print works in Sheffield that the print works in Scarborough has had to close. The law of unintended consequences has come into action.

The building and construction market is dire. The second-home market for premium flats on the seafront is holding up reasonably well, possibly because many people cannot see the point of keeping their savings in the building society given the low interest rates being offered, and because of the worry that there may be inflation coming down the road as a result of quantitative easing. However, the market for residential property, and certainly new-build property, is very poor indeed. Given that people previously got 95 or even 100 per cent. mortgages, I suppose that now that they are being told that they need a 10 or 20 per cent. deposit, it is not surprising that there will be a time lag before people in rented accommodation come into the market, if indeed they can save that money.

The automotive industry is doing better in Scarborough than in other parts of the country, mainly because the Plaxton bus factory and the Bluebird coach factory are selling to local authorities and to the public sector. Of course, the McCain chip factory makes the ultimate counter-cyclical product; there is nothing like a bit of comfort food during a recession.

Of course, the lifeblood of Scarborough and Whitby is the tourism industry, and the weak pound is helping there, as people are choosing not to go abroad. As a result of the uncertainty, people are leaving it later and later before they make their booking. In fact, last year, I asked an hotelier in Whitby on a Thursday what the bookings were like for the weekend, and he said, “It’s too early to say.” People wait for the weather forecast on Thursday night, or even on Friday, before they go online and book their rooms. Fortunately, weather forecasts are more accurate than some of the Chancellor’s forecasts in the Budget. For example, the Economic Secretary to the Treasury mentioned the fact that the economy had contracted by 1.9 per cent. That was announced by the Office for National Statistics only two days after the Chancellor had forecast a 1.6 per cent. contraction in the economy. In fact, Treasury forecasts are so consistently wrong that they are in the same league as Michael Fish was when he told us not to worry about that hurricane.

I should like to flag up a couple of issues that affect the tourist industry, and they give another example of the law of unintended consequences. The first point is about the threshold for VAT registration. We are trying to make Scarborough and Whitby a 12-month-a-year resort, but all too often, when it gets to February or March and the owners of small guest houses look at their turnover for the year, they see that they are on the point of breaching the £68,000 VAT threshold. It makes more sense for them to close down their guest house and go to Tenerife for a few weeks than to stay open. It is a real problem. If they go over the threshold, they have to pay VAT on all the money that they have taken since the previous April. I do not know whether Ministers are thinking about how that could be addressed. Perhaps we will have to leave it to the next Government to try to come up with a solution to that problem.

On holiday lets, bookings are up, but I am concerned about changes in the Budget that affect the holiday let market. From April 2010, income from holiday lets will no longer be classified as earned income; it will instead be classified as unearned income. One consequence is that income from that side of the business cannot be offset against income other than other property income. That affects many small farms that have invested in their farm buildings, and converted them into holiday lets. Those farms now find that the two businesses cannot be offset against each other. Also, income from such holiday lets now does not qualify as “relevant earnings” for pension fund contributions. Such holiday cottages can no longer be considered a business asset, and that will have far-reaching implications for capital gains tax planning. All sorts of reliefs that are available for business assets, such as roll-over, hold-over and entrepreneur’s relief, will no longer be available.

We know why the Government did that; it was because many people had second homes on the coast, or even abroad, and it was seen as unfair that they could use the cost of running those holiday homes, assuming that they let them for 140 days, against their income from their ordinary jobs, but the case of farm cottages is entirely different. They are a diversification of a business. Farmers do not stay in their holiday cottages, but the cottages are usually in the farmyard. They are an integral part of the steading. In many cases the planning permission given by the local authority or the national park authority means that those holiday cottages cannot be sold off separately from the unit. In fact, in some cases, land cannot be sold off separately from that unit. I hope that the Minister will look at that problem and make sure that we can do something to try to help the hard-pressed tourist industry in my constituency.

I agreed with my hon. Friend the Member for Macclesfield (Sir Nicholas Winterton) and, indeed, with my hon. Friend the Member for Hammersmith and Fulham (Mr. Hands) on the Front Bench, when they referred to the fantasy figures that undermined much of the recent Budget. The very idea that there might be 3.5 per cent. growth during the year after next provided the Government with a very convenient alibi with which to avoid making some of the tough decisions that they must make on public expenditure. Those decisions have effectively now been delayed until after the next general election.

My hon. Friend the Member for Hammersmith and Fulham rightly recalled the emergence of the International Monetary Fund, as, indeed, did my right hon. Friend the Member for Hitchin and Harpenden (Mr. Lilley). We went to the IMF some 33 years ago, and the big worry in many people’s minds is that we will have to return to it. I suspect that, if we do go down that path, the Government will do all they can to avoid it happening on their watch.

As the Member for the City of London, I believe that in the months ahead several pressing issues will emerge in our financial heartlands. As the Minister knows, two of the big four domestic banks are now all but fully nationalised. One of those, Lloyds Banking Group, contains what might euphemistically be called “assets” from HBOS, which engaged in a series of balance-sheet boosting debt-for-equity deals during the boom years in the middle of this decade. As a consequence, Lloyds Banking Group has large holdings in a swathe of leading UK companies. Doubtless, many such household names will require refinancing as the downturn proceeds, and their financial rescue will come from the taxpayers’ coffers, for obvious reasons. In short, before long, considerably large parts of mainstream corporate UK could end up being effectively nationalised.

We need to use some much smarter intelligence to nip regulatory problems in the bud. An enhanced role for the Bank of England is very much a part of my party’s policy, but that development will have to be accompanied by the appointment of some high-calibre, trusted and respected professionals to the Bank’s top roles. That in turn should be augmented by the emergence of prosecutors with US-style status to replace what I am afraid is an increasingly discredited Serious Fraud Office. Nothing less will restore the confidence of market professionals and the public at large.

I fear that the banking bail-outs will turn out to be an expensive failure. Indeed, that has already been proved to a large extent, and I do not entirely agree with the earlier comments of my right hon. Friend the Member for Hitchin and Harpenden. The lesson that we must learn is that any institution that is deemed too big to be allowed to fail will forever be prey to reckless risk-taking. If banks cannot fail, they cannot effectively be regulated, because regulation requires the eradication, not reward, of recklessness.

I appreciate that, in the current economic situation, in relation not so much to banks, but to depositors, it is difficult for us simply to stand aside. However, the operation of capitalism requires corporate failure. It is not “market failure”, as it has been articulated by many in the governing circles; it is a sign that capitalism is working properly and efficiently. The message that banks will not be allowed to fail serves only to make their effective regulation all but impossible, because regulation creates tremendous barriers to entry and therefore advantages larger corporations over smaller start-ups. The wisest policy option is to create smaller, more competitive financial institutions, and I fear that nationalisation, of which we may see more, leads us in precisely the wrong policy direction. The best form of regulation must always be open competition, and public ownership is anathema to that policy goal.

How do the Government create smaller financial institutions?

I shall come on to that point in a moment. One of the great mistakes that the US made a decade ago was to break down the Glass-Steagall distinction between investment and depositor banks. We must protect depositors’ interests, but the core problem with the nationalisation of our banks is that bondholders’ interests are now also preserved—at the expense of taxpayers, both present and future.

My right hon. Friend for Hitchin and Harpenden touched on quantitative easing. I suspect that the current consensus that favours it will find less favour as this year wears on. With little evidence that the velocity of money within the economy is any less sluggish as the real recession takes hold, printing money in vast quantities increasingly seems like a last throw of the governmental dice when relatively little else has succeeded. My right hon. Friend is quite right that inflation is clearly not an imminent problem, but the unprecedented pumping of money into the system is certain to be inflationary as time goes on. History suggests that an unsustainable mini-boom may well be on the cards by the first half of next year, but I fear that stagflation—a toxic mix of inflation, rapidly rising unemployment and low growth or diminished competitiveness—will follow. Indeed, the commodities and futures markets already factor it in when pricing for the early years of the next decade. I suspect that the Government will not have seen the last of their recent problems with trying to sell gilts, either. In the City, there is a lot of evidence that many banks now hold vast sums of cash and are ready to reinvest in the market, courtesy of the Bank of England’s policy of promoting liquidity.

I accept that now that we live in a globalised economy, this crisis is certainly different in magnitude from any that we have ever seen. One of the grand old names of British banking, Barings, collapsed owing what seems like a minuscule amount, £780 million, only 14 years ago. Today, the Royal Bank of Scotland survives courtesy only of a £26 billion bail-out. However, we can learn lessons from the past. As I mentioned earlier, we need to restore the distinction between retail and investment banking which, in the US at least, existed for more than six decades until the Clinton Administration repealed the Glass-Steagall Act in 1999. At that juncture, it was regarded as outdated 1930’s throwback legislation, but its purpose was to protect the ordinary depositor from high-risk, if innovative, banking practices. That protection now seems mighty apposite.

How then do we deal with the toxic assets that banks still hold and find so difficult to quantify? Curiously enough, the UK has a pretty good template close at hand. The near collapse of Lloyd’s of London in the insurance market, which has developed great strength in recent years, was avoided almost two decades ago by the creation of the Government-backed Equitas fund. That experience should be the starting point for the consideration of any further large-scale Government- backed rescue expenditure. In fairness to the Government, they have begun down such a path, but we should be fearful of the likely overall cost to the taxpayer.

The nagging sense of insecurity that the spoils of globalisation are being spread inequitably will continue to grow among the majority of the UK work force, and it has the makings of serious social unrest. I echo the words of my hon. Friend the Member for Macclesfield, because the hollowing-out of large swathes of “traditional” UK industry, particularly manufacturing, as employment has been exported to low-cost China and India, has not been accompanied by higher, middle-class and middle-income professional earnings, at least for those outside the gilded world of financial and associated services.

During the past decade, the mirage of higher living standards was maintained only by the credit-fuelled residential property market. The sharp correction of that market has exposed the reality that, in recent times, international free-trade has done little to enrich, personally, at least, the majority of our fellow countrymen. It is dawning on many middle-income folk that the losers from the free movement of labour and capital are not simply the unskilled who are forced to compete with ever large numbers of immigrant workers; it is increasingly apparent that the generation that is about to join the work force will probably be less well off than their parents, not least because they will have to foot the bill for the economic unravelling that became so apparent last September. That phenomenon is almost unimaginable outside times of war and a shocking indictment for today’s generation of politicians.

On the political difficulties ahead, there is little doubt that, whichever political party wins the next election, tough and unpalatable decisions will have to be made on public spending. Even if the Government’s own—almost certainly wildly optimistic—figures on public spending come to pass, during 2009 they will raise only £3 for every £4 that they spend.

I agree with my right hon. Friend the Member for Hitchin and Harpenden that we must come to terms in double-quick time with the fact that, arguably, entire areas of central and local government activity should no longer qualify for public funding. The overall state of the public finances suggests the necessity for further scrutiny, even in areas such as education, health and defence, which in more economically clement times my party pledged to ring-fence. The issue of defence, of course, will be discussed in the forthcoming debate. Although there has been a marked improvement in school and hospital infrastructure in the past decade, much of it has been financed, off balance sheet, by the private finance initiative. It will need to be paid for in the years to come.

I appreciate that the hon. Member for Northampton, North (Ms Keeble), having arrived slightly late, wants to say a few words, so I shall bring my comments to an end. In the past decade or so, we have lived to a large extent in the best of economic times; now, however, we have a big price to pay—and a much tougher era awaits.

I thank the hon. Member for Cities of London and Westminster (Mr. Field) for cutting short what was obviously a much longer speech; we saw him paging through it at the end.

I should like to pick up a few points and make a few remarks to the Government on how to move forward. Despite the need for caution and care, and despite the caveats and risks involved in what the Government are doing, the Government’s approach to dealing with the crisis is absolutely right and it has already spared a great many of my constituents a great deal of hardship. Without the Government’s strategy, I am sure that many more of them would have lost their homes, or been at risk of that happening, and that many more would have found that that they did not have jobs either. Despite the difficulty of managing such a profound recession, I think that we will see the benefits of the Government’s approach.

It would be extremely nice to be able to discuss the comments made by the right hon. Member for Hitchin and Harpenden (Mr. Lilley) and the hon. Member for Cities of London and Westminster, but there is no time for that. I will, however, pick up on a couple of points. First, it is completely wrong to say that the quantitative easing is anything like the printing of money in Zimbabwe. The asset purchase facility, coming on top of the asset protection scheme, has been well designed to deal with the toxic assets and get money flowing in the private sector. It has been absolutely the right approach.

If the right hon. Member for Hitchin and Harpenden is to lend money to the hon. Member for Cities of London and Westminster, I hope that he will conduct an honest assessment of the risks involved with that character, that he does due diligence and that he gets some proper security, because what caused the banking crisis were improper risk management, lack of due diligence and lack of proper security for the assets.

The Minister is not going to respond, but I will make three points to him. First, will he please make sure that there is a report on the results of bank lending to business? Like other colleagues, I think that the situation has not been as we would like and everybody wants such a report. Secondly, will he also make sure that his Department does real work with the Department for Communities and Local Government so that public spending on housing goes to local private contractors and so that local councils can manage things properly and support their local industries? Thirdly, will he make sure that the Government take into account the impact of their spending and efficiency reviews on the wider economy, so that—

I beg to move,

That this House has considered the matter of defence in the world.

I am delighted to open this afternoon’s debate on defence in the world. Today more than 17,000 of our armed forces personnel are deployed around the globe, protecting our national interests and working with our international partners in places such as Afghanistan, Iraq, the south Atlantic, Gibraltar, Nepal, Canada, Belize, Kenya and Cyprus. I know that all Members of the House will wish to join me once again in paying tribute to the contribution that each and every member of our armed forces makes to build a safer world on our behalf, and in acknowledging the sacrifices that they all make in doing so. They are truly outstanding individuals, and the whole country can be rightly proud of their professionalism and dedication to duty.

It is right that, sadly, I should begin by offering my deepest condolences to the family and friends of Cyrus Thatcher, of 2nd Battalion the Rifles, who was killed on active service in Afghanistan this week. We mourn his loss and extend our deepest sympathy to his family.

In April, I had the honour of attending the ceremony to mark the successful completion of British combat missions in Basra. It was, for me and many others, a deeply moving occasion. Our armed forces have achieved a huge amount in the past six years, including a transformed security situation in Basra and an increasingly capable Iraqi police force and army. Furthermore, they have helped to create a secure environment in which Iraq’s new democracy can grow. After years of oppression by Saddam Hussein, southern Iraq now has the opportunity to fulfil its very considerable economic potential.

The task was not achieved without sacrifice. The House will, I know, also join me today in paying tribute to the 179 British armed forces personnel who lost their lives in Iraq. We and the Iraqi people owe them a debt that we can never repay, and that is why we must honour their memory and care for their families. I am in no doubt at all that we have left Iraq a better place, and that we have made a real difference to the lives of its citizens. According to General Odierno, the commander of coalition forces in Iraq, what the British armed forces have achieved in Basra and elsewhere in Iraq is “nothing short of brilliant”.

Operation Telic was not the beginning of our involvement in Iraq; this week, the Royal Air Force concluded almost 19 years of operations in the skies above the country. Whether it was strike missions during the wars in 1991 and 2003 and the protection of the Shi’a of the south and the Kurds of the north from the malevolence and violence of Saddam’s regime, or the provision of support to ground forces and the playing of a vital logistics role over the past six years, the Royal Air Force has a proud record, in the finest traditions of that service.

The combat mission in Basra was not the beginning of the UK’s role in Iraq, and nor does its conclusion mark its end. As part of a broadly based relationship between the UK and Iraq, we are now making the transition to a different, but close, bilateral defence relationship. As the Prime Minister told the House in December, our future military role will focus on continuing protection of Iraq’s oil platforms in the northern Gulf, together with training of the Iraqi navy and marines, and officers of the Iraqi armed forces more broadly. We are preparing to lead an officer training initiative as part of the NATO training mission in Iraq, but that, of course, will be subject to NATO reaching its own agreement with the Government of Iraq.

In the meantime, as our current permissions for operational and training activities expired on 31 May, we have paused in our support to the Iraqi military in Iraq, pending ratification of the new agreement. However, our programme of training for Iraqi service personnel on military courses in the UK continues and is expanding. I very much welcome the Iraqi Council of Ministers’ endorsement on Tuesday of a draft UK-Iraq training and maritime support agreement. Once that has been signed, which I hope will happen shortly, I will place a copy of it in the Library of the House in parallel with its presentation to the Iraqi Council of Representatives.

As our relationship with Iraq enters a new phase, the main focus of operations will naturally shift to Afghanistan. As the Prime Minister has said, Afghanistan and Pakistan are of critical strategic importance to the United Kingdom and the international community as a whole. In December 2007, we set out a comprehensive approach to tackling the insurgency in Afghanistan. Building on that, in April this year the Government published our approach to Afghanistan and Pakistan.

The 9/11 attacks demonstrated overwhelmingly the international terrorist threat posed from Afghanistan. We must never forget that that country was allowed to become a base for al-Qaeda to plan terrorist operations across the world.

Does my right hon. Friend accept that the country of India, perhaps more than any other, has experienced exactly those kinds of terrorist attacks from that base in Afghanistan and, indeed, in parts of Pakistan? Does he welcome the fact that a new and very stable Indian Government have just been elected, and will he tell us of any prospective talks with his counterpart in the Indian Government to ensure that the bulwark of stability in the region that is democratic India can continue to help in what is going on, which is causing so many problems across the world?

I certainly do talk to the Indian Defence Minister, and I was able to do so particularly in the aftermath of the Mumbai terrorist atrocity. India is the most remarkable and vibrant democracy in the world. In my view, democracy is the best defence against extremism. However, as we know—our own history tells us this—democracies need to be defended. The atrocities against the Indian people—the Indian democracy—require a robust response from the Pakistan authorities, because there is no doubt whatsoever that those terrorist missions were launched with support and logistics from Pakistan. That has to be addressed. There can be no hiding place for those terrorists in Pakistan. We therefore welcome the steps that the Pakistani Government have taken to bring them to justice, but more has to be done for that crime to be addressed. Until that action is taken, tensions will remain unnecessarily high in the region. There is no doubt at all, in any part of the House, about our respect for the Indian democracy and our best wishes for the newly elected Indian Government.

We have certainly learned our lesson from the failure in allowing Afghanistan to fall into the clutches of the violent extremists and ideological terrorists. We remain in Afghanistan to prevent it from again becoming an ungoverned space from which terrorism can be launched against ourselves or our allies. So our mission in Afghanistan is designed first and foremost to protect our own national security.

The United Kingdom has contributed military forces in Afghanistan since 2001, and since 2006 we have played a key role in the south of the country, in the Taliban heartland. In Helmand, our forces perform extraordinary acts of bravery and courage every day as they confront the terrorists and help to protect the local population from the fear and reality of violence. They are training the army and the police to ensure that the Afghans themselves can develop a position of strength to withstand and ultimately overcome the terrorists who threaten their country from within, and to create a stable security environment in which the Afghan Government can build institutions and enable development to take place. Across Helmand province, town by town, we have seen that happen. District centres have been taken from the insurgents and are now thriving, with markets bustling and schools and clinics opening.

Crucial to this success has been the development of the Afghan national army. The international community must help Afghanistan to build a capable and competent force that can take the lead on security operations. The long-term future of Afghanistan depends on its ability to manage its own affairs. In the three years that the UK has been mentoring the Afghan national army in Helmand, it has developed into one of the most battle-hardened and competent brigades in Afghanistan, with three of the four infantry kandaks and the brigade headquarters now capable of conducting operations with minimal support from the international security assistance force—ISAF.

These achievements are producing tangible results. Only last December, Afghan security forces, supported by British, Danish and Estonian troops, successfully cleared insurgents from the town of Nad-e Ali. Since that operation, the provincial governor, Governor Mangal, who is doing an excellent job, has held the first shura there for five years; voter registration has successfully taken place; and bazaars in urban areas are open for business again, and thriving. But the most important thing is that since the initial operation, security in Nad-e Ali has been maintained by the Afghans themselves. Our military successes in Helmand have allowed the UK, working with the Afghans through our civil military mission in Helmand, to deliver support to the provincial government and help it to deliver basic services and be more accountable to the people.

Rightly and properly, the Afghan people want and deserve the right to decide the future of their own country. We are committed to helping them to hold credible elections that represent the will of the people and demonstrate that the Afghan Government have the authority to rule. Security over the election period will be critical. That is why last month my right hon. Friend the Prime Minister announced an increase in troops from 8,300 to 9,000 until the autumn. However, the Afghan national security forces will lead on securing the elections; our role is to provide effective support to them. We are working closely with the Afghan national security forces, the Afghan independent electoral commission, ISAF and others to prepare for these elections. Voter registration, which started in October last year, has now been completed across the whole country. More than 4 million new names have been added to the existing voter registry. The fact that the insurgents have failed to disrupt the process so far is a credit to all involved, particularly the Afghan national security forces.

In the emphasis that the British and the Americans are placing on persuading the Afghan people to accept the Afghan constitution, are we not still in danger of imposing too much of a western style of government on to a country to which that is completely alien? Should we not be doing more to work for reconciliation towards more traditional forms of Afghan government in order that we alienate less the tribal institutional structures, particularly in the provinces?

The constitution of Afghanistan is a matter for the Afghan people. The current constitution has been supported in a number of important elections since it was adopted. There is no conflict between supporting the Afghan constitution and supporting the reconciliation process. I think that we are all in favour of seeing greater reconciliation, and there are different avenues and paths through which that can be conducted. Essentially, my view is pragmatic, not ideological. It cannot be said of the Afghan constitution—the Afghan system of government—that it is a thing of perfect democratic beauty; it would be naive and probably premature to imagine that it ever could be. However, the fundamentals of the constitution are decent and enduring. The right of free people to decide their own Government and to choose the people who govern over them is the fundamental characteristic of the Afghan constitution, and that is worth defending.

The problem is that the Bonn constitution was constructed perhaps rather artificially at a time when a large part of the Taliban community of Afghanistan was not involved. The whole Karzai Administration have little support among the Pashtun majority, who were excluded from that constitutional settlement. Do not we need to allow the Afghan people more collectively to reframe a constitution that is more in line with their own history and tradition?

The Afghan people have those freedoms. Ultimately, as I said to my hon. Friend the Member for Brent, North (Barry Gardiner) as regards India, those freedoms are the best defence against the extremism of the violent insurgents who seek to replace the democracy of Afghanistan—imperfect though it might be, as I would concede—with an altogether different regime with no respect for human rights, freedom of conscience and freedom of speech. I am sure that the hon. Gentleman and I would join forces in ensuring that that did not come about. These are ultimately matters for the Afghan people, who are now, fortunately, free to address those concerns themselves.

The instability of Pakistan is also of increasing concern—it is very real and obvious. The threat to Pakistan posed by militancy and terrorism is very severe. Last year alone, internal violence killed 2,000 people in Pakistan. We strongly welcome the current action being taken by the Pakistani Government to address the terrorist problem within their borders, where most violent extremist organisations in Pakistan, including al-Qaeda, operate. Effective security co-operation on both sides of the Durand line is therefore essential for success. UK and ISAF forces would benefit directly from improved border controls that constrained the flow of insurgents in and out of Afghanistan.

However, we must remember that Pakistan is rightly a proud and sovereign nation. It is Pakistan’s responsibility to act against the threat of extremism and when it does, we will continue to offer our assistance.

What discussions has the Secretary of State had with the Foreign Secretary about the potential for the new Indian Government to help the situation in Pakistan by reducing tensions along the border?

I have regular discussions with my right hon. Friend about that, and I am happy to brief the hon. Gentleman about our current thinking. There are opportunities for tensions to be eased, but the essential condition for that will be action against the Lashkar-e-Taiba militants in Pakistan who have still not been brought to justice. I am afraid to say that at the moment, there is little evidence that they will be any time soon. That would be a significant step for Pakistan to take, and we would strongly support and encourage it to do so.

We should maintain our constructive dialogue with Pakistan’s military and help them to combat the insurgency more effectively. We are also supporting financially the efforts of the Pakistan Government to improve the education of its population in the federally administered tribal areas, which is fundamental to removing the insurgents’ ability to exploit local people for unbelievably horrific ends such as suicide bombings.

I am very pleased to hear what the Secretary of State is saying about helping education in Pakistan. One thing that I have bemoaned in this country is that we spend only something like 2 per cent. of our gross domestic product on defence, but in Pakistan they spend only 2 per cent. of theirs on education. The Pakistanis need to consider that carefully, because it is extremely important.

I strongly agree with the right hon. Gentleman. It is ultimately for the Pakistan Government to address their internal priorities and how they wish to spend their resources, but there is undoubtedly a strong view that education needs to be addressed now. If it is not addressed in a co-ordinated and serious way, that will simply allow extremist organisations to take over responsibility for educating young Pakistani boys and girls. I am afraid that that will lead to only one consequence.

My right hon. Friend is being most indulgent in giving way to Members of all parties. Has he had any discussions with the Pakistani Government about the release of Hafiz Sayeed, who was the chief accused of the Mumbai bombings and was in captivity in Pakistan? Does that not betoken a reluctance on the part of the Pakistan Government to pursue these measures with the vigour that we all wish to see?

I have not had any discussion with my opposite number in Pakistan about that, because those are primarily matters for my right hon. Friend the Foreign Secretary to pursue through the normal diplomatic channels. I am sure that if there were a representative of the Pakistan Government here today, he or she would say that the release was a decision of an independent judicial authority, and that it was the actions of the Pakistan Government that led to that individual’s initial detention because of the allegations that he was associated with the crimes committed in Mumbai. Whatever the legal or constitutional position, there is no doubt that a very serious crime took place. Nor is there any doubt in our mind that Lashkar-e-Taiba, acting in Pakistan, was directly responsible for that crime, and action must be taken.

Although current operations inevitably shape our defence posture today, I wish to concentrate my remaining remarks on how we can prepare ourselves for the future. We all agree that the world is changing rapidly around us and that we must be both well prepared for changes and willing and able to adapt to them. The UK has an active international role and presence, and we must take into account the global trends that will shape our future. Two trends stand out to me.

First, ours is now clearly a more connected world. Increased globalisation means increased interdependency, and we must be open to that. Our linkages to the world are essential to the UK’s prosperity and success, and this is no time for protectionism. But global freedoms and connections clearly create vulnerabilities—take, for example, the global economic crisis, the shared problems of insurgency, terrorism, violent extremism and the drug trade in Afghanistan and Pakistan, and the emerging threats of piracy and cyber attack.

Secondly, it is pretty clear now that we are seeing a shift in the balance of power globally. More states have a voice, through greater economic power or strategic importance. Decision making in the world will therefore be more complex and we will need more innovative approaches if we are to achieve peace and prosperity. We talk more today of the G20 than we do of the G7 or G8. China, Brazil and India all have increasing global influence to match their rapidly expanding economies.

So what are the new security challenges that we face in this age of risk and uncertainty? We certainly face a new form of terrorist threat that is transnational and employs extreme and indiscriminate violence. Terrorists who claim to act in the name of Islam seek to pose an enduring threat to our national security interests. Tackling terrorist and other non-state threats is set to be the most likely use of our armed forces for the foreseeable future. That requires not simply a counter-insurgency response but a multi-faceted and multi-agency approach, with new capabilities that can help us in the work not just of security but of reconstruction and good governance.

North Korea’s recent nuclear test is another reminder that proliferation has major security impacts. Belligerence coupled with weapons of mass destruction capabilities has regional and global significance. In addition to states, the continuing risk that terrorists, criminals, or other non-state actors will get WMD technology is incredibly serious when we live in an era of mass casualty attacks and suicide bombing.

The risks of weak or failing states are also clear. Economic and political weaknesses exacerbate factionalism and often provoke conflict. Supporting sound leadership in vulnerable countries and international approaches to reversing downward spirals of decay will be crucial. As the UK is an internationally engaged power, its domestic security interests depend on effective and efficient international organisations. If organisations such as the United Nations, the international financial institutions and the World Trade Organisation are to remain effective, they must respond rapidly to global changes. The same goes for the organisations that protect and serve the people of Europe—NATO and the European Union. They must all adapt the way in which they work and the speed of their responses. Because legitimacy is crucial to effectiveness, they must also change to give the rising powers a proper voice and influence.

Given those enduring and emerging security challenges, it is right that there should be debate now on the changing characteristics of conflict and how our forces should evolve. Of one thing we can be certain: predicting future conflict remains notoriously difficult. Our experiences defy a single pattern. Yes, there may be a broad consensus that the threat of direct state-led military attacks against Britain is extremely low and will remain low for the foreseeable future, and we all celebrate and welcome that fact. However, states still pose threats to wider security in some cases, for example by acting through non-state proxies. Miscalculations by states in dispute with each other could also lead to conflict, and we could find that we are drawn in if our vital national interests are at stake. We ignore those risks at our peril.

There is broad agreement on some issues. First, it is agreed that for the immediate future terrorists will pose the most frequent and direct threat to the UK and our interests, and that they will do so in ways that will continue to plumb the depths of depravity, using women and children as suicide bombers. Secondly, it is agreed that there will be a continuing demand for our forces to counter terrorism directly, and we must look beyond Afghanistan and apply the lessons that we learn from operations there.

Thirdly, it is agreed that there will be a continuing demand for peace support operations from peace enforcement to low-level stabilisation, either following state collapse or to freeze or end inter-state conflicts. Some of those missions could involve the use of coercive force. Fourthly, it is agreed that increasing complexity is likely to be a feature of the future use of our armed forces. They are likely to find themselves operating together with a range of other agencies, building on today’s concept of a comprehensive approach. Finally, it is agreed that there should be an increasing premium on preventive activities across Government, working with allies, partners and non-governmental organisations. The work that we are already doing with the African Union is a prime example, and we should remain leaders in that field.

In all that, we should be mindful that the character of conflict evolves incrementally. Emerging nations will have more of an impact on what we try to do and “host nations” will be crucial, not only for the legitimacy of many operations but in playing a practical role in their planning and conduct.

As an example of both taking preventive action and working with host nations, the Ministry of Defence has a programme of capacity building that extends to 14 states, including Pakistan. The security forces we train are successful in disrupting terrorist plots, so the benefits can be immediate as well as an investment in longer-term security and international relationships.

An important trend, which complicates conflict, is that non-state adversaries using irregular tactics will be increasingly important in international conflicts—not just terrorists but insurgents, criminals, pirates and even disgruntled individuals conducting cyber attacks from their laptops. One practical example of how we are agile enough to counter those threats is the UK’s leading role in EU anti-piracy operations in the Indian ocean. Hon. Members will have seen the evidence in today’s newspapers of successful Royal Navy action against suspected pirates. The protection of the world’s shipping lines is vital for the economy of the world as a whole—and to us, as an island nation, more than many. We will continue to play our part in securing the smooth passage of global trade—something that the Royal Navy has always done marvellously.

Non-state actors often share motivations and aspirations and co-operate and combine to pose new threats. They are likely to change form to defy our efforts to tackle them. The role of intelligence will therefore remain crucial to identifying those variations.

Yesterday, a Ministry of Defence spokesman confirmed that a British frigate had intervened on pirates off the gulf of Aden who had rocket-propelled grenades in their boats and clearly intended to commit crimes on the high seas, but said that because they were not caught in the act, although the Royal Navy could destroy the weaponry, it had to let them go. Clearly, there is a deficiency in international law or its interpretation, or there is something wrong with our rules of engagement. It cannot be right that pirates, who were caught virtually red-handed, are let go.

I have a lot of sympathy with the hon. Gentleman’s point. However, I do not believe that there is any deficiency in the rules of engagement—we are able to defend not only ourselves but the ships that we are there to protect, and if necessary, to use lethal force to do that. The decision was rightly made by the commander on the ground, operating within the rules that he had been set. We have an agreement with the Kenyan Government for transferring pirates whom we detain on the high seas to the criminal authorities in Kenya. That agreement works well and several pirates have been moved into the Kenyan criminal system, but we continue to consider ways to improve—[Interruption.] As I said, the decision was made by the commander on the ground, operating within the rules as he saw them. I am here to support him—I am not trying to do anything other than that. However, I am trying to explain that we reached an international agreement with Kenya, which applies to the EU piracy mission. I do not have the precise figures, but I will give them to the hon. Gentleman, perhaps later in the debate. Many pirates have been detained in those operations and transferred to the Kenyan criminal authorities.