Commons Chamber

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House Of Commons

Wednesday 22 January 1997

The House met at half-past Nine o'clock

Prayers

[MADAM SPEAKER in the Chair]

Intensive Care

Motion made, and Question proposed, That this House do now adjourn.— [Mr. Peter Ainsworth.]

9.34 am

I should like to express my thanks and the thanks of thousands of my constituents to you, Madam Speaker, for allowing this debate to take place. The people of Leeds were shocked and angered by the death of my constituent, Mrs. Edna Harrison, and it is a tribute to your sensitivity to hon. Members' constituency problems that you have so quickly permitted the subject to be debated.

I also wish to pay tribute to my local evening paper. The current Secretary of State for Health, his predecessor, now the Secretary of State for National Heritage, and the Minister here today, the Under-Secretary of State for Health, the hon. Member for Orpington (Mr. Horam), are aware that, over a substantial period, the Yorkshire Evening Post has kept the issue of bed shortages in the public domain. As the Minister knows, health provision is largely run by political placemen in the health authorities, who do not see it as being their duty to acquaint the public with the details of local health matters. The public are largely kept in the dark about the true state of the service. That intensive care bed shortages are a matter of public knowledge and concern in Leeds is a sign of how consistently the Yorkshire Evening Post has raised the issue and it deserves the thanks of the people of Leeds for performing that service.

The Minister will be aware that Mrs. Edna Harrison collapsed in her back garden on a quiet Sunday morning two weeks ago. The ambulance arrived at her home and she was rushed to her local hospital, less than one mile away from her terraced home in east Leeds. That hospital is the 1,500-bed St. James's hospital, famed as "Jimmy's" in the Yorkshire Television documentary that has run for some years. It is reputed to be one of the largest, if not the largest, teaching hospitals in western Europe. Despite all that, no intensive care bed could be found for Mrs. Harrison and, four hours later, she was admitted to a Hull hospital over 60 miles from Leeds where, sadly, she died later that week.

Mrs. Harrison's husband and family have shown great dignity and have expressed nothing but praise for the medical staff at both hospitals. I spent some time with Mr. Harrison on Saturday, discussing his wife's sad death. He continues to show great dignity, but he and his family want to know why the long journey to Hull was necessary and why Mrs. Harrison could not have been treated in her local hospital, thereby minimising the danger of travel. The Minister will accept—as does the working party report to which I shall refer later and which the Minister mentioned in his statement of 6 March—that, for an intensive care patient, travelling is always dangerous. The danger can be minimised, but it should be avoided where possible.

Mr. Harrison and his family would have wanted the danger of travel minimised and they would have wanted Mrs. Harrison to be where they and their friends could have an opportunity to visit her, albeit sadly for the last time before she died. They and I accept the conventional wisdom in various statements by Ministers and health officials about the high cost of intensive care beds and the need not to leave them lying empty. Mrs. Harrison may just have been unlucky as she needed treatment at a time of peak demand, and perhaps it was inconceivable and even unreasonable to expect such a scarce and expensive bed to be available locally.

Time will tell, and that individual case is not the reason for this debate. It may have been a factor, but I have asked for a local inquiry into Mrs. Harrison's death, and Healthcare, the local authority and the St. James's trust—the hospital involved—are conducting one. I am far from happy with the initial details sent to me by the authority, which seems unnecessarily defensive about the whole matter. A fuller and more objective report will no doubt follow.

After our discussion on Saturday, the family and I intend, unless the report is acceptable, to raise a number of other matters. Those include the sheer inconvenience of a family having to travel 60 miles to see a seriously ill mother; the impracticality of the husband finding himself in Hull with no money and being told that he must find his own accommodation and his own way back; and the sadness and distress of the son driving 60 miles having been told that, when he arrived, his mother would be dead. All that, when that family live almost in the shadow of the biggest teaching hospital in western Europe. Those practical problems were compounded by the shabbiness of the accommodation for families staying on the premises because the patient is expected to die, and the fact that other family members and friends could not join in the grieving process as the death occurred 60 miles away in the middle of the week and it was impossible to get the time to leave work and go there.

The family have rightly raised a number of matters that will be referred to the ombudsman. I am sure that, somehow, we shall have the circumstances surrounding Edna Harrison's death properly examined. I was pleased to see that the Minister, in a public statement, expressed his sorrow about it and his determination to ensure that the facts were thoroughly looked at and any lessons learned.

Does my hon. Friend know whether an inquiry was made as to whether a bed was available at Leeds general infirmary, which is only two to three miles from Mrs. Harrison's home? I understand that there is a system whereby the nearest bed can be obtained, and perhaps that was in Hull. It seems incredible, however, that with two such large hospitals within such a short distance of that lady's home, she could be found accommodation in neither. Clearly, the travel problems that my hon. Friend describes would not have been the same had she been able to go to Leeds general infirmary.

I thank my hon. Friend for that intervention. He is aware that, although I shall primarily discuss east Leeds, for which St. James's is the local hospital, all Leeds Members and, because of the regional significance of both hospitals, all Yorkshire Members, know the pressure that is consistently put on intensive care beds at both LGI and Leeds general hospital.

I am advised that there are intensive care beds at Dewsbury hospital, but because there is no money to finance their introduction, they are left idle and without function. That should be dealt with also in the Yorkshire region.

My hon. Friend makes a valid point. Both my hon. Friends remind me of a pertinent fact that deserves examination by the Minister: the two beds that were even nearer but were not even considered. They were at Killingbeck hospital, which has been the subject of an Adjournment debate between two hon. Members present today. Killingbeck hospital is due to close next year and it will be terrible if those beds are not brought into operation simply because of that fact. The explanation is that the beds are ring-fenced for cardiac cases, so no one thought to include them on the register or even inquire whether they were empty. A rumour is going round Leeds that they were empty and available, and they are even nearer to Mrs. Harrison's home than St. James's hospital, so that matter deserves investigation. It would be criminal if bureaucratic ring fencing, however good the reasons for it, excluded Mrs. Harrison from prompt treatment at a hospital that was so close to her home.

I have just come down from my office having done a local radio programme involving Mrs. Harrison's brother-in-law. He wanted to make it absolutely clear that the care that she was offered by doctors and nurses was the best in the circumstances, but that the system was wrong, which is the point that my hon. Friend is making. Has he looked at how beds are managed in the Northern and Yorkshire region, in the light of the Government's abolition of the regional health authority? In the past five years, our region has lost more hospital beds—27 per cent.—than anywhere else. The regional health authority's role in planning care was important for the likes of Mrs. Harrison. I should be interested in my hon. Friend's thoughts on that point.

My hon. Friend makes an important point. The cuts in hospital beds in Yorkshire have been savage. Only last week, my hon. Friend drew the House's attention to an unhappy case and the circumstances surrounding it, at Pinderfields hospital in his constituency. Yorkshire's grave health funding problems and the underlying problem of a lack of intensive care beds become an issue when they culminate in individual cases such as this. Although Mrs. Harrison's death prompted me to raise this matter, the real issue is the fact that the local hospitals' inability to admit her when she desperately needed intensive care treatment was not an isolated incident. Such an incident was predicted, but, as with other events in Leeds, elsewhere in Yorkshire, Warrington and Newcastle, the House was told that it would not happen, as Ministers had listened, learned and taken steps as a result of similar incidents last winter.

I primarily make the case on behalf of my community for an examination of the situation and prompt action in my local hospital. There has been an increase arising from the March statement—one adult intensive care bed and one paediatric intensive care bed—but at the risk of seeming ungracious and ungrateful, I emphasise that we desperately need more. Whatever the situation elsewhere, Yorkshire and the north-west seem to have problems, as explained so well yesterday by my hon. Friend the Member for Warrington, South (Mr. Hall). When a senior figure in the national health service refuses a Member of Parliament a document on the matter, that must make alarm bells ring throughout the service, if not in the House.

I shall let my colleagues make the case for their areas. Apart from the common problem of growing debts and underfunding, the matter should be judged in the light of local circumstances. I am content for the situation in Leeds to be judged on its merits.

The House may not need reminding of last winter. We in Yorkshire witnessed a number of horrifying incidents, culminating in the death of a young child who had been driven through a snowstorm from Manchester. We witnessed the spectacle of a retired policeman being touted round a dozen hospitals in Yorkshire before being flown 60 miles to Scarborough, where he died before he could be admitted. We heard senior, well-respected consultants in Leeds speak of a crisis.

I want to get across to the Minister a point that the Secretary of State seems not to take on board, especially in respect of Leeds and Yorkshire: throughout the year, the two city hospitals in Leeds regularly—not just seasonally—turn away patients. Yesterday I was at St. James's hospital and saw the book of refusals, in which there was not a blank page. Certainly the situation gets worse in winter, but the two consultants responsible for managing intensive care beds at the two major hospitals in Leeds have consistently said that it is not a seasonal problem. It may be exacerbated seasonally, but it is a regular problem. They made that statement last winter, when once again they had to turn away seriously ill patients because they had no spare intensive care beds.

So serious was the position in Yorkshire and elsewhere that after last winter the Secretary of State was obliged to make a statement in the House in March. Last week, sadly, he refused to do so when similar incidents were being reported this winter. On 6 March he stated:

"I told the House earlier this year that I would undertake to ensure that we learn the proper lessons from the general pressure on the emergency services this winter. I shall set out to the House this afternoon the steps that I am taking to ensure that that happens."—[Official Report, 6 March 1996; Vol. 273, c. 356.]

In three brief paragraphs, he dealt with the intensive care beds crisis. He relied largely on the report of a professional working group that examined best practice in the use of intensive care, to which I shall return. With his Commons performance on 6 March, the Secretary of State drew a line in the sand. He accepted that there were lessons to be learned from last winter, he outlined his solutions and the inference was clear: this winter, we would not expect a rerun of the unhappy experiences of last winter.

Sadly, we continue to experience problems in Leeds and Yorkshire. I have raised the tragic case of Mrs. Harrison. The week that she died, Dr. Mark Bellamy of St. James's hospital commented:

"We are sailing extremely close to the wind and sooner or later we are going to come unstuck."

The same week, the following examples occurred: a Leeds patient faced a possible trip to Birmingham or London; Leeds patients were sent to Grimsby, more than 80 miles away; patients were sent from Airedale to Stoke; Bradford patients were sent to Doncaster; and Newcastle patients were sent 100 miles to Edinburgh. In the week that Mrs. Harrison of Leeds died in Hull, a 71-year-old male pensioner was sent from Hull to Leeds for an intensive care bed and died a few days later. Those patients were not sent to a particular centre of excellence because of their specific complaints—they were shipped around because of bed shortages.

A Leeds consultant and British Medical Association representative commented after the death of Mrs. Harrison:

"There are many more incidents which are not reported in the media. The fact that it is going on is very worrying."

A Leeds consultant, Dr. Mark Darowski, was quoted as saying:

"Mr. Dorrell has not learnt the lessons of last winter."

Dr. Andrew Cohen, the St. James's intensive care manager with whom I spent some time yesterday, said:

"Resources are stretched to the absolute limit. The strain has been caused by the increase of illness we always see in winter and the only way we are going to avoid this sort of problem is if there is an increase in intensive care beds. There is a chronic shortage across the region and the country as a whole."

Dr. Andrew Bodenham, intensive care manager at Leeds general infirmary, stated:

"We are just playing musical chairs all the time."

I do not think that he meant to be humorous when speaking about seriously ill people.

It is accepted that last winter there was a shortage of intensive care beds. The Minister took steps in good faith to overcome it, but the signs are that the problems continue. As it is a matter of life and death, the Secretary of State should act urgently. Yesterday, during the health debate, he attacked my hon. Friend the Member for Islington, South and Finsbury (Mr. Smith), claiming that all that my hon. Friend did was

"to parade a few individual cases that are supported by incomplete facts, to make a half-researched charge about the Government's record, wave a shroud, repeat the mantra that Labour will abolish the internal market and base metal will be transformed into gold."—[Official Report, 21 January 1997; Vol. 288, c. 755–56.]

I have not waved any shrouds. Without getting angry, I have tried to express the anger felt in Leeds. I have not used political comments. I have used comments from doctors who have the unhappy task of deciding who is to have an intensive care bed and who is to go on the dangerous search for a bed elsewhere.

I hope that the Minister will consider the following points. First, he underestimates the regular demand for intensive care beds in cities such as Leeds. The consultant at St. James's hospital is a sober, responsible, committed person who weekly faces the task of turning away seriously ill people.

I thank the Minister for the two additional beds that were made available after the March statement. However, the ward has 13 beds, but 18 bays. I do not understand why it seems to be impossible for health officials to sit with the consultant responsible for the service, examine the records, determine the true level of demand and make provision accordingly. It seems that Ministry officials would prefer not to ask the question, because they do not want to know the answer. They fear that the reply may not suit them.

I understand the cost implications, but if that is the reason for the failure to ask questions when lives are at stake, that is unacceptable. As part of the discussions arising from the Minister's March statement, Andrew Cohen made a number of requests. Apart from the additional one paediatric and one adult intensive care bed, nothing else has arrived.

The Minister should understand and make allowances for the effect on demand when intensive care beds are located in a hospital with many regional facilities. I am told that my constituents in east Leeds gain from having so many specialties or centres of excellence at St. James's hospital. However, the Minister knows that those specialties make regular demands on intensive care beds. When someone such as Mrs. Harrison collapses, she must compete for a bed with patients who have been moved to intensive care from other departments within the hospital. Dr. Cohen must decide whether to stop an operation or deal with the inevitable emergency that will result from denying new patients intensive care beds. He advocates separating dedicated intensive care beds from general intensive care beds at Leeds general infirmary and St. James's hospital, and that proposal should be considered.

What is happening with the trust and health authority regarding the provision of high-dependency beds? The Minister appreciates the vital role that those bodies play, both physically and financially, in providing a valuable safety net. However, the health authority and the trust have taken no action to increase the number of high-dependency beds at St. James's hospital—in fact, all eight high-dependency beds are dedicated to the other specialties. In March, the Secretary of State and the professional working group said that such beds play a vital part in health strategy. When patients are admitted to hospital, staff usually determine the availability of intensive care beds with a view to moving patients to a high-dependency unit. That is not possible at St. James's hospital and we must ask why.

The Secretary of State requested discussion, consensus and transparency between intensive care beds, high-dependency beds and the other specialties, but nothing has happened. The trust and health authority have used the Government's money to provide only two extra beds. Is the Minister aware of that fact? Is he monitoring the situation? If so, what is he doing about it; and, if not, why not, as it was a vital part of the 6 March statement?

Does the Minister agree that there is something slightly obscene about forcing seriously ill patients to criss-cross the country in search of intensive care beds? I accept that, if patients require specialty treatment that is available only in Birmingham, it is common sense to transfer them to that hospital. However, seriously ill patients should not be expected to criss-cross the country in search of treatment. Surely specified geographical areas, such as west Yorkshire and south Yorkshire, could combine and squeeze out enough money to provide an agreed safety net, so that we do not see ghoulish transfers of seriously ill patients to hospitals 60, 80 or 100 miles away. It is acceptable for my constituents to travel to Bradford, but not to Bridlington.

I am three years older than the health service, so I have not known anything else—in a way, it is responsible for me, although I have worn better than it has. No hon. Members catch my eye when I say that, but like others of my generation, I know about the pre-health service conditions. Mr. Deputy Speaker, you come from a mining community and you will understand what I am about to say. Why do we cherish and love the health service? Why do those who know nothing else protect it instinctively? It is because our dads and grandads have told us what happened before the NHS was established. You will know more about it than I do, Mr. Deputy Speaker, as you have a long history in the mining industry, and mining communities established many health schemes.

We cherish the national health service because, before it existed, doctors would visit their patients at home. They would ask, "Where is the patient and what is wrong?" The next question would be, "Do you have insurance and can you pay?" Millions of people who could not pay invariably did not receive treatment. The health service introduced free treatment at the point of service that was available when needed. That is why we cherish the health service. The NHS should be there for anyone who requires its services—it may be a matter of life and death. Unfortunately, in the past few years, people have complained that—for whatever reason—the health service was not there when they needed it. That is why Mr. Harrison is aggrieved and why I was prompted to seek this Adjournment debate.

My hon. Friend makes a very good point. We should remind the Minister that many hospitals in Yorkshire—such as Castleford, Normanton and District hospital and others in Hemsworth and south Kirkby—were built using contributions from miners who had small wages, but who knew the value of health care. I am pleased that my hon. Friend has expressed a sentimental view. It would be wrong not to highlight the fact that those hospitals have closed or are now in private hands. That is the disaster that affects mining communities: hospitals built with miners' contributions can no longer serve the people. I am pleased that my hon. Friend has drawn attention to that important issue.

My hon. Friend makes a good point.

I ask the Minister to consider the quiet points that I have made. I understand that individual cases will always cause concern, but there are too many serious incidents at present and that is totally unacceptable.

10.7 am

I congratulate my hon. Friend the Member for Leeds, East (Mr. Mudie) on securing this Adjournment debate and on the way in which he has expressed his feelings about the health service and his constituents. I hope that his comments will be well received by the Minister. My hon. Friend did not engage in tub thumping, but adopted a measured view of what is occurring in the health service. I hope that the Minister will respond in kind.

Hon. Members wish to debate the intensive care beds situation because there is a real crisis in the health service. We do not wish to panic people: this is what our constituents are telling us. It is tragic that we must debate the same subject every winter because the internal market is not working properly. My hon. Friend mentioned the statement made by the Secretary of State on 6 March 1996—almost a year ago—in which, referring to the winter before last, he said:

"This winter has seen those emergency services put under considerable strain."

He added:

"I have … charged the chief executive of the NHS with a specific responsibility of reporting to me at the end of June and again at the end of September on the plans being made by each health authority for emergency services in its area."—[Official Report, 6 March 1996; Vol. 273, c. 356.]

Nevertheless, we hear that in Yorkshire, in London, in the north-west, in the north-east and everywhere else people are experiencing exactly the same problems this winter, if not worse, as they experienced last winter. I hope that the Minister, in his response, will take into account the fact that we believe that what the Secretary of State said on 6 March last year has come to nothing. Indeed, difficulties in our health service seem to be a great deal worse.

I shall mention only two issues. First, I shall talk about my local hospital at Lewisham. Secondly, I shall refer to one of my constituents. I make no apology for raising a constituent's case. I do not believe that individual cases are isolated. Surely they are examples of what is happening throughout the service. I agree with my hon. Friend that many incidents are not commented upon in the media. Indeed, he quoted a doctor to that effect. The cases that we can raise in the House, or which are raised in the media, are only the tip of the iceberg. That is the problem. We are able only by individual cases to draw Ministers' attention to what is happening throughout the service.

Lewisham hospital is a general hospital serving the people of Lewisham, although it is part of the Lambeth, Lewisham and Southwark health authority. Early in December 1996, it was necessary to cancel all non-elective, non-urgent surgery cases. It is ironic that the health authority felt that it could not fund any more such cases. Why was that? That situation was reached because Lewisham was doing even better than had been predicted. The hospital was seeing more people, treating them and doing all the things that the Secretary of State constantly tells us is happening.

So successful was Lewisham, however, that it ran out of funding and could no longer proceed. As a result, people who had dates to go into hospital to be treated were told at the beginning of December, "We can no longer admit you because additional funding is not available." Indeed, that funding will not be available until after the end of March this year.

With my hon. Friends the Members for Lewisham, West (Mr. Dowd) and for Lewisham, Deptford (Ms Ruddock), I have spoken to the health authority and to a Minister. I am not convinced, however, that Ministers are aware of the depth of the crisis. People in Lewisham, particularly, have been waiting for four months and more for admission—over and above the time that they waited to get their date for treatment in the first place. There will be more suffering, people's needs will become greater and costs will increase. As my hon. Friend said, costs will inevitably increase if people are not treated at the time of need.

I shall now move on to the specific case of one of my constituents, Mrs. Queenie Harrild. The case has had a media profile because Mrs. Harrild's family wants to ensure that what happened to her will not happen to anyone else. I pay tribute to the family's courage at a time of bereavement in being able to speak up for others when Mrs. Harrild died. She died because she had to wait five times to have a heart bypass operation. The operation was cancelled on every occasion. I shall go into the case in some detail.

Queenie Harrild was 69. She had been retired for only about four years. Like anyone at that age, she deserved to have a long and fruitful retirement with her husband. She had a bypass operation seven years ago. During the last few months, however, she had been suffering chest pains. She was admitted to Guy's hospital on 13 December.

On 16 December, she was told that she would be transferred to St. Thomas's hospital the next day. She was packed and ready to go. Her husband was at the hospital with her comforting her, giving her support and ready to go with her in the ambulance to St. Thomas's. Late that afternoon, however, she was told that the ambulance had not turned up and that she would be going to St. Thomas's the following day.

On 18 December, Queenie was packed and ready to go again. Again the ambulance did not turn up. This time, she was told that there were no beds available at St. Thomas's and that she was to be discharged, yet the family was told that her name was at the top of the list for the operation at St. Thomas's.

On 21 December, she was told, again, that she was to be transferred to St. Thomas's the following day to be operated on on the Monday. Late on Sunday afternoon, she was told, yet again, that she would not be transferred because no one had told the ward at St. Thomas's that she would be arriving.

On 23 December, Queenie was bathed twice. She went without food in preparation for the operation at Guy's. She was told that she would be sent to St. Thomas's some time that afternoon to be operated upon the following day. Again, later that afternoon, the operation was cancelled.

That process went on until 3 January. In between times, Mrs. Harrild was told that she would be discharged and sent home. She was then told that she would be sent to Lewisham hospital. These instructions went back and forth. She was prepared for an operation on four occasions with a pre-med. She went without food so as to be ready for an operation, only to be told that it had been cancelled. It was cancelled because an intensive care bed was not available. On five occasions there were planned operations. On five occasions her consultant said, "You will have your operation tomorrow."

Mrs. Harrild died on Saturday 4 January, three weeks after she had been accepted into hospital. Of her last 48 hours, 34 were spent without food or drink because she believed that she was to have her operation. At one point she was told that it would be performed privately. It appears that the doctors realised the emergency that they were facing, but that did not happen either.

Mrs. Harrild's family feel—I think that they have some cause to feel—that they lost their mother because the doctors involved had to make a choice between one patient and another, and determine who would be given the spare intensive care bed. It is not the role of doctors to play God, and no doctor wants to do so. It is outrageous that they are forced to make such choices.

The consultant at Guy's who was caring for my constituent said that heart surgery at the trust had been severely affected "for several months". That being so, Mrs. Harrild's case is not an isolated incident at Guy's. There has been a crisis for some time. The consultant said that heart surgery had been severely affected "for several months" because intensive care beds were permanently full. Dr. Bob Knight said:

"This was a disaster for Mrs Harrild and a terrible tragedy for her family, made worse by the feeling that if things had been dealt with in some other way she would still be here."

Dr. Knight is absolutely right. It is a terrible tragedy for Mrs. Harrild's family, but it is one that they could come to terms with if they had any confidence that the Government will ensure that what happened to Mrs. Harrild will not happen to other people. That is why I am participating in the debate today. I want to hear from the Minister that the Secretary of State's speech of 6 March 1996 was not just warm words, but had some significance, that it meant that something will happen about intensive care beds, and that the crisis that we suffered last winter, and are suffering again this winter, will not happen a third time.

I do not know whether my hon. Friend has seen a press release that the Department of Health put out on 24 December showing that £500,000 was spent on purchasing additional intensive care beds in the South Thames region. It lists the extra beds by authority, but not one additional pound of expenditure has been allocated to Lambeth, Lewisham and Southwark, my hon. Friend's health authority. Will she press the Minister specifically on why the allocation is as shown in the press release and why her inner-city health authority, which faces problems that were so graphically described to the House, was excluded from the additional allocations?

I am grateful to my hon. Friend for raising that point. He described very succinctly the problem in funding for Lambeth, Lewisham and Southwark. As there has been a crisis right across that health authority for some time, I hope that the Minister will make a specific response.

I repeat once again that I hope that the Minister can assure us that the case of Mrs. Harrild, like that of the constituent of my hon. Friend the Member for Leeds, East, will not be repeated; that he will not say that these are isolated incidents; that he will recognise that they are symptoms of the deepening crisis in the health service; and that he will commit the Government to doing something quickly to resolve it.

10.21 am

I shall follow on from exactly where the hon. Member for Lewisham, East (Mrs. Prentice) left off. She and I have spoken. I have also spoken to a third colleague who, coincidentally, reflects, because of the party membership of each of us, the fact that this concern is not a party issue. All Members of Parliament have a duty to ensure that the health service works. The hon. Lady told the story of her constituent, Queenie Harrild. Queenie's son and his wife are represented by the right hon. Member for Old Bexley and Sidcup (Sir E. Heath), and the hospital Queenie died in is in my constituency.

Like the hon. Members for Leeds, East (Mr. Mudie) and for Lewisham, East and me, who have participated in the debate, other hon. Members also wanted a debate on intensive care facilities, because in spite of the efforts that the Minister and the Government have made in the past year, which I recognise, we are clearly not providing sufficient intensive care beds.

The White Paper "The National Health Service: A Service with Ambitions", which came out in November, set out the four principles on which the Government believe the NHS should be run. It should be

"universal in its reach, available to anyone who wishes to use it; high-quality; … available on the basis of clinical need"

and

"responsive, a service which is sensitive to the needs and wishes of patients and carers."

By definition, that means that, in both emergency services and intensive care services, the facility has to be where it is needed and when it is needed.

The announcement that the Secretary of State made last year, to which colleagues have referred, which was the starting point of the last chapter of this debate, was very clear. He said:

"Decisions about the resourcing of intensive care cannot be subsumed into general arrangements for other areas."

We have to look at intensive care—and with it goes high-dependency beds and other extra care beds—but we have to look at it separately. When considering resources, beds and their availability, as the hon. Member for York (Mr. Bayley) implied in his intervention, we have to look at this category of service on its own.

I should like to know, either this morning or by answer later, whether the Minister can now update the figures that show where all the additional beds have been allocated. I ask because, in addition to the announcement made just before Christmas, the Secretary of State, in yesterday's debate on the national health service, said that he had announced the distribution of some of the money— £4 million—just after Christmas to bring forward to this financial year the expansion of intensive care planned originally for next year. He said

"it would be used to deliver almost 100 extra adult intensive and high-dependency beds in the last quarter of this financial year."— [Official Report, 21 January 1997; Vol. 288, c. 761.]

Apparently, there are to be a further 100 beds between 1 January and 31 March. We need to know not just where they are but which are intensive care beds and which are high-dependency beds.

When we ask the cost of an intensive care bed, we are always told that it is in the region of £500,000 but, amazingly, the Secretary of State seems to have announced £4 million for 100 intensive care or high-dependency beds. Is that funding to last up to the start of the new financial year? Will the Minister assure the House that the full year's funding in the next financial year is available in the health service budget?

That is another very good point to which we need to know the answer. Of course intensive care beds cost more than high-dependency beds; that is why we need to see the breakdown by area and type.

The third special report of the Select Committee on the Parliamentary Commissioner for Administration, published on 16 October 1996, made it clear that

"one of the prime duties of the NHS Executive is to ensure that Parliament is not … deprived of information by which it can judge the overall performance of the Health Service."

Parliament, and representatives of people like the family mentioned by the hon. Member for Leeds, East, and the Harrild family, need information regularly.

The Royal College of Nursing tells us that there are two reasons why there is a problem. First, there is a shortage of intensive care nurses. I should like the Minister to respond to that. It cites the example that the Royal Sussex county hospital had 11 vacancies out of an establishment of 65, and that Manchester has to recruit intensive care nurses from abroad. Secondly, the RCN says that the guidelines that set the establishment of intensive care beds are too strict. The British Medical Association, in its recent review of the winter crisis, confirmed that the shortage of intensive care beds was a national, not a localised, problem.

After the initial speeches in the debate last night, I went to Guy's hospital, because, coincidentally, the community health council meeting was also taking place. The first item on the agenda was the case of Queenie Harrild, and David and Pauline Harrild, her son and daughter-in-law, were there. The meeting accurately highlighted the questions that I want the Minister to answer.

At the meeting last night, answering questions was the consultant in charge of intensive care at Guy's, Dr. Richard Beale, who is clearly a man of huge sympathy. He told us the story of how the beds at the hospital that he manages are always under pressure; how staff are being reduced to danger levels to be able to take people in; and how they are having to juggle, as the hon. Member for Lewisham, East rightly said, between people who are brought into hospital to wait, and people who suddenly overtake them because they are emergency cases who will otherwise die, almost in the next minute or two.

At the end of the meeting last night, Pauline Harrild said that her mother-in-law was in Guy's "waiting to be saved", but she was not saved. We want to know whether we will have a health service that has sufficient intensive care beds to ensure that a bed is available for people who are identified as needing an operation that requires an intensive care bed. We have, I am told, fewer intensive care beds per head of population than all similar comparable countries. If that is true, we clearly need more. That does not mean that there should not be high-dependency and other beds to which people requiring intensive care can be released, but we must face the hard fact that more intensive care provision is needed.

The consultant was clear about the fact that our area in south-east London—the Lambeth, Southwark and Lewisham health authority area, containing Guy's and St. Thomas's trust—needs more beds. If it had had more beds, people such as Queenie Harrild would have been treated. There is no escaping the simple resource implication: more beds are needed, and more staff are needed to look after them.

It seems to me that our ultimate aim should be to distinguish between emergency and elective or planned admissions, otherwise someone like Mrs. Harrild will always be overtaken by another patient who is, for example, suddenly downstairs in the accident and emergency department. We must ensure that there is planning so that we do not experience such crises. That planning must be national, regional and local, and must be done accountably and democratically. Unless we have such a system, we shall regularly fail our constituents and the public as a whole.

As for now, we plainly do not have enough intensive care beds. That is clear to many hon. Members on both sides of the House. Let me tell the Minister that, if there is one thing that must continue to be given priority by the Government in this financial quarter and in the remaining time of this Parliament, it is that we act in a way that ensures that the deaths that have been reported to the House today have not been in vain.

10.31 am

First, let me pay tribute to Warrington hospital, of which we are all proud. It has a dedicated staff, an efficient chief executive and a chairman who takes a deep interest in what goes on there.

Warrington has a population of 200,000, which is growing year by year. The hospital, however, must also serve the surrounding region, which brings the total number to 350,000. At present, there are only three intensive care beds for all those people. It is impossible for the hospital to manage with so few beds. As a result, patients have had to be transferred, and one of those patients—a Mr. Pitcher—unfortunately died during the process. The coroner took the unusual step of being highly critical of the fact that that gentleman had been subjected to a 30-mile journey.

The shortage of beds worries not only Warrington hospital and trust, but the purchasers, North Cheshire health authority. The problem is finance. We had an extremely constructive meeting with the authority on Monday, following which we understand that one extra intensive care bed is to be provided. That is good news, which is welcomed not only by my hon. Friend the Member for Warrington, South (Mr. Hall) and me, but by the people of Warrington.

As we have heard this morning, however, the crisis affects not only Warrington or, indeed, the north-west region, but the whole country. I invite the Minister to deny the fact—which has been reported to me—that three weeks ago there was not a bed to spare in the whole of England, and that if more admissions had been necessary, patients would have had to go to Glasgow.

I particularly want to draw attention to the strange story of what happened when my hon. Friend the Member for Warrington, South asked the north-west regional office for copies of the reports prepared for the Secretary of State, which have been mentioned by my hon. Friend the Member for Lewisham, East (Mrs. Prentice). They were sent to the chief executive, Alan Langlands, but they were for the attention of the Secretary of State. Having applied to the regional office, my hon. Friend was given a copy of the report on emergency care. I have a copy here. When he asked for a copy of a similar report on intensive care, however—it had been submitted to Alan Langlands—my hon. Friend's request was refused.

How can Members of Parliament do their job if they are not given all the information that they need in order to present their case? Surely this should not be allowed. Will the Minister answer these questions: why was that report suppressed, who made the decision to suppress it, and will it now be released? It seems to me that, in relation to intensive care, there must be a horrible smell at the bottom of the NHS garden. Will the Minister now come clean? Will he tell us that we can have the report on intensive care, and will he explain why my hon. Friend the Member for Warrington, South was not allowed to see it?

I thank my hon. Friend for raising this issue. I believe that the document has been published, but that the region did not want to release it to me in time for yesterday's debate. It is a cover-up, and the Minister should first apologise and then give a commitment that the report will be placed in the Library. Then we shall all be able to see for ourselves whether that intensive care report submitted to Alan Langlands and the Secretary of State does indeed show that there is a problem in our region.

I hope that not only that report, but similar reports from every other region, will be released to the Members of Parliament who need to see them. Otherwise, it will be impossible for us to be well informed and to do the job that our constituents sent us here to do. That shows above all else that there must be a crisis in intensive care throughout England and Wales.

10.37 am

I congratulate my hon. Friend the Member for Leeds, East (Mr. Mudie) on securing a timely debate on an important issue. I thank him for the measured way in which he spoke of a distressing incident involving the death of one of his constituents, whose family obviously took it very hard. I hope that we do not hear more of the accusations of shroud waving that we heard in yesterday's debate. We are all here to represent people and, I hope, the national health service itself. If attention is drawn to the deficiencies in the service, that should not be interpreted as shroud waving. We should be engaging in an honest and earnest debate about the problems in the NHS.

That brings me to what was said yesterday, and what was said today by my hon. Friend the Member for Warrington, North (Mr. Hoyle), about the report on the Warrington intensive care unit that has allegedly been published in the north-west. If that report has indeed been published, it should be available to hon. Members, and also to the public in the north-west, who pay taxes and use the NHS. I hope that, if it has been suppressed internally, the Minister will sort the matter out.

I am sure that hon. Members on both sides of the House have noted the growing concern about what is described as the "winter crisis" in the health service, which has appeared to increase daily. Across the country, intensive care bed capacity has been stretched to the limit because of seasonal upturns in emergency demand. It is clear that there are simply not enough intensive care beds to cope with what most of us would consider to be reasonable demand for this time of year.

Clinicians are unable to perform other surgery in hospitals because intensive care beds are full. Operations are being cancelled, and waiting times are increasing because of insufficient spare capacity in the system to cope with sudden fluctuations in demand for emergency care. So the debate is about not one problem but three. First, lack of intensive care beds strains hospitals' ability to cope with emergencies. Secondly, use of general hospital beds for emergency cases results in cancellation of routine work. Thirdly, postponing treatment for cases sometimes referred to as "non-urgent" leads, by default, to those cases worsening and turning into emergency cases. The shortage of intensive care beds aggravates all those problems.

The build-up of pressure in the NHS was entirely predictable, because no one should be surprised that winter comes between January and March or that winter increases demand on our health service. The situation is similar to the annual need to grit roads after snowfall, when everyone seems to be caught out and gritting lorries are not ready to deal with the crisis. This year, we should have been ready for increased winter demand on the NHS, as the problem has been flagged up year after year. I see that the Minister is smiling at the analogy, but the problem has caught us out again.

Every year, hard-working doctors and nurses battle against the odds to do their jobs in a winter crisis. On Monday, I was at a district general hospital in north-east England, and people there told me about how staff had voluntarily worked on new year's day because of staff illness and other problems. They had to keep the hospital going, and it was wonderful to see their dedication. Ultimately, however, I can only wonder why, time after time, the same crisis sneaks up on us.

I do not think that the Government's solution to the intensive care bed crisis—as reported in the press at Christmas, although we could detect the crisis developing well before Christmas—is sufficient. I am bothered because the NHS chief executive has

"ordered all casualty and intensive care units to stay open in the run-up to polling day".

That policy was reported after seven London casualty departments had been forced to close for some time during the previous six weeks. Within days of the announcement of the new NHS policy, however, trusts were being forced to defy the order because of a severe lack of intensive care beds and an upsurge in medical emergencies.

Since the new year, there have been numerous problems inside the NHS. Two Surrey hospitals have closed their doors to emergency cases. Two Lancashire consultants announced that they were quitting because of a desperate shortage of hospital beds. The Royal Gwent hospital was accepting only medical emergency cases, and the list goes on. On the situation in London, my hon. Friend the Member for Lewisham, East (Mrs. Prentice) told us that, because of the current winter crisis, all non-urgent surgery has been cancelled in the Lewisham hospital. Patients at St. George's hospital—21 of them at one point—have had to spend nights on trollies. Such an environment is unacceptable to people who work and care for patients in our hospitals, to the British public—who pay taxes to fund the NHS—and to patients and their families, who are under enough stress when a family member is admitted to hospital.

Drawing on 20 years' experience, a consultant at St. George's A and E department said:

"I don't think I have ever seen such a terrible state of affairs."

Such quotes come not from shroud wavers but from those who work every day in our health service to care for people who need care. The head of A and E at the Royal Edinburgh hospital said:

"the whole acute hospital service is stretched beyond its ability to cope."

A senior manager at Edgware general hospital said that the situation was "horrendous". Even the head of the emergency bed service, which is supposed to co-ordinate provision for intensive care places, said that now there was "no room for manoeuvre". The service reported that it was "frantically busy" dealing with shortages in intensive care places.

My hon. Friend the Member for Lewisham, East spoke in detail about the sad death from a heart attack at the beginning of this month of a 69-year-old London woman. A hospital spokesman had said that

"an increase in medical emergencies had put the hospital's intensive care beds under pressure over the New Year."

The very next day, a 70-year-old man who had been seriously ill with liver failure was transferred 90 miles, from Birmingham to Sheffield, because no intensive care bed was available locally. He died soon after, and a spokesperson at the Sheffield hospital said:

"He was in a desperate condition. The transfer would not have been good for him."

I wonder what families think when they hear such statements from a hospital to which their relative has been sent, but such service now seems to be acceptable. In some cases, people who are in desperate need of intensive care can be put into ambulances and transported more than 100 miles to receive care. The situation in our national health service, despite what has been done over the past 12 months, is not acceptable.

In his speech, my hon. Friend the Member for Leeds, East went into some detail about a patient being taken from Leeds to Hull. As he said, another patient was transported in the other direction, when a man was taken from Hull to Leeds, where a bed was available. That man died also. Last week, a spokesman for Guy's hospital inadvertently provided the best summation of the Tory crisis. He said:

"Every time we thought an intensive care bed was about to become free, an emergency patient arrived. There was no possibility of transferring"—

a sick patient—

"to another hospital because everyone else is in the same situation."

Such circumstances demonstrate that we have major problems in our NHS.

As everyone knows, since the internal market was introduced into the NHS, five years ago, we have lost 25 per cent. of NHS beds. That reduction does not help. A fortnight ago, Dr. Sandy Macara, chairman of the British Medical Association, said that the crisis faced by the NHS has occurred because

"There just aren't enough beds, including emergency care, available to deal with what ought to be a predictable and predicted peak demand, and that's because of the way that the internal market works and just not having enough money in the system."

The intensive care bed crisis in the NHS is also a cash crisis. As we now know, so that trusts can continue to operate, the Government will allow trusts, by the end of this financial year, to spend £150 million that should be spent in the following financial year. The Government are effectively deferring NHS cuts until future years. It is unacceptable for Ministers to tell the House that, year on year, more money is going into the health service, because we know that that is not the case. Ministers should ask health service practitioners about efficiency cuts in the NHS. If they were to do so, they would discover that efficiency drives have led to the increased bed loss. Real problems in our NHS will be stored up for the future if we do not tackle the issues head on.

My hon. Friend the Member for Leeds, East said that St. James's university hospital, in Leeds, was able to set up two extra intensive care beds—although there are still empty bays on the ward. We cannot run away from the fact that one of the problems facing the intensive care service is the lack of nurses available to staff beds, even when the beds are available. No one can question the fact that that problem exists. I have here a Royal College of Nursing brief for today's debate, which states that the Royal Sussex county hospital has 11 vacancies out of an establishment of 65. I have no doubt that is a major problem across the country.

I conclude with a quotation from a study that the Department of Health commissioned from the London School of Hygiene and Tropical Medicine. The report stated:

"The main reasons for patient refusal is lack of ICU facilities; either the unit is full and no bed available, or beds are physically available but there are insufficient staff to provide adequate nursing".

Something is wrong. It is to the Government's credit that millions of pounds have been put into the service but there is still a problem with intensive care beds. Whatever has been done in the past 12 months is clearly not enough to cater for the needs of our constituents. I hope that the Minister will reply to some of the issues in the time available to him.

10.50 am

It seems a long time, Mr. Deputy Speaker, since you and I were in the House debating health matters earlier this morning. It is as if you and I were nailed to our seats—the Opposition will undoubtedly say that that is a penance.

I congratulate the hon. Member for Leeds, East (Mr. Mudie) on securing a debate on such an important subject. I appreciate the bipartisan, or non-political, spirit with which he approached the subject, and I should like to respond in a similar fashion. I think it was the hon. Member for Southwark and Bermondsey (Mr. Hughes) who said that it was the duty of us all to make the national health service work, and I assure him and the House that that is certainly the wish of Ministers.

I hope that the hon. Members for Lewisham, East (Mrs. Prentice), for Southwark and Bermondsey and for Warrington, North (Mr. Hoyle) as well as my old sparring partner the hon. Member for Rother Valley (Mr. Barron) will not mind if I concentrate, at least in the first instance, on the specific points made by the hon. Member for Leeds, East, to whom we are grateful for initiating the debate.

The Gentleman spoke graphically of the circumstances surrounding Mrs. Harrison's sudden illness. Those events are of course a matter of great sorrow, and I should like to express my sympathy and condolences to her family. The hon. Gentleman asked specifically what action was being taken by the health authority in the aftermath of those events although, as his remarks made clear, he will be aware of some of what is happening.

The hon. Gentleman will be aware that the authority plans further work on intensive care, and that work can be classified under three main headings. First, it aims to complete a thorough review—which, as the hon. Gentleman knows, is already under way—into the facts surrounding Mrs. Harrison's transfer from St. James's hospital to the Hull Royal infirmary. Secondly, it aims to ensure that arrangements are in place to guarantee that every possibility of a bed in Leeds has been fully explored before a transfer to an intensive care unit outside the city is considered. Thirdly, the health authority will convene a meeting with intensive care clinicians to consider with them the protocols and procedures within which intensive care services in Leeds operate.

The hon. Member for Leeds, East raised another important point about which we have corresponded—the situation at Killingbeck. We are in fact discussing a separate matter in relation to that hospital, but I shall say a little about intensive care beds there as he raised the matter today. As he knows, there are seven cardiac intensive care beds at Killingbeck hospital, which are dedicated for the use of cardiac patients and support the highly complex specialist services which Killingbeck and the Leeds general hospital provide. It is because of the specialist nature of these beds and the specialised training of the staff involved that they are not made available for general intensive care use. Their availability is therefore not reported.

It is not correct to say that those beds are ring-fenced financially; because of their specialist nature, they are not generally available. I hope that the hon. Gentleman will accept that. In view of the circumstances, however, the health authority has agreed to review, with the local trust, whether, in certain situations, those and other cardiac intensive care unit beds should be made available to provide general intensive care for local people. I must stress that the use of those cardiac beds for general intensive care would require very careful selection of cases—for example, infectious medical cases such as patients suffering meningitis would not be suitable for treatment in a unit containing cardiac surgery patients. The idea is being considered, but I hope that the hon. Gentleman understands that the matter must be handled with great care.

The hon. Gentleman also mentioned the general expansion plans for ICU beds in the Leeds area, a matter that we have discussed before. He knows of, and acknowledged, the investment of an extra £1 million in Leeds this year to fund one extra bed at Leeds general hospital and one at St. James's. That has been followed by the commitment of an additional £127,000 and a West Yorkshire-wide bid for a further £325,000 for intensive care. That significant investment builds on a general increase in intensive care beds in Leeds in recent years. For example, the number of paediatric ICU beds at the University of Leeds teaching hospital trebled between 1992 and 1996, and beds for adults increased from seven to 10 between 1993 and 1996. An average occupancy rate of 85 per cent. at St. James's ICU suggests that there are sufficient beds for most eventualities.

I have listened carefully to what the Minister said, but I think that he will accept from what he has heard this morning that there is a particular problem in the northern and Yorkshire region of the NHS. We have lost more beds in the past five years than any other region—27 per cent. of our beds have disappeared. That loss has a knock-on effect on intensive care provision in a wider area.

There is clearly a connection between the number of beds in absolute terms and the use of intensive care beds. Indeed, the hon. Member for Rother Valley commented on that. Nevertheless, in this particular instance I am talking about the provision of intensive care beds in the Leeds area and more generally. As the hon. Member for Wakefield (Mr. Hinchliffe) knows, there is a major new development at the Leeds general infirmary. The cost is £72 million, and phase I will come into operation this year. That offers the opportunity to look again at the balance of intensive care and high-dependency beds in the hospital to ensure that there is more flexibility to provide intensive care at peak periods.

A number of the paediatric intensive care beds in Leeds are specialist beds related to heart surgery, burns or other clinical disciplines and are not available, or appropriate, for general use. Will the Minister separate the figures for those specialist beds as it would be wrong to count them with general paediatric intensive care beds?

I take the point. Paediatric intensive care beds should be considered separately from general intensive care beds, although my information is that the intensive care beds I am talking about are for general, not specialist, use. The specialist beds that I was talking about are at Killingbeck.

I also take the point raised by the hon. Member for Wakefield. It is important to consider the matter not on a Leeds basis, or indeed a York basis, but on a regional basis.

The debate has been initiated by my hon. Friend the Member for Leeds, East so it is important that the Minister deals with the points that he raised, but I hope that he will leave himself time to say why the report was not given to my hon. Friend the Member for Warrington, South which, as I said earlier, prevented him from having all the information that he needed for yesterday's debate.

I should like to look into that. I shall write to the hon. Member for Normanton (Mr. O'Brien), who raised the point today and in yesterday's debate, and to the hon. Member for Warrington, North.

As a result of the additional regional funding that we have provided for adult intensive care and high dependency care this year—the £4 million that we were talking about—an extra five intensive care beds and six high dependency beds are being opened in the Northern and Yorkshire region. More will be opened in the region in the next financial year as a result of the extra £5 million that we have earmarked for adult intensive care and high dependency beds, to be matched by £15 million from the growth money provided by local authorities. A stream of new provision is under way.

In the little time that we have left, I should like to point out to the hon. Member for Lewisham, East, who commented adversely on the plans made for this winter by my hon. Friend—

Order.

St Helena

11 am

Its isolation, its history and its position—a tiny dot in the south Atlantic—make St. Helena a romantic and beguiling place. It does not disappoint. From the island's first appearance as a misty bump on the horizon until the Royal Mail ship St. Helena drops anchor under the towering cliffs flanking Jamestown harbour, and when visitors leap ashore up the same steps as Napoleon used, the sense of history is everywhere.

Fascinating as that is, I requested this debate to address the present-day issues of St. Helena and the Saints who live there. My colleagues and I are grateful for the speed with which the debate was granted by Madam Speaker.

The hon. Member for Monklands, West (Mr. Clarke), who is in his place, Lord Beaumont and I visited St. Helena with the Commonwealth Parliamentary Association. Those who know St. Helena will not be surprised to hear that we were given a warm and friendly welcome. Arrangements for the visit were well structured—we had an opportunity to meet many islanders at a large reception at Government house, and we had well-organised briefing papers and discussions. We all felt that the way in which the visit was put together was a credit to the island's Government, staff and elected councillors, and made best use of our time, which was short because of the shipping schedule.

Despite being on the island for only two and a half days before the ship left for Cape Town, we were able to get a clear picture of the problems facing St. Helena. I regret not having been able to lean over gateposts for a chat and meet people in the street. I should also have liked the opportunity to see more of that beautiful and interesting island, but that would have required a longer visit, which would not have been easy for the CPA to fund or organise.

The four key issues that came up over and again were: citizenship; communications—or lack of them—with the island; the commitment of the United Kingdom Government and Parliament to St. Helena; and the constitution. I shall deal with those four Cs in turn.

The first issue is citizenship. Many hon. Members—but by no means all, as I have found from talking to some—will be aware that full British citizenship and the right to live and work in the United Kingdom were removed from the Saints in 1981, and they regard that as a serious and continuing injustice. Citizenship is the key and burning issue for them.

The restoration of the right for Saints to live and work in the UK, quite apart from citizenship, would have many beneficial effects on the island: it would benefit the island economy, because money would be remitted to families still there; the opportunity to work in the wider world in the UK would motivate the islanders further to make progress at school and afterwards; and—this is a key factor in moving forward the development plan for the island—it would bring back outside experience and expertise to St. Helena, particularly from those who might have had entrepreneurial experience in the United Kingdom. Unless the island benefits from such experience, the strategic plan, on which the Government's policy hinges, is unlikely to be effective.

Those two issues of citizenship and development are linked. All those from the House who visited St. Helena believed that, after the handover of Hong Kong later this year, Parliament should again address the issue of citizenship in the interests of justice and practical economics. I am not having withdrawal symptoms about my decision not to stand for Parliament again, but I shall regret no longer being here to advance these arguments—particularly that on citizenship—in the interests of St. Helena.

My second point is about communications. Almost every other place in the world is becoming more accessible and more closely tied to the rest of the world by better air transport links and improved roads. St. Helena, in contrast, has become more isolated in recent years. In the days of sailing ships, 1,000 ships a year called at St. Helena. Until the 1970s, many of the Union Castle vessels sailing between the United Kingdom and Cape Town called there, giving St. Helena a ship probably every two weeks. They were not the fastest Union Castle liners, but the second category, which carried cargo and passengers.

Since the 1970s, the island's only link with the outside world has been the Royal Mail ship St. Helena. It is correctly called the Royal Mail ship, because it carries the mail, which cannot get there any other way. The standard of service on the ship—the way in which it is run, the food provided and the sociability of the crew in looking after their passengers—is excellent. The ship is also a major employer. It has some UK officers, although some are Saints, and all the crew come from St. Helena. It is run by the Curnow line and is an excellent ship, providing a good service.

I am most grateful to my hon. Friend for mentioning not only RMS St. Helena but Curnow Shipping, which operates from Porthleven in my constituency. Does he accept that, over the years, the company has shown absolute dedication to not only the running of the ship but the whole cause of St. Helena and the House's responsibility to face up to its problems, which he is promoting in this debate?

I am grateful to my hon. Friend and I entirely agree with his points. The company deserves congratulations.

The ship attracts a large element of subsidy, without which it could not run between Cardiff, Ascension, St. Helena and Cape Town. The shipping line is endeavouring to promote greater use of the ship as a cruise attraction. Indeed, several people who were on board during our visit had used it many times. One individual, a Brit living in South Africa, of great age and character, had journeyed on the ship about 14 times, which is a pretty good recommendation.

How big is the ship, how many passengers can it accommodate and what contribution would it make to the development of tourism?

The ship can carry about 140 passengers, but some of that accommodation, which is fairly basic, has to be kept available for the shuttle between Ascension and St. Helena to allow the Saints who work in Ascension and on the Falkland Islands to book places on board the ship as part of their working life. There is therefore always the problem of striking a balance between the extent to which the ship can be promoted for straight cruise tourism and the need for it to service St. Helena. My hon. Friend the Member for St. Ives (Mr. Harris) made the point about Curnow's dedication in trying to hit such a balance effectively.

There is no air strip on St. Helena, which remains a major issue for the Saints. Much investment would be required to build an air strip, and, once built, not only would the running of the airport need Government funding, but any of the airlines that have already considered the prospect would require the St. Helena Government to guarantee a certain number of bookings, so a further subsidy would have to be provided. Britain and our taxpayers would therefore face the problem of continuing subsidies for the future.

In my view, the better chance of progress is through the development of a proper breakwater, which would provide a sheltered harbour for St. Helena, and through improvement of the wharfage facilities, which would be of direct assistance to the fishing proposals—to which I shall come in a moment—and would allow passengers on cruise liners to land more easily. At the moment, a liner cannot go alongside. Even RMS St. Helena has to anchor offshore, and passengers and freight have to be taken ashore in launches and lighters. In bad weather, if they get off the liner at all, passengers have to go down to the lighter in a cage and land on the exciting and slightly hazardous steps, which, as I said, Napoleon used when he landed there.

One of the difficulties is that the cruise liners and the shipping lines become vulnerable under insurance arrangements if any injury or loss occurs to passengers. The captains of the liners are therefore even more cautious than they used to be in allowing their passengers to disembark: it is at the captain's command whether landing happens or not. We know that many liners call at St. Helena with the intention of putting a cruise party ashore for a whole day—which would bring very effective income to the island—but due to the swell cannot do so. Major improvements to the wharfage are therefore absolutely vital. Some such improvements are taken care of in the island's development plan, but I suggest that the British Government look further than the development plan if St. Helena is ultimately to be able better to stand on its own economic feet.

I turn to the UK's commitment to St. Helena, the Government and this Parliament. We cannot doubt that St. Helena is a residual responsibility from the days of the empire. The ancestors of those who live there were employees of the British East India Company. Those who live there now, like their ancestors, do so on the understanding that they are British. They know no other citizenship and belong to no other country. They are a special case.

I referred to the strategic plan for the island, which is entitled "The St. Helena strategic review 1996 to 2001". It is the key policy and development plan for the island produced by the Overseas Development Administration. I should like to refer to a few of its key points. It is endeavouring to provide a way forward for the St. Helena Government, elected representatives and Government employees to produce and implement a strategy for economic growth and greater self-sustainability. The British taxpayers' total subsidy to St. Helena during the period of the plan is about £9 million a year, and covers the ship subsidy and the island itself.

Interestingly enough, only last week the hon. Member for York (Mr. Bayley), in a ten-minute Bill, questioned whether ODA money was best spent on work that does not address the poorest in the world. He cited St. Helena as a country that would not be regarded as being among the poorest. He was not in any way suggesting that it does not have problems or does not need aid. He was making the point that, under the ODA budget, such issues need to be considered, and I think that they are bound to be in future. Making such points in the House increases the importance of the development plan to St. Helena's ability better to stand on its own feet—it will never entirely do so; it would not be realistic to expect that.

The plan identifies tourism, import substitution—especially in agriculture and fishing—some basic manufacturing service industries and construction arising from the contracting-out of capital investment projects as key elements. The plan seemed sensible to all of us who visited the island. I shall make two points about it. First, ODA funding needs to be stable during the implementation of the plan—it is important that the House keeps a close eye on that—and, secondly and most important, the elected representatives on the Legislative Council and the Executive Council in St. Helena should take ownership of the plan. It has not been imposed on them; it was drawn up as a result of intensive discussions on the island. The Government in St. Helena must accept responsibility for implementing the plan. We all know that plans are splendid things, but making them work is what really matters.

When the Foreign Office considers appointing anybody from Britain to the Government of the island, it is important that it chooses people who have a real understanding of commercialism and the importance of commercial activity to the island. A glossy brochure aimed at encouraging investment in St. Helena, which was published before the governor took office, showed a complete lack of understanding of reality. When we explored whether the legal infrastructure or the financial arrangements to encourage such inward investment existed in St. Helena, it was made plain to us that they did not. There was nothing to encourage a company to come to the island, and there has been a lack of understanding by the Foreign Office of the importance of putting the commercial elements together if the ODA plan is to work. In many other areas, the Foreign Office has taken up with both hands the challenge of making our embassies and high commissions more relevant to commerce. They need to do the same in St. Helena.

I wish to refer to tourism, which came top of the agenda in the development plan. Those of us who travelled to St. Helena had to fly, courtesy of the RAF, from Brize Norton via Ascension island, and it was our view that Ascension needs to be brought into the tourism and commercial picture with St. Helena. At present, the Bahamas treaty—a 40-year-old treaty between Britain and the United States—prevents Ascension from having any use but a military one. That will not do if fishing is to develop effectively, let alone tourism. We believe that there is scope for the development of tourism on Ascension, which has the right climate and beaches. St. Helena has no beach and a wetter climate than many people appreciate. These factors must be dealt with, but they cannot be dealt with unless the Government address the problem of the 40-year-old Bahamas treaty, which needs a major review. The strategic and defence issues that existed at the time of the treaty have now changed dramatically, so there is every reason to tackle the problem.

There is good news on the fishing front. Argos St. Helena—a company that has developed fishery activities with great success in the Falklands—has a ship called the Argos St. Helena that currently spends half the year fishing off South Georgia. The weather prevents it from fishing there during the other six months. The company, in negotiation with the St. Helena Government—and with, I am glad to say, a fair wind from the Foreign Office—has now established itself, but has registered in Jersey because of the difficulty of registering a company in St. Helena. That makes my point about the lack of a legal framework. The ship will fish from St. Helena, and the company, with the St. Helena Government, will develop a cannery on the island. Commitments have been made by the British Government to improve the cranage at Rupert's bay, where the cannery will be established, and those must be kept.

I had a positive and interesting meeting with Mr. Thompson, the chief executive of the company. He is an experienced man who has made a significant contribution to the development of fishing in the Falklands. He made the point that increased fishing activity around St. Helena would enable the St. Helena Government to go further in providing a fishing zone around the island. At present, such a zone cannot be policed effectively, but other fishing vessels with proper licences can do a good job in chasing away and reporting on those vessels that may be fishing in the area without a licence or adequate permission. My point about Ascension fits in here. Given that the fish move at different times of the year, the need to be able to fish from Ascension for part of the year and to have fishing vessels based there is important. It is crucial that the job opportunities for Saints that exist on Ascension and, through the Ministry of Defence, in the Falklands are maintained. Those are the only job outlets other than work on the island, which is scarce.

I congratulate the hon. Gentleman on securing this important debate, and I share his view that, for historical reasons, we have an obligation to St. Helena. My concern in last week's debate related to the fact that the ODA has to weigh our historical responsibility for St. Helena against its responsibility for development in much poorer countries in the third world. Does the hon. Gentleman share my view that it might be better to ask a part of Government other than the ODA—possibly the Foreign Office itself—to take responsibility for dependent territories, in the same way as the Foreign Office takes direct responsibility for other institutions, such as the BBC World Service or the British Council?

That suggestion is worth considering and, happily, it leads me to my final constitutional point.

If ever there was a case of he who pays the piper calls the tune, it is the ODA and its role in St. Helena. Since the ODA pays for almost everything, our overriding perception was that the ODA experts second-guess practically every policy decision on the island. That is done with the best intentions and because the work involves the use of public money. My taxpayers in Sevenoaks—and those of the hon. Member for York—would expect that public money to be accounted for. However, we found that an ODA expert would give a view and, on some occasions, it was almost a case of the umpire umpiring the umpire. That works directly against the development of the democratic process in St. Helena.

It is sometimes difficult for the Foreign Office team to refer everything to the ODA, whose decisions will most directly affect the island. I am not criticising all the work and the commitment of the ODA to the life and prosperity of St. Helena, as it is vital. But we must encourage those who are politically elected in St. Helena—where there are no political parties—to take real responsibility for the decisions affecting the government of the island.

When there are no political parties, it is difficult for policies to develop and be put through. The policy is developed in the strategic plan, and the Members of LegCo need to feel responsible and must have it demonstrated to them that they have the responsibility for decision making on implementation.

All members of the St. Helena all-party group are extremely grateful for the opportunity to participate in this debate. I apologise on behalf of its chairman, my hon. Friend the Member for Romsey and Waterside (Mr. Colvin), who is committed to attending the Defence Select Committee; otherwise he would be here.

St. Helena will remain in my mind for many years to come. I shall continue to follow its fortunes with interest, admiration and warm regard.

11.30 am

I congratulate the hon. Member for Sevenoaks (Mr. Wolfson) on securing the debate, which is timely because the Commonwealth Parliamentary Association recently sent a delegation to the island, of which he, my hon. Friend the Member for Monklands, West (Mr. Clarke) and Lord Beaumont were members.

It is a pity that the CPA can send a delegation to St. Helena only once every 12 or 13 years; I was a member of the previous delegation in 1984. St. Helena is probably our only dependent territory receiving budgetary aid, and it is extremely isolated. What I have to say will not all be good news.

The hon. Member for Sevenoaks made several important points and I agree entirely with all but one. I hope that the Minister listened carefully. Citizenship is perhaps the most important point. The St. Helenians feel isolated and betrayed by the removal of citizenship, and that must be reconsidered either by the Government or by successor Governments. The matter will not go away, and a settlement must be reached as soon as possible.

I also agree with the hon. Gentleman about Overseas Development Administration officials umpiring the umpire. They have a nice time looking at St. Helena and gathering some information and then they second-guess any decisions that are to be made on the island. One of the Members of the Legislative Council, the honourable John Newman MLC, sent me a fax referring to the recent visit by ODA officials. The fax said:

"It is felt that there was insufficient time given to meetings with the Elected Members and that the majority of consultation was undertaken by expatriate officials which consisted of the Chief Secretary, Financial Secretary, Economist and Chief Auditor with no St. Helenian officials included. I raised this matter with the Chief Secretary and my point was noted."

That shows us in a nutshell what is wrong in St. Helena. I am not attacking ODA officials, who have integrity and try to do their best for St. Helena, but somehow or other the Saints are not included in the discussions, consultations or decisions.

Another important matter is the ability to take advantage of any commercial decisions. The Atlantic Mammoth project is supposed to be a lottery based on the Internet, although I do not know whether it will, or deserves to, get off the ground. It may be, as the hon. Member for Sevenoaks said, that the financial facilities do not exist on St. Helena to allow the project to go ahead. Nevertheless, the elected Members of LegCo are not consulted, their views are not taken into consideration and their questions are not properly answered.

I received a fax from LegCo, and I suspect that other hon. Members received it, too. It said:

"We, the elected members of the Legislative Council of St. Helena do hereby request that permission, co-operation and assistance be given to the Government of St. Helena by HMG to enable it to increase external revenue by any legal means, and by so doing reduce the amount of Financial Aid given to us by the ODA."

That is signed first by Bill Drabble, and by nine other Members; that is the large majority of the elected Members of the Legislative Council.

What is going on in St. Helena? Is the Legislative Council treated as being of no importance? I hope not. I hope that the Governor and the officials who are sent from the Foreign Office to St. Helena by Her Majesty's Government take elected Members of the Legislative Council seriously. If a proposal is made, it should be considered seriously, and if it truly cannot be put into operation, a proper explanation should be given.

If that was all that was wrong with St. Helena, it would not be much of a problem; but there is more. A programme of improvements needs to be implemented. We must consider whether an airport can be built. My views are mixed, but I think that we could investigate the possibility of a mainland African company flying an aircraft one day a week to St. Helena and back from a coastal town on mainland Africa and using that aircraft on other business for the other six days. It would be reasonably easy to build an airport on the island.

Tourism development is important. Other matters that interest St. Helenians and should be addressed include an integrated port management, development of fisheries, better cargo handling equipment, wharf improvements, a wind turbine, water development, a second 1 MW generator, better electricity distribution, expansion of the bulk fuel installation, better water catchment and drainage; and the social issues, including care of the elderly, waste disposal, housing and all the matters that will inevitably crop up in any civilised society. Those matters are talked about, but nothing much happens.

I want to make a crucial point about the government of St. Helena. I am told that the Governor, in an interview on board MS Explorer, which visited the island, said that he found St. Helena "boring and tedious", and that that comment was broadcast to islanders over the radio. That cannot be right. If the Governor can say such a thing, why is he the Governor? I asked a parliamentary question about that, but the Minister of course glossed over it.

We need some honesty about what is going on. It is said by the St. Helenians that the Governor spends much more of his time away from the island than other Governors. Worse is to come. The police used to be given free transport between their home and the police station, and they were suddenly told, with no consultation or negotiations, that that concession was being withdrawn and that in future they would have between £30 and £50 docked from their monthly pay of about £300. They took the Governor to court. The Chief Justice had arrived, but unfortunately had to leave on the ship before the case could be concluded, because the Government did not produce the files that he needed to determine the case. I am told that the island's Attorney-General said that the case had had to be postponed because of the way in which they were deliberately misled. That is not good. There should not be such Government duplicity with civil proceedings on the island.

On 27 October, there was a 200-strong protest march of teachers and nurses led by elected councillors of LegCo. They wanted to petition the Governor because they had been given only a week's notice that fares on school buses would rise by between £9 and £20 a month. There had been no consultation, negotiation or explanation; they were told by diktat. While many matters on St. Helena are the responsibility of the Government, power is vested in the Governor, not LegCo. Hon. Members must understand that all important powers are kept by the Governor, who is nominated by the Foreign and Commonwealth Office in Whitehall and sent to the island.

The Governor would not meet the protesters. I am told that he watched from Solomon's office in Main street and sent the Chief Secretary, Mr. John Perrott, to deal with the deputation. The Governor had previously been manhandled during another demonstration, which is unheard of in St. Helena, which is a civilised place. The last thing that would occur to people there would be to go on a demonstration, let alone manhandle the Governor. I understand that it was simply a case of someone getting hold of his tie, but even so, matters are not right.

The Foreign Office should review the government of St. Helena. A new constitution has been prepared, partly by the Commonwealth Parliamentary Association international secretariat. We must also review whether expatriate officials have empathy, as the hon. Member for Sevenoaks put it, with the people of St. Helena. I do not think that they do.

Finally, there is the case of Mrs. Brenda Cairns-Wicks. She had been a teacher in St. Helena for six years and was an unestablished civil servant. We dispensed with all that 20 or 30 years ago. She became pregnant. Normally, when a teacher becomes pregnant, she gets 14 weeks' leave or whatever, but not a bit of it. The rules and regulations in St. Helena had not been updated and she was required to resign. After her confinement, she would have to apply for another job, if one were available. I brought the matter to the Minister's attention. He is an honourable man and I like him, but it is to his shame that he has done nothing about the matter. She was forced to resign. The rules were changed a week after she resigned, so that others who become pregnant will not face the same appalling situation. Nothing could be done after she had resigned, because her job had already been filled. It does not reflect well on the Government and shames the Minister. No competent Governor would have allowed it to happen.

I do not want to bring this into my closing remarks, so I should like to deal with it immediately. I very much regret what happened to Mrs. Cairns-Wicks, but by the time the matter had been brought to our attention, her job had been filled. She has been told that she can reapply for any future vacancy, but I believe that she is living on Ascension and has no intention of taking up that offer. The Government regret that she suffered from a failure of the law that we rectified as soon as we found it.

I am pleased to hear that. The case should never have happened. I hope that if Mrs. Cairns-Wicks applies for another job, she will be given every consideration.

My time is nearly up, but there are other matters that the Government should consider. The ODA has been trying to do its best, but it could change its views on certain issues. The constitution needs upgrading. Above all, when we appoint expatriate officials, we must ensure that they have empathy with the islanders. It is not enough for them simply to be the man or woman from Whitehall sent to rule the island. To some extent, once they arrive, they are the representatives of the island in Whitehall. In the past few years, I fear that that dimension has been slightly missing.

11.45 am

I speak as secretary of the all-party group on St. Helena and dependencies. I congratulate my hon. Friend the Member for Sevenoaks (Mr. Wolfson) on securing the debate. St. Helena is a British dependent territory; its culture is British and its only language is English. There are fewer than 6,000 people on the island. Those people are our responsibility and it is right that we should debate them in Parliament.

I concur with much of what was said by the hon. Member for Wrexham (Dr. Marek). The House will have sympathy for Saints, as St. Helenians are called. They are almost marooned on an island 700 miles from Ascension and six days' steaming from Cape Town. Inevitably and necessarily, its economy depends on financial support from Britain of between £6 million and £8 million a year. That is a large sum and the Government naturally want to restrain it. However, I shall show that Government policy militates against success in that respect.

Government policy is to persuade the islanders to move towards standing on their own feet. The unhealthy 75 per cent. of jobs in Government employment is being reduced. That is all very well, but as there are only a small number of private sector jobs on the island, the policy has pushed up unemployment to 17 per cent. The Government have responded by advocating self-help, but that is where the British Government have to open doors to enable it to become a realistic opportunity.

There are several matters on which the Government should act. The first is employment opportunities. I know that I am not the only hon. Member who did not realise when we passed the British Nationality Act 1981 that we were closing off the route for St. Helenians to come to work in the UK. I recognise that this is not the appropriate time to press for St. Helena to join Gibraltar and the Falklands in having a general right to seek employment in UK. That should not be done until the Hong Kong issue is out of the way. I should be surprised if the Minister and candidates of all parties at the general election were not approached by Saints in their prospective constituencies and asked for a commitment on that after the election and after the Hong Kong problem is out of the way.

Meanwhile, there are three steps that the Government could take without creating a precedent or other problems, and I urge them on the Minister. First, we could restore the pre-1994 domestic work scheme, under which some 50 permits for Saints to work in the United Kingdom were issued. Secondly, that scheme was replaced by a training and work experience scheme, but it ends at age 35. It would be practical and useful to extend it to 40 or 45. That scheme provides only temporary access to the United Kingdom and only 30 people in St. Helena are currently able to take it up. Making it easier should increase numbers and help tackle unemployment on the island.

Thirdly, general work permits for entry to the United Kingdom from anywhere in the world are issued in respect of specialist skills not available in the UK. Only one Saint has been able to qualify under that scheme. The Government should relax the severe criteria to enable more Saints to qualify and should perhaps place a limit on the number of years that someone can be here—say, seven years. So my first message to my hon. Friend the Minister is that self-help needs opportunity. I urge him to create that opportunity, in a way that will cost him no money and which will help the economy of the island and perhaps make it possible in a minor way to reduce the Government's commitment.

Tourism is a swift route to job creation in any economy, but its development requires an improvement in communications. The only regular access on and off the island is RMS St. Helena. I praise the recent change in its sailing schedules. It now operates more frequently to Cape Town and Ascension island and less frequently on the long, slow journey to the United Kingdom. If tourism is to prosper, we need quicker and easier access from Europe. There is a way in which that can be achieved. The Royal Air Force currently provides a military service to Ascension island as a staging post on the way to the Falklands. We need the Government to put the service personnel flights out to commercial tender and allow tourists to be carried as far as Ascension, with its superb, untarnished beaches. That would reduce from 15 days to four the travel time from Europe to St. Helena and give a tremendous boost to the tourist trade. Self-help needs that opportunity.

As commercial flights to Ascension island are clearly the key, I recently raised the possibility with my right hon. Friend the Secretary of State for Defence. He noted what I said and agreed to come back to me in due course. I look forward, as I am sure many on the island do, to hearing what he can say on that score.

So far, so good, but I have to say that the islanders must be encouraged to create the accommodation and services on the island that modern-day tourists expect. In the past, there has been far too much licensing and far too many restrictions—undoubtedly designed to protect the fragile market of existing providers—but the island needs to be more open and welcoming to competition, which is, after all, the customer's best friend and the best way to raise the standard of tourist facilities.

Before I leave tourism, I have to say that it is not helped when cruise liners visit the island and are unable to land their passengers because there is no mole or decent-sized jetty. Last year, five major tourist vessels were unable to land a single passenger. Indeed, a cruise ship called earlier this month and could not land tourists. That represented a serious loss of potential revenue to the island. So if self-help is to succeed for tourism and local industry, the Government must put in that essential piece of infrastructure.

I illustrate the point in relation to the local tuna fishing industry. The island's boats and its fishing industry have been held back by strict quotas—my hon. Friend the Minister will know about this. The limits are not for conservation reasons, as one might have thought, but are because of the lack of processing capacity for fish when it has been landed. Happily, as a result of the help and encouragement of my hon. Friend the Minister, the Foreign and Commonwealth Office and the island's Government, Argus Helena Ltd. will open a new processing plant, probably in September this year, and the restrictions will then go. It will then be possible for St. Helenians themselves to build up their fishing industry. However, once the tuna has been landed, gutted and frozen, it needs safe anchorage for dispatch to markets in Japan and Italy. I praise the FCO and the Government for the encouragement that they have given, but a quay, jetty or protective mole is needed. Self-help needs a bit of investment.

I have a question for my hon. Friend the Minister about an inward investment proposal, which would provide some 50 jobs. It has already been referred to by the hon. Member for Wrexham, who, like me, no doubt received a fax from a Swedish company, Swegame, which wants to set up an international lottery, using the world wide web and the Internet. The Internet is spreading like wildfire, as my hon. Friend the Minister will know. It is an immense growth industry. An international lottery on the Internet can expect explosive growth. I understand that the Government are minded to refuse consent. I have also received the fax that the hon. Member for Wrexham received, signed by 21 Members of LegCo. I will not quote it because the hon. Gentleman has done so already. My hon. Friend the Minister should explain the Government's attitude and assure us that he will take into account the views of LegCo. If something is a legal and proper international operation—whatever his reservations, I should like to hear them—and if Gibraltar is allowed to have such an operation and there is nothing to stop it there, why should not St. Helenians be allowed to do so?

I sum up by saying that St. Helena is a responsibility of the House. The Government are right to move the economy of the island to self-help, but if that is to succeed, there must be opportunity. Opportunity requires, first, more access to the United Kingdom for employment, secondly a jetty, mole or quay for safe landing and unloading and, thirdly, the relaxation of restrictions on tourist flights to Ascension island and thence on to St. Helena. I hope that my hon. Friend the Minister will be able to give assurances on all those points.

11.55 am

I shall follow up some of the points that the hon. Member for North-West Hampshire (Sir D. Mitchell) made, in a constructive speech. It was a pleasure to listen to the speech of the hon. Member for Sevenoaks (Mr. Wolfson). I congratulate him, as others have done, on raising the situation in St. Helena. His descriptions were as fascinating as his arguments were persuasive. Unlike him, I have not visited the island—the isolation and the time required have prevented me—but I have visited the Falkland Islands. As a result, and because I have been for a long time associated with the Falkland Isles parliamentary group, I have gained a reasonable amount of knowledge over the years of the islands of the south Atlantic. My noble Friend Lord Beaumont has told me about the visit which the hon. Gentleman described. I should like to make only a short speech, so I will follow the structure that the hon. Member for Sevenoaks chose.

We have had a pretty bad record in recent years on the citizenship question. Several hon. Members have referred to Hong Kong. The treatment there of the ethnic minority is potentially a scandal. With respect to the hon. Member for North-West Hampshire, I do not see why St. Helena has to be put in a box until Hong Kong is sorted out. We are talking about fewer than 6,000 people, not a great flood of immigrants. As the hon. Member for Sevenoaks said, those people had British citizenship until 1981 and know of no other loyalty. I should have thought that we had a responsibility to them.

As for communications, I am sure that the hon. Member for Sevenoaks is right about the airstrip. Several hon. Members and my hon. Friend the Member for Wrexham (Dr. Marek) said that it was possible. I should like to know how much it would cost, if the Minister is able to say roughly.

I know that time is short, but there is a problem. If some potential tourist traffic is creamed off on to air landing, the viability of RMS St. Helena will be reduced and the demand for subsidy of its operation will be increased.

That is a fair point. Of course, if resources are limited and the number of people using the transport mode is limited, one may have to decide between one and the other. I agree with the hon. Gentleman. Certainly, everyone seems to be saying that the improvement of landing facilities is of pre-eminent importance. It was bad to hear the hon. Member for North-West Hampshire say that five cruise ships visited the island and had to go away without landing one tourist. That must have represented a large loss of potential income.

On the Government's commitment and the constitution, the hon. Member for North-West Hampshire was talking about self-help and saying that the Government should do this and that, but it is difficult for Governments who are pledged, as an article of faith, to non-intervention where possible to be terribly good at self-starting all those things.

We are talking about regional development on an island in the south Atlantic. Everyone has been careful to say that they know that Overseas Development Administration officials are well intentioned and so forth. There has been a "but" at the end of the sentence, however. I suppose it comes back to the fact that unless one motivates people to motivate themselves one will not succeed through some sort of paternalistic activity, as the hon. Member for North-West Hampshire said.

I want the Minister briefly to say something about medical services. I presume that any airstrip would have short lift-off capacity. I do not know what the hospital facilities are. If someone is in a severe medical condition on St. Helena, what does one do?

Courtesy of the questions asked by the hon. Member for Salisbury (Mr. Key) in March, I have been thinking about education. The information in the answers to the questions is pretty awful. The hon. Gentleman asked:

"how many (a) female and (b) males normally resident in St. Helena had commenced higher education courses (i) on the island and (ii) overseas".—[Official Report, 25 March 1996; Vol. 274, c. 417.]

A list was provided in the answer. Last year, out of the population of just under 6,000—that would perhaps mean 1,500 to 2,000 young people—there were two males and five females. In 1994–95, the previous year, it was one male and nine females. If the community is not educated—through no fault of its own—it will not be a progressive community and that is the plain fact of the matter.

Most things have been said about development. Unemployment of 18 per cent. in a small community is obviously bad and there is a concentration on tourism and fishing. Obviously, St. Helena is a fascinating place and it attracts spasmodic attention because of it. Books on Napoleon are produced every so often, for instance. However, we have a debt to the place and we have a responsibility that we are not fulfilling as we should.

As I have said before—no one agrees, but I will say it again—I have long admired the French system of dealing with their remaining dependent territories. St. Pierre and Miquelon, the two islands off the Canadian coast, are not as isolated as St. Helena, but they have a smaller population—2,500 to 3,000, I think—and they are well treated and backed by the French, as are Martinique, Guadeloupe and all the other French territories. Through France, they also have access to European Union funding. That is a good solution for our remaining dependent territories and not one that should be dismissed simply by saying, "We do not do that—the French do."

I found the speech of the hon. Member for Wrexham (Dr. Marek) very concerning, not least because, as anyone who knows him realises, he is not given to sensation and exaggeration. He said,

"Something is not right on the island."

Sadly, that seems to be true. I hope that when the Minister replies, he will at least tell us that the Government are aware of those shortcomings and of the needs and will respond.

Again, I congratulate the hon. Member for Sevenoaks, who has been the means of our having an interesting morning's debate.

12.4 pm

On these occasions, it is customary to pay tribute to the initiator of the debate and I do so with more sincerity than usual this morning, as the hon. Member for Sevenoaks (Mr. Wolfson) has done some service to the people of St. Helena and to the House by raising this matter.

To pick up on the remarks of the hon. Member for Inverness, Nairn and Lochaber (Sir R. Johnston), there can be no doubt that our commitment—whether that of this Government or of a future Labour Government—to the island and its dependent territories is legal and historical, but it is also a moral commitment and we cannot avoid that. The question, therefore, is how we discharge that commitment, rather than whether it exists; I think that all hon. Members would take that view.

I must own up to my relative ignorance about St. Helena. Possibly the hon. Member for Inverness, Nairn and Lochaber, the Minister and I are the only ones present who have not had detailed exposure to the islands and their people. I must thank my hon. Friend the Member for Monklands, West (Mr. Clarke), who attended the recent Commonwealth Parliamentary Association visit and took the trouble to tell me of his observations and to pass on those of the hon. Member for Sevenoaks, whose written comments and his speech this morning were interesting and important.

I do not want to make a partisan or party-political point, but some of the responses of the Foreign and Commonwealth Office when island issues have been raised have smacked of complacency. That might be an unfair charge, but I wanted to put it on the record and the Minister can deal with it in whatever way he chooses.

An article on St. Helena appeared in The Sunday Telegraph after the invasion of the governor's office and the assault, albeit a minor assault, upon his person. The issue is serious and the Minister's answer in Hansard tended to play it down considerably, playing down the underlying and clear unhappiness of the people on the island. In the article, the governor is quoted as saying that although "dumbstruck" by the events he also found them understandable. He said:

"The islanders are fearful of their future. They worry about what will happen to them—and their anger was taken out not at me personally but at the institution I represent."

The House and the Government have to accept that collectively we are the institution against which that anger was vented. That is important. We have to take seriously the uncertainties and fears of people on the islands.

To an extent I am repeating remarks that have already been made this morning, but if we recognise that two thirds of the jobs on the island depend directly on British Government subvention—the hon. Member for North-West Hampshire (Sir D. Mitchell) said that it was 75 per cent., I think—that the direct bilateral aid budget is more than £8 million but was £11.7 million at the beginning of the decade and that that decrease has paralleled an increase in unemployment from a little under 8 per cent. to the present 17.5 per cent., we must also accept that the worries and fears of the islanders are legitimate. While we are not talking of a third world economy, nevertheless it is not an economy in which people are individually or collectively well off.

While I took considerable comfort in the comments about the progress of the fishing industry, which is clearly to be welcomed, that industry is a relatively modest employer. Even if we envisage great change, it will probably still remain a modest employer for some time to come. The hon. Member for Salisbury (Mr. Key) asked a question about the number of businesses since 1984 that had taken advantage of the taxation breaks available on the island. The answer shows that in the two years for which figures are available, one cabinet maker and one coffee producer had done so. Business formation at that rate will not resolve the problems.

That brings us to the issue of what the islanders want, what the ODA wants, and what the Foreign Office wants. We recognise that economic development will depend on significant input from Britain—however we engage the private sector, the commitment of the public sector will be needed. Will the Minister comment on the strategic review and the country policy plan which either has arrived or is due arrive on his desk this month? We need to know what are the implications for bilateral aid. The need for consistency of aid has already been emphasised; people need an element of certainty in order to operate successfully. That is a legitimate demand, to which I add my voice.

Will the Minister comment on what is known about likely future flows of inward investment? It is clear that inward investment of some sort will be needed—whatever self-help can do, there is neither the level of capital nor the potential for formation of capital on the island to make the necessary investment without outside intervention. What estimates have been made of the potential for investment? In addition, will the Minister comment on what assessment has been made of the viability and growth of traditional industries such as fishing, which has already been mentioned, agriculture and forestry? They have some potential, but one would not want to overestimate their likely impact.

The industry that all hon. Members who have spoken today have mentioned is tourism. When I returned from the Falklands recently and passed through Ascension island, I was lobbied during my brief sojourn on the issue of tourism and on the need to examine both the viability of tourism on Ascension in the interests of Saints who have given many years of service to Britain and to the British Crown, and the possibility of having a two-centre approach. The hon. Member for Sevenoaks mentioned that his report to the Commonwealth Parliamentary Association referred to the opportunity to link the futures of Ascension and St. Helena in a little tourism matrix, as a unique niche form of tourism.

That would depend on transportation links and hon. Members have said that there is a trade-off to be made between the potential arising from air links being opened up and the impact—possibly damaging—on the existing sea route. There must be a strong case—indeed, the Minister may confirm that it is already being done—for carrying out a serious feasibility study into the linkage between the different transportation systems and the development of a tourism industry that could allow the islanders, in a guided way, to exploit the island's resources.

I want to pick up one of the points raised by my hon. Friend the Member for North-West Hampshire. It seems ridiculous that, not only potential, but real demand for tourism is being turned away because of the lack of facilities that would probably require only a relatively modest investment. I urge the Minister to take that matter seriously as part of his consideration of developments that could be achieved in the short term.

In my remarks on the economy of the island, I hope that I have demonstrated that the commitment of any Government of this country to the island must be genuine. I shall now return to the four Cs raised by the hon. Member for Sevenoaks. I have already touched on communication in my comments on transportation links, but there is another aspect to that. I am aware that the island currently receives Cable News Network, courtesy of Cable and Wireless. It might be out of the question, but in view of my personal enthusiasm for the service I want to ask the Minister about the role of the BBC World Service, both radio and television. St. Helena is not only an English-speaking community, but a British community. From my visits to South America, I know of the demand that Britain should have a presence there and that BBC television should be made available. I should have thought that the possibility of extending the BBC service to St. Helena at reasonable cost to the islanders should at least be considered.

All that I can say in respect of citizenship is that I recognise that from the bishops commission—now the citizenship commission—onward there have been demands for citizenship and that will continue. There is no easy answer that I can offer on behalf of a future Labour Government and I shall not pretend otherwise, because that would be dishonest. I shall listen with interest to the Minister's comments.

On the issue of constitutional arrangements, I was concerned by the comments of the hon. Member for Sevenoaks on the legal framework—whether it was adequate and whether it could change quickly enough to respond to the needs of the islanders. That might have an impact on constitutional matters, for example, whether the constitutional settlement is such that the pace of legal change can be rapid enough to respond to the need to welcome business investment.

My hon. Friend the Member for Wrexham (Dr. Marek) has a detailed knowledge of these matters and I was interested in his remarks about the case of the school teacher. I accept and understand the Minister's explanation, but hon. Members must ask themselves whether issues should have to be raised with a Minister in Britain when they might be resolvable at local level. I am sure that the case raised by my hon. Friend would have been resolved in everybody's interests at local level had the local authorities had the necessary powers. That case calls into question whether the current constitutional settlement is one that we would want to promote in the modern world.

We are not talking about a colonial regime of times gone by, but about people who should be given the maximum encouragement to help themselves. That self-help should extend not only to economic matters, but to issues such as local control and self-government where that is appropriate. I ask the Minister to tell us about the various constitutional reviews that have taken place, including the CPA review, and where they fit into the framework. I urge him to consider carefully whether the time has now come for a proper examination of the island's legal capacity and of the potential for local control.

This has been an important debate, because it forces hon. Members—especially me in my capacity as a Labour party spokesmen and as an individual Member of Parliament—to recognise that issues of concern are outstanding and that they are the responsibility of the House of Commons. We cannot duck that responsibility. The relationship between St. Helena and Britain cannot and will not be dissolved—our commitment exists and we have to examine how we can honour that commitment as we move into the 21st century.

12.17 pm

I add my thanks to those already expressed to my hon. Friend the Member for Sevenoaks (Mr. Wolfson) for raising this issue. I welcome the opportunity to set out the Government's position, to explain some of the issues raised by hon. Members today and to state clearly the way in which we propose to deal with the problems in St. Helena.

I agree with my hon. Friend that the state of St. Helena's economy is precarious and that it requires our closest attention. I assure the House that it is getting that attention. The diplomatic and aid wings of the Foreign and Commonwealth Office are keenly focused on the need for positive and real change. I assure the hon. Member for Stretford (Mr. Lloyd) that there is no question of complacency on the part of the Government—we are addressing these important issues vigorously.

Everyone who has the welfare of St. Helena at heart agrees that the status quo is not an option. The problem, as we have known for some time, is that economic and social pressures, when allied to aid dependency, can only lead to a downward spiral of economic stagnation. As with all the remaining dependent territories, we care very much about the welfare of St. Helenians and share wholeheartedly their desire for a better and more prosperous future. Our task, along with that of the St. Helena Government, is to shape that desire and turn it into reality.

Our continuing commitment to the island is evidenced by our aid support, which, as my hon. Friend the Member for Sevenoaks and others mentioned, is more than £8 million a year. That equates to some £1,500 per head of population and is the highest per capita package of UK aid in the world. It is testimony to the seriousness with which the Government take their responsibilities towards the island and shows the importance that we attach to it.

However, we and the "Saints" themselves want to see a reduced dependency on aid, not only because of the burden on the UK taxpayer under the present circumstances, but because we want a self-sufficient, confident and economically viable St. Helena. Neither we nor the Saints want the island held back by financial dependence on the United Kingdom. We want the island to develop. We are committed to a process of change. To paraphrase the St. Helena Government's stated vision for the future, we want economic development to lead to a prosperous future for the island.

Private sector development and public sector reform are the keys to the island's future. To begin that process, we are negotiating an important three-year country policy plan with the St. Helena Government. The basis for the agreement was the St. Helena Government's strategic review, which was completed last year. The document results from a great deal of hard work by the St. Helena Government and the governor, and we congratulate the team on its efforts. The strategic review provides a comprehensive approach to St. Helena's economic and social development.

The country policy plan will set out action plans for each sector. A specific plan will encourage inward investment and private sector development. We shall help with this in every way we can. The plan will also highlight how the Government can either transfer activity to the private sector or deliver services more efficiently through the public sector.

There has been a degree of concern on the island about the Government's public sector reform programme and its social consequences and that has led to some of the matters that have been mentioned, particularly by the hon. Member for Wrexham (Dr. Marek). I appreciate that there have been difficulties between the governor and some of the inhabitants of St. Helena, and I have no doubt that the governor is trying hard to deal with the exceptionally difficult circumstances which the state of the economy in St. Helena has imposed on him. It is not easy for reform programmes to be put in place without a certain amount of short-term hardship and discontent, but I hope that those circumstances can be resolved and that, as the policy plan is put into effect, we shall improve St. Helena's economy and get over the problems that have been mentioned in the House today.

For our part, the plan would commit the ODA to a substantial aid package spread over the next three years, which would give the St. Helena Government more responsibility for their own affairs. They could divert savings from within the budgetary aid element of that framework to other priority areas of Government expenditure. Thus, they would maintain firm control on their own expenditure programme and be able to prioritise accordingly in a way which hitherto they have been unable to do. I hope that that will reassure my hon. Friend the Member for Sevenoaks, who raised the question of the inability of the St. Helena Government, particularly LegCo and ExCo, to play a full part in handling the economy. As we move forward with our plan, those difficulties will be resolved.

St. Helena's isolation proved useful in Napoleonic times and at other times in the past, but in today's world it is a major drawback. It is approximately 1,200 miles from the nearest continental land mass and it takes five days by ship to Cape Town. Physical isolation means that the cost of St. Helena's products when they are exported are high, which is obviously a substantial brake on the island's potential for economic development of the export market. Isolation also deters potential investors from spending their valuable time getting to and from the island to explore ideas for development. We need to find ways around this. I accept the points made today about the need to develop a wharf and to examine air services and I assure the House that the Government are looking closely at those issues.

The RMS St. Helena provides a vital link between the island and the outside world. It is a modern, well equipped ship funded by the ODA and it serves St. Helena and her people well, and long may she continue to do so. As the hon. Member for Stretford said, neither he nor I have had an opportunity of getting to St. Helena, unfortunately. I believe that those who have travelled on RMS St. Helena have found her comfortable and have been extremely well looked after. She should be an asset not only as a means of communication for Saints but to encourage tourism, and I hope that many more people will use the opportunity. As the House knows, we have altered the ship's schedule so that long-haul journeys have been reduced and short-haul local journeys increased. I hope that that will enhance both those opportunities. We shall continue to seek the best balance in the schedule between the island's transport needs and the need to make the ship commercially viable.

Several hon. Members touched on the possibility of providing an airport on the island. We continue to keep that under review, but I shall not hide from the House the fact that such a project would be extremely expensive and currently difficult to justify. One problem would be to find a commercial air service able to run a viable route to the island. Another problem is the enormous expense of building a modern airport that conforms with Civil Aviation Authority rules. The distance from Cape Town means that we would need fairly large long-haul aircraft to make the journey. Moreover, the difficulties of providing an airport on St. Helena are great but we are looking at that problem and I hope that we can find ways around it in due course.

Inward investment is absolutely vital if the island is to prosper. It will breathe new life into the economy. The current cash flow is tiny and the existing private sector is saturated with small service industries. We need new productive investment, encouraged by the St. Helena Development Agency. We also plan a new business forum in London whereby we hope to encourage investment and focus the attention of people in this country on the opportunities that St. Helena offers.

As has already been said, the fishing company, Argos, is leading the way and I welcome the investment that it has put into the island. It is extremely good news as it will create some 40 jobs, which represents about 10 per cent. of the island's unemployment rate. It is worth noting that we do not need extensive investment to deal with the unemployment problem. About 450 people, representing 18 per cent. of the island's work force, are involved. That should not present insuperable problems so long as we and the St. Helena Government work together, as we shall.

Unfortunately, I have very little time with which to deal with the many points that have been raised, so I intend to take some of the more important ones. I mentioned the difficulties that the governor has had on the island. I assure the hon. Member for Wrexham that the ODA consults strongly with the island. Of course, the islanders are sometimes disappointed that the ODA does not accept their plans but the reason is that the ODA does not think that those plans are viable, and the islanders' well-being is the primary reason for any decision that has been made.

I take the opportunity, while touching on inward investment, to commend the work of Mrs. Essex, who is listening to this debate today. She will return to the island in May and has done a phenomenally good job as its representative in this country. I wish her well and hope that her labours will bear fruit.

Hon. Members mentioned constitutional change. There again, we now have the CPA plan at which the St. Helena Government are looking closely. Her Majesty's Government will look with great sympathy at any proposals put by the islanders for constitutional change. It is in our interests as well as those of the islanders that those matters should be satisfactorily sorted out so that the balance of responsibility reflects the reality of the day.

My hon. Friend the Member for North-West Hampshire (Sir D. Mitchell) raised a series of important points. He asked about the training and work experience scheme in this country. I assure him that the scheme is unlimited in terms of the numbers which we would take and it therefore offers great opportunities to St. Helenians to get the necessary work opportunity to stimulate investment so that their expertise can be used on the island.

Will my hon. Friend give way?

No, I do not have time.

I accept my hon. Friend's point about the age limit of 35. My officials are looking into that and I hope that we shall find ways to raise it. I accept that it would be useful if slightly older people could be included in the scheme.

With regard to the wharf, detailed proposals are being put forward to build a breakwater and to improve the anchorage at St. Helena so that we can get the tourists in on the cruise ships and make sure that ships can be loaded and unloaded, whatever the weather.

Finally, on Swegame, we are not prepared to allow an Internet lottery. It takes place on Gibraltar without the consent of the Government or the Governor of Gibraltar. We are investigating how that happened. We cannot yet resolve the difficulty of regulating an Internet lottery, but we hope to do so in the future.

House Condition Survey (Energy Reports)

12.30 pm

Last week the Birmingham Evening Mail published a letter from Mr. Thornton of Weoley Castle, who is a war veteran in his seventies. He stated:

"At the time of writing, the temperature in the kitchen is 42 deg F"—

that is about 5.5 deg C—

"and in the bedroom it is 34 deg F"—

about 1 deg C above freezing.

As the Minister knows, such conditions do not meet even the minimum Government standards for safeguarding health. Sadly, Mr. Thornton's conditions are not an isolated case, as is amply demonstrated by the house condition survey report. I commend the Government for commissioning the detailed work in that hefty document. It has been a long time coming—the survey took place in 1991–92. Although the report states that there has been little change in the situation since then, a new survey is to be undertaken.

It has taken several years for the report to be published. Its publication was originally planned for the summer. I do not know why it was not ready then; the Government were probably aiming for it to be published in the recess. In the event, it was published two days after the Budget and, unfortunately, received little publicity. No one seems to have seen the Department of the Environment press release on the subject. I am pleased that this Adjournment debate allows me to give the Government the opportunity to discuss such an important report.

In 1983, the Conservatives promised to make Britain the best housed nation in Europe. The contents of the survey show how badly they have failed in that aim. The report is an indictment of almost 20 years of Conservative government. It shows that one in five dwellings in the social housing sector, two in five in the private rented sector, and even one in 10 in the owner-occupied sector have energy ratings that show them to be grossly inefficient. On the Government's standard assessment procedure scale, which goes from one to 100—100 being the most energy efficient—those are the proportions of types of homes that are less than 20 per cent. energy efficient. Although I gave the proportion of only one in 10 homes in the owner-occupied sector, that represents 1.3 million dwellings, which is the largest number of dwellings in any sector that are grossly inefficient.

The report states that when the temperature is 4 deg C, which is above the temperature that triggers cold weather payments to people on low incomes, 50 per cent. of owner-occupied housing, 62 per cent. of council and social housing in the housing association sector and 95 per cent. of private rented housing fails to achieve even the minimum standards to safeguard health as laid down by the Government. More than one in three households would need to spend more than 10 per cent. of their income on fuel to achieve the more comfortable standard heating regime. By that standard, more than 60 per cent. of lone pensioners underspend on heating. No wonder in the first two weeks of this year the Government's Office for National Statistics reported 10,000 excess deaths. Mr. Thornton is, indeed, not an isolated case.

The report states that, despite the mild weather in 1991–92, only 25 per cent. of the homes surveyed fully met the standard regime for temperature, and only 70 per cent. conformed with the minimum regime. It is reckoned that, to achieve the 30 per cent. energy efficiency savings laid down in the Home Energy Conservation Act 1995, expenditure of £80 billion will be required. The Government have accepted that target.

The Department of the Environment circular on the 1995 Act issued in early 1996 states that the Secretary of State takes the view that improving the energy efficiency of residential accommodation is important because of the environmental impact of energy use in the domestic sector—estimated to be responsible for more than 25 per cent. of emissions of the main greenhouse gas, carbon dioxide—and because of the desirability of ensuring that every household has access to affordable warmth. I am sure that all hon. Members support that aim, but the report shows how far we are from achieving it.

The guidance notes go on to say that the Secretary of State takes the view that an overall improvement in energy efficiency of 30 per cent. in residential accommodation covered by the Act in England alone is to be regarded as significant, and gives advice accordingly.

The report states that £25 billion to £80 billion is needed to meet that target. It also states that one in five homes cannot be improved to current building regulation standards, and recommends that they should be replaced with new homes. That would mean a massive increase in the house-building programme, in line with the building programme that occurred after the war.

I am sure that the Minister will say that the report tells us that most households are satisfied with their heating systems—only 13 per cent. are not. It is difficult to square that with the objective findings that show the appalling state of our housing stock in terms of energy efficiency.

In case study 4, which deals with a family of owner-occupiers who bought their low-rise flat from the local authority, the family stated in the questionnaire that they were fairly satisfied with their heating system, which was a rather old central heating system. The report notes, however, that at the start of the interview the family voluntarily identified heating as something that they were unhappy about. There seems to be a problem with the collection of the statistics. Nevertheless, I congratulate the Government on the report, which shows how much work needs to be done to bring our housing stock up to scratch.

What have the Government done to bring about such a sorry state of affairs? When I first became involved in politics as a councillor in Birmingham, we had a housing investment programme of £75 million a year. I have checked with Birmingham council, and the housing investment programme allocation for next year is £28 million. One must take into account the difference in prices between the 1979–80 figure of £75 million and the 1997 figure of £28 million, which demonstrates the enormous reduction in investment not just in the council housing sector but in housing associations.

In its 1992 election manifesto, the Conservative party claimed that it was spending £2 billion a year on the housing association sector. That expenditure was reduced to about £650 million in this year's Budget—a massive cut that exemplifies the Government's failure to honour their pledge to the country in 1992. It is just another in a series of broken Tory promises.

Reduced investment leads to all sorts of misery. I know from my surgeries the appalling conditions in which many of my constituents are living. Only 5 per cent. of council-owned stock in Birmingham has energy ratings that meet current building regulation standards of 70 per cent. energy efficiency. Some 15,000 homes are below the national average of 35 per cent. energy efficiency—which is itself too low and needs attention. It is reckoned that it will cost £1.3 billion to raise council housing in Birmingham to modern standards—and, as I have said, the council's housing investment allocation this year is only £28 million. That illustrates the Government's sorry record in this area, particularly their failure to honour their manifesto commitments.

The Government's energy efficiency programme also comprises the home energy efficiency scheme. The Chancellor increased spending on the scheme to £100 million in his 1994 Budget Statement—a mere drop in the ocean in view of the scale of the problem. However, the Government could not maintain even that level of spending and, despite promises from the Chancellor and two other Ministers to maintain it for three years, in November 1995 it was cut to £75 million. That caused many redundancies in firms operating home energy efficiency programmes. Expenditure has not increased this year, and remains at £75 million. We should contrast that figure with the £60 million in assistance provided to those on low incomes through the cold weather payments scheme.

We must invest in our housing stock. There are many ways to do it, but the Government are failing in that task. Although £80 billion sounds like a lot of money, the same sort of sum was spent on Trident. We cannot bring that money back, but it would be good if, as we approach the 21st century, the Government—hopefully, there will be a new Government after the election—would give a commitment to tackle the problem and make Britain the best housed nation in Europe. It is not an insuperable problem: it could be done. The Government recently announced their intention to spend £15 billion on the Eurofighter aircraft. Those aircraft were conceived during the cold war and are now unnecessary. That money could be used to improve the energy efficiency of our housing stock, which would have a favourable impact on global warming and do more to ensure global stability than military spending of that nature. Perhaps that funding could be targeted.

I am pleased that my right hon. Friend the shadow Chancellor has committed the next Labour Government—who I am sure will soon be in office—to a programme of energy efficiency funded by the windfall levy on public utilities. It is most appropriate to spend the excess profits of the gas and electricity industries on a programme to improve energy efficiency, reduce fuel consumption and make people more comfortable.

The debate gives the Government an opportunity to announce their plans for the future. They have failed to tackle the housing problem in their 18 years in office—I wonder what commitments they will make in their next manifesto. The Government must pull their socks up if they are to perform at a level anything like that needed to make Britain the best housed country in Europe—an aim that we must all share as we approach the millennium.

12.44 pm

I welcome this opportunity to debate the important subject of home energy efficiency. It will probably be no surprise to the hon. Member for Birmingham, Selly Oak (Dr. Jones) to learn that I do not agree with the conclusions that she has drawn from our report. I do not believe that any objective interpretation of that report supports her conclusions. Nevertheless, I welcome the opportunity to debate its important findings.

In the words of the hon. Lady, this is a very hefty report. It is the most comprehensive and detailed review of the energy efficiency of the housing stock yet published, and it represents a very careful analysis by the Building Research Establishment of a formidable body of survey data. As the hon. Lady said, we published the report in November last year. I assure her that there was no delay in releasing the information, and results were published as they became available. Early findings were published in the main report of the English house condition survey 1993 and further results were published in 1995 in the Department of the Environment's guide on energy efficiency in council housing.

The hon. Lady selected some figures from the report and placed her own interpretation on them. I do not deny that some households have faced difficulties, especially during the extremely cold weather that we have experienced in the past few weeks, but her selective use of the report's evidence fails to do justice to the subject and does not put the figures into proper perspective.

The starting point for the debate should be the fact that this country's housing stock is relatively old. That brings some advantages: many people value the style, space and arrangement of older houses, but they were constructed when fuel was cheap and when the technology of energy conservation was not well developed. The price we pay is a housing stock that is energy inefficient but which can be—and, crucially, is being—improved. Although the houses are technically inefficient, the survey shows clearly that the great majority of households—some 87 per cent.—are satisfied with their heating. Although we know that elderly householders face particular difficulties, the survey shows that more than 90 per cent. of householders over 60 years of age are satisfied with their heating.

I am especially encouraged by the fact that the figures have improved continually. A similar survey carried out in 1986 found that only 80 per cent. of householders were satisfied with their heating. That is some measure of the improvements that have been made since then. Successive reports of the English house condition survey have shown that great strides have been made in home heating standards in recent years. In 1971, only one in three homes had central heating. By 1991, the proportion of homes with central heating had risen to more than four in five and ownership of homes with central heating continues to grow.

Moreover, in 1971, nearly one in four households still heated their homes with coal fires. By 1991, that proportion had dropped to fewer than one in 15. Nearly 80 per cent. of households now enjoy the convenience and increased efficiency of gas-fired heating. Similarly, the standard of insulation has improved dramatically in the past 20 years. The number of homes with insulated lofts has more than doubled from 42 per cent. to 90 per cent. The percentage with insulated cavity walls has increased tenfold in the same period and the proportion of homes with double-glazed windows has increased sevenfold.

Most households have derived the benefits of those improvements in increased comfort and, as a result of those improvements and the increasing use of domestic appliances, energy consumption has remained at broadly the same level. Without those improvements in insulation and in the efficiency of heating and other appliances, it is estimated that fuel consumption could have risen by 50 per cent. The switch from coal to gas has produced a significant reduction in carbon dioxide emissions and made a contribution to the substantial progress that we have achieved in meeting our climate change commitments under the climate change convention.

Our homes are generally much warmer than they were 20 years ago. That has direct benefits in comfort and health. Although housing conditions are not the sole cause of excess winter deaths, the fact remains that the number of such deaths has halved since the early 1970s. It is not unreasonable to assume that that is in part a reflection of improvements in the way in which homes are heated. Nevertheless, we recognise that while homes remain energy inefficient, some households will continue to face particular difficulties. That is why cold weather payments are made available to those who are most vulnerable in periods of cold weather. So far this winter, more than 5 million payments have been made, totalling £43 million.

We fully accept, as the report shows, that there remains a good deal to be done. The Government are pledged further to improve energy efficiency as part of our commitment to sustainable developments and to containing United Kingdom carbon dioxide emissions, taking into account resource and economic considerations.

The domestic sector is responsible for nearly 30 per cent. of carbon dioxide emissions. We have taken many initiatives to improve the energy efficiency of domestic dwellings. With the aim of increasing the energy efficiency of new housing and reducing carbon dioxide emissions, the Government amended part L of the building regulations dealing with the conservation of fuel and power in 1990, and again in 1994. The 1994 amendment extended the provision for energy conservation to the conversion of existing buildings. New homes are now highly energy efficient.

As the energy report shows, however, there are many vulnerable households living in older property that find it difficult to heat their homes adequately. The largest single programme in the Government's energy efficiency programme is targeted on those households. The home energy efficiency scheme provides grants for basic home insulation and advice for householders who receive an income-related benefit, a disability allowance or who are aged 60 or over. The budget is about £73 million in 1996ߝ97, equivalent to about 400,000 grants.

Will the Minister explain why the Government did not honour their commitment to spend £100 million for three years after 1994–95?

As the hon. Lady may know, that is linked to changes in the application of value added tax on domestic fuel. We have maintained our commitment to a substantial programme to help the households that I have described with home energy efficiency. The hon. Lady will be pleased to know that we have recently announced a 3 per cent. increase in the budget for 1997–98, to take spending up to £75 million.

The scheme is popular and well regarded, and has already helped more than 2 million households—10 per cent. of the stock—since it was set up in its present form in 1991. That represents 2 million low-income and disabled households which have been able significantly to increase their comfort levels and keep themselves warm. The environmental benefits of the scheme are, rightly, secondary to its social benefits. Even so, they are not negligible, as the measures are long lasting and will, over time, contribute significantly to reduced carbon dioxide emissions.

My hon. Friend the Minister with responsibility for energy efficiency recently announced significant changes to the home energy efficiency scheme to make it even better. From later this year we shall be introducing new measures, such as cavity wall insulation and heating control upgrades, in addition to the basic measures of loft insulation, draught proofing and pipe and tank lagging.

Home energy efficiency schemes will continue to provide a high-quality programme of improvements to the housing stock. In recent years, the scheme has been supported by other programmes of improvements, especially those promoted by the Energy Saving Trust in partnership with the electricity regulator and the regional electricity companies under the general title of standards of performance. We have recently announced further Government support for the Energy Saving Trust. About £71.5 million will be available to the trust from 1996 to the year 2000 to promote the efficient use of energy, an increase of £21.5 million on previous public expenditure plans for the years 1996 to 1999.

The Government have fully recognised the role that local authorities can play. Under the Home Energy Conservation Act 1995, which came into force in England in April 1996, local authorities are required to prepare and publish reports on the energy efficiency of all the residential accommodation in their areas. The reports must identify practical and cost-effective measures that will significantly improve the energy efficiency of those dwellings.

The Government have played a full part in ensuring that the aims represented by the Act can be achieved. We have issued guidance, prepared with the full co-operation of local authority associations and other bodies with an interest in energy efficiency, which has stipulated that a "significant improvement" will not be less than 30 per cent. Detailed assistance with the preparation of the report has been provided, including free software to help authorities to assess the housing stock in their areas.

As a further part of the framework supporting implementation of the Act, revised guidance to local authorities on developing and implementing effective energy efficiency strategies for all housing in their areas is in preparation. This will update and supersede the well received guidance that the Department first issued in 1993 on energy efficiency in council housing.

The result of the Home Energy Conservation Act will be a 10 to 15-year programme to bring about a comprehensive improvement to the housing stock. For the first time, statutory authorities have been given a duty to take energy efficiency seriously, and we have made it clear that we expect to see results.

The Act extends local authorities' sphere of influence into the private sector. It recognises the unique position of local authorities to bring a strategic oversight to energy issues. The great majority of homes are in private ownership, and that means that the responsibility for taking necessary action must rest with owner-occupiers and landlords. Local authorities, however, are well placed to encourage that action through information, advice, education and publicity, and the Act lays great emphasis on that. It also provides an opportunity for partnerships with a wide range of other agencies.

In addition to the activities to which I have referred, through the Home Energy Conservation Act, energy efficiency has also been achieved through the new estates renewal challenge fund competition. A total of £174 million was allocated in June 1996 under the first round of the scheme to 11 authorities to facilitate transfers of poor quality local authority housing to registered social landlords. Estates renewal challenge fund money is going towards essential improvements to the stock, which are necessary in many instances to bring homes up to modern standards and to make a transfer viable.

A number of round 1 schemes include measures such as new double glazing, roof insulation and insulation through the cladding of tower blocks. These and other such improvements will greatly improve the energy efficiency of the homes concerned. That will in turn improve the living standards of tenants, save them money in meeting heating bills and assist in making the estates attractive investments for the private sector. These are part of the wide range of activities that we are undertaking. There is also the work that we are doing through private sector renewals and the home improvements agencies, all of which is bearing fruit.

I hope that I have set out the positive measures that we are taking to improve existing stock. As I said at the outset, the starting point for the debate is the fact that much of our housing is relatively elderly.

I listened carefully to the hon. Lady's arguments. By implication—I noted this in passing—there was a strong and pronounced plea from the hon. Lady for additional public spending, including public spending on house building. She referred to the targets that have been set by the shadow Chancellor, but she knows that the activities that are to be funded through moneys raised through the windfall tax do not extend to house building.

Will the Minister give way?

I shall not give way again.

The hon. Lady should know that we are meeting our target on social housing. It seems that she is making a plea for considerable increases in public spending in that area, as well as a diversion of expenditure from defence. It is not clear whether she wants a diversion of public expenditure or additional expenditure. The hon. Lady is nodding, which leads me to think that she is in favour of additional public expenditure. These are matters of interest. She made the charge that we have not spent sufficiently on social housing. She will know that we have set a target of 60,000 social housing properties below market rent, and we are achieving that without the additional spending and building that she seems to favour, which was a very pronounced feature of her speech. I hope that that fact will not be lost.

We have already achieved a great deal through a range of programmes and public spending and are bringing about a pattern of improvement that is—

On a point of order, Mr. Deputy Speaker.

I hope that it is a matter for the Chair.

The Minister is attempting to prevent me from making a contribution and from responding—

Order. The hon. Lady knows that that has absolutely nothing to do with the Chair.

I have given way to the hon. Lady once already.

I conclude by saying that we have done a great deal, and the objective interpretation of the report is one of improvements—

Order. We must now move to the next debate.

Us-Uk Air Service Agreement

1 pm

I am honoured that my right hon. Friend the Secretary of State will reply to my humble debate. It shows the significance and importance of the subject that I am raising.

The talks between Her Majesty's Government and the United States Government on changes to the bilateral air agreement between our two countries are of the greatest significance for civil aviation in this country. The move towards an open skies policy between us means not only that a new era has begun but probably that our Government will have to play the highest card left in their hands—control of access to Heathrow airport. Therefore it is surprising that this appears to be the first time that the negotiation has been debated on the Floor of the House, and then, alas, for only half an hour. I know that other hon. Members are anxious to take part.

The inevitable background to the talks and the proposed alliance between British Airways and American Airlines is the proposal that 168 slots at Heathrow will be transferred. This transfer is presumed to quieten concerns over the possible dangers to competition arising from the alliance.

Let me make it clear that I do not in any way endorse the view of the European Commission that the issue is its responsibility. A Commission that has allowed and condoned massive handouts to national airlines in France, Spain, Italy and Greece, to mention just a few, has no right to expect confidence in its ability to enforce fair competition.

In addition, I do not raise the issue to attack British Airways. I am well aware of its great success since privatisation. However, some considerations lead me to ask whether all the facets of the issue are being properly examined.

First, if confirmed by the bilateral talks, is the British Airways-American Airlines deal really in the best interests of the consumer? At the moment, the two airlines have a 100 per cent. monopoly of 13 transatlantic routes, and 80 per cent. of other routes, particularly the important ones—London-New York, London-Boston and London-Chicago.

Many of the slots that are supposed to be released will be only on a temporary lease and will not, in the eyes of many other airlines, really provide powerful enough competition, especially as they would have to be divided between seven competing airlines wanting to run new services from Heathrow, at least two of which are British. Such a monopoly on so many routes is not healthy. As we have seen over the years in Europe, we know to our cost that many fares are still too high. It is clear that at least three carriers are needed on each route to ensure adequate competition.

There is a further concern that British Airways, having given up some slots, could switch the use of other slots that it currently holds. There is a worry in some regions of the country that that could affect regional services, so they will require some guarantee or reassurance on that point.

If the intention is to strengthen competition, how can British Airways suggest that it sells its slots at about £3 million a time? That would amount to approximately £500 million for British Airways. I have never understood how any airline can claim to own something for which it has not paid, and which is of value solely because of Government action, for example licensing services into Heathrow.

As a member of the Select Committee on Transport, I asked the former Secretary of State for Transport, my right hon. and learned Friend who is now Foreign Secretary, what his views were. His response was similar to the remarks that he made to the American Chamber of Commerce on 24 July 1991. He said:

"No airline has a legal right to a landing or take-off slot. Rather, airlines have permission, and this must be subject to the public interest … People, rather than airlines, come first. The government will decide aviation policy on the basis of what is best for the travelling public, and if this conflicts with the interests of any individual airline, the former will take priority."

He concluded by saying:

"British Airways has benefited over the years from the competition it has received from smaller British airlines. The government will continue to seek to extend the opportunities for all British airlines in Europe, in the United States and right around the world."

Will my right hon. Friend tell the House whether Her Majesty's Government's policy on this point has altered? If so, when and why? If an airline sells only some of its slots and continues to use others, keeping the payments that are made for them, it has extra resources available to fight competitors.

My third question is whether Her Majesty's Government should make an agreement with the United States soley on the basis of the British Airways-American Airlines alliance. Many will argue that there are other considerations, such as the need not just to consider the consumer but to benefit other British airlines that also wish to use Heathrow more—British Midland would like to develop new European routes and says that it needs more slots to do so, and Virgin Atlantic also wishes to increase its intercontinental services—let alone meeting the need to make room for new services from new competitors.

Is there not a danger that if US negotiators feel that our overriding concern is to cement the British Airways-American Airlines deal they will not offer us much else in the negotiations? There are those who fear that a one-sided open skies policy would allow the United States to enjoy extra freedom rights beyond the United Kingdom to Europe and further afield, while British airlines, including British Airways, would gain no greater access to the US domestic market, which is by far the largest in the world with nearly half of all aircraft movements.

The possibility of giving away entry control at Heathrow has led others to ask for more meaningful access in the United States for all UK carriers that want it. The question of cabotage should surely be on the agenda for the intergovernmental talks.

I say to my right hon. Friend that I fully understand why the Government want to help British Airways in its competition with the biggest of the world's airlines, all of which are based in the United States. I suggest to my right hon. Friend that we should never forget that other United Kingdom airlines exist, and they deserve encouragement. I refer to his predecessor's speech from which I quoted.

At this moment we should recall the treatment of Laker Airways, which competitors froze out of the market, and where compensation was paid only long after the airline ceased to fly. I hope that my right hon. Friend will agree that that episode was not the happiest memory in the history of British civil aviation.

My fourth question relates to the ownership of airlines. We know that current United States law forbids foreign ownership or control of a United States airline. That means that, unless the law is changed, British Airways—or any other British airline—can never take over any American airline. Certainly, BA cannot take over American Airlines. Can my right hon. Friend tell the House of any similar legal device that would prevent American Airlines, or any other foreign airline, from taking over BA? In view of what has happened in the public utilities, I suspect not. Moreover, I understand that between 20 and 25 per cent. of BA shares are already in the hands of American investors.

My fifth question relates to the Government's intention regarding the treaty negotiations, and the apparent advantages and disadvantages to be gained or lost from any change. In an attempt to obtain information, I tabled a question to the Secretary of State—Question 5657—in November. I asked

"what information he has asked the CAA to provide concerning benefits to the United Kingdom that would arise from the proposed British Airways-American Airlines alliance; and what factors underlie changes from the previous practice in respect of consultation with the CAA."

A junior Minister replied:

"It is for the competition authorities to analyse the proposed British Airways-American Airlines alliance. I understand that the CAA has contributed to the analysis carried out by the Office of Fair Trading."—[Official Report, 29 November 1996; Vol. 286, c. 420–21.]

Not surprisingly, that reply did not entirely satisfy me, and shortly before the Christmas recess I tabled another question. I asked the Secretary of State whether his officials had discussed with the CAA

"the issue of commissioning a balance of benefits study in relation to the renegotiation of the US-UK Air Service Agreement (Bermuda II); and what assessment he has made of the adequacy of the analysis in relation to the bilateral talks."

The same junior Minister replied:

"Officials regularly discuss UK-US aviation matters with the Civil Aviation Authority, and such discussions have included the feasibility of an overarching 'balance of benefits' study of liberalising UK-US air services. We decided not to instruct the CAA to undertake such an analysis; the number of variables which would need to be taken into account, and assumptions which would have to be made, would make it impossible to model results which could be treated with any confidence. I am however satisfied that UK negotiators are fully briefed for the current series of bilateral talks."—[Official Report, 13 January 1997; Vol. 288, c. 111–12.]

I find that reply remarkable. I have been given to understand that, in the past year or so, the Department itself has requested the CAA to undertake an analysis of the benefits or disbenefits of a European-US open skies agreement. That is clearly much more complicated than the UK-US bilateral. I have also been informed that the CAA has been prepared to produce such an analysis for the present situation. I feel that I must ask my right hon. Friend to explain why the Department abandoned the chance to obtain a balance-of-payments study.

Furthermore, if no such study or analysis can be conducted, will it not be more difficult for the House and all interested parties to judge how successful or otherwise the negotiations turn out to be? Even our own negotiators would surely have been assisted by an analysis. It could even be asked how my right hon. Friend himself can be sure that any agreement is in the best interests of the United Kingdom's airlines and consumers.

I realise that I have asked my right hon. Friend a number of questions that he may not have time to answer fully today, but I believe that they need to be answered, and I hope that he will assure me that answers will be forthcoming.

Let me repeat that I have great admiration for British Airways and its achievements. Some critics, however, feel that it has somehow managed to "sew up" the Department of Transport on the question of the bilateral, and I think that such suspicions will only be confirmed by cagey departmental replies to the questions being raised. According to some newspapers, the chief executive of British Airways has also "sewn up" the Labour party in exchange for his advice to the Leader of the Opposition. I sincerely hope that neither statement is true, but, if either were true, it would not reflect well on the civil aviation policies of either of the main political parties, both of which are now supposed to believe in competition and value for the consumer.

Will the hon. Gentleman give way?

I am sorry; I have only a short time left.

I believe that the guiding principles of our civil aviation industry should be fairer competition, less monopoly, greater opportunities for British airlines in foreign markets—including the United States—enabling new services and airlines to come into being, and the long-term consideration of the interests of the consumer. No one will be more delighted than me if my right hon. Friend can assure me that he agrees, and that those are the very principles that will be kept in mind during the current negotiations with the United States. I await his reply with interest, but, as I have said, I accept that he may have to expand on it at a later date.

1.15 pm

I am grateful to my hon. Friend the Member for Wellingborough (Sir P. Fry) for raising what he rightly described as a very important subject, and bringing his insight and experience of civil aviation matters to our debate. If I do not manage to deal with all his questions, I will indeed write to him and be as helpful as I can.

Let me make two points clear at the outset. The first relates to the position being taken by the United Kingdom in its current negotiations with the United States, which will resume in Washington on 4 February. I hope that the House will understand that it would not be appropriate for me to go into details of the UK's negotiating position here: it would make life much harder for the Department of Transport negotiators if their US counterparts were able to formulate a position based on their reading of Hansard.

We have adopted a robust negotiating posture in the negotiations—so robust, indeed, that the Americans withdrew from them last August. We are beholden to no particular sectional interest in the United Kingdom. Let me respond to the point raised by my hon. Friend at the end of his speech by expressing the hope that the UK Government will be able to reach a liberalising deal with the US, to the benefit of consumers, UK business and airlines generally; but I have no quarrel with his broad description of our overall objectives.

Will not the whole process of the bilateral discussions be improved and strengthened, given that the Governments of both countries have perhaps been dragging their feet in terms of the proposed alliance between British Airways and American Airlines? Will not attention be focused on the process in a way that it may not have been so far? That is why we have been negotiating, or attempting to negotiate, for so long.

I think that I agree with the hon. Gentleman. My own view is that it is in everyone's interest for a liberalising agreement to be reached between the UK and the US, involving more competition, more services, more innovation and more competitive tariffs, but there are difficulties that need to be resolved before we can arrive at that point.

The second qualification that I need to make clear at the outset relates to the proposed alliance between British Airways and American Airlines. The Director General of Fair Trading is currently considering responses to his examination of the proposed alliance under the merger provisions of the Fair Trading Act 1973 and article 85 of the treaty of Rome. My hon. Friend will understand that, because of the formal position of my right hon. Friend the President of the Board of Trade, it would not be appropriate for me to comment on specific competition or consumer aspects of the proposed alliance. My hon. Friend dwelt on those aspects in some detail. I will, however, draw what he said to my right hon. Friend's attention, and see whether he can respond on issues for which he has ministerial responsibility.

It may help if I set out the current position on UK-US air services. Aviation relations between the UK and the US are governed by the Bermuda II agreement, signed in 1977, which has subsequently been amended on many occasions. As it stands now, the arrangement allows full access by US airlines to all airports in the United Kingdom except for Gatwick and Heathrow, which means that there are no restrictions on carriers mounting transatlantic services to airports such as Birmingham, Glasgow, Manchester and Stansted.

Capacity and designation restrictions apply at Heathrow and Gatwick airports. On the routes operated, rules specify the number of airlines which may operate and the capacity that each side may operate in relation to the other. Only a limited number of routes can be operated from Heathrow—to 12 specified destinations—which are restricted to two carriers from each side: British Airways and Virgin Atlantic Airways, for the UK; and American Airlines and United Airlines, for the US.

Bermuda II is a balanced agreement, providing UK and US airlines with broadly equivalent opportunities. Over the years, market share has typically been split 50:50, although recently the split has been 60:40 in the UK's favour—which is due partly to the capacity UK carriers provide the market by using larger aircraft and to the high quality of service provided by British Airways and Virgin. Anyone who has travelled across the Atlantic on either of those carriers does not need me to point out that they lead the world in the product they offer.

Since Bermuda II was signed, the market has grown threefold, and the consumer has been well served in choice of destination and competitive fares. It is a UK success story. One in every four passengers travelling between Europe and the US travels with BA or Virgin, and many passengers from continental Europe choose to fly over London with a UK carrier rather than with a carrier based in their own country.

I shall now deal with the point made by the hon. Member for Cunninghame, South (Mr. Donohoe) in his intervention. The Government are committed to liberalising the air service relationship between the UK and the US. We believe that the consumer is best served in an open and fair market, in which carriers can choose which services to operate. By allowing competition from both established and new entrant carriers, such a liberalised arrangement leads to increased choice, better service and lower fares.

The UK has long been in the forefront of pushing for liberalisation. Our experience of liberal markets has shown that more carriers come on to routes, fares become more competitive, service standards rise and everyone benefits—such as other businesses, the travelling public and, not least, the airlines themselves.

In 1993, the then Secretary of State for Transport, my right hon. Friend the Member for South Norfolk (Mr. MacGregor), and his US counterpart, the then Transportation Secretary, Federico Pena, made a public commitment to liberalisation of the UK-US market. The Government believe that liberalisation of that market must be based on a balance of opportunity for carriers of both sides. Crucial to that goal is the ability of UK airlines to obtain fair access to international travellers originating in or travelling to the large US domestic market, without which UK carriers would suffer a competitive handicap.

Nearly one third of all passengers start or end their journey in the US behind a gateway point. The Government believe that access to US "beyond gateway" traffic is important, and that one of the best ways of achieving such access is through alliances between UK and US carriers. That view has been taken by other Governments and airlines in Europe, where in recent years there have been a number of transatlantic alliances.

Recent attempts to liberalise the UK-US aviation agreement have not been entirely successful. After the 1993 commitment by the UK and the US to liberalise arrangements within a year, the UK proposed a phased liberalisation approach, built around British Airways's plans for further investment in USAir. The US broke off those negotiations in December 1993.

In 1995, both sides resumed a phased approach to negotiations, and, in June 1995, a limited deal was reached. The deal allowed a second US airline on the Chicago-Heathrow route and increased services by BA to Philadelphia; agreed expanded code-sharing opportunities for both sides; agreed some limited access to US Government traffic—known as "Fly America"—through BA's arrangement with USAir; and, perhaps most significantly, agreed regional liberalisation, enabling any number of US and UK airlines to operate from any point in the US to anywhere in the UK, apart from Heathrow and Gatwick.

The 1995 deal was followed by an immediate resumption of negotiations on further limited and balanced access to Heathrow and Gatwick, cargo services, charters and pricing, and some additional limited access to "Fly America" traffic was allowed. In October 1995, however, the US again broke off negotiations.

Since the 1995 breakdown in negotiations, the US-Europe market has developed. Several large alliances have been created, such as those between United Airlines, Lufthansa and SAS, covering the German and Scandinavian markets; Delta, Swissair, Austrian and Sabena, covering the Austrian, Belgian and Swiss markets; and KLM and NorthWest, covering the Dutch market. The US authorities have given anti-trust immunity to each of those alliances, enabling them to co-operate in such areas as routes and pricing, and to build large multinational networks.

We believe that the UK-US aviation market should not be viewed in isolation, but in the context of the overall European-US aviation market. The UK is strong in that market, as 40 per cent. of the US-Europe market travels to or from the UK. The next biggest share is held by Germany, which has 18 per cent. Heathrow is the pre-eminent international gateway for travelling to the US, and many passengers choose to do so via other points in Europe and beyond. Gatwick is increasingly important in that market, and regional airports, including Manchester, have benefited from recent liberalisation.

We are doing well, but strong competition is developing from the other European alliances and airports—such as Frankfurt, Charles de Gaulle and Schipol—which are challenging our pre-eminence. It would not be in the UK's interest to lose our strong position in that market. The alliances developed between other European and US airlines—some of which are very large—represent a competitive challenge to the UK's strong position, and undoubtedly they were formed, in part, to challenge our position. UK airlines can be expected to wish to make similar arrangements so that they can continue to compete strongly.

The Government believe that the proposed BA-AA alliance could provide the basis for liberalising arrangements with the US, provided that the competition authorities are satisfied with the alliance. In its report of 30 July 1996, the Transport Select Committee supported our position. It stated:

"We would not wish the UK to 'miss the boat' in these developments and believe the alliance between British Airways and American Airlines could be a means of ensuring that the United Kingdom continues to be a major player in the world air transport industry to the great benefit of the UK economy."

Formal negotiations with the US are under way—they will reconvene on 4 February 1997—and will be without prejudice to investigations by the relevant competition authorities. As I said, I cannot comment on specific competition or consumer aspects of the proposed alliance, but I should like to make one point clear. The Government firmly believe that the UK competition authorities possess the necessary powers to investigate and, if appropriate, to approve the proposed alliance. The UK's credentials on general airline competition speak for themselves. No member state in the Community has more consistently and actively been in favour of open competition on equal terms within the single European aviation market than the UK.

Control of aviation state aid is one sphere in which the Commission undeniably has responsibility to ensure free and fair competition. Over the years, however, the equivalent of many billions of pounds have been poured with the Commission's full approval into state-owned national carriers by some of our European partners. My hon. Friend the Member for Wellingborough mentioned that matter in his speech, and I should like to give the House some examples of aid packages authorised by the Commission. In 1993, the Commission authorised about £165 million to be paid, over three years, to Aer Lingus. In 1994, it authorised about £700 million to be paid, over three years, to the Portuguese airline TAP. In 1994, it authorised about £1 billion to be paid, over three years, to Olympic Airways. Again in 1994, it authorised about £2.4 billion to be paid, over three years, to Air France.

More recently, in 1996, the Commission authorised Iberia Airlines to receive about £460 million, with the possibility this year of receiving another £100 million. In addition to that distressing catalogue of single market distortions, the Italian Government have recently asked permission to inject about £1.2 billion into Alitalia. The Commission is investigating the matter.

In contrast, UK carriers have received not a penny of assistance from the UK Government. They have had to compete by funding their investment out of their own resources, knowing that they would go to the wall if they failed to keep pace with their subsidised competitors. I am proud that BA, Virgin, British Midland and so many other UK carriers have risen so successfully to that challenge. They are still disadvantaged, however, by the failure to get to grips with state aid elsewhere in Europe.

My hon. Friend asked one or two specific questions that I shall now answer. The Department has not asked the Civil Aviation Authority to undertake a balance and benefits study for the precise reason that he gave. I shall make inquiries about earlier studies into matters European and write to him.

There are restrictions that would prevent AA from taking over British Airways. European Union law requires effective ownership and control of an airline to be in the hands of EU nationals, so at least 51 per cent. of BA has to be in EU ownership.

Towards the end of his remarks, my hon. Friend mentioned the negotiations. I can confirm that the following issues are part of the current discussions: liberalised market access for transatlantic traffic, including the lifting of designation, access and capacity restrictions at Heathrow and Gatwick; a liberal pricing regime; a dispute resolution framework involving an independent panel to ensure swift action against any abuse of market power; rights beyond services between the UK and United States; access to the United States internal market—

Order. We must now move on.

Unemployment And Poverty (Cornwall)

1.30 pm

Cornwall is a poor county and has several of the country's worst unemployment blackspots. In fact, Cornwall is as poor as any region in Europe, our unemployment rate is as high as that of rural Portugal, and incomes and wealth per head are as low as those of the Aegean islands. This poverty is made worse by high costs: housing is expensive, public transport is scarce and, to top it all, we pay the highest electricity and water bills in the country.

Since 1 January, we have been hit by a series of blows: the loss of more than 300 jobs at the St. Ivel factory at St. Erth; the fact that 300 or more jobs are to go in St. Austell's china clay industry; the loss of the air link to Heathrow, which is vital for local businesses; and the news that the A30 improvements at Goss Moor have hit another Government delay.

Officially, however, the south-west region stretches westwards from Cornwall to include the far more affluent counties of Gloucestershire and Wiltshire. As a result, according to the Government's official statistics, Cornwall is simply a small part of the country's third richest region. This merging of Cornwall with a group of far more affluent counties has served to disguise its high levels of poverty and unemployment. Even taking Cornwall and Devon together as a mini south-west region leaves the impression that Cornwall is better off than it really is. It is therefore worth spending a few minutes on hard facts.

Let us start with unemployment. Seasonally adjusted figures for the entire south-west region released earlier this month showed an unemployment rate of only 5.5 per cent., the second lowest in the country after East Anglia and lower than the national average. However, the level of unemployment in our county is more than 25 per cent. higher than the national average. Unemployment in Cornwall actually rose last month, and the county continues to have several of the country's top 10 worst unemployment areas. Already this year, more than 700 jobs have gone or are to go. They have been lost as a result of long-term changes in the local economy and they are unlikely to come back.

For me, however, the key figures relate to the long-term trends for Cornwall compared with the rest of the United Kingdom. Suffice to say that economic reports for the county in the early 1970s, which I have read, talk of the problems of over-employment, with a shortage of workers to fill available jobs. Now, on current figures, our unemployment rate is 25 per cent. higher than the national average, and the gap has widened under this Government.

In December 1981, on the narrow based definition of unemployment—the only definition of unemployment at the time—the national unemployment rate was 12 per cent. In Cornwall it was 16.6 per cent., just over 38 per cent. higher than the national average. As economies fluctuate, those figures will vary, but the differential should not change for the worse—indeed, we would hope to improve it. But, in December 1996, the gap had widened from 38 to 54 per cent. higher than the national average on the equivalent figures. The current figure of 25 per cent. is based on a different calculation of unemployment.

The problems are not confined to people out of work. Those in work in Cornwall can expect to take home far less than the national average wage. Average male weekly full-time earnings in Cornwall are now under 80 per cent. of the national average, and the gap has been widening. In other words, wages in Cornwall are falling ever further behind the national average, despite bills in Cornwall going up more quickly than the national average. Female workers do not fare much better—they are earning just over 80 per cent. of the woman's national average wage. The gap between average female full-time weekly earnings in Cornwall and the national average is wider now than at any time in the past 15 years—indeed, it is twice what is was in 1981.

High unemployment and low wages combine to give Cornwall an average disposable income as low as anywhere in the UK. In 1993, the latest year for which figures are available, the national average gross domestic product per head was £9,263—taking into account everyone in the country, working or not. In Cornwall, it averaged £6,596, only a fraction more than 70 per cent. of the national average.

Costs, however, are high in Cornwall—that applies to housing, getting around and bills. The best-known example is water. Since privatisation, water prices for domestic customers in England and Wales have risen by an average of 39 per cent. in real terms. In the region served by South West Water, however, the rise has been much higher. Since privatisation, average water bills have risen by more than 100 per cent. and are easily the highest in the UK. Local incomes do not reflect that fact, and neither pensions nor benefits are adjusted to allow for it.

The problem is the same in housing. The difference between average incomes and average house prices is, I am told, the highest in the country. This makes the actual poverty far worse in practice because people cannot afford the bills in the way they might be able to elsewhere in the country on the same income.

I hope that there is therefore no doubt of the high level of need in the county. That level of need implies an equally high level of help from the Government, but, time and again, Cornwall does not get the fair deal that I believe it deserves.

Cornwall's councils are still funded by an average of £100 less per person compared with the rest of England. The gap is even greater if we look further afield—the two Coopers and Lybrand reports commissioned by the West Country Development Corporation make it clear that the county does not get the help that similar areas, often facing fewer problems, get—for example, Scotland and Wales. The west country tourist board received only around £400,000 from the Government last year for the whole of the south-west, whereas Scotland received £16.9 million and Wales £14.78 million.

My hon. Friend may have seen the figures that Ministers produced for me this morning on the level of Government investment in the promotion and development of tourism in England generally. It now stands, in real terms, at one third of the commitment that existed even in 1979 whereas in Wales, Scotland and Northern Ireland it has increased by 50 per cent. in real terms. It has increased to the ridiculously low level of 10p per head in England—and, of course, in this context, that includes Cornwall.

My hon. Friend reinforces what I am saying.

Statistically, as Cornwall is lumped together with its wealthier neighbour Devon or with the wider, even more prosperous south-west region, the county does not get the help it could and should get from Brussels. The county's poverty entitles it to the highest level of European grant funding but it gets only a lower level because it is linked statistically with wealthier Devon. Equally, British Government funds have been axed this week as the Rural Development Commission announced that cuts have forced it to close its business support programme.

Today's announcement by the Cornish company St. Merryn Meat that its next major development of 700 jobs will be in Wales not Cornwall illustrates the problem. The company emphasises the good road links to Wales, yet we still struggle to get the A30 completed. The Welsh Development Agency gave it 20 acres of land—we do not even have a development agency.

What does Cornwall need to build jobs, increase wages and create prosperity? How do we overcome the problems of high and rising unemployment, and of increasing poverty against a background of rising incomes in the rest of the UK? Let me set out what might be seen as a manifesto for Cornwall, containing eight key policies to put our problems right. Perhaps I should say at the start that most of them are already supported by most people in Cornwall, irrespective of political party. They are mainly issues on which all Members of Parliament and councillors have fought together, but we need national Government support. So far, the Government have not been persuaded. I hope that whichever party is in government after the general election, we can persuade it to act.

First, we must have a commitment to maintain the air link to Heathrow. It is a vital lifeline for business people in Cornwall, providing frequent global links that allow easy access to worldwide markets, as the Secretary of State for Transport said in the previous debate. The loss of that air route would be catastrophic for many businesses in Cornwall and would make the area even less attractive to inward investors, who often regard access to Heathrow as essential. English China Clay International, for example, has told me in the past that a number of its operations based in Cornwall for its international work could not be operated without the air link to Heathrow. That is not the only business that could consider relocating some operations out of the area if the air link were axed. I have received many letters on the issue, as have other Cornish Members of Parliament.

Gatwick is not a viable alternative. A connection to Gatwick has been tried in the past and proved unviable. Gatwick does not have the same range, let alone frequency, of international flight connections as Heathrow. The Secretary of State has already admitted that he has the power to ring-fence the landing slots at Heathrow for us. So far he has refused to use it. It is time that he did so.

Secondly, a date must be set for starting improvements to the A30 at Goss Moor. After halting the design work more than a year ago, late last year the Government announced that it was to restart—a widely welcomed announcement. The county council had a contract to do this, which it was half way through when the Government previously stopped it. The county council could start again immediately, but the Government are now insisting that the work is re-tendered, so nothing will happen until well after the general election, probably not until 1998. The lack of an efficient road link to the rest of the country is hurting local business and hurting the surrounding villages, into which all the tall, heavy lorries from west Cornwall have to be diverted, because they cannot drive down the main road through the county.

Thirdly, the Millennium Commission has an important proposal for a university for Cornwall before it. The plan has widespread, cross-party support and should be actively supported by the Government. Expanding higher education opportunities in Cornwall would be good for business and good for jobs, stopping the considerable brain drain of the best of Cornwall's young talent out of the county, to which they rarely return.

A similar proposal was a Liberal Democrat manifesto commitment at the last election. This time, I hope that all parties will be able to unite around that promise, on the back of Millennium Commission support. A university for Cornwall would give a much-needed economic, as well as intellectual, boost to the county. The campus would generate hundreds of new jobs and would bring an estimated £20 million a year into the local economy.

Fourthly, we need a commitment to the Eden project, which is also before the Millennium Commission. It is a hugely exciting project that would be a vital boost to visitors to Cornwall, creating much-needed jobs in the St. Austell area, which has been hard hit by the loss of another 300 jobs in the clay industry—losses that can only worsen, as they have over the past 20 years. Once access problems are overcome to protect local residents—I am sure that they can be—the project will become a symbol of optimism for the county and could be a genuine boost to jobs, cutting unemployment and giving the kind of investment in the county that will bring other economic gains.

The fifth vital commitment for Cornwall is that the Government—any Government—should back Cornwall county council's bid to be classified separately from Devon for European funding. Treating the two counties as one area has masked the true extent of Cornwall's relative economic disadvantage. The Government are reviewing the situation. I hope that they will agree that Cornwall deserves a separate NUTS 2 classification, as it is called—I do not think that the name represents a particular view on Europe, it is just the name that it has been saddled with. That classification would give Cornwall the highest rate of European economic support—the so-called objective 1 status, granted in this country only to Merseyside and the Scottish Highlands. That would also reduce the problem of finding matching funding in such a poor area, lack of which is currently holding up many projects that could otherwise go forward.

Sixthly, any new Government must review the funding that Cornwall receives. With fewer police, less for schools, less for development and less for local services, Cornwall has failed to get a fair deal over many years. The two Coopers and Lybrand reports proved that, but still no real action is being taken.

The seventh vital issue is a review of the system of water and electricity charging. The current system leaves us with the highest bills in the United Kingdom, hitting businesses and people alike. Liberal Democrats have already outlined how we believe that that could be tackled. Ours is not the only possible solution, but a solution is needed.

The final, and most important, commitment must be the creation of a Cornwall development agency. The advantages that such an agency, if properly funded, can bring to an area are clear. The successful records of similar agencies in Scotland and south Wales confirm their potential, but they must be backed by adequate Government funding. A Cornwall development agency could draw on local expertise to back local small businesses, as well as the larger employers in the area. It could be a one-stop shop, providing advice and financial support for businesses in the county. Drawing together funds already held by the training and enterprise council, the Department of Trade and Industry, central Government and Europe, it would have real financial clout. It is important to remember that it would not be an extra, but would replace many of the existing agencies.

Decisions could be made locally and fast by people based locally, fully in touch with the problems and needs of the community. Their jobs would depend on bringing investment that far west. Anyone in such a job based further east can justify their job by developments further east, which are easier to bring in. Few developments come to our side of the Tamar.

We are not suggesting breaking links across the border. Cornwall has shown, through the joint office in Europe, that we can build links, working with others, but the agency must concentrate on success in Cornwall. Its work must be based on local knowledge and activity, backed by existing funding. That funding is currently so widely spread between so many organisations that many of them can do little more than print letter heads and fund their bureaucracy before they run out of money, which means that much of it is wasted.

The issue is too important to Cornwall for simple party politics. As I have said, most of the ideas have cross-party support in the county, but not, sadly, at national level, which is what counts for getting the go-ahead. That is why the Liberal Democrats commissioned an independent group of leading Cornish businesses and development experts to draw up a report on how an agency could be set up and how it would work. That report is to be published next Monday and I hope that every party will take it seriously. Whoever wins the general election, the new Ministers will find the report on their desks, with Cornwall demanding action.

People in the county want the chance to show what we can do. We know that we can make a real success of our economy—the talent is there—but this manifesto for Cornwall can be achieved only by Government action, because the power for each decision lies in London, not Truro. If the answer is yes, poverty and high unemployment can become things of the past in Cornwall.

1.47 pm

I congratulate the hon. Member for Truro (Mr. Taylor) on obtaining this Adjournment debate. The issues that he has raised are obviously important for his constituency and the surrounding area.

As the hon. Gentleman knows, last week we announced another large fall in United Kingdom unemployment and a strong rise in the number of people in jobs. That good news applies to all regions, including the south-west, which has the second lowest seasonally adjusted unemployment rate in the country, at 5.5 per cent. As the hon. Gentleman acknowledged, unemployment in the south-west has been falling over the past six months by an average of around 3,500 people a month. The national and regional picture is positive.

However, I accept that unemployment is still too high. I fully accept that more needs to be done in Cornwall in particular, where unemployment regrettably rose last month, against the trend. However, the current unadjusted unemployment rate for Cornwall of 8.8 per cent. compares favourably with the figures of 10.2 per cent. in December 1995, 14.5 per cent. in December 1992 and a peak of 15.5 per cent. in January 1986.

The hon. Gentleman referred to recent redundancies in Cornwall and in his constituency. Of course, the recent announcements from English China Clay International at St. Austell. and St. Ivel at St. Erth, did not make for the best of starts to the new year for those affected by them. We always regret job losses and want to do everything possible to help. Programmes such as training for work, work trials, jobfinder's grants, and so on, are in place to come to the rescue of people who unfortunately find themselves out of work—particularly if it is for a long period. The English China Clay International and St. Ivel rationalisations will be treated as major redundancies, which means that the normal eligibility conditions for the Employment Service and training and enterprise council programmes will be waived. That is a very important consideration for the individuals involved.

With help from the Employment Service and Devon and Cornwall training and enterprise council, there is good reason to believe that people affected can expect—directly or after retraining or other supportߞto find other work in the foreseeable future. I understand that, with regard to the proposed closure of the St. Erth factory, new jobs will be generated at other St. Ivel and Unigate processing plants in the region and redundant workers from St. Erth will be given priority for those jobs.

I hope that the hon. Gentleman will acknowledge that the recent news on jobs in Cornwall has certainly not been all bad. As a result of the Inland Revenue at St. Austell winning its bid to house the self-assessment inquiries and stores section, 300 to 400 telephonist jobs are being created over the next couple of months. He will be aware that a number of new retail jobs can be expected as the new Treliske retail park nears completion. He must also be aware of the £4.8 million six-year CHEERS project, led by Restormel borough council and funded under the single regeneration budget, which is aimed at building and providing housing refurbishment and redevelopment to strengthen community involvement, improve employment and raise skill levels.

I make such comments not of course unaware of the pain and problems caused by unemployment to those affected, their families, and, indeed, across a much wider area, but I do not think that the prospects are quite as gloomy as the hon. Gentleman appeared to suggest. We know that not all people who are made redundant become unemployed and that most spells of unemployment tendߞmercifully—to be short. Of those people who do become unemployed, a quarter leave unemployment in one month, half in three months and two thirds in six months. Those are well-established trends.

However, we need to face the fact that the sort of job rationalisations to which the hon. Gentleman has referred are part of the process of a dynamic and changing economy—indeed a changing region, as he pointed out. It is not for the Government to interfere with or second-guess commercial decisions made by companies. If we were to try in some way to force companies to keep unprofitable sites open, we would inevitably add intolerable burdens to those already on business and risk destroying jobs in the long term, as our partners on the continental mainland have discovered very much to their cost.

We have to recognise that some jobs will be lost and others created, and that the pace of it will vary from time to time in different regions of the country. I should point out that it is to our great credit as a nation that the traditionally large disparities in unemployment between regions have largely been evened out. The extent to which we have succeeded as a nation in ensuring that, by and large, people up and down the United Kingdom have broadly the same opportunity to work is quite remarkable—a startlingly different picture from that even 10 years ago and certainly 15 or 20 years ago. We should be happy and optimistic about that. We must face the fact that people cannot expect to have the same job throughout their working life, and in doing so we must try to ensure that, whether by education, training or different kinds of support, we can help people to make the adjustments that inevitably arise from such changes.

The hon. Gentleman said much about economic assistance to Cornwall and implied—indeed I think said—that Cornwall was not somehow getting its fair share of Government funding. The problems that Cornwall faces are widely recognised in a number of different ways. That is why so much of the county has assisted area status and is eligible for regional selective assistance. Indeed, I understand that nearly £5 million-worth of regional selective assistance grants have already been offered in 1996–97 to companies in Cornwall, generating more than £31.5 million of investment and creating or safeguarding more than 600 jobs.

A number of other sources of assistance include funding to help develop the local economy under objective 5b of the European Community's structural funds. The private-sector led £8 million Bodmin business park, currently under construction, is an excellent example of how that funding is providing opportunities for business and new jobs in Cornwall. Local partners can apply for challenge funds under the single regeneration budget, and there is the new local competitiveness challenge fund, which was announced in October, under which local partnerships can bid for support for programmes to improve the competitiveness of local businesses.

I gather that there has been some misunderstanding locally over the fact that the Rural Development Commission's rural business support fund for rural development areas has become part of the local competitiveness challenge fund, as was alleged in a local newspaper. RDC money has certainly not somehow been cut and therefore become no longer available to rural areas. On the contrary, money formerly available from the RDC is part of the local competitiveness challenge, ring-fenced for rural areas—although that certainly does not prevent rural areas from bidding for further money that is available from the total pot for local competitiveness challenge.

rose—

I cannot give way to the hon. Gentleman because I am going to try to answer all his points in the very little remaining time.

The hon. Gentleman will be aware that, in April, my right hon. Friend the Prime Minister appointed my right hon. Friend the Minister for Local Government, Housing and Urban Regeneration as Minister with special responsibility for the south-west, focusing particularly on Devon and Cornwall. He was given responsibility for co-ordinating Government policy towards the region and for taking forward a "new deal" for the area. That was in recognition of the distinct identity and needs of the region and is a clear demonstration of the Government's support for the south-west.

Since taking up his appointment, my right hon. Friend the Minister has been able to deliver on many of the key strategic issues identified by the West Country development corporation as crucial to the region's economic development. Such issues have included improving vital communications to the far south-west by, for example, securing the restart of work on the dualling of the A30 between Bodmin and Indian Queens and securing £650,000 of European Union money for a feasibility study to speed up train services between Bristol and Plymouth.

My right hon. Friend the Minister has taken a close interest in tourism—a key part of Cornwall's economy—and announced in November a pioneering project funded by South West Water to regenerate Newquay and other seaside towns. A Government-funded strategic study of tourism in the region is also under way, which will provide the region's tourist industry with the best possible analysis of where growth opportunities exist. I would therefore urge the hon. Gentleman to keep in touch with my right hon. Friend in the weeks and months ahead. I shall of course bring the hon. Gentleman's points to his attention.

I might add that I am aware of the perception that the west country generally gets a raw deal compared with, for example, Wales and Scotland, to which the hon. Gentleman referred, when it comes to big inward investment decisions backed by Government funding. Part of the problem is the lack of very large sites for major developments. None the less, my right hon. Friend the Minister has secured progress on the Broadmoor farm site near Saltash by removing the Highways Agency direction to refuse planning permission, thereby paving the way for serious negotiations between developers and the local council. He has also secured early progress on the disposal of Seaton barracks—a prime inward investment site which, although in Plymouth, offers the potential to provide many additional jobs to Plymouth and the surrounding area. In addition, he has announced English Partnership's £5 million factories first initiative, which will provide a stock of readily available units of more than 10,000 sq ft in Devon and Cornwall.

I know, too, that Devon and Cornwall Development International is working hard with the local authorities to attract inward investment. There have already been some notable successes—such as that regarding the United States company Harman International in Redruth—which have been backed by regional selective assistance funds.

The hon. Gentleman mentioned the low pay earned by his constituents. Low pay is of course a relative term. There will inevitably always be some people whose pay is lower than others. The fact is that real earnings have increased at all levels since 1979 and real take-home pay for the bottom 10 per cent. of full-time workers is 14 per cent. higher for a single person than in 1979. More important, low pay does not necessarily mean low household income because household income comes from a number of sources. A family may have more than one wage earner or receive earnings plus state benefits. Even the European Community has recognised that, in the UK, unlike in most EC countries, low pay is a relatively minor cause of low living standards. Here in the UK, the single main cause of low income is not having a job. The best way of helping the lower paid is surely through the creation of the right conditions for a growing economy and the removing of barriers to employment.

The most effective way of raising the living standards and prospects of unemployed people of working age is to help them to get to work. We set up a comprehensive range of measures to help people to provide a better standard of living for themselves through work. The new jobseeker's allowance, for example, helps people to plan the most effective route back to work and creates a better framework of advice and support for the jobseeker.

We provide help through the benefits system to ease the transition from unemployment to work through such measures as family credit and the back-to-work bonus. The Government are currently piloting earnings top-up—an in-work benefit for single people and couples without dependent children—which makes working more worth while and widens the range of potential jobs for unemployed people. From April, the new child maintenance bonus will provide a bonus of up to £1,000 for people with care who leave benefit for work and who were receiving child maintenance while on income support or the jobseeker's allowance.

I hope that the hon. Gentleman will therefore accept that the Government recognise the difficulties that Cornwall faces and are responding to them—perhaps not quite in the way in which he has suggested, but in a way that will be more effective in the short, medium and long term. I hope that he and the local community recognise and support the important work that my right hon. Friend the Minister is undertaking, and that all local agencies, like those in London, will do everything possible to respond to the problems that he has drawn to the House's attention.

It being Two o'clock, the motion for the Adjournment of the House lapsed, without Question put.

Sitting suspended, pursuant to Standing Order No. 10 (Wednesday sittings), till half-past Two o'clock.

Oral Answers To Questions

Trade And Industry

Mid Kent Water Company

To ask the President of the Board of Trade when he expects to make a decision on the Monopolies and Mergers Commission report on the bid for Mid Kent Water by General Utilities and Saur Water Services. [10587]

To ask the President of the Board of Trade when he expects to announce his decision on the takeover proposed for Mid Kent Water by General Utilities and Saur Water Services. [10595]

My right hon. Friend the President of the Board of Trade announced his decision to block the proposed bid for Mid Kent Holdings plc by General Utilities plc and Saur Water Services plc on 21 January. That decision was in line with the recommendation in the Monopolies and Mergers Commission report which he published on the same day, and the advice of the Director General of Fair Trading and the views of the Director General of Water Services.

I thank my hon. Friend for that prompt reply, and I welcome the decision. In view of the fact that, collectively, the two companies have a 38 per cent. holding in Mid Kent, may I ask my hon. Friend what reassurances he can give to the company that that situation will not happen all over again?

My right hon. Friend the President of the Board of Trade has made it clear that the proposed bid by General Utilities and Saur for Mid Kent will be blocked and that undertakings will be sought by the Director General of Fair Trading from both companies. Those undertakings will be intended to ensure that those aspects of the proposed merger that the MMC identified as operating against the public interest are effectively prevented now and in the future.

I, too, congratulate the Secretary of State on a decision that will be warmly welcomed in much of Kent, and is clearly in the best interests of Kent and competition policy generally. Does my hon. Friend accept that that situation has arisen because rival companies have pooled their shareholdings to undermine previous undertakings? In the absence of the compulsory divestment of shares—which my right hon. Friend the Secretary of State is not seeking—how can we be sure that the situation will not arise again? Can my hon. Friend ensure that the undertakings will prevent the bid from being repeated or, indeed, being repeatable?

The honest and candid answer to my hon. Friend must be vigilance on his part, and on the part of my right hon. and hon. Friends who represent constituencies in Kent and of the Director General of Fair Trading. If he or his constituents suspect that something that they do not want is about to occur, they must tell the Director General of Fair Trading straight away.

Electricity Industry

To ask the President of the Board of Trade what representations he has received regarding takeovers and mergers in the electricity industry. [10588]

The President of the Board of Trade and Secretary of State for Trade and Industry

(Mr. Ian Lang)

In the past six months, I have received some 80 representations regarding takeovers and mergers in the electricity industry. In addition, the Director General of Fair Trading has noted some 100 representations when advising me.

Given that 50 per cent. of UK electricity companies are owned by foreign-based companies, does the Secretary of State feel that the Government have helped to defend the interests of British consumers by allowing the companies to be purchased? Is he aware that it is illegal for non-US citizens to buy shares in such companies in the United States?

First, I have had assurances from the American Secretary of Commerce, Mr. Mickey Kantor, that British companies can invest in electricity companies in the United States; and, secondly, the question of ownership does not affect the interests of the consumers. What matters to consumers is that the company is efficiently and competitively run. When the Labour party was last in power, electricity prices rose repeatedly by substantial amounts, but since privatisation, prices for both domestic and industrial consumers have fallen.

Are there lessons to be learnt about hostile and predatory bids as referred to by my hon. Friend and neighbour the Member for Medway (Dame P. Fenner)? Does my right hon. Friend feel that those lessons might suggest that such actions, which are so detrimental to both companies and their customers, should be examined as a matter of urgency?

Of course I will take careful note of what my hon. Friend says and consider it, but what delivers the best results to consumers is a free and open marketplace in which competition is the yardstick by which the Government decide whether it is necessary to intervene in a merger or takeover bid. I have measured my responsibilities against that criterion of competition, and it is notable that, in almost all the decisions that have been taken, the Director General of Fair Trading, the Director General of Electricity Supply and I have been of one mind.

Boeing-Mcdonnell Douglas Merger

To ask the President of the Board of Trade what assessment his Department has made of the implications of the Boeing-MDD merger for the British aerospace industry. [10589]

The proposed merger would be of great significance to our aerospace industry, which competes with Boeing and McDonnell Douglas, mainly through participation in the airbus consortium, but also works with them, notably in supplying equipment. The proposal is being considered by the United States competition authorities, and may also be considered by the European Commission. My Department is currently examining the implications with United Kingdom industry.

Does the Minister recognise that the merger will be a dominant feature in the aerospace industry for both civil and military aircraft and that the Government must ensure that the airbus consortium and our aerospace industry as a whole are able to compete, so that a monopoly is not created? Aerospace is crucial to Lancashire and to the country and we must ensure that it can survive.

The hon. Gentleman has had a long interest in the matter, and of course I take note of, and will bear in mind, what he says. The European Commission has not yet been notified by Boeing; when it is, we expect to play a part in the consultations and discussions, and we shall take account of what UK industry has to say. Indeed, if the Consortium of Lancashire Aerospace, with which I know that the hon. Gentleman is associated, wants to make any representations, I shall be delighted to hear from it.

This announcement, together with Boeing's cancellation of its work on its very large aircraft, makes it important that the Government should back our aerospace industry, and especially Airbus Industrie, with its plans for the stretch A340 and a large aircraft. Launch aid—or more properly launch loans—is extremely important to those two projects, and the recent announcements from America make it essential for the Government to back them.

I hear what my right hon. Friend says; he is right. I have every confidence in the British aerospace industry. To recap for the benefit of the House, since 1979 we have given about £1.25 billion in launch aid to help the industry and we shall certainly continue to consider projects that are brought to our attention, including projects involving research and development under CARAD—the civil aviation research and development programme.

Does the Minister appreciate the fact that 2,300 of my constituents have a strong interest in the response of the Government and of Airbus Industrie to the merger to which he has referred? What chances do my constituents, who make the wings for airbus, have of making the wings of the new jumbo jet that Airbus Industrie has planned?

That must be a matter for Airbus Industrie. We have been in the forefront of trying to persuade the consortium to convert to a company—in effect, a limited company—so that it is better able to compete with Boeing. It has been doing well and it needs to continue improving; we shall give every encouragement to ensure that that happens.

Has my right hon. Friend considered the implications of the proposals of the right hon. Member for Dunfermline, East (Mr. Brown) for the military and civil projects of the British aerospace industry, which the Government have supported through thick and thin? They would be prejudiced, if not terminated, if there were a Labour Government.

My right hon. Friend makes a valid point. If Britain had the misfortune to elect a Government whose spending proposals exceeded the taxation that they imposed, where would they get the money? Perhaps they would get it by cancelling projects such as Eurofighter.

Regional Policy

To ask the President of the Board of Trade if he will make a statement on the significance of the European Commission's first cohesion report for the regional policy of the United Kingdom. [10590]

To ask the President of the Board of Trade if he will make a statement on the impact of the European Commission's first cohesion report on regional policy in the United Kingdom. [10597]

As I informed the hon. Member for Wolverhampton, South-East (Mr. Turner) on 4 December, Official Report, column 696, the European Commission's cohesion report shows that the UK is one of the few EU countries where regional unemployment differences have decreased. It also shows that, since 1989, there has been a narrowing of relative gross domestic product per capita between UK regions.

How does the Minister explain the fact that, according to the report, the gap between the richest and poorest regions in the UK has widened over the past 10 years? Does that not betray the abject failure of his regional policy?

I suggest that the hon. Gentleman rereads the report because it deals not with wealth and poverty but with differences in wealth. [HON. MEMBERS: "Oh!"] There is a difference, which I shall explain. If the UK experienced growth in every region but some regions grew slightly faster than others, it would be a matter for comment in the report. That has happened in many UK regions. The report is an interesting discussion document, but it ends in 1993 and does not take account of the recovery since then.

Contrary to what the Minister says, the report also shows that the gap between rich and poor has widened and that the number of people living below the poverty line has increased. Given that the report fits in well with reports from the Institute for Fiscal Studies, the Joseph Rowntree Foundation and others, will the Minister not dismiss the report but admit that there is an urgent problem that must be tackled?

I am not dismissing the report, which is a useful discussion document. I simply do not draw the same conclusions as do some Opposition Members. The report also shows that, in 1983, eight UK regions were among the 25 EU regions with the highest unemployment levels. By 1993, there was none, such has been our success in creating employment. The report also reveals that the long-term unemployed have shared in the UK recovery: the number is down by 500,000 since its peak in 1986.

What effect would it have on regions in England, especially northern England, if employees in companies in the Scottish region were subject to additional personal taxation? Would not a tartan tax provide an unfortunate and unfair inducement to investment in England?

My hon. Friend makes a good point. The tartan tax would have an effect similar to that of a minimum wage. It would mean that the most vulnerable people in work would be sacked.

When considering the long-term implications of the report, will my hon. Friend bear in mind that the United Kingdom has, in comparison with many continental countries, done exceedingly well? If the momentum to greater prosperity in Britain is to be maintained, there is no point in the UK continuing to provide more and more taxpayers' money for a fund that, if successful, will lead to jobs being transferred from Britain to other parts of the Union.

I hear what my hon. Friend says. It is important that, across Europe, the British idea of reducing state aid is applied. That policy must continue. Once temporary problems have been sorted out, it is our policy to ensure that state aid in EU member states is reduced, and eventually eliminated. That is the way to secure long-term jobs that are based on the productivity, success and competitiveness of private companies.

Is the Minister aware that the gross domestic product per head in Wales has dropped from 92 per cent. of the European Union average 15 years ago to only 83 per cent. now? We were overtaken last year by the Irish Republic, which in the past 12 months has accelerated ahead to the extent that it now has a GDP per head 9.3 per cent. greater than Wales yet the Irish Republic is receiving all the benefits of the cohesion funds. Can the Minister ensure that the benefits from the European Union come to areas such as Wales which have a need in terms of GDP per head when the fund is renegotiated in 1999?

Wales has done well in the recent past, but one of the problems that the cohesion report identifies is what happens to aid to EU member states when circumstances change. The report mentions Ireland as an example of where perhaps in the present circumstances a country should not receive the aid that it has received in the past. That is something that we shall want to see clearly dealt with in future discussions.

Can my right hon. Friend confirm that youth unemployment in Britain is about two thirds of the European average? Is that not the most powerful reason for rejecting the job-killing social chapter so beloved of the Labour party? With its inflexibilities, the social chapter does so much to damage the prospects of the least well-off and most vulnerable in society.

My hon. Friend is right. Youth unemployment in the United Kingdom is only two thirds of the EU average. We need to do more, but the figures show that the number of 16 to 18-year-olds in education and training in the United Kingdom continues to rise. That is good news.

What steps do the Government take to monitor where regional selective assistance and other Government regional aid goes? How confident is the Minister that, since the redrawing of the assisted areas maps, the Government's effort in the regions is going where it is wanted, unlike the sort of measures to which he has referred in his answers?

The hon. Gentleman makes a fair point. We have a network of monitoring committees which assess the value of schemes which can apply for structural funds. From time to time, the Department asks for reports back on how the schemes have been implemented. That dialogue must continue so that we can ensure that we are getting value for money, and that structural funds go to the areas of greatest need.

Does the report make the point that, while in the 1970s unemployment in Scotland was much higher than in other parts of the United Kingdom, that is no longer the case? Is that not the most effective form of regional policy, which the hon. Member for Kirkcaldy (Dr. Moonie) should have had the grace to welcome?

That is indeed the case. The report reveals that the United Kingdom has more of its working-age population in work than any other large EU country. In the United Kingdom, the proportion is more than 68 per cent. In France, it is only 60 per cent. and in Germany, it is only 65 per cent.

The EU Commission's cohesion report highlights Britain's relatively poor national and regional economic performance over the longer term in comparison with other EU member states. Does the Minister agree with the report of the Commission on Public Policy and British Business that that is the result of

"a disproportionately high number of underperforming British companies—underinvestment—insufficient high quality training and education—unsteady government policy"?

If the Minister, like the Deputy Prime Minister, cannot bring himself to agree with the conclusions of that independent report produced by some of Britain's most distinguished business leaders, does he agree with his Government's third competitiveness White Paper, which concludes that

"The same factors mean that Britain has a much larger proportion of poor company performance than France, Germany or Italy"?

I certainly do not agree with the conclusions of the socialist think tank report. Employment is the key issue which runs through every page of the cohesion report. What is clear from the report is that here in the United Kingdom we are winning on the employment front. We are winning on youth employment, employment for women and getting the long-term unemployed back to work. That is what matters.

Inward Investment

To ask the President of the Board of Trade how many jobs have been created and safeguarded as a result of inward investment since (a) 1979 and (b) 1992. [10592]

Since 1979, the Invest in Britain Bureau has recorded more than 853,000 jobs associated with inward investment decisions, of which over 352,000 relate to the period since 1992. The United Kingdom is still the number one location in the European Union for investment from Japan, the United States and Korea. That is an enviable record, which the Government are determined to maintain in the face of increased competition from our European partners.

I thank my right hon. Friend for that answer. Does he agree that, in the years leading up to 1979 under the last Labour Government, the received wisdom of every international commentator was that Britain was the sick man of Europe, and we were down at the bottom of the league tables with Turkey? Is it not the case that the Government's policies have transformed the position and attracted vastly more inward investment and that, in particular, manufacturing industry and the motor trade throughout the country, including Vauxhall in the north-west, have done tremendously well? Will my right hon. Friend confirm that he will continue to pursue those policies?

My hon. Friend is right. Because we have helped the United Kingdom's economy to become more competitive and rejected the social chapter and the other burdens that the Labour party and the European Union would impose on us, we have, in the words of Mr. Jacques Delors, turned the United Kingdom into a "paradise for inward investment". My hon. Friend mentioned the motor industry and I am sure that he welcomes yesterday's announcement by Nissan, which will create some 3,500 jobs, and the recent announcements by Ford-Jaguar, Vauxhall, Rover-BMW and Toyota. Like so many other manufacturing industries in this country, the motor industry is now buoyant and successful because of the Government's policies.

The Secretary of State surely knows that we are all in favour of inward investment, but the Government use it as a fig leaf to cover the nakedness of their policy on indigenous investment. The Government's investment record is rotten and rates poorly against those of all our major competitors. The Government use inward investment as a cheap shot—almost as cheap as the antics of the Deputy Prime Minister yesterday.

The hon. Gentleman is talking nonsense. He should reflect on the fact that, while unemployment has been rising throughout the European Union for the past few years, it has been falling in the United Kingdom, and that the UK is attracting more than 30 per cent. of all the inward investment into the European Union and more than 40 per cent. of all the American and Japanese investment into the EU. That is a judgment from the world on the competitiveness, efficiency and success of the British economy as a good place to manufacture and invest.

Does the Minister agree that we will use every opportunity to attract inward investment, including the refusal to introduce a windfall tax? Will he take the opportunity to condemn the insider dealings of Robert Ayling, who appears to have struck a deal with the Labour party to his own benefit, at the same time earning himself £750,000 a year for bowing and scraping to the Leader of the Opposition?

I agree with my hon. Friend that the windfall tax would penalise consumers of essential utilities, would be arbitrary in its impact and would be unfair on investors and consumers of essential utilities in this country. It is a policy to which the Labour party is committed as part of its high-spend, high-tax approach to the running of this country.

The Government's record in attracting inward investment to the United Kingdom has been remarkably successful in recent years and most people recognise that, but will the Secretary of State bear in mind that one negative factor could damage us in the years ahead—the imbalance between corporation tax levels in the United Kingdom and those of some of our competitor nations?

I am surprised to hear the right hon. Gentleman say that, because our corporate taxes are among the lowest in Europe. When we came into office, the corporation tax rate was 52p in the pound, and 42p in the pound for small businesses. Those rates have been dramatically reduced. The corporate tax rate for small businesses is now 23p in the pound and that is one of the reasons why so many businesses have taken root—there are now over I million more than there were, including those in Northern Ireland.

Does my right hon. Friend agree that more jobs will be created and safeguarded as long as we keep interest rates low and stop the pound becoming overvalued? Will he ask the Governor of the Bank of England to pay exceptional attention to the views of industry on what our interest rates should be?

I am sure that my right hon. and learned Friend the Chancellor will take note of my hon. Friend's point. However, I am sure that my hon. Friend will also reflect on the fact that the capacity of Governments to influence exchange rates is extremely limited. The present exchange rate is a reflection of the strength and growth of the British economy and it helps us to fight inflation. The improved productivity and competitiveness of our economy enables us to continue to manufacture and export at present levels.

Do the figures on inward investment include the purchase of privatised utilities by American and French companies? Do those purchases actually create jobs, given the massive hurdles that those British firms are forced to climb over before being allowed a share of the American and French utility markets? Why have the Government displayed such indolence and half-heartedness in fighting to win for British business fairness in competition and equality of access to the hugely protected markets of France and Germany?

The hon. Gentleman seems to be completely unaware of the dramatic successes that privatised industries are having in worldwide markets. When I was in India the week before last, representatives of British Telecom were with me and they secured a £60 million deal. The same is true in other industries: for example, the water industry has people on overseas missions all over the world, winning business for this country.

Investment involving the purchase of British companies is also inward investment that brings new assets and new money into the country, creates new jobs, invests in new machinery and new technology and helps to contribute to the remarkable growth in output, exports and employment that we have secured in the past few years.

Government Policy (North-West England)

To ask the President of the Board of Trade what recent representations he has received about the impact of Government policies on businesses in the north-west; and if he will make a statement. [10594]

Ministers at the Department of Trade and Industry regularly receive representations about the impact of Government policies on businesses, including those in the north-west. I look forward to hearing more views from north-west business people when I visit Bolton early next month.

When the Minister visits Bolton town hall in 12 days' time, I hope that he will enjoy a good helping of Bolton's excellent black pudding with his breakfast. Will he welcome the proposal to set up a national museum of food in Bolton, which is famous not only for its black puddings but for its excellent bakeries?

The hon. Gentleman may like to know that, only this morning, I had the menu for that breakfast altered to ensure that it will include black pudding. To set up a museum of food in Bolton is a splendid idea and I wish it well.

Is the Minister aware that the effect of Government policies on the north-west and on Lancashire in particular has been to bring about an enormous increase in the number of small businesses there? In my own patch, there are 6,000 and that number is rising every month. Over the past 14 years, that has helped to bring down unemployment from 11 per cent. to only 4.5 per cent.

My hon. Friend is right. The north-west has experienced a net increase of 35,000 jobs in two years and regional selective assistance of £31 million has, by itself, created 6,500 jobs. The north-west has excellent communications, high value-added, high investment and tremendous tourist potential.

The Minister will be aware that the Ford Motor Company has announced plans to shed 1,300 jobs at the factory at Halewood in my constituency in order to concentrate production of the new Ford Escort in Spain and Germany. Can he explain how it makes sense to export 1,300 jobs from my constituency to Germany and Spain in order to produce for import into this country the car that is the second-best seller in this country, that sells more here than in any other market and that costs £500 to £1,000 less to produce here than on the continent? Will he meet a deputation comprising my colleagues and me to talk about this serious matter?

Those decisions are made by the Ford Motor Company and they are based on its commercial judgment. Ford is taking those measures to improve the plant's competitiveness with the aim of securing its long-term future. The Government are committed to assisting Halewood to meet Ford's competitiveness agenda.

Is my hon. Friend aware that Government policies have greatly increased prosperity in my constituency, not least in Garstang? Unfortunately, in contrast, Labour-controlled Wyre borough council's vicious policy of imposing parking charges in Garstang, where hitherto parking was free, will ruin the economy.

My hon. Friend is probably best placed to put pressure on that local authority, but she may like to let me have more details on the matter. In the meantime, I know that she will give it a hard time.

How can the Minister be so complacent, given that small businesses in the north-west will be faced with the catastrophic effects of the closure of Ford in Halewood? According to the Department's figures, there are one in 20 fewer VAT-registered small businesses in the Wirral than there were in 1992. Does not that show why businesses in the north-west and elsewhere are saying that enough is enough with this failing Government?

That is as absurd a question as one is likely to hear. Small businesses thrive in the north-west because of its competitiveness. The hon. Lady mentions Halewood, about which my right hon. Friend the Minister for Industry said he would receive a delegation. Ford is not closing the plant, but is making adjustments in the light of its judgment. We shall assist in securing Halewood's long-term future.

Does my hon. Friend agree that the Labour party ignores all the good news in the north-west? He mentioned the 35,000 jobs that have been created over the past two years, but, as a result of inward investment since 1985, 17,334 jobs have been either created or safeguarded. One important industry is the aerospace industry—not just British Aerospace but the Consortium for Lancashire Aerospace, which comprises more than 130 smaller companies with a turnover of more than £4 billion. It would damage those industries and jobs in the north-west greatly if the Labour party were elected and slashed defence expenditure, bearing in mind the fact that it would have to get the money from somewhere.

Like my hon. Friend, whose remarks I endorse, I do not understand why the Labour party always wants to sell the north-west down the river. I presume that Labour Members would take the same attitude if they were in government. I want them to know that the north-west has high morale. Lancashire, Cumbria, Cheshire and Merseyside are wonderful counties and they are all in good heart—much better heart than I see on the Opposition Benches.

Research And Development

To ask the President of the Board of Trade what has been the percentage change in total Government spending on research and development since 1985. [10596]

Estimated Government expenditure on research and development in 1996–97 is 36 per cent. higher than the cash expenditure in 1985–86.

The Minister was unable to answer the question that I asked. The answer is that there has been a decrease of 16.5 per cent. since 1985. Is it any wonder that, because of cuts in Government-funded research and development, we have fallen from 13th to 18th place in the world prosperity league?

The hon. Lady forgot to ask the question that she obviously wanted to ask because she did not put the words "in real terms" in her question. There has been a real-terms cut in total Government R and D mainly because of cuts in the defence industry, which I have not heard many Opposition voices oppose. She therefore should not try to be too clever on that account. The science base is at the heart of Britain's efforts to be competitive in the long term, and expenditure on it under this Government has risen by 15 per cent. in real terms during that period.

Would it not be more significant to ask what our gross R and D spending is as a proportion of gross domestic product? Is it not broadly in line with our European competitors? Is it not typical of the Opposition that they ask about Government R and D spending as though that will solve all our problems, whereas it is private sector investment that creates jobs?

It is axiomatic that the Government aim to invest in research and development and thereby to stimulate industrial investment. Industrial investment in the United Kingdom still has further to go, although in recent years there has been a year-on-year increase. I have never denied that my message to industry is that it should invest more intensively in R and D. The Government's record is extremely good and compares favourably with Government expenditure in countries such as Japan and the United States. I intend to ensure that the UK research base is the finest, as we believe it to be. That will come about through the schemes that we are delivering to bring the science base and industry closer together.

Public Sector Research Establishments

10.

To ask the President of the Board of Trade if he will make a statement on the progress of the Government's prior options reviews of public sector research establishments. [10598]

The Government are considering the prior options review reports. We are determined to achieve the greatest possible benefit from the substantial resources devoted to public sector research establishments. We expect to make further announcements about outstanding decisions in the near future.

Has the Minister read the comments of the Select Committee on Science and Technology, which described the scale and conduct of the reviews as profoundly unsatisfactory? Is he aware of the disruption that has been caused? Does he plan to make a further announcement before the general election?

I always treat with great respect the views of the Science and Technology Committee and always look forward to appearing before it. There have been misunderstandings about the objectives of the prior options reviews. As the Government consider that £690 million of expenditure on R and D through the research departments should be undertaken efficiently, prior options are clearly important. However, we are nearing the end of the process in the current round, and in the very near future—certainly before the general election—I expect to make an announcement concerning those institutes on which we have not yet made any public statement. I draw attention to the announcements that are already on record. Some of the research departments have stayed in the public sector, some have undergone management adjustments and some have been moved into the private sector.

Will my hon. Friend pay tribute to the people working in the public sector research laboratories in Norwich? Will he confirm that the Ministry of Agriculture's Central Science Laboratory will stay in Norwich? It would be very good news if it did. Bearing in mind what my hon. Friend has just said, how much longer will people in Norwich who are working in the other research laboratories have to wait for final decisions affecting their future?

I am delighted to say that on 9 December my right hon. and learned Friend the Minister of Agriculture, Fisheries and Food announced the future of the Central Science Laboratory as an agency with various management tasks ahead of it. The new facilities in York are of great importance—I shall be visiting the York region this weekend—but I am pleased to say that the excellent work on food science will remain in Norwich. I intend to make other announcements as soon as possible.

One of the central questions that the Minister must answer is what cost-benefit analysis he is using to justify the Government's continued obsession with the privatisation of large swathes of the nation's public sector research establishments. Have not millions of pounds from a hard-pressed science budget been wasted, and thousands of scientists demoralised in pursuit of the Government's flawed policy? The Government should provide encouragement and support for the PSREs, not uncertainty and continuing confusion about their future.

I do not recognise that situation. A review process is not always enjoyable, but some of the research establishments report that the review has given them a more tightly defined mission statement, and they welcome the opportunities that have emerged from the prior options process. I challenge the hon. Gentleman, who has forlorn hopes of his party one day occupying the Government Benches. His question shows that he is not prepared for that transition. If £690 million is to be spent on research establishments, it is the duty of any Minister for Science and Technology to ensure that the money is spent efficiently. We are doing that. We have found new ways of delivering quality in science. I am certain that, as a responsible Minister, I had to undertake that process.

Manufacturing Investment

11.

To ask the President of the Board of Trade what has been the change in the level of manufacturing investment in the past 12 months. [10599]

The figures for the past 12 months will not be available until those for the last quarter of 1996 are published next month. However, the conditions for investment are extremely favourable and the Confederation of British Industry expects manufacturing investment to grow by 8 per cent. this year and next year.

When will the Minister accept that the Government's record on manufacturing investment is abysmal? Even the Secretary of State admitted not long ago that the Thatcher Government had a poor industrial investment record. Why is that situation unchanged?

Like other Opposition Members, the hon. Gentleman never knowingly misses an opportunity to talk Britain down. Business investment grew by 5 per cent. last year and whole economy investment is six times higher than under Labour. Instead of decrying our excellent performance on the manufacturing front, he would do better to celebrate some of the excellent investment in manufacturing industry in his constituency. For example, Omega Engineering recently established a 250,000 sq ft European manufacturing plant in his constituency. Is that not better news than his question suggests?

Is not the CBI's forecast of an 8 per cent. increase in manufacturing investment this year and next year one of the best results to be found in the European Union? What does my hon. Friend think would happen if industry were hit by windfall and other corporate taxes, as proposed by the Opposition this year?

Yes. The performance of industry—particularly of manufacturing industry—would be severely prejudiced by such factors. My hon. Friend is right to draw attention to the CBI's studies in that respect. In the past 24 hours, its quarterly survey has confirmed that confidence in manufacturing industry has risen and that output is up. The number of jobs in manufacturing industry has increased by 130,000 in the past three years. That is good news on the manufacturing front, and it reflects the success of Conservative policies in government.

I welcome the increased investment in the manufacturing sector and the forecast that that will continue, but can the Minister predict when manufacturing investment will return to its 1979 level?

The important statistic is the investment in business as a whole. Those who produce computer games or sell computer software services will find that the distinction between the two in terms of employment and investment is becoming increasingly artificial. Whole business economic investment is growing substantially. Our output and exports are at record levels. International confidence, as reflected in investment, is also at a record level. That speaks well of the performance of our industry and of Government policies in action.

Has my hon. Friend assessed the effect on jobs of taking £10 billion from the publicly owned utilities, which invest in manufactured goods from British industry? How many jobs would be lost if £10 billion were removed from their investment and devoted to £10 billion-worth of make-work schemes, such as those offered by the socialists opposite?

The Opposition have not accounted for any significant losses in employment resulting from their plans, which would wreak havoc with investment, activity, profitability and the future of many utility companies. They have led the way with investment in recent years. Let us not forget that, during the difficult years of the recession, those utilities maintained high investment and employment. The price of their success is the prospect of a Labour Government introducing a swingeing tax thereon. That would be disastrous for their prospects, for consumer prices and, most of all, for the many people employed in those industries.

Is it not true that just over a year ago in the Budget the Government predicted a 10 per cent. increase in manufacturing investment this year, whereas the most recent figures show a decline of 16 per cent. for the same quarter? The Government claimed that an increase would be an indicator of success, but they have said nothing about the decline. Will the Minister confirm that the most recent figures for this quarter compared with the last show a decline not only in manufacturing investment, but in business investment and in whole economy investment? The Minister cited the CBI's prediction for manufacturing investment, but the Government have not predicted what will happen to manufacturing investment. Can the Minister make such a prediction today? Does it not appear that, according to the latest information—whether it be on investment, output, which is static or which is going down, or the forecast export levels in the CBI survey—we are reaping the rewards of this Government's utter neglect of manufacturing over many years?

No. The right hon. Lady is wrong on just about every count. She should update her briefing before she reads it out. She did not refer—[Interruption.] Perhaps the right hon. Lady will give me a chance to reply to her question. The CBI quarterly survey became available yesterday. She may not always believe what the Government say, but she should not deride what the CBI says. It states:

"Manufacturers' optimism grew for the third consecutive quarter. Manufacturing output growth is expected to accelerate over the next four months."

The predictions are that it will rise by 8 per cent. this year and next year. Average unit costs and prices have fallen. For the past year, manufacturing output has risen significantly. That is one reflection of the huge improvements in productivity that have taken place within that sector, which have been fuelled by inward investment. It is a great success story for Britain and Conservative policies. The Labour party should not and must not deride it.

Scientific Research

12.

To ask the President of the Board of Trade if he will make a statement about the implications of the Budget for Government-funded scientific research. [10600]

The Government's commitment to research and the science and engineering base remains as strong as ever, with total Government funding of science and technology being sustained in 1997–98.

As my right hon. and learned Friend the Chancellor of the Exchequer said in his Budget statement,

"our universities and colleges make an important contribution to the economy … We want to ensure that the British science research base remains the best in the world, which it certainly is at the moment."—[Official Report, 26 November 1996; Vol. 286, c. 159.]

May I welcome the Minister's earlier expression of support for the Ministry of Agriculture, Fisheries and Food's Central Science Laboratory in York? Does he join me in recognising the importance to the economy of such public sector science and the additional 750 private sector bioscience jobs in the York area? Will he explain why the Government present an improvement in the science budget when the figures published after this year's Budget, compared with those published after last year's Budget, show that the Government will invest £25 million less in science over four years than they were planning previously?

I am happy to endorse the hon. Gentleman's comments about the Central Science Laboratory and about the work that it undertakes. There was never any question about the excellence of that work. The prior options review was designed to ascertain how best to maintain that excellence in terms of basic research, and how the laboratory could connect with the private community that the hon. Gentleman mentioned in the biotechnology industries. That case-by-case analysis has been the hallmark of our prior options survey.

There is a cash increase in the science budget as a whole, year on year, compared with the lower inflation figures that were originally taken into account. The overall settlement of the public expenditure survey round shows the importance that science has within the total package of Government expenditure.

I draw attention to the extra £100 million that my right hon. Friend the Secretary of State for Education and Employment has found, including an extra £20 million for equipment. Again, it is important to strike a balance, and the settlement meets some of the comments made by the Committee of Vice-Chancellors and Principals.

Science in this country is doing extremely well. Researchers are doing a brilliant job in so many of the areas identified in the foresight programme. The year of engineering success was officially launched today; we should all take pride in talking up the work of the science community.

Manufacturing Industry

13.

To ask the President of the Board of Trade when he next expects to meet the President of the Confederation of British Industry to discuss the manufacturing sector. [10601]

My ministerial colleagues and I regularly met the Confederation of British Industry to discuss a range of issues. In 1997, the CBI expects manufacturing output to grow by 3.5 per cent. and manufacturing investment to grow by 8 per cent.

Does my right hon. Friend agree that reasonably stable exchange rates are particularly important for the manufacturing sector? Is he concerned about the effects of the recent rise in the value of the pound on manufacturing industry?

The rise in the pound is clearly a reflection of the world's perception of the strength of our economy and currency. A strong currency reduces input costs for manufacturing industry when importing from abroad. Manufacturing is now at an all-time high. It has increased by 9 per cent. since the recovery began. Given the high quality of productivity and the prospects for order books, I believe that the capacity exists to maintain that level.

Is the Minister aware of the widespread concern and dismay among trade associations about the Governments's proposals to turn the trade fairs and missions budget into a competition, at the behest of the Deputy Prime Minister? Does the Minister realise that that will prevent necessary long-term planning and will jeopardise future success? Why does he not tell the Deputy Prime Minister to get the tanks off his lawn?

It is the policy of the Government, to which the hon. Gentleman referred, to which all Ministers subscribe. It is important to use Government funds as efficiently and cost-effectively as possible. The broad thrust of our policies—creating challenge schemes, getting the best value for the taxpayer—has been welcomed by industry, and that is reflected in its success in using the resources that we provide.

Does my right hon. Friend recall that, in 1979, it took five men to produce a tonne of steel in this country compared with one man in Japan? Production output per man in the two countries is now equal, if not better in this country. Is that not a matter for great congratulation and a complete condemnation of a Labour Government and socialism?

My hon. Friend is absolutely right to draw attention to the success of the steel industry, which is partly the result of privatisation and the release from the shackles of state ownership to which the Labour party subjected it. That success in productivity applies right across the manufacturing sector. Manufacturing productivity has risen by 80 per cent. since the Conservative Government came to power. We have largely closed the productivity gap with Germany and France, which widened under the last Labour Government. Whereas the Organisation for Economic Co-operation and Development table put the United Kingdom in 14th place in productivity growth under the last Labour Government, we are now top of the table.

Will the President of the Board of Trade join me in drawing the attention of the Confederation of British Industry and the international business community to the fact that west Cumbria has hundreds of thousands of square feet of modern industrial space waiting to be occupied by industries that we want to grow and make successful? We have a flexible, able and capable work force who want to work, and a development agency equipped to put together effective packages to help industries to come to our area. Will he help us now in this major effort to bring jobs to my under-employed community?

I welcome the hon. Gentleman's endorsement of the success of Conservative policies, which have delivered precisely the qualities to which he drew attention. I am sure that his reference to the available manufacturing space in Cumbria will have been noted, and as the manufacturing sector is expanding—it is up by 130,000 jobs in the past three years, which was never experienced under a Labour Government—the potential of Cumbria will no doubt come to the attention of expanding manufacturers before long.

Retail Sales

14.

To ask the President of the Board of Trade if he will make a statement on recent trends in retail sales. [10602]

There has generally been good growth in retail sales in recent months compared with the similar period in 1995. The latest official statistics show sales volumes 3.5 per cent. higher than a year ago.

Is my hon. Friend aware that many retailers in Basildon, Leigh-on-Sea and Southend are reporting an upturn in trade, in spite of it having been a very difficult time for them? Does he share their anxiety that the threatened imposition of the social chapter, the minimum wage and new taxation policies advocated by the Opposition might damage the recovery?

I have a message for the voters of Basildon, Leigh-on-Sea and Southend: they are right to be anxious. I am anxious—my hon. Friend is right to be anxious—that nothing so dreadful should happen to these good people that they should be burdened with a Labour Government.

As we are talking about retail trends, is the Minister aware of the problem affecting mail order companies? Has he made representations to the Treasury on the problems that the industry faces and the huge effect that they could have on the jobs and services that it provides? Will he make representations to his colleagues in the Treasury to ensure that the VAT argument is sorted out?

I am aware of the problems—as they are perceived to be—to which the hon. Gentleman refers, but he is right to identify them as matters for the Treasury. I would not be offended if he made his own direct representations.

How much of the increase in retail sales was funded with cash, and how much was funded on credit?

I do not have the figures with me, but I believe that all the evidence suggests that increasing use is being made of credit facilities—not least, of course, of credit cards.

Trade (Thames Valley)

15.

To ask the President of the Board of Trade what plans he has to improve trade between Thames Valley businesses and the rest of Europe. [10603]

A dedicated export team has been set up at business link Thames Valley. An export development counsellor has been appointed and will take up his position in February, and there will be a Thames Valley export forum later this year.

Is the Minister aware of research carried out recently by Bath university—not least on behalf of the Thames Valley economic partnership—which suggests that 60 per cent. of Thames Valley businesses are now trading with Europe, and that half those businesses find that their greatest problem is exchange rate fluctuation? What measures is the Minister taking to ensure that the number and extent of such fluctuations that his Government's economic incompetence has caused will be reduced in the future?

I am aware of the report. The hon. Gentleman is right to say that there are numerous exporting companies—some 3,000, in fact—in the Thames Valley area. Half those companies are exporting to Europe, and are doing extremely well. Their success is reflected in the fact that a considerable number of American technology companies have set up in Newbury and Bracknell in particular, all as a result of Government policies. The hon. Gentleman laughs, but that is a fact. It is happening in his own constituency.

As for the future, the macro-economic stability of our economy is the surest guarantee that our export performance will continue, that the competitiveness of British goods and services abroad will continue to increase and that the substantial confidence in this country's capabilities—not least in the Thames Valley—that is demonstrated by investment from abroad will be maintained. All that is a good-news story.

Does my hon. Friend agree that the trading competitiveness of small and medium enterprises throughout the Thames Valley would be gravely damaged if the minimum wage and social chapter were introduced, as advocated by the hon. Member for Newbury (Mr. Rendel) and his party? Is it not true that Liberal Democrat policies would mean longer dole queues in Newbury and throughout the Thames Valley region?

My hon. Friend is right: the Liberal Democrats never knowingly undertax either. Whether through tax or through regulation, they would certainly propound policies that would damage the export prospects of numerous businesses, particularly small businesses. Many small businesses cannot afford to export at long distance, and tend to go to our doorstep markets in Europe. They would be the most severely affected by such policies. The hon. Member for Newbury nods in support; I hope that his constituents will understand the employment and investment implications that would be involved if those policies were ever pursued.

Power Supply Interruptions

16.

To ask the President of the Board of Trade what assessment he has made of the risk of interruptions to electricity and gas supplies in winter 1997. [10605]

There is sufficient electricity generating capacity and gas supply to meet foreseeable demand, but my Department keeps the situation under review in consultation with the Office of Electricity Regulation, the Electricity Pool and the Office of Gas Supply.

Will the Minister agree to look again at the issue of interruptible gas contracts? Can it be right that combined cycle gas turbine stations depend on such contracts, and will receive extra payments when they use alternative fuel?

Will the Minister also comment on the fact that hospitals have left themselves in an exposed position by depending on such contracts? That clearly gives cause for concern. What steps will the Minister take to try to resolve the difficulties?

Although it is principally a matter for the parties, the Government properly take an interest in it. We were particularly interested in the report produced by Ofgas in December, which concluded that supply interruptions were most unlikely for customers on firm contracts. As the hon. Gentleman will know, the network code ensures continuity of supply in extreme weather. Every indication has shown that the code is working well, but the Government are not complacent about any of those matters—particularly the contracts to which he refers—and will keep them carefully under review.

Does the Minister think that contracts for 250 hospitals should be interruptible? Hospital staff—such as those in Melrose this morning, at the Borders General hospital—have told me that they have only a 10-day supply of oil left to power their back-up generators, whereas British Gas has advised them that interruptible contracts allow hospitals to be cut off for 45 days. There are 250 other hospitals in the same position.

The hon. Gentleman is most irresponsible if he is an alarmist on such matters.

How dare the Minister.

I dare because the hon. Gentleman is irresponsible. He does not mention the fact that there have not been such interruptions, or that there are perfectly satisfactory and substantial back-up fuel supplies. He also does not state that such contracts offer distinct cost advantages to those who must be careful with how much they spend from the public purse. He peddles fears—which are not founded on reality—on matters of real concern to patients of the health care services.

Royal Yacht

3.30 pm

With permission, Madam Speaker, I should like to make a statement on the royal yacht.

Britannia has just left Portsmouth for her last voyage around the globe. Since the royal yacht was commissioned 43 years ago, she has travelled more than 1 million miles and undertaken almost 700 royal visits overseas—serving both as a royal residence and as a setting for official entertainment by Her Majesty. The royal yacht has also played an important part in national events, such as the silver jubilee and the anniversary of D-day and of VJ-day. She will be at the ceremonies marking the end of British sovereignty over Hong Kong.

Britannia has also lent her prestige to the promotion of British exports worldwide and the attraction of inward investment to Britain, and she has hosted numerous commercial events. The benefits that Britannia has brought to the British economy are invaluable.

It was therefore with great sadness that we announced, in 1994, that Britannia would be decommissioned this year. Although a beautifully maintained ship, she is old. She is increasingly difficult to maintain, and a major refit would be required to convert her to modern sea-going standards.

The decision stands to decommission Britannia. However, the Government have decided to commission a new purpose-built royal yacht, and have so informed Her Majesty the Queen. We have taken the decision because we believe that a royal yacht is an important national asset, which projects a prestigious image of Britain, adding powerfully to official occasions and assisting greatly in promoting British economic interests. Her Majesty the Queen has made it clear that she expects such a role to be the primary purpose of the new yacht. Moreover, the new yacht will at times provide Her Majesty with a suitable residence overseas, thus contributing to the impact of her visits and enabling her to represent our nation in an appropriate setting.

The vessel will be a symbol of the Crown, of the kingdom and of its maritime traditions. It will be designed to exhibit an enduring level of style, elegance and dignity appropriate to that role, and should act as a showcase for Britain's design and engineering skills. Her Majesty the Queen and the Duke of Edinburgh will be consulted on the design.

The Ministry of Defence will procure the new royal yacht. After a study to enable us to draw up a formal specification and a competition, a contract will be placed with a British shipyard. She will be crewed by the Royal Navy and fly the white ensign. The Queen will contribute to the furnishings and fittings of the state rooms and the royal apartments, drawing some items from Britannia.

We have considered carefully what would be appropriate for Britannia after decommissioning. The Government do not believe that it is appropriate to sell her to a new owner for private use. She will not put to sea again, but we are interested in proposals for a suitably prestigious use for Britannia in the public interest in the United Kingdom. Such a scheme would need to take account of the plan to transfer royal fittings to the new yacht. Any proposals for Britannia would need to guarantee that the yacht would be kept in excellent condition. If that cannot be assured, it would be better to see her scrapped than to see her deteriorate.

That leaves the matter of paying for the new yacht. The running costs should not be much more than half those of Britannia. They will be accounted for by the Ministry of Defence. For the capital cost of about £60 million, we have received many interesting proposals for private funding. The Government are grateful for them all, but we believe that a new royal yacht—a symbol of the nation's pride—should be funded not by sponsorship or subscription, but by the nation. The capital cost will be met from public funds in the reserve.

Britain can look forward to a new royal yacht in the new century. I trust that she will enter service in time for Her Majesty's golden jubilee in 2002.

I thank the Secretary of State for bringing the House this news, but we are disappointed that there has been no discussion whatever with the Opposition on the matter. As you know, Madam Speaker, it has been the convention that policy regarding Her Majesty is an all-party matter. Why was the Secretary of State not prepared to discuss the issue with the Opposition?

We, too, appreciate how valuable the Royal Yacht Britannia has been over the past 43 years. We recognise that she epitomises all the best traditions and the excellence of the British maritime industry from shipbuilding to ship repairing and, indeed, the manning and crewing of the vessel. She has epitomised the excellence of British craftsmanship and we wish her well in her final voyage.

The Secretary of State said that Britannia is to be decommissioned when she comes back from Hong Kong. Could he perhaps give us some information about what will fill the gap between the end of this year and the commissioning of the new royal yacht that he envisages in about three years' time? Will he also give us an idea of when he hopes to issue the tender and when he anticipates the contracts being signed?

Why has the Secretary of State rejected in such a cavalier manner the injection of private capital—[Laughter.] I have been told over the past few years that the partnership of private and public capital is the most efficient way of conducting public business. I recall being told by the Secretary of State that the best way of providing accommodation for our service families was by the injection of private capital. If it was good enough for the accommodation of our service families, why has he not considered it for the royal yacht?

As I understand it, the Secretary of State has announced that the royal yacht will be financed from existing public expenditure. He has admitted that the project has been under consideration for more than two and a half years, so why were the figures not included in the Budget? Will he also confirm that the £60 million to come out of the reserve will not be available for emergencies in the years ahead?

The hon. Gentleman will forgive me if I miss a point or two. Part of his statement was drowned by laughter and I was not able to pick up every point, but I shall try to do my best.

After Britannia returns from Hong Kong, she will still have a programme running to the end of the year, probably within British territorial waters. After the end of 1997 and until the new ship enters service in 2001 or 2002, there will be a gap, with no royal yacht on the seas. That will not be as long a gap as the 14 or 15 years between the end of the Victoria and Albert and the commissioning of Britannia.

The hon. Gentleman asked why we had rejected out of hand the idea of using private capital. We did not reject it out of hand; we considered it carefully, but we did not believe it appropriate. [HON. MEMBERS: "Why?"] If Labour Members had not learnt their capitalist lines like parrots, they would understand that some uses of private finance are appropriate and some are not. A royal yacht to support Her Majesty and this nation in our economic and export efforts is not an appropriate use of private money. I am very grateful to all those who stepped forward with suggestions for using private money, but it is not appropriate.

Why?

If the hon. Gentleman does not realise why, he has simply learnt his lines and spouts them and no longer thinks—if he ever did. [Interruption.]

Order. I shall be calling hon. Members to put questions. Wait for it.

The hon. Member for South Shields (Dr. Clark) asked how long it would take to build the yacht and when contracts would be let. I have told him that it should be in service in 2001 or 2002. It will take about two and a half years to build and the period up to the beginning of building will be taken up by deciding on the specification and by the competition.

The hon. Gentleman also asked why we did not discuss the matter with the Opposition. I do not regard today's statement as a constitutional one. I regard the yacht as an important aid to Her Majesty and to this country's economic interests, but not as a constitutional matter. I have come to the House and made a clear statement at the earliest opportunity. I should like to contrast that with the announcement of the previous royal yacht, when a Labour Government, during the 1951 general election campaign, issued a press notice from the Admiralty announcing that there would be a new royal yacht. In comparison, I have made a clean breast of my proposals to the House. The hon. Gentleman ought to study his history better before making such imputations against the Government.

Is it not characteristic that new Labour should have announced its conversion to private finance on the wrong occasion? May I congratulate the Secretary of State on the Government's decision, including the decision on finance, which seems to me entirely right? I accept entirely what my right hon. Friend says about the usefulness to British finance and industry of Britannia and her successor, but at the heart of the issue, is there not the deeper point that a royal yacht is the best way of enabling the sovereign of our country to remind us—and, indeed, the world—of the links between these islands and the sea, which are fundamental to our past and our present?

Indeed. My right hon. Friend is absolutely right. We are a maritime nation, a nation of traders, global thinkers and global doers. The royal yacht will help to emphasise all that and enable us to extend the hand of friendship and connection to our many allies and friends around the world. I am so pleased to have my right hon. Friend's support—not least for the funding, which is wholly appropriate to the dignity of the monarchy and the vessel that will support them in it.

I fear that the Secretary of State might be embarrassed by the amount of congratulation on his conversion to the virtues of public funding for such a matter. Does he share my disappointment that the hon. Member for South Shields (Dr. Clark), for whom I have the greatest respect, did not seem able to match his commitment? Is not the virtue of what the Secretary of State has proposed the fact that the vessel can assist Britain's economic and trade interests and provide dignified and often secure accommodation for the royal family while they fulfil their duties abroad? In view of the fact that the yacht's running costs are to be met from the defence budget, is it envisaged that the vessel should have any role in time of war?

On the last point, it is not envisaged that the vessel should have any role in time of war. I cannot of course predict the future, but it is not expected that she will double as a hospital ship, for example, as was the plan with Britannia. The hon. and learned Gentleman is absolutely right that the vessel is secure accommodation for Her Majesty. She will be escorted and protected by the Royal Navy. It is an admirable way in which to protect our economic interests and to underline our ties with the Commonwealth. The Commonwealth values the vessel as well as our own country.

Given all those advantages and the vessel's versatility, it is indeed disappointing that Her Majesty's loyal Opposition were not able to say today that they support it and would continue the project were they elected.

May I thank my right hon. Friend for today's decision? It will mean much rejoicing in the Isle of Wight. Will he forgive me for mentioning pounds, shillings and pence? As the new royal yacht will play a bigger role in promoting Great Britain plc than Britannia, may I remind my right hon. Friend that the arrival of Britannia in Cowes week every year makes a substantial contribution to the Isle of Wight's economy? I would hope that I could hang on his words and that, perhaps, Britannia will sail on in UK waters beyond 1997. That would make a big difference to us on the island. Her arrival is very much treasured every year by my constituents.

My hon. Friend has been a notable and strong advocate of the replacement of the royal yacht and I can understand its impact on the Isle of Wight, as on all of us. However, I want this statement to be entirely straightforward and without ambiguity. We do not intend that Britannia should run on beyond the end of 1997. I do not want to mislead my hon. Friend on that; I want to make it perfectly clear that there will be a new royal yacht in 2001 or 2002.

It is hard to conceive of who has been more ill advised, the Government in offering the matter to the palace in an attempt to bring it into the political game, or the palace in making the mistake of accepting it.

Unworthy!

I am allowed to make my point. Is it not a fact that, over the next three years, there will be unprecedented cuts in social services? I cannot understand a sense of priority that diverts £60 million more away from such services. Halving the running costs will still cost £10,000 a day. If the royal yacht is a symbol, it is one of extravagance and irrelevance.

I found the right hon. Gentleman's comments ungenerous, inaccurate and wrong. It is entirely the Government's decision as to whether there is a royal yacht, and although we have informed Her Majesty, Her Majesty did not request this. Her Majesty's assent is not required in that sense. Her Majesty is pleased with the decision, but it is not a matter for her. Any blame to be attached should be attached to the Government only. The right hon. Gentleman is not right to bring Her Majesty's name into the matter, as he sought to do.

This is public expenditure and we are entitled to talk the language of priorities and proportion. The social security budget is £90,000 million a year. We are talking about spending £60 million for a yacht that will last about 30 years—a capital cost of £2 million a year. I am sure that one after another, hon. Gentlemen and hon. Ladies will rise in the Chamber to pay tribute to the many ways in which this vessel will contribute to our nation economically, but also to the way in which it will contribute to our prestige, status and pride. I know that I have lost the right hon. Member for Swansea, West (Mr. Williams) now, because he does not understand those three words.

Nowhere will my right hon. Friend's statement be more welcome than in Gosport, with its Navy connections and loyal traditions. May I ask further about the future of Britannia? Her home port has been Portsmouth and she has been berthed in Portsmouth harbour for many years. Nowhere would her future be more secure and more applauded than in Portsmouth harbour, as a centrepiece of the exciting millennium project there. Will my right hon. Friend confirm that that suggestion will be given full consideration?

Certainly it would be given consideration. I was in Portsmouth recently on HMS Victory, and I am aware of the marvellous heritage of the city and of the ships berthed there, which represent some of the maritime history of this nation. However, I must repeat the conditions that I made clear during my statement. The proposal must take account of the fact that at least some of the fittings will have been stripped out from Britannia. The yacht must have a prestigious use; it must be in the public interest; it must be in the United Kingdom; and we need a sponsor who can guarantee the excellence of her condition. I stress again that it would be distressing for all of us to see Britannia deteriorate—we would rather see her scrapped than deteriorate.

The present Britannia has made a valuable contribution to Britain's presence overseas, both diplomatically and commercially, and I have no doubt that the Government have made a good decision in ensuring that we have a worthy successor. May I particularly congratulate the Government on their conversion to the use of selective public sector purchase? May I ask the Secretary of State to give the assurance that the yacht will be built in a British shipyard? Will he make it absolutely clear that on no account will he allow the European Commission to insist upon open competition among European shipyards? Will he give a pledge that, even if Mr. van Miert refers him to the European Court of Justice, he will not allow the Commission to interfere and to get away with it?

I am grateful to the right hon. Gentleman for the generous way in which he welcomed the statement. The yacht will be built in a British shipyard—for security reasons, the yacht should be built here. In any case, this will be a royal yacht and it is appropriate that it should be built in a British shipyard. If there were any challenge to that decision, I would defend it every inch of the way.

I welcome my right hon. Friend's statement about the existing royal yacht and its replacement, and I particularly welcome the fact that the yacht will continue to be crewed by the Royal Navy. Will he confirm that I will have his personal support for the proposal that the new royal yacht should be home based at Portsmouth, as the existing yacht has been for so many years?

My hon. Friend has been generous in his welcome for the statement, and he has been a great advocate for today's decision—as many others who have spoken today have been. I ask him by all means to open his campaign today, but not to press me for a final decision on that—although I understand perfectly the strength of his claim.

I certainly welcome a statement that will bring work to Britain's hard-pressed shipyards, which have suffered so severely from the cuts in the Government's defence expenditure. I should welcome the return of the Royal Yacht Britannia to the Clyde, where she was constructed so skilfully and ably many years ago. However, the Secretary of State should give the House more details on why it was decided to use public money for the capital costs of Britannia.

On the last point, I repeat that it was because we thought that it was appropriate to the dignity of the monarchy. On the earlier points, if the hon. Lady is concerned about our hard-pressed shipyards, I would remind her that those at Barrow would not be building a fourth Trident boat if it were not for the fact that there was a Conservative victory at the previous general election.

I remind the hon. Lady that it is the pledge of her Government—[HON. MEMBERS: "Aha."]—of her party if it were in government, to have a defence review. The hon. Member for South Shields has said clearly that it would be a review with painful consequences. If her party were to win the general election, she would discover soon enough what those painful consequences were, because they would be visited on her constituents by the cuts that would be made by a Labour party in power.

When the shadow Chancellor was asked directly by Jim Naughtie on the "Today" programme yesterday whether he would have to cut defence in order to fund everything else within unchanged public spending ceilings, he simply refused to answer. He dare not answer the question, because it is clear that defence is the place from which any other spending increases would be funded. Defence under Labour would be a soft touch for any Chancellor.

May I thank and congratulate my right hon. Friend most warmly? Does he, however, accept that Britannia is part of this country's maritime heritage and that it would be as appropriate to maintain it at public expense, either as part of the complex at Portsmouth or at Greenwich, as to pay for the new yacht? Will he think carefully about that and about keeping Britannia in service until the new yacht is ready?

I am glad that the statement pleased my hon. Friend, but it is a statement with firm edges. We do not intend to keep Britannia in service beyond the end of 1997, and we do not believe that it would be a suitable use of public funds overall to keep it as some kind of museum. Others may wish to make proposals for a public interest use of the yacht, and I dare say that those people could apply for funding in the usual way—to the national lottery, for example—but we do not intend to launch a Government initiative to keep Britannia in any particular form. The challenge to those who would come forward is clear: suggest a use that is prestigious and suitable and by all means apply for the funding that is available; but any proposal must keep Britannia in excellent condition.

Why did the Secretary of State, in responding to my right hon. Friend the Member for Swansea, West (Mr. Williams), have to turn to insolence, pomposity and arrogance, knowing that out there in Britain, probably 30 or 40 per cent. of the people—it may be more—do not agree with the monarchy? Those views should be expressed in the House. The Prime Minister, on being elected, talked about a classless society.

Is it not right that some of us should say that £60 million should not be spent on a yacht for the royal family when it could be spent on kids who are being lined up in hospital and kicked out; on people who are waiting in corridors on trolleys; on schoolchildren who do not have pencils or even classrooms, in some cases; on pensioners, who are being robbed blind; or on the 4 million people who do not have a job? Surely there is a case to be made that the yacht should not be built. There is a language of priorities that says that we should not spend any more money on this aristocracy, which has been pushing its own self-destruct button for the past decade.

There is a language of priorities and there is a language of proportion. The hon. Gentleman has no sense of proportion. He equates the billions of pounds that we put into the health service and social security with a few million pounds that will be spent on this project over several years and which is, in any case, economically justified. There is more to it than economics. There is national esteem and pride, which he does not share or even understand. Some might think that he was arrogant in pontificating with such self-satisfaction and certainty about the views of 30 or 40 per cent. of the population. I criticised the right hon. Member for Swansea, West not for his views but because he blamed Her Majesty for a decision that was not hers.

Does my right hon. Friend accept that the all-party maritime group, which I chair, welcomes this decision, for which we have campaigned for more than two years? The new yacht should not only be built in Britain, but contain the finest British marine technology, to show the rest of the world that we still lead in maritime affairs.

Speaking from his position and with his background, my hon. Friend's approval is especially welcome. I emphasised in my statement that the ship will provide a showcase for British skills, engineering and design. That, too, will be of great benefit to our nation.

May I assure the right hon. Gentleman that most people throughout the country will warmly welcome this statement? Does he accept from me that most people throughout this country very much appreciate the services rendered by Her Majesty the Queen and Prince Charles to Britain? Does he not agree with me that the Carlton TV programme was a load of unutterable rubbish and totally unrepresentative of British public feeling? [Interruption.] I will be heard. Does he not finally agree that very few people in this country want to see a series of political presidents?

If I may add to that, very few people in this country want to see a brave Labour Member who speaks up for the monarchy being barracked by his colleagues in the way that the hon. Gentleman was. I appreciate his remarks. Apart from their feelings about the monarchy, many people will look forward to the 400 or 500 jobs that I estimate will be created by the contract. As was said by the hon. Member for Dunfermline, West (Ms Squire), who has left the Chamber, the shipyards will welcome the work.

Does my right hon. Friend accept that, with the exception of a few Opposition Members, the nation will warmly applaud the Government's decision? Her Majesty the Queen and other members of the royal family will be able to visit the Commonwealth and other nations in a royal yacht that is fit to show the fine maritime heritage of this country. Could he say a little more about the design of the yacht? May I hazard the thought that, after free competition, and bearing it in mind that Britannia was built on the Clyde, the new royal yacht might also be built there?

Certainly. the Clyde would be a candidate, but there must be a competition and a specification. In welcoming my right hon. Friend's remarks, I must make it clear that the new yacht's specification will be different from that of Britannia. In those days, the designers envisaged that the royal family would travel long distances on board. Today, they travel by air and use the yacht as a residence. Modern technology will allow lower running costs and a smaller crew. There will be substantial differences, but some important things will stay the same. The yacht must be prestigious. It must carry status. It must have royal apartments and state rooms that are suitable. It must create a great impression when people visit it, as something special, something remarkable, and something uniquely British.

May I, on behalf of not only my party but well over 1 million people in Northern Ireland, warmly welcome the statement? Even 77 years after the Republic separated from the kingdom, there are those in the Republic who still have royal yacht clubs and other titles because they, too, are royalists. May I express the hope that when the time comes for the competition, Harland will be one of the bidders, maintaining a tremendous tradition? As a Belfast Member, I hope that there will be those with the vision to bring Britannia to the new Lagan waterfront, which is making Belfast boom. Amidst all the cringing, it is encouraging to realise, when people think that we are bankrupt, that the £90 million is coming from the reserve.

It is £60 million. I welcome what the hon. Gentleman says. I know that the decision will be welcome to his constituents and to, I think, the vast majority in the Province. He rightly points out that it will be welcome north and south of the border in the island of Ireland. I am pleased that he reminded us of that. I thank him for the two bids, one in respect of Britannia and the other in respect of the new yacht. They have been carefully noted. Again, I recognise that those claims could be very strong.

Does my right hon. Friend agree that many of our people, including some living in the constituencies of Opposition Members who poured scorn on the decision, owe their jobs in part to the £2 billion of trade that the royal yacht has won overseas during the time that she has been operating as our national flagship? Does he further agree that in future the Britannia replacement should be called our national flagship, because that is what she is, rather than a yacht, which conjures up visions of junketing around the Mediterranean? If my right hon. Friend is thinking in terms of berthing her, she should be berthed in London as our national flagship, where most people can see her, rather than being tucked away in Portsmouth.

As my right hon. Friend is canvassing opinion on laying up the old Britannia, rather than confining his market to the United Kingdom, will he bear in mind the dependent territories? The rundown of his Department's expenditure in Gibraltar has led to that dependent territory having to switch its emphasis to creating an offshore finance centre, which is precisely the sort of economy that the royal yacht has hitherto been used to promote. Perhaps if he is looking for a fitting final resting place for Britannia, Gibraltar should be the place for her to berth. That would be welcome and it would give just the right message to Spain.

I am tempted to call, "Any more bids?" I heard very well what my hon. Friend said, but I reiterate what I said in the statement—that we shall be looking for a use of public interest in the United Kingdom, and that stands. I cannot accept that anything that was in Portsmouth would be tucked away. I understand the promotion of the case for London. It is not within my authority by any means to propose that the royal yacht should be called anything other than the royal yacht. That is a contentious suggestion.

My hon. Friend is right to recall how much the royal yacht does for the promotion of trade and how much good it can do for the dependent territories. However, I do not want the yacht to be seen simply as a commercial transaction, simply in pounds and pence. It also involves questions of our feeling about ourselves as a nation, and that matters, too.

I warmly welcome the announcement to replace Britannia. Anyone who has seen the thousands of people who flock to see Britannia anywhere in the world—I particularly look back to the pictures from South Africa last year—must know the importance not only to the economy but to the whole image. Given the announcement last week of £500 million—a large amount—to be spent from the millennium fund in Greenwich, which is a project that we can support, although there are certainly some queries about the amount, why has the Secretary of State not considered taking £60 million from that fund, so that the money comes from public money, but money that has been paid for by people through the national lottery?

The answer is simple. The legislation governing the national lottery does not allow us to use it as a substitute for proper public spending, and that is an important rule. This is a burden that properly falls on the nation and the taxpayer. While it would have been possible to think about private finance, it is not possible to use the national lottery for that purpose.

I very much welcome what the hon. Lady said and I am hoping that, given the pressure this afternoon from at least some Labour Members, by the end of the statement we might hear from the Labour Front-Bench team that it has decided that it wants to back the Government's action and to confirm that, in the unlikely event that Labour was elected, it would maintain the pledge that we have made today. Although it is clear that the Labour party is badly split on the issue and that the old republican guard is here in strength, none the less many hon. Members such as the hon. Lady would welcome such a commitment.

In congratulating my right hon. Friend on his admirable decision, which was announced in the most felicitous language, may I be practical and ask that the specification include a helicopter deck? Secondly, could the ship's company of the Royal Navy, who take a great pride in fulfilling that most important role for the duration of their tour, from time to time include distinguished members of the Royal Naval Reserve, who would enormously appreciate the honour of serving on board?

I can accept my hon. Friend's first suggestion straight away. Of course, a helicopter deck should be part of a modern ship. The possibility of arriving and leaving by helicopter and, indeed, of evacuating by helicopter in an emergency, should be part of the design. My hon. Friend's second suggestion is extremely important, and I should like to consider it. I mentioned state rooms and, of course, there must be provision for a band to play on board, because that is an important part of the image, prestige and projection associated with the royal yacht.

Given that the public are paying for the yacht, will they be able to visit it when the Queen is not in residence, which will be most of the time? Has the Secretary of State given any thought to a dual use—what about using it to take disadvantaged children from our inner cities to a foreign destination for a holiday?

I must make it clear to the hon. Gentleman that we have never considered financing the yacht out of swaps, as I believe he used to do in his early days. The royal yacht attracts many people, all over the world. I would not propose making any great changes in the usage of recent years. No doubt the way in which the yacht is used will evolve over time, but it is important that it should be there principally for the promotion of Britain and of her economic interests abroad.

Does my right hon. Friend understand that the Scottish people will be delighted at the proposal to replace the Royal Yacht Britannia? They will hope that it will be based on the Clyde after it ceases to be operational. Secondly, they will hope that the Clyde will have the opportunity to build the new ship, just as we built Britannia. We should also like my right hon. Friend to note that the Scottish national party has called for a bicycling monarchy, and there would be no prospect of a new Britannia being built on the Clyde with such a monarchy.

Let me assure my hon. Friend that no part of the specification will include room for bicycles. During my hon. Friend's remarks, I heard my right hon. Friend the Secretary of State for Scotland say, "Hear, hear." I am sure that he was doing that clearly within the bounds of collective responsibility, but none the less my hon. Friend was well heard on the Front Bench.

I welcome the statement, although I have some suspicions about the motivation that may lie behind its timing. Will the Secretary of State say a little more about what he regards as being appropriate or not appropriate in respect of total or partial private financing? Why is it not appropriate to have any private financing for the royal yacht, given that he recently decided that it was entirely appropriate to sell all the married quarters of all our soldiers, sailors and airmen in England and Wales to Nomura, a Japanese bank?

I do not think that it is the duty of the state to own houses, but I do think that it is the duty of the state to support the monarchy.

May I congratulate my right hon. Friend on his personal commitment to this project over the past two and a half years and on winning the arguments that must have occurred in the Cabinet? Given that the new royal yacht can be built in only one location, can he give an undertaking that there will be a proper symbolism in its construction and fitting out of the fact that it represents the United Kingdom of Great Britain and Northern Ireland? Can he remind the House of any conventions that might exist on what the royal yacht should be called? Have the Government given any consideration to that matter and has Her Majesty expressed an opinion?

We do not yet know the name of the yacht. Undoubtedly, that question will be considered and many suggestions will be made; Her Majesty will certainly be consulted. My hon. Friend, who also fought hard for this decision, makes an excellent point that the yacht must be representative of the United Kingdom of Great Britain and Northern Ireland. Her Majesty the Queen is the Queen of the United Kingdom and her yacht should reflect that.

Was the Secretary of State in the House on Friday, when we witnessed another spending decision? A Bill on the wind chill factor, which was presented by one of my hon. Friends, sought to provide £60 million to give essential life-saving help to poor pensioners. The question that the country will ask about Government priorities is why the Government do not have £60 million to give to poor pensioners, but do have it to allow one family to travel in a billionaire life style.

Yes, but the cold weather payments scheme was invented by the Conservative Government—it did not exist when the Labour party was last in office. Time and again, it has been improved in its generosity and extent. The Labour party did not make those payments. When the hon. Gentleman blathers on, as he has just done, let him admit all that the Government have done in providing a social security budget of £90,000 million. Let him then go away and talk the language of comparisons and proportion, about £60 million over 30 years for a royal yacht.

While regretting the lack of forward planning some years ago, despite prodding from Conservative Members, which means that inevitably there will be a delay, I warmly welcome this sensible decision. Does my right hon. Friend agree that the offers of financial support from commercial and City organisations that were put to the royal yacht parliamentary group and others are a signal of how much interest is felt in such sectors for the concept of a royal yacht? Does he further agree that having a royal yacht is a tried and tested formula and a good way of presenting the latest in British technology and expertise?

First, I congratulate my hon. Friend on his recent knighthood—this is my first opportunity to do so. He is right to say that tremendous interest was shown in the matter, and the interest expressed by the business community tells us a lot about what is happening in the general community and about the spirit in this nation. I entirely reject the remarks of the hon. Member for Bolsover (Mr. Skinner) in that respect. The yacht is tried and tested; the nation has benefited from it; it has helped our sovereign in her work; and I believe that almost the whole House will warmly welcome today's announcement.

May I support the introduction of a vessel that will be unique to the United Kingdom as an aid for the royal family? It has been suggested in the past, however, that the royal vessel could be used as a training ship when Her Majesty was not using it. There is also the question of the royal family's future. We are told that the royal family will have to use passenger trains and that no extra provision will be made for special aircraft. The Secretary of State says that it is important that the royal family should have a vessel financed from public funds, but that it is not important for the royal family to have their own train. What is the difference?

The nation will be confused about why we are taking this stand today when, in the recent past, the royal family have been told that they should use public transport. Why could not the royal yacht be financed by private sector money, given that the Government say that the royal family want to be involved with the private sector and move away from dependency on the state? Why have the Government changed their stance on that issue?

First, I remind the hon. Gentleman of what I have already said several times: this decision was for the Government, not the royal family. The Government believe that it is for the nation to finance something that so closely touches the monarchy's dignity. I can continue to repeat that all afternoon if the hon. Gentleman likes, but it remains our firm position.

The hon. Gentleman asked why we did not choose the training ship design, which was an imaginative idea. We took the view that the vessel's primary purpose is to combine use by the monarchy with promotion of Britain abroad and of our economic interests. To confuse that primary purpose with something quite different, which would be difficult to make compatible, seemed to make the matter too complicated and likely to fail in its primary purpose.

As Secretary of State for Defence, I am responsible for announcing this decision, which has been taken by the Cabinet. We have taken that decision because of all the reasons that I have given about how the yacht helps to project Britain and the monarchy abroad. Those reasons stand on their own legs and are self-explanatory.

May I assure my right hon. Friend that nowhere will the Government's decision to build another royal yacht be more happily received than in Lancaster, with its special relationship with Her Majesty in her style as Duke of Lancaster?

I am most grateful to my hon. Friend. The connection between Lancaster and Her Majesty is clear and well known. I am relieved that, to the best of my knowledge, Lancaster has no shipyard, so I do not have to chalk up another bid.

rose—

Thank you very much.

Bill Presented

Government Communications Headquarters (Restoration Of Trade Union Rights)

Mr. David Winnick presented a Bill to provide for persons employed at the Government Communications Headquarters to have the right to belong to an independent trade union of their choice; and for connected purposes: And the same was read the First time; and ordered to be read a Second time upon Thursday 1 May, and to be printed [Bill 76].

Building Societies (Distributions)

4.22 pm

I beg to move,

That leave be given to bring in a Bill to amend the law in respect of distribution of assets on the take-over or conversion of a building society.

The Bill's aim is to remove a serious injustice being done to tens of thousands of building society customers by the way in which building societies choose to allocate shares as they abandon mutual status and convert to public companies. The House will be aware of recent announcements by the Halifax, the Alliance and Leicester and the Woolwich building societies, each setting out a slightly different methodology, and of the preparations being made for flotation by the Northern Rock.

Under section 100 of the Building Societies Act 1986, building societies have considerable discretion as to who may qualify for shares and to what extent. The Act is more prescriptive when it comes to cash bonuses arising from the takeover of a building society but the same injustice arises and the Bill covers both circumstances.

The broad principle adopted, with variations, by the societies is that the first-named person on the account is the member, and members may qualify once only as saver and as borrower, irrespective of the number of accounts held.

The problem arises with joint accounts and trustee accounts, where the trustee is the first name on the account and the underlying beneficiary is the second or subsequent name. In some cases the trust is a formal relationship, as between a solicitor and a client. In most cases, it is an informal relationship where, in order to help an elderly, disabled or handicapped person who cannot look after his or her own account, a relative or carer becomes the trustee with the responsibility to sign the account.

If the carer as trustee has only one account, he or she will have a fiduciary duty to ensure that the beneficiary receives the share allocation. If the carer as trustee is the first-named person and has more than one account, even though those accounts may be entirely unconnected, only one share allocation will be made.

The problem is most acute in cases of multiple trusteeship. The matron of a nursing home, for example, may have been asked to look after the accounts of, say, 20 elderly patients. She will find that there will be only one allocation of shares to be divided up between all the patients. The same applies to the warden of a hospice, the manager of an old people's home, or a solicitor or accountant who is a trustee for a number of clients. Charities, associations and youth clubs can all be placed at a disadvantage.

Under the terms of the Halifax conversion, some recognition is given to the aggregate balance of the accounts, but no such provision is made by the Alliance and Leicester.

Sometimes anomalous situations arise from a detail as elementary as the design of the form completed by the customers when opening their building society accounts. That applies particularly to accounts opened for children. Some of those accounts are adversely affected, but others are not.

Unfortunately, second-named account holders cannot risk taking the obvious step of changing the order of names on their account in anticipation of future flotations. If they do that, they may break the continuity of the account and render it ineligible anyway.

To tackle the problem, my Bill requires building societies to recognise the legitimate entitlement of underlying beneficiaries to receive the same allocation of shares as every other customer, where it can be shown that they would have been the first-named account holder and qualified in their own right, but for the presence of a trustee. The Bill requires converting and merging building societies to establish a reserve or suspense account charged against assets, from which to meet legitimate claims from underlying beneficiaries of trustee accounts.

No onus at all is placed upon the societies to track down those who may be eligible. That would be an impossible task and a daunting prospect, and may well explain why societies have been unwilling to face up to the problem, of which they have been only too well aware.

Instead, the Bill requires societies in the course of normal notification to their members to tell them that claims within the specific definition will be considered, and that claimants should submit details of their circumstances and allow time for the society to satisfy itself that the criteria have been met. The society can then make a payment of equivalent value out of the fund set aside for the purpose. It will not cost the society anything extra. The society will, after all, only be returning to its mutual members the fruits of mutuality.

The most significant although not the only category of people to benefit from the Bill will be the disabled, the handicapped, the sick, the elderly and those who, through misfortune, are unable to look after themselves. That is why leading charities, such as Mencap, SENSE, and the Royal National Institute for the Blind, are strong supporters of the Bill.

One must ask how the building societies could have felt comfortable producing a share distribution formula that they knew was likely to exclude those most needing to benefit. We might also ask why at least one society, with expensive advice at its disposal, should have told its members that they were constrained by legislation from addressing the problem. In fact, nothing in current legislation prevents converting building societies from including in their share distributions the second-named account holder or beneficiary in circumstances where they would have qualified if they had been named first.

For share distributions, my Bill requires building societies to do what the law already permits them to do. For bonus distributions, my Bill amends the 1986 Act to make it possible and then requires building societies to act. Such a procedure will prevent building societies from attracting a great deal of unwelcome and unnecessary criticism of the type that so marred the Lloyds bank takeover of the Cheltenham and Gloucester. It will help to preserve the high esteem in which the building society movement has been held for so long but which has been severely tested in recent times.

The procedure outlined in my Bill could have been adopted voluntarily by the Woolwich, the Halifax and the Alliance and Leicester. With the benefit of hindsight, I am sure they would now acknowledge that they underestimated the public's strong belief in fair play. Fortunately, the Alliance and Leicester is showing clear signs of a change of heart, but the Halifax still perceives technical obstacles. Even though those societies have already sent out their conversion documents, I hope that—within the constraints of company law—they will make every effort to find a formula that enables them to follow the requirements of my Bill.

There is an opportunity for a go-ahead society to blaze a trail and set an example of best practice. I hope very much that that will happen. However, once the Bill is passed, societies that convert or merge in future will have no choice: they will have to recognise the rights of underlying beneficiaries, and a massive injustice will have been corrected. I commend the Bill to the House.

Question put and agreed to.

Bill ordered to be brought in by Mr. Douglas French, Sir Andrew Bowden, Mr. John Butterfill, Mr. David Evennett, Mr. John Greenway, Sir John Hannam, Mr. Hartley Booth, Mr. David Hunt, Mr. Peter Luff, Sir Geoffrey Pattie, Mr. James Pawsey and Mr. Michael Stephen.

Building Societies (Distributions)

Mr. Douglas French accordingly presented a Bill to amend the law in respect of distribution of assets on the take-over or conversion of a building society: And the same was read the First time; and ordered to be read a Second time upon Friday 14 February, and to be printed [Bill 77].

Orders Of The Day

Finance Bill

(Clauses Nos. 40, 62, 68, 82 and 92 and Schedules Nos. 7 and 13.)

Considered in Committee.

[MR. MICHAEL MORRIS in the Chair]

Ordered,

That the Order in which proceedings in Committee of the Whole House on the Finance Bill are to be taken shall be Clause 82, Schedule 13, Clause 62, Clause 92, Clause 40, Clause 68, Schedule 7.—[Mr. Wells.]

4.35 pm

On a point of order, Mr. Morris. I understand that it would be convenient and appropriate to discuss schedule 13 while debating whether clause 82 should stand part of the Bill. The clause is short and the meat of the argument is to be found within the schedule. The amendment refers to the schedule. I would not anticipate two separate debates.

The Chair is happy to accede to that request, as long as all parties are agreed that that course should be followed. It seems that there is no disagreement. That being so, we shall take schedule 13 with clause 82.

Clause 82

Writing-Down Allowances On Long-Life Assets

Question proposed, That the clause stand part of the Bill.

With this it will be convenient to take the following: Schedule 13—Capital Allowances on Long-Life Assets.

Amendment No. 3, in schedule 13, page 188, line 18, at end add—

11. The Treasury shall produce a report each year which—
(a) describes the response of companies to the withdrawal of fiscal support for investment in long—life assets made effective by this Schedule, and
(b) assesses the costs of operating the provisions of this Schedule and whether they are generating test cases before the Commissioners and the Courts.'.

The clause and the attached schedule, according to the Chancellor of the Exchequer in his Budget speech, are designed to ensure that the writing-down allowances that various Finance Acts provide for should be brought into line with normal accountancy practice. I think that, as a matter of principle, no one would argue with that. We have no objection in principle to the clause, but we would like to take the opportunity to raise a number of matters that arise from the operation of the clause and the attached schedule, and at the same time try to elicit from the Minister further clarification of what the Government intend.

The Committee will see, when examining the amendment, that it is intended, if agreed to, to allow the Government to bring forward, in effect, a report on the effect of the workings of the clause and the schedule. Whenever Parliament provides for allowances, or restricts or curtails allowances, it is important to be sure about the effect of what is proposed. There are many occasions when proposals are brought before the House of Commons and passed into law which turn out a year or two later not to have the intended consequence.

Perhaps it would be convenient to dispose of the principle of allowances, a principle on which I think there is broad agreement on both sides of the Chamber. The principle is that allowances should be designed to assist and encourage investment. They should be carefully worded so that they achieve the specific aim that lies behind them. They should not be allowed to distort investment decisions. Equally, the cost of the allowance should not be disproportionate to the gain. That has happened in the past. The Government's objective is to stop the cost of the allowance becoming disproportionate to the benefit gained. That is something that would generally be supported. Allowances should be in place to assist and encourage the investment process. At the same time, they should be fair. That is a point to which I shall return shortly.

It is my recollection that not so long ago the Opposition argued for enhanced capital allowances—indeed, a possible return to 100 per cent. first-year allowances. I certainly remember that in 1984, when we moved to a lower rate of income tax and lower capital allowances, there was opposition from the Labour party. Is it now the Opposition's policy to pursue what I would consider to be a more sensible approach, which is to follow accounting depreciation?

I suppose it was predictable that the hon. Gentleman would not be able to resist departing from a serious matter to make rather a silly point. If he cares to write, I shall look into what happened in 1984. I was not a Member of this place at the time and I do not remember what happened that year.

Successive Governments have accepted that capital allowances can be justified provided that there is a relationship between the cost of the allowance and the gain. That is the intention, which we want to support. It has always been the position that the Government of the day must review the working of allowances to ensure that they are cost effective and are achieving what was intended initially. Successive Governments have supported that principle.

It is clear that the level and rate of allowances will vary from time to time. I repeat, however, what I said at the outset of my remarks. I do not know whether the hon. Member for Beaconsfield (Mr. Smith) was listening at the time. I said that there is much to be said for ensuring that allowances do not distort investment decisions, and that there should in general be an alignment between what is normal accounting practice, normal business practice and the provisions of the appropriate Finance Act. There is no difference between us on that. Having established that principle—we do not need to waste time arguing the point—I shall deal with a number of points, some of which may interest the hon. Member for Beaconsfield, who tabled amendment No. 11, because he is on to the same point.

What immediately strikes anyone reading this provision is that although the intention is that the law will follow established accounting practice, that does not, I understand, happen. Let me give an example. The aeroplane manufacturing industry has drawn the Government's attention, and certainly our attention, to the fact that although aircraft are an asset and are capable of lasting more than 25 years, and therefore are caught by the provisions of the Bill, many operators in the United Kingdom do not use their aircraft for anything like 25 years; they sell them after 15 years. Therefore, they believe that they are discriminated against. Perhaps they have a point.

I can understand the Government's view that lines have to be drawn somewhere, but considering that railway rolling stock is exempt, I just wonder what the Government's rationale is. Although aeroplanes are caught by the provisions of the Bill, it is arguable that a great deal of an aeroplane that is still flying 25 years after its original manufacture may not be 25 years old, because parts will have been replaced during its working life. The same cannot be said of a railway carriage, a large part of which is the same railway carriage as left the workshop many years earlier.

Perhaps there is something of which we are not aware that has led the Government to exempt railways but to include aeroplanes. It will be interesting to hear from the Financial Secretary the Government's thinking on that point. If there is a rational explanation, I am sure that we will all accept it. Aeroplane manufacturers are concerned that they will be discriminated against. Perhaps I should return to one or two of those points later. It would be helpful to know why railways have been exempted.

I understand why ships have been exempted, because every year in Committee and in the proceedings relating to the Finance Bill we debate shipbuilding, and hon. Members on both sides of the House have been sympathetic to the plight of British shipbuilders. It will be interesting, however, to know why the Government want to exempt railways. Some people have unkindly suggested that it is a favour to those who have acquired the privatised railways, that they need these incentives to make ends meet, or perhaps they were promised this during the privatisation process. We are not all cynical, however, and it may be wrong to suggest such things, but it is difficult to see why so many other people have been included whereas railways have been exempted.

I notice in the explanatory memorandum that the Government issue to all members of the Committee that the rules will apply, in the words of the memorandum,

"only to companies that invest heavily in long life assets."

The memorandum does not, obviously, have the force of law, but what Ministers say can be of help in interpreting what Parliament means, which brings me to my second point.

In regard to what is said in the memorandum, the terms and language of schedule 13 are vague. I understand that of necessity it may not be possible to have the precise language that one might like, but bearing in mind the fact that investment decisions may well turn on the allowances that are available, it would be helpful if the Minister could say what he believes the words "invest heavily" actually mean. Presumably an aircraft manufacturer, for example, will almost exclusively invest in assets that have a long life. What do we say to someone who makes the components of an aircraft that might or might not last 25 years? I do not know. Some parts may well last that long; others will not. That is clearly of some importance.

The same is true of the oil industry. It has been put to me by people involved in the oil industry that many of the decisions as to whether to invest in a new field are highly marginal. There are many considerations, of which capital allowances are only one, but it could be the critical factor. Some of the plant that is required will last more than 25 years; some will not. It will be helpful—I cannot find this in the schedule—to know in precise terms what the Government have in mind, and the definition of the assets that are to be caught.

Apparently, there is a further problem. Under the Bill, the test of the lifetime of an asset is whether it is capable of lasting for more than 25 years. I understand that it is normal business practice to write down plant according to the lifetime anticipated by the user or owner of the asset. Let us take the example of an aeroplane again. An aeroplane may be intended to operate for 15 or 20 years; the asset is then sold to someone else, who may use it for five or six years, and subsequently sold again and again, being used for progressively shorter periods. As the Bill stands, it is possible that people in possession of assets that are capable of being used for more than 25 years will find that, through no fault of their own, they will not receive the full allowances.

4.45 pm

In view of what I said at the beginning of my speech, I should point out that I am not arguing that allowances should be granted indiscriminately when they may not always be justified; but there seems to be an anomaly in both the scope and the definition of the clause and schedule. Although the stated intention is to align accounting practice with the practice of the law, many individuals will find that their practice still bears no relation to the new law. We should not enact a measure that would distort decisions.

Aeroplanes are, by definition, very mobile. Unlike power stations or water pipelines, they do not have to be in this country. It has been said—although such threats should always be taken with a pinch of salt—that some operators might decamp and set up abroad in order to avoid these provisions and, in a global economy, we must of course be very aware of the tax competition issues that may arise.

I dare say that the Minister will have an answer to all those points, but it would help the Committee—and, perhaps more important, those who will have to put the measures into practice—to know what the Government intend, and how they propose to deal with the anomalies to which I have referred.

Some operators and owners, such as the utilities, have assets which, on any view, are likely to last for more than 25 years. In the case of others, such as the telecommunications industry, it is a moot point: there could be considerable argument about how long modern telecommunications equipment is supposed to last. Those who listened to the "Today" programme this morning will have heard an argument about the erection of telecommunications beacons in a park in Yorkshire. It was argued that they would last only another five years, but they are clearly capable of lasting for 25 or 30 years.

A theme that has recurred during debates on Finance Bills over the past few years is the desire not just to simplify the body of tax law, but to pass legislation that has some degree of clarity; but clarity is sadly lacking in clause 82. It is possible that the Government introduced the clause and schedule simply on cost grounds, but, if that is the case, let us hear it: let us not pretend that there was some other motive. If, on the other hand, the intention was to align accountancy practice with the practice of the law on allowances, will the Minister explain the apparent anomalies—as between railways and aeroplanes, for example—and will he explain what the taxpayer is supposed to do when he has an asset which he has no intention of operating, for any purpose, for anything like 25 years, although the law assumes that it will last for longer than that? That leads to a question that specifically concerns aeroplanes. What are people supposed to do when an asset that may be in the sky 25 years after its frame took to the airways is not the same asset as was originally built? I am sure that other Committee members wish to speak to clause 82 and to amendment No. 3. It would be helpful, however, if the Financial Secretary would explain what the Government have in mind with their provisions.

I listened very carefully to the remarks made by my hon. Friend the Member for Edinburgh, Central (Mr. Darling). Unsurprisingly, he dwelt on the example of aircraft, which is a good example for the reasons that he gave—its mobility and the possibilities of life extension and, although it will still be an aeroplane, of changing almost all its features. The latter feature of aeroplanes may be an argument against applying these provisions to them; I am unsure on that point. It is clear, however, that what is good for trains should be good for aeroplanes. Anyone who has travelled on the west coast main line will know that the life of those assets is considerably longer than 25 years. The railways provide some obvious examples for this debate.

It is always strange when Ministers suggest that legislation will be clarified by a comparatively modest amendment which, upon examination, only adds to the confusion. That is why we should like to have an annual report. If the Government's notional majority were to prevail and clause 82 were retained, it should be incumbent on the Government and on successive Governments to report on changes in the law. It is therefore desirable that we should receive an annual report on developments. Such a report would be to the advantage of the House, to potential investors and, not least, to the accounting profession.

My hon. Friend the Member for Edinburgh, Central mentioned the utilities and the oil industry; he also mentioned this morning's very interesting radio report about beacons for mobile telephones. We should also like to know the status of assets in the cable industry—which is busy digging up our country's roads and destroying trees. Asset life in that part of the telecommunications industry might be of considerable length, and I hope that it is. I do not want my street dug up again, and—given cable operators' tendency to drill holes through any wall they encounter—my wife does not want them anywhere near our house again.

In the utilities and telecommunications sectors, the burgeoning cable industry is entitled to receive some indication of how assets will be treated so that it can determine whether the provisions might frustrate development of exciting new technology. Interaction between home, office and shop, for example, could revolutionise the way in which we live and work.

My hon. Friend the Member for Edinburgh, Central also mentioned the oil industry. I am sure that he will recall that, some years ago, in Scotland, we attended a seminar hosted by a major oil company at which we heard a debate on investment intentions between senior executives of that company. It was clear that executives from the company's American headquarters were mesmerised by the "upstream" and "downstream" arguments on a proposed tax change. The headquarters executives were not interested in the somewhat refined debate on the relative importance of the Government's then proposed tax changes, and their patience was fairly short. If they had thought that tax advantages in the North sea were considerably less than those in south-east Asia or in Australia, they would have been quite happy to move their investment programme to a location that was more cost effective on tax. It is therefore important that the Minister gives an idea of the impact not only on the oil industry but on the petrochemical industry—the downstream industry in which the UK has assets.

I have a constituency interest in that many of my constituents work at the Grangemouth complex, which is on the edge of my constituency. It is one of the major facilities for harnessing and taking advantage of the products of the North sea oil industry. The investment programmes there are of considerable significance, and I do not think that the industry would wish to be disadvantaged by the changes that appear to be in train and which would be available to some industries and not others.

By the same token, we should consider the effect on power stations. Although this is not important at the moment, because the level of power station construction is not quite what it was in the early 1980s, it is clear that, come the end of this century and the beginning of the next—the date might coincide with 2010—a number of new plants will have to be constructed because the life of the existing ones will have been pretty well exhausted. New plants will have to be brought on line. If there is not to be a beneficial tax regime for companies that invest in this sphere, we might face a shortfall in generating capacity.

The construction of power stations involves petrochemicals and electricity generation. Even allowing for the new technologies involved in the generation of electricity, the construction of power stations is a major source of employment. The construction of the kit used in power stations is also a source of employment. It would be dangerous for the Government to highlight one industry—the railway industry—but discount the possible impact of those changes on others.

I am anxious for the Government to make their position clear. We are not happy with the vagueness of

"investing heavily in long-life assets".

It could be open to all kinds of abuse and misinterpretation. It is therefore essential that the House has the opportunity to review at regular intervals the impact of the proposed changes. The best way to do that would be with an annual report.

The amendment is therefore sensible, easily operable and one from which the House, the accounting profession and industry would benefit. I see no reason why the Minister should not accept it. If he can tell us what

"investing heavily in long-life assets"

means with a degree of clarity and concision uncharacteristic of Ministers on most issues, we shall be pleasantly surprised and perhaps reassured. If we do not get that reassurance, I hope that the amendment is accepted. It has considerable merit and would certainly go some way to reassure the people on whom this country depends for employment and wealth creation.

I take the view that, as far as possible, the taxable profit of a business should, for the purpose of corporation tax, be as near as possible to the reported profit that appears in the accounts. Of course, it is not possible to achieve that in practice for very good reasons. In practice, one takes the reported profit in the accounts, adds the depreciation and then deducts the capital allowances to which the company is entitled. However, as far as possible the capital allowances should be roughly the amount of the depreciation that appears in the accounts. Clause 82 and schedule 13 take the capital allowances system a step further down that road.

For that reason, the proposed reform is sensible, but we should recognise that it is a reform that can be made only in an era of low inflation. The hon. Member for Edinburgh, Central (Mr. Darling) took exception to my question about the history of this matter, but it is significant that, 20 years ago, we could not have had the system that we have today. In fact, 20 years ago, when the rate of corporation tax was 52 per cent. and inflation fluctuated between 15 per cent. and 25 per cent., not only did we have to have 100 per cent. first year allowances for all capital investment, we had to have something for stock relief, recognising the fact that replacing stock costs a lot of extra cash in a high inflation era.

At that time, it was not good enough just to look at the reported profits of a company; the cash flow also had to be examined. In the 1970s, plenty of profitable companies had negative cash flow because of the effects of inflation on the need to maintain fixed capital and working capital.

5 pm

The 1984 reform was important because it reduced the standard rate of corporation tax significantly, and reduced capital allowances. That was a welcome change, because it removed distortions from the system. As has rightly been said, having capital allowances significantly higher than the accounting depreciation introduces distortions into the system, which result in commercial decisions being taken for tax reasons rather than for good business reasons. I am glad that we have reached a stage at which the total capital allowances available to a business will be roughly equivalent to the accounting depreciation that appears in the accounts.

I should like to mention one or two issues that arise from the schedule. The first relates to aircraft, which the hon. Members for Edinburgh, Central and for Clackmannan (Mr. O'Neill) have mentioned. There are exceptions in the schedule for trains and ships. The best way to deal with aircraft seems to be to make an exception for them, too.

The determining factor in deciding how much depreciation will be charged in the accounts is not how long one owner expects to use an asset—so it is not open to an airline that expects to use an aircraft for 15 years to decide to depreciate it at 6 per cent. over 15 years—but the expected useful life of the asset, regardless of how long the current owner expects to use it. That is the problem for airlines. Although an airline may expect to use an asset for only 15 years, the life of an average aircraft these days may well be 25, 30 or even 35 years. United Kingdom airlines tend to buy new aircraft. A new 747, for example, might be owned by British Airways for 15 years and then be sold—probably abroad, although that is not particularly significant—to another operator, who operates it for another 10 or 15 years.

The problem needs to be tackled, and I hope that my hon. Friend the Financial Secretary to the Treasury will be able to do so. I do not understand why the Inland Revenue favours a reducing balance method. Why do we have 6 per cent. on a reducing balance? Would it not be more straightforward to allow 4 per cent. on a straight line basis over 25 years, and at the end of 25 years the asset could be written off? That is straightforward.

The Confederation of British Industry observes in its representations on the schedule that, at the end of 25 years, there is a substantial unrelieved cost. At the start, there is 6 per cent. relief, but that is 6 per cent. on the reducing balance. The CBI points out that, at the end of 25 years, a 6 per cent. reducing balance allowance leaves approximately 20 per cent. of the value unrelieved, whereas accounting depreciation over the same period would have written off the expenditure fully. I do not know how much longer it would take after 25 years at 6 per cent. on the balance for the expenditure to be written off completely. It could easily be another 15 years. It would be simpler to have a straight line basis of capital allowances. I wonder whether my hon. Friend the Financial Secretary could comment on that.

Another important detail relating to the transitional arrangements has been drawn to my attention. Proposed new paragraph 38H of schedule 13, at the top of page 187, provides:

"This Chapter does not apply—

(a)to any expenditure incurred before 26th November 1996"—

Budget day—

"or

(b) to any expenditure incurred before 1st January 2001 in pursuance of a contract entered into before 26th November 1996."

That sounds straightforward, but it has been pointed out to me that some large capital projects—the provisions are directed principally towards such projects—such as the construction of a large power station might be organised as a series of contracts. There might be five or six. Although the project would be agreed, the contracts might not all be signed at the start. On 26 November 1996, it is possible that a company might have agreed a project with a construction company but contracted only for the first or second stages. Will my hon. Friend the Financial Secretary consider whether that is a genuine point of practical concern? I do not know. I have raised it with him because it has been raised with me.

I am interested in the hon. Gentleman's point. There is another aspect to that problem. A power station can be built with different generating sets added over time. To get the show running and to generate some income, as well as electricity, the first set is put in and then funded out of the next one, which may come several years later. A continuing programme of expansion can be carried out under the umbrella of the original contract.

If it was clear that there was one contract and everything was carried out under that umbrella, there would not be a problem, as I understand the schedule. However, if there was something less than a contract—a commitment that was not contractually binding under which the project would not be viable if the whole undertaking was not proceeded with—there may he a problem. I do not know, but I hope that my hon. Friend will consider that.

Cable has been mentioned. I wrote to my hon. Friend the Financial Secretary in December about a problem that is of particular concern to Cable and Wireless, although it may be a problem for all cable companies. I shall not go into the detail, but I hope that my hon. Friend will be able to respond to that.

Having said all that, I think that the changes proposed in the schedule are sensible. They can be made only in a low inflation environment, but it is sensible to try to have the profit for the purposes of corporation tax as near as possible to the reported profit in a company's accounts. For that reason, I welcome the proposals.

The schedule adds a further eight and a half pages to the Capital Allowances Act 1990. No doubt it will also add substantially in due course to the voluminous case law on the issue.

It is clear from its size that the measure is not business-friendly. Capital allowances are complicated and present significant difficulties for small and medium-sized businesses in fathoming what allowances they can use for tax purposes.

The issue is of concern to many tax practitioners. In their book, "Practical Capital Allowances", Peter Newbold and Martin Wilson write about some of the practical difficulties. They say:

"It is common practice to speak of 'preparing' a capital allowances claim. This pre-supposes that particular types of assets qualify automatically for particular types of allowances, and that a claim consists of no more than assembling and presenting self-evident facts.

In the 1990s, the process is much more complicated. Both tax law and building design have moved on to a new plane of complexity, and the 'grey areas' have grown—the facts are often less evident than they once were.…

A claim for capital allowances must be 'developed' before it can be developed and it must be 'planned'. This clearly involves a good deal of work, and the question is often asked whether the cost (in both time and money) is justified."

That is a very real concern for a number of United Kingdom businesses, especially small and medium-sized ones in the west midlands.

Does the hon. Gentleman agree that the exemption in the schedule for any business that spends less than £100,000 in one year on capital investment means that it is unlikely to apply to all small businesses and many medium-sized businesses?

No, I do not agree. The £100,000 limit will not exempt a significant number of medium-sized businesses—certainly companies that are still small but operate in a group structure. If the hon. Gentleman looks at the schedule, he will find that it places very severe restrictions on companies that operate group structures.

I would accept the principle behind the clause and the schedule if it really brought the tax treatment of long-life assets more closely in line with normal accountancy practice. The hon. Member for Beaconsfield (Mr. Smith) welcomed it, and like him I want taxable profit more closely to approximate accounting profit. In the same speech, however, he rightly made the point when referring to the CBI's submission, that, at the end of a 25-year period, as a result of the reducing balance system proposed in the schedule, about 20 to 21 per cent. of the value of the assets will not be relieved from tax. That does not seem to be getting close to mirroring tax treatment with accounting profit. The Government must be honest and give the real reason for the schedule. If it is a clever tax wheeze to raise £1 billion in two financial years, they ought to come clean and say so.

Following the point made by the hon. Member for Beaconsfield (Mr. Smith), I am prompted to ask my hon. Friend to look at section 38C of schedule 13, where he will see that there is a further problem concerning the £100,000 figure. Although it would catch a contract that spanned several accounting periods and treats them as being one accounting period, what would happen if concerns so arranged their affairs to have a series of separate contracts? In speaking in support of the amendment, my hon. Friend will know that we do not want to reach a point where we are creating a very healthy living for lawyers who argue such matters. Some certainty would be very helpful. Although I appreciate why the Government are trying to be helpful in exempting small firms, they could unwittingly be creating a gravy train for lawyers.

I thank my hon. Friend for his comments, which are not only valid but have independent support. Andrew Dilnot of the Institute of Fiscal Studies said when questioned by the Treasury Committee on the issue of capital allowances and long-life assets that the provision would indeed create a gravy train for tax lawyers and accountants. He was far from convinced that the projected yields of £325 million in 1998–99 and £675 million in 1999–2000 would be achieved. We should listen to what he says. Tax lawyers and accountants are already gearing up to offer companies advice on how they should organise their tax affairs. Some of the utilities with which I have discussed the issue certainly feel that there are ways around the system and that it will not affect their businesses to any substantial degree.

5.15 pm

I turn to some of the detail of schedule 13, which raises fundamental issues that require scrutiny. It is unfortunate that, since this is the first clause and schedule to be discussed in Committee, it will not receive the level of detailed analysis that it deserves if we are to make good law in the area. I draw the Committee's attention to section 38A(2)(a) and (b), which revolve around who determines whether assets will have an economic life of at least 25 years and what we mean by a "useful economic life".

It seems clear that individuals and—probably—partnerships will decide themselves whether assets are caught by the legislation because, with the coming self-assessment regime, it will be up to them to determine such tax matters. Similarly, tax lawyers and accountants will advise companies, and undoubtedly some very interesting discussions will be held between companies and their firms of auditors as to how tax treatment of certain assets should be determined and accounted for.

The point is well made by the Institute of Directors in some of the concerns that it has been expressing about the Budget. It says that consultation with industry and tax advisers on how the rule can be implemented is desperately required. I very much endorse that. I will be interested to hear what plans the Financial Secretary to the Treasury has to consult those who will be affected by the legislation and whether further consideration should be given on Report to some of the problems that are likely to be associated with it.

Another key point to make about the section is that, although many major manufacturing companies will not keep assets for 25 years, they are nevertheless likely to be caught by the legislation because it may well be deemed that the asset has a "useful economic life" of 25 years. The most recent Government research that I have seen shows that the average age of plant and machinery in the United Kingdom is about 11 years.

Some of our leading manufacturers certainly have very clear investment programmes. I cite GKN plc as an example. It will clearly make significant capital investments in plant and machinery but will be upgrading and disposing of it well within a 25-year period. How will the section take account of obsolescence so that a machine that could last for 50 years can be replaced by a more advanced one within 15 or 20 years? What happens if everybody agrees in good faith that an asset will last for 30 years, but it lasts for only 20 years? Would the taxpayer be compensated for the loss of cash flow as a result of having only 6 per cent. allowances during this period?

Section 38A(4) and (5) deal with expenditure incurred on long-life assets in relation to composite assets, and state that apportionments should be "just and reasonable." This is peculiarly ill-defined, and it has some important knock-on consequences. Section 66 of the Capital Allowances Act refers to building alterations and states—in summary—that where a person carrying out trade incurs capital expenditure on alterations, it counts as plant and machinery. A company installing a major new manufacturing cell—which would be counted as plant and machinery, but may have a useful economic life of less than 25 years—may have to make substantial alterations to a building to install that cell. Those alterations would then be caught by the new regulations. At present, building alterations can qualify for the 25 per cent. writing-down allowances, but they will not in future. Companies that are likely to make alterations when investing in plant and machinery will be disadvantaged as a result of this part of the Bill.

Section 38B provides exemptions for dwelling houses, retail shops, showrooms, hotels and offices. I accept the point about dwelling houses, but it is not immediately obvious why it is right and fair to exempt retail shops, showrooms and hotels—or, indeed, offices. A number of large hotel groups and companies are making major investments in long-life assets, such as offices, and these will not be caught by the legislation. But a manufacturing company investing in plant and machinery to create wealth in the United Kingdom will be hit by the legislation. That does not seem to be a fair basis in law.

Section 38B(3) is welcome, as it provides exemptions to the shipbuilding industry. However, it is not immediately obvious why shipbuilding should be exempted, but dry docks—where ships go to be refurbished—are to be classified as long-life assets and caught by the Bill. If we intend to do something to help the shipbuilding industry—we have had discussions during debates on previous Finance Bills on the need to support shipbuilding—it is slightly anomalous that dry docks will not be relieved in the way that the shipbuilding industry is. In case law, I cite Inland Revenue Commissioners v. Barclay Curle and Co. as holding that dry docks are plant and machinery. Grain silos are also classed as plant and machinery and they will be similarly affected by the new legislation—even though they are used for the purposes of loading and unloading ships. We need clarification.

We also need details on the subject of investment in sports grounds. Section 70 of the Capital Allowances Act 1990 provides that investment in safety in sports grounds can be treated as plant, but there is no exemption in the legislation for such investment. In future, such investment is likely to get relief at the 6 per cent. rate rather than at the current 25 per cent. rate. Is that what the Government intend? Are they aware of the problem? Will they do something about it?

I also wish to highlight the potential problems in relation to the private finance initiative, and I will be very interested to hear the Minister's response. A number of PFI contracts for the hospital sector—which are being signed rather belatedly—are from major companies that will invest in long-life assets, and certainly in assets with an expected useful life of more than 25 years. Before this Budget there was an understanding that they would get capital allowances at the 25 per cent. rate. It seems to me—there is nothing in the schedule to suggest otherwise—that PFI projects in the health service could be damaged by the change in tax treatment proposed by the legislation. We need urgent clarification on this.

Perhaps the Minister will talk to his civil servants and respond in writing to the next few points that I wish to raise. Section 38C(3)(b) and (4)(b) of schedule 13 talk about expenditure incurred by an individual being subject to the relevant limit, which is set at £100,000. Section 38C(3)(b) says that this is subject to the individual devoting

"substantially the whole of his time in that chargeable period to the carrying on of that trade and profession".

What happens if the individual—or partnership—does not devote

"substantially the whole of his time in that chargeable period to the carrying on of that trade and profession"?

Section 38C(5)(a) talks about excluding expenditure

"on the provision of a share in machinery or plant".

Why will expenditure on such shares be excluded? We could be talking about a 50 per cent. share of a £20 million capital investment. That does not seem to me to be obvious.

Finally, I wish to highlight the point that I made at the start of my speech in relation to groups of companies and associated companies. It seems to me that the legislation will affect company decisions about whether businesses should be part of groupings or not.

That could happen, because the legislation states that the £100,000 limit should be divided by the number of companies in the group, so for four businesses in a small group the maximum capital allowance in any one-year period would be £25,000. If that is so, it is fundamental, because small companies operating in group structures could be caught by the legislation. Will the Minister clarify whether my reading is correct and respond on whether that seems fair?

5.30 pm

I am slightly concerned about the cliff edge of the de minimis limit, in that long-life expenditure of £100,000 will result in allowances of £25,000, but £100,001 will produce an allowance of only £6,000. Many companies will be concerned about contract values around the margin if they are considering investments of about £100,000, and that could have some serious tax consequences.

We need some clear answers about the real purpose of the clause and of the schedule to which the amendment refers. If it is to bring tax treatment more closely in line with normal accountancy practices, there are, as the hon. Member for Beaconsfield said, better ways of doing that than using a reducing balance method that leaves 20 to 21 per cent. of the asset value unrelieved after a 25-year period; if the real reason is that it is a nice little earner for the Treasury and a good tax wheeze, why does not the Minister say so?

Many probing points have been made, and I want to say at the outset how much I welcome the opening comments of the hon. Member for Edinburgh, Central (Mr. Darling). I was grateful for his remarks on the broad principles underlying the measure. He went to the heart of the matter when he rightly said that capital allowances should not be allowed to distort investment. I believe that he said that in the context of the previous reforms, and he certainly attached his remarks to the reform before us today.

One of the underlying themes of the debate has been, why we are doing this? The hon. Member for Dudley, West (Mr. Pearson) asked a moment ago whether it was a wizard wheeze to raise lots of money, and my hon. Friend the Member for Beaconsfield (Mr. Smith) suggested that it might be a timely reform to bring into line with accounting principles the way in which tax allowances treat long-life assets. It is very much that principle that has driven us in our considerations on the measure.

The current economic circumstances make it more propitious to advance that line of argument. It is important to refresh the Committee's memory about the rate of corporation tax. While we have been the Government, the mainstream rate has decreased from 52 per cent. to 35 per cent., and the small companies rate from 33 per cent. to 23 per cent.

For all those who express doubt or indeed dissent about aspects of the measure, however detailed, the acid test to which we return is whether enacting this reform in addition to our previous reforms to the tax allowance system allows us to sustain, and indeed—for small and medium-sized companies—to improve the corporation tax regime, to the extent that, by my assessment, we have the most generous small companies corporation tax regime and the most competitive mainstream corporation tax rate of the major economies.

When business people were asked where they prefer the balance to lie between allowances and a lower rate of corporation tax, by and large they preferred the lower tax. The measure allows us to sustain that position. There is no hiding from the fact that money will be raised, as that will clearly happen if we reduce an allowance—in this case to bring it, as far as the tax system is concerned, into conjunction with the accounting principles involved—and we make no apology for that result, because the corollary is a further improvement in the small companies corporation tax rate.

I hope that I have dealt with the points made by several hon. Members. The hon. Member for Edinburgh, Central said that whatever we did should be fair and should assist and encourage. I share that view: the tax regime on companies should be fair and it should assist and encourage investment. Everyone participating in the debate has expressed a genuine wish to remove distortion by virtue of tax allowances. As my hon. Friend the Member for Beaconsfield said, that is what the reform has done. On those points, I believe that the probing questions of the hon. Member for Edinburgh, Central have been answered.

The juxtaposition of aircraft and railways was mentioned, and there was some comment on ships, the oil industry and the cable industry. I shall try to deal in detail with the points raised on those issues. I was grateful for the supportive comments of the hon. Member for Edinburgh, Central, who acknowledged that it was appropriate to exclude shipping in this context. He has long experience in that area, and clearly recalls the changes that were made in response to representations from the shipping industry: in the previous Finance Bill we made changes in the roll-over relief arrangements, and it would clearly not be appropriate to undo by the current measures the good that we did on behalf of the industry at that time.

On railways, there is no fiendish plot artificially to favour those involved in rail franchising. First and foremost, circumstances in the railways are rather different from those in the mainstream industries affected by the proposal. The Committee will reflect on the fact that the railway industry has historically been a loss maker. However much we may have debated the rights or wrongs of privatisation, we set out with a genuine intention to try to improve our railway system through privatisation and the franchising operation.

I may have misunderstood the Government over the past three or four years, but I thought that the privatisation process was intended to ensure that profits, not losses, were made. I wonder, therefore, about the justification for excluding the railways, because I understood that they were to be in exactly the same position as, for example, an aircraft manufacturer or operator, and that they were to make profits. The hon. Gentleman seems to be acknowledging that they will never make profits and that they will have to be subsidised. That is a concession, is it not?

The hon. Gentleman has spent a great deal of time considering particular points of detail in the Bill, and indeed in the schedule, but perhaps it escaped his attention that the provisions last until 2010, when they are to be reviewed, and that is precisely because we see the potential of increasingly improved finances in the railways. The Government are providing grants, which are now paid through the franchising director for the provision of loss-making services. If these measures increase the costs of the railway industry, those costs will simply come back to us through the subsidies that will be paid to the franchises that are to be negotiated. That is a sensible move. I emphasise that we expect the railway system to move into profit in due course. To judge by some of the excellent commercial ventures that have already been started by various franchise winners, the process is well under way.

I listened carefully to the Financial Secretary. He seems to have made two fairly clear commitments. If I am wrong, perhaps he will clarify the matter. Is he saying that all the railway companies will be in profit by 2010? If he is, is he guaranteeing that when the matter is reviewed in 2010, they will be put on the same taxation basis as everyone else?

I refer the hon. Gentleman to paragraph 4 of the Inland Revenue press release of 26 November, which states:

"Capital allowances will continue to be given at 25 per cent. a year on sea going ships and railway assets bought before the end of 2010, when this exclusion would fall to be reviewed by the Government of the day."

That was my point. I have expanded on the reasoning behind the shipping and railway exclusions.

If I understood him correctly, the hon. Member for Edinburgh, Central continued to probe the meaning of investing substantially in long-life assets. Those words are meant to make it clear that the sorts of enterprise concerned are exactly what the proposal says that they are: those that invest in long-life assets. In some trades, professions and activities, assets have a short life. We will discuss the question of life because many of his points revolved around the definition of long-life assets. That is why we recognised that there should be a cut-off—the de minimis exclusions—to try to take out the small and medium enterprises from the proposals.

Hon. Members have touched on how the proposals affect individual companies, and the hon. Member for Dudley, West mentioned groups of companies. Groups of companies that spend less than £100,000 a year on long-life assets, other than assets wholly excluded in the rules, are excluded. It would be to his advantage to examine the information in notes on clauses. The definition of the scope involved was "sizeable expenditure" on assets that are treated in accountancy terms as being long life. We are talking about industries that invest in substantial structures, such as heavy machinery and pipelines. The oil industry was mentioned, as were aircraft.

5.45 pm

I hope that the answer to the question of the hon. Member for Edinburgh, Central suggests itself. In the real world, certain assets are deemed to have a life of 25 years or more, and it tends to be the bigger end of the investing spectrum that is affected.

May I seek clarification of that point, because it may help those who have to implement it? Does investing heavily refer to the value of the investment or to the nature of the business or individual? If the Minister personally decided to build a power station, would that be investing heavily? If a railway company that never bought any carriages suddenly bought one, would that be a light investment, even though it was a long-life asset? Is it the value of the investment or the practice and nature of the business that decides whether an investor is heavy?

There are two parts to the definition. It is determined, first, by the life of the asset, and, secondly, by the value. The point of the de minimis exclusion was that many small investments need not be caught by the provision. Serious sums above £100,000 a year would be regarded as starting on the trail of heavy monetary investment. However, to be caught, the life of the asset must be considered. If, in terms of accounting practice, it has a life of 25 years, it will be deemed to be a long-life asset and will therefore be caught. To answer the hon. Gentleman's point, if companies do not invest, they will not be caught.

I apologise for my absence from the start of the debate; I was chairing a Committee.

On the life of assets, is there not a strong case for differentiating between turboprop and jet aircraft, as the former tend to have a much longer life?

I shall pre-empt some more detailed remarks that I was going to make on that. For light aircraft, matters such as the number of flying hours can be taken into consideration. It is for the company to decide all such matters when it starts in its accounting principles to deal with long-life assets. If there is a dispute about assets being long life or short life, the discussions with the inspector of taxes come into play. If no agreement is reached between the inspector and the taxable entity, the matter can be referred to the commissioners for further adjudication.

At the start of the debate, we discussed bringing tax allowances into line with accounting principles: accountants will identify the asset at company level and decide whether it is appropriate to write it down in the company's accounts as a long-life asset. It is at that point that the tax treatment is triggered. We have brought the principles together as detailed in schedule 13.

I want to pick up a point made by the hon. Members for Edinburgh, Central and for Clackmannan (Mr. O'Neill). Major components of aircraft such as engines can be treated separately. When such significant components are replaced, they can be treated as any other replacement part would be under a tax regime different from the long-life tax regime. An oil rig or exploration device may be made up of a series of separate modules, and the test would apply to each part. The principles are fair in their practical application.

Is my hon. Friend saying that it would be open to airlines to break down an aircraft into its component modules? If the engines had a life of only 15 years, could they claim capital allowances at the current rate on the engines but claim for the fuselage under the new arrangements?

Engines are generally treated as separate entities for tax purposes. That would not apply to the rest of the aeroplane. I hope that that is clear.

The engines and fuselage are treated as different parts because they are made by different companies. My limited knowledge of aircraft manufacture is almost wholly gleaned from a recent visit to Rolls-Royce. I am no aircraft engineer, but I know that many other parts of the aeroplane can be separated. Is the Minister saying that many other parts of the aeroplane can be separated? For example, I understand that the most important part of an aeroplane is its wings. Those who make the wings tell me that the wings affect how the aeroplane flies and performs. The bit in the middle that we all sit in is of lesser interest.

How can the Minister take the separation of the component parts of an aeroplane or anything else so lightly? Surely lawyers will have a field day arguing that the components of an aeroplane, a power station or anything else are separate assets and that the value of not one of them exceeds £100,000. The Minister can see what arguments might be open to accountants and lawyers. Will he be a little more helpful on what line the Revenue will take? We need some certainty.

Those of us who use aeroplanes—I think that the hon. Gentleman occasionally travels home in one—would regard the placing of the pilot as rather more important than he implied. My remarks were predicated on the Inland Revenue's current tax treatment of significant and separate components. If the hon. Gentleman knows anything about aircraft, he will know that engines are taken out and new ones are put in as part of maintenance operations. A wing is an integral part of the structure of the aircraft: people would not normally take one out and put another one in. He and I can debate that, but I have British Aerospace's military aircraft division headquarters in my constituency, so I perhaps have a shade more knowledge of aircraft maintenance procedures than he has. I do not want to get into such a debate, Dame Janet, or you will rightly call me to order.

The hon. Member for Edinburgh, Central spoke generally about the mobility of airline industry investment. My hon. Friend the Member for Beaconsfield (Mr. Smith) voiced a concern that has been expressed by the industry. The sum total of the effect of the proposal on the United Kingdom airline business on an annualised basis will be £25 million, against a total investment of some £2 billion. That represents an on-cost of £1 per passenger per year. Although the industry is bound to express concern, that figure puts it into perspective.

The financing of aircraft, which is also affected by the proposal, is an international activity. People go around the world with their various lease arrangements, almost collecting tax allowances as they go.

The hon. Member for Clackmannan drew the Committee's attention to the cable industry, and he expressed concern about how the proposal would affect it. It is important to put the matter into perspective. The annual capital expenditure of the cable industry runs at some £2 billion, and £6 billion is to be spent over the next three to five years. Given the current annual turnover of about £1 billion—which is growing—the effect of this tax proposal on the cable industry will be containable. It is not a showstopper, given the size of the investment.

We return to the question of non-distortion. It is fair to say that we have not tried to make artificial distinctions between one type of industry and another, apart from those of which I gave the Committee details a few moments ago. Given the size of the commitment, there is not a problem.

The hon. Member for Clackmannan also drew the Committee's attention to the effect of the proposal on the oil industry and asked whether any calculation had been done to measure it. I hope that my comments will reassure him. The tax effect is the equivalent of less than one third of 1 per cent. of the industry's turnover. Any industry is bound to mount an argument for special pleading, but I genuinely do not believe that the oil industry can argue that the effect of the proposal is such a serious matter.

There is, however, an important point of principle. The hon. Member for Edinburgh, Central was right to draw the Committee's attention to the need for an allowance regime that does not distort. It is important that decisions on major investments are not made by virtue of the tax allowances; sometimes, far bigger costs have to be taken into account. One of the biggest single costs to the airline industry is the amount of fuel used on a journey. One of the most important factors affecting profitability is—to use the colloquial expression—the number of bums on seats, which has a far greater effect on determining investment decisions. Airlines seek aircraft of a more modern design to save fuel, or with more capacity so that more passengers can be carried. Such considerations are more important than the effect of the tax allowance. It is important that decisions on investment should not be distorted by the allowance.

I am grateful to the Minister for trying at least to give some figures. The sums that he gave were somewhat vague. One does not know what would be the significance for investment in, for example, the North sea. We have to take account of the globalised character of that industry. At the margin, a project might be disadvantaged by even a fairly modest change in the tax regime. Such a project may be in competition with another in Alaska or the Gulf of Mexico, and it might be to the company's advantage to move there. Oil companies care not where they get their oil but about the money that they get from the projects in which they invest. That is the point that I was trying to make.

The Minister has not quite fiddled the statistics, but he has given a meaningless figure that needs either to be clarified or to be discarded as irrelevant.

I am not prone to deliberately misleading the Committee, but I have been informed that the hon. Gentleman was right when he said that my figure was meaningless: it referred to the airline industry, not to the oil industry. I take this opportunity to apologise to right hon. and hon. Members for my error. It adds to my argument about the airline industry and acknowledges the point that the hon. Gentleman made.

Resign.

For a third of 1 per cent., that is going a bit far.

I am advised that the change mentioned by the hon. Member for Clackmannan is unlikely to cause any project, certainly in the North sea, to be dropped. I shall consider whether I can make any further points, with perhaps greater accuracy, to quantify the effect of the measure.

I have dealt with the points made by the hon. Member for Clackmannan about the cable industry. I was pleased to have the support of my hon. Friend the Member for Beaconsfield. He raised a number of issues on aircraft and I hope that I have dealt with them. I was also grateful for his assistance in answering the point made by the hon. Member for Edinburgh, Central about aircraft being sold on. He answered it with clarity and knowledge.

My hon. Friend also made some points about ships and railways, with which I hope I have dealt. He asked why we had chosen the figure of 6 per cent. Capital allowances on machinery and plant are calculated by pooling expenditure. That method is generally preferred by taxpayers as it is simple to operate, but it means that allowances are given on the reducing balance basis rather than on the straight line or any other basis that may be used in commercial accounts. It is misleading to look at the period over which the expenditure is written off on the reducing balance basis. In theory, it is infinite. In practice, it is not possible to determine because the identity of the expenditure is lost in the pool.

The better comparison is with the net present value of allowances. On that basis, 6 per cent. gives the best fit with commercial depreciation for an asset with a working life of 25 years or more. That is the technical explanation. I draw my hon. Friend's attention to the Inland Revenue press release, which explains the transitional rules. I suspect that he would also have liked to mention the effect of the proposals on theatres, but did not have the time. I acknowledge his interest. If he will be kind enough to inform me of his concerns, I will be delighted to write to him about them. To pick up on some of the other transitional points that he mentioned would add an undue complication to our proceedings. I know that he would like all the matters to be dealt with through a tax law rewrite, but that is complex.

6 pm

Finally, the hon. Member for Dudley, West took us at some length through the central issue of how one determines the life of an asset. He read out a number of quotations. The straight question of who decides the useful economic life of an asset that needs to be determined when the accounts are drawn up. That is one for the accountants, who are used to it and understand it. As I said, if there is a disagreement, it is the role of the tax inspector and the commissioners to sort it out.

The hon. Member for Dudley, West asked whether inspectors would be bound by the expected economic life used in the accounts. That will be strong evidence of whether the 25-year test is made, but the inspector must be able to query the figure if he is not satisfied that it is reasonable. Those are fairly simple and straightforward statements.

I have been involved in industry, as has the hon. Member for Dudley, West (Mr. Pearson). How can my hon. Friend the Minister believe that in this modern age any asset lasts for 25 years? If we are to remain efficient in this competitive age, we need to replace machinery of almost any sort within 10 years. Writing off assets over 25 years is a total nonsense, and puts this country at a grave disadvantage with our competitors.

My hon. Friend is right. If he is drawing the Committee's attention to the fact that machinery may be built that has an obviously shorter operating life, to take account of technological advance, that clearly is a matter for the accountant. I remember this argument being used when I was involved with the glasshouse industry. It was made clear that some of the structures might not last all that long. The advice to that industry was clear—take it up with the tax inspector.

rose—

I hope that my hon. Friend will forgive me if I do not give way again, as I want to draw my remarks to a conclusion.

The life of an asset was a central part of the remarks of the hon. Member for Dudley, West. I shall certainly study carefully some of the further technical points that he made and, if he will excuse me, I shall write to him about them. I commend the clause and the schedule to the Committee.

I thank the Minister for his brief final comments and for explaining the meaning of life to the Committee. I appreciate that he will write to me about some of the technical issues, and so will not mention again building alterations, dry docks, grain silos and the treatment of groups of companies. Will he comment on how the Bill affects the private finance initiative, with particular reference to hospitals?

Has the Treasury taken into account in its estimates of cost savings the way in which contracts will be redesigned to take account of the new legislation? It seems clear that, when putting in a new production line or a manufacturing cell, whereas one might have awarded a £2 million contract for 10 different machines and all the links, one will now use 10 or 11 different contracts plus an assembly contract to get around the legislation and claim the allowances.

I am grateful to the hon. Gentleman for giving way when my hon. Friend the Minister would not. Is not one of the problems the fact that accountants make these decisions rather than production managers or engineers, who have more knowledge of the benefit of equipment than accountants, who merely look at the figures and the bottom line? Would the hon. Gentleman, whose interest and involvement in industry and in rugby football I have considerable respect for, comment on that matter before the Minister responds?

The hon. Gentleman is right, if he is making the general point that too many accountants run businesses and that too few people with a knowledge of production and manufacturing industry are on the boards of companies.

I should appreciate a response from the Minister on the PFI and hospitals, on the extent to which the Department has taken account of the real world and on how contracts will be redesigned as a result of the legislation. It is easy to draw a coach and horses through some of the Bill because of the way in which it is drafted.

We do not hide the fact that the Bill will affect the PFI and contracts where long-life investment exceeds £100,000. As the hon. Member for Edinburgh, Central said, the quality of the investment is what should see the thing through. The matter should not turn on the question of tax allowances, which is why we are removing this distortion. The underlying thesis is the fact that, in business terms, the highly competitive corporation tax regime is far more important to those who want to make quality investments than the tax allowance regime.

I know that the Committee anticipates a vote and I shall not speak for too long, but I must refer to a number of matters. The debate has shown the difficulties that we can get into when a straightforward proposition becomes complicated by exemptions, and where different reliefs apply, depending on different definitions. Indeed, it appears that, while the Government were trying to simplify the provision of allowances, the position has become rather more complicated and many of the gainers will be lawyers and accountants.

I will deal with one or two questions that the Minister did not completely answer. We should be grateful to him for clarifying the position on railways. We have a clear admission from the Government that the railways will be making losses for some years to come—certainly for 13 years. I understand the argument that there is not much point in giving a tax break to someone who has to be subsidised by the taxpayer. That admission undermines all the Government's claims about the railways. According to the Minister, they are loss making and therefore we cannot justify giving them a further tax break. I understand the logic of that, but it bears out what we have been saying—that the taxpayer will have to subsidise the privatised railways for many years to come. Thirteen years is a long time before any review.

I have never understood why aeroplanes are included in the measure and railways are not. The Minister did not deal with that central point.

It concerned me when the Minister, in effect, gave the industry tips on how to get around the provisions of the Bill, because it seems that the engines of an aeroplane can be removed and treated separately. Perhaps the example I gave, of wings, was not a good one, although the wings are a major part of an aeroplane. I should probably declare an interest, as I use aeroplanes at least twice a week. I have always—perhaps naively—thought of an aeroplane as being one body rather than the sum of a number of component parts, all of which can be treated differently for tax purposes and removed as appropriate.

That illustrates my point. If operators and manufacturers get round the problem by treating different parts of the aeroplane in different ways, it will lead to precisely the difficulty that was pointed out by the hon. Member for Macclesfield (Mr. Winterton)—accountants will instruct manufacturers to ensure that a part cannot reasonably have a life of 25 years and, therefore, obsolescence will be built in. When an engine or the electronics of an aeroplane is designed, the accountants will say that it must not last for more than 20 years, in case it gets caught. They can then claim the 25 per cent.

That shows the problems that arise when the law becomes, not simpler, as we all profess to want, but more complicated. I am worried that we are, in fact, creating great opportunities for lawyers and accountants. When describing the new concept—the meaning of economic life—the Minister referred to accountants, saying that they understand these matters. I was once a practising lawyer, so I know that accountants and lawyers understand these matters. In particular, they understand that a good and long argument is a lucrative way of spending their time, and we should not put together a tax system that guarantees them work for 25 years. Nevertheless, that appears to be what we are doing.

I have come to believe that the next Government will have to spend a substantial amount of time trying to sort out these difficulties, some of which will be immediately apparent, while others will only appear when the law starts to operate. It would be unreasonable to burden the next Government with having to report to Parliament in addition to that, as I suggested in my amendment.

Question put and agreed to.

Clause 82 ordered to stand part of the Bill.

Schedule 13 agreed to.

Clause 62

Phasing Out Of Relief For Profit-Related Pay

I beg to move amendment No. 4, in page 56, line 19, at end add—

'(4) The Treasury shall produce a report each year on the companies which had schemes registered under that Chapter.

(5) The report mentioned in (4) above shall analyse the actions taken by companies in relation to profit related pay after 1st January 1998.

(6) The report mentioned in (4) above shall also describe separately the impact of the removal of tax relief for profit related pay on employees paying income tax at both higher rate and basic rate.'.

With this, it will be convenient to discuss amendment No. 5, in page 56, line 19, at end add—

'(4) That Chapter shall not have effect in relation to any payment made by reference to a profit period beginning on or after 1st April 1997 if the primary purpose of the scheme under which the payment is made is the avoidance of tax.'.

The clause deals with the Government's proposals for the phasing out of the tax relief on profit-related pay. Over a period of 10 years, the Government have spent £4 billion on an experiment to find ways to encourage a closer relationship between the remuneration of employees and their company's profits. Given the proposals in the clause, it is fair to ask certain questions. Was that £4 billion wisely spent? What were the Government's objectives and have they been met? When the tax benefit is removed, will employees still be happy for 20 per cent. of their pay to remain in the schemes? What is likely to be the companies' reaction to the withdrawal of the relief?

6.15 pm

Only yesterday, the Deputy Prime Minister argued that the Government understood business very well—indeed, he claimed a monopoly for the Conservative Government in that respect. I am sure that hon. Members will agree that any business that invested £4 billion should monitor that investment and, at the end of the experiment, assess the effectiveness of the investment and whether the objectives had been achieved.

The original objectives of the profit-related pay scheme were set out by the then Chancellor of the Exchequer, now Lord Lawson, in his 1986 Budget. It was floated as a potential cure for unemployment. He said that if "a significant proportion" of wages were more flexible and rose and fell according to the company's profitability:

"This would not only give the work force a more direct personal interest in their company's success … it would also mean that, when business is slack, companies would be under less pressure to lay men off; and by the same token they would, in general, be keener to take them on."— [Official Report, 18 March 1986; Vol. 94, c. 172.]

That does not appear to have been the result of this particular tax relief.

The initial take-up rate was slow, with most companies taking advantage of the tax concession to continue their existing schemes. The original hope was that profit-related pay would reduce pay demands and prevent redundancies, but that has not happened. The evidence is that companies registering schemes are motivated more by a desire to secure extra tax relief for their employees than by a desire for flexible pay. The amendments seek to address that problem.

In justifying the changes, the Government have identified the enormous cost to the Treasury and the abuses that now occur in the scheme. It is somewhat surprising that their discovery of abuse has come so late. In the 1993 Budget, the Chancellor asserted that £100 million would be saved in 1994–95 from closing down what was then identified as a loophole in the profit-related pay rules. The loophole was closed and employers were then unable to offer profit-related pay without some degree of risk that payments made under the regime might vary with profits.

However, the Chancellor did not prevent the problem to which the Government are now returning—that of employers constructing schemes that expose employees to only a negligible risk of loss of earnings. Therein lies the problem. Employers typically guarantee to pay out 80 per cent. to 90 per cent. of the profit-related element of the pay, leaving only the remainder to vary with profits. Ernst and Young has estimated that 75 per cent. of the current schemes are an abuse of the objectives and says that it can clearly identify that the primary reason for implementing profit-related pay has been to contain costs, rather than to motivate employees.

Effectively, 80 per cent. of employees must vote in favour of the scheme, so it is unlikely that a majority of employees will vote for a scheme in which there is a material risk to their pay—where they are likely to suffer a loss. The overwhelming majority of schemes have been converted into the guaranteed pay type where 20 per cent.

is the risk element of the payment. That reasoning has been supported by a survey of evidence from the income data studies report, which was produced in June 1996 and which suggested that the major part of the millions of pounds cost to the taxpayer of profit-related pay was funding schemes which provide tax-free pay rises rather than performance-related pay.

The Government published a research report on profit-related pay in May 1995, commissioned by the Inland Revenue, the Department of Employment and the Treasury. Its main conclusions were that the tax relief had stimulated a significant take-up of PRP because companies and employees were sharing the relief and that from an employer's point of view the main benefits of the relief were in tax efficiency. The report went on to say that employee involvement had been created, although it did not substantiate that claim. It did not provide conclusive evidence that the cost to the taxpayer of performance-related pay was justified by improved economic performance.

The arguments against the Government's case are clear and the Government now have an obligation to justify the expenditure. In 1986, when the then Chancellor—now Lord Lawson—introduced that tax relief, he said:

"There is considerable inertia to overcome, so it might make sense to offer some temporary measure of tax relief."

Ten years later, the present Chancellor of the Exchequer said:

"I can no longer justify the ever increasing cost of the tax relief to the 22 million taxpayers who are not in profit-related pay schemes. We cannot permanently divide the work force into groups of people who pay different levels of tax on the same earnings depending on whether the firm that they work for is in a scheme or not."—[Official Report, 26 November 1996; Vol. 286, c. 165.]

That is absolutely right: it is only surprising that it has taken so long for the Government to discover that. Some 3.7 million workers now in those schemes are threatened by the proposals to phase out the tax relief, possibly with dramatic drops in their take-home pay. What do the Government expect to happen once the tax break is removed? What consultation has taken place? Will pre-tax earnings rise as companies compensate employees, or will employees—particularly the low paid—suffer a loss of earnings?

Although the abolition of profit-related pay is partly due to the mounting cost to the Exchequer, another factor must be that the scheme is being abused. There are a growing number of so-called "salary sacrifice" schemes, under which employees exchange part of their salary for profit-related pay. The tax saving is shared between employees and the company, which means that the employer's wage bill is reduced. The employer and the employee share the relief. One of the water companies with a profit-related pay scheme has notified its employees that that was exactly the purpose of its scheme: when the relief is removed, the scheme will be cancelled.

The Government must explain why they did not prevent those abuses at an earlier stage. In many schemes there is little risk of employees' pay falling because employers gave an undertaking that if the Government changed the regulations the employees would be returned to their previous status. I will give examples of just a couple of schemes. Information circulated by the National Westminster bank, Lloyds, TSB, Barclays and the Midland was intended to explain profit-related pay to employees in advance of the ballot on whether the scheme should be established. The documentation, which was not secret, made it absolutely clear that the proposal was to share the tax relief—which cuts straight through the Government's argument that it should be about giving employees a stake in the company's profits.

A letter about the National Westminster bank scheme, which was started in January 1996, says:

"The Revenue regulations will not allow these payments to be guaranteed"—

that is the 20 per cent., the part that is supposed to be at risk—

"but the Bank has stated that if, during the period the scheme is in operation, it believes it is falling dramatically short of its projected performance it will cancel the scheme, revert people back to their original salaries and ensure that individuals are in a no loss situation with regard to tax.

The Bank is proposing a one year scheme which it believes would be protected from any changes in revenue arrangements for its duration."

The Barclays bank document explains how employers and employees would share the tax profit. They did so on a 40:60 split. The number of employees in the PRP scheme meant that employees, who received 40 per cent., benefited to the tune of £20 million—that is loss of revenue to the Government—and the bank benefited by £30 million. They were sharing the tax relief in that case. Other banks had different schemes. Some operated a 50:50 split, for example, and the TSB scheme was intended to benefit the bank to the tune of £6 million in the first year.

Those documents are freely available and it is beyond belief that the Inland Revenue did not discover them and see that this important measure, which was supposed to establish stakeholding for employees—employees would be given a share of their company's profitability—was being widely abused. Depending on what happens during the period of phasing out the relief, there will have to be a great deal of negotiation between employees and employers to restore employees to their original position.

Even worse, having allowed the scheme to be abused, the Government have allowed good, genuine schemes also to be damaged in the process. The John Lewis partnership scheme is a prime example. A true sharing of profits is being undermined and disturbed by Government action in this area.

The Labour party believes that it is right to reward success. We want employees to be involved in their companies and to benefit from their profits. We also want the Government, first, to state clearly—the amendment advances this case—that they will monitor the schemes so that we can see how many continue to exist once the tax relief is removed. Secondly, it should be a clear objective that any future arrangements for sharing profitability, however they may be constructed, are not allowed to degenerate into abuse and loss of revenue to the Exchequer, as the current scheme has.

Through the amendments, we seek to press the Government for a post-investment audit. Employees who will now have to renegotiate their arrangements with their employers and who may lose out deserve an explanation, as does the Committee, of why an experiment was allowed to go on for 10 years and consume £4 billion of revenue when the Government could clearly see that abuse was occurring and that they would have to act against it.

6.30 pm

I note in passing that the Opposition seem to be allowed by their Treasury spokesmen to ask for reports, but not for anything else. No doubt that will change in time, whether they remain in opposition or not.

The hon. Member for Bristol, South (Ms Primarolo) properly set out the purpose of the temporary measure. She described how, during the past year, there has been a great rush to take advantage of it in ways that produce no worthwhile effect, except to the employer and employees concerned. She drew attention to the position of people who work in the John Lewis Partnership, which is one of the best examples of co-ownership in Britain. It was set up 70 years ago as a result of an apparently eccentric decision, and its history should be better known. People who work in the group's stores are not employees, but partners.

For people who are paid significantly more—perhaps those who are partners in firms of accountants or solicitors—the tax system provides all sorts of arrangements for income sheltering. If one took an average of the difference between the actual earnings of partners in top accountancy firms, established what proportion of those carry a direct burden of tax, and applied the same proportion to those working in the John Lewis Partnership, one might find that they could do better than under the existing scheme.

I shall go a stage further than the hon. Lady and ask my hon. Friend the Financial Secretary what representations have been received at the Treasury from the John Lewis Partnership, what response has been made and whether meetings have taken place with the partners or the senior people in the partnership. My hon. Friend could respond when he replies to the debate or by letter afterwards. Will the Government consider over the next two or three years what changes might appropriately be made to reward those in genuine co-ownership and profit sharing? Of course, that is not the reason why the Chancellor introduced the scheme in 1986; he introduced it for flexibility, which is a by-product of co-ownership.

I would advise my hon. Friend, and it would be in keeping with the mood on both sides of the Committee, to open up that prospect over the next year or so. In the case of the John Lewis Partnership, we are not dealing with megabucks—the tens of thousands of pounds that might be at stake for highly paid individuals. We are speaking mainly of people for whom £1,000—an extra month's pay—is roughly the reward for success and, for that matter, for expansion.

During the next year the limit comes down from £4,000 to £2,000, and the following year it comes down from £2.000 to £1,000, before being eliminated—a millennium prize. Will my hon. Friend consider the mechanics of a scheme allowing one month's extra pay as a bonus or profit-share for companies that cannot offer a share ownership incentive? The John Lewis Partnership has no shares that can be given out to employees because they already own all the shares. Such a scheme would be in keeping with what many of us want to encourage.

My hon. Friend may reply that the John Lewis Partnership is a deadweight issue. I should explain to those who have not had discussions with the Treasury that every reasonable suggestion must get over the hurdles of deadweight, substitution and displacement. In this case it is a matter of deadweight. The Treasury might argue that the John Lewis Partnership has had profit-sharing or surplus-sharing for 70 years and did not introduce the practice because of the tax break allowed in 1986. I accept that, but the tax break was supposed to encourage the attitudes exemplified in one possible way by the John Lewis Partnership.

I ask my hon. Friend gently whether he has had meetings with the John Lewis Partnership. Would he or his advisers be prepared to talk to the partnership and to others who may be interested in this subset of issues? Will he reflect on the possibility that in the Finance Bill next year or the year after it might be in the public interest to find a way of protecting those who benefit at low levels?

The hon. Member for Eltham (Mr. Bottomley) addressed a request to his hon. Friend the Financial Secretary. I shall pose the same question to my hon. Friend the Member for Bristol, South (Ms Primarolo), in the expectation that she will shortly be on the Government Benches and have to decide on matters arising from the Bill.

Unusually, I was away from the House on Budget day. I was in a mock-up television studio in Wirral, South, listening to the Chancellor's statement. Among the people on the panel were ordinary constituents from Wirral, South. After listening to the Chancellor, one lady said, "Bang goes my new car," and her husband said, "There goes my profit-related pay." He was worried that a scheme that was on the verge of being signed would disappear. Part of the argument that had been put to him and his fellow workers in an engineering company was the incentive, to be part of that commonhold and to have a stake in the operation.

Like the hon. Member for Eltham, I have carefully studied John Lewis and other enterprises, such as Scott Bader—an unusual company with an equally odd history. In his will, Ernest Bader left the stock of the company to his employees. The company has survived through several recessions in a difficult area of chemical manufacturing. It should be regarded as a model operation.

Unusually in the chemical sector, which I know well from my constituency, the company is situated in one of the most beautiful locations in the country, in Northamptonshire. It is difficult to see that the factory is there. The ethos has survived in an attractive environment and the company has quietly got on with its job, competing effectively in a complex market. Through most of the 50-odd years since Ernest Bader's death, the attitude of the employees has been a determination to succeed. I think that employee stakeholding is an important element in that company's success. My hon. Friend the Member for Bristol, South described the exercise as a £4 billion experiment. According to the 1986 Lawson Budget, it was a potential solution to some of our unemployment difficulties and, by that measure alone, the experiment has not proved terribly successful. If it were properly utilised and generated a feeling of ownership among employees of an enterprise, the scheme could be termed a qualified success. However, we do not know whether that has occurred.

We are about to phase out tax relief on the basis of some new-found Treasury interpretation of fairness. The Chancellor claims that we cannot divide the work force permanently into groups of people who pay different levels of tax on the same earnings, depending on whether the firms for which they work are members of the scheme. Fairness has been cited as part of the reason for the Treasury's withdrawal of tax relief, but the Treasury does not reflect upon the success or failure of other aspects of the scheme: first, has it had an impact on employment; and, secondly, has it improved relations between employers and employees in the sort of enterprises that the hon. Member for Eltham and I described? We referred to model situations, but there are many other lesser examples elsewhere. The experiment should be evaluated much more seriously.

The scheme is somewhat muddled, and it is undoubtedly widely abused up and down the country by companies that view it as a convenient way of paying less tax rather than as a genuine measure that would achieve the objectives that the Chancellor set out when he introduced it. It is unfortunate that no one has tried to deal with those abuses. My hon. Friend the Member for Bristol, South referred to several highly publicised schemes whose raison d'être appears questionable in the context of the issues raised in the debate. The scheme has been poorly monitored.

If we are to make any progress in this area, we must encourage a culture whereby employees have a greater sense of ownership in their companies. I have been party to a number of discussions about employee share option schemes over the years, and there is no doubt that such schemes have the potential to change attitudes in very difficult circumstances. It is a pity that we cannot evaluate whether that has occurred in this instance.

I support the amendments spoken to by my hon. Friend. Against that background, I hope that the Minister will reflect a little more on the subject rather than simply ending the scheme apparently for reasons of fairness, which may be perfectly justified but which do not necessarily take account of the issues that hon. Members have raised today.

6.45 pm

I hope that the Minister will accept the amendments spoken to by my hon. Friend the Member for Bristol, South (Ms Primarolo) as it would be no bad thing to build into the Finance Bill a commitment to survey and examine thoroughly the workings of profit-related pay before the proposed phase-out, which would be discharged by another Government—I hope and expect that it will be a different Government.

My hon. Friend pointed out that Lord Lawson proposed the original changes to the tax law. I am extremely interested in this subject, but I did not know the extent to which profit-related pay in the context of British tax legislation was Lord Lawson's baby. It is remarkable how much of our catastrophic economic inheritance this decade is the result of that noble Lord's innovative decisions—whether it is the business expansion scheme, which led to widespread abuse, or the various other problems that have been set right in the past three or four Finance Bills. Many of our problems can be traced to the chancellorship of Lord Lawson, who I think is sinking down the league table of Chancellors—if there is such a thing. With each Finance Bill, he descends further down the historical ladder. I do not know what he is losing faster: his weight or his reputation. Although he has spawned some wonderful children who write eloquently about many subjects in our national newspapers, Lord Lawson's historical reputation now lies in tatters.

The question of profit-related pay is very important. The Government cannot simply write out 3.7 million taxpayers who have a stake in it: it is a significant part of their pay arrangements. We must consider the matter carefully and examine my hon. Friend's amendments. The earnings question is becoming more and more crucial in our modern society, as I was reminded over Christmas. A 17-year-old relative had secured holiday work in a restaurant and I asked whether she would be working on new year's eve. She replied, "No. The owner won't pay us double time, so none of us are turning up." I do not know whether it was a strike, but it was interesting that that 17-year-old and her fellow student workers had an idea of pay equity. When it was denied, they chose to do something else with their time.

A disturbing aspect of the debate about profit-related pay is that the notion of fair pay rates has been thrown out the window as a result of various economic and fiscal policies that the Government have introduced in the past 18 years. It is no longer a case of a fair day's pay for a fair day's work—the Rotherham job centre now advertises pay rates of £1.50 an hour. As the Organisation for Economic Co-operation and Development never ceases to remind us, Britain has the widest—and most rapidly widening—gap between incomes and pay of any European or east Asian economy. People are desperately worried about how they are paid and about how their earnings reflect their efforts.

Lord Lawson introduced the scheme in 1987 at the height of fascination with the Japanese economy. Dame Janet, you will recall from your visits to that wonderful country that the salaries of Japanese workers consist, in addition to monthly pay, of two annual bonuses that are supposed to be related to profits. At least, that was the myth. Anyone who speaks Japanese or who studies the complicated structures of the Japanese pay system soon learns that those bonuses are pre-negotiated and are not dependent on company profits. But the Government bought the myth that Japanese pay was profit-related and introduced it as a scheme to be encouraged in the United Kingdom. As we have seen, there has been a large increase in the use of it and nearly 3.7 million employees are involved.

The irony in Japan is that many Japanese companies are moving away from the payment of bonuses, whether negotiated or based on profit. Japanese firms are finding that what really counted in the Japanese labour market was job security. As that has disappeared in Japan, firms are beginning to find that they must negotiate much harder with their employees on the basis of normal wages. It is in that area rather than linkages to profit that the real issue of pay has to be discussed.

We know that the maximum annual tax-free payment under profit-related pay is £4,000 or 20 per cent. of salary, whichever is the lower. That can provide for a higher-rate taxpayer a tax saving of £1,600 a year. This debate raises questions that Ministers in the Treasury and other Departments will have to answer in 12, 24 or 36 months' time. Will the abolition of PRP lead to an impetus to pay-driven inflation as unions and employees seek to negotiate pay rises to compensate for the loss of tax relief?

The figures are startling. Higher-rate taxpayers would need to obtain a pay rise of £2,666 a year merely to compensate for the loss of PRP if companies did not make fair adjustments. My hon. Friend the Member for Bristol, South was right to stress the Treasury's responsibility to examine the issue in some depth and to send out messages or signals to ensure that companies do not cheat on their employees' pay. As I said, an extra £2,666 would need to be paid each year to compensate for the loss of PRP. It is a sizeable sum. We have been told that abolition stems from the cost of relief, which is running at about £1.5 billion a year.

There seems, however, to be some intellectual dishonesty. If PRP had been introduced in all sincerity—in other words, had the Treasury wanted the scheme to work and wanted companies to move to paying partly on the basis of profits—it cannot be assumed that it would cover only 1, 2, 3 or 4 per cent. of the taxpaying population and the companies that employ taxpayers. It would have to cover the entire taxpaying population. Thus a level of tax relief ought to have been built into the planning of such a scheme, covering everyone.

The real reason for abolition—strong evidence has been put before the Committee this evening—is that PRP has been abused. My hon. Friend the Member for Bristol, South quoted figures from Ernst and Young. I have seen an unpublished study produced by two young academics working on their masters dissertation at City university, which was sent to me a couple of weeks ago. They have examined different forms of share save, PRP, employee share ownership plans and share option schemes.

The section on PRP in that report was extraordinary. It showed clearly that the vast majority of companies use PRP only as a tax fiddle and that if tax relief was removed, they would kill it stone dead. It was shown that PRP was not built in, as Lord Lawson had hoped, to encourage a relationship between the employee and the output of the company as expressed in terms of profit, but to avoid tax.

Thus there is a growing number of so-called salary sacrifice schemes, where employees exchange part of their salary for PRP. Often there is little risk to employees that their pay will fall. In a sense, the scheme was not related to cyclical profitability because it became a tax abuse scheme.

Service companies, and especially professional partnerships, will regularly use PRP vehicles, where it is relatively easy to engineer the required profit level. In an earlier debate, there were references to wings and fuselages of aeroplanes being separated for tax accountancy purposes. Similarly, accountants can separate out the earnings and profits of employees and companies, park them in different companies and ensure that a scheme that was started with good intent becomes a tax avoidance fiddle.

In certain schemes, it became clear during the year that if the profit target for PRP purposes would not be met, the scheme would be suspended, with employees keeping the PRP that they received up to that point. Again, we find abuse of the scheme, there being no relationship to profit. Employees at all levels, from managers down to apprentices, do not accept such variation in their pay. The concept is spreading to quasi public sector areas such as higher education, where we are almost drifting into abuse. Lecturers are paid on throughput rather than on quality and the raising of education standards.

Instead of abolishing PRP so brutally and coldly in the Budget, perhaps it would have been better to tighten the rules so that relief applied only to genuine schemes in which a part of employees' pay would fluctuate in line with employers' profitability.

The John Lewis scheme has been mentioned, under which 36,000 employees receive pay on the basis of the company's profitability. That is not the result of Lord Lawson's intervention 10 years ago. The John Lewis scheme has been in operation for more than 70 years. Many of us who shop at John Lewis and Peter Jones, or different partnership stores such as Waitrose, believe that, like the motto, "Never Knowingly Undersold", the Government should not so knowingly undervalue the contribution that is made by John Lewis employees. Those employees are now to see a very good system for them thrown out the window.

There will be a move to another tax relief benefits scheme, perhaps a miniature version of the fat-cat package, which has caused such scandal in recent years. The most obvious candidate is an approved profit-sharing scheme under which employees might be given shares. The employer will be exempt from tax on the distribution of shares, provided that they are held by employees for three years. That, however, will not be fair on firms such as John Lewis—because, as with many other firms, John Lewis does not have marketable shares. It will not be fair on partnerships, co-operatives, trusts and many small firms that cannot gain advantage under an approved profit-sharing scheme that is based on employee share distribution.

I support the amendments and I hope that the Minister will accept them. I hope also that he will understand that we want a serious examination to take place. One weakness of the current rules is the lack of an obligation imposed on employers to disclose to their employees the profit target for PRP purposes. In other words, employees do not know what they are meant to achieve by their extra work, diligence, innovation and imagination in making the company more successful, and, of course, there is the question of what profit is eventually achieved, be it within the firm as a whole or in its different component parts.

Employers should be required to disclose that information and put it in an historic and more general context. Opposition Members do not want to see profit-related pay thrown out the window with quite the casual indifference proposed by Conservative Members who are seeking to bury Lord Lawson. We believe that PRP could become more effective in motivating staff, involving them in the business.

7 pm

In relation to quoted companies, it could be argued that the disclosure of profit targets to staff constitutes price-sensitive information, but that is no more significant than the profit estimates that are routinely issued and updated by brokers as a company's accounting period progresses, which anybody who deals in shares can get from the many consultants in the City, or even from the Internet, where they are widely available.

One of the fascinating aspects of profit-related pay—I, of course, would be the hon. Member to bring this up, Dame Janet—is that it is now becoming a European issue. The European Commission, inspired by the take-up of PRP in Britain, is now examining the idea of profit-related pay and, indeed, seeing whether a directive could be crafted to encourage it in other European countries. It seems a shame that the Government are throwing profit-related pay out the window just at the moment when Europeans are adopting what is, at its kernel and with reforms, a sound British idea.

I shall speak briefly and compare and contrast two schemes that have been brought to my attention recently in the Nottingham area, one of which shows the positive values of profit-related schemes; the other can be described only as an abuse.

I shall start with the abuse. In the autumn, some people employed at Nottingham university came to see me to suggest that the university was to have a "salary sacrifice" scheme. They were somewhat bemused in that they wondered how an institute of higher education could produce profit in the true sense of the word. They were also keen to point out to me that profit-related schemes have traditionally come from the private sector, and that the university, although no longer clearly in the public sector, was not a private sector animal in the true sense of the word.

Those people were not just academics. The people most concerned were technicians who had worked at the university for many years. One of them, Graham Tomlinson, is a stalwart of the local community. He described the scheme as a scam. He said that it is about making money for the university and about tax avoidance. He said that they had been given assurances that they were not at risk. He pointed out that the whole point of the exercise was for the university to save money. He is a man of some integrity. He took the view that he did not want to avoid paying taxes, because he could see the irony of a situation in which his taxes allowed education to continue. In effect, taxes funded the university. I am pleased to say that the scheme at the university has not gone ahead.

I contrast that scheme with the one at Philip A. Minson, a manufacturer and distributor of net curtains in the Nottingham area. Again, the directors and employees contacted me to say that theirs is a profit-related scheme in the true sense of the word. Its employees take risks. Their salary is dependent upon how the company performs. They pointed out to me that now that the scheme has come into effect, they are all stakeholders in the company and that performance has improved.

I am concerned about what appears to be real abuse, and 3.6 million people are affected. There are about 13,000 schemes. In 2000, £1.7 billion will be saved. There is a real issue here.

I am keen to support the amendment because it looks to the future, to a situation that I am keen to see—people adding value to their company, the company valuing them, and people becoming stakeholders in companies. There is abuse, as at Nottingham university, but there are examples of excellent practice, as at Philip A. Minson. That is why I am very pleased that the amendment calls for reports to be made in future.

I do not think that this is the end of the line for the issue. I very much hope that, in future, we will introduce measures and policies that really will ensure that people who work for companies are part of that company, that they are valued by that company and that in effect they become stakeholders, who get a payback from the company.

I begin by paying a warm tribute to the Chancellor of the Exchequer for taking the decision to phase out profit-related pay schemes. That was described in the magazine Taxation as being "politically courageous". That is right. Politics is about taking hard decisions. Undoubtedly there are a number of genuine profit-related pay schemes, but it is clear from all the survey evidence that has been published that there have been widespread abuses.

If you will excuse me, Sir Geoffrey, I shall be self-indulgent and quote myself. I have never done that before. In the Standing Committee that considered the Finance Bill last year, I said:

"all too often PRP schemes have been abused and used by companies as a tax dodge."—[Official Report, Standing Committee E, 15 February 1996; c. 351.]

I pointed to the significant level of programme dead weight and the lack of additionality of the vast majority of PRP schemes. I also highlighted the fact that it was very much a get rich scheme for consultants, who were visiting companies and telling them, "I know how I can save money on your wages bill," and making a very easy sale because the tax man was picking up the cost.

I feel sorry for those who have been operating genuine PRP schemes. I recognise that there might be some danger that the Chancellor has, as one of the directors of the CBI pointed out at the time of the Budget,

"thrown the baby out with the bath water,"

but I do not see any practical alternative when legislating in this area.

I have particular sympathy for the John Lewis Partnership, which was mentioned earlier. Last year, it paid out more than a third of its £150 million profit in profit shares. The company chairman said:

"No doubt some clever accountants and lawyers have run rings around the PRP rules, but the John Lewis scheme was a genuine sharing of profit from top to bottom of the company."

I believe that to be correct. I have sympathy for any employees who will lose out as a result. I do not think that we can ignore the widespread abuses of the scheme. That is why the Chancellor was fundamentally right to take his decision.

I must disagree with my hon. Friend the Member for Rotherham (Mr. MacShane) when he put the blame on Lord Lawson for the abuse of the PRP scheme. I think that any blame should be placed on another former Chancellor, the right hon. Member for Kingston upon Thames (Mr. Lamont). Until March 1991, fewer than 300,000 people were covered by PRP schemes; it was the March 1991 Budget, which doubled PRP relief, that led directly to the widespread abuse of the schemes that has occurred since then. In less than five years, membership of PRP schemes has grown from 300,000 to 3.7 million.

It is worth reiterating the statement made by the Chancellor in his Budget speech, when he spoke of the 3.7 million people who would be affected by abolition of the scheme. He said:

"I can no longer justify the ever increasing cost of the tax relief to the 22 million taxpayers who are not in profit-related pay schemes. We cannot permanently divide the work force into groups of people who pay different levels of tax on the same earnings depending on whether the firm that they work for is in a scheme or not. The aim … of widespread use of PRP—has been achieved. and I would rather make faster progress on lower taxes for everybody."—[Official Report, 26 November 1996; Vol. 286, c.165.]

I know that intellectual consistency is not normally the remit of politicians, but if what the Chancellor said, rightly in my view—I refer to the words

"We cannot permanently divide the work force into groups … who pay different levels of tax on the same earnings depending on whether the firm that they work for is in a scheme or not"—

applies to the 3.7 million people who currently benefit from PRP schemes, it applies equally to the 700,000 or so people who are participating in profit-sharing schemes, the 500,000 participating in "save as you earn" share option schemes and the 100,000 or thereabouts participating in company share ownership plans, which used to be described as discretionary share option schemes.

If the Chancellor is intellectually consistent, he is clearly indicating that he wants to abolish tax relief on "save as you earn" share option schemes, company share ownership plans and profit-sharing schemes. If that is indeed the Government's intention, perhaps the Minister will tell us so in his reply.

The amendment invites us to spend up to £150,000 on a report. That is unnecessary public expenditure. The details will be recorded in the Inland Revenue statistics, and I see nothing in the arguments that we have heard that commends the amendment.

The second amendment confirms that profit-related schemes can save costs for companies. The job that Lord Lawson set out to do with the profit-related pay schemes—encouraging the establishment of such schemes—has now been done; my right hon. and learned Friend the Chancellor now believes that the relationship of profit to pay can be sustained, but without the need for further support from the tax system. I am therefore confirmed in that line of argument in the substantive part of the relevant clause.

My hon. Friend the Member for Eltham (Mr. Bottomley) mentioned John Lewis. I have received a letter and a telephone call from my hon. Friend, and I will consider carefully what he has said; but I remind him that John Lewis has made it clear that it wishes to continue its scheme although, on this occasion, the profit-related pay scheme and the tax relief associated with it have been withdrawn.

I invite the House to reject the amendment.

7.15 pm

That was a rapid speech from the Financial Secretary. I think that he was spoken to about the length of the answers that he was giving. It is a shame that he could not be a little more forthcoming about the Government's assessment of the success of the profit-related pay scheme. It was breathtaking to hear him say that the Government balk at spending £150,000 on a report, when they have just spent £4 billion on a scheme that did not work. Let me add, just in case anyone thinks that that is a spending commitment, that we think that it could be done with the current resources.

There are genuine schemes. I am sorry that the Financial Secretary could not be more helpful to his hon. Friend the Member for Eltham (Mr. Bottomley), who made some very fair points about how we could assist in the future and continue to pursue the Government's stated objective. We have supported that objective—enabling employees to share in the profitability of the companies that employ them, which would encourage greater participation and more understanding of those companies.

We entirely agree with the Government that they could not and should not continue to preside over a scheme that was being so widely abused, but we are entitled to a fuller explanation of the likely impact of the removal of the relief than "The Chancellor believes that it will be OK". I think that—to quote the Chancellor—hell will freeze over before we believe what the Chancellor has to tell us, if it is not substantiated.

The Financial Secretary has behaved in a cavalier fashion this evening. There is a substantial amount of expenditure that he is not prepared to justify. The Government were prepared to squander taxpayers' resources without explaining why. The scheme that we are discussing was a clear abuse—an abuse that they knew was going on—and they have now left 3.7 million people high and dry in schemes that are to be wound up.

We will pursue the matter on another occasion; but, as the Committee wants to make progress, I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 62 ordered to stand part of the Bill.

Clause 92

Agricultural Property Relief

I beg to move amendment No. 6, in clause 92, page 81, line 19, at end insert—

'and

(c) the public are allowed reasonable access thereto.'.

This is a small amendment, but I consider it important. It could be described as a stile—a little hurdle that I want to put in the way of the Financial Secretary, making him pause for a moment and reflect before continuing on his path. I hope that we can find a signpost directing us to an agreed way forward: I am sure that hon. Members on both sides of the House believe that it is possible to improve the landscape and the environment, while at the same time allowing a greater opportunity for the public to enjoy the countryside.

At the time of the Budget, the Ministry of Agriculture, Fisheries and Food put out a press release which stated:

"The average full year cost of the proposal is estimated to be negligible."

It is clear to me, and to my colleagues on the Front Bench, that the time has come to review rigorously all aspects of public spending, and I think that some real and hard choices must be made about priority. I felt that there was a throwaway ring to those words in the press release: the cost was

"estimated to be negligible".

It reminds me of the old story about expenditure bids. A bid of 0.1 per cent., or one tenth of 1 per cent., will not break the Treasury—but I know that my colleagues are mindful of the fact that just a thousand pledges like that would eat up the entire Budget.

One very interesting policy development has been the growth in so-called agro-environmental schemes—of which the prime mover is the countryside stewardship scheme. The amount of money committed to the countryside stewardship scheme has grown considerably. I estimate that, as of 1 April 1996, £11 million was committed to it. This Budget provides it with another £5 million, which, in the 1997–98 financial year, will increase spending on it to £21 million.

I am not necessarily concerned about that expenditure, because a strong policy argument can be made that, if we want to make payments to farmers and landowners, we should switch the focus from payments for crop production to payments to improve the landscape and environment and to attract wildlife—to "green" the landscape, to benefit us all and to add value to the world. If one wished to discover where savings could be made, one should examine arable area payments. In 1995, £1 billion in such payments were made to farmers and landowners.

I have no doubt that the type of schemes we are discussing are the schemes of the future and that they represent a switch in emphasis to achieve a "green premium". I support many aspects of the proposals; I merely seek to improve them. The schemes' principles are right, but they have not worked in practice. My amendment would require that, in habitat schemes,

"the public are allowed reasonable access"

before tax concessions are made. I draw the Committee's attention to the word "reasonable" in my amendment.

There has always been conflict between public access and the need to protect countryside and habitat, and those conflicts must be resolved. The proposals will lead to increased bird life, for example, which I welcome. There have also been some very useful attempts to use set-aside lands as areas in which birds can breed and be protected. However, people should also have a right to access, so that they can go to look at birds and to see what is happening in the countryside. Countryside protection benefits not only wildlife but people, and finding a reasonable balance is extremely important. The history of agro-environment schemes does not make pleasant reading because, as I said, although enhancing the environment and greening the environment is the right principle, in practice we are not achieving that goal.

I should draw the Minister's attention to schemes that accomplish the twin goals of creating wildlife habitat and of allowing greater public access. One current scheme—public access to environmentally sensitive areas—has all the hallmarks of the proposals that we are considering. I am holding a map that allegedly shows the public how they can locate a public access area in Dartmoor. The applicant is Mr. R. Jephson, who lives in Bedfordshire, and the address on the map is in Bedfordshire. As the map provides no other references to the site's location, it would be impossible for anyone to find the site, which is in Devon. The map was produced by the Ministry of Agriculture, Fisheries and Food and circulated by it in September 1995, and represents land that has been committed as an environmentally sensitive area, to which the public should have access. However, it does not give anyone a clue or a chance to find the land, because people would be looking for it in Bedfordshire rather than in Devon.

The countryside access scheme is similar to the environmentally sensitive area scheme. I am holding two examples of the maps, documentation and information on that scheme published by MAFF. One of the examples concerns the operation of the scheme at Denham Hill farm. The problem is that "Denham Hill farm" is the only information provided on the location of the site. The map provides no other information, such as a nearby village, or any other way in which to find the site. We are paying a subsidy to that farmer so that people can enjoy a right to walk over his fields, but no one can find where his farm is located.

An even better example is provided in a letter, dated 13 February 1996, from MAFF to the Ramblers Association, in which the association is advised that there is a right of access to a site belonging to an applicant—the Guilde Morden Townlands charity. The map does not provide the name of a town, county, road or other reference, but shows only a track, a pit and a coloured open-field site. We are paying significant amounts of money under the countryside access scheme to farmers and landowners, but, as MAFF's documentation shows, the public cannot find the sites. I spent a great deal of time trying to find the land belonging to the Guilde Morden Townlands charity, but I have been unable to do so. The examples demonstrate the current waste and abuse of public money.

I have worked with the Ramblers Association in examining the countryside access scheme and public access to environmentally sensitive areas, and we have surveyed many sites. I think that we can draw two conclusions from those efforts. The first is that few people know of the so-called "new opportunities" because of poor publicity and misleading and unhelpful information. Secondly, once the sites have been located, local people have made it clear that, in half the cases, public access or a public footpath had already existed, and that, in a quarter of the cases, a de facto right to roam had already existed. The public are therefore losing out twice, because they either cannot find the sites, or, in 75 per cent. of the cases, they already had access to them. The situation is not scandalous, but I am deeply disturbed that significant amounts of money are being paid for the public to have rights of access which they cannot exercise or which already existed.

As I said, the largest scheme is the countryside stewardship scheme, which the Agriculture Minister recently described as the premier vehicle for protecting and enhancing countryside access. The countryside stewardship scheme has the hallmarks of failure of the two other schemes that I mentioned.

I draw the Minister's attention to a document entitled "Countryside Stewardship Scheme: Public Access Sites", which I helped the Ramblers Association to publish in March 1995. It was a survey of all the countryside stewardship schemes in the country at that time. It was a major undertaking in that 600 sites were examined.

The survey found that a third of the sites were difficult to find, as I described in relation to other schemes, and, significantly, that 21 per cent. of the grid or ordnance survey references were wrong. That is clearly bad practice. More than 30 per cent. of sites had no sign at the entrance to say that they were countryside stewardship sites although such a sign is a condition of receiving a grant. Perhaps most important, 48 per cent. or almost half of the sites had access problems.

Following the map provided by the Countryside Commission, I accessed a site at Pye Bridge—not far from the Economic Secretary's constituency in Derbyshire—and had to cross the Midland main line. There are eight tracks at that point and, as the Minister knows, trains travel the line in excess of 120 mph. Clearly, that site was wrongly identified and people's lives were being put at risk. I am pleased that the Countryside Commission has now taken the site off its list.

7.30 pm

Of the sites surveyed, access was already available to 44 per cent. of them. One criticism of the scheme is that sites are difficult to find, but, when they are found, it appears that de facto access or access across a footpath is already available. Such schemes need to perform better. I estimate that the access element of the countryside stewardship scheme will cost £6 million over 10 years. To put it baldly, we are not getting value for money.

Another example of such a scheme is the conditional exemption from inheritance tax scheme under which the public are also allowed greater access to the countryside. The amendment is clear in seeking reasonable public access to land that is in a habitat scheme, but the conditionality of inheritance tax also has all the hallmarks of failure. I have raised this matter with the Financial Secretary before and I am very grateful for the interest that he has so far taken in it. I hope he will not find it churlish if I say that I have admired his interest but not what has been achieved.

Again, there is a loss of inheritance tax to the public purse in—allegedly—allowing the public greater access to the countryside. The problem with this specific scheme is that because of taxpayer confidentiality, sites cannot be identified. Therefore, the public are in theory being allowed greater access to the countryside, but taxpayer confidentiality means that no one is told where the sites are. That is absolutely crazy, and I do not believe that anyone can justify that situation.

The Countryside Commission administers the scheme on behalf of the Government. I know that the commission itself would like to see a change, and I hope that conditional exemption from IT and the habitat scheme will both be changed to allow greater public access so that people know where the sites are and can access them.

I said that the Financial Secretary had been extremely helpful, although some of the answers to my questions did not inspire me with confidence. On 29 March 1996, the Financial Secretary replied to a written question. I asked how many sites had been given

"conditional exemption from IT on the basis of public access having been granted."

He replied:

"The information requested about the number of locations which have been granted conditional exemption is not available."

That is not good practice.

In answer to another written question, the Financial Secretary confirmed that the cost of conditional exemption in such cases was between £5 million and £10 million each year. We are talking about significant sums of money—£5 million to £10 million a year in loss of inheritance tax, £10 million over 10 years on countryside stewardship schemes, and lesser amounts for the smaller schemes that I mentioned.

It is imperative that the spirit of the amendment is accepted. If payments are to be made, either in cash or by the avoidance of inheritance tax being allowed, the public should get something back—they should have greater access. The central problem is that Departments, backed by Ministers, are unwilling to advertise the sites.

Also on conditional exemption, I asked the Financial Secretary what consultation had taken place. Again on 29 March 1996, he replied that tourist offices and town halls had been consulted. Since receiving that reply, I have written to every county council in England. With three exceptions, none could find any evidence at all of being consulted. To be fair, three did say that they were consulted but were not prepared to give details of sites in their county because of the prescription of taxpayer confidentiality. Some did not know, and a smaller group would not say. It was the same when tourist information centres were contacted.

I asked the Financial Secretary how he knew that the relevant tourist centres were displaying information telling people about access to the countryside. Also on 29 March 1996, he replied:

"I am unable to provide the requested information about tourist information centres as it is not held centrally. And, in any event, providing such information may help identify individual cases of tax exemption, thus compromising the normal rules on taxpayer confidentiality."—[Official Report, 29 March 1996; Vol. 274, c. 777.]

There we have it—a promise is being made that tourist information centres are consulted and have the necessary information but, at the same time, the Financial Secretary is saying that they are not allowed to display that information for reasons of taxpayer confidentiality. To put it bluntly, it is a real mess—a quagmire. I have anxieties that the clause will lead to similar problems. Substantial amounts of money are being paid to farmers and landowners.

It is important that people who want access to the countryside—there is an ever-growing demand—should have the information to find the locations that they want and that there should be new public access. That is the purpose of the amendment. It is a long, hard road, but people will not give up easily. There is a tremendous desire across the United Kingdom for a better, greener landscape. We want to enjoy that landscape.

There should be a partnership between the Government and those who want to go to the countryside. The Government's policies have set up a series of misdirections, stiles and blocks on footpaths. That is not good enough. People will not tolerate it and there will have to be change. The amendment is a small step in pushing for that.

I should like to comment on the amendments tabled by the hon. Member for Sherwood (Mr. Tipping), whom I am delighted to follow, and his Front Bench colleagues. I oppose both amendments.

Order. I must point out to the hon. Gentleman that we are debating only amendment No. 6.

Indeed. Amendment No. 6 was moved by the hon. Member for Sherwood and deals with public access to habitat scheme sites. I apologise for being confused about which amendments we are discussing. I hope to be able to catch your eye on the following amendment as well, Sir Geoffrey, but I shall now confine my remarks to the right of public access to habitat schemes.

A description of what the habitat schemes in question are designed to achieve might be helpful. A pilot scheme was launched in May 1994, aimed at creating or enhancing certain valuable habitats by taking land out of agricultural production. or introducing extensive grazing. and managing it for the benefit of wildlife. The scheme targets three types of habitat: water fringes in six designated areas; farmland previously in the five-year set-aside scheme; and coastal salt marsh.

There is a philosophical divide between the two sides of the Committee. I believe that this country's extensive right of way system is not used to its fullest extent. If the system was already fully used, I could begin to understand the objections of the hon. Member for Sherwood, but it is not. There are a number of reasons for the lack of use, not least of which is the presence of one or two unco-operative landowners and farmers. I condemn those who block up proper rights of way. The Countryside Commission's target is that all rights of way should be open by 2000.

Introducing a public right of way over habitat scheme areas in a Finance Bill is not the right way to proceed. When a Government introduce an agri-environment scheme, they have to ask what that scheme is designed to achieve. I have already set out the nature of the scheme; it is designed to create better habitat. Many of the habitats that we are trying to create need peace and quiet. The Opposition's policy of a right to roam, with people wandering everywhere, would not work with this scheme. Permission to bring the scheme into effect will be granted only if the organisers believe that it will achieve the desired objectives. That will happen only with an out of the ordinary habitat, which would be impossible to achieve with people wandering everywhere. I strongly oppose the introduction in a Finance Bill of the right to roam over habitat scheme areas.

The Government have an excellent record on agri-environment schemes, including the habitat scheme. The public want that to continue. We spend approximately £100 million a year on agri-environment schemes. That is a creditable record. I am delighted that the countryside stewardship scheme budget for England alone is £46 million. I hope that Labour Members warmly welcome our agri-environment programme.

7.45 pm

I do not want any action to be taken that would damage that progress. I have an interest to declare—I am a farmer. I am also a member of the Environment Select Committee. I believe in the duty of landowners and farmers to enhance the environment of our precious planet. I cannot support the amendment, because it would jeopardise the habitat scheme. There may well be other schemes in which a specific provision for a right of public access might be reasonable, but that should be implemented when the scheme is introduced, and by the same Ministry. When the Ministry of Agriculture, Fisheries and Food introduced the scheme, it had no intention of making public access part of it.

Imagine a rare bird, such as the stone curlew, nesting in a habitat scheme area. Some well-meaning rambler might come along, not knowing what he was looking for or why the area had been designated as a habitat scheme, and put his foot on that rare nest.

If the hon. Gentleman looks closely at the amendment he will see the words, "reasonable access". I would certainly not put my foot on the nest. I know that the hon. Gentleman agrees with the point that I made about the need to balance conflicting interests in the countryside. That is why the word, "reasonable" has been included in the amendment.

I am grateful for that helpful intervention, which shows that we agree on the fundamental point that there should be proper access to the countryside. It is a pity when conflict occurs. However, we then part company. I do not believe that the scheme in question would benefit from increased public access, for the reasons that I have given. Many other schemes, to which the hon. Gentleman referred, have public access provisions built in.

In the spirit of open government that we Conservatives believe in, any public access provision built into a scheme should work properly, otherwise it should not be in the scheme. I deplore the fact that certain people have undertaken to give public access and then obfuscated that undertaking at every stage. They should not draw public money with the promise of access and then try to deny the public that right, but that is not the case with the habitat scheme. On that basis, I find it very hard to support the amendment.

I suspect that I would part company with the hon. Member for Sherwood over a general right to roam, which the amendment encompasses. All my remarks apply to a general right to roam, because exactly the same arguments can be applied both to the right to roam and to the right of public access to a habitat scheme area. Given his rambling interests, I am sure that the hon. Gentleman accepts that, just as there are irresponsible landowners and farmers who are causing difficulties with legitimate rights of way, there are some irresponsible ramblers. If the public are allowed to wander all over the place, some irresponsible ramblers will put their foot in it in the manner that I have described. If the hon. Gentleman accepts that there are some irresponsible ramblers, he must agree that we have to channel them into certain places.

The habitat scheme forms part of an agri-environment scheme that the Environment Committee has considered. There is no doubt that some habitat schemes are near areas to which there is much access, such as the Cotswolds national trail and other national trails. The Select Committee visited one such trail in the Peak district national park, where great boulders had to be lifted in by helicopter to accommodate the huge right of access.

I am not suggesting that habitat schemes and the terms of the amendment relate to such huge numbers of people, but one never knows. If such a scheme happened to be on the edge of a large conurbation, the very purpose for which the scheme was set up—to keep the area peaceful, tranquil and undisturbed—might be undermined.

It is very hard to divine why the hon. Member for Sherwood has chosen to table an amendment on habitat schemes. I could have understood his tabling an amendment on one or two of the other schemes, where public access is catered for; I would have had some sympathy for his argument. When providing access, people who approved the scheme and paid public money for it, with the landowner and the farmer, would have considered the problem of excess public access and concluded that they could easily cope. I am not sure that the hon. Gentleman has thought the matter through and considered all the implications.

I am keen to ensure that our environment is enhanced. We are considering not only some of our rare birds, about which we hear so much. The Environment Committee went to the natural history museum the other day to learn more about some of our endangered species. Habitat schemes were designed and introduced precisely to protect some of them. Although we hear much about some of our high-profile creatures, such as hawks, raptors and some of the small songbirds, habitat schemes are designed to protect many other extremely rare species.

The Environment Committee was given a great lecture on lepidoptera—butterflies—and learnt that at least six species are in serious danger in the British Isles. Habitat schemes were specifically designed to help such very rare species, and rely entirely on the progression down the species in the animal kingdom. The progression starts with the larger mammals, which the schemes might help to protect, and goes down to smaller mammals and birds. Birds depend on food such as smaller insects, molluscs and other items further down the food chain. Many small insects are preyed on by larger animals, and they too need to be protected. That is precisely why the habitat schemes were inaugurated.

On the visit to the natural history museum—

Order. This is all very pleasant, but it would be helpful to the House if the hon. Gentleman spoke about the amendment.

That is precisely what I was trying to do.

The hon. Gentleman should try to be more successful in doing so.

I shall try to confine my remarks more closely to the ramblers who put their foot in it, for whom the hon. Member for Sherwood is trying to prevent people receiving tax concessions.

The amendment concerns not only larger mammals, birds and butterflies, but smaller insects. Experts in the Ministry of Agriculture, Fisheries and Food tell me that the habitat schemes are very important for the smaller insects. A computer mapping scheme on a worldwide basis includes the huge amount of information held at the natural history museum. It is the largest database in the world concerning all sorts of species. It is absolutely vital to preserve valuable habitat schemes and vital smaller insects for future generations to study. A vital aspect of the food chain would otherwise be lost.

Sadly, I heard only part of the most interesting speech of the hon. Member for Sherwood (Mr. Tipping). Does my hon. Friend agree that the right to roam, which is very much part of the argument advanced by the hon. Gentleman, has costs? Does he accept that those who grant the right to roam and want to move across the countryside contribute a cost, whereas those who are part of the countryside and have to maintain it must meet that cost? I am sure that, as a practising farmer and one who represents an agricultural constituency, my hon. Friend knows a great deal about such matters. Will he comment on the cost of the right to roam, which is so much part of the hon. Gentleman's argument?

I am grateful to my hon. Friend for introducing the subject of a right to roam, on which I have tangentially touched. I must, however, return to the smaller insects and the molluscs. [Laughter.] I do not know why hon. Members are laughing. I do not find the subject at all funny; it is very serious. The hon. Member for Sherwood wants the public to be able to walk all over—

Order. The hon. Gentleman must relate his remarks to the amendment and the clause. He is failing to do so. I hope that I do not have to draw that to his attention any more.

I am very grateful for your advice, Sir Geoffrey. I thought that I was trying to relate my remarks to the clause. We are talking about exemption from inheritance tax in relation to habitat schemes. The substantive Opposition amendment will be debated next, but the hon. Member for Sherwood is trying to give members of the public an automatic right to roam on sites exempt from inheritance tax.

I wish to draw the attention of the hon. Gentleman, again, to the amendment, which refers to "reasonable access". I have pointed this out to him, but he is getting carried away with his own enthusiasm. "Reasonable access" tries to balance the needs of the habitat and wildlife—about which he talks so eloquently—and the needs of the public. He knows that the countryside is a living countryside and that there must be a balance between those interests. The conflict between them interests all of us who are concerned with the future of the countryside.

8 pm

Bearing in mind your strictures, Sir Geoffrey, and the two interesting interventions that we have heard, I shall move on to the second part of my speech and deal with "reasonable access thereto"—the exact words used in the amendment.

Does my hon. Friend accept that my intervention relating to the cost of "reasonable access" had an important impact on the amendment? The amendment states that the public should be allowed reasonable access, and the clause relates to inheritance tax. I repeat that my hon. Friend has considerable knowledge of the countryside because of his practical experience as a farmer. Are there not considerable costs involved with this amendment? Should not the amendment—which the hon. Member for Sherwood has quite reasonably tabled—clearly reflect the costs involved for those who own the land in question?

I am grateful to my hon. Friend for reinforcing his earlier intervention. It is a good point to debate. What is "reasonable access"? Does it mean one person a year having access to one habitat site? Does it mean that an enormous number of people should have access, such as we saw in the Peak district national park where rocks were flown in by helicopter to maintain paths? They had to fly in rocks because thousands of people were visiting the area. I do not disparage that, but is it "reasonable access" to a habitat scheme? I would suggest that it is not.

If the amendment were accepted, we would need a clearer definition of "reasonable access". My hon. Friend the Member for Macclesfield (Mr. Winterton) is absolutely right to suggest that a general right to roam is not "reasonable access" as it will have a cost. He rightly pointed out that I am a practising farmer, and I obtain some of my income from my farm. I know full well that unreasonable access on a completely ad hoc basis—which the hon. Member for Sherwood is seeking—could do immense damage, particularly to stock-rearing areas where, I understand, many of the habitat schemes envisaged in the amendment would be.

The hon. Member for Sherwood wants the public to have an unfettered right of access to habitat scheme areas, but does he believe that that would damage the livelihoods of farmers? I support a right of access, provided that access is channelled to the right place at the right time, but if the public were able to walk everywhere—as I believe the amendment would allow—it would cause damage. For example, dogs might stray as a result of the type of irresponsible rambler to whom I have referred.

The key to all my remarks is that farmers' livelihoods are being damaged by irresponsible ramblers, and although farmers accept that the vast majority of ramblers are responsible, there is always one who spoils it for everybody else. For example, a rambler might allow his dog loose and the dog might kill several lambs or ewes. Who will pick up the bill for that? The rambler who has let his dog loose will be long gone by the time anyone discovers what has happened.

May I remind the hon. Gentleman for the third time that the amendment does not ask for unfettered access but "reasonable access"? My position on this matter is set out clearly in the Access to the Countryside Bill, which I advise him to read. He can then identify my position, rather than make a false prospectus. Many of the points that he has made could not be attached to the Access to the Countryside Bill.

I am grateful to the hon. Gentleman for trying to clarify his position, and I look forward with great interest to reading his Bill.

I wandered in and thought that I had got my days wrong. I heard the discussions about habitats, but I thought that we were discussing the Finance Bill. I have listened with interest to my hon. Friend who, if I may say so, is making heavy weather of this. I hold no brief for the hon. Member for Sherwood (Mr. Tipping), but the word "reasonable" is very important in the legal sense. We all know that some people abuse these schemes, but we must bear it in mind that the public legitimately want access to the countryside and that we want to preserve habitats. There should be "reasonable access" and some give and take by farmers and ramblers. If people start going the wrong way, we must take action against them. But perhaps we should be more liberal than regressive on this matter.

I am trying hard to keep my remarks brief, Sir Geoffrey, but I keep being distracted. Unfortunately, my hon. Friend was not here for the start of my speech, so I must briefly tell him that I am not against public access at all, but that we must have the right attitude towards it. The existing rights of way network should be upheld, but if the hon. Member for Sherwood wants to table an amendment such as this, he must specify what he means by "reasonable access."

The hon. Gentleman is making a terrible meal of this. He has made clear to the House that he has interests in a farm, and so have I. My farm is in Scotland where there is, in effect, a right to roam. It has never caused anybody any problems, and there is a good partnership between members of the public who walk around the countryside and the farming industry. What is the point in having a habitat scheme to protect habitats for the benefit of the public if we deny the public reasonable access to them? He is overdoing it.

The hon. Gentleman has shown clearly that he has no idea what the habitat scheme is for. The whole idea is to keep an area completely undisturbed to enhance a particular habitat, and we must not get that muddled up with other areas of farming land where the public have a perfect right of access. The whole idea is that we wish to enhance particular flora or fauna which otherwise would not exist. That is why we are prepared to pay taxpayers' hard-earned money—to enhance those things that the public want to see.

I do not know about the farm of the hon. Member for East Lothian, but if the amendment were to be applied to it, I suspect that valuable areas of habitat might be affected. We are talking about small areas, and we do not want to deny the public the right of access to huge areas of countryside. We are making heavy weather of this because I keep being interrupted. The amendment is absolutely nonsensical and totally contrary to the purposes of the scheme. On that basis, I totally oppose it.

We have had an interesting diversion for the last 28 minutes. It has been a veritable tour de force—a tour of fauna and flora, molluscs, insects and the animal kingdom.

I want to bring the debate back to the amendment. My hon. Friend the Member for Sherwood (Mr. Tipping) has raised an important issue, which is something of a hardy annual in Finance Bills: it comes back year after year. My hon. Friend should be congratulated on being such a doughty champion of the right of access to land that has benefited from the public purse. He raised the issue in Committee last year and he has done so again today, this time in relation to clause 92, which extends inheritance tax relief to land within habitat schemes.

The amendment would make the relief conditional on a modicum—a reasonable amount—of public access. That is exactly the sort of phraseology that was encompassed in the original Act to deal with the issue: the Finance Act 1976. The continual concern of the hon. Member for Cirencester and Tewkesbury (Mr. Clifton-Brown) about the words "reasonable access" can therefore perhaps be laid to rest if he cares to examine previous laws dealing with the matter.

The argument is not about the principle of relieving inheritance tax in exchange for gaining public access to important parts of the countryside. The simple principle is that if the taxpayer is forking out a small fortune—because that is what is represented by the millions of pounds of revenue forgone in the past—the Government should ensure that the recipients either fulfil their obligations to public access or forgo the tax advantage.

It is a question of rights and responsibilities: the right to receive public subsidy and the responsibility to guarantee public access. That is the principle that my hon. Friend the Member for Sherwood wants to enshrine in the law through the amendment. The problem, as he said both this year and last year, is that public access cannot be guaranteed when information about the land concerned is not readily available.

We do not even know the number of sites that are subject to conditional exemption. The Government's shuffling off of responsibility to the Countryside Commission and individual local authorities simply will not do, because the local authorities do not know, and the commission will not say, where the sites are. The public, who are the ultimate financiers of the relief, cannot find out where the land is.

Last year, I paid particular attention to the Minister's comments when he replied to a similar debate in the Standing Committee. He sought to reassure my hon. Friend the Member for Sherwood about information being available to the public. He said that such information was available

"if we care to ferret out the facts."—[Official Report, Standing Committee E, 27 February 1996; c. 555.]

It is not. In any case, the public should not have to ferret out information that should by right be theirs.

I appreciate that it would be wrong for the Inland Revenue to disclose information about the affairs of individual taxpayers. We do not ask how much relief is worth in individual cases, but we want to know where access has been promised in return for relief and we want that access to be guaranteed. As the Ramblers once memorably put it, the law is supposed to give the taxpayer some quo for its quids.

Has the hon. Gentleman studied Inland Revenue publication IR156?

I have not had the opportunity to study that publication, but I am sure that in his response the Minister will acquaint the whole Committee with its contents. I am concerned to ensure that, if public subsidies are given to landowners to take land out of farming use and to attain the laudable environmental objectives of preserving the countryside, the people that that is supposed to benefit—the public—have a right to reasonable access.

The hon. Gentleman is advancing a reasonable case, but he should consider the cost of granting that reasonable access to the countryside. I make this intervention because part of my constituency lies within the Peak park, which was referred to by my hon. Friend the Member for Cirencester and Tewkesbury (Mr. Clifton-Brown) in his 28-minute contribution. Will the hon. Gentleman make reference to the substantial cost that is often involved in granting what the hon. Member for Sherwood has rightly described as reasonable access to the countryside? I make particular reference to the cost of maintaining footpaths, as I have considerable knowledge of the Peak park and of the problems that growing access to the public cause to that rural environment.

The hon. Gentleman makes an important and telling point. If rights and responsibilities apply on one side of the argument they must apply on the other. We should certainly not condone behaviour in the countryside that causes damage to areas of outstanding natural beauty or creates additional costs for those who are responsible for looking after them. I hope that the Minister will take note of the hon. Gentleman's point about my hon. Friend the Member for Sherwood having a reasonable case.

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It is especially important that the right of public access should be guaranteed where it has been promised, because many of the lands covered by existing inheritance tax agreements lie in areas of outstanding natural beauty—the jewels in the crown of our countryside—but we do not even know where they are, so members of the public cannot properly enjoy them.

Conservative Members have been as concerned as Opposition Members about some of the issues that we have discussed this evening. The National Audit Office also expressed concern about the operation of the current inheritance tax regime, which the clause extends to lands under the habitat schemes.

An NAO report in 1992 said:

"The Department should give further attention to the nature and frequency of the procedures to monitor owners' compliance with undertakings given in return for conditional exemption from inheritance tax on land, buildings and particularly chattels. They should also review the extent to which assurances on retention, maintenance and rights of access remain heavily dependent on owners themselves."

It is five years since the office produced that report. I understand that a Public Accounts Committee report produced the following year made similar recommendations.

Perhaps the Minister can allude to the Government's response to the NAO report and to the subsequent PAC report. A consistent thread runs through the arguments of the NAO, the PAC and my hon. Friend the Member for Sherwood. It is that simple maxim that if the public are to foot the bill through tax reliefs and tax subsidies to landowners, it must be conditional on the owners guaranteeing the public the simple right of access. That is an important principle, and I hope that the Minister will respond favourably to the amendment.

I am grateful for the opportunity to speak briefly on the important amendment moved by the hon. Member for Sherwood (Mr. Tipping). The hon. Member for Darlington (Mr. Milburn) gave the game away in terms of his philosophical approach when he talked about the public footing the bill for tax reliefs or tax allowances. It is worth reminding him that we are not talking about handouts from taxpayers, but about a change in the law that would allow certain individual taxpayers to keep more of their own money and not have their assets taxed by the state as much as they would otherwise have been.

My hon. Friend may be confusing two issues. One is the payment for the habitat scheme, to which I think that the hon. Member for Darlington (Mr. Milburn) was referring. The other is set out in the clause on exemptions from inheritance tax.

I am grateful to my hon. Friend for putting me right. I am, indeed, referring to the inheritance tax reliefs in clause 92.

My concern about the amendment of the hon. Member for Sherwood derives partly from the conservation efforts being made in my constituency and in other parts of the Chiltern hills and partly from the list of enactments in clause 92(3). Clause 92(4) empowers the Treasury to

"by order made by statutory instrument amend the list of enactments in subsection (3) above."

I shall return later to the principle of enabling powers, and of giving a further such power to the Government.

First, I will deal with clause 92(3)(a) and (c). Paragraph (3)(a) refers to regulation 3(1) of the Habitat (Water Fringe) Regulations 1994.

Is my hon. Friend aware that there are six such designated areas under clause 92? The Committee may be interested to know that they are as follows: the York, Derwent and Rye system; the Ribble tributaries; the Shropshire meres, which are especially important for people who live in the Welsh Marches; the River Beult, which I gather is in Kent; the Flapton Ley, which I believe is in Devon; and the upper Avon, Wylye and Nadder valleys in Hampshire and Wiltshire.

I am grateful to my hon. Friend. Inland river systems sustain a great variety of wildlife, but they have come under increasing pressure in recent decades as a result of changes in farming techniques, improved drainage and the greater use of pesticides. It is important that we should do our utmost to conserve the flora and fauna that remain in those rich habitats.

By their nature, water fringes, especially when they are near large population centres, attract many people as sites for picnicking, camping and other recreational pursuits. I am sure that my hon. Friend the Member for Cirencester and Tewkesbury (Mr. Clifton-Brown) has, like me, enjoyed a family walk along a country river or around a lake. His mention of the Shropshire meres reminded me of such an afternoon in the company of my wife—and a very pleasant outing it was.

My hon. Friend mentioned meres, but what about canals? I refer in particular to the Cheshire ring and the Macclesfield canal. What about the flora and fauna there? Will he comment on that in adding to his excellent contribution?

I am grateful to my hon. Friend for the benefit of his customary detailed knowledge of the area that he represents.

My hon. Friend the Member for Cirencester and Tewkesbury informed the Committee that regulation 3(1) of the Habitat (Water Fringe) Regulations 1994 does not apply to the canal systems in Cheshire mentioned by my hon. Friend the Member for Macclesfield (Mr. Winterton). However, statutory instruments, by their nature, can easily be extended and this one could be extended to cover more sites than were included in the original Department of the Environment list. It is certainly conceivable that the canals mentioned could come within the scope of subsection (3)(a) if the Government of the day decided to amend the provisions. My hon. Friend made an important point about canals, which sustain a variety of wild plants and animals. To his knowledge of the waterways of Cheshire, I add mine of the Aylesbury and Wendover arms of the Grand Union canal which both support wildlife and attract people who live and work in towns and want to get out and enjoy the countryside.

This debate forces us to examine carefully the inevitable tension between the interests of conservation and of the rights of public access to recreation in the countryside. Water fringes are vulnerable habitats, but that is even more true of the saltmarshes mentioned in clause 92(3)(c). I do not know whether my hon. Friend the Member for Cirencester and Tewkesbury has been able to ascertain a list of those sites covered by the Habitat (Salt-Marsh) Regulations 1994.

Mention of salt marshes makes me think of the coast of north Norfolk. I am not expert on this part of the Bill. Can my hon. Friend explain whether coastal saltmarshes would be affected by the regulations?

The salt marshes of north Norfolk and the Wash would appear, at least in principle, to be eligible for inclusion in the Habitat (Salt-Marsh) Regulations 1994. If they are not among those sites which would be affected directly if the amendment were passed, they could be affected in the foreseeable future.

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Does the hon. Gentleman accept that access to saltmarshes is already provided under one of the agri-environment schemes—the scheme on public access to environmentally sensitive areas? Does he agree that the balance between protecting the landscape and the environment and allowing public access is what is exercising the mind of the Committee?

I wholly agree with the hon. Gentleman that the test for the Committee is to get the balance right. It is my contention that that is best achieved by examining the terms of schemes and making arrangements for access to sites rather than by incorporating the rather broad language of the amendment in the Finance Bill.

My hon. Friend asked me whether I had been able to obtain any information about the saltmarsh option. Unlike the water fringe option, which is for inland waterways—fresh water—at six designated sites, the aim of the saltmarsh option is to create and extend areas of saltmarsh on suitable land, consistent with the provision of effective and sustainable coastal defence. That might be helpful to my hon. Friend.

Indeed. We have only to consider the pressure on saltmarshes, as on inland waterway systems, not only from agriculture but from development of various types, to see why we need to take great care to ensure that such sites are adequately protected. North Kent and the now aborted proposals to develop the Maplin area of the coast of Essex for an airport in the 1970s are just two examples of the pressure on saltmarshes around the coast of Britain. That is why the Committee should be careful before allowing public access in the way that the hon. Member for Sherwood wishes. I know that it is not his intention, but the amendment might unwittingly have the effect of allowing access to such an extent as to damage the habitat that attracted people there in the first instance.

I am becoming genuinely interested in the point about public access. There is a distinction between public access and total exclusion of the public. Is there any halfway measure under which restricted access could be allowed, either now or in the future? I know that certain categories of people are allowed into certain special conservation areas. Is that relevant to the clause?

My hon. Friend makes an important point. One of my quarrels with the term "reasonable access" in the amendment is that it does not seem to allow sufficiently for the dilemma that my hon. Friend has illustrated.

I return to the point that I made to the Committee earlier. If a public access agreement is drafted which is specific to a particular site, it will allow for access to be given to biologists and genuine researchers. It would allow the public to be barred from sites at particular times of the year, in the same way as public access to the Fleet lagoon in Dorset is strictly limited when the wading birds are likely to be nesting. Detailed site-specific arrangements could then be made. My fear is that the language adopted by the hon. Member for Sherwood would allow public access to continue and to grow, perhaps to the detriment of particular sites.

My hon. Friends have raised an important point. Of course, the scheme is time-limited to 20 years, so any public access would be prescriptive rather than statutory. If it were prescriptive, would it be possible to limit public access to certain times of the year? To take my stone curlew nesting example, it is important to keep the public away during the nesting months of April and May. Does my hon. Friend think that that would be a good idea?

That would be a good idea. Even within a public access agreement for an individual site, it would be desirable to allow a degree of discretion to the managers or those responsible for supervising conservation on a particular site. For example, if a particular habitat is used by migratory birds during their flight north or south in spring or autumn, it would surely be sensible to allow a measure of discretion to those responsible for conservation so that if migration was early or late in a particular year, they could bring forward or put back the period of public access in the interests of conservation. My hon. Friend's point strengthens my view that the language of the amendment is inappropriate.

I move from new section 124C(3)(a) and (c) to the subsection which, I confess, troubles me most. New section 124C(3)(b) refers to the Habitat (Former Set-Aside Land) Regulations 1994. As every member of the Committee will appreciate, set-aside land is found in every part of the country. No one knows for certain how the scheme is likely to develop. There have been significant changes during the past 12 months, as a consequence of the impact on the European beef market of the BSE crisis since March 1996. That brings me away from the coasts and back towards my constituency and neighbouring constituencies and to the Chiltern hills.

The Chilterns are a valuable habitat. They include much land which is classed as an area of outstanding natural beauty, and much which is green belt, but the Chilterns also often mark the dividing line between land which is given that class of protection and land which is available for normal development, subject to the usual planning process.

Counties such as Bedfordshire, Buckinghamshire and Berkshire, which are just beyond the rim of the London green belt, are peculiarly subject to development pressures. Anyone who has studied the Department of the Environment's recent Green Paper on household projections will know how the demand for housing and new premises for employment in those south-eastern counties is forecast to grow steadily—some might say dramatically—in the next 10 to 20 years. That growth will put still further pressure on agricultural land and woodland in my constituency and in other parts of the Chiltern hills.

And in the Cotswolds.

The Cotswolds and the Chilterns probably have a great deal in common so far as development pressures are concerned.

My hon. Friend makes a good point, but does he accept that it is not merely areas to the north and west of Greater London, such as the Chilterns, his constituency and the Cotswolds, that suffer such pressures? Areas on the periphery of great cities such as Manchester also suffer. I refer to my constituency of Macclesfield in Cheshire, where the same pressures are being exerted and the same arguments are relevant to my hon. Friend's proposals, which he is making in an excellent contribution to the debate.

I thank my hon. Friend. Having some good friends who live not in his constituency, I fear, but nearby, and having visited Wilmslow, Knutsford and Mobberley, I am certainly aware that development pressures in Cheshire as a consequence of people coming out from the Manchester conurbation are probably as acute as those affecting counties such as mine, which are adjacent to the London conurbation, although on a slightly smaller scale in view of the relative size of the two cities.

There is not only development pressure on the Chiltern hills and Buckinghamshire. Understandably, there is also a huge demand for public access and I have immense sympathy for that. I was brought up in north-west London and used to go for Sunday walks with the family along the Chess valley or the scarp of the Chiltern hills. None of us wishes to deny such walks to present or future generations, but we have to ensure that public access does not develop in such a way that it damages a precious environment. Public access has to be managed.

In my part of the country, there are many opportunities for legitimate public access through long-distance paths such as the Ridgeway along the scarp of the Chiltern hills and the north Buckinghamshire and south Buckinghamshire footways, which Buckinghamshire county council has developed with great prescience and vision to balance public access, conservation and efficient farming in a way that I am sure that the hon. Member for Sherwood seeks to achieve as much as anyone else.

There have also been clashes, however. A number of farmers and landowners in Buckinghamshire and Oxfordshire have been alarmed at some of the initiatives taken by the Ramblers Association and people such as the hon. Member for Sherwood who want a more general right to roam enshrined in law.

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I think that the hon. Member for Aylesbury missed the beginning of my speech. I have never advocated an unrestricted right to roam. As I said earlier in this short—but extending—debate, my position is set out in the Access to the Countryside Bill, which tries to deal with the tensions that the hon. Member so rightly recognises.

I am grateful to the hon. Gentleman for making that point clear.

This is becoming a very interesting debate. Before I became a Member of Parliament, I spent much time in the national park areas involved with the Duke of Edinburgh award scheme and so forth. To what extent do these issues differ in national park lands and in the areas that he is describing in Bedfordshire and Buckinghamshire? Does national park status make a difference and, if so, how?

I am no expert on national park land. Some people have argued that the Chilterns or the Cotswolds might be given national park status. I would prefer to avoid that degree of what some people might describe as overmanagement and rely on finding a sensible and pragmatic balance between the differing interests of agriculture, forestry, public recreation and conservation in the way that I have sought to describe.

Two local issues have given me cause for great concern about clause 92(3)(b). The first is my knowledge of the efforts being made by the Berkshire, Buckinghamshire and Oxfordshire Naturalists Trust to establish a network of nature reserves throughout the Chilterns to try to bring back some of the flora and fauna that have been lost as a result of poor stewardship during previous decades of this century. The people most closely concerned with those projects have told me that it is no good relying on a tiny network or series of oases of nature reserves, from which we exclude the public altogether and expecting that plants and animals will thrive in those isolated colonies. Instead, they argue, we need to link those oases through hedgerows and set-aside land which is responsibly managed in the interests of conservation. The creation of those links between nature reserves, in the traditional sense, could be put at risk by the amendment.

My second cause for concern locally derives from the ambitious project under way in the Chilterns—due in part to the great generosity of my constituent Mr. John Paul Getty—to reintroduce the red kite back into England. You will know, Sir Geoffrey, that the red kite is a bird of prey which, through persecution, had been confined to a small area of mid-Wales around Plynlimon, but which can now be seen by drivers along the M40, thanks to a sensible programme of conservation and management.

The hon. Member for Darlington (Mr. Milburn), contributing from the Opposition Front Bench, referred to the fact that it was difficult to obtain details of every site listed under the various regulations described in clause 92(3).

I hesitate to correct the hon. Gentleman. However, the sites that we said the public had difficulty in finding were not those to which he refers, but those which have conditional exemption from inheritance tax to allow greater public access. I do not think that the hon. Gentleman has been following the debate closely enough.

My point is that in the interests of good conservation—this was certainly true in the case of the red kite—it is often important to keep the location of specific sites secret so as to ensure that rare species are allowed to breed and thrive without the attentions of bird egg collectors or poachers intervening in that process. I would not want circumstances to arise in which, in order to achieve the desirable objective of greater public access to and enjoyment of our countryside, we allowed intrusions that could severely damage efforts to introduce or restore species to habitats in this country and to ensure that they thrive there.

I said earlier that I wanted to return to the enabling powers that the clause would give to the Government. I simply note that in clause 92 the proposed section 124C(4) to the Inheritance Tax Act 1984 would enable the Treasury, by order, to

"amend the list of enactments in subsection (3)".

It follows that if the Committee were to accept the amendment proposed by the hon. Member for Sherwood we would be putting into law a right of public access—or "reasonable access" in the terms of the amendment—not only in respect of those enactments already listed in proposed section 124C(3), but in respect of any future enactments added to the list by any future statutory instrument introduced at the behest of any future Government. It is a good principle that, whenever possible, we should try to avoid giving too many enabling powers and it is that principle which causes me to have further doubts about the amendment.

The amendment moved very reasonably by the hon. Member for Sherwood (Mr. Tipping) seeks to make inheritance tax agricultural relief for land dedicated under long-term habitat schemes conditional on the public being allowed reasonable access to the land. Does my hon. Friend accept that protecting or improving the environment and creating public access to land are totally different objectives, albeit equally desirable ones? Is that not why there are different arrangements dealing with habitats and with public access to land? I have considerable sympathy with the argument advanced by the hon. Member for Sherwood, but are not the matters relating to habitats and public access that we are debating two very different issues? Will my hon. Friend deal with those two issues?

Order. Before the hon. Member for Aylesbury (Mr. Lidington) deals with those points, I must say that that was a very long intervention.

And a very relevant one.

Order. Relevant or not, interventions are supposed to be brief and to the point—and that one was neither.

I am sure that my hon. Friend will try to catch your eye later in the Committee's proceedings, Sir Geoffrey, so that he can develop his important arguments.

I want to conclude by saying to the hon. Member for Sherwood that, although I understand and have some sympathy with the motives behind his amendment, he has chosen a blunt instrument with which to secure his objective: there are better ways of securing improved public access to our countryside.

This has been an interesting debate, which has shown that Conservative Members have a clear understanding of and a great deal of sensitivity towards the issues relating to the countryside and habitats.

I want to deal directly with the lines of argument advanced by the hon. Member for Sherwood (Mr. Tipping) when moving his amendment.

Some time ago.

Indeed, it was some time ago. I might be wrong, but I believe that the hon. Member for Sherwood has stirred up the proverbial hornets' nest among Conservative Members.

First, I want to direct the hon. Gentleman's attention to an important piece of logic relating to his amendment. I would not normally accuse him of being an opportunist, but there is an element of opportunism in the phrasing of his amendment. He has, in his own way, asked for land covered by clause 92 to be subject to an extra requirement in respect of access. As I know from a former ministerial incarnation, the hon. Gentleman takes an interest in countryside and farming matters, so he will understand that we could not have had this debate had it not been for the fact that the Government responded to representations from concerned landowners, who wanted to advance land into various environmental schemes for the general benefit of the people and of the countryside environment, but who would hold back from so doing if we were to leave the law unchanged. Taking into account the inheritance tax factors affecting ordinary farmed land, it is an entirely praiseworthy and meritorious development that we are now moving towards encouraging more land not to be farmed but to be dealt with in an environmentally sensitive way. I therefore hope that the hon. Gentleman will give us some brownie points for our actions in that respect.

Although clause 92 is fairly narrowly drawn in the areas that have to be exempted from inheritance tax provisions, the debate has alerted us to a wider issue, with which the hon. Gentleman entertained the Committee. The narrow issue is the question whether there should be "reasonable" public access to the types of habitat scheme enunciated in proposed section 124C(3) to the Inheritance Tax Act 1984. What is distressing coming from someone who takes a genuine interest in countryside matters is the fact that the hon. Gentleman has not defined what he means by "reasonable".

In my former incarnation at the Ministry of Agriculture, Fisheries and Food, I opened one of the first six habitat water fringe schemes. I recall tramping through a meadow adjacent to the Ribble and understanding precisely what was happening in that ecologically finely balanced area as a result of the scheme, which imposed a highly restrictive regime on the farmer concerned. If we had not had a clear definition of the word "reasonable", we might have had large numbers of people, having been alerted to that habitat scheme, tramping across the meadow land and taking away all the advantages of its entering the scheme in the first place. The Committee could not reasonably be asked to support the amendment without the word "reasonable" being more closely defined.

In view of the consensus that has been achieved in the course of this good natured debate, could not the two Front Benches come to an agreement—enter into collusion, if necessary—reinforced by all the rest of us, to ensure that any future Treasury Bench, under whatever management, would underwrite landowners' interests? I am only a window box farmer, but such a measure would cover landowners against public liability claims, which have arisen in my constituency to the extent that one farmer was forced to sell his land because of an alleged injury sustained by a rambler walking across his land. As no insurance company will provide such cover, a future Chancellor of whatever party should undertake to do so, even if it means increasing income tax.

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The right hon. Gentleman makes an interesting point, which may be relevant to the general issue of encouraging farmers to offer to put land into habitat schemes that require public access. Those points will no doubt have been noted by my right hon. and learned Friend the Minister of Agriculture, Fisheries and Food, who is responsible for schemes such as the countryside stewardship scheme. I shall draw the right hon. Gentleman's remarks to his attention.

I have criticised the narrow point of the amendment and shall now trespass a little into other areas. First, however, I refer to the incisive speech by my hon. Friend the Member for Cirencester and Tewkesbury (Mr. Clifton—Brown), who made cogent, coherent and knowledgeable representations about this matter before the Finance Bill was published and before the announcement on the issue on Budget day. He spoke on behalf of many concerned landowners in advocating that we follow that measure. I publicly record my appreciation for his lines of argument alerting us to the matter in the first place. In my hon. Friend's knowledgeable speech, he attested to many of the real issues that surround the whole question of reasonable—however one defines that—access to land in the type of habitat scheme that is the subject of the amendment.

The hon. Member for Sherwood went wider than the narrow terms of the clause and took us into two important realms, one of which was land that is already the subject of the inheritance tax exemption, but which may be in various forms of habitat scheme. The debate ranged over schemes such as the countryside stewardship scheme, the countryside access scheme, environmentally sensitive areas and the woodland grant scheme, to name but four of the major schemes. If I understood the hon. Gentleman correctly, in moving his amendment in that way, he sought to make the wider demand that, if that land was to continue to enjoy the inheritance tax exemption, as does all other farm land, because of its habitat nature that land, too, should have greater access. He cited the Ramblers Association audit of knowledge about the schemes.

I do not want to go into areas where I should not go, but it is worth reminding the hon. Gentleman to look carefully at publications on the countryside access scheme, which tell farmers who put their land into that area the ways in which they should make information more widely available. The hon. Gentleman and I have debated before the signposting of information in tourist centres and so on. The best service that I can render the hon. Gentleman and the Committee is to draw to the attention of my ministerial colleagues responsible for policing those schemes some of the deficiencies that have been attested to.

It was interesting to note the figures that the hon. Member for Sherwood gave. He said that a third of the land was difficult to find. He did not, however, say whether the people trying to find it were experts in map reading and using other aids to locate it. Nor did he entertain us with information on whether the other two thirds was found easily.

I am conscious that the Financial Secretary had to miss part of the debate. Had he been present, he would have heard me say that at that time the countryside stewardship scheme was administered by the Countryside Commission, and that 20 per cent. of the grid references provided by the Countryside Commission were wrong.

Clearly, that is historic information, but it is important. The point that I am making is that, to join all those other schemes, landowners must fulfil various access requirements, yet under clause 92(3) some other forms of land are particularly sensitive and one would have to be certain about what "reasonable" meant in those contexts.

Will my hon. Friend give way?

I should like to make a little progress, but I shall give way briefly to my hon. Friend.

Does my hon. Friend agree with the point made by the hon. Member for Sherwood (Mr. Tipping), that all landowners must—I emphasise the word "must"—publicise public access arrangements that are agreed by the appropriate heritage agency working in conjunction with local authorities and other interested parties? Is that not vital to the Government's aims, and does it not work towards what the hon. Member for Sherwood is trying to achieve?

Yes, but I fear that three different issues concerning access have become muddled. My hon. Friend's remark is relevant and correct. In a moment, I shall deal briefly with the third issue, about which the hon. Member for Sherwood had something to say, relating to land that may be farmed.

In general, if farm land is admitted to environmental schemes, closely defined access requirements are already built into the schemes, so there is no need to embroider them.

I pay tribute to the perceptive and sympathetic remarks of my hon. Friend the Member for Aylesbury (Mr. Lidington), who drew our attention to the terms of the salient part of clause 92, which is of direct relevance to our discussion.

The third issue to which the hon. Member for Sherwood drew our attention was those forms of asset—in this case, land—that were the subject of exemption from inheritance tax, in exchange for access, so to speak. I remember that last year the hon. Gentleman debated the subject at length, but I shall not attempt to paraphrase our comments. I undertook to make that information more widely available.

The hon. Member for Darlington (Mr. Milburn) said in his pugnacious way that members of the public should not have to go ferreting around for that information. I can tell him that the ferrets can go back in the pocket and down the trouser leg: the public have no need to ferret about, because we have taken further action to make the information exceedingly widely available. That is why I asked the hon. Gentleman whether he had read Inland Revenue publication No. 156. I shall furnish him with a copy of that excellent new leaflet, which sets out the broad-brush approach for obtaining information about the land that is on the exempt register.

I have asked the Inland Revenue to write to all the local authorities that run a library service, giving information about the availability of the Inland Revenue leaflet and providing a poster to publicise our efforts to make more knowledge available about where the land is and how it can be accessed, while maintaining taxpayer confidentiality. We have put the entire register on the Internet, so there is now public as well as private provision for obtaining the information.

We have addressed all three of the areas of concern identified by the hon. Member for Sherwood. In the light of the information and assurances that I have given him, I hope that he will not press the amendment to a Division.

The debate has been stimulating and enthusiastic. We have been taken down paths that perhaps we should not have trodden, we have been to faraway fields, and at times the debate almost became a picnic. We have tested your tolerance, Sir Geoffrey.

Across the Committee, there has been a recognition of the need for a balance between protecting the habitat and allowing public access. That is a great challenge. I have set out my position in the Access to the Countryside Bill, which is before the House. It deals with many of the points made in the Chamber—for example, the notion that access should be allowed only at certain times of the year, the notion of restriction orders, and the notion that access not only is a right, but entails responsibilities. I am particularly interested in the point raised by the right hon. Member for Lagan Valley (Sir J. Molyneaux) about owner liability. I am currently addressing that issue, with a view to including it in a subsequent version of the legislation.

The Minister called me an opportunist—he was very nice about it—and I confess to that charge. The amendment was intended to provoke debate and discussion. One or two hon. Members said that their interventions would be short, but if their walks are as long as their short interventions, I shall never accompany them.

I have taken the opportunity to raise issues such as public access to environmentally sensitive areas, countryside access schemes, the countryside stewardship scheme and conditional exemption from inheritance tax. I praised the Financial Secretary earlier in the debate for always listening and taking an interest in such matters. I believe that we shall continue to tread this path. I am conscious that changes have been made, but much more remains to be done.

The hon. Member for Macclesfield (Mr. Winterton) referred to issues of cost, and he will recall that I identified sources of funding. For example, I mentioned the arable area payments scheme, in which the hon. Member for Cirencester and Tewkesbury (Mr. Clifton-Brown) is also interested. Landowners and farmers receive substantial sums from that source and the hon. Gentleman has advocated capping that expenditure.

There is general agreement within the Committee that we must balance the people's right to access the countryside against the need to enhance and protect the countryside and lift the landscape. It is a complicated area, and I am delighted that we have had such a stimulating debate. I am glad that the Minister has re-examined the matter, and I shall continue to press him on those issues. Progress has been made, so I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

I beg to move amendment No. 7, in page 81, line 46, at end add—

'(7) This section shall only apply to land which has been acquired for bona fide reasons and shall not apply to land which has been acquired as part of a scheme or arrangement of which the main purpose, or one of the main purposes, is the obtaining of a tax advantage.'.

The amendment has one simple, but significant, purpose: to protect the taxpayer and the Inland Revenue from any possibility of abuse as a result of the proposal in clause 92 to extend inheritance tax relief to land in habitat schemes. The Opposition support the principle behind the habitat scheme: promoting nature conservation is clearly a laudable objective, particularly as it applies to sites of special environmental significance. We would like to see the common agricultural policy reformed in such a way that it focuses resources still further on those positive environmental objectives.

We are equally concerned about protecting family farms. Those family businesses provide a key focus for stability and continuity in rural communities—they are often the backbone of our countryside. It is clearly an important Government objective to try to avoid the break-up of working farms of that sort. The extension of agricultural property relief under the IHT rules in the 1992 Budget from 50 per cent. to 100 per cent. was presented as a means of doing just that. Nowadays, exemption from inheritance tax can be gained after only two years of owner occupation of a working farm. Two years ago, provision for 100 per cent. relief was also extended to tenanted farms. According to the Budget press release of 26 November 1996, the Government's—

There is a slight inaccuracy in what the hon. Gentleman has just said. The exemption for tenanted farms was only that granted in the recent tenancy legislation for farm business tenancies, not for all tenanted farms.

9.15 pm

That is right. It is 100 per cent. relief after seven years rather than two for owner-occupied farms.

According to the press release of 26 November, the Government's new intention, which is enshrined in clause 92, is to extend relief from inheritance tax to land managed under the terms of the habitat scheme. The release tells us that the Revenue has received legal advice that as the law stands such land would not qualify for such relief. Perhaps the Minister will explain how that situation arose. He alluded to representations that have been made by landowners. I hope that he will tell us how many representations were made. He might allude as well to the legal advice that he has received that has necessitated the clause that is before us.

I hope also that the Minister will indicate the costs of extending relief in the way that is set out in the clause. That is important for two reasons. First, those with land covered by the habitat scheme are already receiving a public benefit. Expenditure on the scheme is projected to rise to almost £2 million by the end of the decade. Extending the IHT relief to land in habitat schemes represents a double benefit at public expense so it is doubly important that the taxpayers' interests are properly protected from abuse.

Secondly, as there is now a substantial body of evidence to suggest that agriculture property relief is being systematically abused for tax avoidance purposes, our amendment aims to prevent such abuse so that the extension of APR is available only to those who have a genuine desire to farm and to protect the countryside. It would prevent the unscrupulous from hiding behind a laudable environmental objective purely for the purpose of erecting a convenient tax shelter.

Such abuse has become all too common. The Financial Times of 14 May 1994 contained an article entitled

"Tax farming: an old crop is revived".

It outlined how tax avoidance under IHT rules could not be simpler for those who could afford it. It is an interesting article. It referred to the current market for land and the fact that there were only a few farms available for sale at that time, partly because of the influx of British and foreign buyers. It reads:

"British buyers now include the rich, eager to take advantage of the new inheritance tax rules. 'Sell a house in the English home counties', says Christopher Wilson of buying agent Wilson and Wilson, 'and put the proceeds into a farm with vacant possession. Work it for two years, perhaps by contracting out, and IHT will vanish.' His firm and accountants Grant Thornton have formed a `city landowners service' to handle that sort of work."

In other words, those who are wealthy enough can enjoy a 40 per cent. tax windfall simply by parking some cash in farmland for two years.

The article went on to suggest that the changes in IHT rules are distorting the market for farming land. There is some evidence to suggest that the very people who the IHT rules were designed to protect—small working family farmers—are losing out as wealthy buyers from home and abroad buy up land for tax avoidance purposes.

I do not regularly surf the Internet, but thankfully we on the Opposition Benches have one or two advisers who do, and they came across an interesting article—if that is the right word for it—just two days ago, from Strutt and Parker. It says:

"Since the beginning of 1996, Strutt and Parker have sold and purchased in excess of £100 million worth of farms and estates throughout the United Kingdom."

The article talks about the upturn in the market for land and farms. It goes on to say:

"However, 1996 saw the re-emergence of a substantial amount of non-farming money which purchasers were looking to invest in farmland. Many of these investors were tax driven, taking advantage of rollover relief and reinvestment relief. Others were looking to acquire agricultural property for Inheritance Tax purposes."

Indeed, the article says that, such are the distortions in the market, towards the end of 1992 there was a lack of farms available for sale.

The Sunday Times of 3 September 1995, commenting on the 1995 inheritance tax relief rules, quotes Mr. Adrian Baird, the Country Landowners Association chief tax adviser, as saying:

"we are worried that exploitation of the legislation for tax avoidance, particularly by outside people buying into land, will bring it into disrepute."

The article, which is entitled "Rich landowners to reap millions in tax changes" goes on to say that the paper has surveyed many of the country's biggest landowners and has looked at the way in which they plan to benefit from the new rules.

"Some,"—

it says

"are interested,"—

purely

"because it allows the perfectly legitimate avoidance of inheritance tax, others because it offers ways of giving tenant farmers shorter leases."

Indeed, the article quotes several examples. The Marquess of Normanby's 60,000-acre estate in Yorkshire is one such example. James Jackson, the Duke of Northumberland's agent, is quoted as saying that he was considering "one or two wheezes" relating to the new legislation on the Duke's 90,000-acre estate.

The reality is that it is possible to drive a coach and horses through the existing inheritance tax rules. Of course there should be proper protection for people who are genuinely in the business of farming, but the current loopholes in the inheritance tax rules make it all too often little more than a tax shelter for the very wealthiest, at the public's expense.

Inheritance tax, particularly agricultural property relief, is like manna from Heaven for the tax planning industry. I took the opportunity today to look at Tally's Taxfinder, the Bible on these matters, and I came across the following passage on page 23 of the 1993–94 tax planning guide, volume I, which says that the remarkable new regime introduced by the Finance Act 1992

"is potentially there also for the benefit of others, since it provides the opportunity almost to 'buy' freedom from inheritance tax by purchasing an appropriate category of property and owning it for two years. It is even possible,"—

it says

"to do so through the purchase of a USM portfolio. which would require no participation in the business or the need to farm."

It is precisely such loopholes that make tax avoidance so easy, and which are now being extended in clause 92. Indeed, extending them without proper safeguards, as the Bill as drafted does, removes the inconvenience of even having to farm the land to make the gain. Instead, the land can just be sat on for two years before 100 per cent. inheritance tax relief comes into effect.

It is worse than that, because not only can the land just be sat on to qualify for the tax breaks to which my hon. Friend referred but even more money can be paid in from the taxpayer by setting the land aside, and getting paid by the Ministry of Agriculture, Fisheries and Food for doing nothing.

I thank my hon. Friend for his intervention. He brings a certain knowledge to our debate—not knowledge of tax avoidance, of course, but knowledge of rural communities and the agriculture industry. Perhaps I have been too generous in regard to those matters.

Without our amendment, the possibility of abuse and tax avoidance will be extended. The amendment would empower the Inland Revenue to deny inheritance tax relief to those owning land in habitat schemes when it was clear that the purpose was tax avoidance. We want relief to focus on those with genuine environmental objectives, not on those who shelter behind them merely to gain a tax advantage. The public should not foot the bill for the wealthiest, who are using lax laws to reduce their liability.

At a time when ordinary families are paying more tax than they were at the last general election, the Government should stand up for the decent, hard-working majority of taxpayers. Those who are experiencing the biggest tax hike in peacetime history, following 22 separate tax rises, are entitled to demand a fair and efficient tax system; but the current inheritance tax rules ensure that the system is not fair and efficient. In many respects, inheritance tax has become a purely voluntary tax, and clause 92 would extend that spirit of voluntarism to land covered by habitat schemes.

The loopholes in the inheritance tax system mean that many of the wealthiest members of society get off scot free, or at least mostly tax free. The latest figures for 1993–94 from the Inland Revenue's 1996 statistics—a riveting read, as the Government Whip will no doubt appreciate—show that there were only 1,478 cases of inheritance tax being paid on agricultural property, out of a total of 17,363 paying any form of inheritance tax. That represents just 6 per cent. of the total number of estates notified for probate.

The Government's argument seems to be that, as the inheritance tax system that they created is so riddled with anomalies and loopholes, the answer is not to reform it but to extend it on the way to abolishing it. It is less a case of "If it's broke, fix it" than a case of "If it's broke, axe it"—and, as I have said, the beneficiaries of such an approach would be the wealthiest members of society. If the Prime Minister's objective—abolition of inheritance tax—were fulfilled, the wealthiest people would reap the biggest rewards. At the very top, each of the 201 families inheriting estates valued at more than £2 million would gain nearly £1 million. Such a tax cut would hand out millions to people who are already multi-millionaires.

I do not believe that abolishing inheritance tax, or extending it in the way suggested in clause 92, will do anything to create an enterprise economy in which merit is the crucial determinant of success. If the Conservatives got away with their objective, it would merely make the wealthy even wealthier. If there is room for tax cuts in the future, they should be used to help the hard-working majority. Opposition Members want to reform the inheritance tax system rather than abolish it, and the amendment is a step in that direction.

It is of course right that the inheritance tax system does not penalise people on middle incomes, whose property values may rise over time, which is why raising inheritance tax thresholds—

The hon. Gentleman appears to be drifting into a general discussion on inheritance tax. The amendment—as he knows, because he moved it—deals specifically with inheritance tax and habitat schemes.

I was about to mention two matters. First, raising inheritance tax thresholds may be a desirable reform. Secondly, however, the system must be safeguarded against abuse if it is to have integrity and command public confidence. Amendment No. 7 intends to achieve precisely that objective, which is why it is so important.

We want family businesses and farms to be protected. Opposition Members want to prevent the breaking up of bona fide businesses and farms and the tax system to work fairly and efficiently. The extension of inheritance tax proposed under clause 92 should not be made unless taxpayers' interests are properly safeguarded. Our amendment would accomplish that goal. It would prevent tax avoidance but offer help to genuine farmers and to those interested in preserving the very best of the British countryside.

I find it hard to believe that an argument can be made against such a motive or that a convincing argument can be made against our amendment. In his speech, no doubt the Minister will prove me wrong. In the meantime, however, I commend our amendment to the Committee.

9.30 pm

My hon. Friend the Financial Secretary to the Treasury kindly mentioned that I made representations to him on clause 92's exemption for habitat schemes. That tribute should have gone to my constituent, Mr. Michael Fitzgerald, because he brought the matter to my attention. Thereafter I brought the matter to the attention of my right hon. Friend.

I think that it would be helpful if I explained to the House the origin of clause 92 and the need for amendment No. 7. I am indebted to the Country Landowners Association, of which I am a member, for providing the technical note which I shall use. It is important to understand how the issue arose, and the note at least partially answers the questions asked by the hon. Member for Darlington (Mr. Milburn) about why it was necessary to include clause 92 in the Bill.

Under section 117 of the Inheritance Tax Act 1984, as amended, agricultural property can qualify for inheritance tax agricultural property relief only if the property is

"occupied for the purposes of agriculture"

during the required period. As the hon. Member for Darlington made clear, in the case of owner occupation the required period is two years immediately prior to any transfer of the property, and in the case of occupation by someone other than the owner, the required period is seven years immediately prior to any transfer.

When set-aside schemes were first introduced, owners who elected the fallow option were considered to remain in occupation of their land for purposes of agriculture because the scheme required the landowner to maintain the property in a fit state for agricultural production. The Revenue's view was that, although minimum maintenance was required under the scheme, the requirement provided sufficient indication of intent, as suggested by the word "purposes".

The 20-year habitat scheme, the inheritance tax exemption and amendment No. 7—all of which the Committee has spent so much time discussing today—push so far forward any prospect of future agricultural use that the requirement to maintain the land in a fit state for future agricultural use would not make sense. Thus, there is no hook on which the Revenue can justifiably hang a proper belief that such land remains in agricultural application.

When I brought the matter to the attention of my hon. Friend the Financial Secretary to the Treasury, he took legal advice from the Revenue—perhaps also from elsewhere—and its view was precisely the one which I have paraphrased. However, he considered—I am grateful to him for this—that a charge to inheritance tax under the habitat schemes would deter people wishing to enter those schemes. Indeed, my constituent, Mr. Fitzgerald, who entered 212 hectares in the scheme, would not have done so had it not been for clause 92. I am therefore grateful that my hon. Friend has seen fit to remedy the situation in that way.

The amendment exemplifies some of the worst fears of farmers and landowners. The hon. Member for Darlington made it clear that should the Opposition get anywhere near power, they will not only introduce changes such as that which they have proposed this evening but will seek to extend the scope of inheritance tax. One of the easiest ways to extend its scope would be to abolish what are known as potentially exempt transfers.

Anyone who keeps an asset for more than seven years is exempt from inheritance tax, but I believe that one of the first things that the Opposition would do is abolish that relief. We should then have a potential wealth tax in the making—who knows, perhaps the Opposition are proposing a wealth tax. The Opposition have ruled out some personal taxation options but that means that others will have to be considered. This particular exemption relating to habitat schemes—

Order. The hon. Gentleman knows when he is guilty of straying out of order.

To return to the amendment, I must say that it strikes one as a little spiteful. We are trying to improve the environment. If someone has the foresight to buy a piece of land, and probably pays a great deal of money for it, he is by nature altruistic and wants to improve the general habitat. Does it really matter if, at some stage in the future, he might get away without paying a little bit of tax? The amendment is simply jealousy of the highest order and shows that the Opposition are still unreconstructed when it comes to tax. Jealousy is still their motive.

The proposed new provision contained in clause 92, which would give exemption from inheritance tax, is a preliminary to our abolishing inheritance tax. The Opposition spokesman made it clear that his philosophy is to extend it. Tonight's debate could not reveal more sharply the philosophical difference between us when it comes to raising taxation: the Opposition want to increase taxes in rural areas and destroy rural employment. Anyone thinking about voting for the Opposition at the next election should consider that point very carefully.

Having listened carefully to my hon. Friend the Member for Darlington (Mr. Milburn), I have to say that I detected none of the implications referred to by the hon. Member for Cirencester and Tewkesbury (Mr. Clifton-Brown). I did, however, note that the point of the hon. Gentleman's speech was precisely what the amendment is intended to prevent—the possibility that a further loophole may be opened in the inheritance tax legislation and rules.

In considering the matter, we are entitled to examine the broader context in which clause 92 is being proposed. Part of that context is formed by clause 91, which raises the threshold for the payment of inheritance tax from £200,000 to £215,000. That is £10,000 more than is necessary for the usual indexation, and it will cost £16 million a year in lost revenue to the Exchequer. Adding that to the previous year's huge increase, the threshold for inheritance tax has risen by 40 per cent. in two years, from £154,000 to the proposed figure of £215,000. Inflation is running at about 2.5 per cent. That threshold increase vastly outstrips the retail prices index and house price inflation.

Conservative Members have declared an ideological opposition to inheritance tax. This further loophole may be designed to ensure that the tax is eventually abolished. The implications of abolition are substantial. The likely cost would be £1.6 billion—the equivalent of 1p on the standard rate of income tax.

Given the Government's record and their ideological commitment to the removal of inheritance tax, we are entitled to be suspicious that they may be opening a further loophole in the tax through which millionaires and others could crawl, as happened with the 1992 decision to relieve agricultural properties from inheritance tax. A small industry has developed, advising estates on how to take advantage of that provision. The industry could also feed on clause 92. According to the 1996 Inland Revenue statistics, a large number of the country's wealthiest estates have already found loopholes to avoid inheritance tax.

Order. The hon. Gentleman must relate his remarks to amendment No. 7.

Thank you for that advice, Mr. Morris. I shall endeavour to take it.

It is clear that a large industry of tax advisers, lawyers and others has developed around the specific function of advising estates on how best to exploit any loopholes that emerge. Our amendment was drafted to offer the Government assistance—they are obviously in need of it—in avoiding the possibility of the clause becoming an additional loophole.

Even without clause 91, there has been a decline in the inheritance tax base, as the Inland Revenue figures show. There has been a 2.5 per cent. reduction in the past two years in the number of estates paying inheritance tax. We need to ensure that a potential new loophole is not opened. The amendment would help to do that.

Do the hon. Gentleman or any of his hon. Friends have any idea why reliefs were given to agricultural properties? It was because agriculture is a long-term business with relatively low long-term returns.

I understand the hon. Gentleman's point. That may have been the intention, but, as civil servants in ministerial offices who draft legislation often do not realise, there is a wise world out there, full of people who do nothing but try to find ways of exploiting loopholes. The Sunday Times said that the Marquis of Bath, whose wealth is estimated at £40 million, was investigating the loophole. Our amendment is drafted to secure the objectives that the Government claim to want to achieve. We feel that there is a danger in the drafting of the clause that a further loophole might emerge.

I thank you for your tolerance, Mr. Morris. I suppose that I have stretched the point slightly, but I have attempted to address the issues behind the amendment and the logic of our proposals.

9.45 pm

This has been an interesting debate. Before I deal with the substance of hon. Members' remarks, I hope that, with your indulgence, Mr. Morris, I can deal with the detail of the points relating to clause 92 and something that I said in previous exchanges.

I did not in any way want knowingly to mislead the hon. Member for Sherwood when I said to him that we have made the register more widely available. I should be absolutely clear: the path that is more widely available in the ways that I described—through libraries and the Internet—relates to works of art. Particular provisions relate to the requirements that those who qualify for exemption for land should, with the help of heritage advisory agencies working with local authorities, draw up a list of such information. In following up the points, I satisfied myself—indeed, the hon. Member for Edinburgh, Central (Mr. Darling) probed me by means of parliamentary questions on how we audit the fact that such matters are properly adhered to—about that information, but in the light of the further comments of the hon. Member for Sherwood, I shall obviously look again at the matter.

I am very grateful for the Minister's comments. If works of art can go on the Internet and not breach taxpayer confidentiality, I find it difficult to understand why the issue of land cannot be considered again.

I am sure that local authorities, for example, that keep lists of land that is available for public access will have taken careful note of what the hon. Gentleman has said. He will understand that those items of land are included in more general lists of land where access is available precisely for the reasons of taxpayer confidentiality. I am grateful for his comments.

I turn specifically to the content of the amendment. With his considerable knowledge—not only from his direct farming interests—of land law and surveying, my hon. Friend the Member for Cirencester and Tewkesbury (Mr. Clifton-Brown) made the farming background to the measure very clear. He went to the heart of why we are debating the item. Indeed, the hon. Member for Darlington (Mr. Milburn) asked me specifically where the representations came from, from whom we had heard, and so on, and made a number of points about legal advice.

This is one of the rare occasions on which all Members of Parliament say to people, "Why don't you write in and we will have a look at the matter." This is one of the genuine occasions when a concerned citizen did just that through the good services of his Member of Parliament. As my hon. Friend the Member for Cirencester and Tewkesbury said, the matter was taken up by the Country Landowners Association, and we also received representations from the National Farmers Union. To a certain extent, the matter snowballed, but one could not say that there was a mass lobby of the Treasury on the point.

Once we had taken legal advice on whether the concerns of those who made representations were real or imaginary, I understood very clearly the importance of ensuring, especially with regard to the narrow range of schemes so affected, that there were not unnecessary barriers to land entering an environmental scheme. Our previous exchanges identified fairly adequately the narrow range of habitat schemes that potentially would have caused somebody an inheritance tax liability—as clause 92 does—as opposed to other environmental schemes which would not. It was right to make the move.

The reason why the Government said that the proposal's costs were negligible is that under the scheme the land has to come from within the curtilage of an existing farm. The short answer is that if the land had not gone into one of the tightly defined environmental schemes, it would have continued to have been farmed land. If the land had been on an owned farm or on one farmed under the Agricultural Tenancies Act 1995, to which my hon. Friend the Member for Cirencester and Tewkesbury referred, by definition it would have automatically qualified for inheritance tax relief, subject to the conditions to which my hon. Friend accurately attested. By definition, costs cannot therefore be anything other than negligible.

In terms of this tightly defined scheme, we are talking about relatively small parcels of land. I stated earlier that I had been to see one habitat scheme alongside the River Ribble, and it involved a margin of land alongside a tributary of the river. We are not talking about broad acres, but narrow areas. Other forms of environmental scheme are more extensive in terms of acreage—for example, the environmentally sensitive areas scheme covers something like 10 per cent. of farm land in this country. The narrow scheme that we are discussing does not fall into the same category.

As we have been invited to consider seriously the amendment, we must look at exactly what it says. At its heart there is a motive test. The hon. Member for Darlington (Mr. Milburn) had clearly done a certain amount of homework, but he did not tell us what kind of motive test he envisaged. If the amendment were passed, it would create considerable uncertainty among those who may have to act upon it. The amendment is flawed in that respect.

The scheme cannot be deemed to be a vast handout to rich people. I doubt very much that anyone would follow the circuitous route referred to by Opposition Members during their remarks on the amendment. If one followed the logic of the hon. Member for Darlington, one would go out to buy a farm to put a piece of land into a narrow group of environmental schemes to get the inheritance tax relief that one could otherwise have received even if one had not put the land into such a scheme. He went down an extremely tortuous route to try to make his wider point—that inheritance tax relief on agricultural land is, in some way, a vast tax dodge.

The constituency of the hon. Member for Darlington is surrounded by some of the best farming land in north Yorkshire, and he will know that the countryside can remain almost unchanged for decades and centuries, as families with a long-term interest in the area farm the land. If he ventures out from the urban citadel that is Darlington, he will meet some of the farmers whose families have farmed the land for up to three generations. These are precisely the people to whom the hon. Gentleman referred in his opening remarks, when he said that we must maintain the fabric of the community, and particularly family farms. These are the people who, by and large, form the farming communities in this country.

The hon. Member for Darlington also asked what would happen if someone bought a farm to get the advantages of clause 92, but then simply "sat on the land" and allowed it to rot. He asked whether such a person would still qualify, and that is a serious point. This is where the two-year rule to which he referred is used. In judging whether the farm is a working farm, the Inland Revenue will look at the farm's accounts to see if proper business has been carried out. If it turns out that the farmer has simply sat on his backside and done nothing, the accounts would quickly start to show that it was not a properly farmed piece of land, and it would not—by definition—qualify for the types of relief about which we have been talking.

I must remind the hon. Member for Darlington that the two-year test in terms of owner-occupation—introduced to establish whether the land acquisition was merely a passing fancy or a genuine attempt at farming—was a definition borrowed from the capital transfer tax regime that a previous Labour Administration introduced. We merely carried forward the test into our legislation, and I hope that he will agree that there is some sense in that. I hope also that he will accept our assurances about the way in which the Inland Revenue checks to make certain that the land is being properly farmed. If it is being properly farmed, the hon. Gentleman—from his earlier comments—can have no objection to the inheritance tax provision being applied. That is another reason why the amendment is entirely unnecessary.

The hon. Gentleman gave the Committee the impression, perhaps inadvertently, that all farm land was owned by some vast group of rich people using it simply as a means of tax avoidance—no, I do him a disservice, because he mentioned family farms, and I must not mislead the Committee about that, although he did give that impression in his later remarks. He may be interested to know that the majority—more than 70 per cent.—of estates in receipt of relief are worth less than £500,000, and 90 per cent. less than £1 million. Considering that agricultural land prices might be £2,000 to £3,000 per acre, we are hardly talking about especially large farms.

We are talking about precisely the group of farmers that the hon. Gentleman said should receive assistance, to avoid having the family farm broken up through the inheritance tax mechanism. I could not stand here and say that some people may not in the past have bought a farm with tax in the back of their mind, but the evidence that I put before the Committee this evening showed that proper working farmers gain the advantage of the provision.

On habitat land, we are not talking about fly-by-night merchants. The habitat schemes require management undertakings for up to 20 years and if people did not do what they were supposed to—if they were to withdraw from a scheme before its end, for example—they would face penalties. The schemes are properly organised, managed and run.

There has been a consensus across the Committee this evening that we want such environmental provision for land; if there was a barrier through inheritance tax, we have removed it in the clause. The amendment is therefore not necessary and I invite the Committee to reject it if it is pressed to a vote.

This has been an illuminating debate. I am especially grateful to my hon. Friend the Member for Hemsworth (Mr. Trickett) for his perspicacious probing of the Government's intentions on inheritance tax.

I remind the Committee of the intention behind the amendment: to stop abuse of the tax system. It is designed specifically to prevent the buying up of farm land—in this case, land set aside for conservation purposes—as a cover for tax avoidance. It would empower the courts to test whether the buying up of farm land designated under a habitat scheme was for genuine purposes or for tax avoidance.

The amendment has three aims: to protect genuine farms, and especially small family-run farms, from being broken up; to encourage more farmers actively to engage in efforts to preserve the best of the countryside; and to root out deliberate tax avoidance. We have heard how the current inheritance tax rules, which are being extended in the clause, are wide open to such abuse. The system effectively allows the very wealthiest to make a tax killing simply by parking cash for two years in farm land. That does nothing to encourage family farms and everything to encourage tax avoidance.

I would have thought that a responsible Government would want to take a tough stance on tax avoidance. After all, in the Budget the Government declared war on tax loopholes. I am afraid that once more dogma is standing in the way of reason. The Minister has refused to give the Committee an assurance that tax avoidance will be clamped down on; instead, he has stood up once again for the vested interests of those who can make huge tax gains at the public's expense, simply because of their huge wealth. He has stood up for the few against the many; for unfairness against fairness; and for irresponsibility in tax matters against responsibility. For that reason, the Minister's approach leaves us with no alternative but to test the opinion of the Committee.

Question put, That the amendment be made:—

The Committee divided: Ayes 263, Noes 300.

Division No. 49]	[9.59 pm
AYES
Abbott, Ms Diane	Davis, Terry (B'ham Hodge H)
Adams, Mrs Irene	Denham, John
Ainger, Nick	Dewar, Donald
Ainsworth, Robert (Cov'try NE)	Dixon, Don
Allen, Graham	Dobson, Frank
Anderson, Donald (Swansea E)	Donohoe, Brian H
Anderson, Ms Janet (Ros'dale)	Dowd, Jim
Armstrong, Ms Hilary	Eastham, Ken
Ashdown, Paddy	Ennis, Jeff
Ashton, Joseph	Etherington, Bill
Austin-Walker, John	Evans, John (St Helens N)
Banks, Tony (Newham NW)	Ewing, Mrs Margaret
Barnes, Harry	Fatchett, Derek
Barron, Kevin	Faulds, Andrew
Battle, John	Fied, Frank (Birkenhead)
Bayley, Hugh	Fisher, Mark
Beckett, Mrs Margaret	Flynn, Paul
Beggs, Roy	Forsythe, Clifford (S Antrim)
Beith, A J	Foster, Derek
Bell, Stuart	Foster, Don (Bath)
Bennett, Andrew F	Foulkes, George
Benton, Joe	Fraser, John
Bermingham, Gerald	Fyfe, Mrs Maria
Berry, Roger	Gapes, Mike
Betts, Clive	Garrett, John
Blunkett, David	George, Bruce
Boateng, Paul	Gerrard, Neil
Bradley, Keith	Gilbert, Dr John
Bray, Dr Jeremy	Godman, Dr Norman A
Brown, Gordon (Dunfermline E)	Godsiff, Roger
Brown, Nicholas (Newcastle E)	Golding, Mrs Llin
Bruce, Malcolm (Gordon)	Gordon, Ms Mildred
Burden, Richard	Graham, Thomas
Byers, Stephen	Grant, Bernie (Tottenham)
Callaghan, Jim	Griffiths, Nigel (Edinburgh S)
Campbell, Mrs Anne (C'bridge)	Griffiths, Win (Bridgend)
Campbell, Menzies (Fife NE)	Grocott, Bruce
Campbell, Ronnie (Blyth V)	Gunnell, John
Campbell-Savours, D N	Hain, Peter
Canavan, Dennis	Hall, Mike
Cann, Jamie	Hardy, Peter
Carlile, Alex (Montgomery)	Harman, Ms Harriet
Chisholm, Malcolm	Harvey, Nick
Clapham, Michael	Hattersley, Roy
Clark, Dr David (S Shields)	Hill, Keith (Streatham)
Clarke, Eric (Midlothian)	Hinchliffe, David
Clarke, Tom (Monklands W)	Hodge, Ms Margaret
Clelland, David	Hoey, Kate
Clwyd, Mrs Ann	Hogg, Norman (Cumbernauld)
Coffey, Ms Ann	Home Robertson, John
Cohen, Harry	Hood, Jimmy
Cook, Frank (Stockton N)	Hoon, Geoffrey
Corbyn, Jeremy	Howarth, Alan (Stratf'd-on-A)
Corston, Ms Jean	Howarth, George (Knowsley N)
Cousins, Jim	Howells, Dr Kim
Cox, Tom	Hoyle, Doug
Cummings, John	Hughes, Robert (Ab'd'n N)
Cunliffe, Lawrence	Hughes, Roy (Newport E)
Cunningham, Jim (Cov'try SE)	Hume, John
Cunningham, Ms R (Perth Kinross)	Hutton, John
Dalyell, Tam	Illsley, Eric
Darling, Alistair	Jackson, Ms Glenda (Hampst'd)
Davies, Bryan (Oldham C)	Jackson, Mrs Helen (Hillsborough)
Davies, Denzil (Llanelli)	Jamieson, David
Davies, Ron (Caerphilly)	Janner, Greville

Jenkins, Brian D (SE Staffs)	Prescott, John
Jones, Barry (Alyn & D'side)	Primarolo, Ms Dawn
Jones, leuan Wyn (Ynys Môn)	Purchase, Ken
Jones, Dr L (B'ham Selly Oak)	Quin, Ms Joyce
Jones, Nigel (Cheltenham)	Radice, Giles
Jowell, Ms Tessa	Randall, Stuart
Keen, Alan	Raynsford, Nick
Kennedy, Charles (Ross C & S)	Reid, Dr John
Kennedy, Mrs Jane (Broadgreen)	Rendel, David
Khabra, Piara S	Robinson, Geoffrey (Cov'try NW)
Kilfoyle, Peter	Rogers, Allan
Kirkwood, Archy	Rooker, Jeff
Lestor, Miss Joan (Eccles)	Rooney, Terry
Lewis, Terry	Ross, Ernie (Dundee W)
Litherland, Robert	Rowlands, Ted
Livingstone, Ken	Ruddock, Ms Joan
Lloyd, Tony (Stretf'd)	Salmond, Alex
Llwyd, Elfyn	Sedgemore, Brian
Loyden, Eddie	Sheerman, Barry
McAllion, John	Sheldon, Robert
McAvoy, Thomas	Shore, Peter
McCartney,Ian (Makerf'ld)	Short, Clare
Macdonald, Calum	Simpson, Alan
McFall, John	Skinner, Dennis
McKelvey, William	Smith, Andrew (Oxford E)
Mackinlay, Andrew	Smith, Chris (Islington S)
McLeish, Henry	Smith, Llew (Blaenau Gwent)
Maclennan, Robert	Smyth, Rev Martin (Belfast S)
McMaster, Gordon	Soley, Clive
McNamara, Kevin	Spellar, John
MacShane, Denis	Squire, Ms R (Dunfermline W)
McWilliam, John	Steel, Sir David
Maddock, Mrs Diana	Steinberg, Gerry
Maginnis, Ken	Stevenson, George
Marshall, David (Shettleston)	Stott, Roger
Marshall, Jim (Leicester S)	Strang, Dr Gavin
	Straw, Jack
Martin, Michael J (Springburn)	Sutcliffe, Gerry
Martlew, Eric	Taylor, Mrs Ann (Dewsbury)
Maxton, John	Taylor, Matthew (Truro)
Meacher, Michael	Thompson, Jack (Wansbeck)
Meale, Alan	Thurnham, Peter
Michael, Alun	Timms, Stephen
Michie, Bill (Shef'ld Heeley)	Tipping, Paddy
Milburn, Alan	Touhig, Don
Miller, Andrew	Trickett Jon
Mitchell, Austin (Gt Grimsby)	Turner, Dennis
Molyneaux, Sir James	Tyler, Paul
Moonie, Dr Lewis	Vaz, Keith
Morgan, Rhodri	Walker, Sir Harold
Morley, Elliot	Wallace, James
Morris, Ms Estelle (B'ham Yardley)	Walley, Ms Joan
Morris, John (Aberavon)	Wardell, Gareth (Gower)
Mowlam, Ms Marjorie	Wareing, Robert N
Mudie, George	Watson, Mike
Mullin, Chris	Welsh, Andrew
Murphy, Paul	Wigley, Dafydd
Oakes, Gordon	Williams, Alan (Swansea W)
O'Brien, Mike (N Warks)	Williams, Alan W (Carmarthen)
O'Brien, William (Normanton)	Wilson, Brian
O'Hara, Edward	Winnick, David
Orme, Stanley	Wise, Mrs Audrey
Pearson, Ian	Worthington, Tony
Pickthall, Colin	Wray, Jimmy
Pike, Peter L	Wright, Dr Tony
Pope, Greg
Powell, Sir Raymond (Ogmore)	Tellers for the Ayes:
Prentice, Mrs B (Lewisham E)	Mr. Kevin Hughes and
Prentice, Gordon (Pendle)	Ms Angela Eagle.
NOES
Ainsworth, Peter (E Surrey)	Ancram, Michael
Aitken, Jonathan	Arbuthnot, James
Alexander, Richard	Arnold, Jacques (Gravesham)
Alison, Michael (Selby)	Ashby, David
Allason, Rupert (Torbay)	Atkins, Robert
Amess, David	Atkinson, Peter (Hexham)

Baker, Kenneth (Mole V)	Forman, Nigel
Baldry, Tony	Forsyth, Michael (Stirling)
Banks, Matthew (Southport)	Forth, Eric
Banks, Robert (Harrogate)	Fowler, Sir Norman
Bates, Michael	Fox, Dr Liam (Woodspring)
Batiste, Spencer	Freeman, Roger
Bellingham, Henry	French, Douglas
Bendall, Vivian	Fry, Sir Peter
Beresford, Sir Paul	Gale, Roger
Biffen, John	Gallie, Phil
Body, Sir Richard	Gardiner, Sir George
Bonsor, Sir Nicholas	Garel-Jones, Tristan
Booth, Hartley	Garnier, Edward
Boswell, Tim	Gill, Christopher
Bottomley, Peter (Eltham)	Gillan, Mrs Cheryl
Bottomley, Mrs Virginia	Goodlad, Alastair
Bowden, Sir Andrew	Gorman, Mrs Teresa
Bowis, John	Gorst, Sir John
Boyson, Sir Rhodes	Grant, Sir Anthony (SW Cambs)
Brandreth, Gyles	Greenway, Harry (Ealing N)
Brazier, Julian	Greenway, John (Ryedale)
Bright, Sir Graham	Gummer, John
Brooke, Peter	Hague, William
Brown, Michael (Brigg Cl'thorpes)	Hamilton, Sir Archibald
Browning, Mrs Angela	Hamilton, Neil (Tatton)
Bruce, Ian (S Dorset)	Hampson, Dr Keith
Budgen, Nicholas	Hanley, Jeremy
Burns, Simon	Hannam, Sir John
Burt, Alistair	Hargreaves, Andrew
Butler, Peter	Harris, David
Butterfill, John	Haselhurst, Sir Alan
Carlisle, John (Luton N)	Hawkins, Nick
Carlisle, Sir Kenneth (Llnc'n)	Hawksley, Warren
Carrington, Matthew	Hayes, Jerry
Carttiss, Michael	Heald, Oliver
Cash, William	Heathcoat-Amory, David
Channon, Paul	Hendry, Charles
Chapman, Sir Sydney	Heseltine, Michael
Churchill, Mr	Hicks, Sir Robert
Clappison, James	Higgins, Sir Terence
Clarke, Kenneth (Rushciffe)	Hogg, Douglas (Grantham)
Clifton-Brown, Geoffrey	Horam, John
Coe, Sebastian	Hordem, Sir Peter
Colvin, Michael	Howard, Michael
Congdon, David	Howell, David (Guildf'd)
Conway, Derek	Howell, Sir Ralph (N Norfolk)
Coombs, Anthony (Wyre F)	Hughes, Robert G (Harrow W)
Cope, Sir John	Hunt, David (Wirral W)
Cormack, Sir Patrick	Hunt, Sir John (Ravensb'ne)
Couchman, James	Hunter, Andrew
Currie, Mrs Edwina	Hurd, Douglas
Curry, David	Jack, Michael
Davis, David (Boothferry)	Jackson, Robert (Wantage)
Day, Stephen	Jenkin, Bernard (Colchester N)
Deva, Nirj Joseph	Jessel, Toby
Devlin, Tim	Johnson Smith, Sir Geoffrey
Dorrell, Stephen	Jones, Gwilym (Cardiff N)
Douglas-Hamilton, Lord James	Jones, Robert B (W Herts)
Dover, Den	Jopling, Michael
Duncan, Alan	Kellett-Bowman, Dame Elaine
Duncan Smith, Iain	Key, Robert
Dunn, Bob	King, Tom
Durant, Sir Anthony	Kirkhope, Timothy
Dykes, Hugh	Knight, Mrs Angela (Erewash)
Elletson, Harold	Knight, Greg (Derby N)
Emery, Sir Peter	Knight, Dame Jill (Edgbaston)
Evans, David (Welwyn Hatf'ld)	Knox, Sir David
Evans, Jonathan (Brecon)	Kynoch, George
Evans, Nigel (Ribble V)	Lait, Mrs Jacqui
Evans, Roger (Monmouth)	Lamont, Norman
Evennett, David	Lang, Ian
Faber, David	Lawrence, Sir Ivan
Fabricant, Michael	Legg, Barry
Fenner, Dame Peggy	Leigh, Edward
Field, Barry (Isle of Wight)	Lennox-Boyd, Sir Mark
Fishburn, Dudley	Lester, Sir Jim (Broxtowe)

Lidington, David	Oppenheim, Phillip
Lilley, Peter	Ottaway, Richard
Lloyd, Sir Peter (Fareham)	Page, Richard
Lord, Michael	Paice, James
Luff, Peter	Patnick, Sir Irvine
Lyell, Sir Nicholas	Patten, John
MacGregor, John	Pattie, Sir Geoffrey
MacKay, Andrew	Pawsey, James
Maclean, David	Peacock, Mrs Elizabeth
McLoughlin, Patrick	Pickles, Eric
McNair-Wilson, Sir Patrick	Porter, David
Madel, Sir David	Portillo, Michael
Maitland, Lady Olga	Powell, William (Corby)
Major, John	Rathbone, Tim
Malone, Gerald	Redwood, John
Mans, Keith	Renton, Tim
Marland, Paul	Richards, Rod
Marlow, Tony	Riddick, Graham
Marshall, John (Hendon S)	Rifkind, Malcolm
Marshall, Sir Michael (Arundel)	Robathan, Andrew
Martin, David (Portsmouth S)	Roberts, Sir Wyn
Mawhinney, Dr Brian	Robertson, Raymond S (Ab'd'n S)
Mayhew, Sir Patrick	Robinson, Mark (Somerton)
Mellor, David	Roe, Mrs Marion
Merchant, Piers	Rowe, Andrew
Mitchell, Andrew (Gedling)	Rumbold, Dame Angela
Mitchell, Sir David (NW Hants)	Ryder, Richard
Moate, Sir Roger	Sackville, Tom
Monro, Sir Hector	Sainsbury, Sir Timothy
Montgomery, Sir Fergus	Scott, Sir Nicholas
Moss, Malcolm	Shaw, David (Dover)
Needham, Richard	Shaw, Sir Giles (Pudsey)
Nelson, Anthony	Shephard, Mrs Gillian
Neubert, Sir Michael	Shepherd, Sir Colin (Heref'd)
Newton, Tony	Shepherd, Richard (Aldridge)
Nicholls, Patrick	Shersby, Sir Michael
Nicholson, David (Taunton)	Sims, Sir Roger
Norris, Steve	Skeet, Sir Trevor
Onslow, Sir Cranley	Smith, Sir Dudley (Warwick)

Smith, Tim (Beaconsf'ld)	Tredinnick, David
Soames, Nicholas	Trend, Michael
Speed, Sir Keith	Trotter, Neville
Spencer, Sir Derek	Twinn, Dr Ian
Spicer, Sir Jim (W Dorset)	Vaughan, Sir Gerard
Spicer, Sir Michael (S Worcs)	Viggers, Peter
Spink, Dr Robert	Waldegrave, William
Spring, Richard	Walden, George
Sproat, Iain	Walker, Bill (N Tayside)
Squire, Robin (Hornchurch)	Ward, John
Stanley, Sir John	Wardle, Charles (Bexhill)
Steen, Anthony	Waterson, Nigel
Stephen, Michael	Watts, John
Stern, Michael	Wheeler, Sir John
Stewart, Allan	Whitney, Sir Raymond
Streeter, Gary	Whittingdale, John
Sumberg, David	Widdecombe, Miss Ann
Sweeney, Walter	Wiggin, Sir Jerry
Sykes, John	Wilkinson, John
Tapsell, Sir Peter	Willetts, David
Taylor, Ian (Esher)	Wilshire, David
Taylor, John M (Solihull)	Winterton, Mrs Ann (Congleton)
Taylor, Sir Teddy	Winterton, Nicholas (Macclesf'ld)
Temple-Morris, Peter	Wolfson, Mark
Thomason, Roy	Wood, Timothy
Thompson, Sir Donald (Calder V)	Yeo, Tim
Thompson, Patrick (Norwich N)	Young, Sir George
Thornton, Sir Malcolm
Townend, John (Bridlington)	Tellers for the Noes:
Townsend, Sir Cyril (Bexl'yh'th)	Mr. Roger Knapman and
Tracey, Richard	Mr. Bowen Wells.

Question accordingly negatived.
Clause 92 ordered to stand part of the Bill.

To report progress and ask leave to sit again.— [Mr. Brandreth.]
Committee report progress; to sit again tomorrow.

Family Mediation Scotland

Motion made, and Question proposed, That this House do now adjourn.— [Mr. Brandreth.]

10.17 pm

I am grateful for the opportunity to raise the important subject of Family Mediation Scotland. I know that my right hon. and learned Friend the Minister of State recognises the importance of the topic, as do Scottish Members of Parliament on both sides of the House, including my hon. Friend the Member for Ayr (Mr. Gallie) and the hon. Member for Moray (Mrs. Ewing) who, I recall, asked me a question on this very topic on 30 March 1994. I see the hon. Member for Edinburgh, Leith (Mr. Chisholm) on the Opposition Front Bench. The hon. Member for Monklands, East (Mrs. Liddell) was courteous enough to apologise to me for being unable to attend because of a particular commitment; I know that she, too, is interested in the subject.

My right hon. and learned Friend's commitment to Family Mediation Scotland was demonstrated this morning, when he met me at short notice. He has given an extremely positive and speedy response to the representations made to him in respect of grants for Family Mediation Scotland under section 10 of the Social Work (Scotland) Act 1968, and he will no doubt want to bring the House up to date tonight.

I am grateful to the hon. Gentleman, who has always been kind in this context, for giving way. I understand that only six of the 10 services will receive funding. Has the hon. Gentleman any indication of that? We all want the family mediation service to be fully funded at all levels and in each region of Scotland.

I understand that all the applications have been granted, but I would rather leave the details to my right hon. and learned Friend when he replies to the debate.

Misunderstandings sometimes arise about what mediation is. It should not be confused with arbitration or marriage counselling. It is a voluntary process in which a trained, skilled mediator enables people to negotiate their own mutually acceptable resolutions to issues arising from separation or divorce, especially concerning the continued parenting of children. The advantages of mediation are clear. Although it must be recognised that it will not always be successful, at the other end of the spectrum it can sometimes save marriages. The major advantages of mediation are that it takes place at an early stage and that the children's interests are a priority of the process.

Everyone recognises the desirability of resolving problems, if possible, before they reach the courts. That is in the best interests of parents, children and the legal system.

Will my hon. Friend accept, in response to the point raised by the hon. Member for Moray (Mrs. Ewing), that all who applied have received grants?

I am grateful to my right hon. and learned Friend for confirming my understanding of the situation. He is to be congratulated on his response to the representations made to him.

How sad it is to hear a husband or wife say in court, "It should never have come to this." That is recognised in legislation, and the availability of accessible family mediation services is essential to the implementation of part I of the Children (Scotland) Act 1995, which my right hon. and learned Friend so ably piloted through the House. Part I of the Act, which was implemented on 1 November 1996, aims to create a new climate within which children experience parental separation and divorce. It is based on the following principles: first, that parental responsibility and rights in relation to children will not be affected by parental divorce; secondly, that co-operative parenting should be the basis of the relationship with children after divorce; thirdly, that parents should seek to take a non-adversarial approach to parental separation and divorce; and, fourthly, that court is not the appropriate place to resolve disputes in relation to children.

Family mediation services provide not only opportunities for parents to resolve disputes but potential on-going support for parents in the co-operative parenting which the Act presumes. The Act also imposes specific obligations on the courts to give children an opportunity to express their views and to have them regarded by the court. As from 1 November last, the courts are obliged to make that further inquiry, which may involve sending an appointed person to seek the child's views. Litigation could become more lengthy and costly, but that could be avoided through mediation. It is crucial that services are readily available to ensure that the spirit of the 1995 Act is implemented.

The Scottish Office is to be congratulated on its early, consistent and sustained support for Family Mediation Scotland through section 10 of the 1968 Act. Funding is available from a variety of other sources—trusts, fees, local authorities and fund-raising by organisations. My right hon. and learned Friend confirmed in his response that applications for continued section 10 funding from Borders, Tayside, Western Isles and Central Scotland have been granted, together with applications for new services in Dumfries and Galloway and in Grampian.

There has been a growth in all-issues mediation—mediation as one process covering issues related to the children, property and financial issues. There are two possible sources of mediation in Scotland, including all-issues mediation: the services provided by the family mediation service, which is the subject of this Adjournment debate, and the services supplied by solicitor-mediators—people who are solicitors and trained mediators.

The Scottish Legal Aid Board launched a pilot project in 1995 to pay out to solicitors as an outlay to a solicitor holding a legal aid certificate or as a payment under the legal advice and assistance scheme. I recognise that the pilot project will need to be evaluated. My right hon. and learned Friend will not be able to give such an evaluation this evening, but I hope that he will accept that the present legislative position seems to create a problem in Scotland, as against that south of the border. Under present legislation, the Scottish Legal Aid Board cannot make a block grant to the family mediation service without primary legislation. I am glad to see the hon. Member for Moray nodding in agreement. I understand that, in England, such a grant can be made under the Family Law Act 1996.

With regard to the pilot project, there is a question about whether it is right to go down the solicitor-mediator route. The training of solicitors is adversarial: that is their role. I do not criticise them for that, but mediation is an entirely different process.

A further question concerns the public expenditure implications of the other methods of financing mediation services. I make no criticism of the hourly rate paid to Scottish solicitors, which I believe to be of the order of £80 an hour under the legal aid arrangements. That is about 10 times the sum that mediators are paid by the family mediation service. Legal aid is demand led, and my right hon. and learned Friend will know the problems that demand-led programmes can create. My right hon. and learned Friend will not be able to provide answers tonight to questions about the pilot project because the evaluation has not been completed, but I hope that he agrees that those questions must be considered seriously. I hope that he will agree also to examine the legislative difference between Scotland and England and Wales, as it is clearly creating problems.

My right hon. and learned Friend's commitment to mediation is extremely well documented and well known. During debate on the recent Children (Scotland) Act 1995, he emphasised that we must put the interests of the child first in this process. I look forward to hearing him respond to the debate tonight. I am happy to give the Floor to my hon. Friend the Member for Ayr (Mr. Gallie), who wishes to make a brief comment.

My hon. Friend will have noticed in the Scottish press comments by the hon. Member for Cunninghame, North (Mr. Wilson) about my right hon. and learned Friend and his ability to listen and take the message on board. It seems that my hon. Friend has certainly been listened to, and he must be delighted by the way in which the message has been taken on board in this instance.

10.31 pm

I congratulate my hon. Friend the Member for Eastwood (Mr. Stewart) most warmly on bringing this matter before the House. The presence of my hon. Friend the Member for Ayr (Mr. Gallie) and of the hon. Members for Edinburgh, Leith (Mr. Chisholm) and for Moray (Mrs. Ewing) in the Chamber tonight demonstrates the importance of the subject. In responding to my hon. Friend's speech, I shall try to present our thoughts about the future of family mediation services in Scotland. I will also deal with the future of the organisation, Family Mediation Scotland, which I visited recently.

My hon. Friend has recalled the origins and development of family mediation in Scotland from the time of the establishment of the first service in Lothian in the early 1980s to the service that is now available in almost every part of Scotland. That is truly a remarkable achievement in a relatively short period. Those who pioneered the service in its early days must be proud—and justifiably so—of that achievement. Those who continue to provide and develop family mediation in Scotland must share that feeling of pride. It has not always been easy for them and they have come through some difficult times, but the sustained growth of a family mediation service in Scotland is a tribute to their determination and perseverance.

I am pleased that the Scottish Office was able to play a part in the service's development from the very beginning of family mediation in Scotland. We funded the Lothian service from the outset in the early 1980s when it was an innovative pilot project. That project demonstrated the value of mediation, and services began to be established in other parts of Scotland. By the mid-1980s, the headquarters body—Family Mediation Scotland, or the Scottish Advisory and Family Conciliation Service as it was then known—had been set up. Again, I am pleased to say that we have also assisted the headquarters body with central Government grants totalling just under £600,000 over 10 years.

During the past three years, we have provided support for several local services. We currently support five such services. When combined with the grant paid to the headquarters body, we are currently making available just under £220,000 for family mediation in Scotland. I say "currently" because, as I announced earlier today, from next year we intend to extend our support by some £50,000 in order to introduce a further two local services—Family Mediation Grampian and Family Mediation Dumfries and Galloway. In addition, we shall be able to renew the grants for four services beyond the end of their current funding period. I am sure that that will come as welcome news for those services, as it will for all those in Scotland who are concerned with mediation services.

I am delighted to hear that there will be an extension of the service to Grampian. The Minister and I have been in correspondence about the extension over several years. Can he say how many qualified and trained mediators will emerge from the new project? It is not merely a matter of talking to somebody; we need people with qualifications. Will the Minister comment on that?

I shall be happy to make inquiries and to write to the hon. Lady with the precise detailed facts that she requires.

33333333 As a Government, we believe in marriage and the family as the proper foundation for a civilised and responsible community. For this reason, we propose to offer additional support totalling £50,000 to marriage guidance in Scotland. We believe that this will help to save marriages that still have hope of reconciliation. We shall shortly be advising the individual organisations about this.

Sadly, a proportion of marriages nevertheless break down. Marital breakdown is a cause of distress, and it is exacerbated when there are children of the marriage. Our policies have generally been designed to ensure fairness to both parties when a marriage breaks down. This underlies the Family Law (Scotland) Act 1985. We have also promoted the need to consider the welfare of the marriage, and this principle is given legal status in part I of the Children (Scotland) Act 1995. It is generally accepted that where a marital breakdown is acrimonious, this is more damaging for the children. We therefore want to minimise the opportunities created by the law for acrimony between the parties.

In the 1985 Act we provided that the matrimonial property should be shared fairly between the parties to a divorce. The Act provides that fairness demands equal shares, but the court has a wide discretion to make orders meeting the actual needs of the parties. One of the factors to be taken into account is the burden of caring for children, which may fall more upon one party than upon the other. In the Child Support Act 1991 we removed the issue of child maintenance from the divorce courts. This was another means of reducing the scope of litigiousness between the parties.

In part I of the Children (Scotland) Act we have created a clear framework for the welfare of the children of a marriage to be the paramount consideration for the court in making orders concerning children. The Act sets out in sections 1 and 2 the responsibilities and rights of a couple as parents. Those responsibilities and rights should normally survive separation and divorce. Each parent is given an active responsibility to promote the child's continued relationship with the other parent. Ideally—this is a most important message—the parties should agree arrangements between themselves for the continued discharge of parental responsibilities and rights.

Part I of the Children (Scotland) Act embodies the concept of minimum intervention by the court. Only if it appears to be in the interests of the welfare of the child should the court intervene. This reinforces the fact that the burden of making appropriate arrangements for the children now lies with their parents. The parents should explore all avenues and agree as much as possible between themselves before approaching the court. There may even be no need for the court to be involved, other than to grant the decree of divorce.

Most importantly, if it proves necessary for the court to be involved, part I now requires the court to take into account the views of the child—if the child has sufficient understanding and maturity to express these and wishes to do so. There is a presumption that a child over 12 has sufficient maturity. It is no longer possible for the parents and the court to develop proposals for the child without the child being given the opportunity to be consulted, except in the case of very young children and those who cannot understand what is going on. Similarly, before reaching any major decisions which would affect their children, parents are required under section 6 to take into account the views of their children.

It is against that background that we reaffirmed the important place of family mediation services in various remarks in this House and in the other place. We fully accepted that such mediation services have an important part to play in making certain that couples discuss any difficulties that they have concerning the future of their children. That reduces the scope for acrimonious litigation and the consequent harm that that can cause the children caught up in separation or divorce.

For some years now, rules of court have enabled the court to refer parties to mediation at any stage during the process where questions arose about children in a family action. That rule has been re-emphasised with the commencement of part I of the Act by enabling the court to arrange a hearing at a very early stage of a case, to take out of contention the issues between couples involving children and thus to maximise the possibility of early resolution of such matters. We will monitor the effectiveness of court referrals to mediation as part of our general evaluation of the Children (Scotland) Act reforms. This may be an appropriate time to point out that neither the primary legislation nor the rules of court prescribe which organisation is to provide the mediation.

My hon. Friend the Member for Eastwood drew attention to the fact that Family Mediation Scotland is the major player in family mediation in Scotland, and that through its affiliated services it has a very important part to play in our programme of reform. There is another source of mediation through solicitors who are members of Comprehensive Accredited Lawyer Mediators, otherwise known as CALM. They may provide mediation if either party is referred by their solicitor or the court.

We are currently funding a research programme to study the effect of participation in mediation, whether provided by Family Mediation Scotland affiliates or by accredited lawyer mediators. That research is proceeding well and we believe that it will be successful in providing qualitative evaluation. It will also look for evidence that mediation is more cost-effective than traditional dispute resolution through the legal process in Scotland.

The qualitative arguments for mediation are, to my mind, every bit as important as any financial arguments. It appears intuitively likely that a mediated agreement between couples about such issues as care of children after separation or divorce is likely to be a better quality agreement and to be more durable. We shall look for evidence of that from the research that is in hand.

I am very interested in what the Minister is saying about the assessment that will be made. Will it include an assessment of the implications for aid and assistance? As constituency Members, most of us find that legal aid is often one of the major problems, from whichever direction it comes. Will an assessment be made of that?

On the subject of legal aid, as the hon. Lady and my hon. Friend know, in the White Paper on crime and punishment we have undertaken to consult on civil legal aid. Proposals for the future funding of family mediation is one of the issues that could be covered in that consultation. I hope that that will be of assistance.

One challenge that I would like to offer to Family Mediation Scotland in its future development concerns the matter that I mentioned earlier of considering the views of children. If it is to play its full part in these reforms, it will need to develop ways of ensuring that parents accept their responsibility to take the views of children into account in reaching mediated agreements.

I have already announced extensions to the funding of Family Mediation Scotland affiliated services from social-work-related grants, but I am all too well aware of the arguments that that is not a satisfactory long-term basis for funding these services. We have had extensive discussions with Family Mediation Scotland about the suitability of seeking to fund its services by charging the parties. That would unlock the possibility of its being funded as a legal aid outlay where the reference is made by the court or by a solicitor acting for a legally aided party.

While Family Mediation Scotland has seen some scope to introduce charging for its services, I understand that it does not regard this as a way of securing the future of the local services. It stresses that mediation is most effective introduced early in the process of divorce and separation, when it is unlikely that the parties will have approached a lawyer. We have noted those points.

We have also noted the support that Family Mediation Scotland has given to the approach south of the border, where the availability of mediation will be explained to parties seeking a divorce when they attend the compulsory information session at the beginning of the process. The Lord Chancellor intends mediation to be funded through block contracts with the Legal Aid Board, and to be subject to tests of means.

We have not yet decided whether it is right to reform Scots family law in line with what has been done in England and Wales. In Scotland we have a background of less acrimonious divorce generally than south of the border. In 1995 around 65 per cent. of divorces in Scotland were on the grounds of non-cohabitation, but we accept that that percentage falls to 47 per cent. in relation to couples with children.

We believe that the process of mediation can and should take place between the parties and their lawyers and should not be seen only as a diversion from the legal process. We shall certainly be examining the present state of our family law to see whether further reform is desirable to achieve that. Our examination will include consideration of such issues as whether fault grounds for divorce should remain. We shall also consider whether mediation by mediation organisations should be given a more prominent place in the process.

Will the Minister give way?

I have only a few moments left in which to speak, and I have already given way twice to the hon. Lady.

I hope that what I have said offers some reassurance to hon. Members, including my hon. Friend the Member for Eastwood. The main good news tonight will be the success of the applications for section 10 grant from Dumfries and Galloway and from Grampian. As for the longer term, I must stress again that we have under active consideration the future place of family mediation, both in relation to legal aid and in relation to family law generally. We shall of course consult widely on any new proposals, and I can tell all hon. Members who have been public-spirited enough to attend this important debate that they—along with interested organisations including Family Mediation Scotland—will be able to influence the outcome. I look forward to hearing their representations in due course, and I thank them for their welcome for the extra steps that we have taken.

Question put and agreed to.

Adjourned accordingly at fourteen minutes to Eleven o'clock.

Volume 288: debated on Wednesday 22 January 1997

House Of Commons

Prayers

Intensive Care

St Helena

House Condition Survey (Energy Reports)

Us-Uk Air Service Agreement

Unemployment And Poverty (Cornwall)

Oral Answers To Questions

Trade And Industry

Mid Kent Water Company

Electricity Industry

Boeing-Mcdonnell Douglas Merger

Regional Policy

Inward Investment

Government Policy (North-West England)

Research And Development

Public Sector Research Establishments

Manufacturing Investment

Scientific Research

Manufacturing Industry

Retail Sales

Trade (Thames Valley)

Power Supply Interruptions

Royal Yacht

Bill Presented

Government Communications Headquarters (Restoration Of Trade Union Rights)

Building Societies (Distributions)

Building Societies (Distributions)

Orders Of The Day

Finance Bill

Clause 82

Writing-Down Allowances On Long-Life Assets

Clause 62

Phasing Out Of Relief For Profit-Related Pay

Clause 92

Agricultural Property Relief

Family Mediation Scotland