With permission, Madam Speaker, I would like to make a statement about the report of the study group on directors' remuneration, chaired by Sir Richard Greenbury, which was published today.

The group was set up in January this year, on the initiative of the Confederation of British Industry, in the wake of public concern about executive remuneration in some public limited companies. The Government supported the setting up of the group and we now welcome the publication of Its report. We congratulate the group on a thorough, speedy and authoritative review of the issues. We welcome its recommendations in principle, and strongly support the emphasis that the group places on the need for pay to be justified by performance.

The group's report follows shortly after the report by the Select Committee on Employment on the remuneration of directors and chief executives of privatised utilities. While the Government will give a considered response to both reports when Parliament resumes after the recess, the House will expect me to make some preliminary comments now, and I willingly do so.

Pay in the private sector is a matter for companies and their shareholders. The Greenbury initiative demonstrates that companies and institutional investors recognise the level of concern on the issue and are determined to act. There is no doubting the authority of the group's recommendations. The group's report vindicates the self-regulatory approach. It will deliver more effective, speedier results than legislation could achieve. Indeed, there has already been a perceptible change in some companies' attitudes to those matters.

The Greenbury report will be underpinned by action by the stock exchange. Its recommendations are addressed primarily to listed companies. It is appropriate therefore that the stock exchange should enforce them through the listing rules. The Government welcome the stock exchange's announcement this morning that it will do so.

The Government have no intention of introducing a top people's pay policy. We do not begrudge top salaries for top performance. Our companies must compete at world level if our nation is to prosper. We must pay the rate for the job. Greenbury points out that although comparisons are difficult, total remuneration levels in the United Kingdom are well below American levels and broadly comparable with other European countries. The fastest way to drive our best talent abroad—in any field, not just business—would be to impose restrictions on earnings.

There has been particular concern about windfall gains arising from share option schemes in the privatised utilities. The Government accept the group's recommendation that for newly privatised companies, no share options should be made available until at least six months, and preferably a year or more, after privatisation.

The great success of virtually all the privatisations of recent years has been a feature of the strengthening of Britain's economy. Consequently, some share options have yielded substantial benefits to those who guided that success. But the huge achievements of the privatisation programme have also brought dramatic benefits for consumers in terms of lower prices, more choice, better consumer-focused service and more investment, as well as a large and growing flow of revenue to the Exchequer through taxation.

There are three recommendations for legislative action addressed to Government. My right hon. and learned Friend the Chancellor of the Exchequer has already announced this morning that the Government will introduce legislation in the next Finance Bill to withdraw the income tax reliefs at present available to directors and employees participating in executive share option schemes that have been approved by the Inland Revenue. The withdrawal of the reliefs will take effect in relation to grants or the exercising of options on or after today.

The second and third recommendations are for minor amendments to the Companies Act, to remove overlap with the group's proposals for comprehensive disclosure and to amend the Companies Act rules on the disclosure of the value of pensions benefits, when they have been drawn up by the actuarial professional bodies. The Government will consider both recommendations carefully and quickly. We remain willing to consider other legislative back-up if experience shows that it is needed.

In summary, the Government welcome the publication of the Greenbury group's report. It is comprehensive and well judged. It will help to ensure that pay is based on performance. It tackles specific problem areas with firm, fair and practical proposals. It is a package that meets today's needs, and I believe that it should be supported.

I begin by taking this first opportunity to congratulate the right hon. Gentleman on his appointment as President of the Board of Trade. Of course, he took over from the right hon. Member for Henley (Mr. Heseltine), who has become a kind of Prime Minister-in-waiting. He is not here today, we notice; no doubt he is staking out No. 10 Downing street, the great panjandrum of this decrepit Government. If the right hon. Member for Henley had been half as successful in creating jobs for the British people as he has been with his personal job creation schemes, unemployment in Britain would be much lower than it is today.

We are, however, delighted to see the Chancellor of the Exchequer in his place. After all, it was he who, over many months, dismissed our calls for share options to be taxed as income. On 8 December last, the right hon. and learned Gentleman said:

"The hon. Gentleman's proposals"—

referring to my hon. Friend the Member for Dunfermline, East (Mr. Brown)—

"on loopholes are undesirable changes in taxation on legitimate business. I have considered his proposal on executive share options many times".—[Official Report, 8 December 1994; Vol. 251, c. 474.]

But he rejected it. It is little wonder that the right hon. and learned Gentleman was seen practising somersaults in the garden of No. 11 Downing street early this morning. He has opposed these proposals for many months, but we are now led to believe that he is anxious and willing to introduce them.

Does not the President of the Board of Trade recognise that, had Labour not demanded action and had Labour not reflected the understandable anger of repeatedly exploited consumers, the Government would have done nothing, as the right hon. and learned Gentleman intended? Incidentally, that is also what the former President of the Board of Trade intended, as a leaked memo in March from his office to the Prime Minister made clear. It stated that the President was loth to take action. That was the true position of the Government until the Greenbury report appeared. They have in no sense reflected the public anger or the outcry that followed the many abuses.

Before the right hon. Gentleman tries to fabricate Labour policy, let me say that we have always recognised that high performance merits high reward—[Laughter.] But the reality is, and Conservative Members know it, that the rewards given by their friends and themselves to the directors of privatised monopolies bear no relation to their individual performance or merits, or the performance of the organisations. Indeed, as everyone knows, the gap between executive pay and lower pay is as wide as it has ever been. The Government have a curious philosophy that directors must be given much higher rewards to motivate them, but people on low and middle incomes must have their wages controlled to motivate them.

The Greenbury report has some welcome proposals. I believe that Sir Richard would have gone further, but members of the committee stopped him. The draft report was offered in traditional Marks and Spencer fashion—those who did not like it could take it back and change it, and they did repeatedly.

Complete transparency on salaries and pensions is welcome, as is the relation of bonuses to performance criteria. It is right that the stock exchange must be obliged to enforce the code of practice, and its decision to do so is welcome.

However, does not the Minister recognise that the report ducks the crucial issue—the issue of abuses of private monopoly power, of the need for a truly independent member on each remuneration committee, the need for shareholders to have a legal right to vote on remuneration packages at annual meetings, the need for the abolition of all share options in privatised utility companies and the need for self-regulation to be changed, as it has clearly failed and not protected consumers from those many abuses in those privatised industries?

The Greenbury report ducks the crucial issue of share option rip-offs and huge salary hikes in exactly the industries where they have been the most outrageous. Greenbury recommends a voluntary review, which the Minister has welcomed; a voluntary review by those who made themselves millionaires at our expense in the first place. Does the right hon. Gentleman—does anyone in the House—believe that those guilty of those abuses of private monopoly power will confess? Are they likely to reduce their salaries and their share options? It beggars belief that they will do so, so, frankly, the idea that self-regulation will end those abuses does not bear examination.

Does not the right hon. Gentleman also recognise that privatisation has left consumers wide open to abuse, exposed to the exploitation of private monopoly power; that the weak regulatory regime has manifestly failed to protect consumers? Does not he recognise that those abuses are set to continue and that those massive personal gains will continue, as the memorandum from his predecessor to No. 10 Downing street, from which I quoted earlier, confirms? It also confirms, in case he has not read it, that

"none of the options is related to performance (either of the company or the individual)."

What more evidence do we need than his predecessor's own confession to the Prime Minister that none of that can be justified?

No notice has been taken at all by people in PowerGen, National Power or water companies of the public outrage that followed those abuses. The evidence is there—they do not intend to change their practices, and the right hon. Gentleman knows it. Indeed, in the case of British Gas, total factor productivity has been stagnant for several years, but that did not prevent the chief executive officer from giving himself a 75 per cent. pay rise, bearing no relation to the performance of the organisation.

Is the right hon. Gentleman aware that the conclusion that he has reached—that the report is welcome—will not be welcomed outside the House by consumers, who are fed up with being exploited and fed up with the Government's failure to act? Those issues will continue to infuriate consumers until the next general election. The Government's failure to end those abuses, like their broken promises on tax, will be neither forgiven nor forgotten.

I thank the right hon. Member for Copeland (Dr. Cunningham) for his welcome to me in my new position.

The right hon. Gentleman asked about the handling of share option schemes and why my right hon. and learned Friend the Chancellor resisted any change in taxation in the past. The answer is perfectly simple. Share option schemes were introduced in 1984 for senior executives, with the tax arrangements that have just been changed, to provide a long-term incentive for senior executives to become involved in privatisation exercises and make them a success. What is more, those schemes were introduced at a time when we had not completed the process of reducing the income tax levels that we inherited from Labour. We have now made considerable progress in that regard, and the privatisations are now mature and successful. The value that attaches to share option schemes is a direct consequence of the substantial contribution made by senior executives to the successful operation of privatised companies.

The right hon. Gentleman said that he believes that pay should reward performance. I remind him that it is hardly credible for him to say that, when his party is committed to a windfall tax on excess profits of privatised utilities, a training tax on employers and the introduction of a minimum wage. The right hon. Gentleman would clearly also introduce a maximum wage. Labour is going step by step towards the introduction of a full wage policy at all levels. Conservative Members know perfectly well that that is Labour's true aspiration.

Only today, the Full Employment Forum, as it calls itself—a body of 60 Labour Members of Parliament and Members of the European Parliament—called for a higher tax rate of 50p in the pound on all individuals earning £50,000 and more.

The right hon. Gentleman talked about monopoly. He does not seem to realise that since the gas industry was privatised, it has moved from being a monopoly to an industry of 42 companies, and 44 companies are engaged in supplying electricity. That competitive element in the provision of utilities has led to substantial advantages for the consumer—whom the right hon. Gentleman says we are not protecting. He might have forgotten that BT's main prices have fallen by 35 per cent. after inflation since privatisation, and that domestic gas prices have fallen by around 23 per cent. since privatisation.

Perhaps the right hon. Member for Copeland is not aware that the right hon. Member for Sedgefield (Mr. Blair) travelled to the far ends of the world to make a speech to the News Corporation leadership conference in Hayman Island, Australia, when he said:

"Our parliamentary system is hopelessly outdated. There is, believe it or not, still prejudice against success in trade and business."

What a pity that the right hon. Member for Sedgefield, in e-mailing himself down the, Internet to Australia, forgot to fax a copy of his speech to members of his Front Bench at home. The fact is that Labour does not admire success, but is interested only in state control. That is not in the interests of consumers or shareholders.

Will my right hon. Friend confirm that the tax changes proposed by my right hon. and learned Friend the Chancellor will not impact on the secretaries, office workers and shop floor workers in my constituency who have taken share options? Does my right hon. Friend acknowledge that many shares go to ordinary employees on average wages?

I am happy to reassure my hon. Friend. Labour does not like and does not choose to recognise that there are 10 million shareholders, and 6 million shareholders in privatised industries. If Labour's alleged recognition of enterprise were to be believed, one would think that it would welcome those figures.

The package is acceptable as far as it goes and disclosure will be helpful, but does the Secretary of State acknowledge that small shareholders will still be powerless? Will he introduce a new charter, to give them the authority to approve directors' packages? Will he confirm that, even after the Chancellor's new initiative in changing the tax regime that applies to such packages, the fat cats will have to pay only an extra £2,400? Surely that is small beer in terms of the losses and gains seen in the recent past.

The hon. Gentleman calls for a charter. If he reads Sir Richard Greenbury's report, he will see that it clearly sets out a code of best practice and makes a number of substantial recommendations—the majority of which are being taken up by the stock exchange and made obligatory under the listing rules. That not only greatly strengthens shareholders large and small, but sets down a code of practice that all companies will be expected to operate.

Were any requests received from the Opposition parties to widen the scope of the Greenbury inquiry to include the pay and perks of journalists, television personalities, pop stars and professional sportsmen?

My hon. Friend makes an extremely good point. It is wrong for the Labour party to abuse and describe as fat cats those in the City whose skills and professionalism are admired throughout the world and which generate so much enterprise, revenue and employment in this country.

In welcoming the right hon. Gentleman to his post, may I welcome the parts of the Greenbury report that reflect the views of the Labour minority and reject those of the Tory majority? Has the right hon. Gentleman read the Employment Select Committee report? Has he any comments to make now on that report? As I presume that he has read the Richard Greenbury report, does he unequivocally agree with all the recommendations and remarks contained within it?

The hon. and learned Gentleman is familiar with these matters because he is a long-standing member of the Ladbroke Group plc board's remuneration committee, which recently approved the chairman's salary of £583,000 and a share option package for directors worth £2.3 million. I welcome the hon. and learned Gentleman's participation in the discussion.

I have read the Employment Select Committee report. I shall ensure that we reply to it, as I said in my statement, in the autumn. The hon. and learned Gentleman asked me whether I agreed with every detail and point in the Greenbury report. I have said that we welcome the report in principle, agree with most of its recommendations and will respond fully in the autumn.

May I ask my right hon. Friend to take the opportunity to reject utterly the concept of a statutory wages policy, which would be the inevitable outcome of the comments of the right hon. Member for Copeland (Dr. Cunningham)? Is not the real issue the need to encourage the representatives of large institutions to take a much more active role in companies, and to find ways of enabling them to do that, which will not lead them into running foul of the necessary rules against insider trading?

My hon. Friend makes a valid point. Institutional shareholders are investors who seek to make a profit, just as small individual shareholders do. The fact remains that they have substantially more voting power. They tend to hold their shares for longer and they are in a position to exert greater influence. It behoves them to use that power responsibly, as many of them do. It is a matter that I shall be considering further.

Will the President of the Board of Trade give a clear answer on the voluntary code and the role that is being barred to shareholders? Will he introduce some checks and balances into the system? Those outside this place consider that to be important.

Have the Government any plans to examine the corporate government of companies, especially in regard to institutional shareholders? Will they take all stakeholders into account, especially when it comes to competitiveness? That issue has been raised on several occasions by the Select Committee on Trade and Industry.

The hon. Gentleman will have heard my reply to my hon. Friend the Member for Elmet (Mr. Batiste) about institutional shareholders. As for the code of best practice, I urge the hon. Gentleman to read the recommendations in detail to understand how they interrelate. He will then appreciate that the importance of the remuneration committee is considerably enhanced. There is a far greater requirement for disclosure, accountability and transparency. I think that that will be of considerable advantage to all shareholders.

Does my right hon. Friend realise that many people will be delighted at the Government's quick action? There was genuine concern and it will be welcomed especially that the remuneration committee, under the code of practice, will not contain people who will step up one another's salaries to suit one another. That is important, because it gives confidence. May I be the only consumer in this place who is delighted with British Gas and the service that it has given me in my new house?

My hon. Friend makes his point well. I welcome his support for British Gas. Board pay at British Gas accounts for about 15p per consumer per annum. The savings that British Gas has achieved for consumers are equivalent to £77 per annum. Those figures alone justify the level of remuneration that a company the size of British Gas has chosen to set.

Has not the President of the Board of Trade omitted to mention the mistakes and mismanagement that Greenbury found on investigating some of the carryings-on in certain utilities? Is it not a fact that some of the top cats currently under investigation were members of the 11-member committee? Has it not been said that small shareholders should have more of a say at annual general meetings before massive increases are paid? Sir Iain Vallance—a top man—was paid £50,000 to do a little job for 18 days a year, along with another £665,000; another director of a utility was paid £465,000 a year, plus £500,000 worth of share options and £38,000 to do three little jobs for three days a year. Should not the right hon. Gentleman be considering those issues?

Perhaps the difference between the Opposition and the Government is that we believe that committees should be manned by people who know something about the subject, rather than just by those with prejudices about it. As for the hon. Gentleman's point about the position of small shareholders, I have noted the point made in the Select Committee's report about the circulation of motions for the annual general meeting, and we shall of course consider it.

Does my right hon. Friend agree that, in the context of performance, one aspect of a director's responsibilities is the ability to exercise self-discipline and restraint, and to understand what is acceptable to employees as well as shareholders? Is it not important for Her Majesty's Government, in all dealings with the utilities, to encourage directors to exercise that responsibility?

In the context of international relativity, is it not also essential for Her Majesty's Government to continue to reduce direct taxes on income, so that international entrepreneurs and directors will want to make a living in this country?

I agree with both those points. When making international comparisons, however, it is important to recognise that many top managers have skills that could easily be transported to other countries. In Germany, France, Belgium and Italy, pay levels are slightly higher than in this country; in companies of comparable size in the United States, pay is twice as high as it is here. Our directors must also take that into account.

Has it occurred to the President of the Board of Trade that, following the fiscal changes, a chairman of a privatised utility who was taking home £300,000—perhaps in the form of share options—will take home £297,000? Less than 1 per cent. of his salary will have been taken away. The employees at the bottom of the scale, to whom the hon. Member for Dover (Mr. Shaw) referred, however, may lose as much as 25 per cent.

If the right hon. Gentleman has reflected on that, will he also reflect that all the huge, unjustified payouts by chairmen of former nationalised industries to themselves and their directors are just a little like what happened in "Animal Farm"—the bit where the pigs have taken control?

Obviously, the circumstances of individual directors will vary according to their salary levels, the size of their share option schemes and their circumstances in relation to both income tax and capital gains tax. The hon. Gentleman's figures are meaningless. If he feels that the change that my right hon. and learned Friend the Chancellor has made to the tax system is inadequate, however, why on earth have his hon. Friends bayed for it over recent months?

Will my right hon. Friend pass on my congratulations to our right hon. and learned Friend the Chancellor on reacting so quickly this morning by altering Companies Act legislation? Is it not typical of Labour Members that, if my right hon. and learned Friend had not made his statement, they would have criticised him for doing nothing; but, now that he has responded quickly to the Greenbury committee—as he said that he would—they say that he has performed a somersault? Is not that ridiculous?

My hon. Friend is absolutely right. I can reassure him that we shall also urgently consider the other two matters for which legislation is recommended, on the disclosure of salaries in company accounts and the disclosure of pension benefit levels.

Is not it true that a small number of directors and executives of privatised utilities are now carrying stock share options that are worth more than £100 million—I repeat, £100 million? Will they simply be free to exercise those options, which none of them has earned? What about last week's events? We understand that some directors were able to exercise options in advance of the announcement, on the basis that they were given insider knowledge. What does the Secretary of State have to say about that as well?

I have no knowledge of any insider knowledge having existed. If the hon. Gentleman has any evidence of that, I hope that he will send it to me. The share options are valuable because the value of the companies rose as a result of the efficiency with which they were run after they were able to cast off the yoke of nationalisation. Privatisation, in almost every company that has had the benefit of it, has been a triumphant success. I was asked about the issue of existing share option commitments. If the Labour party is recommending that contracts and contractual arrangements that are already entered into should be ridden over roughshod and broken, I disagree.

Does my right hon. Friend agree that, if Greenbury's recommendations and the Employment Select Committee's majority report are implemented, remuneration, especially of executives of privatised industries, will be transformed? I note my right hon. Friend's important point that those industries have delivered substantial price reductions. Will he keep an eye on the situation and be prepared to act again if that is needed? Will he ignore the Labour party's constant efforts simply to encourage spite and envy, which is dangerous, damaging and very silly?

I am happy to give my hon. Friend the assurance that he seeks. Of course I shall continue to keep an eye on the situation. However, I think that the implementation of the Greenbury recommendations will bring about a substantial improvement.

Will the Secretary of State now acknowledge that the public outcry about these excesses is genuine and is based not on envy but on anger, and that the Greenbury proposals will do almost nothing to assuage that anger, because they will not deal with the problem? What will he do to end the absurdity of the block vote system at annual general meetings? Mr. Giordano exercised 3 million block votes to give himself a huge increase and override the wishes of everybody at one such meeting.

The hon. Lady obviously knows all about block votes. There is a principle of one share, one vote, and that seems extremely fair. On the issue of voting, perhaps the hon. Lady should reflect on the outcome of the Labour party's Scottish conference in March, which on one day voted to abolish clause IV and on the next voted to renationalise every public utility.

My right hon. Friend will, of course, bear it in mind that tens of thousands of ordinary employees have share options and will know that when they exercise them, their gains fall well within the £6,000 capital gains tax threshold. Will he avoid the trap into which the Labour party has clearly fallen and which would hit ordinary employees? Will he ensure that if there is any switch to income tax, that allowance will be kept intact for ordinary people?

My hon. Friend makes a good point. I am sure that the public will notice Labour's commitment to abolish share option schemes. So much for Labour's commitment to enterprise. Some 6 million shareholders have secured their shares as a result of privatisation. The vast majority of those people are small shareholders who have a stake in their company and in the future of their enterprises. Conservatives are determined that they will have the benefit of that.

Who chose the members of this remuneration study group committee? Why were there no women on it and no representatives of the consumer's interest? Why did it not have an employees' representative? Why was it made up entirely of big nobs from big business, people who earn millions from salaries and options every single year? How can the public have any faith in this? All that has happened is that the fat cats have been put in charge of the creamery.

The members of the committee will note what the hon. Gentleman thinks of their skills. The chairman of the committee, Sir Richard Greenbury, runs one of the most efficient companies in the country, which is a considerable advantage to consumers. He took a cut in his salary last year, reflecting the circumstances of his company. Indeed, the entire board of Marks and Spencer pays itself less than it gives to charity every year. The qualities and experience of the men on the committee formed the right mix to bring to bear the knowledge that was needed to get a worthwhile and sensible report, which is what we have.

Will my right hon. Friend confirm that the Greenbury report will have no bearing on the Government's policy of reducing income and capital taxation as soon as it is prudent to do so?

My hon. and learned Friend will have heard what my right hon. Friend the Prime Minister and my right hon. and learned Friend the Chancellor have said on that matter on many occasions.

The President of the Board of Trade said that he had read the report by the Select Committee on Employment. Will he confirm that the main recommendations that Greenbury came out with over the weekend are not to be found in the majority report, which was supported by his hon. Friends, but are contained in the minority report produced by me and my colleagues, the Labour members of the Employment Select Committee? As people are watching our discussions, will he correct the statement that he made earlier, which was that Labour was out to abolish share options? The Labour party has said that it is opposed to executive share options and that if executives have share options, they should be taxed as income.

In other words, the hon. Gentleman is narrowing down the qualification to say that Labour is opposed to share option schemes only for some people, preferably those who are most efficient and most senior in their companies and who have most to offer to the management of those companies. I doubt whether that will impress executives or employees.

Will my right hon. Friend join me in welcoming the proposal that service contracts should not last for as long as they have historically? Does he agree that the real scandal in the City is the compensation paid to the incompetent rather than the salaries paid to the successful? Does he also agree that the politics of envy, the proposals for a minimum wage and the proposals for a maximum salary demonstrate which party is not the heir to Thatcherism, is not a believer in the market economy and hankers after the controls that hindered this country so much in the 1970s?

I agree with my hon. Friend's latter points; he has also hit on a good point about compensation. One of the reasons why shorter contracts are now in contemplation is to avoid the excessive compensation payments made to people who have turned out not to be up to the job.

Will the Secretary of State confirm that the 11 members of the Greenbury committee have a total salary, excluding share options, of well over £4 million? Does he agree that nobody should take seriously anything that this group says, because it is merely trying to protect the interests of the already very rich? If it is good enough for the very rich in industry to be paid the going rate for the job, why is the Secretary of State so opposed to the train drivers getting a decent increase for the responsible job that they do in ensuring the safety of the public and the efficiency of our railway network?

People should be rewarded according to their performance. There is no doubt that the quality of the members of the Greenbury committee justifies their level of salary. One needs only to look at the success of their various companies to see that.

Is not this report simply a charter for the fat cats to keep purring contentedly? Is not the self-regulatory ethos deeply flawed and has it not failed in the past? Does not it contrast extremely starkly with the ruthless regulation of the remuneration of teachers, nurses, train drivers and others who really make this country work?

Perhaps the hon. Gentleman should look at the words of his hon. Friend the Member for Edinburgh, Central (Mr. Darling), whom I see in his place. He said in February this year:

"We believe that people should be rewarded for improved performance whether in the form of increased salary or the granting of options."

What a pity it is that that enlightened view does not stretch to the hon. Gentleman's Back Benches.

Surely when the President of the Board of Trade seeks to equate the scandal of executive share options with the share offers that have been made available at various times to ordinary employees of privatised utilities, he is aware that there is little comparison between the two, either in terms of the nature of the schemes or in terms of their value. Some of the greatest outrage about executive share options has come from those self-same employees. If he believes that senior executives must have their loyalty to their companies won by being paid millions of pounds, why does he not take the same view about ordinary employees?

The Greenbury committee makes a number of recommendations about future share option schemes. I welcome the fact that it is keen to encourage long-term shareholdings. It is also keen that all long-term incentive schemes should be approved by shareholders, that the discounting of share options should be stopped, and that share option schemes on new privatisations should not be introduced for six months, or preferably a year. All those measures will improve the relevance and efficiency of share option schemes and remove some of the excesses that have caused so much concern.

Will the President of the Board of Trade explain the precise legal means that the Government have employed to ensure that share options are taxed as income rather than capital with immediate effect? Will he also explain whether the benefit to the individual taxpayer will be taxed in the financial year in which the option is exercised or whether the taxpayer will be allowed to spread the benefit over the period from when the option was originally granted?

The change will be made in the forthcoming Finance Bill and the hon. Gentleman must wait for its publication to have his question answered.

rose—

I watch very carefully to see which hon. Members come into the Chamber after a statement has been made. May I ask the hon. Member for Welwyn Hatfield (Mr. Evans) whether he heard the entire statement?

I did, Madam Speaker.

In that case, I will hear the hon. Member.

Is my right hon. Friend aware that, during the recent Labour leadership election, the right hon. Member for Sedgefield (Mr. Blair) received £79,000 from three London Weekend Television directors who earned their money from share option schemes? Does not he think it a bit rich that the lot opposite should criticise us when their own leader was elected on the back of share option schemes?

My hon. Friend is absolutely right. We keep hearing about new Labour, but what we have seen and heard today is old Labour, which is full of envy and spite towards success and enterprise, and cannot resist interfering, regulating, legislating and controlling. Old Labour would reduce this country, as it did before, to impoverishment and high unemployment.

Is it not revealing that from neither the Government Front Bench nor Back Benches have we heard one word of condemnation of the manifest and widespread abuses of salary hikes and share options in the privatised utilities? Is it not the same story in respect of their attitude to Lloyd's, for example? Once again, they have refused to take action to end abuses in Lloyd's, even though Lloyd's management has asked them to do so.

Before the right hon. Gentleman continues to misrepresent what we have been saying, will he acknowledge that I said that share options for directors of privatised utilities should be ended, not all share options, as he inadvertently claimed a few moments ago? If he reads our published statement to Greenbury and elsewhere, he will see that it is clear that we recognise that remuneration should be related to performance and that people who perform well are entitled to be well remunerated.

I shall study Hansard with great care. As for action to end abuses, that is exactly what the Greenbury committee was set up to do and what its report and recommendations should do.

On the right hon. Gentleman's commitment to enterprise, the Labour party talks in its new clause IV about the rigour of competition and a thriving private sector, but its every word and action today shows that it means the opposite.

With permission, Madam Speaker, I shall make a statement about the press and privacy.

I am today publishing the Government's response to the report of the National Heritage Select Committee on privacy and media intrusion. Copies are available in the Library and Vote Office.

I pay tribute to the Select Committee for its report. The Government very much appreciate the Committee's patience in its long wait for this response. The issues in this area go to the heart of our democracy and the Government have thought about them long and hard. In every democracy a balance must be struck between the rights of individuals to personal privacy and the freedom of the press. As the Select Committee recognises, that is not always easy to achieve.

It is a proud feature of our free society that for 300 years, other than as a necessity in times of war, the United Kingdom press has been at liberty to write whatever it chooses, subject to the constraints of the law as it applies equally to all citizens. Such freedoms are jealously guarded, by the press itself and by this House. The surest means of protecting those freedoms is to ensure that they are used responsibly. Overall, the quality and standards of our local, regional and national press are high. Some newspapers, however, have ridden roughshod over people's privacy when there was no possible justification for doing so. Cases concern not just those in public life, but private citizens who become the subject of media scrutiny through circumstances not of their choosing. People are entitled to privacy for themselves and their families.

In response to those concerns, the industry has taken a number of steps. An independent, non-statutory Press Complaints Commission was set up at the beginning of 1991. My noble Friend Lord Wakeham was appointed as the commission's chairman at the beginning of this year. He has considerably strengthened it. The majority of its members are now independent of the press and bring robust common sense to the cases before them. Lord Wakeham set out the steps that he has taken in a recent letter to my predecessor. It is published today as an annex to the Government's response.

The development of a national code of practice for the press is a significant improvement on what has gone before. The code, and how it is applied, is being shown to have effect. The House will be aware, for example, of a recent instance where the editor of a Sunday tabloid was publicly reprimanded by the newspaper's proprietor for breaching the code. More needs to be done and I am glad to note that, as the Select Committee on National Heritage recommended, increasingly compliance with the code is being written into the employment contracts of editors and journalists.

My noble Friend Lord Wakeham is bringing forward proposals for discussion on how both the public and the PCC can contribute to revising and further toughening the code of practice. That is welcome, as are his proposals for performance targets against which to measure the commission's efficiency and responsiveness.

It is essential that self-regulation is both effective and seen to be effective. There have been improvements to the PCC. Lord Wakeham is committed to doing more. I have written to him setting out further improvements that the Government wish to see both in the procedures of the PCC and in the code of practice itself. My letter is published as an annex to the Government's response to the Select Committee.

We recommend that the PCC pays out compensation to those whom it judges have had their privacy violated by the press. Such awards would be paid from a fund set up by the industry. That would be a collective recognition from the industry that one of its members had wronged a member of the public.

We have proposed several ways in which the code of practice might be further tightened up. In particular, there are several points where the language of the code should be more precise, or the emphasis changed, to place greater weight on the protection of individual privacy.

We support the Select Committee's call for a direct and rapid line of communication between the chairman of the PCC and newspaper editors. That would be used to warn them where, in the chairman's judgment on the basis of the evidence submitted to him, the code was about to be breached. That could be used to head off abuses. It is also important that the public have rapid and direct access to the PCC. That facility should be well publicised in the press so that the public are aware of it.

The Government have considered carefully whether legislative options should be pursued, rather than the self-regulatory alternative. We have decided for the present to allow Lord Wakeham's commission, and the press, to demonstrate that self-regulation can be made to work. Let me say something, however, about each of those legislative alternatives.

The Select Committee on National Heritage and Sir David Calcutt's 1993 report before it both took the view that legislation was needed to prevent abuses by the press. There is disagreement, however, about the best remedies to apply. Sir David Calcutt recommended a statutory press complaints tribunal, but that was rejected by the Select Committee.

The Government agree with the Select Committee that a statutory press complaints tribunal would not be right. We believe in a free press. Like the Committee, we are reluctant to see statutory controls. A statutory tribunal would be a very significant step on a path that we have no wish to travel. For the same reason, we cannot accept the Committee's recommendation for a statutory ombudsman.

I come next to the Select Committee's recommendation for a protection of privacy Bill with both civil and criminal elements. The criminal elements would be similar to the intrusion offences proposed in the Calcutt report. The Select Committee, however, unlike Calcutt, would extend the offences to cover intrusion for any purpose and not just for publication.

The Government have made it clear that they see attractions in principle in the use of the criminal law to prevent and penalise blatant and unjustified intrusions into the privacy of individuals; nor could the owners or editors of most newspapers, we believe, legitimately object to sensible laws in that area.

The Government have therefore given the most painstaking consideration to how the necessary legislation might be drawn up. In particular, we examined from every angle how the Calcutt offences might work in practice. That work is described in detail in chapter 3 of the Government's response.

We have been guided by the principle that the law must be both clear and enforceable. It must have a good chance of catching those who are abusing their powers while not inhibiting legitimate journalistic investigation. Any legislation would have to establish a balance that protected privacy while allowing responsible journalism, and without creating defences that were so wide as to render the offences meaningless.

We have been forced to conclude that the difficulties of scope and definition of the proposed offences, and the necessary defences, are formidable. The Government would prefer to see a self-regulatory process than to introduce a law that could create more problems than it is designed to solve. The Government therefore have no immediate plans to legislate in that respect.

The Select Committee also recommended a civil remedy for infringement of privacy. That would give victims of infringements of privacy a right to damages and to seek injunctions. In 1993, my noble and learned Friend the Lord Chancellor and the then Secretary of State for Scotland consulted on a new civil remedy. That consultation did not generate the clear support which the Government look for when considering major measures of law reform. The Government are not yet persuaded that there is sufficient consensus on which to base statutory intervention in this area. Moreover, the Government strongly prefer the principle of self-regulation.

On balance, therefore, the Government have decided not to legislate for a new civil remedy, at least for the present. We believe, however, that the right to privacy should be more explicitly spelt out in the industry's code of practice. For that reason we are publishing, as an annex to our response, what a civil remedy might look like, with the recommendation that elements of it should be incorporated into the code.

The House will look to the industry to respond positively to the recommendations set out in my letter to Lord Wakeham. Self-regulation still has a case to prove. Despite the serious practical difficulties, legislative measures should not be ruled out. The fact is, however, that self-regulation is the most practical way forward. The appointment of Lord Wakeham and the approach he is taking offer the best opportunity for some time that self-regulation will be made to work in a way which commands public confidence.

There are signs of a growing recognition among editors, including past miscreants, that the right of individual privacy is not to be casually cast aside. The industry now has to back the PCC and to make self-regulation fully effective. This is an issue which the Government and the House will and should continue to monitor and debate.

May I welcome the Secretary of State to her new role and responsibilities? I congratulate her on her promotion and I hope that she has brought her assiduousness, but not her philosophy, with her from the Department of Health.

In the statement, the Government have clearly recognised the need for and the difficulty of balancing the right of free expression with the right to individual privacy for ordinary citizens. Any new provisions must be aimed above all at protecting the ordinary citizen, not the rich and famous, and protecting the right of the media to expose and counter injustice wherever it happens. I am not convinced, however, that the Government have got that balance right in their statement.

May I begin by expressing severe disappointment that the Calcutt committee's recommendations from 1990 on an offence of specific physical intrusion have not been adopted? It proposed a very limited set of provisions in criminal law to prevent intrusion from bugging devices and invasion of private property. In the then Home Secretary's response on 21 June, he said:

"We accept them in principle."—[Official Report, 21 June 1990; Vol. 174, c. 1125.]

The then Secretary of State for National Heritage said in January 1993:

"The Government accept the case for new criminal offences to deal with specified types of physical intrusion and covert surveillance."—[Official Report, 14 January 1993; Vol. 216, c. 1068.]

On 29 January 1993, the then Under-Secretary of State said:

"the Government will therefore bring forward legislation in due course to give effect to those proposals".—[Official Report, 29 January 1993; Vol. 217, c. 1344.]

Not only have Ministers promised to implement those Calcutt recommendations, but Conservative Back Benchers have advocated them on several occasions, including, on 14 January 1993, the hon. Members for Thanet, North (Mr. Gale) and for Pudsey (Sir G. Shaw), both of whom I see in their places today.

Such a provision against physical intrusion would at least cope with some of the worst excesses of press intrusion. When the hospital bedrooms of Gorden Kaye or Russell Harty are invaded to get a cheap story, all hon. Members wish to deal with the issue, yet the Government's statement does not do anything whatever to deal with it. Those who do not seek public limelight should surely be protected, as the very specific and limited proposals that Calcutt came forward with in 1990 would have done. The Secretary of State's excuse that it is difficult to frame legislation really does not wash. It is possible, Calcutt set out how, and the courts could, under the normal common law principles, interpret on a case-by-case basis.

May I however welcome the Government's rejection of Calcutt's 1993 recommendation for a statutory press regulatory body? It seems that the "last chance saloon" has been granted a substantial extension to its drinking hours. It is important, except in the very specific circumstances to which I have already referred, that self-regulation rather than censorship ought to be the rule. But for self-regulation to work, it must be seen to work. We note with interest the Government's sympathy for the establishment of a compensation fund for victims of press error. Is there not a danger, however, that if the fund were established with contributions across the board from all members of the press, the good papers would end up subsidising the misdeeds of the bad? Is that not a foolish way of going about ensuring that miscreants are given an incentive to behave better?

Will the Secretary of State consider one further specific change to the Press Complaints Commission: that it establishes a research capacity so that it looks not simply at individual complaints but more widely at general areas of concern about media behaviour? May I turn her attention also to the Lord Chancellor's consultation paper in 1993 and note that she has ruled out for the present the introduction of a civil offence of infringement of privacy? Without legal aid, any such civil remedy would of course be available only to those with deep pockets. May I warn her against instituting a law that would protect only the well-heeled and not the ordinary people of Britain?

Surely a much better approach would be to incorporate properly into British law the European convention on human rights, together with its article 8, with a right to the protection of personal privacy, and article 10, with a right to freedom of expression. It should include a specific definition of acting in the public interest where privacy is infringed and couple it with the introduction of a Freedom of Information Act to open up the workings of government. That would have been a sensible approach; it would have been a far-reaching approach; it would have got the balance right. The Government have today yet again missed a fundamental opportunity.

I thank the hon. Gentleman for welcoming me to my new office, which I am delighted to take on. I look forward to debating with the hon. Gentleman many subjects on a wide range of issues.

The hon. Gentleman rightly talked about the balance needed between the right of free speech and the right of privacy—the Select Committee report contained precisely those comments. The report stated:

"The Committee does not believe that this balance can or should be achieved by legislation which imprisons the press in a cage of legal restraint".

The Government have been looking carefully at exactly that issue for the past two years.

On the criminal remedies, the hon. Gentleman and the House will see that chapter 3 of our response details at some length the intractable difficulties that beset the issue. On the subject of intrusion, issues such as listening devices, privacy and hospitals are all set out in greater detail in the code of practice, which has been substantially enhanced since the debate on the subject began. As I set out in my letter to Lord Wakeham, I expect to see further clarification and strengthening of those precise points.

As has been said:

"It's how you define the 'public interest' that is so difficult. It's impossible to lay down an absolute definition."

Those are not my words, but the words of the hon. Member for Islington, South and Finsbury (Mr. Smith) in an article in the News of the World. That is precisely the dilemma: we must achieve a public interest defence that does not run a coach and horses through the issue.

Finally, there is the danger of developing show trials, whereby someone whose privacy has already been breached finds him or herself able to seek redress only in a criminal court, where any vestiges of privacy that he or she had will be thoroughly lost. He or she might well be subject to further allegations and further intrusions into his or her privacy.

The hon. Gentleman is right when he speaks of the need to ensure that self-regulation carries public confidence. Lord Wakeham has set out a number of measures and we will expect them to be delivered. Above all, the House must be satisfied that the interests of our constituents are being properly served.

On the subject of a civil offence, the issues are set out in chapter 4. We also published annex B to the document which shows those civil offences, with the commendation that they should be incorporated in the code of practice.

I know that the Labour party feels that the European convention on human rights is the be all and end all, but it does not remove the tension that we are discussing between freedom of speech and the importance of privacy. The convention means that instead of such matters being decided by a sovereign Parliament, they are increasingly being handed over to judges, and judges in Europe at that.

As for a Freedom of Information Act, the hon. Gentleman will be well aware of the White Paper on open government and the detailed and practical steps that the Government have taken to deliver that. When my right hon. Friend the Secretary of State for Health comes to the relevant element of his briefing, he will discover detailed commitments on availability and freedom of information in the health service.

Does my right hon. Friend accept that I am considerably disappointed that, after so long a period—going back to the 1993 Select Committee report—she has decided that inaction is the order of the day? Will she please tell the House why she believes that the voluntary system, as embodied in the Press Complaints Commission, will have some kind of force behind its recommendations? Why should we believe that editors and newspaper proprietors will behave more rationally now than they have in the past?

As to intrusion, my right hon. Friend cannot accept that a piece of legislation is too difficult to frame in relation to mechanical devices that are provable in court or that can be obtained from under the floorboards of some unfortunate person's premises. It is surely the Government's duty to try to respond to widespread public concern that the fourth estate is using methods—let us leave aside opinions—that transgress heavily upon those who are least able to protect themselves.

I understand my hon. Friend's strength of feeling about the matter, which I think is shared by most hon. Members. I think that he is on solid ground when he speaks of the past and of the lack of confidence in the Press Complaints Commission. The letter that I received from my noble Friend Lord Wakeham states:

"It seems to me that the manner in which the Commission dealt early in its life with several issues arousing great controversy came very close to undermining fatally that reservoir of authority—and in turn the standing of self regulation".

I think that many hon. Members will appreciate his recognition that all was far from well in the past.

On the other hand, we have already seen improvements in a number of ways. We have seen a strengthening of lay representation. The appointments committee comprises a majority of lay members, as does the Press Complaints Commission. As I set out in my letter, I wish to see lay representation on the code of practice committee. I want to see the code of practice incorporated in contracts of employment and I want to see pre-emptive action developed further through the use of the hotline.

When my hon. Friend has time to study the papers in detail, I think that he will find a number of specific measures that we wish to see incorporated and acted upon, as well as some of the detailed reservations and difficulties that my right hon. Friends have considered carefully for the past two years.

It is with some regret that I have to say that the Secretary of State, in her first outing in her new portfolio, has made a bad case that will convince very few people who are concerned about freedom of the press and the protection of privacy.

By suggesting that the European convention on human rights—with its careful balance between article 8, which guarantees privacy, and article 10, which guarantees freedom of expression—is only for the courts in Strasbourg to consider and is not applicable to judges in this country, the Secretary of State abandons one of the most helpful possible remedies to the dilemma that has certainly baffled her.

Can the right hon. Lady explain why she has rejected—indeed, she has done a sharp U-turn—the acceptance by the Secretary of State for the Home Department of the proposals about physical intrusion? If she believes that it is not practical to devise legislation for the courts, why should we rely or place any weight upon the prospects of the Press Complaints Commission's drafting effective legislation to operate in a voluntary manner in that sphere?

Finally, as to the right hon. Lady's proposed remedy of having the Press Complaints Commission make payments from a fund to the victims of violation of privacy, will she at least consider whether it would be better to derive that money from bonds that are put up by media proprietors and that are forfeitable, in whole or in part, if they fall foul of the code of practice to which they have subscribed?

The hon. Gentleman will know that we are bound by the European convention on human rights, but to put such a measure into our law would politicise our judges. The hon. Gentleman mentioned a compensation fund and while the route that he outlined is certainly one option, there will need to be discussions between Lord Wakeham and the members of the commission as to what is the most practical way forward. It is clear from the comments of the hon. Gentleman and other hon. Members that they will not be satisfied until they see in practice, as well as in commitment, proper protection for the men and women of this country and their privacy. I feel as strongly about the matter—as do the Government—as the hon. Members who have commented today. The issue is how we can achieve a practical solution. We believe that we have set out a way forward that will get the balance right without the adverse consequences inherent in many other options.

There is some reason to believe that the press acquired details of the death of our late colleague Stephen Milligan by eavesdropping on conversations of members of the Metropolitan police by using laser-directional microphones. I have in my possession a private telephone bill submitted to me by a journalist working for the Daily Mirror, which is the kind of material supplied by private investigation agencies on a regular basis. I also have in my possession a tape made of a News of the World journalist in which he says clearly that he has total contempt for the effect of the libel laws in this country, as he knows perfectly well—as does his newspaper and presumably its proprietor—that the ordinary person cannot afford to have recourse to the laws of libel.

Most hon. Members respect entirely my right hon. Friend's assessment that a free society requires a free press. But as our press is now dabbling in excesses solely to meet the demands of a circulation war, the time has come to act. If she is to suggest to Lord Wakeham that the Press Complaints Commission set up a fund to provide redress, let it be a very large fund indeed.

I accept the points made by hon. Friend, and I recognise his authoritative position as someone involved in this field in the House for a long time. The precise examples that he gives do not address the dilemma of how we achieve legislation with precise definitions that tackles cases without adverse consequences. The questions of definitions and the public interest would time and again vex the matter. The other point about the code of practice is that it is a more flexible and less cumbersome route. I shall state to Lord Wakeham that there is a sense of anger and impatience, and that commitments and changes which have been set in hand—there have been some encouraging signs—must not only be carried through, but accelerated.

The right hon. Lady mentioned nothing about the invading army of picket-line doorsteppers who have besieged rape victims' houses and the homes of widows of people killed in Northern Ireland, a matter which the Committee investigated, and she said very little about phone bugging. The sanctions of the Press Complaints Commission do not exist. Unlike the General Medical Council, the Law Society and even the Football Association—which fine and punish members—the PCC never does, even if newspapers break embargoes. Despite what the right hon. Lady said, the press can carry on putting hidden cameras into gymnasiums and showing women with their legs up in the air. Even Princess Di did not have the money to stop that sort of thing. The right hon. Lady's own son had his privacy grossly invaded by the press, as the Prime Minister's son did last week, simply because he was related to a politician. He committed no crime or offence at all.

That is the sort of press invasion being carried out by a group of people who are now acting like the KGB and the Stasi in every aspect of British life which they think might sell a newspaper. There is no need to bring in the judges and lawyers. We can insist on proper sanctions and a proper tribunal that is run independently, and which is not controlled by the press or in the pockets of the press.

I know that passions in this matter are running high. I am listening carefully to what Back-Bench Members are saying, but I am not hearing questions. I am hearing statements from people who feel passionately about the matter, but we must have questions to the Secretary of State.

The hon. Gentleman said that we should not bring the judges and lawyers into the matter, but the approach that many of my hon. Friends and other hon. Members are pursuing would bring endless numbers of judges and lawyers into the matter. It is extremely complex to frame legislation because whenever one area of concern emerges, a new one develops. The strength of the code of practice is that it covers a great number of areas—some of which were mentioned by the hon. Gentleman—including intrusion into grief and shock, inaccuracy and distortion, the opportunity to reply and the use of listening devices. The hon. Gentleman also made the point that the code should have some bite. I expect not only that the code will be written into contracts of employment, but that dismissal will be considered in areas where the code has been seriously breached.

Should not the proprietors and the boards of directors of newspapers be made legally liable along with their editors for excesses, so that they can be held accountable for them? Is not it significant that when Mr. Michael Foot started proceedings in respect of the disgraceful allegations made against him in The Sunday Times, he got a speedy and satisfactory response as soon as he sought to associate the owner of that newspaper with the proceedings, which otherwise could have dragged on for years and cost Mr. Foot a fortune in legal fees?

I accept my hon. Friend's comments about Mr. Michael Foot, who was able to seek redress. But once again it is a question of the extent to which we introduce the law into press control. To introduce statute into a free press after 300 years would be an extremely serious step with great constitutional implications.

The Secretary of State referred to a compensation fund. Does she expect her recommendation to be accepted? If so, what will be the time scale for payments to be made out of that compensation fund? Will payments be made for every breach of the code, or will further discretion be exercised by the PCC? What can an aggrieved individual do if the latter is the case?

It is clear from the response to my statement following the Select Committee report that hon. Members feel extremely strongly on behalf of their constituents whose privacy has been invaded. There is no doubt that the Press Complaints Commission under Lord Wakeham needs to make urgent progress in taking forward the details of a compensation fund. It is too early for me to go into detail on how the fund would work, but it will undoubtedly be the subject of close scrutiny. I take the view that dismissal could be used against those who breach the code of practice, and that may be one of the most powerful effects to make sure that the spirit, as well as the letter, of that code is followed.

May I add my congratulations to my right hon. Friend on her new appointment? Is she aware that I find that I cannot agree with much of what she has said, even though some of her proposals will be useful? Is she also aware that she has shown no recognition of the fact that measures such as she has proposed have been tried time and time again in the past and have proved constantly to be unsuccessful? The time has come to deal with the matter.

I do not agree with my right hon. Friend's remark that we have a responsible British press. We have nothing of the sort. She also said that we have some of the finest press in the world. We have nothing of the sort. That used to be the case, but large parts of our press are now the worst in the world. Those of us who see a great deal of the world in our travels recognise that full well.

One essential in every sphere of life is that freedom involves responsibility and that if we abandon responsibility, we will find that our freedom is attacked. I do not wish to attack the freedom of the press, but I want us to deal with the problems that it faces.

Is my right hon. Friend aware that the biggest revelation of the disastrous state of the present British press was that, during the election of the Conservative leader, only one newspaper was prepared to say who it supported while the rest plainly wished to kill him off? They thought that they ran the Conservative party, that they ran Parliament and that they ran the country. The question is, are they now going to take notice of the fact that they do not?

Is my right hon. Friend further aware that yesterday morning when people bought their heavies—let us ignore the lights—66 per cent. were owned by foreigners who have no interest in our welfare, our people or our future? Their only interests are selfish ones. [HON. MEMBERS: "What about Tony Blair?"] I was somewhat surprised about that, but perhaps members of the Opposition Front Bench can explain how the Leader of the Opposition came to spend time in Sydney, consorting with Mr. Murdoch and all his minions. I know that he declared that he wants to be the second Mrs. Thatcher, but I am not sure that that is the way to do it.

Will my right hon. Friend consider introducing a Bill with two simple clauses? If not, I hope that some Back Bencher will do so. The first clause would provide that no item of the media could be owned by more than one individual, corporation or trust. The second would provide that where an offence is proved—I have no doubt that Lord Wakeham will do his utmost in this respect—the apology by the newspaper involved must be printed in the same place as the original offending article and must be printed in the same sized type. There is nothing difficult in that. Would my right hon. Friend be prepared to introduce such a Bill?

I am sure that my right hon. Friend will be aware of the White Paper on multi-media ownership produced by my predecessor. Perhaps my right hon. Friend will table an amendment when we debate the subsequent legislation in order to pursue the course that he has outlined.

My right hon. Friend spoke about the deplorable behaviour of the press in relation to the recent leadership election involving my right hon. Friend the Prime Minister. I am pleased that the British people have more sense than to believe everything that they read in the newspapers which, I hope, are all eating a healthy diet of humble pie.

I know not what the Leader of the Opposition is doing in the southern hemisphere or what good or ill fortune it will bring him, but I know that these are extremely serious matters. The debate will continue, and hon. Members will require further and stronger action.

As for my right hon. Friend's specific point about apologies, substantial progress has already been made on that front, but one of the other matters on which I am seeking further progress from Lord Wakeham is that the adjudication shall be produced in some detail so that, in a sense, the equivalent of case law can build up. It is important that members of the press know and understand not only the letter of the code of practice but the spirit of it. They should be aware of the consequences if they disregard the principles that are so important to all of us.

The Minister is not short of suggestions this afternoon, but may I add another to the long list given by my hon. Friend the Member for Islington, South and Finsbury (Mr. Smith)? I believe that the right to reply to inaccurate reporting—the right to have a correction printed in the newspaper without having to go to court—would help ordinary people more than anything else. Very few people can afford to go to court, but inaccurate reporting has destroyed many people's lives or made them miserable without those people having the opportunity to correct the original inaccuracy. Those who do have that opportunity often have it only at the whim of an individual editor, not as a right. I believe that the right to reply should be considered.

This is an area that the hon. Member for Hammersmith (Mr. Soley) has explored at some length and on which he made considerable progress. Item 2 of the code of practice identifies in detail the opportunity to reply. Some progress has been made: in recent months, there has been an increase in the number of complaints reported to the Press Complaints Commission, many of them relating to accuracy or, in a sense, the right to reply. As I said, some progress has been made, but it is undoubtedly an aspect where further advances are needed.

Does my right hon. Friend recall the observation which, on being translated from Latin, reads:

"Whom God would destroy He first sends mad"?

an observation which applies to some of us in public life just as it applies to some of the press? Does she accept that if that madness were to continue in some parts of the press, the British people would cut the press off at the ankles just as they cut off the king, the barons, the Church and the trade unions, even if that moment has not yet arrived in the British people's mind?

I wholly share the view expressed by my right hon. Friend and my predecessor but one. There is an impatience among the British public and in the House for action to be delivered. The final sentence from Lord Wakeham's report states:

"My central aim is … to ensure proper redress for ordinary people against abuses by the press, while preserving the essential freedoms of the press—without which any democracy will surely founder."

The importance of the freedom of the press in a democracy cannot be overstated. At the same time, the impatience of the House to see further action, as evidenced today, also needs to be firmly underlined. I hope that this does not first make me or my right hon. Friend mad.

Is not the truth of the matter that there is a never-ending circulation war among the tabloids and that the invasion of privacy, which we all deplore, makes very good stories? Why does the Secretary of State believe that what she has said today will make the slightest difference? In view of the fact that there seems to be little or no support from any party for what she is suggesting—indeed, to many of us it is a total cop-out—why does she not reconsider?

The Government have been considering this matter for about two years and have examined all the options very carefully. When the hon. Gentleman has had time to read the response to the Select Committee's report in detail, I think that he will see why the intractable problems of pursuing a statutory route are so great. I wish to see further progress on the privacy front and agree that we need greater detail, greater clarity and greater enforcement.

May I wish my right hon. Friend well in the tenure of her new office? Is she aware that she has the sympathy of many of us in that, after two years in which the Government have been wrestling with this matter, we appreciate how difficult it must be for her to show the smack of firm government at the Dispatch Box? May I suggest that the best defence of what she is proposing—incidentally, we should not have to apologise for not rushing to legislation—are the six pages of correspondence from Lord Wakeham in which he expresses his regrets at the way in which the PCC has sometimes conducted itself and makes suggestions for the future, and the further four pages of requirements, which all of us hope that the PCC will take seriously? The Government have willed that the press have a further round of drinks in the last chance saloon—let us hope that it is not business as usual in all parts of the bar.

I thank my right hon. and learned Friend for welcoming me to a post that he held with such distinction and, indeed, to a post that he was the first to hold. He well understands the tension created by this issue. The freedom of the press is vital to our democracy, but the needs of the public to have their privacy protected are also urgent. The correspondence set out in the document gives strong grounds for encouragement. I remind the House, however, that I do not rule out legislation for all time; I am simply saying that it is the Government's view that this is the right way forward in the present circumstances.

What sums of money have been considered for compensation? Will the right hon. Lady acknowledge that large sums of money will be needed for deterrence, and does she understand that hon. Members on both sides of the House are disappointed with the measures that she proposes?

I cannot go into detail about the sums of money, but I have to say that I believe that the real deterrent will be the threat of dismissal for those journalists or editors who flout the code of practice.

Today may not be the best time to have a dispassionate debate about privacy and the freedom of the press, but does my right hon. Friend accept that the fact that, although a breach of privacy is easy to recognise, it is difficult at law to define what privacy is, should not prevent us from seeking to do so?

Would my right hon. Friend therefore reconsider Calcutt I and ensure that that comes into force, as recommended by the Calcutt committee, as soon as possible? If she is not minded to do that, would she, when considering the powers of the Press Complaints Commission, allow it not simply the power to award damages out of some fund, but the power to award damages against the newspapers and to make those awards enforceable at law?

I thank my hon. and learned Friend for his suggestions. When he has time to read the document in detail, he will see set out the intractable and complex issues involved. I want progress on the compensation fund, and I shall pass on his comments to Lord Wakeham for further consideration.

Would not the moral basis of the House for dealing with that section of the press that obviously represents the worst of journalism be immeasurably increased if a Freedom of Information Act were on the statute book? Will that not require the election of a different Administration from the present one—one who also will be able to direct attention to the abuses that our constituents suffer as a result of the malpractices by sections of the press at present?

The hon. Gentleman refers to a Freedom of Information Act. He knows full well that we applaud the ends but not the means. That is why there has been such substantial progress on the White Paper on open government, which has been developed throughout Government Departments—not least, as I said earlier, in the Department for which I previously had responsibility.

I congratulate my right hon. Friend on her appointment and on at least giving some dentures to what has previously been a toothless bulldog—the Press Complaints Commission.

I do not understand, however, why my right hon. Friend speaks about intractable difficulties in introducing legislation. Most of the states of the United States have managed it, and they operate under English law. The French have it; the Germans have it; the Italians have it; so why cannot we have it too?

Is not something wrong when in this country members of the press are unable to look into the Robert Maxwell situation—journalist friends of mine knew what Robert Maxwell was up to but were unable to do genuine investigative journalism because of the fear of gagging writs—but they are able to look into the gym of the Princess of Wales?

My hon. Friend talks about watchdogs. To quote Lord Wakeham again, he says:

"We are a watchdog with sharp enough teeth to bite the hand that feeds us, or we are nothing."

I quote frequently from him because of the clear determination that we now have to improve the service provided to protect the public.

My hon. Friend referred to the circumstances in France. I believe that, if people examined in detail the laws in France, few would believe that they were appropriate in this country. I believe that there are serious deficiencies in those, which would not be acceptable in our system of parliamentary democracy.

What my hon. Friend said about Robert Maxwell was related to the law of libel, and it identified once again the fact that, even where there is an existing law, it is extremely difficult to ensure that in practice that law tackles every abuse or misuse.

Both in her letter to Lord Wakeham and her statement, the Secretary of State spoke rightly about the need to head off potential abuses by way of, presumably, the so-called hotline, which would be available both within and outwith so-called business hours. What kind of measure is that—how practicable and how efficient? How can an ordinary person who is being besieged by so-called journalists from the tabloids prevent an upcoming story from appearing in, for example, a newspaper, in 24 or 48 hours? Surely the right of reply, the apology and the compensation are much more effective deterrents than that hotline.

I am not altogether in agreement with the hon. Gentleman because I believe that most people want above all to prevent the material from being published in the first place. Any redress that takes place afterwards is on the basis that the damage has already been done.

The hotline, which would be widely advertised, would ensure that the Press Complaints Commission could indeed make contact urgently with the editors of the newspapers concerned. A help line is already available so that the public may go straight to the editors. We are talking about one in which the Press Complaints Commission would be involved.

There are other examples of progress, such as that prompted by concern for those experiencing grief and shock. The police and Army have a practice of advising people whose relatives have lost their lives in traumatic circumstances. As the report says, we wish to develop that as good practice to ensure that people have the skills, and know where to turn, so that in such circumstances they are able to protect their interests long term, but we want pre-emptive action above all.

Although I recognise the Government's reluctance to legislate, is my right hon. Friend aware of the public revulsion for tactics such as those used by the press in doorstepping the wife of the late hon. Member for Dudley, West, Dr. John Blackburn, only days after his death last November? Although it is important to talk about compensation where the Press Complaints Commission is concerned, would not even that be inappropriate in such circumstances, and is it not more appropriate to talk about penalties that the Press Complaints Commission could levy on recalcitrant newspapers?

Once again, my hon. Friend identifies a set of circumstances in which the code of practice recognises that that procedure should not be deployed.

I have to say to those of my hon. Friends who want a statutory approach whereby every misdemeanour is enshrined in legislation as subject to court proceedings or legal activities, that I believe that such an approach would create a monster that we would live to regret. I do not believe that such legislation could be framed for every circumstance. Its administration would be out of all proportion to its benefits and there are, as I have said, severe difficulties about the public interest defence and about the development of show trials, which in many ways exacerbate the misery that causes them.

Does my right hon. Friend realise that, as a mark of the attitude that the House and Members of the House have towards the press and the great fear that they have, I have been strongly advised not to intervene or to ask any questions for fear that the press, who are up there in the Press Gallery, will start terrorising me again, as they did a year and a half ago and as they did all last week?

Most Members of the House feel that the Government are taking a thoroughly gutless and supine approach, that we should break up the press and that we should have a privacy law.

Is my right hon. Friend aware that most people cannot obtain legal aid and simply cannot afford to sue in a libel action? I had cause to monitor the press for about six weeks, and I found that it was not wealthy or public figures who were libelled day after day, but perfectly ordinary people, whose lives were being shattered by the press. We should be protecting those people just as much as people who are in the public eye. They have no recourse at all; nothing that we do helps them. We really must have some type of privacy law to protect people like that.

We must also break up the press. Is my right hon. Friend aware that papers such as The Sunday Times do not fire the shots? They put the information through to The Sun down to Today, and Today fires the shots. It is a rotten rag. I do not suppose that anybody in this Chamber reads it. We should break up the monopoly of the Murdoch press. The Labour party will not do that—it is off to Hayman Island with Murdoch.

My hon. Friend speaks with great emotion and strength of feeling, for good reason. I have great sympathy with his comments and respect them. My hon. Friend and many other hon. Members—either for themselves or for the sake of their families—feel bruised and scarred by personal experience of the press behaving reprehensibly. My hon. Friend is concerned about not only those of us in public life, who elected to stand for public office but whose privacy should not be as curtailed as some might wish.

My hon. Friend spoke about the accessibility of procedures for men and women throughout the country. He speaks as a lawyer. Many people do not feel that the legal processes, however defined, would be user friendly, easily accessible and flexible as a means of redress. It matters that the Press Complaints Commission acts swiftly and flexibly—without great cost to users—to prevent wrongdoing before it happens. Anything after the event is after the damage. Surely we should be pressing most vigorously for pre-emptive action.

Does not the Secretary of State realise that her statement has received virtually no support from any part of the House? In the light of hon. Members' response and our lack of confidence that the right hon. Lady's proposed steps will give any real protection to the privacy of ordinary people or enhance the legitimate freedom of journalists and the media, will the right hon. Lady withdraw her proposals and think again?

After a two-year delay in responding to the Select Committee's report, I do not believe that the House would want me to think yet again. Having considered the complex and difficult matters in question at great length, the Government have set out their decision. We do not rule out legislation for all time, but we believe that the changes in hand and those that we are requiring from the Press Complaints Commission offer the prospect of better protecting the public.

This debate has largely concerned the national press. There are many regional and local newspapers throughout the country. If a statutory approach were adopted for the local and regional press, that would have a profoundly adverse effect on many of those people whom a few of us, in our constituency capacities, wish to criticise. They are also part of the picture.

rose—

We must now move on.

On a point of order, Madam Speaker. In 21 years, I have never sought to challenge the Chair, but I seek your guidance. Those of us who wanted to raise on behalf of our constituents—the little people against the big battalions—the invasion of privacy in recent months are naturally frustrated that we have not caught your eye, Madam Speaker. Can you give some assurance that you will seek to take into account those of us who have been unable to catch your eye today, when the matter is considered again—as I believe it must?

The hon. Gentleman is correct. I have a list of hon. Members who have not been called. I am as frustrated as the hon. Gentleman, and I am glad that he raised the matter. I have listened for more than an hour, and at the beginning I hoped to call all hon. Members who were seeking to catch my eye. Although I intervened, many hon. Members insisted on making long statements, and there were long answers from the Dispatch Box. When that happens, I am unable to call all hon. Members who rise. The answer lies to a large extent with Back Benchers, as with the Secretary of State—who often gives long answers.