Commons Chamber

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House Of Commons

Wednesday 8 July 1998

The House met at half-past Nine o'clock

Prayers

[MADAM SPEAKER in the Chair]

Points Of Order

9.34 am

On a point of order, Madam Speaker. I seek your advice on whether Standing Orders allow a Minister to make a statement between now and 3.30 on the apparent leak of the strategic defence review which appears on the front pages of all this morning's broadsheet newspapers. Earlier this week, you once again felt constrained to observe that it seemed that the House was consistently being bypassed on these matters. I understand that the leaking of the document was systematic, in that it was sent to a series of newspapers in brown envelopes. We thought that brown envelopes were a feature of the previous Parliament, not of this one.

I am sure that you will agree, Madam Speaker, that leaking in that way is an insult to the House and to the men and women of the armed services whose jobs and future may depend on the contents of the strategic defence review. Can you advise me whether Standing Orders permit any Minister who seeks to make a statement between now and 3.30 to do so, and whether you would look favourably on any such application?

Further to that point of order, Madam Speaker. The examples that you dealt with previously could have been accidental leakages, but, in the words of my hon. and learned Friend, this leak seems to be quite deliberate. May I draw your attention to the fact that they were not photocopies but actual copies of the defence review? It seems to be a deliberate attempt to drive other matters from the front pages of the newspapers.

Further to that point of order, Madam Speaker. Given your strong feelings on such matters, could you tell Ministers that you would regard it as entirely appropriate if, following their investigations, the most proper and perhaps draconian action were taken against those who are responsible?

In answer to the first point of order, the Standing Orders of the House do not allow for a statement on that matter before 3.30. The Secretary of State for Defence has already telephoned me this morning. I am fully aware of the situation. He is prepared at 3.30 to make some comment—I put it no higher than that—on this matter, which disturbs him greatly, too. If the House will bear with me until 3.30, I think that he will be very forthcoming at that time.

I am very much obliged, Madam Speaker.

Eu Structural Funds (London)

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

9.37 am

I shall first declare an interest. I am a former director of Greater London Enterprise, and I am still the chair of Greater London Enterprise development capital on a pro-bono basis. I am a former leader of Merton borough council and vice-chair of the Association of London Authorities, a member of the leaders' committee of the ALG and a director of the London First centre.

I am pleased to have an opportunity to debate the current and future position of the EU structural funds for London. The United Kingdom's presidency of the European Union has just finished, and I am keen that the House should have an opportunity to hear from my hon. Friend the Minister about her progress in the past five months on achieving a good deal for the UK and particularly for London. She is, of course, a London Member.

Agenda 2000, which set this matter in train, led to the publication of new regulations governing the reform of the funds. They were published by the EU Commission on 18 March and cover the period 2000–2007. I understand that agreement on the overall structural funds budget is due at the Vienna summit in December and that final adoption of the regulations will take place at the German summit in June 1999. Therefore, the timing of the debate is helpful in ensuring that the London case is put in time.

Already, hon. Members in all parts of the House have been putting the case for their constituencies. A recent example of that was on 15 June when my hon. Friend the Member for Clwyd, West (Mr. Thomas) had an Adjournment debate on the subject in the context of Wales. All hon. Members would wish to support Northern Ireland's quest to continue its objective 1 status. The continuing sad news from Northern Ireland underlines the need to ensure that the Commission allows Northern Ireland to retain that.

I pay tribute to the various organisations that have, over recent years, been part of making the case for London. Greater London Enterprise has been foremost in that. It has a specialist team working on that case, but it was important that, some four years ago, London house was made available by Greater London Enterprise to ensure that there was a base for London to be able to lobby the European Commission. Before 1994, other regions had already set up lobbying organisations. Perhaps they were ahead of London in realising the importance of having a visible presence in Brussels.

The next grouping that I commend to the House is the Association of London Authorities, the London Boroughs Association, and the Association of London Government, as it became in 1995. I particularly pay tribute to my hon. Friend the Member for Hayes and Harlington (Mr. McDonnell), who, as secretary of the ALA and ALG, led the drive to ensure that London was not left behind in terms of ensuring that structural funds were available. I pay tribute to the current secretary, Martin Pilgrim, and to the assistant secretary, Madeleine Williams, the person in charge, for the work that she and her department do to ensure that London is properly represented.

I commend also the work that has been done on the London study, which was presented to my hon. Friend the Minister for London and Construction at a meeting on Monday to demonstrate a way forward. That study was part funded by the EU, by London boroughs and by many organisations in London, and sets the backdrop to a strong claim for objective 2 status for London in the negotiations that are coming up.

I obviously commend the work that has been done within the Committee of the Regions by our representatives on the committee, Councillor Peter Bowness, who has now been translated to another place and who, I think, was the first member of the committee, Councillor Toby Harris, who is shortly to be translated to another place, Councillor David Williams from the Liberal Democrats and Councillor Sally Powell. I know that other councillors have also done excellent work on the committee, but, at a key time, when it was so important to put the case for London in the committee and the European Commission, they were the four people who led the charge.

I mentioned the work of the London First centre. There was a tremendous need, which was clearly identified, for London to have its own development agency. On a basis of shared funding between the Department of Trade and Industry, the borough of Westminster, London Docklands development corporation, the Corporation of London and the business community, over the past three or four years, there has been a lively and successful inward investment agency for London, albeit working on rather limited funds compared with what is available for, say, Scotland, which has a similar population, or Wales, the population of which is significantly smaller.

As I develop my theme, hon. Members will see that London's needs are perhaps as great as those of Wales and Scotland combined, so it is important for the Minister to take back to the DTI the need to ensure that the funding for the London First centre and successor bodies is adequate.

Obviously, I commend the new shadow London development agency. That will help to bring together much more strongly the work of the organisations that I have mentioned. It is important that the Greater London authority—the elected mayor and assembly—has a clear view from the business community, from the social partners in London and from elected representatives in London of the way in which the GLA should support the way forward for EU structural funds and for the future of London.

I pay tribute to Members of the European Parliament who have spearheaded this work, including, obviously, Pauline Green, as chair of the socialist MEPs, and my own MEP, Anita Pollack, the MEP for London South West London, who has done sterling work in looking after that area.

As hon. Members will realise, Putney is not in an objective 1 or 2 area. Wandsworth council, with the local training and enterprise council, AZTEC, of which I was formerly a director, and the local regeneration partnership, the Wandle Valley Partnership, has been extremely successful in obtaining funds through objective 3, the European regional development fund, the European social fund, Adapt, Horizon, Social Exclusion, Youthstart, Life, Pacte, PHARE and Ecos Ouverture.

I have listed those EU programmes in full because I am concerned that virtually all the programmes will be subsumed within the new objective 2 and 3 status. It is important that areas in London that suffer from high unemployment and deprivation, such as Wandsworth and parts of Putney, should still be able to apply for and to receive EU funding.

I commend to the House the work of the Wandsworth economic development office, under Mike Brook and Judith Roscoe, in ensuring that those funds have been won fairly. One hears in the House, correctly, that there has perhaps been a tilting of the playing field, in favour of the standard spending assessment for Wandsworth, but, in this area, I commend Wandsworth council for its work to ensure that funds are available for unemployed people and others who can benefit from those programmes. It has won its case fair and square with Brussels, with the Government office for London and with Whitehall.

The vast majority of current EU London funding goes to the Lea valley and east London. I know that my hon. Friends from some constituencies in those areas wish to take part in the debate to do their own advocacy. Those areas will receive in 1997–99 some £80 million; that is 102 million ecu. That is 4 per cent. of the UK total of objective 2 funds. The London share of the UK unemployed is 18 per cent. and its share of the long-term unemployed is 25 per cent. London has more unemployed than Wales and Scotland put together; their share of the UK's unemployed is 15 per cent. London receives only 4 per cent. of objective 2 resources, compared with Wales and Scotland, whose share is 29 per cent. North-east England receives 15 per cent. of the resources and has only 7 per cent. of the unemployed. The west midlands receives 18 per cent. of the resources, but has only 9 per cent. of the unemployed.

I have no wish to denigrate other regions or countries within the British Isles about their share of those resources. I wish to ensure only that the London case is put. I believe that those comparisons have not been put to the House before. That clearly shows a lack of interest in London by the previous Government when it came to EU resources. I and fellow London Members want to ensure fair treatment for London for the next period—2000–07. I do not criticise the single regeneration budget division of resources, which more accurately reflects the needs of London, but it is remarkable that the EU share-out does not.

I have used comparative unemployment levels, which were the key indicator used for objective 2 for the last round. However, things are changing; the Minister will advise us of that. In terms of Agenda 2000, the amount of money that can be accessed is being reduced—the share of the EU population that benefits is reducing from 50 per cent. to between 35 and 40 per cent. There is a new way forward, which particularly takes account of EU enlargement in coming years.

I understand that, to maximise the UK overall take, the key criterion that should be used is gross domestic product; the UK has the fourth lowest GDP in Europe. However, while I would support that, other indicators should be looked at when considering the split of EU resources within the United Kingdom. I understand that 50 per cent. of the indicators come from Brussels and the other 50 per cent. from the UK.

The Association of London Government proposes criteria that relate to

"areas with substantial rates of unemployment in excess of the EU average which have recorded substantial industrial job losses since 1985."

Greater London has lost 382,000 industrial jobs, representing 50 per cent. of industrial employment, since 1984. In east London and the Lea valley, 51 per cent. of industrial jobs have been lost—77,000 down to 40,000—with a further loss of 10,000 jobs in the service sector. It is a difficult area and it needs every penny it can get. It is important that the current £80 million funding is sustained, if not increased.

It is important to stress that 70 per cent. of Britain's most deprived wards are in the capital, which people often do not realise. Although my constituency has been fortunate to receive funding, in some wards unemployment is now rising. In addition, no structural funding money hit the ground until 1996, whereas every other British ERDF area has had funding over a much longer period. It is critical that we do not lose the objective 2 money, and that other areas of London are able to benefit from it.

I agree with my hon. Friend; I was about to discuss the wider indicators that need to be taken into account.

The partner of my hon. Friend the Member for Hammersmith and Fulham (Mr. Coleman), Councillor Sally Powell, has fought successfully within the Committee of the Regions and the EU generally to ensure that "urban areas in difficulty" qualify under objective 2. The criteria should include the points made by my hon. Friend the Member for Bethnal Green and Bow (Ms King)—first, a high level of poverty, including precarious housing conditions; secondly, poor housing conditions; thirdly, a degraded environment; and fourthly, a low level of education. All those criteria are met in a number of wards in the constituencies of my hon. Friend the Member for Bethnal Green and Bow and other London Members, especially those representing the Lea valley and east London. It is important that my hon. Friend the Minister remembers that.

The London research centre-Peabody Trust document "A Capital Divided", prepared in February last year, gave information at ward level which clearly showed the needs of London.

Under the draft regulations for objective 2 funding, the particular strand covering "urban areas in difficulty" is seen as applicable to only 2 per cent. of the population. I urge my hon. Friend the Minister to convince her colleagues that the urban industrial reconversion strand should be significantly increased, if possible up to 10 per cent., which is the level of the other strands. My hon. Friend the Member for Bethnal Green and Bow made that point well.

I listed a number of new areas that Wandsworth had been able to access and those areas outside objectives 1, 2 and 3 that will not be available. There is particular concern that the urban initiative will be cut. While the funding for that initiative is modest—£12 million for the period 1994 to 1999—the benefits have been real. In evidence to the Select Committee on Trade and Industry, the Local Government Association endorsed the continuation of the initiative.

The proposals for Community initiatives outside objectives 1, 2 and 3 will now have to be extremely limited. I understand that there are just three, of which only one is directly relevant to London—although it is highly relevant: the new initiative on transnational co-operation to fight discrimination and inequality preventing access to employment. I commend that initiative to my hon. Friend the Minister. I know that not just London but many other areas will want to have a strong say in it.

The new proposals around objective 3 are very much needed for London. The divide in London between those who are out of work and those who are in work is widening. Those who do not have the right skills—the new deal provides a way to acquire them, and I applaud the fact that the scheme has now been widened to include the over-25s—can fall further and further behind. It is specifically a London problem.

Structural funding is meant to help regions and economies through difficult times. It is intended to help economies to pick up and for the regions to benefit from that. The problem is that the more successful the scheme is, the greater is the risk of those regions losing continued support. Regions that already get funding argue to hold on to it, while others argue their need also to benefit from it. That is one of the problems with enlargement of the EU. Our Spanish colleagues are arguing against enlargement because they do not want any institutional reforms that would threaten their structural funding.

I agree with my hon. Friend. However, one piece of good news that we received last March was that Commissioner Kinnock had proposed a safety net, under which no areas would face a funding reduction of more than one third. That may be cold comfort to the Spanish, but it is important to UK regions in terms of their success compared with London.

In the 1970s and 1980s, London was booming while other regions were undergoing major industrial decline. London's nemesis came in the late 1980s, so we have had to face that problem later than other regions. It is important for those in areas such as Clydesdale, which my hon. Friend represents, to realise that the success that that area has achieved needs to be replicated, in particular, in the Lea valley and east London.

We need objective 3 to deal with retraining. We want London to get its full share, especially for areas that promote social inclusion, lifelong education and training, facilitation of economic change and, in particular, improving the participation of women in the labour market. London should be accessing those areas under objective 3. I know that other hon. Members will explore these issues in their speeches and will be urging the case for London.

For the remainder of my speech, I want to deal with NUTS. I am not insulting the House with that acronym, it stands for the nomenclature of units of territorial statistics—

Order. It is nice of the hon. Gentleman to spell it out.

NUTS provides a single uniform breakdown of territorial units for producing regional statistics across the whole of the European Union. Almost all the sub-national statistics collected and disseminated by Eurostat are based on the NUTS structure of regions. The statistics deal with topics such as population, birth rates, employment, unemployment, gross domestic product, transport and energy. I am sure that they also deal with other matters.

Since 1988, NUTS regions have formed the geographical basis for determining distribution of structural fund expenditure. Currently, objective 2 funding is based on NUTS level 3 regions.

On 29 June, the Chancellor of the Exchequer answered a written question from my hon. Friend the Member for East Ham (Mr. Timms) about the new United Kingdom NUTS map. I know that some changes, such as splitting Cornwall and Devon at level 2, have been welcomed on both sides of the House. That change may help to ensure that Cornwall receives its fair share as an objective 1 area. However, it seems strange, at level 2, to divide London into inner and outer London, and the borough groupings at level 3 seem stranger still.

The statisticians seem to have no appreciation of the sub-regional partnerships that have been developed in recent years with the help of the Government office for London. The partnerships include the Lea valley partnership, which stretches up to Enfield; the east London partnership; the Park Royal corridor; and, in my case, the Wandle valley partnership, which covers Wandsworth, Merton, Sutton and Croydon. The partnerships of boroughs, and of the business and social partners in those boroughs, have been recognised in the past four single regeneration budget rounds and are increasingly successful in delivering solutions to areas with considerable industrial decline in those parts of London.

NUTS also do not relate to TEC areas. I therefore ask again whether the classification system will be re-examined. Alternatively, could each borough be designated a NUTS level 3? I remind the House that current objective 2 funding is agreed on the basis of NUTS level 3. Moreover, the population of individual borough often exceeds the population of other NUTS level 2 units. The population of some London boroughs, for example, is greater than that of Cornwall. A re-examination of the system is necessary.

As my hon. Friend the Member for Bethnal Green and Bow said, the current objective 2 map is drawn at ward level. I think that level 4 should be composed of wards within boroughs, rather than—as at present—of boroughs. As hon. Members will know, some wards—of which I have examples in my constituency of Putney—have a very high deprivation level, whereas others do not. It is extremely important that the objective 2 status map should deal with that fact. I believe that the NUTS classification system proposed on 29 June is not helpful to London, and perhaps not to other parts of the United Kingdom that share the same problem. I look forward to the Minister confirming that the matter will be re-examined.

In Putney and at Wandsworth council, we are concerned about the need for support in making objective 3 bids. It has been possible in previous years to make them, but it has been a problem this year. We want to ensure, first, that areas such as Wandsworth that have been successful when operating on a level playing field and on a case-by-case basis are not squeezed out.

Secondly, we have to ensure that as much pressure as possible is brought on Brussels to operate a more positive urban policy—which, as I said, would reflect London's priorities.

Thirdly, it is important that we work to decrease bureaucracy and simplify the approval process. Currently, there are many criteria assessment processes. Whereas some bids are approved directly from Brussels—via GOL—others are approved via Departments. We need clarity in the matter. We need quicker decision making and prompter payments, and greater emphasis on outcomes and outputs rather than—as currently—on inputs.

London as a whole has lost out on the Euro-gravy train of the past 18 years, during which the previous Government ignored the pleas of local government leaders and of the community of London. The fact is that 18 per cent. of the United Kingdom's unemployed live in London, but they receive only 4 per cent. of the EU resources provided to deal with the problem here.

Once the Greater London authority is established, we will have a doughty fighter to ensure that London's voice is clearly heard. Meanwhile, I ask the Minister—who is a London Member—to discover how that great economic injustice can be righted, and to ensure that the right thing is done for London, so that we receive a fair share of resources.

10.4 am

I congratulate the hon. Member for Putney (Mr. Colman) on putting the case for London so well, and on pointing out that we have large unemployment problems in the capital and that we will have to ensure that London's case on the reshaping of structural funds is made.

I should like to make a few comments on reform of objective 3 funding—especially as it relates to the European social fund—which is particularly germane to London. As the hon. Member said, regional—even sub-regional—definitions can miss out areas of concentrated poverty, which are, by their very nature, quite wide. As he also said, London is likely to miss out not only on objective 1 funding but on much of objective 2 funding. In the worst case scenario, none of London's areas will be given objective 2 status. Therefore—particularly because of the regional definitions—it is important for areas such as London that overall objective 3 funding is well resourced.

As the hon. Member said, London has concentrated areas of poverty that are not revealed in the nomenclature of units of territorial statistics definitions. Those areas have to be able to share in support from Europe. If that support will not come from objective 2, we will have to ensure that objective 3 is well resourced so that it can back us up.

Administration of objective 3 funds is another issue which must be addressed. Although the hon. Member touched on the issue, I should like to make a couple of major points. Hon. Members will have read the Trade and Industry Select Committee's recent report on the reform of European structural funds, which makes two telling points on reforming administration of the European social fund. The first deals with the complexity of current administrative arrangements.

At the back of the report, there is a submission from the Leader II network in England, which describes current administrative arrangements for the social fund as "Kafka-esque" and says that the number and complexity of forms render it incredibly difficult for many organisations to apply. As a consequence of the complexity, simply to apply for funds, political lobbyists have to become involved in the process, and special posts have to be created. That is not an efficient way of running such a system.

Administrative complexity creates barriers for, and limits the number of, organisations that would otherwise apply. It is almost as if the funds were being rationed by complexity. We want a much more open, simple and transparent process in which many more people and organisations can apply.

A second aspect of the administrative arrangements that requires reform—which also was highlighted by the Select Committee—is to push down administration of large pots of money from Brussels to the national and regional tiers. Such reform would help to improve the fund's administrative efficiency, would inherently simplify administration and would provide a much more targeted focus in allocating funds.

The Liberal Democrats welcome the Government's proposals for regional government in London. The development of regional government and regional development agencies may well produce tiers of government to administer the pots of money that come from Europe through objective 2 or objective 3 status and ensure that they are more efficiently administered; the byzantine processes of the current system seem to miss many areas of need.

If we do not have better and simpler administrative arrangements that follow the principle of subsidiarity, we will miss out on money being channelled to some of the most severely deprived districts in the country. As the hon. Member for Putney said, some areas of London are severely deprived. The top four areas in the index of deprivation include London boroughs.

My constituency is normally considered to be one of the more prosperous boroughs, but some wards suffer severe deprivation. Norbiton, for example, has a higher Z score than almost any other ward in outer London and is on a par with the poorest areas of central London. The need to ensure that money goes where it is most required is urgent, and one of the best ways to achieve that is to reform the administrative processes.

10.10 am

I join the hon. Member for Kingston and Surbiton (Mr. Davey) in congratulating my hon. Friend the Member for Putney (Mr. Colman) on securing today's important debate at such an appropriate time and commending him for focusing on London and correcting the mistaken impression of many right hon. and hon. Members and the wider public that London escaped the recessions of the 1980s and 1990s.

Londoners have not magically overcome or avoided the deprivation that affects other cities and regions. Indeed, there is enormous disparity between those who are very wealthy and those who are very poor. Greater London includes some of the poorest areas in the country, and is affected by poverty, deprivation and social exclusion.

This is an apposite time to be discussing structural funds for London. There are 13 objective 2 areas in the United Kingdom, covering 31 per cent. of the population and spending 30 per cent. of the objective 2 structural funds from Europe. However, as was said earlier, London receives only 4 per cent. of the UK allocation. That cannot be a fair distribution. Indeed, London has only one objective 2 area—east London and the Lea valley—which is programmed to spend about £132 million by the millennium.

Many have pressed the case for London over an extended period; several organisations were mentioned earlier. They include Greater London Enterprise and the Local Government Association, but I should like to pay particular tribute to the London Members of the European Parliament who campaigned for a long time, despite the scepticism of their colleagues and the opposition of many bureaucrats in Europe, but finally won through to secure a bridgehead for London and recognition of the multiple deprivation that is suffered here.

East London and the Lea valley objective 2 area combines great need and significant opportunity. The need exists across the entire area, but it is concentrated in the central and eastern parts—in Tower Hamlets and Newham. There are also significant development opportunities in the upper Lea valley where there are more than 200 hectares of underdeveloped and derelict sites waiting to be developed to provide opportunities.

The London TEC Council, recently produced a report entitled "Skills and Sustainable Development", which identified six distinct local economy profiles within London. They range from the global city core, which I do not need to describe, to the regeneration economy. The report states:

"A regeneration economy requires comprehensive long-term economic, social and physical development to compete successfully for investment, jobs and resources."

That is a description of east London and the Lea valley. All the indicators show that the area suffers significant deprivation, poverty and social exclusion. Tower Hamlets, Hackney and Newham would appear at the top of any list from any statistician. Indeed, parts of Haringey, Waltham Forest and, in my constituency, Enfield also appear high on the list of deprived areas.

Of course, the problems in the Lea valley have been exacerbated in recent years. There were 26,000 jobs losses between 1984 and 1991, and the area has failed to benefit from the wider new industries that have been attracted to the regional economy in Greater London. Perhaps most significantly, local people have been unable to maximise the opportunities that are available because they lack the skills to tap into the job market. The objective 2 bid was originally made in order to tackle some of those deep-seated problems.

East London and the Lea valley has a population of just over 500,000. The area has a significant level of need, which is illustrated by one statistic that has been used by European statisticians. Unemployment there is two and a half times the national average. There are many deprived communities, especially black and ethnic minorities, who represent 36 per cent. of the total population, and, according to all the indicators, suffer significantly greater deprivation and unemployment than the norm. A recent survey carried out of the Bangladeshi community showed that only 44 per cent. were engaged in the real economy.

There have been a number of successful projects that will benefit local communities and have a significant impact on the development of the objective 2 area. I shall mention three of them briefly. First, a science park is being developed in northern Enfield on 45 hectares of derelict land. There are three partners: Middlesex university, Thames Water and the London borough of Enfield. The lead agency on the site is building 60 incubator units to foster new and high-technology businesses. It is a very exciting business called the Lea Valley Business Innovation Centre and it does tremendous work. It was set up using regional development funding and is one of 12 such developments across the United Kingdom and one of 150 in the European Community. It promotes innovation by providing support and advice, and early-stage finance, should that be needed for the development of the business. Since it was set up three years ago, it has supported more than 1,000 business ideas. In its first year, it helped to establish 22 new businesses, creating 44 jobs. It is a very exciting development.

I should also like to mention the Tottenham Hale transport interchange, which provides a one-stop service to either Stansted airport or central London. There are excellent connections on the London underground, and the road network is connected directly to the M25 and central London. The interchange will open up an entirely new and, until now, fallow area of the Lea valley objective 2 area for development.

I turn briefly to the impact that Agenda 2000 and the Government's negotiations will have on objective 2 funding for London. First, I accept that enlargement of the European Union will necessarily mean a refocusing of funds on new member countries of eastern Europe, although the Government's acceptance that that will lead to reductions in the overall structural fund does not sit easily with their commitment to regeneration. Indeed, in a recent consultation document in which the Government outlined the features that should underpin their future regeneration policy, they concluded that

"policies must be aimed at addressing social exclusion and need. Our cities will not be competitive unless opportunities are extended to everyone who lives in them. There is nothing more corrosive than the existence of disaffected or disadvantaged groups who feel they have no stake in their city's decisions and prosperity."

Achieving such aims require continued funding of objective 2 areas and the Government to address poverty and deprivation in many parts of London.

Secondly, concern has been expressed at the use of unemployment as the principal criterion for the designation of new objective 2 areas. That would be to the advantage of east London and the Lea valley—and, indeed, as has been said, of Greater London. I accept—and I think that London would accept—that, given that different countries are at different stages of their economic cycles, the use of such a criterion does not make sense and may not be the most appropriate basis on which to divide spoils among member states. Unemployment is only one of many indicators and will not, by itself, give an accurate picture of local need. Below the national criteria, some form of assessment of deprivation or social exclusion based on national and regional criteria would be favourable and a sensible way forward. After all, local people know best what is happening in their area.

Thirdly, there must be flexibility of implementation to allow member states both to decide on the new criteria for objective 2 designation and to draw the boundaries of new areas, taking account of the situation on the ground. For example, many deprived areas may be concealed in a larger and much more prosperous region. Such a problem is far more prevalent in Greater London than in other parts of the country. We need to take on board local experience and local knowledge in evaluating the criteria on which we want to operate.

Fourthly, I should like to address the issue of the safety net, which has been mentioned. According to recent estimates, before the concept of a safety net came forward, only a third of the current eligible population under objective 2 status were likely to be covered under the new criteria. A safety net that allows us to drop only a third of the coverage marks significant progress. The Government—and Commissioner Kinnock, if he was involved—should be congratulated on that.

However, there is still a difficulty. I understand that part of the EU's policy on objective 2 funding states that it will be limited to 18 per cent. of the population of any country. Such a limit could adversely impact on objective 2 funding in London. I ask the Minister to consider that carefully.

Fifthly, we must protect existing investment. East London and the Lea valley achieved objective 2 status only in 1995. Projects and programmes will have been running only for a maximum of four years by 1999. Continuity of funding is therefore necessary to deliver the regeneration that was called for when the objective 2 area was set up. That is important if we are to replace jobs lost through industrial decline, and train the local work force so that they can take jobs that are becoming available not only in the Lea valley but across London. The investment that has already been made in east London and the Lea valley area should not be put at risk by the phasing out of objective 2 status after 1999. Such status has contributed to a reversal of economic decline in the area.

To take up a point made by the hon. Member for Kingston and Surbiton, there is growing awareness among local groups and voluntary organisations—even the private sector—of the benefits that an area can accrue from structural funding. It is important that we maintain that interest and focus. If that is lost through the phasing out of objective 2 status, it will be difficult not only to maintain such interest but to set up the partnerships that will be critical to the future success of the area.

The new arrangements for Agenda 2000 should attempt to achieve several other things. They should reduce the complexity of the system. The EU has already gone some way towards that; it has reduced the number of objectives to three and the number of initiatives from 13 to three, greatly simplifying the structure. The Trade and Industry Committee suggested that funding arrangements for four or five different funds should be simplified and brought together in one straightforward fund.

We also need to consider how we can simplify the process for people at the other end of it. If we do so, we shall achieve significant benefits. We need to reduce bureaucracy. To how many agencies do people who have received European structural funds have to report? How many do they have to keep in touch with? How many forms do they have to fill out? The situation is ridiculous; we need to simplify it and ease the process for organisations and partnerships that are trying to achieve the objectives that we have set them.

We must simplify form-filling. One needs a degree in the subject simply to understand the complex forms. Indeed, the complexity of EU forms is legendary. Everyone who has attempted to contact the bureaucracy in Brussels has to complete an exceptionally complex form. That has become a major impediment to new groups coming forward, and it has meant the failure of groups that could have delivered on the objective 2 criteria if that hurdle had not been placed in their way.

We need arrangements to increase transparency. No one understands how Europe operates; I am still trying to find out. The reality is that we end up with consultants, political insiders and people who know how the bureaucracy operates earning a living doing that rather than contributing to the objectives. There should be opportunities to simplify matters for those filling in forms and trying to create local partnerships.

We need flexibility, a greater say for local agencies and the involvement of non-statutory organisations to help ensure that we target the funds more efficiently. That will be essential if we are to maintain public support for an effective programme of regeneration into the 21st century.

10.30 am

I congratulate the hon. Member for Putney (Mr. Colman) on securing the opportunity to debate the needs of London in relation to the European Union. I congratulate him also on his stoicism, as he appears to understand the bureaucracy and the nonsense related to accessing those funds.

I was surprised to hear him describe his constituency of Putney—where I was born and raised—as having pockets of severe deprivation. That must be a triumph of rhetoric over reality. I have toured all around Putney all my life, and to compare it with parts of other cities seems a slight exaggeration.

I was referring to the Roehampton estate. Perhaps since you left Putney—

Order. The hon. Gentleman should remember to address other hon. Members in the third person. His remark appeared to be directed to the Chair.

I apologise, Mr. Deputy Speaker. May I, through you, remind the hon. Lady that Putney has several parts to it, including Roehampton, which is seen within the Z scores laid down by the Department of the Environment, Transport and the Regions as being an area of significant deprivation?

The hon. Gentleman has no idea which part of Putney I lived in. The old Roehampton estates were the jewel in the crown of the old GLC and were greatly desired by people moving out from the innermost parts of London, who regarded them as almost a rural retreat. As for the other parts of Roehampton and the appalling tower blocks overlooking Richmond park, they were a triumph for the gerrymandering of Labour Governments after the war. I deplore the blocks, but they are still much more pleasant places to live than many parts of our cities.

I wish to support, and not repeat, the remarks of the hon. Member for Kingston and Surbiton (Mr. Davey) about the rabbit warren of regulations and the regiment of bureaucrats through which one must manoeuvre to get to the pot of gold—gold which has been enormously contributed by the British taxpayer. We are, after all, accessing our own money as we go through the European rabbit warren. It is slightly more difficult than accessing lottery funds—perhaps not much more.

I wish to correct the image of London given by the hon. Member for Putney in his quite understandable pursuit of European money. I have lived almost all of my life in London, and I have represented parts of London on a council. That has given me an intimate view not just of central London, but of many of the parts of London that he described.

I have had a lot of contact with businesses that were driven out of London. The problems that they experienced were largely made by their own councils—most particularly with the rates, which went up and up through the roof until the roof came off and the businesses had to move out of town. People may not realise that local authorities often demanded from £10,000 up to £100,000 in rates from small high street shops, which made it impossible for them to function. All the small furniture factories in the east end and areas such as Hackney and Haringey—which sustained an enormous number of valuable jobs—were driven out by the nature of the local councils.

We cannot lay the blame for the depredation at the door of central Government. If the problem exists, bringing in European money will not necessarily solve it. The costs of running small businesses will still exist.

We hear about the 18 per cent. unemployment in London. That figure beggars belief. It can be difficult to find a Londoner working in some industries—particularly the service industries. The other evening, I had the great pleasure of going to dinner at the Norwegian embassy. We were served by young women from the Philippines, the butler who handed round the drinks was Spanish and I am not sure of the nationality of the person who opened the door for us.

The point is that there are massive opportunities in London to work, particularly in the service industries. We have one of the largest tourism industries in the country, which provides many opportunities for us to solve the problems. If there is unemployment, we should look at legislation that impedes employers from taking on English workers, or we should study the nature of the councils—many of which are under Labour control. It is for a council to decide how to utilise the funds that are available. Whether they wish to give funds to the society for sustaining three-legged dogs or to the useful business of keeping the rates down for shopkeepers is a matter for them.

I have lived in London long enough to see parts of Wandsworth that were deprived turned into desirable areas, with lots of new industries, under the stewardship of my hon. Friend the Member for Christchurch (Mr. Chope). It is a question of management and leadership. Battersea is another part of central London which used to be considered run down. I am sure that the hon. Member for Putney would have described it as a deprived area, yet that, too, was resurrected—not by structural funds from Europe, but by the good management of Conservative councils. I urge the Minister to remember that we have in our hands the powers to restore the pockets of deprivation in London.

I read in the newspapers recently that a great many Indian restaurants are crying out for staff because of a staff shortage. Perhaps some of the unemployed Bangladeshis in London could find jobs if they looked for them a little harder.

10.38 am

We have had a good debate, ably introduced by the hon. Member for Putney (Mr. Colman). My hon. Friend the Member for Billericay (Mrs. Gorman) shares with me the privilege of having been born in Putney, so this is very much a debate about Wandsworth and London as a whole.

The hon. Member for Putney's conclusion that London had lost out on the Euro-gravy train over the past 18 years rather ignores the facts. The 1998 edition of "Regional Trends" shows that gross domestic product per head in London is over £13,000, compared with £8,700 in Northern Ireland and £8,900 in Wales. By 1996, disposable household income in London was 16.4 per cent. above the average for the rest of the UK, compared with 12.8 per cent. above the average in 1992. Things were getting better in London between 1992 and 1996, yet the hon. Gentleman tried to paint a picture of things in London getting worse.

In Wandsworth, and in Putney in particular, Wandsworth council has been able to deliver improved services, which have received massive endorsement in local elections. The hon. Member for Putney, intervening on my hon. Friend the Member for Billericay, described the Roehampton estate as an area of significant deprivation, but it will not have escaped his notice that, in May, for the first time in many years, the electors chose three Conservative local councillors, whom they believed would more properly represent them. That is a reflection of the success of the Conservative council in Wandsworth.

We should consider the structural funds in context. Figures from the Government office for London show that, last year, this year and next year, £25 million per annum have been and will be allocated to London through all the EU structural funds. The revenue support grant for London, which comes from the taxpayer, is £4.4 billion, which is in addition to Government capital grants. To debate structural funds in London—which are only £25 million a year—for one and a half hours, while ignoring the much larger sums of money that are being spent on London, is to fail to see the wood for the trees.

The hon. Member for Putney argues that small EU-funded programmes in Wandsworth should be preserved, but, this year, the Labour Government substantially reduced the revenue support grant to Wandsworth. Surely Wandsworth council is in a better position than remote officials in Brussels to judge the needs of the local community. If he believes that there are pockets of deprivation in Wandsworth that need assistance, he should be arguing for a larger revenue support grant funded from our national taxes; he should not be trying to use a complicated structural arrangement through which a proportion of the money that we give to Europe returns to us after myriad committees have determined how it should be spent.

The leader of Wandsworth council stated in the foreword to the most recent annual report:

"These are exciting times in Wandsworth. The local economy is more robust than at any time in the last decade while confidence has returned in a spectacular way to the housing market…the council's economic development office helped to create more than 600 new jobs for local people… The value of construction activity last year topped £200 million—almost double the previous year".

That is the role that a local council can play in developing the local economy. With the greatest respect to the bureaucrats on the continent, I do not think that they are in a position to second guess local judgment.

I hope that the Minister, in winding up, will explain how, in what seems to be a new anomaly, the 14 new electoral areas that the Government want to set up for the Greater London authority will fit in with the five new NUTS regions for London, given that local authority and other electoral boundaries are supposed to be linked to the NUTS system.

There is also a problem with the lag in statistics. The allocation of EU resources between 2000–07, meagre as they are, will be based on average gross domestic product in 1993–95 and will be subject to a safety net to reduce the number of losers in the change from the previous system. Despite the unwieldiness of the system, that will allocate, at most, some £500 million. It would be much better if we left the Brussels bureaucracy out of it and kept the £500 million ourselves, so that Parliament could decide how the money should be allocated to individual regions or even wards.

A number of hon. Members mentioned subsidiarity. I understand that, as a result of a £90,000 European regional development fund grant allocated to the Banglatown area of Tower Hamlets, 10 historic buildings, 2 km of footpaths and one environmental area have been improved and one permanent and 300 temporary jobs have been created. Surely those matters should properly be dealt with by the local council—probably by the local councillor—rather than by highly paid bureaucrats in Brussels. One can only speculate about the amount and cost of the bureaucracy needed to allocate that one grant.

At a meeting of the Select Committee on Trade and Industry, the Minister rather wriggled when she was asked whether she thought that individual member states were in the best position to decide the needs of their communities. I hope that, in responding to the debate, she will be more robust and say that, yes, she thinks that local councillors and Parliament have a better idea of the needs of individual parts of the United Kingdom, and that it would be much better if we kept the money and allocated it according to our wishes.

10.45 am

I congratulate my hon. Friend the Member for Putney (Mr. Colman) on bringing the needs of London to the attention of the House. As he rightly said, I am a London Member of Parliament, so I share his interests. However, as the Minister in the Department of Trade and Industry with responsibility for the co-ordination of structural funds issues for the United Kingdom as a whole, I have to take a wider view of the process and the factors that have to be taken into account.

Many good points have been made in the debate, especially on the need to tackle bureaucracy—something that the previous Government failed to do. The hon. Member for Christchurch (Mr. Chope) said much in his speech, but little about the reform of structural funds. Perhaps he will give a more considered response when he has had his brief a little longer. It will not surprise the hon. Member for Billericay (Mrs. Gorman) to hear that I did not agree with everything that she said in the speech that the House is used to hearing from her, although she made a good point on the need for simplification, as did my hon. Friends the Members for Putney and for Edmonton (Mr. Love).

Since the publication of the draft regulations on 18 March, we have, under the UK presidency, taken forward the negotiations on structural funds with the Commission and other member states. Throughout the negotiations, the Government continued to emphasise the overarching principles of fairness, affordability and durability. As we head into the discussions in the autumn under the Austrian presidency, those principles will remain as important.

The desire for fairness has dominated the lobbying position of the Government—and of local organisations—in Brussels with the Commission and with other member states since the publication of the Agenda 2000 communication. As I have said on a number of occasions—I have no compunction about repeating it now—fairness means that the costs of reform should be shared fairly between all member states. However, the Government do not believe that the current proposals will achieve that. We believe that, if we are to agree fair and affordable reforms, all member states must be prepared to accept cuts.

We are not prepared to bear disproportionate cuts in United Kingdom coverage. On the strength of our lobbying before publication of the proposals, we secured the last-minute concession of the safety net in the draft regulations, limiting the loss of coverage for objective 2 and 5b areas to no more than a third. That could certainly prove to be an important achievement in several areas in the UK.

In addition, the Government will continue to press for flexibility, both in the objective 1 gross domestic product cut-off and in the new objective 2, in which we are keen to ensure that funds are targeted within member states, using national and local indicators that accurately reflect the areas of greatest need. It has also been said that member states have the ability to know where their areas of deprivation are, and we shall seek the maximum flexibility on objective 2. Those points were well made by my hon. Friends the Members for Putney and for Edmonton, as well as by the hon. Member for Kingston and Surbiton (Mr. Davey).

In the negotiations to date, the UK presidency has been able to secure agreement on some of the general principles that support the universally agreed aim of simplification of the funds, making them more effective and better value for money. That is an important first step, and we are proud to have played our part in it.

Reference has been made to the agreement on changes to the UK NUTS boundaries announced last week by my hon. Friend the Economic Secretary to the Treasury, who has responsibility for the Office for National Statistics. The structural funds reform negotiations are entirely separate from the issue of NUTS boundaries.

The Government supported the Government statistical service's proposals, sent to Eurostat last summer, which were the result of a general consultation early last year. We asked the Commission to encourage Eurostat to produce a rapid and satisfactory result. Ultimately, as the House will be aware, this has been a statistical exercise, subject to Eurostat's decision, and we welcome the fact that agreement has now been reached.

The European Commission has proposed that NUTS II and III areas be used to draw up the new European Union structural funds map. The Government expect that the new UK NUTS boundaries will be used. However, all those issues depend on the content of the final structural funds regulations and on the data for individual areas. We cannot at this stage predict with certainty what might be the implications for individual areas.

One of our goals in our presidency was to leave a solid framework for continuation of the work into the Austrian presidency, which began last week. All member states have very distinctive views on issues affecting finance and eligibility criteria. Most, including the UK, have difficulties with the proposals as they stand. The issues will begin to be tackled in earnest under the Austrian presidency. The discussions are likely to take place from the autumn and will continue into early 1999.

The Cardiff meeting last month set a deadline of March 1999 for the Agenda 2000 discussions. Reform of the structural funds is one of the most important elements in the process. It is certainly one of the most visible benefits of the European Union to local people, and I warmly welcome the emphasis in this debate on the local nature of the funds.

Many local representatives have put their case to me for objective 2 status, and I am sure that they will continue to do so. The eligibility criteria for the various strands within objective 2, and the distribution of funds, will not be clear until the final structural funds package has been decided. Neither will we know how much flexibility we shall have at member state level in determining the eligibility of areas. I am certainly aware that people feel strongly on those points, which is why the Government will press for maximum flexibility.

I think that we all welcome the proposal to target a number of non-industrial urban areas under objective 2. The extent to which we can do so is a matter for consideration and discussion. We would welcome the ability to home in on pockets of deprivation.

From various parliamentary answers, and the recent Adjournment debate through which I was able to bring the House up to date, hon. Members may know that the focus of our presidency has been to a large extent on simplifying the administration of the funds, which means attempting to reduce the bureaucracy wherever possible and to increase the involvement of local people.

I am delighted to say that we have achieved a great deal of consensus among member states. At the informal meeting of EU regional policy Ministers in Glasgow last month, chaired by my right hon. Friend the President of the Board of Trade, there was universal agreement on a number of principles: the importance of job creation, employability and regional competitiveness; the value of effective partnership between the Commission, national Governments, and regional and local organisations, with a clear definition of the role for each; and bringing decision making as close as possible to the people affected. All hon. Members will welcome more regional and local control over the funds' delivery.

The UK has a reputation in Europe as a good manager and administrator of European funds. That has been earned through the hard work of those involved in the partnerships and on the monitoring committees throughout the country, including in London. The House has learnt today about some important projects.

I have been able to observe the development of some of the projects: for example, the business innovation centre in the Lee valley, which does excellent work with small businesses, and especially those looking for expertise in new technology. That is why I attach so much importance to ensuring that we engage those involved in the day-to-day administration of the funds and feed their views into the relevant discussions.

I spoke at the national simplification conference in May, where we discussed, among other matters, ways of improving administration and regional partnerships. We have heard about the important issue of community initiatives in London, such as the urban initiative in Park Royal. Some of those initiatives have helped to form useful local and regional partnerships, such as the urban partnership groups, which have involved local residents, community groups and voluntary organisations in the strategy for tackling social exclusion. My hon. Friend the Member for Bethnal Green and Bow (Ms King) spoke about some of those important partnerships.

I am aware that the programmes can be complex to administer, especially given the small amounts of funding involved, and often fragment the strategic approach to the very issues that they are designed to address. It is important that community initiatives should add value to the mainstream programmes. They should certainly not duplicate or cut across other programmes. Since there must be a close relationship between the community initiatives and the main objectives, we can take a view on particular initiatives only once the framework for the main objectives is clear.

We should remember that this is merely the starting point in a long and complex set of negotiations. A great deal more work needs to be done to achieve

"fair criteria and transparent systems"

—a phrase that we used time and again for all the objectives. I am grateful to those hon. Members and their local groups who have lent their support to our efforts in the structural funds discussions so far and also to all hon. Members who have come to see me. We have a long way to go, but, by working in the common interest in the United Kingdom, we can have a fair and just solution.

Order. We must now move on to the debate on disadvantaged areas in Wales and to the right hon. Member for Caernarfon (Mr. Wigley).

Disadvantaged Areas (Wales)

10.59 am

I am very grateful for the opportunity to debate this subject and for Madam Speaker's choice of subject. I also thank the Under-Secretary of State for Wales, the hon. Member for Neath (Mr. Hain), who is here to reply. I had half expected a Treasury Minister to be present. Indeed, the Treasury can be said to have most to answer for with regard to the state of the Welsh economy. Perhaps Treasury Ministers know that all too well and that is why they are not here. Clearly, the problems of the Welsh economy go well beyond the competence of the Welsh Office; likewise, the solution, which is worth remembering in the context of the National Assembly for Wales, which is to be set up next year and which will have no greater remit than that of the present Welsh Office. Its powers may not be adequate to deal with the problems.

I am conscious that this debate follows the publication yesterday of "Pathway to Prosperity". No doubt we will have an opportunity to discuss that document in detail when the Welsh Grand Committee meets in Merthyr Tydfil next Monday, and I look forward to that debate. Suffice it to say now that the document is certainly strong on analysis. Indeed, it is brutally honest about the lamentable state of the Welsh economy—more honest than any previous publication. It recognises the appallingly low gross domestic product per head in Wales. According to the figures in that document, GDP in Ireland is 43 per cent. higher; it also admits to a job shortfall of about 260,000, which presents a massive challenge on any analysis.

Whereas the publication is strong on analysis, it is sketchy on how the problems will be put right and it offers no additional resources, which is its central weakness. It is remarkable for such a document to refer to the need for better education and skills, better road links, fibre-optic networks, strengthening business support services, creating industrial villages and providing basic rural services, when all that is to be achieved without one single penny of extra Government expenditure in Wales. It is appropriate that we are debating the matter this week—the week before the Government's spending review—as the Treasury has a lot of responsibilities to face up to in that context.

There are both disadvantaged people in Wales—people who may be disabled, unemployed, sick, poor or old—and disadvantaged areas, with high unemployment, low activity rates and low incomes. Those are areas of physical decay, with sub-standard housing, dilapidated social provision, old hospitals, schools and village halls and even old toilets—a decaying environment. They are areas of inadequate provision: a lack of new leisure facilities; a lack of doctors and dentists, which is a problem that is becoming more and more apparent in many areas of Wales, both rural and industrial; a lack of a modern transport system; and a lack of opportunity and hope.

The disadvantaged areas come in many forms and in several parts of Wales. Parts of our cities suffer acute deprivation and poverty. Equally, there are areas of acute rural poverty, which is being exacerbated by the present rural crisis. What is more, in the old industrial areas—the coal mining valleys, slate quarrying villages, iron and steel working towns and sea fishing ports—those old industries have gone, leaving only their relics behind, and new industry has yet to find them.

Between 1986 and 1996, while the M4 and the eastern A55 corridors gained 9,600 new manufacturing jobs, which we welcome, the western part of Wales and the valleys lost 9,200 manufacturing jobs, which is almost an identical loss. That shows how Wales is becoming polarised.

We often hear about Wales's success in attracting inward investment and we certainly welcome what has been achieved, but we are in danger of becoming victims of our own propaganda. There is a gross disparity in the distribution of the jobs created by inward investment within Wales. The six counties with most jobs in overseas-owned manufacturing plants are Flint, Wrexham, Bridgend, Rhondda Cynon Taff, Caerphilly and Cardiff. Between them, they have 52 per cent. of all the jobs that have come to Wales by way of such plants. As that pattern shows, they are mainly in the north-east and the south-east of Wales. The six counties with the least such jobs are Conwy, Gwynedd, Ynys Môn, Ceredigion, Pembroke and Carmarthen, which have between them only 8 per cent. Of course, those areas are all in the west. There is thus a massive east-west divide in inward investment and the creation of new jobs.

Needless to say, the prospects for disadvantaged people who also live in disadvantaged areas are acutely limited. Surely we must put a priority on Government action in those areas. Whereas the Government may not be able to answer the problems of every man, woman and family in every community and every company, they can and must create the conditions in which those problems can be met and overcome—problems of economic, social and environmental infrastructure. Only Government can provide those prerequisites.

Which areas am I describing as being disadvantaged? Some are economically and some socially disadvantaged, and the two overlap. One may be the consequence of the other or may cause a spiral with one leading to the other. Economically disadvantaged areas can be considered in terms of high unemployment. In May 1998—the most recent date for which figures are available—Aberdare and Blaenau Gwent had 10 per cent. unemployment and Ynys Môn and south Pembroke 9 per cent. Those are in the north-west and the south-west and the old coalfield valleys. The lowest unemployment is found near the border with England in the counties of Flintshire, Wrexham, Powys and Monmouthshire.

Clearly, Wales has a problem with low activity rates. Blaenau Gwent has one of the lowest, with 67 per cent., Caerphilly has 68 per cent., and Ynys Môon and Rhondda Cynon Taff, 69 per cent. Again, it is the same pattern. There is a massive gulf between incomes per head in Wales. The lowest incomes per head are due to part-time and seasonal jobs and low wage rates. The areas with the highest wages, on a band of about £340 to £350 per week according to last year's figures, include Cardiff, Wrexham, Neath and Flint. The lowest have wages of about £280 to £290 a week and include Conwy with £284, Gwynedd with £289, and Blaenau Gwent with £309. There is a gap of £60 between weekly incomes in the better and the poorer areas, a fact which reflects pockets of real poverty, both rural and urban, and the Government must do something to close that gap.

Some areas have low wage rates. There are variations within manufacturing industry, of course, and some assembly jobs pay abysmally poor wages—only £3 to £4 an hour. There are also areas with high manufacturing wages, for example in the steel industry, which mean that the Port Talbot and Neath area have a relatively high income per head.

Without doubt, the biggest problem is in the service sector because tourism, for example, pays relatively low wages and is seasonal. The service sector in Wales has a level of remuneration that is about 10 to 16 per cent. below the average for Great Britain because of the difference of the mix within that sector—tourism and other such elements in Wales, compared with financial services in south-east England. The problem of low incomes is acute and is increasing in agricultural areas, where farm incomes have fallen by 43 per cent. Many small family farms in Wales are subsistence farms. With that sort of reduction, if the farmer's wife did not have another job, the farms would not survive.

In the socially disadvantaged dimension, we have areas of high sickness and disability, particularly in the old industrial areas and the valleys—that is particularly true of Merthyr Tydfil. Indeed, eight of the 10 constituencies in the United Kingdom with the highest figures for long-term illness are in Wales, in the old coalfield areas of Dyfed, Glamorgan and Gwent. Many of those areas have poor housing stock, which worsens health. Housing renovation should therefore be a priority.

The four factors of unemployment, activity rates, low wages and widespread sickness mean that some areas have desperately low GDP per head. Of the five counties in Britain with the lowest GDP per head, three are in Wales—Mid Glamorgan, at 62 per cent. of the European Union average, Dyfed at 68 per cent. and Gwynedd at 72 per cent. Yesterday's publication showed that, for 1988–98, Gwynedd got just 3 per cent. of regional selective assistance spending in Wales, and Dyfed-Powys got only 4 per cent. RSA has certainly not started to solve the problem.

In addition to the disparity in GDP per head among areas of Wales, the gap is widening. Between 1982 and 1995, real GDP per head grew by 72 per cent. in Flintshire, 78 per cent. in Torfaen, 62 per cent. in Bridgend and the Vale of Glamorgan, 69 per cent. in Wrexham and 55 per cent. in Cardiff. In the same period, it grew by only 13 per cent. in Pembrokeshire, 16 per cent. in Conwy, 25 per cent. in Anglesey, 23 per cent. in Carmarthenshire, 23 per cent. in Blaenau Gwent and 31 per cent. in Rhondda. Unless action is taken to help the west and the valleys, the gap will worsen.

The western areas and the coalfield valleys are structurally disadvantaged. They are further from markets than other areas. They are at the fringe—sometimes they seem beyond the fringe—of the modern motorway network and of railway links. The population's age puts immense pressure on local government to provide personal services. The skills pattern is often geared to an industrial structure that has long gone. There is inadequate investment in modern educational and training facilities. Housing stock is often old and in need of renovation. Many of the remoter communities have long travel times to work, to hospital and to recreational facilities.

In many disadvantaged areas, money from grants, subsidies and social security immediately flows back out through the centralised structure of retailing and the banking sector. It is also difficult to retain maximum benefit in those areas from any Keynesian-type investment project. There are three approaches to those problems. First, there is the Thatcherite, free market response: "Let them decline; if they cannot regenerate, let them die." Plaid Cymru emphatically rejects that approach. Communities have rights; people are entitled to reasonable hope of decent jobs and services within reasonable reach of their homes. Young people should have a future within their localities, and should not simply be told to get on their bikes. Elderly people should not be left in limbo in aging communities that their grandchildren have left to search for work.

A second approach is Government intervention to help disadvantaged areas. What can the Government do? They could compensate for disadvantage by subsidising low wages through systems such as family credit. They could provide job creation schemes, although those may not survive in the long term. They could subsidise industrial premises, rents or capital.

However, a third approach, which we favour, is to work to remove disadvantage and to create better communications by air, rail, public transport and fibre optics. I was glad to see a reference to that idea in yesterday's publication, although there was no reference to the money needed. We could create better skills through investment in education. Ireland has used regional colleges of technology to boost the skills of its labour force, and to increase income per head. We need to make curriculums relevant to places of work, a point also referred to in yesterday's paper. We need to invest in infrastructure—hospitals, clinics, schools, energy conservation measures, housing and leisure facilities.

The second two approaches—subsidy to compensate for disadvantages, or action to remove the disadvantages—involve public spending, on social security and on rebuilding the capital stock of our communities. If we reject the Thatcherite approach, we must face the need for higher public spending. That is where the Government's juggernaut of promises crashes into the rocks of reality. It is not possible to implement a meaningful programme to rectify the disadvantages of western Wales and the coalfield valleys without higher public spending, a point ignored by "Pathway to Prosperity".

I can hear the Thatcherite mandarins, whose writ still seems to run in the Treasury, claiming that private capital will sort out the problems of the disadvantaged areas. However, private capital goes only to areas in which it will make a profit. It has not gone to western Wales and the valleys, because no profit can be seen. The private sector could be bribed to go there, but that would mean continuing subsidy, diverting public money into private pockets. It would be better to use public money to remove sources of disadvantage, and to harness public and private activity in competition or co-operation, as appropriate.

We cannot hope to tackle the problems of the disadvantaged areas if we adhere to Tory spending ceilings. We need to improve education with more teachers, schools and better equipment; to improve health care, build hospitals and clinics, and employ more doctors, physiotherapists and community nurses; to improve the housing stock through renovation and insulation, better rooms and replacement of defective doors and windows; to tidy up derelict buildings and the environment, bringing wasteland into proper use; to create a proper public transport system and new railways; and to develop recycling schemes.

If Tory orthodoxy were not in charge at the Treasury, we could choose between two options. First, we could divert expenditure from Trident and aircraft carriers to schools and hospitals, from millennium domes to fibre optic networks, and from nuclear weapons to energy conservation. The second option is to raise total public spending. The United Kingdom spends about 40 per cent. of gross national product in the public sector, less than in all but one EU country—Ireland, which ought to spend more in the public sector, too. Finland spends 52 per cent. of GNP in the public sector, Denmark 57 per cent. and Sweden 62 per cent. Yet those countries have high standards of income and quality of life, and of public services. We could raise taxes to allow ambitious plans to go ahead. We could, of course choose both options, changing spending priorities and raising taxes to meet our agenda.

If the Labour Government are not willing to put more public resources into helping disadvantaged people and communities, what on earth was the point of electing them? Were they elected just so that we could see different smiling faces at the Dispatch Box as they carried out the same old Tory Thatcherite policies? From May, responsibility for health and education, housing, roads, jobs and the environment will pass from the Secretary of State for Wales to the national assembly, to which the Welsh Office will be answerable. Where will the assembly get the extra resources to spend on disadvantaged parts of Wales to help attract private sector investment in new industry?

Are we restricted by the Barnett block, which Lord Barnett himself has acknowledged to have been inadequate to meet the needs of Wales? What new expenditure will there be? The figure seems to have fallen to £6.7 billion for 1998–99. Will that be the figure included in next week's spending review, or will we be allowed the £6.9 billion mentioned in April, or the £7 billion stated in the White Paper on which the referendum was fought? The White Paper provisions are being met in many other areas, so I hope that the spending priorities to be published next week will not take the figure below £7 billion.

What will happen if the Department of Trade and Industry changes industrial development policy by giving Wales higher status? In 1993, the Tories reduced development areas in Wales from covering 35 per cent. of the population to covering 15 per cent. Will resources additional to the Barnett block be available, or will money have to be diverted from education or health? Will the assembly be able to borrow to invest in infrastructure projects in disadvantaged areas? What are the prospects for the European structural funds, especially objective 1 funding? I am glad that the nomenclature of units of territorial statistics, NUTS 2, map has been accepted by Eurostat.

Wales has the lowest gross domestic product per head of any country or region in Great Britain and stands 68th in the league table of European regions. It is ridiculous that, unlike England, Scotland or Northern Ireland, we in Wales have never had any objective 1 funding. It is time that changed, and I hope that it will later this year with the announcement for the period 2000 to 2006.

What will happen if we get objective 1 funding? May we assume that the additionality rule will apply and that such funding will be over and above current expenditure patterns? If so, it would logically be over and above the Barnett formula. Will the Minister confirm that? If we need to find 25 per cent. matching funds to trigger the objective 1 money, will they have to come from within the Barnett formula; and will there be enough to meet that cost without depriving other necessary social projects?

Can the Minister give an idea of the timetable for objective 1 decisions? Can he confirm that Eurostat accepts the east-west NUTS 2 map, as I think he can? Will he confirm that 75 per cent. of GDP per capita will still be the threshold for objective 1 eligibility? Will he clarify the financial implications for the assembly and ensure that a beefed-up Welsh Office team will work on projects to take advantage of objective 1 money for disadvantaged parts of Wales?

Will the Minister clarify the position on the new regional policy map? When can we expect the details? I realise that that is not a Welsh Office decision, but it is no doubt involved in discussions. Does he accept that the UK regional map should reflect the UK NUTS 2 bid, as in all logic it should? We hope that significantly more than 15 per cent. of the population will be in the new development areas.

On direct public spending programmes, will the Minister take note of the great dissatisfaction among local job seekers and local subcontractors about the way in which capital projects are managed? In many disadvantaged parts of Wales, for significant capital projects such as the A5 scheme across Anglesey the companies with the contracts bring in their workers with them. It is not only the key workers; we realise that they must come. They also bring people in to do work when local unemployed people could equally well do it. They give subcontracts to outside companies when local companies could do the work.

I realise that the European Union public contract rules tie the hands of central and local government but there must be some way of maximising local employment from such projects. Unless that is done, we lose half the benefit of the investment programmes. If Wales is to get objective 1 status, the objective is surely to raise the standard of living in these areas, not to let the benefit leach away and so lose the maximum impact in the NUTS 2 and objective 1 areas. I hope that the Minister will consider that.

We hope that the Welsh Office will create a new European project department that has some clue about how to use European funds to the maximum benefit of disadvantaged areas. The main issue is how those resources can create long-term self-regenerative economic activity in such areas to ensure that they develop in a way that makes subsidy and grants unnecessary, as Ireland has succeeded in doing. I acknowledge that Ireland has not yet distributed its new-gained wealth to eliminate its pockets of acute poverty.

These are the basic issues. In our disadvantaged areas, how do we ensure that we maintain and expand employment in existing enterprises in manufacturing, agriculture and services? How do we make them more efficient to give better rewards? How do we create more indigenous enterprises and innovation? How do we attract inward investment to disadvantaged areas and create in them the social infrastructure that enhances the quality of life? What is the role of public expenditure in creating industrial, transport and communications infrastructure? How do we adapt UK and EU regional policy to that end? Can that ever be a priority here in London; and shall we have the vision, drive and resources for it to be an effective priority in the Welsh assembly?

We give the Welsh Office credit for recognising the size of the problem, but we are far from convinced that it is providing the answers. We do not believe that it is possible to create 260,000 new jobs and increase GDP per head by 40 per cent. in an environmentally sustainable manner without higher public spending. We suspect that the Welsh Office ministerial team share that misgiving but are constrained by Treasury rules. "Pathway To Prosperity" ends on a significant note. Paragraph 9.6 states:

"Our success in achieving the vision will be judged against how well we do in closing the GDP gap, raising employment rates, increasing average earnings, and spreading prosperity."

We shall indeed judge the Government by those criteria. We look forward to working in our national assembly to achieve what Westminster has so far manifestly failed to deliver.

11.25 am

I congratulate the right hon. Member for Caernarfon (Mr. Wigley) on raising this subject. It concerns all hon. Members that there is gross imbalance in the Welsh economy.

When I came to the House in 1964, regional policy was based on a uniform system. There were development areas, and the rest of the country. Areas had development area status or nothing. As a Back Bencher, I argued that parts of the development areas were as much worse than their neighbours within those areas as the development areas were worse than, say, south-east England. We therefore needed a differentiated regional policy. I was lucky as a Minister in the Department of Economic Affairs in 1967 to be able to take my proposition through Cabinet Committee. That led to the creation of the special development areas that were so valuable to the valley communities while they were allowed to exist. They were destroyed by the previous Administration, however.

What worries me is that I am more depressed today than I was in 1964 when I was arguing for differentiated policy. I jotted some points down as I listened to the right hon. Member for Caernarfon. I am sorry that my remarks are not as structured as his speech was. He mentioned the 200,000 job shortfall. That conceals a problem in itself. The important thing is that the shortfall is not uniform across Wales. Most of it is in the areas that hon. Members here today represent. That is an internal problem of imbalance within Wales. The Cardiff area is doing relatively well, and I am delighted that it is. I find it incredible that Swansea, which was once a sub-regional hub of industrial development, now has some of the most deprived wards in Wales. Hon. Members present can cite wards in their constituencies in the same situation.

The job shortfall is not evenly spread throughout Wales, but is concentrated in the areas that have the least prospect of being able to make up the shortfall. It is not only that there has been job loss but that there has been a downgrading of jobs. New jobs have in general not matched the quality of the jobs that have gone. Well-paid, skilled and manufacturing jobs have been replaced by part-time and low-paid jobs. Welcome as such jobs are, it is implicit that the ability of the areas that have experienced this to pull themselves up by their own shoestrings is diminishing. As income levels in those areas go down, their ability to generate redevelopment becomes increasingly dependent on resources from outside.

My right hon. Friend provides a telling description of the dilemmas facing communities such as mine. I was astonished that the press and other media did not record more prominently the stark and startling 200,000 jobs gap. So that we can get an impression of how much of a mountain that is, can my right hon. Friend tell us what is the averaged and annual net job creation over the past 10 years?

I have to confess that I do not have that information immediately to hand, but if my hon. Friend would give me two or three minutes, I am sure that I could produce it. My right hon. and hon. Friends on the Treasury Bench have access to the collective wisdom in the Box in the corner, so perhaps they can come up with those figures by the end of the debate. My hon. Friend is absolutely right to say that it is important that we should have that information, so perhaps the Under-Secretary of State for Wales, my hon. Friend the Member for Neath (Mr. Hain), can produce it when he winds up the debate. If he cannot, I have no doubt that he will provide the answer in a parliamentary answer as soon as possible.

The structural imbalance is sad, because it is a divisive force in Wales. We do not want Cardiff and the rest of Wales to be turned against each other. I rejoice in the prosperity that Cardiff and the south-east have in prospect; but to return to the comments of the right hon. Member for Caernarfon about resources, that prosperity has been achieved by an abnormal distortion in the flow of resources within Wales. We know that massive sums from the public purse have been put into the Cardiff bay development. That has been a success—as the Welsh Office rightly boasts, it has also drawn in £800 million or more in private funds—but when one adds the massive injection of lottery money, one can see how Cardiff has become what I would describe as a black hole: it has developed the capacity to draw in all the significant new developments that come to Wales.

My right hon. Friend makes the point that Cardiff is heavily dependent on public expenditure. Does he agree that some of that is old-fashioned public expenditure, in hospitals, universities, the BBC and other fields; and that that is where the danger lies, because restrictions on public expenditure could affect Cardiff's GDP?

My right hon. Friend is absolutely correct. One does not solve the problems of deprivation in an area as large as Wales without matching needs with resources.

I hope that my hon. Friend the Member for Merthyr Tydfil and Rhymney will forgive me for saying that part of the problem is that the valley communities, for example, were created as artificial economic units, bringing to previously sparsely populated areas people to drag the coal out of the ground. When we stopped mining the coal, economic logic ceased to be in the communities' favour. One needs only to look at an Automobile Association motorway map to see where the economic strength in Wales lies—at the focal point of all the motorways and of the Severn bridge.

All roads lead to Merthyr.

I desperately hope that Merthyr, too, will enjoy all the benefits that are currently flowing to Cardiff, but the fact is that, in addition to that capital and resource inflow, the south-east benefits from its strength of location, with its distribution network leading via the M5 and the M4 to the north of England, middle England, the east of England and the continent.

That enormous advantage is, as I said, creating a development black hole, which presents the rest of Wales with a double problem: we are in danger of being wedged in, because although we talk about what Ireland has achieved, we tend to forget that Ireland is our competitor. Those of us who represent western areas of Wales, not just the south-west, are competing against the attractions that Cardiff has to offer and against the massive incentives that Ireland has to offer. I remember my hon. Friend the Member for Merthyr Tydfil and Rhymney telling me that the ratio of European Community funds per head flowing into Ireland compared with Wales is about 5:1.

Recently, it looked as though Swansea was going to get a worthwhile electronic development, but we lost it. The Welsh Development Agency has suggested to me that the reason why that happened was not only the incentives that Ireland offered, but the fact that Ireland's tax regime is far more favourable to investment than is ours. It seems to me that that is a matter which we can solve without worrying about the EC. I recognise the constraints on Ministers and I know that, in respect of regional policy and incentives, we are in an EEC straitjacket—but we are free to set tax policy. When I was in charge of regional policy and inward investment in the last three years of a 1970s Labour Administration, we had the best tax regime of anywhere in Europe, with optional one-year 100 per cent. write-off with roll-on facilities, so a firm could choose the form of depreciation and write off that which best suited it. That enabled us to get a disproportionate share of new industry.

Ireland now occupies that position. It has probably the most benign tax regime in Europe, in addition to its regional incentives. The result is that new industry that looks beyond Cardiff has to ask itself whether it wants to go to the relatively low incentives available in west Wales, or whether it might as well go that little bit further and enjoy the tax regime plus high incentives available in Ireland. We are negotiating from a position of weakness, which is why it is essential that we do not lose out in the current negotiations in Brussels on the objective 1 status that Wales so desperately needs to keep. I welcome the announcement made by my right hon. Friend the Secretary of State about what appears to be a marked improvement in our prospects in those negotiations.

Let me conclude on the following point. Recently, my right hon. Friend the Secretary of State devised the term "powerhouse"; but a powerhouse that is created purely by merging three existing quangos, without providing extra resources, is a form of support that is only a marginal improvement on what was there before. All that can be achieved is a few efficiency gains. If a powerhouse is to work, it has to have power; and in this context, power is resources. I know that my right hon. Friend has been fighting his corner in the Cabinet, but so has every other Minister. We will see the result in the near future. It is important to recognise that the powerhouse is symbolic unless it has the resources to match the needs with which we expect it to deal.

11.39 am

I congratulate the right hon. Member for Caernarfon (Mr. Wigley) on introducing this subject to the House. As we well know, there are many disadvantaged areas of Wales, including the valleys, Pembroke dock, Llandudno junction and areas to the west and the north as well as rural areas such as Powys and west Wales.

Rural and urban disadvantaged areas share similar problems in some respects, but there are causes and effects specific to certain areas. The key signs are poor housing, failure in education and training and, in many parts of Wales, low aspiration. That is a sad commentary.

The economy is the key to improving those social problems. The document published yesterday, "Pathway to Prosperity", is to be welcomed as far as it goes, but it does not tackle the issues of rural Wales comprehensively enough. It does not provide information or data specific to the area that I represent, which is Powys. Powys is lumped with Dyfed. I should like to know why no figures are available for Powys. It is a unitary authority. Will the Minister confirm that the Welsh Office does not intend to provide individual figures for the county of Powys? Why is it being ignored? The Office for National Statistics has the figures and I understand that it consulted civil servants in the Welsh Office, only to be told that the figures were not required.

I led a campaign in the early 1990s, when the previous Government were in office, to obtain economic indicators for Powys. I was told then that they were not available. I warn the Minister that I will bombard his Department with questions to get the answers as soon as possible because it is a serious matter. We need those indicators to quantify the problems.

The economies of disadvantaged areas of Wales must be addressed if Wales is to be successful within a United Kingdom and European context. According to 1995 figures, the weekly wage for males in Wales was £331: the figure for Powys was £278. As a result of work done by Bristol university, we know that in some areas of Powys, such as parts of Newtown and Cwmtwrch in my constituency, wages are as low as £159 and that in Ystradgynlais they are £188 per week. The average in Powys is £100 per week less than the UK average and that does not include figures for those who are not earning. These areas are really disadvantaged. According to Welsh Office reckoning, the whole of Wales must surely be disadvantaged, except the south-east and perhaps some corners of the north-east.

The economic disadvantage that exists already is worsened by the migration of educated young people. In mid-Wales, many young people leave at the start of their economically active life, as a result of which we cannot foster enough locally based entrepreneurs. I am glad that the document produced yesterday will address that problem.

In rural areas, there are many people over the age of retirement—20 per cent. is a common figure in many parts of rural Wales. Large sectors of the population are not economically active enough and place a huge strain on local public services.

There is very little mention in the document of the agriculture crisis. We cannot blame that entirely on Welsh Office Ministers because Treasury policy on the strength of the pound has had a great impact on agriculture and on manufacturing industry, of which Wales has a higher percentage than any other part of Britain. It is difficult for anyone to export now. Last week, I visited a factory in Wrexham that produces JCB machines. I was astonished to find that most of the parts that it uses are imported from Turkey. Eighteen months ago, the factory obtained 20 per cent. of its parts from Britain, but it now imports 80 per cent. of its parts for transmissions. That is a big problem and is a result of Treasury rather than Welsh Office policy. It demonstrates how hamstrung we are.

The agriculture crisis is felt throughout the rural economy in support and service industries. We have a low-wage economy with low expectations. Urban areas of Wales face problems of higher unemployment. Many parts of rural Wales do not have such high unemployment, but that is partly because of the migration of many of our young people. There is a lack of job security in urban Wales with low-wage, low-skill jobs. Many social problems stem from that, as the document recognises. Bad housing, low educational achievement and so on must be put right, but it is a mammoth task.

The document, "Pathway to Prosperity", and the economic proposals were announced to the press yesterday, but not to Members of the House. I had to seek out the information from the press. The electronic revolution may be proceeding well in Wales, but nothing came through on my fax machine or e-mail to tell me about the announcement. I looked for it on Monday when it became obvious that there was a planted question, but we did not hear anything until the middle of yesterday afternoon. It was announced by an all-Wales electronic network known as Link-up, of which I heartily approve, but some hon. Members struggled to find the information yesterday.

I want to address specifically the issue of average earnings, which is a problem that is hanging round our necks. Many jobs in rural areas, particularly in Powys, are manual and are agriculture related. What targets does the Welsh Office have for manual workers, or are they not in the equation? The economic powerhouse must regenerate the whole of the Welsh economy, both urban and rural.

Money for home improvements—

I apologise for intervening, but it is important to record the fact that "Pathway to Prosperity" was available to Members of Parliament at the same time as it was to the press conference. A parliamentary question was also answered at that time.

I acknowledge what the Minister says, but we expected the document on Monday—it slipped out yesterday. We were not aware of its existence until well into the day. I have just been told that envelopes were made available during the morning, and, if that is true I apologise. I was not aware of that, and neither was the Vote Office because, when I asked for the document, it did not know that it existed. There is something wrong somewhere, as they say in some parts of the press.

I want to move on because many hon. Members want to speak. A Welsh Office Omnibus survey carried out in 1995 showed that almost a third of households in Powys suffered from some social deprivation and that almost one in six households suffered from material deprivation. Those figures were much higher than for Wales as a whole and they were much higher than for Dyfed. As I said, in many economic indicators for Wales, Powys is lumped with Dyfed. For example, the GDP figure is averaged out at 76 per cent. for Dyfed and Powys combined. That is not a satisfactory way to proceed and it must be put right.

The right hon. Member for Caernarfon stressed the needs of the valleys and west Wales. I am well aware of those because I lived in west Wales for many years. However, the needs of Powys are being lumped in with a NUTS 2 area excluded from Powys. We are not in the same income league as north-east or south-east Wales. We have many needs, but have practically no infrastructure—we do not know what an A55 or a motorway is.

What representations has the hon. Gentleman made to the Welsh Office for his county? Is he aware that the hon. Member for Meirionnydd Nant Conwy (Mr. Llwyd), my hon. Friends the Members for Clwyd, West (Mr. Thomas) and for Clwyd, South (Mr. Jones) and I made strong representations to the Welsh Office at the 11th hour and managed to get Denbighshire and Conwy included in the objective 1 bid? What measures did the hon. Gentleman take to ensure that his county was included?

The only official figure was 76 per cent. of average GDP, which, as the hon. Gentleman will realise, does not qualify for objective 1 status. The figures for Powys are lumped in with those for Dyfed. The county council had to commission and pay for a special study by Bristol university to produce many of the statistics that I am quoting in the debate, and that is not good enough. I want the Minister to promise that Powys will be considered for objective 2 funding from European Union structural funds because that is vital.

In future, we want better statistics about Powys. We know that it is very difficult to collect data for Powys because it is the most rural area in Wales. None the less, we need them.

Does my hon. Friend agree that the people of Powys and we, as their representatives, have repeatedly impressed on Ministers, until they have probably become sick of hearing about them, the difficulties of rural poverty in our area and the need for objective 2 status?

I certainly agree with my hon. Friend.

I realise that time is short, but I want to address one or two important issues; otherwise, as an agriculturist, I should be doing less than justice to the present crisis in rural areas. We are approaching common agricultural policy reform, which is very important for our family farms. CAP reform, as it affects rural Wales, must take into account the family farm structure, which differs from that in England. We must examine modulation and direct payments to farmers in the context of CAP reform. Direct payments will certainly be allowable within the context, for example, of the World Trade Organisation negotiations. It is vital that our family farm structure is maintained.

In the past two years, farm incomes have reduced by 90 per cent. Many of our farms are no longer viable—in fact, at DM3 to the pound, they are bankrupt. All these issues are causing enormous stress to farming families in rural Wales. I beg Welsh Office Ministers to influence the Chancellor to change his policy of high interest rates and high valuation of the pound to assist agriculture.

We are also having great problems with the domination of the supermarkets in purchasing livestock throughout Wales. I should be grateful if Ministers would take account of the Welsh Affairs Select Committee's report, which called for an investigation by the Office of Fair Trading, particularly into the marketing of meat through supermarket outlets and the possible problem of excess profits being made in that way and rock-bottom prices being received for livestock in markets in Wales.

We need—I am grateful that this is recognised in the "Pathway to Prosperity" document—much more effort in co-operative marketing of Welsh produce from our farms and added value for that produce so that more income can be generated in rural areas. That matter needs urgent action.

The creation of the Welsh Assembly and its start-up next year will undoubtedly assist the economy of rural Wales. The assembly's committees, particularly those that will focus on economic development in conjunction with the strategy for the Welsh Development Agency and the powerhouse, will certainly bring great benefit. However, those plans are long term—perhaps too long term for some parts of Wales that need immediate assistance.

The quangos must be made more democratic and responsive to the needs of many parts of rural Wales. I make a special plea for our local authorities, which need much more assistance and more generous support from the Welsh Office. I hope that Ministers succeed in their negotiations with the Treasury for the block grant so that local authorities can have greater assistance in the coming financial year. The Government will, I hope, propose targets for greater activity by local authorities, which have huge responsibilities throughout Wales and which, on the whole, have an excellent record of doing a good job.

Once again, I make a plea to the Minister on behalf of rural areas. In the past three months, 86 jobs have been lost in Powys from rural businesses. That may not sound like many, but if one examines the statistics, one realises that 100 jobs lost in Powys are the equivalent of 1,000 jobs lost in Merthyr. Those jobs are a huge loss. Some agricultural merchants have closed, as have two machinery firms in Powys. A multinational company has closed its feed mill. Many such closures have occurred. They may not be writ large on the pages of the Western Mail or the Liverpool Daily Post, but they are severe blows to some of our more remote rural areas.

The assembly has a huge task to improve the lot of people living in disadvantaged areas of Wales. Much poverty in urban and rural Wales must be dealt with. I know that Ministers' hearts are in the right place, but we need action.

11.56 am

I congratulate the right hon. Member for Caernarfon (Mr. Wigley) on securing this important debate. I agreed with about 95 per cent. of what he said.

My county is hit particularly hard in a number of sectors. In the heavy industrial sector, we lost the Point of Ayr pit, which is on the outskirts of my constituency and used to employ 700 people. In the light industrial and service sectors, 1,500 jobs have been lost in my constituency in the past four months. Traditional British seaside tourism is in decline, which some say is terminal. Two of the biggest towns in my constituency—Rhyl and Prestatyn—have experienced that. Denbighshire has a large rural area which has suffered enormously in recent years. It has an abysmal record of attracting inward investment—that has created only 89 jobs in the past four years. I therefore share the opinions of the right hon. Member for Caernarfon.

I shall try to stress the positive aspects. We are very close to achieving objective 1 status for Wales. Last week's announcement by Eurostat that it has accepted the NUTS 2 map for Wales could provide the springboard for the long-term recovery of the Welsh economy. I am informed by Welsh Office civil servants that that would allow Wales to tap into £1.8 billion between 2000 and 2006. We have now jumped the biggest hurdle for achieving objective 1 status, but we are not there yet. Important negotiations must take place and decisions must be made before we have access to that money.

It is time to reflect on our success to date. Before we try to jump the final hurdles, we should assess our success so that we can go into the final straight invigorated and more determined than ever to secure the best possible deal for the people of Wales. There are many unsung heroes in the fight to gain objective 1 status. Many of the main movers have been castigated for their role. I want to take the opportunity to redress the imbalance and to mention a few of those key players.

I pay tribute to the work of the Under-Secretary of State for Wales, my hon. Friend the Member for Neath (Mr. Hain). I extend to him my heartfelt thanks, on behalf of the people of Denbighshire, for his decision to allow, at the 11th hour, Denbighshire and Conwy to be included in the objective 1 bid for Wales. My hon. Friend the Member for Conwy (Mrs. Williams)—who, unfortunately, is in hospital for two months—has asked me to pass on her heartfelt thanks on behalf of her constituents.

The acceptance of Denbighshire and Conwy has extended to two of the most economically crippled counties in Wales the opportunity to share in a huge aid package. I remind hon. Friends of the plight of those two counties. Conwy has had the worst record of foreign inward investment in Europe—no jobs have been created by foreign inward investment in the past five years. The county has the lowest pay rates in the country and the lowest gross domestic product in Wales. Denbighshire, my county, has experienced 1,500 job losses in the past four months—800 jobs at KwikSave Group, whose national headquarters in Prestatyn have relocated to Bristol, 180 jobs at Hotpoint, Bodelwyddan, and 50 jobs at Egatube in St. Asaph in the past eight weeks alone.

Some people urged my hon. Friend the Under-Secretary to forget about Denbighshire and Conwy because, they said, their inclusion so late in the day would threaten the objective 1 bid for the rest of Wales. They said, in ignorance, that the inclusion of Denbighshire and Conwy would raise the GDP level of the Welsh objective 1 bid above the crucial 75 per cent., which would have excluded us—despite the fact that Conwy has the lowest GDP in Wales. Some people said that Denbighshire and Conwy belonged to the prosperous north-east region or sphere of influence in Wales, and that to include the two counties would produce a NUTS 2 region that was not cohesive or coherent—despite the fact that, historically, geographically and linguistically, the two counties share more with west Wales, and therefore should be included in the west Wales and valleys bid.

My hon. Friends the Members for Conwy, for Clwyd, West (Mr. Thomas) and for Clwyd, South (Mr. Jones) and the hon. Member for Meirionnydd Nant Conwy (Mr. Llwyd) and I put the case for Denbighshire. My hon. Friends the Members for Conwy and for Clwyd, West and I countered the opposing arguments strongly with facts, figures and logical argument. Many of those opposed to the inclusion of Clwyd and Denbighshire would not listen. I am pleased to say that the Under-Secretary did listen. He listened carefully to our case and, after due deliberation, he included the two counties. Many were upset by that decision, but he stuck to his guns and did not waver in his support. He was truly a good shepherd, who looked after his entire flock, maximising the area and population covered by the Welsh objective 1 bid.

I pay tribute to the work of my right hon. Friend the Secretary of State for Wales. He spoke up in Cabinet for the Welsh case for objective 1 status. I commend him for the way in which he acquitted himself in that task. He carried the Welsh case forward, convincing his Cabinet colleagues and the Prime Minister that Wales had a fair and just case for objective 1 status. He had to do so in a Cabinet whose other members represented other areas that wanted objective 1 status.

The Secretary of State's calm and measured approach paid dividends. The Welsh case received the backing of the Cabinet and the Prime Minister. Some people openly criticised the Secretary of State for not being blatant, dogmatic and vociferous. If my right hon. Friend had adopted that approach, he would have jeopardised the Welsh case in Cabinet instead of aiding it. Many of those accusations were not responded to. He took the statesmanlike approach, put his country before political sniping and let the accusations go unchallenged, for to answer them would have distracted his attention from his main goal—that of achieving objective 1 status for Wales.

I congratulate other Ministers on their role in connection with the objective 1 bid, including the Minister for Small Firms, Trade and Industry, the Economic Secretary to the Treasury and the Minister for the Regions, Regeneration and Planning. Their guiding principle was "fairness not favours". They have shown themselves ready to hear the cases put by all Members of Parliament, from all areas and all political parties. Their every word and intonation on objective 1 matters was subjected to detailed examination. They have walked a political tightrope. Some hon. Members challenged those Ministers to declare openly their support for the Welsh objective 1 case. For a Minister to do so would probably have meant the end of that Minister's career, and it would definitely have meant the end of the Welsh objective 1 bid, because favouritism would have been seen to have preceded fairness.

I thank the individuals, institutions and organisations who provided the hard-headed facts that enabled the debate to progress. I include among them the staff of the Library—I do not know whether I am allowed to name any individual, but I especially want to mention Jane Dyson, now Jane Hough. I also want to mention Cardiff business school and the Wales European Centre. They provided the factual information that was lacking. I share the concern of the hon. Member for Brecon and Radnorshire (Mr. Livsey) at the paucity of factual information available. I believe that that was due to the fact that Wales experienced local government reorganisation, and those facts were not available on a unitary authority basis. However, the Library and others dug out the facts, enabling us to prove our case.

The purpose of my contribution has been to recognise our achievements to date and to pay tribute to those who have worked behind the scenes, out of the glare of publicity, carefully making the case for Wales. I hope that, by recognising and celebrating our achievements to date, we can go forward with high morale, refreshed and united, in the final stages of achieving objective 1 status for Wales.

12.6 pm

I congratulate my right hon. Friend the Member for Caernarfon (Mr. Wigley) on his good fortune in securing this debate, which allows many of us from many parts of Wales to make a contribution, and on the way in which he introduced the subject. The speeches that have been made from both sides of the Chamber have revealed much common ground.

I make common ground with the hon. Member for Vale of Clwyd (Mr. Ruane), who represents an area that I know extremely well. He put his case for objective 1 for his area forcefully and, obviously, successfully. Now that the European Commission and Eurostat have accepted the plan we are on our way, and we hope that an announcement will shortly be made on objective 1 status for west Wales and the valleys.

The comments of the right hon. Member for Swansea, West (Mr. Williams) struck a chord with me, especially when he spoke of jobs in rural Wales being lost and replaced by jobs of lower quality. That is a significant factor in the reduction of gross domestic product in many of the areas that we represent. The response of previous Governments to the loss of jobs in, for example, Trawsfynydd and Trecwn was to appoint task forces. I make a plea to the Minister to forget the idea of using task forces as a response to the loss of jobs in rural Wales. We need a coherent policy that replaces those jobs with jobs of equal quality, although we accept that there are difficulties in ensuring that that always happens.

I should like to respond specifically to a point that the President of the Board of Trade made in the statement on energy policy. My right hon. Friend the Member for Caernarfon alluded to the very high unemployment in Anglesey and to the fact that all parties—including the Labour party—fought the last election in Anglesey on a manifesto of support for a gas-fired power station at Porth yr Ogof on the Wylfa site. As the Under-Secretary knows, there was another application for Rhosgoch. Therefore, the statement gave rise to great disappointment.

In a letter to me, the President of the Board of Trade acknowledged that the people of Anglesey were disappointed by the Government's energy policy proposals, which will prevent that gas-fired power station from being built. That disappointment is tinged with anger because we had a plan, agreed by all parties, that would have created hundreds of construction jobs in the next few years, created 100 permanent jobs and secured the future of Anglesey Aluminium, the other major employer on the island. The announcement by the President of the Board of Trade has jeopardised not only the construction plan and permanent jobs in the energy sector but the long-term contract for Anglesey Aluminium.

I understand that the Minister will see an Anglesey deputation next week to examine those issues. I stress the importance of looking again at plans to build the gas-fired station in Anglesey. It may be difficult for British Nuclear Fuels to do that itself, and it has highlighted the reasons for that. It is hard for a wholly owned Government company to breach the Government's energy plan. However, there is no reason why the plan could not be transferred to the private sector for section 36 consent. I ask the Minister to respond to Anglesey's concerns. If the path to prosperity is to be meaningful, quality jobs must be created in places such as Anglesey.

12.10 pm

I am grateful for the opportunity to contribute to this important debate. I congratulate the right hon. Member for Caernarfon (Mr. Wigley) on securing the debate. It was wonderful to hear the old orthodoxy in his speech. Labour may have dropped socialism, but it is good to know that Plaid Cymru has picked up the torch and is running strongly with it.

I shall split my speech into several parts, but I do not want to rehash the speech that I may make next week in Merthyr Tydfil when we discuss the economic agenda for Wales. That is especially important because of the publication of "Pathways to Prosperity". It was not one of my most gripping reads and I have condemned it as being next to useless. It is full of apple pie and spin and has more waffle than Bird's Eye. Wales needs action, not rhetoric, which is what that document contains.

Wales came a long way during the 18 years of Conservative government. Before that, in 1970, some 270,000 people were employed in mining, but the figure is now down to 2,000. More than 30,000 jobs have been lost since the 1970s. Many jobs have transferred from heavy industry and mining to the public service, other service industries and tourism. Manufacturing is vital in Wales; I shall speak later about that.

We must consider the economic context in which Wales operates. The Government have inherited the longest period of low inflation for 50 years and faster growth and lower unemployment than in any other major European Union country. Britain was winning the lion's share of inward investment from outside the EU. With 5 per cent. of Britain's population, Wales gained 20 per cent. of that investment, but not enough of it was spread to west, north-west and south-west Wales. Much of it went to the M4 and A55 corridors.

I welcome the fact that the shift in investment emphasis started when my right hon. Friend the Member for Richmond, Yorks (Mr. Hague) was Secretary of State for Wales. He ensured that it was more evenly spread and that there was greater emphasis on the Welsh Development Agency. One of its great challenges when it is turned into an economic powerhouse will be to compete with regional development agencies in England.

The golden legacy that I have mentioned is being wasted, frittered away. For the first time in many months unemployment is rising, and is doing so even before the introduction of the minimum wage. The Economist of 20 June stated:

"Ministers may make the situation worse in a number of ways: imposing a minimum wage will add to labour costs without any guarantee of improved productivity…By setting out his spending plans so far in advance Mr. Brown seems to have ruled out using fiscal policy to help bring the economy smoothly down to earth, leaving the bank to do the job alone by means of interest rates".

Interest rates have risen six times in the past 14 months, and it is pointless to blame the Monetary Policy Committee under Eddie George because the Government set that up with the emphasis on controlling inflation, which is now rising. The target has been missed 12 times out of 13, and there is a threat that interest rates will rise again. If that happens, Welsh businesses, especially the smaller businesses of west and north-west Wales, will be hit again. Inflation is bad for their ability to predict, and higher interest rates are bad for those with loans and overdrafts. The minimum wage will have a knock-on effect on differentials, and the high pound, which has been mentioned several times in the debate, is bad for exports.

I spoke about the importance of manufacturing. The publication "Pathways to Prosperity" states that manufacturing accounts for 28 per cent. of the Welsh GDP. The strong pound is hitting exports, and higher interest rates mean a stronger pound. A non-competitive pound makes our exporters less able to compete with those in the rest of the EU. A CBI survey shows that export orders for May and June were the lowest since January 1983. In a document that it sent to me, the Federation of Small Businesses recommends the introduction of an export promotion board.

"Pathways to Prosperity" states that the Government will try to bring together a number of agencies so that there will be a one-stop shop and advice centre for exporters and those who want to export, It is said that that will be introduced at the end of this year, but manufacturers face problems now and cannot wait until then. I urge the Minister to bring that plan forward to ensure that as much support as possible is given to Welsh firms that could benefit from an increase in exports. If they can increase exports, more jobs will be created throughout Wales.

The right hon. Member for Swansea, West (Mr. Williams) spoke about investment in Cardiff. We welcome that tremendous success, but we must ensure that investment spreads to the rest of Wales. One of the local Welsh newspapers reported that about £110 million is to be invested in redeveloping Swansea city centre. I hope that that is a success and that it will attract more jobs to Swansea and, as a result of the ripple effect, to west Wales.

The Federation of Small Businesses also seeks a development bank for Wales to help indigenous firms. It is excellent that 20 per cent. of inward investment comes to Wales, but indigenous firms must be enabled to grow. In a letter to me, the federation states:

"Many small businesses currently find borrowing money over the medium term impossible because either the banks do not offer such facilities or the repayment conditions place an excessively heavy demand on cash flow. A development bank for Wales would ensure a greater degree of certainty that borrowing terms would be affected by cyclical factors such as inflation, recession or a housing market slump."

Farming is another disadvantaged sector in Wales. A press release from Bob Parry of the Farmers Union of Wales refers to the rally in Cardiff at the time of the European summit. It states:

"Farmers must stand together and fight for their rights against the hostility shown to the countryside by some senior members of the Government."

He condemned the Minister of Agriculture, Fisheries and Food and said that farm incomes in some places had fallen by 89 per cent. The press release continued:

"He is responsible for agriculture in the UK, but seems more interested in cutting costs and guarding the purse strings of the Treasury. He is the enemy within. Chancellor Gordon Brown is keeping a miserly grip on spending despite the overwhelming crisis that threatens to engulf our industry. Prime Minister Tony Blair is presiding over this farce as the entire fabric of rural life in Wales is torn to shreds."

On Monday, I was in Welshpool, where I spoke to some farmers from Smithfield. They have no doubt about who is responsible for this crisis—the Government. The Government must take urgent action to assist farmers in Wales before it is too late. It is already predicted that, if this carries on much longer, 8,000 more farming jobs will be lost in Wales. That must not be allowed to happen.

All that the report says about farming is that we should think about putting greater emphasis on organic farming. Farmers want to do the job that they set out to do. Many have done it for generations, yet all the Government can offer them is greater emphasis on organic farming. The Government are simply not listening.

The economic report talks again and again about education. It says that the Government need to invest more in education to ensure that more people in Wales get a better education, yet what do we see? Apart from the fact that we were promised lower class sizes, which are increasing in Wales, yesterday, the House of Lords threw back to this House the amendment that proposed that students in Wales, England and Northern Ireland should pay £1,000 extra if they go to Scottish universities—£1,000 more than students from Scotland, Milan and Catalonia.

That has to be wrong. I hope that the Minister will put great emphasis on that, and will have words with Ministers in the Department for Education and Employment and with the Prime Minister to ensure that we do not throw that amendment back to the House of Lords, but accept it. It is common sense and it will help all the people of Wales and Britain with their further education.

12.20 pm

I congratulate the right hon. Member for Caernarfon (Mr. Wigley) on securing this debate because it allows the Government to underline our absolute commitment to achieving economic prosperity for the whole of Wales.

May I immediately respond to the predictable tirade of the hon. Member for Ribble Valley (Mr. Evans)? Instead of being cheap and cheerful, he has become cheap and cheeky in his role in Welsh affairs. He attacked—I know that he is doing his job valiantly as an Opposition Member—"Pathway to Prosperity", saying that it is "next to useless." That is interesting. The document was written in careful partnership with the Confederation of British Industry, the Federation of Small Businesses, the Trades Union Congress, academics from the economic sector and others involved in the serious job of building the Welsh economy. The hon. Gentleman rejects it with a cheap and cheeky slogan.

The hon. Gentleman's Government presided over 20 years of destruction of west Wales and the valleys, from which we are now trying to recover and which the right hon. Member for Caernarfon addressed with great eloquence We never had an economic agenda from the Tory Government; it could have been written on the back of an envelope. At least we have produced 53 pages of closely argued analysis and action proposals, which need to be debated on their merits.

The higher pound is undoubtedly causing severe problems, especially for manufacturing exporters in Wales and elsewhere in Britain, but two thirds of the rise in the pound occurred under the Tory Government. The hon. Member for Ribble Valley cannot simply wish away or ignore that. I remind him that "Pathway to Prosperity" proposes detailed action plans, which we will have an opportunity to discuss next Monday in Merthyr Tydfil; in that sense, the pathway to prosperity leads to Merthyr Tydfil. We will address that when we get the opportunity.

I apologise on behalf of my right hon. Friend the Secretary of State for Wales, who is unable to be here for the whole debate, but he assures me that he will carefully read all the speeches—with the exception perhaps of the previous one—for the detailed points that they make, especially the speeches of my right hon. Friend the Member for Swansea, West (Mr. Williams), which included some valid points, and of the hon. Member for Brecon and Radnorshire (Mr. Livsey). I look forward to being bombarded with questions about statistics, but I tell the hon. Member for Brecon and Radnorshire that Powys will be a separate NUTS 3 area, so the Office for National Statistics has been asked by the Welsh Office to supply detailed figures, including those on gross domestic product, for Powys. I hope that that will therefore absolve him from the obligation to bombard me, and absolve me from the obligation to reply to him.

Anyone who has read "Pathway to Prosperity" will have been struck forcefully by the enormous job gap figure of 200,000. Earlier, I intervened on my right hon. Friend the Member for Swansea, West (Mr. Williams) to ask how we can measure that job gap by net job creation in Wales over the past 10 years. I do not know whether the Minister can reply to that point today, but, if he comes to Merthyr Tydfil, I hope that he will have an answer.

The broad answer to my hon. Friend's point is that, if we had the Tory strategy on job growth, it would take another 40 years to make up that gap, so it is not a strategy at all.

The hon. Member for Ynys Môn (Mr. Jones) understandably raised important points about Anglesey, particularly the future of Anglesey Aluminium. As the Minister most immediately responsible, and having worked with the Secretary of State, I assure the hon. Gentleman that we have been determined to protect the future of Anglesey Aluminium in particular, which is crucial to the local economy. I am confident that we will be able to do that and to secure its energy supply at a relatively cheap rate, if not at exactly the rate that it has enjoyed, which it was not expecting to maintain. Therefore, I do not think that there is doom and gloom ahead for Anglesey in general, or for Anglesey Aluminium in particular.

I express my gratitude to my hon. Friend the Member for Vale of Clwyd (Mr. Ruane) for his contribution and especially for the expert way in which he identified the plight of Conwy and Denbighshire.

Nearly two decades of woeful neglect have produced a real crisis in west Wales and the valleys. There has been a dramatic change in the economic and social fabric of Wales over the past two decades: rather than the historic north-south divide, there is now an east-west divide. That has been confirmed by an authoritative analysis from the department of city and regional planning at Cardiff university, which I understand is to be published next week.

I was particularly grateful that the European Commission has now designated west Wales and the south Wales valleys as a single NUTS 2 area and, in so doing, has recognised the new realities of the Welsh economy.

I agree with many of the points that the right hon. Member for Caernarfon made, and join him in rejecting the Thatcherite free-market approach that plunged Wales into such difficulty over 20 years. I gently point out that his contribution was strong on analysis, but weak on the action that he called for us to provide. I hope that when he inspects this pamphlet before making his speech in Merthyr—which, as my hon. Friend the Member for Merthyr Tydfil and Rhymney (Mr. Rowlands) always reminds me, is the centre of the industrial revolution—he will read some of our detailed proposals and discuss them on their merits.

My main criticism was the lack of resources. Will the Minister confirm whether there is any additional money to turn this into reality?

There is much money; indeed, tens of millions of pounds, if not hundreds of millions, is embedded in this strategy, but I point out that, next week, an announcement is due to be made by my right hon. Friend the Chancellor of the Exchequer on the comprehensive spending review, and the right hon. Gentleman would not expect me to anticipate that—at least not if I wanted to stay in this job.

GDP per head in west Wales and the valleys NUTS 2 area is about 72 per cent. of the European Union average. It is one of poorest areas of Europe, as the right hon. Gentleman rightly pointed out. That compares with the east Wales GDP per head, which is over 90 per cent. of the average.

A third of the working age population are jobless. They may or may not be on the unemployment register, but they are without work. In areas such as Pembrokeshire and Anglesey, the official male unemployment rate is more than twice as high as for the rest of Wales. Even those in work suffer among the lowest wage rates in Britain. Ill health and disability is rife in the south Wales valleys in particular, where the rate of limiting long-term illness is more than 60 per cent. higher than the Great Britain rate. That is a terrible indictment.

Those problems have been at the forefront of our thinking on the analysis in "Pathway to Prosperity", our new economic agenda for Wales, which the Government published yesterday. We did so for the first time with a video link conference throughout Wales. The Secretary of State was able to take questions, including some from Caernarfon, Wrexham, Newtown and Newcastle Emlyn, not forgetting Swansea. The chief executive of Gwynedd county council welcomed the document, and we are grateful for that.

The document is an important milestone and there will be a full opportunity to debate it next Monday. One of its themes is the need for a pronounced and decisive shift of effort to those areas that are most in need, notably west Wales and the valleys. The area must have the infrastructure that it needs, key industries must be fostered, small businesses must receive the support that they need to grow, and communities and individuals must be given the opportunity and facilities to sustain them. This programme depends on a powerful and productive partnership between the public and private sectors and we are determined to secure one.

Concern has been expressed about tourism. I fully acknowledge that the Welsh tourist industry, which is vital to the economy of west Wales, is under real pressure. Increasing competition—

Order.

Illegal Encampments

12.30 pm

Every year, with the onset of spring and summer—although this year the onset of summer has been some time coming—all elected representatives begin to fear one particular telephone call. It usually comes on a Saturday evening, and it is that some 30 caravans have descended on one of the public spaces in our constituency. We are asked, "What are you going to do about it?"

The problem arises every year and we try to deal with it. Once summer has passed and the pressure eases off, the determination to work out a defined plan goes with it. Therefore, I am grateful for the opportunity to raise the matter today, more in anticipation of difficulties in Birmingham—which we have experienced from year to year—rather than because there is an acute problem.

I chose "Illegal Encampments" as the title of the debate quite deliberately. I am not referring to Romanies and other people with an alternative life style, who have the right to be protected. They have the right to expect us to treat them as seriously as we treat our constituents. I am talking about cowboy builders and traders who use mobile phones to do business from public sites. They cause havoc for neighbouring communities. They cannot be traced when anything goes wrong—they move on and leave devastation behind.

I shall never forget the Ley Hill estate last summer, when some 30 caravans and their owners occupied one of the parks. The devastation they caused was more like an invasion of the original tribe of the Vandals than the pursuit of an alternative life style. The village hall's windows were smashed and wooden fences were ripped apart. Several cars were dismantled and torched; one caravan was gutted and dismantled. They even left bits of kitchen units behind. I had some difficulty explaining how they came to be there. They also left behind soiled clothes and general household rubbish. There was fly tipping. My powers of description are inadequate, but I know that hon. Members will be familiar with the scene that I am trying to describe.

I am talking about cowboy builders and tradesmen, unsafe working practices, stray dogs, noise nuisance from generators and fly tipping of commercial as well as domestic waste. Local residents feel threatened, intimidated and helpless. They turn to us and say, "What are you going to do about it?" If a local authority serves notice, the whole process of eviction can take up to 10 days. That may not seem a long time, but try living next to one of these sites and 10 days is a very long time.

The problem appears to be seasonal; during the summer, tarmacing and double glazing businesses are pursued from public spaces. During the winter months, the traders move to more permanent and, I assume, more comfortable surroundings.

I know that some of my hon. Friends feel that it is not especially useful to try to draw a distinction between real travellers and cowboy business men with their anti-social behaviour. I understand that it may be difficult to define that distinction in legislation, but I can assure the House that our constituents do not care a great deal about the finer legalistic difficulties; they are exposed to nuisance and they want us to deal with it.

Does my hon. Friend accept that part of the problem is that the Criminal Justice and Public Order Act 1994 means that local authorities have to deal with the problem on an individual basis? Could not part of the solution be a return to a designated area, which might solve some of the problems she has described?

I accept my hon. Friend's point and I am grateful to him for raising it.

How much of a problem are illegal encampments? Birmingham city council suggests that the number of encampments is not rising, but the number of complaints is. There is a little sophistry here—if the number of complaints is rising it is because people are getting very tired of the absence of any co-ordinated action. The council also made the point, which I accept, that, as the city has changed and there are now fewer derelict factory sites—which the travellers used to use—travellers have moved to more publicly visible spaces, which has provoked a more open public response.

The council also suggested that, because of public hostility, travellers feel the need to travel in larger groups for security. I accept that, but the travellers are not an homogenous group. People who want to pursue an alternative life style, such as gipsies, may want to travel in larger groups, but cowboy business men do not need to do that.

No evidence from national figures is available. When I raised the issue with the council, it said that when travellers are moved on they simply go to another area and cause the same problems there, which does not resolve the underlying problem. I am reluctant to accept that. We have no national figures that show the true extent of displacement, but I am convinced that a significant section of the transient business community could be discouraged from continuing with the practice.

When travellers descend on public spaces, where do we ask them to go? Birmingham has two properly supervised sites—one run by the local authority, the other private. One is in Castle Vale, the other in Aston. They can accommodate some 20 vans. However, I am far from convinced that the sites are properly managed. At one, internecine disputes between groups of travellers means that the minute one group moves on, warfare breaks out. I understand that the National Gypsy Council tried to intervene. One of my colleagues has told me that some of the travellers are on the electoral register, with the caravan site as their address. That gives a degree of permanency to the sites, which is not what was intended. The sites in Birmingham are not properly used.

When there is an invasion of a public space and the travellers move on after 10 days, at the most, we are left with the bill for clearing up. Birmingham city council has spent £300,000 over the past two years on clearing up such public spaces. That is unacceptable.

I understand that, in the last week of June, 20 caravans were illegally parked—compared with 70 last year. I have some doubts about the comprehensiveness of the figures. Perhaps one reason for this year's figure being slightly lower is the particularly successful police operation at Woodgate Valley country park a few weeks ago. Some 30 caravans were on the move and local residents tipped off the police. When the travellers reached the park, they began to dismantle a wooden fence. The police arrived and Inspector Pepper told them that they could either face charges of criminal damage—they had been caught red handed—or they might like to move on. They decided that, on balance, they would like to move on.

What would happen if the police brought criminal damage charges against 30 caravan owners? They have the power to impound some of the vehicles, but if the owners are charged and taken to the police station, the administration is time consuming and bureaucratic and probably will not help in the long run.

I fully support my hon. Friend's argument and should like to add a further point to the one she has been making. In Hertfordshire, we have similar problems with encampments, which impose substantial costs not only on the police and local councils, but on private individuals. A number of private individuals in my constituency have incurred considerable expense either making security arrangements to stop people encamping on their land or remedying the effects of such encampments. Harassment of many members of the local population when dealing with travellers is another problem. Does my hon. Friend think that that is also a problem in her area?

Yes, I can confirm that it is a problem in my area. Some of the remedies that I should like the Minister to consider would address the problems of both private individuals and local authorities. My hon. Friend's intervention was therefore very timely.

Speed—being on the spot almost immediately—is the essence of resolving the problem, as it is almost too late once an encampment has been established. We have to have good co-ordinated action involving a variety of agencies, which must act simultaneously and with one purpose. We also require good local intelligence—perhaps almost as an extension of neighbourhood watch schemes.

We must also not overlook the availability of properly supervised traveller sites. Such provision is essential. It is perhaps a pity that local authorities are no longer under a statutory duty to provide sites. Nevertheless, as I said, I do not accept that lack of sites in Birmingham can be used to justify lack of action. The problem is one of supervision.

Birmingham city council has not entirely ignored the problem, and I give it credit for the advances that it has made. The council has committed £108,000 to secure—as my hon. Friend the Member for Welwyn Hatfield (Miss Johnson) described—five public open spaces that have frequently been used by travellers. Although, unfortunately, all five sites are outside my constituency, I shall certainly continue to press for securing the more vulnerable ones.

Two of those sites are among about five in my constituency that are regularly abused by itinerants. I hope that the Government's Crime and Disorder Bill—which puts responsibility on councils, in partnership with police and local organisations—will show that partnerships are one way of preventing such illegal trespassing, which is what it is, and finding swifter means, by building local crime action plans, to combat trespassing when it happens.

I am grateful for my hon. Friend's intervention. I very much support his comments.

Although securing sites by installing concrete bollards, for example, is useful, it is only a delaying tactic.

Although I am aware that my hon. Friend has to finish her speech, I should like to say that one of the sites—Barnes hill—is in my constituency. She will be aware that it is a great tribute to the area's residents that security measures are now being installed there. They co-operated with the local council and me to ensure that scenes of devastation such as she saw in Ley Hill could not happen there. Does she agree that our hon. Friend the Member for Birmingham, Erdington (Mr. Corbett) is right: we need better co-ordination, which must operate both inside and outside working hours? All too often, the system seems to grind to a halt once 5 o'clock comes along.

I thank my hon. Friend. He is absolutely right.

Do we—as we are constantly told—require new legislation? Birmingham city council's environmental services committee presented proposals to Birmingham Members and asked us to push for new powers allowing local authorities, once they had made proper provision for alternative sites, to ask police to require travellers to move on to those sites within 48 hours. Although that is a very tempting solution—which should perhaps be pursued with another Minister—I have a difficulty with the proposals because they define a gipsy as a person of nomadic habit of life, whatever their race or origin, but do not include members of an organised group, travelling showmen or persons engaged in travelling circuses who are travelling together as such.

I am worried that such definitions get away from the real problem—anti-social behaviour. We object to such behaviour—by whomever and in pursuit of whatever life style. We have to deal with it.

What can be done? It is a difficult problem and there is no easy solution. Travellers form an extremely diverse community. Very often, that diversity of backgrounds and purposes is used as an excuse for doing nothing. I am no longer prepared to accept that excuse. We have reached a stage at which we often mistake activity for achievement—thinking that we are achieving something by holding yet another meeting to discuss a difficult problem. The time has come to deal with the problem.

The problem that my hon. Friend is describing exists in the outer conurbation—it certainly exists in south Staffordshire and Cannock Chase. The issue has previously been discussed as it applies to the shires, but the urban aspect of the issue is the pressing one. Although my hon. Friend has discussed some solutions, my meetings with police suggest that only two things are required: moving-on power, to which I should add power to impound vehicles, and the provision of sites. I speak as someone who was stoned by some of the people she has described when trying to make those points to them.

I thank my hon. Friend for his intervention and am delighted that—by the looks of it—they missed.

I stress that I take traveller welfare issues extremely seriously. I am not dealing with those issues more explicitly in this debate because of time limitations and the fact that I want to deal with co-ordinated action.

The Crime and Disorder Bill provides us with a unique opportunity—it imposes a duty on local authorities—with police, to make provision for safe communities. I should like the plans to include specific proposals to deal with illegal encampments and to state who will be responsible. Who does one telephone on a Saturday afternoon? Who will man the telephone lines? As my hon. Friend the Member for Birmingham, Erdington (Mr. Corbett) said, it is entirely unacceptable that—as happened last year—a city council does not start until the Tuesday morning following a bank holiday to deal with an encampment that started the previous Friday. The Crime and Disorder Bill's safer community strategy will provide us with power to take immediate action.

We should establish a communication system so that people know there is a hotline and who to telephone if they see encampments on the move. They should be clear about whether police or the local authority are responsible for reacting to reports. We need fast and reliable information.

The public have a role to play not only in providing information but in taking some responsibility for the problem. It is no good complaining one week about cowboy traders but using those traders the next week to fix the driveway. There is some inconsistency in behaviour which will have to be resolved. We will have to make it clear to people that a natural consequence of using cowboy traders is that those traders will be attracted to an area.

I should like other agencies to be involved in the matter much more swiftly and with much greater co-ordination. I expect those who do business from open sites to pay tax. I therefore expect the Inland Revenue, Customs and Excise and the Benefits Agency to take some interest in such trading. The action should be co-ordinated—even at the risk of stoning—and possibly include police.

Illegal encampments are a local problem with national implications. I urge the Minister to assess the various local strategies to develop a national strategy. We need agreed and enforceable protocols. We cannot continue with the current arrangements whereby responsibility is shifted from one agency to another. At the end of the day our residents suffer and, to add insult to injury, they are also left to pick up the bill.

12.49 pm

The Parliamentary Under-Secretary of State for the Environment, Transport and the Regions

(Mr. Nick Raynsford)

I congratulate my hon. Friend the Member for Birmingham, Edgbaston (Ms Stuart) on securing a debate on a subject that I know is of very great concern to her, to many of my hon. Friends who are here today and to residents and businesses in her constituency. I fully take on board the concerns that have been voiced about the particular problems experienced in the west midlands.

We do not underestimate what an appalling nuisance unauthorised encampments can be. I and my ministerial colleagues have met a number of local authorities and hon. Members to discuss the issue, and it is not surprising that correspondence about it continues to feature heavily in my postbag. We liaise regularly with our colleagues in the Home Office, who have responsibility for police powers to deal with trespass on land and with criminal activity, whether by gipsies or by anyone else.

On that very point, perhaps the Minister or his colleagues in the Home Office will be able clarify a matter that I am raising on behalf of the Country Landowners Association, of which I am a member. Can the Minister confirm that the Wealden case did not apply to section 61 of the Criminal Justice and Public Order Act 1994, but only to section 77, which applies to local authorities, and that therefore the police can take action even though the landowner concerned may not have taken civil action first? I appreciate that it is a highly technical point and I should be grateful if the Minister would respond by correspondence in due course.

As the hon. Gentleman recognises, he has raised a highly complex issue and, rather than give a brief response on a matter of which I have had no prior notice, I would prefer to write to him and I undertake to do so.

On a more positive note, however, our latest biannual count of gipsy caravans shows the lowest number ever on unauthorised sites. For the first time the figure has fallen to below 20 per cent. of the recorded number of caravans, compared with 50 per cent. when the counts began almost 20 years ago. Some of those vans will be on sites that are tolerated, even without planning permission. The remaining 80 per cent. of caravans are on local authority or authorised private sites.

Before moving on to talk about what the Government are doing to tackle the problem of unauthorised camping, let me make it clear that we recognise that not all gipsies and travellers cause problems. The Government have no quarrel with those who pursue a nomadic way of life. Many gipsies are keen to follow their travelling way of life in peace and are keen to provide sites for themselves or to secure places on authorised sites. In addition to meeting those concerned about unauthorised camping, I have met several groups representing gipsy and traveller interests to gain their perspective on a travelling way of life.

As I have said, it is clear from our biannual count of gipsy caravans that there is a persistent problem with unauthorised camping in the Birmingham area, and I understand the wishes of my hon. Friend's constituents to have something done about it. I understand that she has put forward proposals to the Minister of State, Home Office, my hon. Friend the Member for Cardiff, South and Penarth (Mr. Michael) for changes to the law that her local authority considers would enable it and the police to deal more effectively with unauthorised camping.

Of course, it is for my hon. Friend the Minister of State the Member for to respond in detail to those proposals. I understand that he is to meet my hon. Friend the Member for Edgbaston to discuss the matter further. He has certainly made it clear that he will do so.

In the meantime, I know that my right hon. Friend the Secretary for the Home Department is deeply concerned about the disruption and misery that can be caused by unauthorised encampments. The police have a wide discretion under sections 61 and 62 of the Criminal Justice and Public Order Act 1994 to remove people who trespass with a view to taking up residence. Enforcement of the law is the responsibility of chief police officers. The Government urge them to use their powers in relation to trespass whenever appropriate. The law makes no distinction between travellers and anyone else, and applies to anyone who acts in a way which society finds unacceptable.

Does my hon. Friend accept that it is often easier for police and local authorities to negotiate travellers to move on than it is to use the powers that are available to them, and that that is part of the problem?

I shall come to the specific procedures in a moment, but I wanted to make it absolutely clear that the police have powers to remove people. There is no question about that.

The Government are under no illusion about the nuisance associated with many unauthorised encampments. If there is evidence of criminal activity on an unauthorised site, of course it is right that the police should deal with that as they see fit, just as they would with members of the settled community.

I have seen the proposals for changes in the law to which my hon. Friend the Member for Edgbaston has referred, and I have given some thought to the policy issues relevant to my Department, in particular the proposals that affect local authorities. The proposals appear to envisage a return to the position in part II of the Caravan Sites Act 1968, which is now repealed, which placed a legal duty on local authorities to provide sites for gipsies, as then defined. Once a local authority had provided adequate sites, or the Secretary of State had deemed it not necessary or expedient for them do so, the authority's area could be designated by the Secretary of State as an area where gipsies camping on certain categories of land were committing an offence.

The provisions in the 1968 Act resulted in a good number of sites being provided by local authorities, and there is a network of well over 300 sites providing some 5,200 pitches for gipsy families. We want those sites to remain open and available for gipsies to use if they wish. They should also be properly managed. My hon. Friend the Member for Edgbaston referred to that important issue. I understand that one site in Birmingham can accommodate up to 15 caravans and that the last five biannual counts indicate that there may be vacancies on it. That may be associated with the management difficulties to which my hon. Friend referred.

However, the overriding demand from gipsies is for sites owned and managed by gipsies themselves. That came across very strongly in the meetings I had with gipsy representatives. The proportion of vans on privately owned sites has more than doubled in the past 20 years, but, in the same time, the number of vans on local authority sites has increased by only a third. The January 1998 count revealed that a new privately owned site, with planning permission, has emerged in the Birmingham area, which in January was accommodating five caravans.

The council has identified that providing for all the unauthorised campers would require an additional 70 places. My hon. Friend the Member for Birmingham, Edgbaston (Ms Stuart) referred to the seasonality of the problem. Surely we need to establish the origin of some of the travellers. Rather than being taken to local sites, they should be sent packing back to where they came from or where they stay in the winter.

I should make two points to my hon. Friend. First, the provision of local authority sites in Birmingham reflects the level envisaged as appropriate for Birmingham to meet its responsibilities under the 1968 Act. I am not sure whether further extensive provision to meet the needs of a substantial number of additional people who may well be transients is necessarily appropriate, given the seasonal factors to which she referred. Secondly, it is extremely difficult to anticipate whether and when people of a genuinely nomadic life will arrive in a particular place; therefore, there have to be proper arrangements in place to cope with the particular problems generated by unlawful camping, which is often the consequence.

The provision of sites for gipsies under the 1968 Act required a tremendous level of local political will to identify and produce sites that were acceptable both to gipsies and to the local community. I can see no reason why local authorities today would find it any easier to secure such sites. It involves difficult decisions, often against considerable local opposition, so I am somewhat sceptical about the proposed changes in the law back to the 1968 model.

It is clear that the authors of the proposals my hon. Friend the Member for Edgbaston described recognise that there will be a need for further sites to ensure that gipsies will have somewhere lawful to camp. Local authorities already have discretionary powers to provide further permanent sites if they consider it necessary. Alternatively, if the gipsies concerned are visiting the area for short periods, they can consider the provision of temporary, tolerated sites on council owned land. Circular advice to local authorities from my Department already advocates the provision of such sites in local authority areas to cater for the needs of those visiting the area for short periods.

The provision of short-stay sites with sanitary and refuse collection facilities can do much to ameliorate nuisance and should deter some gipsies from camping on more unsuitable public or private land. My hon. Friend the Member for Edgbaston rightly drew a distinction between genuine gipsies and people whom she described—probably rightly—as cowboy builders. It is important to recognise that the Government are determined to ensure that effective action is taken against people who camp unlawfully and cause immense nuisance and trouble to others. In consultation with the university of Birmingham, we have therefore been developing good practice on the handling of unauthorised camping. Work on that is proceeding apace; there will be an announcement in the autumn. Obviously, we are also working with the Home Office and other Departments.

In the meantime, I am sure that Birmingham city council appreciates the importance of working closely with the police in dealing with this issue. Inter-agency agreements—

Order.

Village Schools

1 pm

It is a great privilege to secure this Adjournment debate on village schools and rural communities—it is disappointing that not a single Liberal Democrat Member is present to listen to it.

When I became the Member of Parliament for North Norfolk more than a year ago, I was unaware of the extent of rural deprivation. I knew what poverty was like in cities such as Birmingham, Sheffield and Glasgow because I had lived and worked in such places. Poverty is much less obvious in small rural villages, but it is just as serious. Industrial areas have suffered great change, but, to some extent, have been cushioned by inward investment and Government spending. Rural areas have faced similar changes, but without the cushion.

The change has been insidious; village life has progressively had the heart torn out of it. In my village, there is no longer a school, a pub or a shop. The church is hanging on by its fingernails. Public transport in many areas is a joke. Market towns are facing competitive challenges from supermarkets and big-city shopping complexes, and as a result of changes in agriculture. Housing, especially in coastal and other tourist areas, is being priced out of the reach of local people. Some villages are in danger of being populated solely by retired people and holidaymakers.

That is the social background against which politicians must assess the importance of village schools. The Minister for School Standards will know that I intend to raise the future of Potter Heigham first school: I visited the hon. Gentleman only 10 days ago with the school's chairman of governors and head teacher, the vice-chairman of the parish council and a parent of a child at the school. I raise the subject of Potter Heigham both because I feel passionately that the school and its children deserve a future and because it raises wider issues.

On such wider issues, does my hon. Friend agree that the decision whether to keep open a village school is often taken purely on financial grounds, without giving proper consideration to the children, who, on the closure of their school, must be bussed much greater distances to another school in the local town, thereby making their school day very long and their schooling programme much less satisfactory?

I fully agree with my hon. Friend. I shall draw out some of those points later.

Potter Heigham parish council has written as follows:

"The whole structure of our village and way of life would be gravely affected by the loss of the School.

We would be condemned to a retirement village with an ageing population. Young people with families would no longer come and live here, and those already here will move away to where there is a local school.

We feel that children are an essential ingredient in a balanced society and the children and School play an important role in the local community.

The School holds a Nativity Play, a Harvest Festival and a Carol Service. They sing regularly at the Old People's Home and appear every year in the Christmas Pantomime run by the local drama group—all this will be lost to our village if the School is closed.

The loss of young persons in the village will also affect various Village Hall-based clubs:—Playgroup, Brownies and Cubs will all fold through lack of numbers … There would be a domino effect on local amenities and societies".

The parochial church council has written:

"The PCC has always had links with the School. The village children have held their own services in the Church … Closing the School will result in those village children whose parents do not take them to services, never having the opportunity to get to know the Church building and its associated activities. Whichever school they attend will naturally have links with its own village Church.

The Church and other village organisations would lose the vital energy that young adults bring to them, besides the enjoyment of young children participating in village life. The result would be a steady and unstoppable decline in village activities".

Elderly residents of Potter Heigham have written:

"As elderly residents of Potter Heigham, we realise the value of having a School in our village. Young families are vital to small rural communities such as ours, otherwise a village dies. We enjoy visiting the School several times a year for functions such as shows, fetes and the School's Nativity Play."

A group of past pupils has written:

"The presence of the School in the village engenders a community spirit which stays with children throughout their education, and helps provide a sense of identity. All children and parents know each other, and can provide support for each other; for example, pupils have familiar adults present if their parents are late."

Those statements are more eloquent than any words of mine could be.

I should add that transport is another key consideration. in the debate. In Norfolk, home-to-school transport costs £11 million a year. The closure of village schools will add to that, as well as putting more cars on already-congested roads. The Minister should be in no doubt that village schools go to the heart of the rural community. I know that he spent some time as a child in Coltishall in Norfolk, so he will be well aware of those facts.

Village schools do far more than I have so far described. Being part of the community would not be enough if they did not also provide excellent education for our children. I ask the Minister to go to North Norfolk to see for himself. Last week, he was in North-West Norfolk, where he said, if the newspapers are right:

"We are investing in schools in rural areas … to offer a high quality of education."

He knows that village schools can and do offer excellent education, so long as they have high-quality teaching resources and the support of their local education authority. He went on to say:

"Norfolk's village schools will be protected, so long as they are providing pupils with a high standard of education."

There is a fashionable belief in some quarters that small village schools somehow cannot deliver the national curriculum. That is rubbish, and totally contradicted by all the evidence—certainly in the primary schools that I have visited in North Norfolk. In last year's key stage 2 tests, schools with fewer than 100 pupils delivered the goods: 66 per cent. of pupils reached level 4 or above, compared with the national average of 57 per cent. In science, the figure in small schools was 65 per cent., compared with 54 per cent. nationally. In maths, it was 74 per cent. against 62 per cent.

In July 1996, the present Secretary of State for Education and Employment sent a message to the National Association for the Support of Small Schools. He commended the excellent service that village schools offered both to their pupils and to their communities. He hoped that

"the period of pressure of 'surplus places' is drawing to a close and that we can concentrate instead on developing the excellence that does exist, and recognising the valuable work of all schools, including those that do form the core of the communities."

I—and all those in Potter Heigham and other villages with schools—rejoiced when the Minister stated earlier this year that

"All proposals"—

by an LEA—

"for the closure of a rural school will be called in by the Secretary of State for decision",

and that

"there will be a presumption against closure".—[Official Report, 26 March 1998; Vol. 309, c. 672.]

We now want the Minister to honour those words and to send out a message to Norfolk county council and other rural councils that village schools are too important to be allowed to wither and die. Councils and the Government have an obligation to rural communities to provide high-quality local first and primary education. The Minister must make it clear that the deliberate, orchestrated attempt to close Potter Heigham by Norfolk LEA is wrong and must be reversed.

The council seized on a temporary decline in teaching standards—which has since been reversed, as confirmed by the Office for Standards in Education—and a poor head to justify the closure of the school without making any serious effort to address the problem. Indeed, the council encouraged parents to take their children away from the school to help to prove the case against it. That is not acceptable, and I hope the Minister will examine all the facts surrounding the proposed closure with great care.

The matter does not reflect well on the council, and there are local demands that the council's behaviour should be placed before the ombudsman. There are also legitimate claims that it is not just the schools which should face tough Ofsted examination, but the LEA. I can agree with the council in one respect, however. The Government must recognise the extra costs implicit in providing education and other services—especially social services—in rural areas. I accept fully the comments of Bryan Slater, the director of the LEA, who has written to me as follows:

"The issue for Norfolk and for the Government is whether historical funding mechanisms adequately meet the inescapable additional cost of providing education through small schools in the county. A recent study carried out for Norfolk County Council showed that it can reasonably be estimated that the sparsity factor in the existing Standard Spending Assessment falls short by up to £100 per primary age pupil (or about £6 million) for the county in this regard alone. This is in addition to the unsupported additional costs of transporting children to school in the county which are a staggering £50 per school pupil, or about £5 million in total."

The Government must recognise the funding issue. First and primary schools in North Norfolk and other rural counties have been the Cinderella of the education budget for far too long. There are far too many mobile classrooms and dilapidated buildings in primary schools in North Norfolk.

The governors of Potter Heigham and those who live there are not against change—neither am I. In my experience, institutions and organisations never stay the same—they either improve or get worse. The Potter Heigham village school has been around for over 100 years. It has seen good heads and bad heads come and go. It has gone from being a primary school to being a first school. It has seen its numbers vary between 100 and about 40. It has seen the arrival of Ofsted and the national curriculum. Perhaps above all, it has seen the extraordinary and wonderful rise in the aspirations of parents and children. Children whose ambitions would have been limited both by geography and education and by their parents can now raise their eyes to wider and much more challenging horizons.

Small schools can and do adapt to change. Perhaps we shall see a cluster of village schools sharing a head in that part of North Norfolk. Perhaps the internet, or an intranet between local schools, will provide part of the solution. No doubt nursery education will pose its own challenges. All I know for sure is that village schools, when properly supported, provide a firm foundation for an excellent education, the right transition from home to school and a strong basis for a cohesive integrated local community.

I realise that the hon. Gentleman is coming to the end of his comments, and I thank him for giving way. Does he agree that village schools are important in preventing the depopulation of the countryside, which ultimately becomes inevitable if there is nothing to attract young families?

I am pleased that the hon. Gentleman has taken his place, and I agree fully with his comments.

For me, and for the people of Norfolk—I am glad to see two other Norfolk Members on the Government Benches—Potter Heigham is a test case. The Government's commitment to village schools will be judged by whether or not the school stays open. I hope that the Minister will reassure us in that regard.

1.13 pm

I begin by congratulating the hon. Member for North Norfolk (Mr. Prior) on securing this debate and on the measured and reasoned way in which he presented the important arguments concerning village schools and the part that they play in the rural community—an important issue.

May I say how pleased I am that the hon. Member for Montgomeryshire (Mr. Öpik) has joined us for the debate? He has been missed over the last few months—certainly by me. I am delighted that he is back in the House and, I hope, fully fit.

Just.

"Just," he says, and I hear the sound of plastic being tapped. It is good to see the hon. Gentleman here.

This is a timely debate. As the hon. Member for North, including Norfolk said, I had the opportunity last Friday to visit schools in North-West Norfolk at the invitation of my hon. Friend the Member for North-West Norfolk (Dr. Turner).

I visited five schools serving that part of Norfolk, including Magdalen primary—where I saw a good example of a village community supporting a school by offering the use of the village hall to ensure that the school has a vibrant and successful future. I visited Terrington St. John primary, to see at first hand the difficulties of an old building having to be adapted to meet the needs of the new national curriculum. I visited Harpley primary school, which serves a clearly identifiable community—and I was pleased to be there on the day that my right hon. Friend the Secretary of State announced not only more than £1 million for Norfolk schools as a whole, but £72,000 specifically to ensure that the pupils of Harpley primary would no longer have to suffer the indignity of using outside toilets. I visited Smithdon high school in Hunstanton, to see the links it has developed as a high school with local primary schools, serving a rural community, and I visited Brancaster voluntary controlled primary on the north Norfolk coast— a very small school whose education difficulties and problems of a few years ago have been turned round by the devotion and hard work of a good and effective head teacher.

That visit showed clearly the commitment from heads, teachers, parents and the community, and brought home the very important role that schools play within the community. Schools are part of an active community, and that is particularly important when we consider their role in rural areas. That is why the Government support rural schools. We are aware of the problems that may arise if there are smaller numbers of children in a catchment area. However, it is not good enough to say that we support rural schools—we have to do more. We have to offer practical help and assistance.

Clearly, one of the major concerns of village schools is the threat of closure. We heard from the hon. Member for North Norfolk about his concerns about Potter Heigham, and I shall say a few words about that school later. It is worth reflecting on the fact that, since 1983, some 450 rural schools have been closed. I would not wish to suggest that none of those schools should have been closed—clearly there will be occasions when it is wholly appropriate through amalgamation or closure to provide the sort of education that our children deserve.

Having looked at some of the schools that were closed—I have to say, under the previous Government—I am in no doubt that, had the previous Government adopted a presumption against closure, as we have done, a number of schools would have been saved. We have adopted a presumption against closure because we recognise that a rural school is often the focus of village life.

If a rural school closes, it affects not just the pupils attending the school but the wider community. That is why we announced last February that proposals to close rural schools would be called in for decision by the Secretary of State and that there would be a presumption against closure. That policy is now in operation. No rural school will be closed until all the issues have been considered carefully, including any points made by local people. The onus will be on the promoters of closure to provide clear evidence that a school should be closed.

Will the hon. Gentleman clarify that point? He confirms the statement that he made at the time of the countryside march earlier this year, that decisions to close rural schools would be called in by the Secretary of State. The Government resisted attempts to enshrine that policy in the School Standards and Framework Bill, but will they now give it a legislative framework, rather than merely asserting it in the House?

We are in danger of rehearsing a debate that we have already had. As we said in our discussions on the School Standards and Framework Bill, it is not appropriate to specify in a Bill the detailed criteria that the Secretary of State must consider. However, in exercising his powers to decide whether a school serving a rural community should be closed, the Secretary of State will make a presumption against closure. I have put that on the record and, if people feel that we are ignoring that criterion, they can take action against the Secretary of State through judicial review.

The hon. Member for North Norfolk mentioned standards in small schools. He was right to say that it is almost an assumption in some quarters that small schools cannot deliver a quality education. However, it is clear that they can. He referred to the excellent results that schools with fewer than 100 pupils attain. The independent inspectorate Ofsted has also said that there are many effective small schools and that small schools do not disadvantage their pupils in terms of standards or the national curriculum and the breadth of the curriculum that can be offered.

All schools, whether they be small or large, whether they serve a rural or an urban area, need the same things—strong management and good teachers—to deliver the quality of education that we all want. Obviously, small schools find it more difficult to offer the range of activities that are available in larger schools, but there are many examples of small rural schools which, with imagination and flair, offer a whole range of experiences to those children for whom they are responsible.

I do not have time to go into great detail about how that can be achieved, but I want to give three examples of small schools in rural areas that have met the challenges that they faced. Hornton primary school in Oxfordshire has 49 pupils. It has developed a productive partnership with parents and governors; it has good teaching and excellent support from adults in the classroom; the environment is imaginatively used; and the school is the focal point for the community.

Temple Sowerby Church of England school in Cumbria has 30 pupils. Its philosophy and aims are strong and it enjoys good leadership. It has a rich curriculum, which is enhanced by good use of outside activities. Again, the school is well led by a head teacher who expects and requires high standards.

Thornton in Craven primary school near Skipton in North Yorkshire has 24 pupils, but its standards are well above average. There are high expectations and standards throughout. The school has an exciting and challenging curriculum, and excellent use is made of school grounds, visits to museums and education resource centres. There are many other examples across the country of small schools in rural areas that offer a rich diversity of provision and high standards of education.

The hon. Member for Maidenhead (Mrs. May) referred to the procedures that must be followed when closure or a significant change of character of a school is proposed. First, the local education authority must consult all interested parties. Detailed information must be given on all the options, and the responses that are received as part of the consultation exercise must be listened to carefully. The LEA can publish its proposals for a school only when it has considered all the views and, if there are disagreements, all the objections. The proposals must say who may object, and to whom their objections should be sent.

A copy of the published proposals must be sent to the Secretary of State; Ministers will consider them very carefully, along with any objections, before arriving at a decision. In doing so, Ministers will take into account the views of Ofsted about the quality of education that is offered, but we shall also consider other factors, including the accessibility of alternative schools—and the length of bus trips to them—the standards of those schools and the effect of closure on the local community. Those who promote the closure of a village school will need to consider those significant factors if they want to rebut the presumption against closure.

The hon. Member for North Norfolk mentioned the proposals for Potter Heigham county first school, which the Department is currently considering. He will understand that it would not be appropriate for me today to deal with the issues that he raised, but I assure him that I shall take them into account before a final decision is made. I shall also take into account the points that were made so effectively by the delegation of concerned parents, teachers and people from the local community that he brought to meet me some 10 days ago. I am conscious that people want a decision to be made, and I hope that we shall be able to arrive at one in the near future.

The hon. Member for Maidenhead referred to the decision-making procedures. As she knows, the School Standards and Framework Bill contains proposals, through the establishment of school organisation committees, to devolve the power to determine school closures to local level. I assure the House that the Secretary of State will ensure that the presumption against closure of a rural school will form part of his guidance to those committees on how to determine applications; the committees will have to take account of the needs of local communities in arriving at their decisions, as will any independent adjudicator to whom the issue is referred.

The key must be to raise standards in our schools. That applies to rural schools as much as to schools in urban areas. Rural schools face particular challenges, but, as I said, those challenges can be met. We need to find new ways in which to ensure that children in rural schools have the opportunity to progress and achieve the highest standards.

I believe that we can harness the new technologies to assist small rural schools and communities. The STARS—superhighways teams across rural schools—project, for example, has created a network of schools in isolated rural areas across the north and north-west of Scotland, with the aim of enhancing provision for able pupils. Eighteen small primary schools with four teachers or fewer and two secondary schools have taken part in the project, with excellent results. In Argyll and Bute, effective use has been made of new technology to enhance the curriculum, extending opportunities for teaching and learning and supporting the management of schools and co-operatives. Forty small rural schools participated, using a combination of text and video conferencing, e-mail and fax.

New technology can be harnessed to provide a lifeline to small, rural schools, and I am pleased that, through the national grid for learning, we have been able to help Norfolk—to the tune of £1.6 million—to improve information technology. As we develop the national grid, we shall similarly help schools across the country.

There can be no doubt that a small school in a rural area plays an extremely important role. The Government recognise and intend to address the issues not only by fine words but by deeds, ensuring that schools are given the support that they deserve and need.

This debate has provided a timely opportunity to discuss the importance of rural schools and the communities that they serve. A school is part of a community, and sees it through good times and bad. Because we value the role played by rural schools, we have taken practical steps to help them and to safeguard their future.

We look forward to working with rural schools and the communities that they serve to raise standards and provide children with the quality of education that they deserve.

Women (Science And Engineering)

1.30 pm

I should perhaps declare an interest as I am a woman scientist, although, unless the electorate decide otherwise, I do not intend to return to my scientific career.

The importance of science, engineering and technology to Britain's future prosperity is well recognised and has been stressed by my right hon. Friends the Prime Minister, the President of the Board of Trade and the Chancellor of the Exchequer. If we are to build a truly competitive economy, we need to develop the new industries that exploit the opportunities provided by science and engineering, and especially biotechnology and electronics, and a key component of that strategy is to ensure that we have qualified scientists and engineers to work in those high-technology industries.

The pharmaceutical industry, which is arguably the industrial sector in which Britain is most competitive internationally, is already expressing concern at the shortage of suitably qualified scientists, and the engineering industry, including some firms in my constituency, is seriously affected by skills shortages. In that context, the under-representation of women and girls in science and engineering is of great concern.

In 1993, although 60 per cent. of university students in the biological sciences were female, women accounted for only 30 per cent. in maths and the physical sciences, and only 14 per cent. in engineering. How can we hope to meet future needs for scientists and engineers if half the population is excluded?

The previous Government, to their credit, began to recognise the problem, which was documented in the report, "The Rising Tide", published soon after the science White Paper, "Realising Our Potential". Measures were introduced to try to encourage girls and women to take up scientific careers, and those have been built on and extended by the present Government.

Much attention and activity, including the Engineering Council's WISE—Women in Science and Engineering—campaign, have focused on making science education more girl-friendly. The problem for girls is not only getting in, but getting on. There is considerable qualitative research evidence suggesting that women actively choose not to enter science and engineering professions because they perceive that they offer them poor promotion prospects. A report by the Prism group of the Wellcome Trust in 1994 documented a feeling among women science undergraduates that science had a masculine culture of which they did not want to be a part.

There is little quantitative data on women's participation in science in the private sector, so most of the statistics that I cite will relate to the academic sector, but anecdotal evidence suggests that women scientists experience the same difficulties in both the private and the public sectors.

In 1994, although 17 per cent. of all university science academics were women, they were disproportionately concentrated in the lower echelons, constituting 19 per cent. of all science lecturers, but only 5 per cent. of all readers and senior lecturers and only 2 per cent. of all science professors.

A recent study by Fielding and Glover of the occupational destinations of women science and engineering graduates, funded by the Engineering and Physical Sciences Research Council, showed that only 15 per cent. were employed as professional scientists or engineers, compared with 31 per cent. of the equivalent male graduates.

Most women science graduates are employed in teaching and in non-professional jobs for which they are overqualified. That represents not only a limitation for the women involved, but a considerable underuse of public resources. It is expensive to train engineers and scientists, and it must be of general concern if a high proportion of those trained choose not to stay in science and engineering, even when jobs are available.

Given the apparently poor promotion prospects for women, it is not surprising that they choose not to enter science. I want to focus on one factor that may contribute to women's problems in getting on in academic science: the difficulty in successfully competing for research funding. That funding is absolutely essential for scientists to establish themselves as independent investigators and progress up the academic promotion ladder.

Last May, a paper was published in Nature by two Swedish women scientists, Christine Wenneras and Agnes Wolde. The authors used Sweden's freedom of the press rights to gain access to the scoring system used by the Swedish Medical Research Council in assessing candidates for post-doctoral fellowships.

It was already public knowledge in Sweden that women had a lower success rate than men in the fellowships. The panels that award them base their assessment of each applicant in part on a score for scientific competence, the most objective measure of which is given by a person's record of scientific publication, which would consist of both the number of articles and the quality of the journals that published them. Wenneras and Wolde showed that women were consistently marked down by the assessment panel, and on average a woman needed to have published 2.6 times as many papers as a man to be awarded the same competence score.

The publication of the Swedish study raised concerns in this country about the appraisal methods used in allocating research funding here. In response to that concern, my right hon. Friend the President of the Board of Trade asked the director general of the research councils to investigate whether their assessment methods for allocating both grants and fellowships were free from any bias against women.

The director general reported that the success rates of men and women applicants for funding were similar, and that there was no statistically significant evidence of a bias against women. That is confirmed by figures given to me in parliamentary answers and by a study by the British Medical Research Council, published in Nature in December 1997.

Will the Minister ask his officials to examine more closely the systems used by the research councils? The strength of the Swedish analysis was that the competence scores of all the applicants, both successful and unsuccessful, were compared with an objective measure of their scientific output, whereas the director general's analysis merely compared success rates, which would demonstrate an absence of bias only if the quality of the male and female applicants was exactly the same, and I shall expand in a moment on why the quality of female applicants might in fact be expected to be higher. The director general should be asked to look again and consider whether candidates of equal competence are assessed equally, regardless of gender. The research councils should also be asked to monitor their own assessment procedures internally to ensure that British peer review panels, unlike their Swedish counterparts, do not discriminate in favour of men.

In questioning whether equal success rates really reflect a lack of bias in assessment, I pointed out that women and men applicants might not have equal competence. The most striking statistic in relation to research council funding is the percentage of women among the applicants. Even in the biological sciences, which have the highest proportion of women graduates, only about 15 per cent. of applicants for project and programme grants from the Biotechnology and Biological Sciences Research Council are women, for the Natural Environment Research Council, the figure is only 9 per cent., and for the Particle Physics and Astronomy Research Council, the figure falls even further to 7 per cent.. The percentages are slightly higher for fellowships and grants aimed at new investigators, but even so, they are still low.

I have already quoted data to show the reduction in women's participation as they move up the scientific career pyramid. That must indicate a greater difficulty for women in achieving promotion in science, which suggests that women who have succeeded in establishing themselves as independent investigators—that is, the women who are in a position to apply for research funding—may well be of higher average competence than the much larger group of male applicants who have faced fewer barriers to their career progress. If that is so, one would expect women to have a higher success rate than men if the assessment system were truly without bias.

The low percentage of women among applicants for research funding is an issue in itself. Promotion within academic science depends on publication record and the number of publications depends, apart from on ability itself, on the ability to win research funding for oneself and one's research group. Clearly, the larger the group, the more work it will get done and the more publications it is likely to be in. We need to identify the factors that discourage women from applying for grants and fellowships. It could well be that fewer women are in a position to apply for funding. In most cases, only researchers in permanent positions can make independent applications, which rules out many women researchers as evidence shows that men are more likely to get permanent positions.

The Government have encouraged the research councils and the universities to introduce more family-friendly conditions, including more child care provision, holding women's grants in abeyance while they are on maternity leave and allowing women to take fellowships with them if they have to move from one place to another because of family commitments. I applaud all those measures, which obviously help to make it easier for women to pursue a scientific career and I hope that the Government will redouble and continue their efforts in that way.

However, it appears that the barriers to women's progression in science are more complex than that. Comparisons between the situation in Britain and in France, for example, suggest that the problem is more fundamental. France has a tradition of high levels of support for child care, which is reflected in the fact that most women scientists in France have full-time and relatively uninterrupted working patterns similar to those of male scientists. That is not so in Britain. In addition, academic scientists in France do not have to cope with the same degree of insecurity and mobility as do scientists in British universities. Obviously, that is a factor that tends to affect women more than men. Despite those advantages, French women scientists and engineers experience exactly the same difficulties in promotion as do their British sisters, which suggests a need for a serious rethink about the way in which science is organised.

I congratulate my hon. Friend on this debate, as I have been involved in this matter for some time as a boss in a university department where more than half of the students were female, but where we had only one female member of faculty. It took some brutishness on my part and that of others to increase the number of women, but we managed to get it up to five after much resistance.

Recently, I went to the United States on a Science and Technology Committee visit with my hon. Friend the Member for Birmingham, Selly Oak (Dr. Jones), to find out how practices in science were progressing. Somehow, I had expected more of the United States. Sadly, the situation is just as bad there. The US Congress has now set up a commission, which will legislate to improve matters for women. The battle continues throughout the world and its time has certainly come.

My hon. Friend confirms that the problem is extremely complex and that no country has yet managed to crack it.

Furthermore, all the figures I have quoted so far on the percentage of women applying for research funding and on their success rates relate only to that part of the Government science budget that is channelled through the research councils. However, that is only just over a fifth of Government spending on research and development. About £1.3 billion is allocated annually through the research councils and just over £1 billion by the Higher Education Funding Councils for England, Wales and Scotland to finance university infrastructure, but more than £3.5 billion or 63 per cent. of the Government's total science budget, is spent by other Departments including the Ministry of Defence, the rest of the Department of Trade and Industry—apart from the Office of Science and Technology—the Department of the Environment, Transport and the Regions, the Ministry of Agriculture, Fisheries and Food, the Department for Education and Employment and the Department for International Development. All those Departments award research funding by competitive tender, yet when I asked them in written questions to tell me the percentage of women among the researchers that they funded, they were unable to do so because they do not collect the data.

If the Government are serious in their commitment to ensure that they do not discriminate against women researchers—I believe that they are—they need to monitor all their science spending for equal opportunities, not merely the money within the OST budget. I hope that the Minister will be able to take up that point with his colleagues in the other Ministries and urge them to monitor gender balance in the same way as the OST.

I shall end with an allusion to my constituency. Last week, I visited a school on an estate in Milton Keynes where all the streets are named after famous engineers. It is called Energy Village and has many energy-efficient homes. When the head teacher was first appointed to the school, which is new, he noticed that the street names all commemorated famous male engineers. Therefore, he chose to name the school after Caroline Haslett, who was born in 1895 and became the first secretary of the Women's Engineering Society and the director of the Electrical Association for Women. Through the association, Caroline Haslett encouraged the use of electrical power in the home, believing that electricity was the real emancipator of women.

I applaud the efforts of that head teacher in choosing Caroline Haslett's name for his school to give a positive message to his pupils—girls and boys alike—that engineering is not the sole preserve of one sex. However, unless the reality of the barriers to women's progression in science are removed, girls will continue to choose more congenial career options and British industry will continue to be held back by a shortage of engineers and scientists. Making science and engineering more woman-friendly is not merely an issue for women, but one which we have to get right if we are to capitalise as a country on the opportunities of the new technologies.

1.47 pm

First, I thank my hon. Friend the Member for Milton Keynes, South-West (Dr. Starkey) for raising this subject, as well as all hon. Members who have stayed to take part or to listen. My hon. Friend speaks with more authority than most of us on these matters. We often ask for role models for women in science and she said, almost apologetically, that she had a former life as a scientist to which she might not return. As a scientist in here, her scientific training shines through in the quality of her contribution and long may she contribute to this House precisely on those terms.

I am tempted to be brief and to say, "Yes, I applaud and agree with every word my hon. Friend has said", and that the Government will take forward her proposals in a practical and direct way. I am grateful to her for her comments.

We must not continue to risk wasting the talents of more than half the population. If we do not allow women's talents to be fully developed, we shall jeopardise our future. There is an international problem, but we have much to do. Women are significantly under-represented in almost every area of research and employment in science, engineering and technology. In those areas, women work disproportionately in junior positions. There is little room at the top for women in science, and that must change. More practical action is required to increase participation.

Since we came into office, my right hon. Friend the President of the Board of Trade—a scientist herself—has actively pursued equality of opportunity and has attempted to increase the participation of women in science, engineering and technology, not least through the Department of Trade and Industry's development unit on the subject. She has also worked closely with bodies including the Engineering Council, which is making great efforts.

My hon. Friend the Member for Milton Keynes, South-West said that there are complex reasons for lack of participation. I was encouraged to read an article in The Independent by Susan Greenfield, the professor of pharmacology at the University of Oxford. She wrote:

"One of the problems of 'women in science' is that it is not just one problem. Rather, the term is a convenient umbrella for referring to a range of issues touching on women in late 20th-century society in all its complexity, and encompassing therefore economic imponderables, cultural values, biological imperatives and the public perception of science and scientists. There is no magic bullet through this tightly woven tapestry of feelings and facts."

There are complex reasons for the lack of participation, and we must tackle them.

The problem starts at an early age. Not enough young women are attracted into science, engineering and technology, particularly the physical sciences such as engineering, physics and information technology. If we are to change that, we must understand why girls tend to opt out of such subjects. We must explore that with the Department for Education and Employment.

Even when women choose science subjects at school and go on to higher education and research or careers in industry, further factors inhibit their progression, as my hon. Friend has said. Having chosen a career, women face barriers to progression; that, contrary to popular opinion, is true even of the biological sciences and medicine. My hon. Friend put it well when she said that we need to focus attention not only on women getting into science, but on women getting on in science. Many barriers are associated with the balance of work and home life, and those need to be addressed.

One disincentive to continuing an academic research career in the United Kingdom is the possibility of a fixed-term contract. Although that might bring advantages of flexibility for funders of research and employers, it can, if badly managed, put women off.

The development unit in my Department works with other Departments in trying to attract more girls towards science subjects and to encourage women into higher education. It considers means to improve women's career progression up the academic ladder. The campaign for Women in Science and Engineering—WISE—began in 1984 when only 7 per cent. of engineering graduates were women. That figure improved a little—to 14 per cent.—by 1998, but it remains far too low. The Engineering Council, the Women's Engineering Society, women in computing, physics, medicine and neurosciences and the European Union's women in technology group are all dedicated to increasing the participation of women.

WISE recently asked for funding for 1998–99 for an outlook project to provide an opportunity for girls aged 13 and 14 to obtain practical experience of engineering on a three-day programme at a further education college, including a visit to a company. That would be a sort of engineering workshop, and the DTI is providing £35,000 to allow 1,750 girls from 70 schools to participate. That is a small step, but we can build on it. The development unit's booklet, "X²—the mystery of vanishing girls", was aimed at girls aged 13 and 14. A series of posters was published in September. Videos and websites are among small, practical ideas aimed at secondary schools as we try to use every means to ensure increased participation.

My hon. Friend raised important points about the difficulties women face as they try to progress in their careers in science once they reach the research stage, especially if it is academic research. She mentioned the Swedish study. Its findings were welcome, and we have taken prompt action to examine our research council's review system. We examined success rates for grants and fellowships for all research councils. A much larger exercise than the Swedish study examined the outcome of 114 applications, and we are trying to make sure that success rates for grants and fellowships are monitored annually so that we can keep a grip on the analysis.

My hon. Friend referred to our study's finding of no apparent difference in success rates for men and women. Although that is welcome, especially in view of the concern generated by the Swedish study, we cannot be complacent. We must recognise that our study is not necessarily the whole picture. We will go a step further by examining whether there are underlying gender differences in the proportion of potentially qualified candidates who apply for grants and fellowships—a study that should help us to begin to address seriously my hon. Friend's concerns. We need to get down to the level of examining competence, and to find out why such a small proportion of academically qualified women apply for fellowships. I assure my hon. Friend that the work that she has requested today will be undertaken. I am grateful for her exploration of gaps in the preliminary research.

It is important to develop policies for family-friendly employment. We can co-ordinate Government policies on employment and social security to fit in with that, and we must identify examples of good practice so that we can focus the employers' attention on ensuring that opportunities exist.

Might my hon. Friend embark on a study, perhaps through the European Union, to find out why there are more women in science and engineering in southern Europe? In Spain, about 30 per cent. of engineers are women, and it may be that lessons could be learnt from that.

I am grateful to my hon. Friend for internationalising the point. She, my hon. Friend the Member for Milton Keynes, South-West and I, among others, attended a conference in April at which note was taken of the comparative differences within the EU. I was struck by the German delegate who said Germany was like a developing country when it came to equal opportunities. That is true of all EU countries. We need to consider family-friendly policies, but without seeing families and children as the problem, because that would suggest, in turn, that women were the problem. There are deeper structural questions to address, and comparative work with our EU partners could prove helpful.

Role models are important. I have met young women doing high-level particle physics research at CERN in Geneva and running gas plants as top engineers in the north-east. We should draw attention to such examples so that they can inspire other women. I was delighted to hear from my hon. Friend the Member for Milton Keynes, South-West about the school named after Caroline Haslett. Many women have been involved in the development of science, but they are, sadly, absent from the record. I should name Dorothy Hodgkin, a Nobel prize winner for her work on crystallography, Jocelyn Burnell, who discovered pulsars, and Rosalind Franklin, the co-discoverer of DNA. Their names are lost in the male stories, and we should celebrate women in science rather more.

We are making strong efforts to increase representation on public bodies, councils and committees in science-related fields. Women's voices should be heard more strongly in policy and decision making. In 1992, women held 8 per cent. of places on research councils. The figure is up to 17 per cent. now, and the Government's target is 30 per cent. by 2000 with further improvement after that. That is achievable.

I have tried to stress that the problem is complex. Only 8 per cent. of all professors are women, but an even lower 3 per cent. of professors in science, engineering and technology are women. The shortage of women professors is not simply a result of women having children. Larger structural questions need to be addressed—

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.

Private Business

Alliance And Leicester Plc (Group Reorganisation) Bill Lords

Order for Second Reading read.

To be read a Second time on Thursday 16 July.

Oral Answers To Questions

Duchy Of Lancaster

The Chancellor was asked—

Freedom Of Information Bill

When he intends to publish the proposed freedom of information Bill. [47908]

I am in the process of drawing up the draft Bill, taking into account representations following the public consultation and the views expressed in the report of the Select Committee on Public Administration. I intend to publish the draft Bill for pre-legislative discussion before the end of September.

I am pleased to hear that, but can the right hon. Gentleman directly confirm or deny whether senior members of the Government, including the Home Secretary and the Minister for every portfolio, have been trying to weaken the Bill and take out its sharp edge to secure their positions? Will the Bill be as radical as the White Paper produced earlier this year or will it be weaker?

The White Paper sets out the principles of the whole Government towards freedom of information. Clearly, as the Select Committee's report showed, there are many complex issues in the White Paper and the draft Bill. As one would expect, there has been healthy discussion of those issues.

Will my right hon. Friend—in whom I have every confidence, if that is not too sycophantic—ensure that the Bill is the strongest possible opening to information and that it is in the Queen's Speech for the next Session so that we can end the situation in which people claim that they have wholesale access to information and try to retail it at inordinate profit for themselves?

I can assure the House that we have an agreed timetable to publish the draft Bill by the end of September. There is nothing in that timetable that precludes its candidacy for inclusion in the Queen's Speech later this year.

In addition to the legislative change on freedom of information mentioned by the previous two questioners, do we not also need a cultural change? Without both, will not greedy and loud-mouthed young men continue to seek information and contacts at extortionate prices?

I agree entirely with every sentiment expressed by the right hon. Gentleman. I hope that if we have radical freedom of information legislation, it will mean that the milieu in which such people purport to operate will be diminished.

In reply to the hon. Member for Lewes (Mr. Baker), my right hon. Friend referred to "healthy discussion". I wonder whether he was using those words with great care. Can we have an assurance that everyone is equally committed to taking this legislation forward in the way for which Labour party branches throughout the country have argued for the past 20 or 30 years? We believe that this is the litmus test of a Labour Government. Do we deliver on this agenda that everyone wants?

I listened carefully to what my hon. Friend said; I choose all my words with care. Clearly, there is a healthy debate, but, at the end of the day, we are committed to the principles contained in our White Paper. I was certainly encouraged by the support that I received, not only from my hon. Friends on the Government Benches, but from Opposition Members, when we had a full discussion of the issue on Monday.

I welcome the Chancellor's openness on the matter. He will be aware that the Royal Society of Chemistry is keen on freedom of information because it is part of the scientific world; but will he bear in mind the society's concern that such freedom might be misused by others and that that issue might not be taken care of in the Bill?

We are aware of that sort of difficulty and that there is always a balance to be struck between privacy and personal freedom. We are also aware that there must be protection for genuine scientific research and we have built into the Bill the seven special exemptions that can be considered when deciding whether information should be withheld. If information were to be withheld, the information commissioner could make a judgment, based on the merits of the case, as to whether that decision was right. It is a robust piece of legislation, designed with the ordinary citizen—the ordinary men and women—of this country in mind.

Public Appointments

What plans he has to encourage Government Departments to use the public appointments list. [47920]

Departments seek nominations from a wide range of sources, of which the public appointments unit's list is one. Others include advertising, executive search, consultation with interested bodies and other departmental databases. Departments regularly consult the unit for names of candidates for specific appointments. Since April, the unit has suggested some 1,200 candidates for more than 150 posts and has been informed of 20 appointments. Others are still under consideration.

I thank the Minister for that reply, but is he aware that the 20 appointments since April bring the grand total to 71 appointments of the hundreds made by Government Departments since the general election? Is he also aware that seven staff are employed in the operation? Does he regard it as an effective means of providing names to Government Departments, or does he agree that it is time either to beef it up, or to shut it down altogether?

The hon. Lady may recall that, when I was in opposition, I raised exactly the same questions about the public appointments unit, but, because the then Government insisted on secrecy, it was difficult to extract the very information to which she is now privy. I share her concern, but I have to tell her that the public appointments unit is devoted specifically to trying to increase the representation of women and people from ethnic minorities; and, although I accept that its performance appears to be in question, I would remind her that the decisions are made by individual Departments and not by the unit. The unit is trying purposefully to project as many names as possible into consideration for appointments, as they become available.

Millennium Compliance

What assessment he has made of the relative preparedness of Government Departments and agencies in respect of millennium compliance. [47922]

The results of the June quarterly review show that central Government are making good progress in achieving millennium compliance, although greater attention needs to be paid to embedded systems and to telecommunication systems. Departments have typically completed about 30 per cent. of the necessary correction work and 25 per cent. of their testing. On the whole, departmental plans have remained stable since the first review in March and all Departments now have target dates for completion of work on critical systems.

I congratulate my right hon. Friend on his continuing review of the matter and his openness about it. However, I should like to press a matter that I have raised with him before, which is using agencies, where appropriate agencies exist, to ensure the proper preparedness of different parts of the public service. I am especially concerned about the role that the Medical Devices Agency could play in providing a centralised test of different pieces of equipment used within the health service, so as to stop different parts of the health service and different health service trusts repeating each other's work. Will he give me an assurance on that?

My hon. Friend has raised this matter on a previous occasion and it is a pertinent point. The whole issue of the national health service has caused some concern in the House and, during our recent debate on it, I expressed my concern at the fact that there are still gaps in the national health service and local government—a view supported by the National Audit Office and the Audit Commission. Since that time, the NHS executive has completed its own review, which is more encouraging. It shows that satisfactory progress is being made in over 90 per cent. of NHS organisations. I am still concerned about the other 10 per cent. I shall draw the attention of the NHS executive to the specific point raised by my hon. Friend.

Is it not the case that, on this unique issue, no one can really say—not even the Government—how well we shall be prepared to respond to the problems until the first midnight of the new millennium? Is it not essential that we have contingency plans prepared, put in place and tested well before the end of next year?

The hon. Gentleman is, as always on this issue, absolutely correct. We shall probably not have to wait until 1 January 2000 because various other dates, such as 9 September 1999, will trigger difficulties. We need contingency plans in place and that is why the Government have established MISC4 and MISC4(P) to look at those issues and to try to ensure that there are contingency plans across both the private and the public sectors because one interrelates with the other.

Has my right hon. Friend had a chance to look again at something that I have suggested before, which is a practice on a Saturday or Sunday where we could take 10 per cent. of public services, wind the clocks forward and test the embedding technology? I wonder whether my right hon. Friend has evaluated that. Can he comment further?

We are looking at that proposal. It may not be possible to do that in every Department, but we believe that there may be opportunities in certain sections to try that experiment. It is something which we are trying to evaluate now.

Is the Chancellor in a position to guarantee that at least the public utilities such as water, the sewerage system, electricity and so on will continue to work? If not, when will he be?

We are discussing those very issues in the Cabinet Committees dealing with the matter. We have papers by the week from the various Departments and the territorial Departments which explain how the public utility suppliers are trying to cope. We must consider the interrelationship between the public utility suppliers and the contingency plans that will be necessary because, if one fails, they will almost certainly all fail. We are taking this seriously and there are almost weekly meetings of Cabinet Ministers looking at the matter, and getting the best advice possible.

The situation in the NHS is still worrying, with perhaps 10 per cent. of projects behind schedule. How will the Minister ensure that the people responsible are held to account, because accountability is an essential part of any meaningful target setting? Has the right hon. Gentleman persuaded the Prime Minister that, in the interests of accountability, he should remain as Chancellor of the Duchy of Lancaster until the millennium so that he can be held to account?

The hon. Gentleman raises a serious point about accountability, and nobody has a monopoly of knowledge in that sphere. I hope that every hon. Member will take it upon herself or himself to ensure that they are confident that their local health trust is following the course of action outlined in the excellent document by the Audit Commission entitled, "A Stitch in Time". We have set in place a template for the national organisation—the national health service—with its millennium project to try to deal with the outstanding issues. We also need action at local trust level. I urge hon. Members to assure themselves that their constituents are being satisfied and protected in this respect.

Smartcards

What progress he has made in developing the use of smartcards to provide access to Government services and information. [47923]

Smartcards and other new technologies can radically change the way in which the Government do business. Examples such as supermarket loyalty cards are already transforming the levels of service and choice offered in the private sector. As we move from the old industrial society and its way of working to the new information age, the Government's relationship with our citizens is changing and we must lead and manage that change. I want a wired-up Government to provide high-quality, easy to use and flexible services to our citizens.

I thank my right hon. Friend for that encouraging but rather general response. I draw his attention to a specific smartcard project—the Endorse project, which was launched last month by the Government with Barclays bank to cut out form filling for the newly self-employed. Is the Minister aware that the project is being piloted in Rotherham, which is one of nine pilot areas, four of which are in South Yorkshire? Can he tell me when the pilot period is due to end and what plans he has to make sure that the lessons and benefits from the pilot are promoted across the country?

I was pleased to launch Barclays' Endorse, which followed a similar pilot project by NatWest and the Post Office, called "Business as usual". They make life easier for our citizens, who, until we introduced an electronic method of registering as self-employed, had to send to three Departments six separate forms, with the possibility of having to follow those with eight forms. The result was, not surprisingly, a failure rate of 40 per cent. We tackled that problem by allowing people to register electronically as self-employed, which means that they fill in one smart form on a personal computer, which is immediately electronically transmitted to all the relevant Government Departments. I am sure that the experiment will be a success, and I look forward to the days when there are 1,000 such terminals available to our citizens.

What consideration has the right hon. Gentleman given to using smartcards for providing information to the authorities? For example, when shall we do away with the flimsy bit of paper that happens to be our driving licence and use a smartcard for that, or does the right hon. Gentleman live in fear of the civil liberties lobby?

The Government have made a decision not to introduce a national identity card, but we already have in hand the issue that the hon. Gentleman mentioned. A small smartcard driving licence is being tested in various parts of the country and, before long, will become universal. Like the hon. Gentleman, I look forward to the day when we use smartcards to provide Government services such as the renewal of television licences and payment of motor taxes. We would not have to go to the post office armed with a sheaf of papers, but simply go to a kiosk, use our smartcard and get a licence immediately. That is the future.

Forms

What steps he is taking to (a) simplify and (b) condense Government forms that the general public have to fill in before having access to many Government services. [47925]

Making it simpler and easier for people to access public services and cutting down forms and queues are at the heart of better government. Pilots of interactive on-line forms are part of the story, but so, too, is a move from telesales to teleservices: for example, using the telephone to help people at home to complete forms and to make better use of public services.

I thank my hon. Friend for that reply. Is he aware of the case of my constituent, Mrs. Ball, who was faced with a 32-page form when claiming disability living allowance for her son? She could fill in that form only with the aid of the local branch of Mencap. Now she is notable in the area for her achievement, and is inundated with requests for help from people who are as bemused and confused as she once was. Has any assessment been made of the waste of time in people going to tribunals unnecessarily or the personal hardship involved in delayed payments as a result of those complex forms being wrongly filled in? Does my hon. Friend accept that public support for benevolent policies is being destroyed by the ordeal to which people are subjected in gaining access to the entitlement that they have as citizens of this country?

I am aware of the problems encountered by Mrs. Ball, my hon. Friend's constituent, and I understand that my right hon. Friend the Chancellor of the Duchy of Lancaster has written to express our regrets at her experience.

The Benefits Agency keeps all claim forms under regular review. The disability allowance and attendance allowance claim forms were redesigned recently—a new child-specific pack was introduced in August last year and a new adult pack in October last year. Disability organisations were involved in the development and design of the new forms. However, I understand my hon. Friend's concern. The characterisation of government in queues and forms is one aspect which the "Better Government" agenda will address later in the year.

Does the Minister not realise that the civil service is doing what it always does very well, which is to produce forms that fully meet its own standards? Can the civil service not take lessons from the private sector, the first lesson of which is that the customer is always right? The customer finds forms very complicated. Is it not possible to include more representations by the consumer in the planning of those forms?

The hon. Gentleman will have to forgive me if I disagree with his assertion that there is always something to be learned from the private sector.

Increasingly, the public service, pragmatically, is willing to learn from private sector practices, and it is always willing to re-evaluate its own procedures. As I said, the Benefits Agency does so, and we want to extend that type of good practice into all arms of government, central and local.

Millennium Compliance

If he will make a statement on the progress and cost of year 2000 compliance by Government Departments. [47926]

My statement in the House on 8 June 1998, Official Report, column 716 gave the results of the latest quarterly review. They show that central Government are so far making good progress in achieving millennium compliance. However, we are not complacent; the review raised a number of concerns, which I have taken up with the Departments concerned. The latest estimate of the costs of millennium compliance within central Government is £402 million.

The next quarterly return is due in September. As that will fall during the recess, I propose to write to all Members during the recess to report the results. I shall also arrange for all relevant information to be placed in the Libraries of the House and on the internet.

I thank the right hon. Gentleman for that answer, but can he confirm that the Government have not allocated any new money to Government Departments to tackle that problem? Can he also confirm that, despite the fact that, three months ago, the Prime Minister said that he would put new money into training 20,000 bug busters, not a single one has started a training course, let alone started work?

Every Department of central Government was aware of the cost implications of millennium compliance, and figures for those implications were built into the estimates that we inherited from the previous Administration. In his Budget, the Chancellor of the Exchequer announced that £30 million was to be made available for the training of 20,000 bug busters. That process is on course. We have had discussions with the training agencies to ensure that the right course is made available to people. We are also discussing with small and medium companies how they can best release people for training, so that they can do their own millennium compliance. [Interruption.]

I should be obliged if conversations were not quite so loud. [HON. MEMBERS: "Hear, hear."] I see that the House agrees with me. Thank you.

Electronic Information

What steps he has taken to permit individuals to supply information electronically to Government. [47927]

The Government have been working closely with the public and private sectors on identifying new ways to enable people to supply information electronically to Government.

Last December, we launched the "intelligent" form, which enabled people to register as self-employed at a bank. That model has now been extended by the launch of the Post Office-led "Open for Business" pilot, which enables people to register as self-employed in a post office, library, a community-based "telecottage" or local government office. As my right hon. Friend the Chancellor of the Duchy has said, the Barclays bank Endorse project, which uses a smartcard-based digital signature service, enables registration on the internet to take place in people's homes.

I thank my hon. Friend for that reply. Does he agree that many people are phobic about information technology? If we go for a process of open government under which the citizen will be allowed to provide feedback, many people who are allergic to IT will need assistance and encouragement. What are his Department's plans to encourage that process?

In reality, many projects are being encouraged, not just by my Department but by Government, to raise the standard of IT literacy throughout the nation. There will be a parallel approach to the fulfilment of the information technology era. Hard copy forms of information and electronic forms will run contemporaneously. There will always be those who lag behind new developments.

Open Government

10.

What recent representations he has received on his Department's open government proposals. [47928]

I recently received the report of the Select Committee on Public Administration in response to the White Paper, "Your Right to Know". I am studying that report and its 44 detailed recommendations.

Will the right hon. Gentleman explain how he can reconcile his Department's proposals for open government with the practice of arranging meetings between Ministers and the general public to discuss policies, when the only members of the public who are invited to such meetings are those who are soppy about the Labour party? How can he reconcile his proposals on open government with the practice of leaking sensitive material before it is reported to the House? Is that not taking openness a bit too far, and is not the truth about the Government that they are open to no one other than Labour party supporters?

I simply have no idea of what the first part of the hon. Gentleman's question was about. In answer to the second part of his question, we and the Government have made it quite clear that we deplore the leaking of all Government documents. In terms of the recent assertion about the leak of a defence document, the Prime Minister has announced that there will be a leak inquiry to ascertain how that came about.

I welcome the Prime Minister's announcement of a leak inquiry into the appearance of a defence document before selected journalists. The Government's proposal on open government is to ensure that, under the process of democratic discussion, everyone—and not just the chosen few—is equally informed.

The right hon. Gentleman is right to draw the House's attention to the need for freedom of information legislation that will provide the hyphen between the Government and the people. I passionately believe that more freedom of information in the genuine and true sense will obviate the occurrence of young whippersnappers leaking and bragging to the press about how they can get access to Ministers and influence Government decisions.

11.

What steps he has taken to make his Department more open. [47929]

Openness is intrinsic to good government. In addition to my proposals for a radical and robust freedom of information Act, which will be the flagship for openness, much more is being done. We do not need to wait for the Act to provide our citizens with more and better information, as I have shown in my quarterly reports to Parliament on the year 2000 problems. Our proposals are to open up quangos and to ensure 50:50 representation on them for men and women. The Government have been open in providing information to their citizens on the internet, and we shall continue to do that.

I congratulate my right hon. Friend on his commitment to openness in government. I know from his strong freedom of information proposals that he believes that it is essential to our democracy to have that openness. I hope that he may long continue in his present post; despite the malign briefing against him, he has done an excellent job. However, some other Government Departments are not as committed to openness as his Department. For example, too many answers start with the words, "Because of disproportionate cost," and, despite the fact that we spend £32 million a year on Chevening scholarships, Departments are not prepared to say even to whom we award those scholarships. It is essential to a Government who are committed to openness in government that we have that freedom of information legislation in the next Queen's Speech.

This Government are committed to freedom of information legislation. We had the declaration in our manifesto and we shall deliver on that manifesto commitment. We believe that, if we are going to rebuild the trust between Government and the people, we must empower people by giving them information. That is precisely what our new Bill will do; that is precisely the new Bill that this Government will introduce.

Prime Minister

The Prime Minister was asked—

Engagements

Q1.[47949]

If he will list his official engagements for Wednesday 8 July.

This morning, I had meetings with ministerial colleagues and others. In addition to my duties in the House, I will have further such meetings later today.

Is the Prime Minister aware that, in Southend-on-Sea, where Labour and Liberal Democrat councillors have just imposed savage increases on home help charges for the disabled and elderly, and are planning to close three old folks' homes—not because they are nasty, but because there is not enough money—there is huge anger at the fact that the Government have had no difficulty in finding an extra £1.5 million to increase the number of political advisers by 50 per cent? Does not the Prime Minister think that it would strengthen our democracy if he simply allowed civil servants—respected people—to tell people the truth, whether good or bad, rather than employ that huge and costly army of news twisters, who many of us think are an insult to democracy?

No, I do not know about the particular circumstances in Southend that the hon. Gentleman has raised—[Interruption.]—although I have to say to him and his colleagues who are shouting about it that, of course, as a result of keeping to tough spending limits in the first two years, we have had difficult financial decisions to make. But I hope that he realises that, as a result of what the Government have done since they came to office, we have put more money into the health service, into education and into social services. That is a huge difference between the Government whom he supported—more or less—and the Government whom I lead.

In view of the recent reports in The Observer, will the Prime Minister consider one constructive suggestion? The ministerial code should be amended to prohibit Ministers and officials from dealing with people who are lobbying on behalf of others, where those people have, within the past five years, been employed as aides or advisers to any Minister. Will he add, by way of a gloss, that the legitimate way in which to petition Parliament or the Government is either directly to Government offices, or through the agency—the legitimate and open agency—of elected Members of Parliament?

Of course Ministers or Members of Parliament will meet lobbying groups and organisations as part of their normal work, and there is nothing wrong with that; but I agree with my hon. and learned Friend that the concern that has been expressed—and I do take it seriously—does show, as I said yesterday, that we have to be extremely careful about any relations between lobbying firms and special advisers and those in Government. I have instructed the Cabinet Secretary, therefore, to revise the rules that we inherited that govern such contacts and to strengthen them in any way that he thinks fit. In particular, there can be no circumstances that ever justify either passing confidential or inside information to a lobbyist, or the granting of any improper preferential access to, or influence on, Government. These rules will be strengthened and they will be published. Anyone found breaching them will be out on his ear.

Why does not the Prime Minister tackle the culture of cronyism that he has created in his Government, instead of talking about rules that should already be observed across the Government? After the allegations in The Observer at the weekend, a national newspaper sacked one of its columnists, a lobbying company suspended one of its directors and another reprimanded one of its employees. The only organisation who have not acted against their employees or investigated their employees are the Government. When will the right hon. Gentleman act, rather than protecting the cronies with whom he has surrounded himself?

First, I welcome the right hon. Gentleman back. Secondly, I can tell him that we have investigated each allegation in The Observer in turn. I shall go through them for him. First, there was the supposed leak of a Select Committee report. We investigated that—no Minister was involved and no Members of Parliament were involved. A member of a lobbying firm simply took a press-embargoed copy. That should not have happened, but obviously it was not the Government's fault.

Secondly, there was the allegation of a leak of selective information in my right hon. Friend the Chancellor's Mansion House speech. There was no such leak; indeed, the information concerned was not even in the speech. Thirdly, the allegation about Mr. Liddle, as the right hon. Gentleman knows, was based on talk at a cocktail party at the Guildhall. A freelance journalist claiming to be an American business man said that he wanted to invest in Britain. He asked Mr. Liddle to help, and he perfectly properly agreed to do so. It is emphatically denied that, in doing so, he in any way offered to act on behalf of a lobbying company. The journalist claimed to have words suggesting that on tape, but it is now admitted that that claim was false and that no such tape exists.

We have investigated these matters very carefully. Instead of making general allegations, the right hon. Gentleman should make a specific allegation, provide the evidence for it and, of course, we would then investigate it.

I am grateful for the welcome back, but even with my sinuses I can smell the stench from these revelations. As for this so-called defence, of course some things did not involve Members of Parliament or Ministers—it is not MPs and Ministers who are running the affairs of this Government.

The central allegation about Mr. Liddle has not been disproved: it has been denied by Mr. Liddle. If it had involved an ordinary civil servant, investigations would now be under way and disciplinary action would be in prospect. Saying that people drank too much champagne on the night and could not remember what they had said would not be regarded as an adequate or convincing defence.

When will the right hon. Gentleman stop protecting the money-grabbing cronies with whom he has surrounded himself and start—[Interruption.]. They are indeed feather-bedding, pocket-lining, money-grabbing cronies. When will the right hon. Gentleman clean up the Government's act?

Perhaps I could return the right hon. Gentleman to the facts. The right hon. Gentleman alleges that if Mr. Liddle had been a civil servant he would have been suspended immediately. I have checked that with the head of the civil service and it is not correct—he would not have been suspended. Secondly, all the right hon. Gentleman's other allegations have been investigated and found to be false. I understand why he wants to suggest that this Government are the same as the Government of whom he was a member—[HON. MEMBERS: "Worse."] This case is not Jonathan Aitken; it is not Neil Hamilton; it is not cash for questions; and it is not Asil Nadir. Those allegations were made and proven, whereas not a single allegation in The Observer article is true.

Only people in the Prime Minister's inner circle would think that a fireside chat with someone with a hangover disproves the allegations. The problem is not just the allegations but the whole culture that he has now created—in which hon. Members can be hung out to dry; Ministers, such as the one sitting next to him, can be briefed against; and members of his inner circle are the untouchables. The right hon. Gentleman has created a culture of cronyism—in which the Paymaster General hangs on to his job because he has villas in high places, and in which Ministers do not even blush when they try to make the wife of his private pollster the deputy chairman of the BBC. Let the Prime Minister tell the House whether he even recognises that there is a problem of cronyism over which he now presides.

If I may return the right hon. Gentleman to the facts, just a moment ago he alleged that I had put someone connected with me forward for the BBC deputy chairmanship. I have had nothing whatever to do with those who have been put forward for the BBC deputy chairmanship. If he has any evidence to the contrary, perhaps he will produce it. All the other allegations are general ones. He is making general allegations because he knows that he cannot sustain a single specific one: it is a classic smear tactic.

The one allegation that the right hon. Gentleman has not made—perhaps he is about to make it—is that we leaked the strategic defence review. Such an allegation would not surprise me. We have instituted an inquiry into how the leak happened. The BBC correspondent Robin Oakley said that, at six o'clock yesterday, he was shown a copy of the document by a Conservative Front Bencher. If I find that anyone in the Ministry of Defence, or any other Ministry, was involved in leaking that document, I will dismiss him. Would the right hon. Gentleman do the same?

Only a Prime Minister in desperate trouble could believe that the leak of a Government document did not somehow originate with the Government. How ridiculous! He cannot admit that there is a problem of cronyism—which all the rest of the country can see—because the problem goes to the heart of new Labour, in which cronyism has taken the place of principle. In the words of the former aide to the Chancellor—who is chuntering on—the

"Labour Government is always of two minds…On big issues especially, they don't know what they are thinking."

Does the Prime Minister not realise that government without principle quickly becomes government for sale—which is what is beginning to happen?

People will again note that the right hon. Gentleman has made no specific allegation or tried to substantiate one. All we have had is the usual windy rhetoric and general allegations. Until very recently, he and the Conservative party were trying to claim that we were responsible for the leak of the strategic defence review. I notice that he has not repeated that claim today, or said that he would take action against anyone involved in the leak.

As for saying that we do not get the big issues right, we have in the past few days published our proposals on the Child Support Agency—[HON. MEMBERS: "Leaked".] We have also published our proposals on the rough sleepers initiative, on numeracy and on the defence review—[HON. MEMBERS: "Leaked."] They were certainly not leaked by us—[Interruption.]

Order.

Those are all very serious issues, and the Government's policy to deal with them is correct. The right hon. Gentleman has nothing to say about those issues, because the Opposition have no policy criticism that they can sustain against the Government. He is reduced to making wide allegations with no particularity. He does that because he wants to try to prove that we are the same as the previous Government—but we are not, and we never will be.

Of course these are all serious issues and they should all have been brought to the House before they were brought to the media, as should every other Government announcement. This is a serious issue in which former aides of the Prime Minister, the Chancellor and the Minister without Portfolio—wherever he happens to be skulking at the moment—appear to have offered access to Government and Government information in return for a fee, and the Government have not been able to disprove it. That is an extremely serious matter and it is taken seriously by the people of this country. Will not the Prime Minister come to see in time that it was a defining moment in the record of the Government when people were able to see the Government for what they are—too many cronies and too few principles?

The right hon. Gentleman gets no better with repetition. He keeps making great allegations of cronyism and corruption. He bandies around the words, but he will not make a specific charge and sustain it because every allegation made in The Observer has been investigated and found to be untrue. The reason that he carries on with all this rhetoric about the Government is that he and his party—as is noticed more in the country than anywhere else—have nothing whatever to say about the big policy issues of the day.

Given the Leader of the Opposition's sinuses, I will not ask him how he thinks Westminster city council smells. A report by Alan Langlands, chief executive of the National Health Service Executive, states that under the previous Administration, health authorities and emergency care services in the north-west were facing collapse. Since we have been in government, we have spent an extra £19 million on the South Cheshire health authority and an extra £9 million on North Cheshire to improve care in cancer treatment, to reduce waiting lists, to improve intensive care treatment for young people and to attack the winter crisis. How will my right hon. Friend ensure that under our Administration the health service in the north-west will never again face collapse?

By giving it the investment and the reform that it needs. Of course my hon. Friend is right. Since the election, we have put substantial extra sums of money into the health service over and above Conservative spending plans. Of course there was a defining moment a few days ago when the shadow Chancellor said that the Government were spending too much. That is the position of the Conservatives. Their attack on us in respect of public services is that we are spending too much, so let us never hear anything more from them about waiting lists or any other public service matter.

Whatever problems the Government have over the events of the past couple of days—they have some and I hope that they will tackle them—I know of no sight more stomach-churning than the Conservative party accusing others of sleaze. [Interruption.]

Order. The House will come to order to hear the right hon. Gentleman.

Surely the issue that should worry us today is not so much the job prospects of a couple of cadet new Labour insiders, but the jobs of tens of thousands of people across the country that are now placed in jeopardy as a result of the rising pound and rising interest rates. Does the Prime Minister not realise that he could take a decision today that would relieve the pain immediately: he could come off the fence on the single currency, set a target date—subject to a referendum—and give the economy, the country and industry the lead that they so desperately need?

As I think I have told the right hon. Gentleman before, the worst reason for making a decision to join the single currency would be some short-term advantage in the currency markets. That would not be sensible at all. The economic policy that the Government are pursuing is to make sure that we have monetary stability, which is why we gave the Bank of England independence to set interest rates, which have had to go up—they should have gone up before the election and they have had to go up since in order to squeeze out inflation. We will also ensure financial stability through curing the Budget deficit. That is the right long-term policy for the country. I have no doubt about that; and I have no doubt, either, that it is ultimately in the best interests of industry, although I understand the concern about the short-term problems that have resulted from the rising pound.

The Prime Minister has given that answer before. It did not wash then, and it does not wash now. If he took the decision that I have suggested, the pound would come down tomorrow, interest rates would come down next week, investment would keep coming into this country over the next decade, and Britain would have more influence in Europe right through into the next century. Why does he not realise that, on this occasion, long-term interest and short-term advantage coincide? He will have to take such action soon; why not take it now?

It is because I do not believe that short-term advantage and the long-term position coincide. If the pound were to be brought down artificially tomorrow, and if we, say, cut interest rates when the monetary conditions were not right to do so, the result would be inflation—the very problem that we had under the Conservative Government. If we do not take the action necessary to root out inflation, put the economy on a stable footing and ensure that the public finances are in order, we will be back to the days of 15 per cent. interest rates and the record repossessions and bankruptcies that occurred under the Conservatives. The policy mechanisms in place are precisely designed to avoid that.

A decision on the single currency must be taken in the national economic interest. Given the national economic interest, and as our economy has not converged with the economies of continental Europe, it would not be sensible at the moment to say that we would join.

What do students with A-levels from Eton, Charterhouse, Wellington and Westminster schools do during their first year at St Andrews and Edinburgh universities? Does my right hon. Friend share my suspicions about the motivation of some of their parents, who happen to be members of another—hereditary—House and who keep on voting for public subsidies for that, no doubt, very interesting first year?

If I may deal with tuition fees, I suggest that people who have doubts read the speech of Lord Dearing—who, after all, chaired the committee that was set up by the Conservatives when in government—in which he backs the Government's case to maintain our position on Scottish tuition fees. He does so for the very sensible reason that, if we were to do what the Opposition are suggesting—although I believe them to be completely opportunist in so doing—we would end up having to find another £27 million. It would be far better to spend that money on improving university education.

Community Hospitals

Q2.[47950]

If he will make a statement on the Government's policy on community hospitals.

We certainly recognise the strength of feeling that people have for their local community hospitals. Community hospitals can play a role in the national health service, particularly offering a safe, clinically effective and efficient service for their areas. They must of course meet the same high quality standards and fairness and efficiency tests as any other hospital.

I have just come from a meeting of many community hospital representatives, who are here because 27 community hospitals are either definitely to close or threatened with closure. How does the Prime Minister reconcile that fact with his oft-stated commitment to save the national health service?

The programmes of closure are proposed by local health authorities; there may be varying reasons for them. In certain areas, closures are proposed because health authorities genuinely believe in reorganising hospital provision. It is important to ensure that the reasons for any change in community hospital provision are genuinely concerned with the national health service and its interests. That does not mean that, if other provision is being made, every hospital closure must necessarily be wrong. That is not so in all 27 areas. Indeed, my right hon. Friend the Secretary of State for Health is to sit in on appeals against several of those cases. However, not every programme of reorganisation must be opposed.

Does my right hon. Friend agree that after the closure of Edgware hospital by the previous Government, this Government have been making great strides in restoring services to the new Edgware community hospital, and that the new waiting list money will go a long way in helping that process? Is he also aware that after the rundown of the hospital by the previous Government, one of the problems is getting over to local people that there are services at Edgware hospital, and that it is alive and vibrant? Will he use his best endeavours to ensure that we can get that message over to the local community?

I am sure that my hon. Friend has just done that, and I back him up entirely. Edgware hospital provides a valuable service to local residents and will continue to do so. It is, of course, under this Government that the largest hospital building programme in the NHS is being put through. After years of delay, we are getting that hospital building programme under way, and five are already starting up.

Ministerial Visits

Q3.[47951]

What plans he has to pay an official visit to the St. Ives constituency.

I have no immediate plans to do so.

That is a pity. In my constituency, we are concerned about the NHS. When will the highly committed NHS staff of three of the four community hospitals in my constituency that I visited this weekend be told whether they have hospitals to work in and jobs to go to? Their jobs have been on the line since October last year, and the plans have been on the desk of the Secretary of State for ever and a day. When will they know whether they can join in the 50th anniversary celebrations of the NHS?

The plans have not been there for ever and a day. It is correct that my right hon. Friend the Secretary of State has to make his decision in due course. He will examine the proposals carefully to make sure that they represent the best way forward for health services in Cornwall. On underfunding, we accept that the NHS needs more investment. That is precisely why the comprehensive spending review is geared and designed to make sure that the health service has the resources it needs.

I hope that the hon. Gentleman will welcome very much what the Government have done in Europe to try to make sure that Cornwall, with its special circumstances, is treated as an area in its own right for the purposes of regional aid. That is a different topic, but we are trying to do our best for the people of Cornwall and will carry on doing so.

Engagements

Q4.[47952]

How can the Prime Minister, as an elected Member of this House, be satisfied that he presides over a Government who, time after time, trail important policy announcements in the press before they are made properly to this House? Is he determined that, in future, policy statements will be made by unelected and unaccountable spin doctors, lobbyists and cronies?

In respect of the leak of the strategic defence review, I have made it clear that if anybody in government has been connected with that, they will be dismissed forthwith. The leak inquiry will try to get to the bottom of the matter, but I do not believe that anyone in government has been involved. I hope that the hon. Gentleman will join me in saying that if the review has been leaked not by someone in my party but by someone on his side, that person should be dealt with by his leader.

Q5.[47953]

Can the Prime Minister confirm that an undiluted, full-strength, 22-carat freedom of information Bill will be in the next Queen's Speech? Does he agree not only that that would redeem a key manifesto pledge, but that it would be the best way to stop lobbyists and other parliamentary parasites trading, because it would, by making Government information available to the many, not the few, devalue the very currency in which they trade?

As my hon. Friend appreciates, I cannot start saying what will be in the Queen's Speech, but a freedom of information Act is a key part of our constitutional reform programme. We have set out proposals in the White Paper, and the next step is to publish the draft Bill for further consultation, as we shall in due course. It remains a key Government commitment.

Q6.[47954]

Yesterday, a Labour peer—and former Labour Minister—described the measure whereby students from Northern Ireland, Wales and England would pay £1,000 more in fees than students from Scotland and the rest of the European Union as repugnant and as discrimination against our fellow countrymen. Will the Prime Minister explain why students from Manchester will have to pay £1,000 more than students from Milan and why students from Liverpool will have to pay £1,000 more than students from Lisbon? To get through the message that that is nonsense, will the students have to club together to hire a lobbyist to contact one of his cronies at No. 10?

I do not know whether the hon. Gentleman paid any attention—I suspect that he did not—to what I said about Lord Dearing, who, as far as I am aware, is not known as a lobbyist. Lord Dearing has rightly pointed out that 354 students from other parts of the European Union are involved. If the proposals were limited to Scotland, the sum of money involved would be only £2 million. However, as Lord Dearing also pointed out, it would be wrong to suggest that students who do four-year courses in Scotland should be treated differently from those who do four-year courses in England—[HON. MEMBERS: "That is what you are doing."] We are not doing that; that is precisely the point. If we were, the cost would be £27 million.

I remind the hon. Gentleman that the £1,000 tuition fee will not be paid by the poorest third of students and that the next third will pay a reduced rate. The Conservative party proposals, however, would make all students, from whatever part of the United Kingdom, pay the full tuition fees. That would be wrong and would discriminate against those from low-income families.

Strategic Defence Review

3.31 pm

With permission, Madam Speaker, I should like to make a statement on the outcome of the strategic defence review.

Today, I am publishing a White Paper setting out the conclusions of the review and a volume of detailed supporting essays. Copies are available in the Vote Office. Moreover, I have written, enclosing copies, to all hon. Members individually.

Before I deal with the review, may I first apologise to you, Madam Speaker, and to the House for the unauthorised and improper disclosure to some newspapers last night of the White Paper's contents? I am as angry and as outraged at this leak as any hon. Member—indeed, I hope that it will be condemned by hon. Members from both sides of the House.

I have today asked the Cabinet Secretary to authorise an immediate and thorough investigation into how the leak came about. The person or persons responsible will be dealt with severely. The leak represents a serious breach of an embargo designed to ensure that the detail of this major review was given first to the House of Commons, and I very much regret the fact that the House and Ministry of Defence employees heard first from the media. I take full responsibility for that, as my office demands, which is why I apologise to you, Madam Speaker, and to my parliamentary colleagues

The British people are rightly proud of their armed forces. They want—indeed, they expect—the Government to provide strong defence for their country. The strategic defence review does just that. It is the most radical and far-reaching reshaping and modernisation of our armed forces for a generation. It is unique in three key ways. First, it has been foreign policy led, not Treasury driven; secondly, it has been unprecedentedly open and inclusive; and thirdly, it has the whole-hearted support of all the service chiefs, for whose help I express my thanks.

The review will fundamentally reshape and modernise Britain's armed forces, sorting out the weaknesses, building on our strengths and providing a structure to deal with tomorrow's threats, not yesterday's enemies. Our forces will be more mobile, better manned, better supported and equipped, and better able to act as a force for good in the world, where we can and when we choose.

The world has changed out of all recognition since the end of the cold war. NATO remains the basis for defence and security, but, while the threat of major war in Europe is now a remote prospect, new threats confront us: terrorism; the international drugs trade; the proliferation of nuclear, chemical and biological weapons; information warfare; ethnic rivalries; population pressures; and the break-up of existing states.

In the cold war, we needed large forces at home and on the continent to defend against the constant threat of massive attack from the Soviet Union, but now instability is the new enemy, and the need is increasingly to help to prevent, or to shape, crises further away, if necessary by deploying military forces rapidly before they get out of hand. In other words, we must now be prepared to go to the crisis, rather than have the crisis come to us.

The review has demonstrated that our forces are not properly adapted to the new environment. In today's world, we need to get our troops to trouble spots and crisis areas quickly and safely, and ensure they are properly supported when they get there. The review has highlighted the serious weaknesses that we inherited, most notably in heavy transport and in our hollowed-out and demoralised defence medical services.

At the same time, increased commitments have taken their toll on morale and on recruitment and retention, and have worsened the already very serious problem of undermanning in our forces. The review proposes major new investment and enhancements to improve our troops' ability to deploy more rapidly to trouble spots around the world.

We will acquire four additional roll-on, roll-off container ships and four large C-17 aircraft or their equivalent. To support and supply our troops once they reach the trouble spots, we will enhance the Army's supporting arms, so that, for the first time, they can undertake two operations simultaneously.

Because we have a solemn duty of care to our service men and women, whom we ask to put their lives at risk, we will make new money and personnel available to revitalise the defence medical services. In total, I am proposing an increase in the size of the Regular Army of 3,300: a change which will go a long way towards restoring vital parts of our armed forces that have been hollowed out.

Another key theme of the review has been a more integrated or joint-service approach to defence, to improve the operational effectiveness of our forces. We are introducing a series of radical changes, which include bringing together all our battlefield helicopters under a single command and expanding the responsibilities of the Chief of Joint Operations; a new joint defence centre to develop doctrine and other planning on a tri-service basis; and a four-star Chief of Defence Logistics, who will properly co-ordinate and standardise our three support services for the first time. I am pleased—I know that my pleasure will be shared widely in the House—to announce that the first such Chief will be Lieutenant General Sir Sam Cowan, who is currently the Army's Quartermaster General.

I am also responding in the review to an historic proposal by the First Sea Lord and the Chief of the Air Staff, by developing what will be known as Joint Force 2000, bringing together Royal Navy and Royal Air Force Harrier jets into a single organisation, able to operate equally effectively from aircraft carriers or land bases.

The most important of the joint initiatives is the creation of a new pool of joint rapid reaction forces, which will be the spearhead of our new modernised front line and will include all our high-readiness forces. Not only will they enable us to respond quickly and effectively to crises of all kinds and to build up larger forces should that be necessary, but—unlike today—we will be able to mount more than one Bosnia-type operation at a time.

The review also introduces important new front-line capabilities. We will create a sixth deployable brigade, which will increase the Army's flexibility and help tackle overstretch. The parachute role of the current airborne brigade will also be transferred to the airmobile brigade, which will become a new powerful and highly mobile air-manoeuvre brigade or air cavalry when the Apache attack helicopter enters service.

To meet our longer-term needs, I am delighted to be able to tell the House that we plan to replace our current small carriers from around 2012 with two larger, more versatile, carriers—in effect floating airfields capable of carrying a more powerful force, including a future carrier-borne aircraft to replace the Harrier—the cost of which will be spread over about 20 years.

I can also tell the House that the review confirms that the acquisition of 232 Eurofighters remains central to our long-term plans, providing a step change in the RAF's combat ability. Changes in the nature and scale of operations mean that we need two fewer submarines, three fewer destroyers and frigates and 36 fewer combat aircraft. However, those changes will not lead to cuts in the overall strength of our regular forces since the manpower released by the reductions will be used to fill gaps in front-line manning, thereby easing overstretch.

For our reserves, there will also be important enhancements to the Royal Naval Reserve and the Royal Air Force Reserve. I am determined that the Territorial Army should become more relevant, usable and integrated with the rest of our forces. Those who want it to languish in an outdated cold war role do the TA no service at all. Although its numbers will be trimmed to 40,000, it will be given a real heavyweight role in our nation's defences and called up more frequently in times of crisis. For that, we intend also that it should be better trained and properly equipped.

Unlike other recent reviews, this review is designed to put people first. That is why I am today announcing a significant new training and education initiative to boost recruitment and retention. All recruits will be given the opportunity to gain the six key skills needed by all in the workplace, and all personnel will be given the chance to achieve qualifications recognised by civilian employers.

In addition, there will be a major new programme—the learning forces initiative—to expand education and training opportunities for the armed forces through the new learning credits, which may be claimed during service careers and for some time afterwards. Those proposals will boost recruitment and retention by increasing the already considerable benefits of a service career, and benefit defence by developing the skills needed for modern warfare. The economy as a whole will also benefit as better qualified personnel return to the civilian employment market after their service career.

For our service families, we are setting up a task force to address the special problems that arise from their particularly mobile life style. For Britain's ex-service men and women, we are setting up a new veterans cell to provide an access point for guidance and advice.

Of course, it is vital that our armed forces are properly resourced, but if defence is to command the support of the nation, it must also be seen as good value for money. By 2001–02, in three years' time, we will be spending £747 million more than this year. In real terms, allowing for one-off asset sales, that will be a reduction of £685 million or about 3 per cent. of the defence budget. That compares with a reduction of more than 20 per cent. in real terms in the last seven years of the previous Government. We will do that primarily through increased efficiency, smarter procurement and better utilisation of our assets. Because the review represents a three-year settlement, we will be able to bring a new stability to our defence planning.

The Government believe that, in addition to caring for our people and defending our rights at home, we must also discharge our responsibilities in the world.

We must strengthen the effectiveness of the international community in peace support and humanitarian missions of all kinds, particularly through the United Nations. I can announce, therefore, that Britain will make a larger proportion of our front-line capabilities potentially available to the UN for peace support and humanitarian deployments, including all our rapidly deployable forces.

In a still uncertain and unstable world, we must be able to react quickly to crises as they develop, but we should aim to do more than that. We should aim to prevent conflict from arising in the first place. I intend to elevate conflict prevention—defence diplomacy, as I have called it—to be one of the eight core missions that will underpin our defence planning. That commitment will be backed up by a series of practical measures, including a new education and training initiative to help to develop and promote modern, democratically accountable forces around the world.

I turn now to the review's conclusions on our nuclear deterrent. The Government were elected on a promise that we would retain Trident. We have kept that promise, and we will continue to keep it. All of us want a safer world in which there is no place for nuclear weapons, but, while large nuclear arsenals and risks of proliferation remain, our minimum deterrent remains a necessary and continuing element of our security. We have, however, conducted a rigorous re-examination of our present deterrence requirements, and we have concluded that we can safely make further significant reductions from cold war levels. We will retain Trident as our sole nuclear system, but the single submarine on patrol at any one time will carry only 48 warheads. That compares with the previous Government's announced ceiling of 96 warheads. By reducing our overall stockpile to 200 operationally available warheads, we will have cut the explosive power of the deterrent by 70 per cent. since the end of the cold war.

At the same time, we will press ahead with arms control, and will introduce much greater openness on nuclear issues, including on our stocks of fissile material.

All in all, these are sensible measures, and I am sure that they will be widely welcomed. This truly radical review builds on the strengths and successes of our armed forces. It rectifies the weaknesses that we inherited, and it modernises our forces to deal with tomorrow's threats rather than yesterday's enemies. It places the skilled, brave and versatile people on whom our defence depends firmly at the centre of planning, and it gives them a clear sense of direction into the next century. Above all, it delivers the modern forces Britain needs for the modern world. It is a good deal for defence and a good deal for the country. I commend it to the House.

I endorse entirely the tribute paid by the Secretary of State to our armed forces and their families. They always acquit themselves with courage and distinction, and the whole country is rightly proud of them.

Let us be clear that the review was never a strategic defence review, but was always about cutting defence expenditure. The Secretary of State even began with a pre-emptive concession, offering the Treasury £500 million. He has ended up with cuts of more than £900 million a year. The Treasury has had its first instalment, and I must warn him that it will not be the last.

The cuts come as no surprise: Labour Governments always cut defence spending—[Interruption.] At least Labour Members have woken up and are making a lot more noise than they did when the Secretary of State made his statement. My hon. Friends and I noticed their ringing endorsement for his policy on Trident; I can assure him of at least our support on that.

The review was intended to take six months, but it has taken 14. For only 10 of those was it in the Ministry of Defence. The final four months saw the strength of our country's defences become a political football as the review was kicked around Whitehall between the Ministry of Defence, the Treasury and No. 10. No doubt a few focus groups were thrown in, too. What that has done to the morale of our armed forces can only be imagined.

Nor was it ever a foreign policy-led review. The Government have never published the foreign policy baseline as they promised—not even today. Even the panel of experts set up by the Government to advise them has never seen it. If the review had genuinely been foreign policy-led, it would have had to make some effort to match capabilities to commitments. There is no attempt in the White Paper to do that.

What has happened since 1 May last year to make the Secretary of State think that the world has become a safer place? All the evidence of the past year suggests exactly the opposite. Our commitment in Bosnia is clearly very long term. We nearly became involved in another Gulf war. A nuclear arms race has begun in Asia. The enlargement of NATO increases the level of our commitment to that organisation. I believe that we might still become involved in Kosovo. On top of that, there are dangers that no one can foresee, and it is not good enough to say that there are no threats just because we cannot foresee them. Who foresaw the Falklands or the Gulf crisis? Who, in the early 1930s, when defence spending was last at the level to which the Government plan to reduce it, foresaw the threat that subsequently engulfed the world? By their nature, such threats cannot be foreseen, but they must be provided against.

We welcome many of the proposals in the review and will support them. The Secretary of State concentrated on the few gains; I want to ask him about the many losses. The defence budget is to be reduced by £915 million a year under these proposals. Can he say what exactly that means for our armed services? Paragraph 89 of the White Paper says that we should be able to respond either to a major crisis such as the Gulf war or to undertake a lesser-scale deployment and a peacekeeping operation. Is he saying that we will not able to mount a major deployment such as the Gulf war as well as maintaining our operation in Bosnia? That is the implication of paragraph 89.

We welcome the various initiatives intended to make the lives of our service men and women and their families better and to improve conditions of service. There is one simple thing that the Secretary of State could to do this afternoon. He could respond to the repeated calls for more generous telephone allowances for our troops in Bosnia. It is a small matter for him, but a major matter for our troops, and he could solve it today.

The Navy is to lose two of its hunter killer submarines, three frigates and destroyers and three mine hunters. Those are significant reductions in capability. We will have fewer frigates and destroyers than France or Japan and about the same number as Italy. When will the cuts be implemented and which ships are involved? Can the Secretary of State confirm that the Falklands protection force will not in any way be diminished?

The Secretary of State has made much of the two planned aircraft carriers. They will, of course, add significantly to our ability to project force, but they will be very expensive and they are not planned to be in service until 2012, by which time Invincible will be 35 years old. Can he give a firm commitment to order those carriers? Conservative Members would be amazed if a Labour Government ever built and equipped them. They will be too expensive and will get killed off by the Treasury, first by delay and then cancellation.

Is the Secretary of State satisfied that our much-reduced surface fleet will be able to protect two carrier groups as well as HMS Ocean? Can he tell us something about the state of Project Horizon? It is widely known that it is in trouble, but the White Paper says that the new ships will replace our air defence destroyers in 2004. Can he confirm that that is the plan? The Navy is getting real cuts today for the possibility of two new carriers in 15 years' time. I confidently predict that the Government will never commission the new ships and that we will be left with a permanently weakened Navy.

We are delighted that the concepts of joint operations and rapid deployment are to be developed. Those ideas were started by us. We are also delighted that the Army is to get its full complement of Challenger 2 tanks. They were ordered by the previous Government, as was so much of the equipment now coming on stream, such as the Eurofighter and the Apache and Merlin helicopters. They will ensure that our forces have first-class equipment. Conservative Members doubt whether that would have been so had Labour been in power in the 1980s when those decisions were made.

We believe that cutting the Territorial Army by a third will prove to be one of the biggest mistakes of the review. Is it true that 172 TA centres will close? Which will they be, and when will they close? How much money will be saved by cuts to the TA?

The Paras have won the respect of the public and their fellow soldiers, to say nothing of our enemies. It is probably sensible to acknowledge the limited remaining role for brigade-sized drops, but, in making the change to the Paras' deployment, can the Secretary of State assure the House that the ethos and identity of the Paras will be retained as a discrete unit in the new brigade that they are to join?

The RAF is to lose 36 front-line aircraft: that is a significant and, we believe, dangerous reduction in our air power. We welcome the acquisition of the four C-17s, but is the Secretary of State confident that that will be enough? We were expecting him to order six. Can he tell us whether those planes are being leased or purchased; and, if leased, for how long? The future large aircraft project is apparently continuing, despite its well-known problems. Does he foresee a successful conclusion and to what timetable?

The White Paper is appallingly light on finance. It is absolutely impossible to understand how the annual totals are arrived at, or how capital receipts have been treated. Will the Secretary of State publish, in the very near future, detailed figures, so that the Select Committee can review them? He admits that the cut in the annual defence budget will amount to £915 million in real terms by the end of this Parliament, but does he agree that defence spending in the last year of the Conservative Government was £21.5 billion and that his plans for 2001–02 are for £23 billion, which represents a real-terms cut of £1.25 billion—considerably more than the £915 million that he is claiming?

There are many aspects of the White Paper that we shall support—indeed, many are simply the continuation of things that we had started or planned. However, there are far too many cuts—cuts in manpower and cuts in equipment. There will be fewer men, fewer planes and fewer ships to do more and more in an increasingly unstable and dangerous world. The Government's priorities are now clear and defence is not high on the list. We always suspected that the strategic defence review was a cover for cuts and today we have been proved correct.

It is my pleasure to welcome the hon. Gentleman to the Dispatch Box for the first time as shadow Secretary of State for Defence. He has been put to a good and important job, although I cannot congratulate him on the quality of his argument. I suspect that he inherited that press release from somebody who was there before, rather than having made it up himself after giving due consideration to the White Paper that I gave him four and a half hours ago so that it would be possible for him to digest it.

It is a bit rich to be lectured by a former Conservative Treasury Minister about cuts in the defence budget. The hon. Gentleman was Economic Secretary to the Treasury between July 1990 and April 1992. The defence budget in the year 1991–92—one single year—was cut by a full 10 per cent. in real terms, yet he has the brass neck to come to the House of Commons and complain that I am going to reduce the defence budget by 3 per cent. over three years. The Government of whom he was a member cut defence expenditure in this country by 23.5 per cent. in real terms between 1990 and 1997, which amounts to 4 per cent. in real terms every year. The figure for the defence budget in 1997 was £6.5 billion lower than in 1990. Cumulative total cuts of some £25 billion of defence expenditure were made. I really think that we should take with a pinch of salt some of the hon. Gentleman's points.

The hon. Gentleman says that we have treated defence like a political football in the past year, but the very opposite is true. I wish that he had consulted his predecessor, the right hon. Member for North-West Hampshire (Sir G. Young), because the right hon. Gentleman knows that the review has been unprecedentedly open and inclusive. The hon. Member for Salisbury (Mr. Key) attended some of the seminars that we organised and gave his point of view as part of that exercise. We have made sure that everybody had their say in the whole of the process, so that today the review is not simply the property of me as Secretary of State for Defence, or of the Ministry of Defence; I believe that it comes from all the inputs that we received over that time.

The hon. Gentleman made a point about the foreign policy baseline. I have provided for him in the White Paper the foreign policy priorities of the country and he will see a further outline in the supporting essays. Last October, I gave the House a clear outline of the Government's foreign policy objective and I followed that up with two major speeches; one at the Royal United Services Institute and the other at Chatham House. That is a weak debating point.

The hon. Gentleman said that we live in a much more dangerous and unpredictable world. Of course, we do. One of the problems that I have had to address when trying to ensure that our forces are fit to deal with that more dangerous world is to repair some of the weaknesses that I inherited. The hon. Gentleman will have noted that I was deliberately not critical of the previous Government, but those inherited weaknesses are there for everybody to see in defence medical services, logistics and heavy lift. We have had to rectify that.

Contrary to what the hon. Gentleman says, the outcome of the review means that there will be more regulars in the armed forces of this country. They will have better equipment and be better organised and they will be more relevant to dealing with the new dangers.

I gave the hon. Gentleman the White Paper and the supporting documents well in advance of my statement, so I am surprised that he asked about the force planning assumptions. It states clearly in the White Paper that our force planning assumption is based on being able to conduct a Bosnia peacekeeping operation and a Gulf operation simultaneously. That is what drives it. In the supporting papers, the hon. Gentleman will find even more documentary evidence of that.

The hon. Gentleman has obviously not read the supporting papers very thoroughly because he asked about telephone allowances. On page 9–6 of the supporting documents he will see that we say that telephone allowances will be increased as part of the review. We were responsive to what the armed forces had been telling us all along.

The number of frigates and destroyers will be reduced. It is interesting that, in the background piece of paper on which the hon. Gentleman was working last week, his researchers did not seem to know how many destroyers and frigates we had in the Royal Navy. The piece of paper that I have says that they thought we had 33 frigates and destroyers when, in fact, we have 35. It claims that the number will be reduced to 30 when, in fact, it will be 32. That is manageable in the current strategic circumstances and I stand behind it.

Our commitment to the Falklands is laid out in specific and graphic terms. The garrison will remain unaltered, and our commitment to the islands and their inhabitants remains and is on alert.

The hon. Gentleman made a point about aircraft carriers. Rather than deal with this substantial issue, which the Government have studied in detail, the hon. Gentleman chose to make a few cheap debating points. I said that we were planning to replace our three valuable and useful small carriers with two large carriers in 13 years' time. That is the commitment that we make in the review, and it is part and parcel of the capabilities that we think will be relevant for the future. As I have said, they will be paid for over a substantial time. Major decisions will still be required about what aircraft they will carry and what role they will perform, but we believe that our intention makes sense.

The fleet configuration has been part of the defence review, and the Royal Navy is completely satisfied with it. The Royal Navy may be losing some frigates and destroyers, the number of attack submarines may eventually drop from 12 to 10 and it may have fewer than planned in the way of mine counter-measure vessels, but it will also have the enhanced amphibious capability which is so important and of which it is so proud. It will also have some missiles that will work on the vessels that it has today.

The hon. Gentleman made much of the reduction in numbers in the Territorial Army. The bulk of the Territorial Army is configured for a threat that has gone. We want to make the Territorial Army more relevant, more usable and more integrated into the regular forces because that is what it wants. We want the Territorial Army to be able to be called up and form units because it told us that that is what it wants. My hon. Friend the Minister for the Armed Forces will outline more of the details tomorrow, and we shall consult the Territorial Army about the footprint and contact point that is so important.

I am glad that the hon. Member for Stratford-on-Avon (Mr. Maples) congratulates us, or at least commends us, on the new deployment for the Parachute Regiment, which it will welcome. It will make it much more usable.

The Royal Air Force will lose some of its fast jets, but will gain 232 Eurofighters, which is one of the best multi-role aircraft that the country has probably ever seen. When it comes into service, it will add substantially to our RAF capabilities. We shall order C-17s or their equivalent because that is one of the capability holes that the previous Government left us. The future large aircraft will be a contender for the longer-term role.

The hon. Gentleman concludes that we have left the forces less strong than they have been, and that we have reduced manpower; but we have increased it. He claims that we have reduced the capability of the armed forces, when we have increased it. I know that he is new to the job, but the review has the backing, in public and in private, of the three service chiefs and the Chief of the Defence Staff. The review is right for Britain and its defence forces. That is why the hon. Gentleman is wrong and the forces are right.

I very strongly welcome and support what my right hon. Friend has announced to the House. I congratulate him and other Ministers in the Department on making the right decisions on difficult issues.

I strongly welcome my right hon. Friend's announcement about the replacement of the aircraft carriers, which will be good news for my constituency. Will he spell out in more detail the time scale for that procurement objective? What further work will be put in place now to prepare for the replacement of the carrier programme? Will he say more about the Government's plans for our nuclear attack submarines? In particular, what decision have the Government made about ordering the additional two Astute class SSNs, which, as he will understand, formed part of the original decision last March under the previous Administration, who ordered three, with an option for two?

I thank my hon. Friend very much for his understandably warm welcome for the review and its conclusions. As he is the Member for Barrow and Furness, which is the birthplace of HMS Invincible, I can understand his attachment to the concept and actuality of carriers. The time scale that I have made clear is an in-service date of 2012. That is the date which the Royal Navy believes to be sensible and achievable. Any acceleration was not viewed as practical.

On the new attack nuclear submarines, the existing plans remain as they are, and we are committed to taking delivery of the Astute class.

I thank the Secretary of State for his courtesy in allowing me sight of the White Paper some four and a half hours ago, which is about 50 per cent. longer than his right hon. Friend the Foreign Secretary and I were allowed to study the contents of the Scott report.

I share the Secretary of State's indignation at the leaking of the White Paper. Whoever was responsible for that insulted not only the House of Commons but the men and women of all three services, whose lives and jobs may well be affected by the White Paper's conclusions.

I hope that the right hon. Gentleman will not be surprised if the response to his White Paper is relief, and not necessarily one of rapture, on the somewhat dubious ground that the reductions are not as severe as was originally feared.

I welcome the premium to be placed on flexibility, mobility and rapid deployment, the decision to restrict the number of Trident warheads, the confirmation of the commitment to Eurofighter and the emphasis on joint operations and planning. Will the Secretary of State explain why the White Paper of a Government who, rightly, want to play a leading role in Europe makes such scant reference to the opportunities for defence integration in Europe—a mere 22 lines or so on page 10? Will he tell the House what consultations took place with our European allies in the thinking that lay behind the White Paper? Will he also tell the House what account was taken of the current strategic concept review being carried out by NATO?

Finally, can the Secretary of State confirm that the expeditionary strategy that lies behind the White Paper will be pursued in the interests of the United Kingdom, and in accordance with our treaty and other obligations—as, for example, to the United Nations—but will not be based on an automatic assumption that the United Kingdom will, in all circumstances and in all parts of the world, underpin United States foreign policy?

I thank the hon. and learned Gentleman for his welcome for the key items in the review. I register his thanks for the time that was made available to him to read the report. I suffered 18 years in opposition, constantly complaining about the amount of time available to the Opposition to read documents before statements had to be made. I am very glad that, at the first major opportunity, I was able to do as I said for so many years; I believe that it makes for a better debate.

This is a good review by any standards. The force structure was put together following the foreign policy baseline establishment, and the force structure reflects the country's foreign policy priorities, which I believe are generally agreed and appreciated. Only after that was done were the proposals presented to Government, and the resources discussed and debated.

The force structure that was recommended by Defence Ministers, with the full support of the chiefs of staff, was accepted by the Government in its entirety—that is a crucial point for people to register. I believe, and they believe, that the finances that are available for it, given the new configuration of forces and the targets for efficiency and for asset management, are demanding but achievable, and will still give us the ability to pack a punch in the world.

The hon. and learned Gentleman's criticisms were more moderate than those that we received from the Opposition Front Bench. It is strange how keen the Conservative Front-Bench defence team are to spend more public money, when the shadow Chancellor does not spare an opportunity, any day of the week, to say that the Government are slack on public expenditure. I wonder whether they would deliver in government what they are so keen to say today.

On Europe, we have been engaged in a permanent consultation with our allies about the strategic defence review. On Monday night, at Lancaster House, where I met the Defence Ministers of Germany, France, Sweden, Spain and Italy and outlined where our review had taken us, they welcomed it with considerable congratulation. I hope that when they read the review when they get it in the post tomorrow, they will find something there of interest and value. NATO colleagues have also been consulted as we have gone along, and the formulation of the strategic concept takes very much on board many of the ideas in the review.

We are not tied to any particular alliance or to any individual country, because Britain needs and demands a right to be able to act alone. However, we take our treaty commitments enormously seriously. We take our alliances seriously, and our deep and lasting continued friendship with the United States of America underpins a common view that we have about many of the problems in the world today.

rose—

Order. I seek the co-operation of the House. There has been an opportunity for only three questioners in three quarters of an hour. There must now be very brief questions; I am sure that the Secretary of State will co-operate in his responses.

I welcome the outcome of the review and welcome the reduction in operational nuclear weapons, but I note that annual savings could be doubled if Britain concentrated on non-nuclear defence. I ask my right hon. Friend a single question: from this review, will the Government be in a position to get rid of nuclear weapons in the period following the next general election?

If there is progress in multilateral negotiations, and if there is to be a balanced reduction in nuclear weapons leading to their elimination, we shall play our part in that, but today I have announced reductions in our nuclear forces. We shall maintain the minimum deterrent to which we committed ourselves before the general election—a commitment on the basis of which my hon. Friend and I were elected—but we have done so in circumstances where we have made a contribution to a process which, I hope, will eventually lead to a nuclear-free world.

The House will have had considerable sympathy for the Secretary of State as he searched for something to say about the strategic defence review that we have not been able to read in the newspapers over the past four weeks. In terms of the leak, if the Ministry of Defence is so insecure, one wonders whether it can be entrusted with our country's security.

The right hon. Gentleman made a welcome announcement about increasing the establishment of the Army by 3,300, and he mentioned pay and conditions of service. Could he be specific about those? He will be aware that there was already a shortfall of 5,000 men in the infantry, and I cannot think of what he can announce in the SDR that will enable 8,300 more soldiers to be recruited and others to be retained.

Let me deal with the leak. I am not prejudging the outcome of the inquiry or who leaked the document and how it was disseminated. Let us wait and see, and hope that everybody condemns it because it was wrong and whoever did it, if that person is found, will be treated appropriately. However, let us distinguish that leak, which was wrong and improper, from the widespread consultation through the year on all the issues on Britain's defence, for which I apologise not one bit.

I listened to the views of many sections of the community. The right hon. Member for Bridgwater (Mr. King) who is a distinguished former Secretary of State for Defence, came to me and offered his view and advice, as did Lord Younger of Leckie; Lord Carrington; Lord Healey; Sir Geoffrey Pattie; Pat Duffy; the right hon. Member for Kensington and Chelsea (Mr. Clark); the former shadow Secretary of State for Defence, the right hon. Member for North-West Hampshire (Sir G. Young); and a host of others. We listened carefully to military and non-military views, and they were debated in the country as a whole. I am proud that although the review may not be a surprise today, it will be seen as common sense, the way forward on which we should all be able to unite because of that consultation process.

The hon. Member for Romsey (Mr. Colvin) mentioned the increase in Army numbers. That is welcome, and is in line with the Army's ideas. My hon. Friend the Minister for the Armed Forces, like his predecessor, is making valiant efforts to turn round the recruitment position that we inherited. The Army was 5,500 short, but we think that we have turned the corner and that recruitment is making up the deficiency. Through the other enhancements, and especially through the learning forces initiative, it is up to us to make sure that we get the right people of the right quality for the future.

May I begin by paying tribute to my right hon. Friend and my hon. Friends in his ministerial team? The strategic defence review is a tremendous achievement and will provide a secure future in a modern world. Does my right hon. Friend agree that a core mission of defence diplomacy for the United Kingdom's armed forces is essential to deal with the diverse uncertainties and crises of the present day world? Will he confirm that the review will provide the equipment and support that are needed by our armed forces for such a role, and that it will build on their excellent worldwide reputation as forces for good which can make a difference?

I very much welcome my hon. Friend's support, which she has given not just today but throughout the exercise. As the Member of Parliament for Dunfermline, West and therefore for Rosyth dockyard, she will welcome the review's good news for that dockyard. She is right to pick up the defence diplomacy initiative and to ask for assurances. If we are to engage in serious military-to-military contacts that will lead to a reduction in tension and a greater increase in understanding, we must back our efforts with proper resources. That is why our defence attaché network will be strengthened and why there will be more resources for joint training and exercises with some of our allies, including some of our former opponents. That will make a much safer world, and certainly a safer continent.

I congratulate the right hon. Gentleman on putting a brave face on what is obviously a difficult announcement, and on his courtesy in inviting me to give him advice on the review; I only wish that he had taken it. Having said that, I certainly welcome the development of a number of ideas that have been Ministry of Defence policy for some considerable time and are right—the development of jointery and the development of the rapid reaction forces have to make sense in the new world in which we live.

May I correct the right hon. Gentleman on one other point? As he will know, he has not made any reduction in the number of warheads because we never announced the number of warheads that we would have, for good reasons, and I am surprised that he has chosen to announce it today; we only ever announced the maximum that there could be.

I have had the opportunity of reading only The Daily Telegraph to find out what is actually in the review. The one thing that sticks out clearly, which is profoundly unwise in the present situation and which will link in to the problems of overstretch, undermanning, recruitment and morale, is the cuts in the TA. That is merely an initial comment, because I have not had a chance to study the statement, but there is one specific question and one point that I should like to put to the right hon. Gentleman. It is one thing to make reductions in our armed forces because there is a major change in the strategic situation, and then to fix at a level of defences which I believed was the minimum level that this country should have. There cannot be a justification to make further reductions on the ground that "You did it, so we can do it, too."

The Chancellor of the Exchequer has just left. Will the Secretary of State assure the House, after all the worries of this review, which took longer than I know he wished, that, now the review is over and the expenditure levels are fixed, there will be no attempt whatever by the Treasury to make further cuts in the defence programme—and that he has had that undertaking?

I valued the advice that the right hon. Gentleman gave me. I listened to the advice that was given to me by former Secretaries of State, former chiefs of the defence staff and former permanent secretaries, as I listened to many others involved in this exercise. Like him, I could not take on board everything that was said in terms of advice. I wonder how, when he looks back on his career and on the substantial cuts in defence expenditure that occurred around the time that he was in office, he cogitates on that. However, I welcomed what he said, and I am sure that he will recognise some of the views that resonate through the White Paper when he has a chance to read it.

In terms of the nuclear deterrent, the world has moved on. I sit on the Euro-Atlantic Partnership Council and the Permanent Joint Council of the NATO-Russia Founding Act with the Russian Defence Minister. We are building trust and relationships. We should be much more open and much more transparent, and the rules of the cold war should not necessarily bind us at times such as this. That is why we are opening our books, making it clear what we have and, by doing that, making absolutely certain that people know that the deterrent is still there, still credible and no one should mess with us as a consequence.

The right hon. Gentleman says that we are going to reduce further the level of our forces. We are not. The Regular Army, the regular forces of this country, will be increased by 3,300 as a result of this review. That is what is going to happen. I hope, therefore, that he will not rely on The Daily Telegraph, although, as it was working from a photocopy of the White Paper, it may have got it right.

We are increasing the strength and capability, and we have the satisfaction of the Chief of the Defence Staff as well as of the other chiefs in putting forward this force configuration. The right hon. Gentleman may think that we are unwise to cut the TA. I hope that he will look at the White Paper and see what we propose. We want to strengthen and underline the TA's importance, make it more usable and more integrated and give it a role for the future, not let it be stuck in the past, still in a cold war role.

May I congratulate my right hon. Friend on this strategic defence review, which has clearly been taken for strategic reasons and not, as the Opposition Front-Bench team has maintained, for financial reasons? I particularly welcome the joint operations, the rapid deployment that is mentioned in the document and, when thinking of my constituency, the Eurofighter confirmation. Is it possible for my right hon. Friend to say a word or two about the Procurement Executive at Abbey Wood in Filton, and what effect the review will have on it?

I welcome my hon. Friend's question, which allows me to underline what he said—that this has not been a Treasury-led review. As my right hon. Friend the Chancellor has made clear, the finances are fixed for three years. That will give the armed forces a much greater ability to plan ahead and much more stability than they have ever had in the year-by-year haggling that characterised public expenditure in the past. I can understand my hon. Friend's interest and, I am sure, satisfaction in the confirmation of the role and numbers of Eurofighters that we will be ordering.

There will be implications for the Procurement Executive in Bristol—a considerable reform of the procurement process, which will lead to better value being obtained for the equipment that we buy. However, it is right and proper that these changes should be subject to consultation with the Procurement Executive's employees before anything is announced in the House.

The objectives of greater mobility, flexibility, firepower and joint operations are admirable. However, as there are to be fewer flying squadrons, is there not a risk that morale will be further reduced and personnel may leave? In order to fill the 232 cockpit places for the Eurofighter, will the right hon. Gentleman consider allowing pilots to do commercial pilot courses at ground school during their flying training, so that if they leave the regular service they could join the auxiliary air force, thereby making good any shortfall in that way?

The training initiative is already under way and my hon. Friend the Minister for the Armed Forces has it under review. I assure the hon. Member for Ruislip-Northwood (Mr. Wilkinson) that morale in the Royal Air Force will not be affected, other than for the better, by this review and our vision for the future. The confirmation of the order for Eurofighters has been looked for and their role has been vindicated by the very deep analysis carried out in the review. I thought that the hon. Gentleman might have welcomed the decision to take over the lease on the C-17s or their equivalent. I am aware that he has a long-standing interest in that.

Morale in the forces has been badly affected in the past by hollowing out. That is especially true of morale in the RAF, which has led to an exodus of fast jet pilots. That will be relieved by a reduction in the number of fast jets but a continuation of the existing levels of manpower. It will relieve the overstretch that has been at the basis of falling morale.

I congratulate my right hon. Friend on his foreign policy-led defence review. I especially welcome his comments not just on expensive pieces of military kit, but on our most valued asset—the men and women of our services and their families.

In the context of the review, does my right hon. Friend agree that the process has again highlighted the absolute lunacy of an independent Scotland, a separation of the forces and their payment and the creation of two foreign armies, two foreign navies and two foreign air forces, operating in two separate countries side by side on these islands?

I entirely agree with my hon. Friend. Nothing better highlights the fantasy world of the separatists in Scotland than the concept of a separate Scottish army, navy and air force—presumably with the hon. Member for Banff and Buchan (Mr. Salmond) as the commander-in-chief. Our armed forces contain a rather large proportion of high-quality Scots, and they are strengthened as a consequence of that.

The review is very good news for the armed forces in Scotland. It is good news for Rosyth dockyard; good news for Faslane; good news for the Nimrod replacement and Kinloss; good news for Leuchars; good news for the Edinburgh area with the Eurofighter contract; good news for the Army personnel centre and the other central functions of the MOD in Kentigern house in Glasgow; and good news for Scotland. Separation and ripping Scotland out of the United Kingdom would be profoundly bad news for Scotland and for the rest of the country.

Leaving aside the panic button that was obviously triggered by opinion polls in Scotland, may I tell the Secretary of State that—despite many hon. Members' urgency in finding answers to specific questions—the documents merit serious study and considered response? What are the geographical implications of reductions in Territorial Army numbers? There has been genuine concern in the highlands and islands of Scotland that, in a line from Fort William to Stonehaven, there may be no Territorial Army centre.

The Secretary of State also mentioned the issue of the special problems—such as mobility—faced by service families. Will there be a specific Ministry of Defence education budget to assist children who have to move from various settings and countries—sometimes at very short notice—or will the matter be negotiable with the Department for Education and Employment, the Scottish Office, the Welsh Office and local authorities? Parents and families are concerned about that matter.

Finally—very briefly—why are we only cutting in half the number of Trident nuclear warheads? Why do we not set a model example for the rest of the world, so that we can genuinely argue the case for non-proliferation?

I do not know what position the hon. Lady will have in Alex's Scottish army—perhaps chief of the air staff. We shall see. She asked about the Territorial Army. The geographical distribution of the new, reinvigorated Territorial Army is a very important matter which should be the subject of consultation with the Territorial Army itself. My hon. Friend the Minister for the Armed Forces is currently engaged in such consultation—which, rightly and properly, should take time to be completed.

The hon. Lady was right about education, and I hope that she will register both my comments and the White Paper's contents dealing with the matter. We shall establish a task force to deal specifically with the problems experienced by mobile families—who do not have first choice in choosing schools to provide the education that their children deserve, and who find it difficult to get on to doctors' waiting lists and almost impossible to get NHS dentistry.

Those problems are difficult ones because of the current structure of the health service and education service, which is why a specific task force will be established to deal with them. Although the problems may seem to be small issues within a vast strategic defence review, they are far greater than any strategic issue if one cannot get medical attention or one's children into school. We want to deal with those problems.

With the interests of my 3,800 aerospace workers in mind, will my right hon. Friend say more about the heavy-lift future large aircraft? We want to build its wings—will it fly? Will the Astor project—I have a constituency interest in it—go forward? Will he say how many more months we shall wait to hear the fate of the 3rd battalion Royal Welch Fusiliers (Territorial Army)?

My hon. Friend is a doughty champion of the interests of the aerospace workers in his constituency, and rarely wastes an opportunity to make his views on them clear to me. I am always glad to listen to him. I have made it clear that we have an interim need for heavy-lift transport, and the C-17 or an equivalent fits into that category. However, the future large aircraft project continues. We fully support it, and hope that it will provide an appropriate European heavy-lift aeroplane for the future. We have a commitment to the Astor programme, which goes ahead. My hon. Friend will receive news of the Territorial Army configuration once consultations have been completed.

The Secretary of State will be aware that the proposal for the joint rapid reaction force expansion builds on the Conservative joint rapid deployment force; therefore, we welcome it. However, he will also be aware that I am extremely concerned about the future of the Parachute Regiment and airborne forces. Is it not the case that, as a result of a review, the cap badge and the red beret of the Parachute Regiment and the proud ethos of airborne forces is likely to be submerged into the new air manoeuvre brigade? Is he now able to respond to the point that I made in the House last week—that this welcome new brigade should be based in Aldershot in Hampshire rather than in East Anglia because the forces have to deploy from west of London not east of London?

The hon. Gentleman takes a healthy non-partisan view of defence which is very welcome. Although he did not say it, I am sure that he welcomes the thrust of the review. He says that we may well have taken some ideas from the previous Government's joint rapid deployment force, but even he will recognise that it was not easily deployable, so we have given it the capability to deploy and the rapidness that it did not have in the past. I am happy to continue with some of the better ideas of the previous Government and to give them the resources to make them work.

The hon. Gentleman is right to praise the Parachute Regiment, its proud tradition and record of fighting, but it is generally felt that its capability in parachuting should be built into something that makes more sense and is relevant to future circumstances. Its cap badge will be maintained, as will its traditions and, given those who run the Army at present, it is highly unlikely that there will be any attempt to change that. However, within the new air manoeuvre brigade, its relevance and purpose will undoubtedly be increased in future. No decision has been taken about where the brigade will be based, I hear what the hon. Gentleman says about Aldershot and I am sure that he expresses a dispassionate and objective view, but I have no doubt that other objective views will be expressed from other parts of the House, and we shall listen to them all.

May I welcome my right hon. Friend's announcement today, particularly the reference to the defence medical services? It was depressing to find that those in Bosnia doing the job on behalf of our reserves and regular forces were so damaged by the reorganisation of services by the previous Government. It is difficult enough to work in the medical services, as I know, and to do that job in dangerous and awful conditions is something which I consider unacceptable. I very much welcome the move to do something about it, and I am most grateful to my right hon. Friend.

I thank my hon. Friend who is a member of the Defence Select Committee and has seen at first hand many of our troops in operations. Like so many others, she has heard from them about the current demoralisation in the defence medical services. The previous Government made a serious mistake in the way in which they made economies. It is something which many people regret. I do not make much of it, in the interest of maintaining the consensus that we have built up, but it has to be rectified, and we are committed to that. If our deployed troops require and rely on anything during operations, it is the medical back-up; we have to re-create that and make sure that it is there.

I should be grateful if the Secretary of State could answer three or four quick questions about the White Paper, as I am sure that many right hon. and hon. Members will have doubts about how £750 million will be saved. He spoke specifically about overstretch and undermanning. How does he square that with reducing the number of ships. Putting more men into ships, but having fewer ships will undoubtedly mean more deployment, possibly for longer. Where will the new aircraft carriers be kept? I should like to make a special plea for Portsmouth dockyard, which is custom made for it. Will he also explain to the tens of thousands of people in the Greater Portsmouth area who rely on the defence industry for jobs what there is in the White Paper that will give them some satisfaction that their jobs are safe and that the projects that they are currently working on will not be abandoned? I am heartened by the thought that there will be a further statement tomorrow. Finally, will he let us know what he plans to do with defence medical services, in particular the future of the Royal Haslar naval hospital?

It is difficult to give short answers, Madam Speaker, if hon. Members ask five questions. May I first put the hon. Gentleman right? The savings in the defence budget will not be £750 million. We are talking about a 3 per cent. reduction in real terms in the defence budget by the end of three years—£685 million. We believe—and the MOD believes—that that can ensure that we still deliver the force package that we have announced. Undermanning in the Royal Navy will be helped by the reduction in the surface fleet. Unlike previous Governments—let them remain unnamed at the moment for the sake of peace—who reduced both the surface fleet and manpower, creating overstretch, we are leaving manpower levels as they are. The Navy believes that that will make a substantial difference to overstretch.

I note—no more than that—that the hon. Gentleman wants the new aircraft carriers to be based in Portsmouth. The happy news is that my constituency of Hamilton, South is absolutely landlocked. I am therefore completely objective in that regard. No doubt, there will be competing interests for that basing policy. It is just conceivable that I will not be the Defence Secretary around at the time who must make that decision. [HON. MEMBERS: "Oh."] I express shades of mortality rather than any sign of modesty.

The defence industry is in very safe hands. It is important to the country because of the jobs that it creates, the exports that it generates and the technology of which it is a part. The defence review underlines the importance of the British defence industry, which I spend much of my time helping when visiting foreign lands.

Does my right hon. Friend understand that the threat of a new nuclear arms race in southern Asia is worsened by Britain retreating to a position from which we defend our national right to use nuclear weapons but deny that same right to almost every other nation on earth? If so, does he accept that, in announcing that Britain is and will remain a nuclear weapons power, he has missed an unique opportunity to give a lead on nuclear disarmament, which could pull the world back from a nuclear brink that has suddenly and frighteningly become that much closer?

Despite my new post, I watch the Scottish press carefully. I always thought that my hon. Friend believed in delivering what one promised. He and I were both elected on a manifesto that stated that we would retain Trident; we should keep our commitments. On the subject of new nuclear arms races, this Government ratified the comprehensive test ban treaty immediately they came to power. I hope that India and Pakistan will also do so. That would make a serious contribution to reducing the chances of proliferation and the dangers of testing.

The Secretary of State will be aware that service men and women, from the most senior officers to the newest squaddie, will have been watching and listening to what he has said. Does he accept that what he has announced, which an artillery man might call a smokescreen barrage, cannot disguise huge cuts? Our service men and women will have noticed that he failed to answer the question asked by my right hon. Friend the Member for Bridgwater (Mr. King). The Secretary of State has no undertaking that the cuts will end—otherwise, he would have told us. How can he possibly believe that recruitment, retention and overstretch will be helped by his announcement of huge, Treasury-driven cuts?

I welcome one or two points, particularly the strengthening of defence medical services, which the Secretary of State will know are important in my constituency. Does he recognise that his announcement on the cutting of fast jets now, with the promise of jam tomorrow when the Eurofighter arrives, will not help retain pilots? That is the economics of the madhouse; they will all have left long before the Eurofighter is available. Does he recognise that all he is promising is beyond visual range? Will he finally answer the question that I have been asking him and his Minister of State on behalf of my constituents for more than a year? Will he address the scandalous refusal to announce what there will be in the splendid buildings of the staff college in Camberley?

The hon. Gentleman is right in one respect. Our forces across the world will be interested in the defence review and in what their Parliament has to say about it. Where he is wrong is in underestimating their intelligence when it comes to discriminating between what he is saying and what I am saying. They know what the past seven years have been like. They know of the 23 per cent. cuts and compulsory redundancies in the armed forces when they were on operations in Bosnia.

We are saying today that the regular armed forces of this country will be increased. The Army will be increased by 3,300, and all other services will be maintained at present levels. Our forces will be able to understand what is in the review, and they will see the contrast between it and what they have experienced. The hon. Gentleman was not listening when I made the point—following the right hon. Member for Bridgwater (Mr. King)—that the financial deal in the White Paper is part of the comprehensive spending review and is guaranteed for the next three-year period. No Conservative Government gave a three-year forward commitment.

The hon. Gentleman mentioned Camberley and what use might be made of that building. We will consider, with all the valuable buildings that are within my responsibility, the best and most appropriate way of dealing with those sometimes surplus assets, and whether they could be used in terms of the rationalisation of some of the defence estate.

I congratulate my right hon. Friend and the rest of the MOD team on the review. It is the first review I can recall where Wales has not been penalised in terms of job losses. During the final two terms of the Conservative Government, 2,000 defence jobs were cut in Pembrokeshire and Carmarthenshire.

May I ask specifically about the three armoured regiments that are planned to return from Germany with their 2,500 personnel? Has a decision been made on where those three regiments will be based and trained? If no decision has been made, may I recommend that my right hon. Friend look closely at basing them and providing training at the Castlemartin tank range in my constituency?

I am taking careful note—I am sure that my officials will be as well—of all bids for the new configurations, which I know will be generally welcomed. No decisions have yet been taken about where the regiments coming back from Germany will be based. We will look carefully at the assets, to ensure that the right decisions are taken in terms of the military and the public purse. My hon. Friend is absolutely right to draw a contrast between the experience of those in the armed forces and what is promised in the review today. The defence review was designed as a vision of the future that would unite as many different elements in the country as possible, so that defence would cease to be the political football that it has sometimes been in the past. I believe that it does that, and that it is good for the country.

As the right hon. Gentleman continues to deny that the Treasury had anything to do with the review, he is, I suppose, unable to accept the congratulations that some of us would want to offer him and his colleagues on having fought extremely well against the predators of the Treasury and having coming out with cuts which are much smaller than many of us feared. I am sorry that he cannot accept those congratulations, which are offered sincerely.

May I particularly welcome the appointment of a new Chief of Defence Logistics? I hope that the Secretary of State will instruct him to finish the job of managing defence centrally, which was started all those years ago by Mountbatten and has been frustrated from time to time by single-service rivalries and turf protection. If he can solve that problem and bring together all the defence logistics, he will have done us a great service.

I wish to make a point about the Territorial Army. In this country, the services, in their professionalism, are gradually getting further and further away from the people. The closing of Territorial Army centres and the taking out of the defence world of members of the civilian community will accelerate that. Will he look at that problem, because if the services are divorced from their civilian counterparts, we will get an unstable and unsatisfactory situation, which we have not had in this country since the war?

If I had had a battle with the Treasury, I would have been happy to accept the congratulations of the hon. Gentleman. My right hon. Friends the Chancellor of the Exchequer, the Prime Minister, the Foreign Secretary and the President of the Board of Trade have all had an interest in the White Paper, and we have had a reasonable discussion.

As I said—and it should not be underestimated—the package that was designed in the Ministry of Defence by the Chiefs of Defence Staff, the Ministers and others who gave their input to the process was untouched by Government. A civilised discussion then took place with the Treasury, and a package was agreed. None the less, I accept the hon. Gentleman's congratulations on the size of the package and pass them on to my hon. Friend the Minister for the Armed Forces.

I thank the hon. Gentleman for welcoming the Chief of Defence Logistics; we believe that it will result in better co-ordination of a key component in ensuring that the right forces can be delivered at the right time. I know that General Sir Sam Cowan's appointment as the first chief has been generally welcomed; there is probably no better man to fit that position and to begin with energy doing the job that the hon. Gentleman describes.

I recognise that very small armed forces, which are proudly treasured by the British people, can become disconnected from their local communities and lose visibility. The TA plays a part—but not the only part—in ensuring that there is contact. That will be one of the key criteria by which we judge the TA's final shape when it is reconfigured, reinvigorated and made more appropriate to the future.

Recent events in Iraq, India and Pakistan have raised awareness of the terrible risks of nuclear proliferation. Does my right hon. Friend believe that the initial cuts in British nuclear weapons that he has announced will enable Britain to take a strong lead both in discouraging proliferation and in reviving the process of multinational disarmament?

My hon. Friend is right. We need to move with some urgency towards a safer world, in which there are fewer of these weapons. We believe that we should maintain a credible nuclear deterrent, but that that can be done at lower levels. We also believe that we can be more open about what we have. The review will achieve that, which is good news for those who serve in our deterrent patrols and will, I believe, be welcomed in the country and, indeed, in the wider world.

Does the Secretary of State agree that, on the crucial medical services, the White Paper is strong on generalisations, which I welcome, but silent on points of detail? Is that not surprising, as a report was completed some months ago on the secondary care agency? Will he confirm that he will build on the core of the Royal Naval hospital at Haslar and the medical college at HMS Dolphin, retaining them as a centre of the enlarged medical services?

Rebuilding the defence medical services and the morale that has disappeared will not be easy, but we are committing money and people to ensure that it happens. I cannot say what the final shape will be; Haslar and the local national health service trust are having on-going discussions. I want urgently to consider how best we can fulfil our commitment, use properly the money that we have set aside and ensure that one of the key capabilities of our armed forces is given the priority that people believe it should have.

May I pay particular tribute to the review's acknowledgement of the worth of our service people and its practical commitment to improving their lives through better personnel services, education and training and the task force for the family? Will my right hon. Friend tell my constituents when a decision is likely to be reached on the future of RAF Scampton in Lincolnshire?

My hon. Friend is right to point to the key role that people have in the review and in the armed forces as a whole. I am told that it is a cliché to say that people are our key asset, and I suppose that it is; it is repeated by those who have done them a disservice as well as by those who have done them a service. However, it is a fact of life. People make our defences the envy of the world; their capability and skills are highly important. She mentions the Royal Air Force, of which the same is true; the fast jets do not fly without skilled people to man them, and we give those people due priority.

We will announce in due course the implications of the review for individual circumstances, which are complex at this stage, and I am sure that my hon. Friend will be relieved as a consequence.

I thank the right hon. Gentleman for including me in the consultation process, and I am naturally gratified that some of the recommendations that I, among others, made have found their way into the document. He did not, however, properly answer the question put by my hon. Friend the Member for Stratford-on-Avon (Mr. Maples): will the carriers in fact be built? They are the only factor that justifies the word "strategic" in relation to the review, which is otherwise a list of fairly intelligent cuts and an exercise in saving money.

How will the Secretary of State protect himself against the fact that, as soon as the Treasury realises how much equipment and expense will be involved in maintaining a dual-carrier task force—the review is short on detail—it will torpedo the carriers, leaving only the debris of the three services that have been pillaged to pay for them?

I thought, when I made the announcement, that I would have the right hon. Gentleman's support, as I know of his abiding interest in the subject. Every capability in the Ministry of Defence has been examined thoroughly in the review. The balance in the document and in the supporting documents—he may care to read them—leads to clear conclusions about how we should best configure our forces to meet the uncertainties of the new world. That is why we decided to plan for two new carriers to replace the current three.

The costs of the carriers and the aircraft to go on them—decisions are still further down the line—will be considerable, but they will be spread over a long period in both preparation and delivery. It is no intention of the Government to make a proposal and then walk away from it. We are saying in the review what we believe will be right for our country's future and what should be delivered.

I congratulate my right hon. Friend on an inclusive and open process, culminating in the television programme, which was undoubtedly the talk of the steamie throughout Scotland. As a member of the armed forces parliamentary scheme, it struck me as faintly bizarre that we have invested tens of thousands of pounds in technicians who have no transferable pieces of paper to take them into civilian life, and officers who can drive boats and ships across the world but are not qualified to drive a CalMac ferry across the Minch. I welcome the learning forces initiative. Does my right hon. Friend have a time scale in mind for its implementation?

My hon. Friend is my own representative in Parliament, and a very fine one, too. I welcome her question. The transferable qualifications that we have proposed that all recruits and existing personnel should aim for are a key component of the review, to help to ensure that we recruit and retain the best people. The learning forces initiative is designed to be implemented as quickly as possible.

I know that my hon. Friend is in the armed forces parliamentary scheme with the Royal Navy, and perhaps I may take the opportunity provided by her question to make a small announcement about the review's implications for our frigates. As the White Paper makes clear, the emphasis is moving away from large-scale maritime warfare and open-ocean operations, and as we have concluded that our force of attack submarines will be reduced from 12 to 10, there will be implications for frigates.

HMS Splendid will pay off in 2003, when she was due for refit. HMS Spartan will have a refit in Rosyth, starting in 1999, but will pay off in 2006, a little earlier than previously planned. Five type 22 frigates based in Devonport will be paid off: in 1999, HMS Boxer, HMS Beaver and HMS London; HMS Brave will be paid off in 2000; and HMS Coventry in 2001, as two new type 23s are brought in. HMS Birmingham—a type 42 destroyer—will pay off as planned in 1999, to be replaced by a new type 23 frigate. It is right that the House should receive that news, not any outside audience.

rose—

Order. I must conclude questions on the statement—[Interruption.] Order. Some Members are exasperated that they have been rising for a long time, but have not been called and I sympathise. At 4.15 pm, I said that progress was not to my satisfaction, but hon. Members ignored what I said and continued to put many questions to the Secretary of State, as well as making long statements. To a large extent, the House must discipline itself. I have done my utmost to call hon. Members with direct responsibility for defence establishments in their areas. If there is a debate on the White Paper, I shall see to it that those hon. Members who have taken an inordinate length of time asking questions today do not get priority.

Points Of Order

5 pm

On a point of order, Madam Speaker. It arises from yesterday's debate, in which the right hon. Member for South-West Surrey (Mrs. Bottomley) sought to intervene on my speech. I initially resisted her intervention. However, I had named the right hon. Lady and intended to give way to her after I had completed that part of my speech. I apologise to the House for any unintended discourtesy on my part. I must reassure the House that I accept unequivocally that it is right and courteous to give way to right hon. and hon. Members whom one has named in a speech and I thank you, Madam Speaker, for giving me the opportunity to advise the House that I intended no discourtesy to it.

Thank you.

Further to that point of order, Madam Speaker. I accept the hon. Gentleman's apology. Perhaps he should have allowed me the opportunity to right that wrong accusation, but I accept his apology and his endorsement of the convention.

I appreciate that. Thank you.

Empty Homes (Value Added Tax)

5.1 pm

I beg to move,

That leave be given to bring in a Bill to reduce Value Added Tax paid on the renovation of long standing empty homes.

The Bill would take a large knife and cut the waste of empty homes, which litter our towns, cities and countryside. Ours is a small island straining to provide enough decent housing for all its inhabitants. With the countryside under threat from development and inner cities in need of regeneration, we have a bewildering and contradictory situation that allows the building of new houses on green-field sites to be exempt from value added tax, yet penalises those refurbishing, converting or saving homes by charging them VAT at the full rate at 17.5 per cent. The Bill would provide a greater incentive to the building industry to bring empty homes back into use by reducing the level of VAT paid on their refurbishment. In doing so, it would help to create a more sustainable house-building policy.

In England and Wales, more than 800,000 homes are empty, and the great bulk of them are in the private sector. When publishing the White Paper, "Planning for the Communities of the Future", my right hon. Friend the Secretary of State for the Environment, Transport and the Regions announced that the target for building homes on previously developed land would increase from 50 to 60 per cent., which was a welcome move. As we frame a new housing policy, it is vital that we consider how to sustain existing property. Wasted homes that are lying idle could make a significant contribution to the Government's inherited figure of 4.4 million homes being needed—or however many we end up believing we need.

Lowering VAT to 5 per cent. on the renovation and refurbishment of homes that have been empty for more than a year would make that significant contribution to providing for the nation's housing. The Government have stated that they are committed to producing an agenda for sustainable development and, in doing so, have undertaken to consider moving taxation to environmental bads from environmental goods. We saw evidence of that in the vehicle fuel escalator and the reducing of burdens on home energy-saving materials in the recent Budget. Most environmental groups are convinced that the use of empty homes would not only provide a contribution to housing the nation, but save the existing fabric of buildings and reduce toxic greenhouse emissions associated with the manufacture and transportation of materials.

Much has been done to bring empty properties back into use, but it has been led principally by local authorities, often in partnership with housing associations. I was responsible for introducing an empty property strategy on my local council. Within 18 months, we had refurbished 100 empty homes, but the cost had to be transferred to tenants through higher rents. High rents can prove a barrier or a disincentive to low-income families, or to those who want to move from welfare to work. If my Bill had been in place, my council could have renovated 15 more properties. The same is true of many excellent local authority initiatives up and down the country. However, the matter cannot be left to local councils, because most empty properties are in the private sector.

There is proper concern about how we define an empty property in need of refurbishment. My Bill would not provide a loophole for anyone who left home on holiday, returned via a do-it-yourself store and sought a reduction in value added tax. The Bill addresses the 250,000 empty homes of long standing, on which councils all over the country have full information because of the details that they are required to provide from their council tax work. Councils are well placed to issue exemption certificates, as local authority bodies have said. A mechanism is in place for the avoidance of fraud.

The next question is whether the Bill's proposals are achievable under European law. The Government have successfully negotiated a cut in VAT on fuel. They had to work hard for that, and cutting VAT again would require time-consuming and difficult negotiations. However, a modest, sustainable and sensible policy would be better than the ill-conceived and contradictory existing policy that allows barns to be converted and millionaire mansions to be built on green-field sites for social reasons, free of VAT, while local councils have to stump up the full whack when they bring a two-up, two-down terraced house back into use for a family on low pay. The policy is the wrong way round.

I concede that there would be an initial loss of revenue. However, we should not lose sight of the savings that my Bill would bring. Increasing work on empty homes will increase the VAT yield. More work for the construction industry means more national insurance and tax contributions. Lower rents will cut benefit bills, and grants to housing associations could also be reduced.

My Bill does not go far enough. I am constrained by the rules on Bills from promoting all that I would like. I want the Government to create a level playing field for the refurbishment of long-standing empty homes and the building of new homes on green-field sites by harmonising VAT at 5 per cent.—a move which was supported by more than 60 hon. Members on both sides of the House in early-day motion 1467. Harmonisation would yield £200 million a year for the Treasury if 176,000 houses were built. That truly would be a sustainable policy.

The Bill is supported by the Campaign for the Protection of Rural England, the Civic Trust and the Empty Homes Agency, which has done much work and which deserves tribute. Moreover, the Bill has been recommended to the Government by their own advisory panel on sustainable development.

Reducing VAT on refurbishment of long-standing empty properties to 5 per cent. is an important first step towards dealing with the waste that bedevils our community. We inherited an appalling legacy in social housing, with council house repairs running at £20 billion. The Government made a good start by releasing council house receipts, but many families still live in appalling bed-and-breakfast accommodation, which is bad for their health, bad for their children's education and an indictment of society. The indictment is all the greater when houses are waiting for renovation and builders want to do the work.

Question put and agreed to.

Bill ordered to be brought in by Mr. Jonathan Shaw, Mr. Robert Marshall-Andrews, Mr. Bill Rammell, Dr. Brian Iddon, Mr. David Chaytor, Mrs. Helen Brinton, Jane Griffiths, Mr. Martin Salter, Mr. Derek Wyatt, Mr. Vernon Coaker and Mr. Brian Sedgemore.

Empty Homes (Value Added Tax)

Mr. Jonathan Shaw accordingly presented a Bill to reduce Value Added Tax paid on the renovation of long standing empty homes: And the same was read the First time; and ordered to be read a Second time on Friday 6 November, and to be printed [Bill 223].

Orders Of The Day

Competition Bill Lords

Ordered,

That the Competition Bill [Lords], as amended, be considered in the following Order, namely, Amendments relating to Clauses 1 to 3, Clauses 17 to 19, Schedules 1 to 4, Clauses 4 to 16, Schedule 5, Clauses 20 to 24, Schedule 6, Clauses 25 to 45, Schedule 7, Clauses 46 to 49, Schedule 8, Clauses 50 and 51, Schedule 9, Clauses 52 to 54, Schedule 10, Clause 55, Schedule 11, Clauses 56 to 74, Schedules 12 to 14, Clauses 75 and 76, New Clauses, New Schedules.—[Mr. Ian McCartney.]

Clause 3

Excluded Agreements

5.10 pm

I beg to move amendment No. 2, in page 2, line 42, at end insert

'or—

(e) resale price maintenance for over-the-counter medicines'.

With this, it will be convenient to discuss new clause 4—Exempted goods—

'() The Chapter I prohibition does not apply to an agreement relating to the resale price of goods of a class which are the subject of an order made under section 14 of the Resale Prices Act 1976 (exemption of goods by the court).'.

I am grateful for this opportunity to speak on amendment No. 2 and comment on the rather good new clause tabled by my hon. Friend the Member for South Cambridgeshire (Mr. Lansley), which directly bears on the same problem.

In many of the debates on the Bill, the Opposition have pointed out that one of its unfortunate consequences—which I trust was unforeseen by those who drafted it—will be the closure of many smaller pharmacies. We have continually argued that the Bill makes it more likely that resale price maintenance will have to go. We have had confirmation of that view and various explanations from Ministers in Committee. Ministers would like the nation to believe that the threat comes from Brussels rather than from their actions and legislation. However, we will seek to show that pharmacies are threatened by the Bill and the Government, as well as by the possible threat from Brussels to which Ministers like to refer.

There are some agreed matters in this debate. It is agreed that, if resale price maintenance is abolished, some pharmacies will close. Indeed, Ministers have suggested that hundreds will close. It is common ground for about 170 Labour Members and for Opposition Members that that would be extremely damaging.

Where are they?

My hon. Friend asks where all those Labour Members are. It would be good to have them here expressing concern about their local pharmacies. However, the Whip on duty, who is now going through contortions trying to show that he has a sense of humour, has done a good job of ensuring that there will be no dissent and no expression of opinion or strong views by Labour Members in defence of the pharmacies that they know will close.

Perhaps the right hon. Gentleman can tell us why the Community Pharmacy Action Group does not support the amendments.

I trust that the Minister will restrain his impatience a little, because it will give me great pleasure later in my analysis to take the House through the position of the Community Pharmacy Action Group and its advisers, Lawson Lucas Mendelsohn.

It is agreed that there is a substantial threat of closure, and that it comes from the abolition of resale price maintenance. It is also agreed, I think, that we can go this far in asserting agreement—that some combination of possible Brussels investigation and this legislation will cause the end of resale price maintenance.

The Minister will doubtless say, as he did in Committee, that there is an investigation under the existing system, but he should remember that there have been investigations before. The most recent concluded that the arrangements were in the public interest. If the Bill did not change the law, it would be possible for the retail pharmacies to win their case under existing law and arrangements as they did before, and continue thereafter to benefit from the advantages that resale price maintenance brings them.

It may help the House to remember why RPM is important to pharmacies, and why there are sensible alternatives for customers who rate price above service. This is important, because the typical local or rural pharmacy provides service and advice. That is often expensive. The number of customers may be limited, but they appreciate the whole service—not just the ability to purchase the goods once the right one has been identified. To sustain the considerable costs of this service, there is a system of recommended and maintained prices which enable pharmacies to recoup the costs of providing the full service and advice through a slightly higher margin than would otherwise be the case.

Does the right hon. Gentleman agree that retail price maintenance would become insignificant if the professional services provided by pharmacists were properly rewarded? Should not the President of the Board of Trade talk to her Cabinet colleagues about getting the Department of Health to pay properly on time, rather than keeping chemists waiting 90 days to pay bills?

The hon. Gentleman makes an excellent suggestion. It is a pity that the President of the Board of Trade is not present to hear that advice. I trust that her Minister of State or the Minister for Competition and Consumer Affairs will pass it on. I do not wish to repeat the allegation made outside this House that she is insignificant. She holds an important office of state, and I hope that she will consider that kind suggestion from her allies in government, the Liberals. I associate the official Opposition with the idea that the NHS should pay its bills on time. That would help the cash flow of many small and larger pharmacies.

Pharmacies need something more than the NHS paying its bills on time. They have traditionally enjoyed the protection of slightly higher prices, which provide them with extra money. That has been found to be in the public interest under the law that the Government are trying to replace.

Given the right hon. Gentleman's comments about the presence of my right hon. and Friends and the powerful case that he is making for community pharmacies, has he wondered where the hon. Member for Tunbridge Wells (Mr. Norman) is this afternoon? As the chairman of the Asda supermarket chain, he launched the complaint against resale price maintenance with the restrictive trade practices court. Why is he not here to debate these important matters?

It shows my hon. Friend's strong sense of conflict of interest that he does not wish to be here to make the business case that is firmly held by Asda. He knows that the official Opposition strongly disagree on this occasion with Asda, fine company though it is. We will vote in favour of support for retail pharmacies. I am not a spokesman for my hon. Friend the Member for Tunbridge Wells (Mr. Norman). He is wisely not here tonight because he has other important business.

Although the case is now being taken forward by the executive management of Asda and not by my hon. Friend, his absence shows how sensitive he is on this important point. I should have thought that Labour Members would want to give him credit for that, rather than trying to coax him into making a statement that they would doubtless misconstrue against him.

I am grateful to the right hon. Gentleman for his continued patience. I understand the conflict of interest that has been created. Does he have any information about which Lobby the hon. Member for Tunbridge Wells will join this evening?

I have already made it clear that I do not speak on this occasion for my hon. Friend the Member for Tunbridge Wells. I speak for the Opposition, and I am making our position clear. I suggest that we move on to more weighty matters that relate to the future of many of retail pharmacies. [Laughter.]

Many Labour Members think it is amusing and that the only interesting thing is the position of my my hon. Friend the Member for Tunbridge Wells, who is a fine Member of this House. They should concentrate on what worries their constituents, who are not asking about my hon. Friend's position. They are asking what, if anything, the Government will do to help community pharmacies. Will they tonight, by their inaction and vague statements, sign the death warrant of hundreds of small pharmacies, as I think they will; or will they listen to the urging of the Opposition, and, for a change, do something that might help those businesses?

The right hon. Gentleman promised the House that he would answer the question I put to him: why is the Community Pharmacy Action Group not supporting the amendment? It is because it supports us.

Life is not that simple. I must again ask the Minister to contain his impatience. His hon. Friend the Member for South Thanet (Dr. Ladyman) has been interrupting on less important matters, and I have been extending to him the courtesy of answering his point. The Minister makes a more important point that is worthy of a longer reply, which I shall give at the right point in my argument; but it is right that I first explain the general position: the threat of closures, the sort of services that the pharmacies offer, and why they are important in local communities.

If someone, even in one of those local communities, thinks that price is far more important than service and the branded medicine, that person can travel to the nearest large supermarket and take advantage of the excellent goods sold in, for example, the supermarket that used to be run by my hon. Friend the Member for Tunbridge Wells. There, and in other, rival and equally competitive, supermarkets—I do not wish to recommend any particular supermarket—can be found cheaper medicines, equivalent to the branded goods, sold on price.

We are not trying to stifle choice in the marketplace, or to prevent people from buying cheap medicines if price is important to them, but we think that, in this unique situation—we do not recommend similar measures for other industries—it is worth preserving the system of RPM that has served local communities so well in the past and could do so in future.

The House will want to know how we propose to achieve that. There are two mechanisms on offer, in amendment No. 2 and in new clause 4. The amendment tabled in my name on behalf of the official Opposition does the job in a straightforward way, providing that, if the competition authorities wished to change their minds on the issue, Ministers would have to come back to the House to amend the legislation.

It is an old technique and a democratic one. I know that such things are going out of fashion with the Government, but I recommend it to the House, as it would ensure that the matter would be under democratic control and properly debated. The amendment provides a lock on the door, unless and until a majority party in future wished to change the arrangements. It works simply, by adding

"resale price maintenance for over-the-counter medicines"

to the list of exemptions in clause 3, which sets out the main prohibition regime and exemptions to it.

If the House finds the amendment a little too dramatic, because it would clearly do the job, there is an alternative in the form of new clause 4, standing in the name of my hon. Friend the Member for South Cambridgeshire. If the Government chose to accept that instead of the really strong version, it would enable the Government to continue to exempt those goods

"which are the subject of an order made under section 14 of the Resale Prices Act 1976".

The new clause would preserve the exemption all the time that the court exemption is in existence; and the court would still have to satisfy itself about the particular case. That, too, would receive the blessing of the official Opposition, if that is the best that the Government are prepared to accept in order to get themselves out of the hole of their own making.

Ministers argued in Committee—as doubtless the Minister will argue tonight—that there is no point in taking such action in British law, because Brussels is determined to end the system of RPM, and that we must allow Brussels to have its way. However, instead of leaving it to Brussels to do that, Ministers say that the issue must be examined by the courts here: if the courts find in favour of the current practice, it will go, albeit over some longer period; and if the courts find against it, the courts will impose their own timetable for its removal. It is not much fun for the retail pharmacies fighting the case before the court to know that, either way, they will lose, but there may be some debate about how quickly the system is phased out.

I find it quite extraordinary that the Government take such a view of Brussels as they have done on this subject. In the fine soundbites to which we are often treated, we are told that the Government intend to be influential in Brussels. We are told that, by having made so many concessions to Brussels—on the social chapter and the treaty of Amsterdam, to name but two occasions—they are now in an extremely good position to get all sorts of free gifts back from Brussels.

Therefore, we ask the Minister to put up on this matter, and take a trip to Brussels. So generous am I in this respect that I should be happy to see public expenditure rise by the price of a return air fare to Brussels, if only the Minister could promise me that he would use that trip to insist on a better answer for the British retail pharmacy sector from Brussels.

The Minister must by now have had enough dealings with Brussels to know that, in Brussels, matters are often more in the nature of a negotiation than of a legal construct. Although they have legal form under treaties and court procedures, in practice many matters are settled, not in the normal judicial way as we would understand it, but behind closed doors by bargains between politicians and/or senior officials.

The matter before us is clearly a case in which the Government could use their influence—if they have any—to try to get Brussels to agree that RPM for retail pharmacies in this country is in the public interest, as was found under the previous Government, and that Brussels should recognise that, and not be too crass in its application of competition law.

Will the right hon. Gentleman clarify his remarks? Is he telling the House that he would prefer, and that we and our community pharmacies should put our trust in a deal struck behind closed doors with civil servants in Brussels, rather than in a British court, the restrictive practices court, and the current arrangements?

No—the hon. Gentleman is being uncharacteristically slow-witted. I have made it clear that I want British parliamentary democracy to settle the issue. As proof that the Government have influence in Brussels—I do not believe they do, but I am always willing to be proved wrong—I want them to go there and tell Brussels to get its tanks off the lawns of our retail pharmacies.

That is a simple proposition, and I am explaining, for the benefit of the Minister, how Brussels works. I am not saying that I approve of that system; I am saying that that is the system, that it is the one within which the Government must work, and that, on this occasion, they should do so in the interests of British democracy—so that we can settle the matter here—and the interests of our constituents, who would clearly like the RPM system to be maintained.

I believe that the Government's influence in Brussels would be greatly strengthened if they accepted either amendment No. 2 or new clause 4—the position would be clearest if the official Opposition's amendment were accepted. They could go to Brussels and say, "That is the will of the whole House of Commons," because not only would they carry with them tonight all the Opposition Members, as far as I know, but they would have all the Government Members' votes, if the Minister asked the Whip to get people to stand on their heads again and vote more in line with their conscience.

The whole House of Commons could be united for once, in defence of a good public service and a good British interest. Surely that would have some sway with those in Brussels when trying to judge both the political mood in this country and how much rope they would have to change our minds for us. Making the amendment would give a strong signal, and I recommend it strongly to the Government.

We know that the United Kingdom authorities are investigating, and I dare say the Minister will say that that cannot be stopped, but there is more chance of that investigation coming to the right conclusion from the pharmacies' point of view if the House clearly expresses its views.

I am not going to argue that that investigation cannot be stopped. I suspect that it could be stopped if the vice-chairman of the Conservative party were persuaded to withdraw the complaint that he lodged on behalf of his company. Will the right hon. Gentleman support me in making such a request?

I am suggesting that the complaint could be stopped by changing the law, which is what is on offer this evening. I have no doubt that I would not be able to persuade the Asda company, which has moved on from the days when my hon. Friend the Member for Tunbridge Wells was in sole charge and has new executive management, to drop its complaint. The executive board members would meet and say, no, they want to pursue the complaint, because it is in their business interests so to do.

I do not object to that, because I believe in a free society in which people can pursue their legitimate interests. All I ask is that we know where people are coming from, just as the House asks hon. Members to reveal whether they are coming from a particular position in cases where people should be aware of their interest.

I am saying that, on this occasion, we can change the process if we wish by primary legislation. We could do so tonight and that would send a clear signal to the investigating authorities or it could even overturn the investigation itself. The Government have the power to do something if they wish. That is all I am trying to establish at this stage in my argument.

5.30 pm

I shall now deal with the issue that has been the passion of the Under-Secretary—the attitude of the Community Pharmacy Action Group. As he has asked about it, perhaps the House will give me leave to go into some detail about the different positions that it has adopted during the passage of the legislation.

When the Community Pharmacy Action Group first alighted on the issue, it considered it carefully and drafted a comprehensive paper on the changes it thought were needed to the Bill in order to protect the interests of its members. It wrote to Mr. Mark Hickson of the Competition Bill team at the Department of Trade and Industry—I believe that that letter has been circulated to all interested Members.

The action group stated that it was campaigning for the continuance of resale price maintenance on over-the-counter medicines. It said that its response

"seeks to make the case for the retention of RPM on OTC medicines and proposes amendments to the draft Bill that we believe will be necessary if the present agreement is to have any chance of surviving…we have made it clear in the submission that our preferred option would be the inclusion in the new Competition Bill of a specific exemption for the present agreement based on contemporary public interest grounds. We have sought to be constructive and hope that you will incorporate this in the final version of the Bill."

I agree with that advice.

I think that the action group was sensible, and I told it so when I was in touch. The group did not tell me or my staff at the time that it was working in conjunction with LLM, the lobby firm. I dealt directly with the action group, and the telephone number that I had was the telephone number of the Royal Pharmaceutical Society of Great Britain. The letterhead made it clear that the Community Pharmacy Action Group was extremely well supported, and that it consisted of the Royal Pharmaceutical Society, the National Pharmaceutical Association, the Pharmaceutical Services Negotiating Committee, the Scottish Pharmaceutical General Council, the Company Chemists Association, the Proprietary Articles Trade Association, the British Association of Pharmaceutical Wholesalers, the Proprietary Association of Great Britain, and the Co-operative Pharmacy Technical Panel. The action group led me to believe that it spoke for all those bodies, which in turn spoke for all their members. I believed that it was an extremely wide-ranging and broadly based alliance. I and my office continued to be in touch with the action group through the Royal Pharmaceutical Society.

Today, I received a letter dated 6 July which changed the line that the action group was recommending in some respects, although not as much as the Under-Secretary is suggesting. For example, it says that it is continuing to oppose the action of the European Community on all this. The letter says:

"I have seen the letter from the Commission, and the Community Pharmacy Action Group is appalled at this threat of legal action"—

that is, from the Commission.

"The EU appears to be seeking, whether of its own motion or at the request of the OFT is unknown, to interfere in the UK's internal market. The effect of the threat from the Commission is that we have been presented with a choice: fight in the UK courts or in Europe."

The letter goes on to say that it firmly believes that resale price maintenance serves the British public well, particularly those who depend on the local chemist. The action group does not believe that Europe has a role in deciding its future, and would prefer UK to European jurisdiction. At the end of the letter, it says, rather surprisingly, that the action group no longer supports or seeks further amendments to the Bill.

I decided to telephone the action group today to seek clarification on that amazing change of heart from the strong and sensible position that was adopted as long ago as September, and which had continued throughout the Committee stage of the Bill. I was surprised to find that the telephone number under the letterhead of the Community Pharmacy Action Group was that of LLM.

When I asked to speak to the chairman of the action group, I was told that he was not there, but that I could talk to the account executive who was handling the case. I was happy to do so. However, the account executive became rather shy, and said that, since it was me, perhaps it would be better if I continued talking to the chairman with whom I had dealt in the past. As soon as I put down the telephone from the account executive at LLM, I received a telephone call from the chairman, Mr. David Sharpe, trying to explain the change of heart.

I have serious questions for the Under-Secretary in the light of these extraordinary exchanges. I should like to know whether the meetings with the President of the Board of Trade and the Under-Secretary were arranged by LLM. Was LLM present at the meetings.

The Under-Secretary is not listening.

I do not mind whether or not he is listening. He has some questions to answer and, one way or another, he will have to answer them, for the House and for the benefit of the nation.

Was LLM present at the meetings? Did the Under-Secretary have private meetings or telephone calls with LLM, and did he tell LLM that it would be helpful to get that group of small pharmacies to back off from pursuing what is obviously an embarrassing amendment for the Government? I do not know whether that happened, but we have a right to know whether there were any such conversations or private meetings or telephone calls between the Under-Secretary and LLM on this issue without the client, the Community Pharmacy Action Group, being present.

We should like to know whether there was any sort of deal. We see in the newspapers that lobbyists believe that one can do deals with the Government. Was there a deal? If so, can we please know its terms, so that we can judge whether it was a good deal?

I wonder what point the right hon. Gentleman is making. Is there not a fraction of possibility that the action group, which has been represented all along by people supporting its interests and helping it to present its case, has considered the facts and concluded that the Government are right and have been right all along? Could it be that the group believes that the Government have been advising it correctly throughout, and has now decided to support the Government's position?

That is a theoretical possibility, but there are many other more interesting ones that are considerably more likely, and I shall explain why.

There is an inaccuracy in the comments of the hon. Member for South Thanet. Mrs. Sharpe, the wife of the chairman of the group, confirmed on the telephone to me this afternoon that she and Mr. Sharp had never informed me or my staff that LLM was involved in the case. I was not aware that that was the position. I prefer to see people directly. I do not like the intermediary of a lobbyist.

I take the view that we are all paid to represent good causes in the House, and that we are the natural channels for a good case. A good case should go directly to the Minister and persuade him, or it should come through me and my hon. Friends or through the constituency Member, so that we can make our judgments about whether it is a good case, which we wish to back without remuneration, or whether it is not a good case, which should be politely referred to someone else, or that those involved should be told that we are not in agreement. That is the purpose of the House. We must make sure that people can get redress for legitimate grievances. I do not like to feel that I have been in any way misled about who is acting for different people, and what sort of game is being played.

I want to get back to the Government's involvement. We need to know how much the Government knew and how they were able to persuade either the advisers or the Community Pharmacy Action Group, or both, that this was not the appropriate way to proceed.

The letter from the action group, and my subsequent discussions with it, have made it clear that something changed, and that it came to believe that Brussels would pursue this case even if the United Kingdom protected the position in legislation. That is not a new fact. I have known that that was a possibility for months, ever since I began handling this Bill. I believe that the Under-Secretary made that clear in his defence of the Government's position in Committee.

The Under-Secretary has not suddenly come to the view that Brussels might take this up independently. It has been a well-known threat for a long time. All my planning to help the community pharmacies, which I wish to do, has been predicated on the fact that Brussels could interfere. I have constantly urged the Government to take Brussels seriously, and to go there to try to sort it out.

The letter to which the right hon. Gentleman refers specifically says that the author, David Sharp, has seen the letter from the Commission. That is the letter of 8 May, which I believe changed things. Has the right hon. Gentleman seen the letter because it has been available?

That letter certainly did not change my view, because, since last year, when I first examined the Bill, I have of course been aware that Brussels might well pursue the case separately, or that there could be separate complaints to Brussels.

I thought that the aim of the Bill was to sort out double jeopardy. We have been telling Ministers that it will be very difficult to do so, and, as the Under-Secretary will remember, I have been urging the Government to go to Brussels expressly to sort out that point. It is clear from his attitude tonight that he has not done so. He is not about to say, "The right hon. Gentleman is wasting his breath, because I have solved the problem. I have been to Brussels, and there is agreement that Britain should be able to settle this issue in the interests of retail pharmacists by maintaining resale price maintenance."

The Government have given us fine words, saying that they support small pharmacists, as do the rest of us, that RPM would help, and that some pharmacists will close if it is not maintained. However, they say to the pharmacists, "Pity us, because wicked Brussels will sort out the problem in a way that we do not want, so you should back off and not embarrass us in the House by backing amendments that would solve your problem."

Does my right hon. Friend agree that it would be interesting to know also what conversations between the Minister, his colleagues and the Commission preceded the emission of the letter from the Commission? It would be interesting to know precisely what requests were or were not made to the Commission, formally or informally, for assistance to get the Government off the hook by issuing such a letter, which was, as my right hon. Friend has pointed out, always a possibility. Should not the Minister give us a travelogue to make it clear exactly what contact he had?

As always, my hon. Friend has put his finger on an extremely important point. It is possible that the Under-Secretary went to Brussels and implied that it would be very helpful to Britain if such a letter were written, because it would get him off the hook and avoid a potential large Government Back-Bench rebellion. He clearly has a vested interest in trying to explain to his hon. Friends and the nation that he has no power to do anything, that he is only the Minister and cannot be expected to sort out the problem, and that it is all the fault of Brussels. Now that he has a letter, he is able, directly or with the help of friends—perhaps another part of the magic crony circle is at work—to get decent people to back off because the Government are misinforming them about the true state of play of the relative powers of the House and Brussels.

I want the Minister to have the full question put to him. Although my hon. Friend the Member for West Dorset (Mr. Letwin) was very forensic, he did not mention that, when deals are done for the Department of Trade and Industry in Brussels or anywhere else, they are normally conducted by people from the Treasury or No. 10, or possibly by "Tony's cronies". We ought to know exactly who, if anybody, has been to the Commission to ask about these matters.

My hon. Friend is absolutely right, and he has enlarged the question in a way that will further embarrass the Government.

We should like to know more about the web of influence and lobbyism that seems to have been working. Perhaps we have here the first case of cash for no influence. This might be the first case of a group being asked to pay money to a lobby group only to be told that it should obey the Government and not influence them for the better. I feel rather sorry for those who thought that their interests were being looked after, who now find that that is not being done properly in the way that they would expect. We need to know rather more about their change of heart.

Suffice it to say that Her Majesty's Opposition—and, I trust, other Opposition Members—wish to give proper support to community pharmacists. This is a problem which the Government could solve by using British law if they wanted to. Ministers should go to Brussels and argue the case for our businesses and the services in our communities, instead of using Brussels in an attempt to stifle a Back-Bench rebellion that would be very embarrassing for them.

The Government should understand that community pharmacies in this country, as Health Ministers recognise, provide an extremely important service, which is now at risk, not just because of Brussels, but because of the Government's actions and inactions. There are many questions that the Under-Secretary should answer before we finish the debate.

This argument is not new. There is no division in the House about the wish to help retail pharmacies and maintain them in their role, which is invaluable to the communities they serve. At issue are the two approaches to safeguarding their position.

The approach outlined by the Government is to let the appeal to the Office of Fair Trading continue because, if it is successful, the Bill will allow the agreement to be maintained for five years. The appeal is highly likely to be successful, given that the Office of Fair Trading has previously adjudicated on the agreement and found it to be in the public interest. The proposed line would protect retail pharmacies' position for about five years, during which they could adjust to the new climate imposed by Brussels and the Bill.

5.45 pm

The right hon. Member for Wokingham (Mr. Redwood), however, proposes to hard-wire into the Bill perpetual protection for resale price maintenance for retail pharmacies. He tabled the amendment knowing that it is in breach of, or counter to, the principles of the legislation—articles 85 and 86—with which the Bill harmonises UK law. It is known also that the only outcome of pursuing the right hon. Gentleman's approach is that, if it were successful, Brussels would take over, investigate and, very likely, decide that resale price maintenance should be stopped. The pharmaceutical industry would then be in far greater jeopardy than if the Government's course were followed.

We came to the nub of the issue in the right hon. Gentleman's winding up. He is challenging the Government to go to Brussels and demand that the law is changed, knowing very well what the answer would be. What marks out the true obsessive is that, whatever the issue, he returns to the point of obsession, which in the right hon. Gentleman's case is Europe. We realise the true nature of the Opposition: the amendment has nothing to do with helping retail pharmacies; it is an attempt, yet again, to stage a confrontation with Europe to demonstrate the likely infringement of the sovereignty of British law. We have heard that case before and it is being rehearsed in exactly the same form tonight.

At issue is an attempt to dupe the retail pharmacies.

Will the hon. Gentleman explain what is wrong with the idea of Ministers going to Brussels to try to achieve a sensible exemption for a British industry that will otherwise be damaged?

What is wrong is that the right hon. Gentleman knows that that is inconsistent with the Brussels legislation under which the Bill falls. The Bill tries to harmonise British legislation with that of Brussels so that—this is the precise point that the right hon. Gentleman made earlier—companies will not face double jeopardy and the uncertainties and expense of two legislative regimes. The right hon. Gentleman knows that, and all the legal advice that he has been given must have told him that, yet he persists with his amendment, knowing that it could lead only to a confrontation that cannot be won.

Retail pharmacies would be damaged by the amendment, and if they adopted the right hon. Gentleman as a friend they would have a false friend. However, they are more sensible, which is why they sent the right hon. Gentleman the letter he read out earlier. They will not be duped by this attempt to use them to stage a stunt that goes against Brussels and highlights the issue of European legislation and British sovereignty. I am thankful that the pharmaceutical industry has more sense than to listen to Opposition Members.

I am grateful for the opportunity to support amendment No. 2 and to speak to new clause 4, which stands in my name.

My right hon. Friend the Member for Wokingham (Mr. Redwood) was right to emphasise the desirability of basing one's arguments, in the first instance, on what may be learned by talking to community pharmacists. As members of the Committee know, I was at pains to talk to staff of community pharmacies in my constituency and I instanced one in particular, in the village of Gamlingay.

The pharmacy in Gamlingay fully illustrates the predicament of community pharmacies. They often have a limited catchment area that does not give them a very high rate of return, but instrumental in that rate of return is the mark-up they are able to achieve on over-the-counter medicines, given their difficulty—to which the hon. Member for Eastleigh (Mr. Chidgey) rightly drew attention—in securing an adequate rate of return on the provision of prescription medicines and the valuable advice service that pharmacists provide.

In the example I offered, the pharmacist gave 15 consultations a day. Each of those 15 consultations would have resulted in a general practice consultation but for the presence of a pharmacist. It is the only opportunity many people in the village have to access to a local pharmacy. The suggested alternative of a visit to a large, multiple superstore is not available within seven or eight miles.

There is every reason, therefore, to support community pharmacies. I understand from our debate in Committee that support for community pharmacies is not confined to the Opposition; Labour Members' support is evident. I shall not detain the House by quoting them, but Second Reading speeches by the hon. Member for South Thanet (Dr. Ladyman) and others gave particular support to community pharmacies.

The question is whether, in Committee, and especially in relation to the schedule introduced by the Under-Secretary to provide for new transitional provisions, the Government have provided the protection the House seeks for community pharmacies and for resale price maintenance on over-the-counter medicines in the long run. I say "in the long run" because it seems to me that when the other place made amendments and they were, initially, considered by the Committee, what was proposed presented a problem.

At that stage, the case before the restrictive trade practices court would have been stayed and there would have been an accusation to be made to the Commission. This is at the heart of the problem. There would have been an accusation to be made to the Commission that the case had not been considered on its merits, including the public interest and general public health interests additional to the competition considerations; that the legislation had simply obviated—circumvented—proper consideration of those issues; and that, therefore, the Commission should take it upon itself to consider the issues.

For that reason, it was probably right for the amendments made in another place to be overturned in Committee and to be substituted by measures designed to give direct effect in the Bill to the House's intention to support resale price maintenance on over-the-counter medicines. However, the Government have gone about it in a way that has limitations, which were clear in Committee. Although the Government rest upon the question of the court considering the issue, if the court considers the issue and concludes that resale price maintenance does not act against the public interest, a protection is built into the Bill—a protection, through transitional provisions, for five years. However, there is no provision in the schedule to extend the transitional period further.

That brings us back to the letter that the Under-Secretary was at pains to speak about, and on which my right hon. Friend the Member for Wokingham rightly responded. The letter from the Community Pharmacy Action Group illustrates the point. The CPAG has been presented with two unpalatable options. The more unpalatable of the two is that the court goes ahead and comes to a conclusion without Government support for community pharmacies before the court—or, indeed, without the Government going to the Commission and saying, "You should rest on the court's decision". On the other hand, the action group is told, "Do not press the amendments; do not look for anything else; do not embarrass the Government on Report. Say that the Government have done what is required, and you will get Government support"—presumably by way of evidence, or whatever, before the restrictive trade practices court—"and you will subsequently benefit from the five-year transitional provision."

I say that with the evidence that, in the letter referred to, Mr. David Sharpe, chairman of the CPAG, says:

"On the understanding that the Government will continue to support retaining the network of community pharmacies, we will not seek further amendments to the Bill".

When the Under-Secretary replies to the debate, will he tell us the meaning of the phrase,

"On the understanding that the Government will continue to support retaining the network of community pharmacies"?

That is the key question.

My hon. Friend is right. Does he agree that the Under-Secretary would be more convincing if he published the letter or evidence that he sent to Brussels in defence of our pharmacists before he received the letter giving him a rather dusty answer, and if he published the evidence that he intends to give the court, also defending our pharmacies?

I am grateful to my right hon. Friend. I hope that the Under-Secretary takes up that challenge; it would be very enlightening if he did.

However, the response from the Commission—the Under-Secretary may interrupt me if I am wrong—referred to on 8 May, is essentially about whether the Commission would intervene if the legislation were amended, as happened in another place, to stay proceedings before the restrictive trade practices court. That is not the question before us now, which is: will the Commission seek to intervene if the House legislates on the basis of resting on the decision of the restrictive trade practices court?

The view that the Under-Secretary expressed in Committee was pretty clear on that point. He said:

"I reached the conclusion…that the Commission is looking to the restrictive practices court to examine the evidence and to make a ruling."—[Official Report, Standing Committee G, 23 June 1998; c. 608.]

That is in the context of a conclusion reached by Richard Whish, an eminent competition lawyer, that the Commission is capable of taking into account general public health interests in its examination of a case under article 85 of the treaty on European Union. The proposition seems to be, therefore, that the Commission would be able to rest upon the public interest test applied by the restrictive trade practices court and, on that basis, not pursue an article 85 investigation if that court concluded that RPM was not acting against the public interest.

That brings us back to amendment No. 2 and new clause 4. They differ from what the Government propose in the following important respect. The Government are proposing that community pharmacies should be protected for five years. I do not understand it to be the intention of the House that community pharmacies should be given a stay of execution. My understanding of the debate, including the contributions made on Second Reading and in Committee by Labour Members, was that we had concluded that, subject to an examination of the evidence by the court, there was a belief in the House that the process of resale price maintenance on over-the-counter medicines acted in the public interest—that it was not necessarily anti-competitive in any case, but that, in addition, it was justified on general public interest grounds. We had concluded that, if we moved to an article 85-style or chapter 1 prohibition-style investigation, the narrower gateway—moving from a public interest examination to a simply competition examination without taking broader public interest criteria into account in this instance—might well lead to a narrower conclusion that was prejudicial to community pharmacies. We concluded that that was undesirable. The House therefore wished to move toward protection for community pharmacies and to vest that in the legislation.

The Government are offering only five years' protection, but the wish of the House is to go further. Devices are available to achieve that: amendment No. 2 and new clause 4 would be perfectly adequate for the purpose. The proposition before the House is that we should not limit the protection of community pharmacies by a stay of execution but should rest on the court's decision that RPM on over-the-counter medicines is not against the public interest. I hope that the Government will respond positively to the amendment and the new clause.

I shall expand on the points that were made by my hon. Friend the Member for Bexleyheath and Crayford (Mr. Beard). The amendment's stated aim, which was outlined by the right hon. Member for Wokingham (Mr. Redwood) is to protect community pharmacies. It is interesting to note that there seems to be a slight split in the Tory party in that there are alternative proposals, but I shall pass over that. As I understand it, the amendment also aims to ensure that resale price maintenance continues for ever. As my hon. Friend said, it has several aims. One is to distract attention from the unfortunate fact that in a former life the hon. Member for Tunbridge Wells (Mr. Norman) initiated the attack on RPM.

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Until the Bill started its passage through Parliament, the Tories took no action to protect pharmacies. An early-day motion has been widely cited, but that is a two-edged sword because I understand that although only three Conservative Members signed it, the Conservative party now says that it is wonderful and does not go far enough.

The reason for the smokescreen was evident in the speech made by the right hon. Member for Wokingham: the amendment is an opportunity for yet further Euro-bashing. The constant talk about Brussels is revealing. It is as if Europe is over there in Brussels and not a community of which we are a part. To speak about Europe as if it were separate is ridiculous and demonstrates a certain mind set. I congratulate the right hon. Gentleman on his ingenuity in dragging the issue of lobbying into the debate.

Amendment No. 2 does not seek anything in perpetuity. Parliament can change its mind and change legislation at the drop of a hat if there is a will to do that, and that freedom is in my amendment. New clause 4, which my hon. Friend the Member for South Cambridgeshire (Mr. Lansley) has tabled, would allow the court to come to a different judgment at some future time. There is no split between us, and we are aware that we would need Labour votes to pass either. We offer Labour Members a choice and we would be happy with either. The hon. Lady spoke about the early-day motion. My right hon. and hon. Friends and I voted for its wording on Second Reading—and we should have liked Labour Members to join us on that.

I accept the correction: of course Parliament can undo what it has done and, to that extent, nothing need continue for ever. I dissent from the right hon. Gentleman's analysis of the effect of the amendment and the new clause. They would expose RPM to abolition by the Commission within years, whereas the Government proposals give at least five years of protection.

Another point that has arisen in the debate was also made in Committee. The Opposition have made great play about being the protectors of community pharmacies, but they have slightly narrowed the definition of such pharmacies. Judging from how they speak about them, they have been recruited to their rather spurious notion of country life and occur only in the countryside. I appreciate that such pharmacies are incredibly important to rural communities, but they are also important to urban communities, and the dichotomy between supermarkets and independent pharmacies is not quite as strong as the Opposition make out.

In my constituency, some small pharmacies are independent and others are branches of a large national chain. There is also an excellent pharmacy inside a Tesco supermarket. It is extremely active in co-operating with local GPs and has run health education campaigns on asthma, diabetes, antenatal care and emergency contraception services.

There is no argument between us about the need for an extensive network of pharmacies in all communities; I merely ask the Opposition to accept that community pharmacies are not simply small independent ones. Pharmacies serve all sorts of communities and include those in large supermarkets as well as the independents. I look forward to the Government's plans to ensure that all pharmacists, whether they are independent, in community pharmacies or in shops or supermarkets, are used more effectively. However, I do not think that such a debate should form part of the discussion on this part of the Bill.

The Opposition are engaging in a cynical exercise. Under the guise of the protection of community pharmacies, they are addressing an entirely academic point. They know that their amendment would provoke the end of RPM, although they say that they are trying to protect it.

I shall not reiterate what has been said because I agree with much on both sides of the argument. We all support community pharmacists, large or small, urban or rural, and we want them to be able to function with some security. The people who use them should have access to them not just for the next five years, but beyond. The proposals that we are debating will lead to a lack of security. If resale price maintenance fails the public interest test, that could be the end of many community pharmacists. The alternative is a five-year stay of execution.

We would have more sympathy for the Government's proposals if, during the five years, they offered an opportunity to look at ways in which to fund pharmacists and provide them with security. However, after five years, pharmacists will be left to the marketplace, and that would not provide the security that they seek or leave the communities that they serve with the feeling that such pharmacies will remain.

If the five-year transition period were used positively to prepare plans for the funding of pharmacists, that might enable us to support the proposal. Pharmacists in my constituency feel that convenient access to medicines for people who have been to their doctors is a vital part of primary health care. It is an anomaly of the health care system that that one part is not included in health care operations. That is because we regard pharmacists as small chemists and take the view that resale price maintenance is the best and only way to fund them. Many pharmacists feel that their qualifications and experience, and the valued support that they provide to GPs by way of health education and even diagnosis are worth more than just the protection of RPM on over-the-counter medicines. They should be considered as part of primary health care.

Resale price maintenance has served pharmacists and their communities well. We will support the amendment because it would ensure, at least in the short term, the continuance of RPM and, therefore, the protection of pharmacists. RPM will be under constant commercial attack, and those challenges may be the pathfinders for many more. Such insecurity may prompt some pharmacists to give up. Pharmacists who are thinking of retiring in the not-too-distant future may be feeling fearful about their ability to sell their businesses. Pharmacists who have received their qualifications and are looking for new opportunities may feel distinctly uncomfortable about taking on positions in small chemist shops that may be under threat in only a few years.

That insecurity is the reason for this debate. Although the Minister has provided good protection for a short period of years, if it is needed, he has not looked in the long term—at the long-term provision of pharmacists and access to them, which is at the heart of what we are looking for. On this occasion, we support the Opposition amendment.

I hope that the Liberal Democrat party will make it clear how it wishes to help the pharmacists, if it does not wish to support either the amendment or new clause tonight. We think that they are the best way in which to do it.

I did say that we would support the Opposition's amendment as I was about to sit down.

I want to discuss the substantive issue—community pharmacies—and move to an issue of much wider significance, which arose from the exchange between my right hon. Friend the Member for Wokingham (Mr. Redwood) and the Minister for Competition and Consumer Affairs, where matters have reached a serious pitch.

In common, I suspect, with many hon. Members on both sides of the House and certainly with many of the Liberal Democrat Members who are present, I represent a seat that is perhaps the archetype of the problem. It is inconceivable that there should be available in the smaller towns of West Dorset sufficiently elaborate national health service provision to meet all the needs of the ordinary citizen, who is often unable to move around easily because of necessarily limited rural transport. The Government's persistent attack on rural transport by car through short-sighted actions with environmental aims has limited it even more. It is of the essence that such citizens in West Dorset should have available to them what has been available to them for a long time, and will, if the amendment is passed, continue to be available to them—access to a rural pharmacy. That will not continue to be available for much longer if the amendment is not passed.

Our pharmacies in West Dorset depend on the amendment. I speak not speculatively, but on the basis of intensive discussions with each of the principal rural pharmacies in each of the smaller towns in my constituency, of which there are not very many; it is possible to cover them all because their number is small. The number of villages is, of course, great and, again, that is an archetype. There are some 55 larger villages in West Dorset, each clustered around the towns. They, too, depend on the rural pharmacist. In discussions with rural pharmacists—in many cases, I have gone to the trouble of asking them specific questions about their turnover, margins and current profitability—it has become clear that their existence depends on resale price maintenance or some equivalent.

I thought that the interjection of my right hon. Friend the Member for Wokingham during the remarks of the hon. Member for South-East Cornwall (Mr. Breed), who spoke for the Liberal Democrats, was highly pertinent. It is possible to imagine—it has always been possible to imagine—that the Government would seek to introduce alternative means of supporting rural pharmacies. There may even be, theoretically, preferable alternate means of supporting such pharmacies.

I have a worry, which I suspect is shared by many hon. Members who represent seats such as mine, which is not a theoretical worry; it is substantive, practical and based on a knowledge that I suspect all hon. Members have of how Government and, in particular, the Treasury, under any Administration, work. If grants, subsidies or special arrangements are introduced to support a particular cause when there is a ferment about that cause—this would be one such case, potentially—they are always a soft target for any Chief Secretary to the Treasury when he comes in the spending round to look at what might be eliminated.

For all the dangers that the hon. Member for South-East Cornwall pointed out, resale price maintenance has at least persisted for a long time and is difficult to dislodge, because it requires action in the courts and may take time. At least that system is not as likely to suffer from the vicissitudes of the attentions of a Chief Secretary which, alas, can quickly be brought to bear on any grant system.

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Essentially, if the amendment is not passed, the access of many of my constituents to what is effectively the only source of help and advice available to them other than GPs, many of whom they find it difficult to reach on many occasions, will depend on the hope that the Government will introduce an as yet unknown mechanism—there is no certainty that they will do so—and that no future Chief Secretary will remove the mechanism.

There is a ready remedy, which is to extend the provision of NHS services in rural areas. That takes us way outside the scope of the amendment and anything, I suspect, that the Government are willing to guarantee. The costs of doing that vastly exceed the economic cost of resale price maintenance in this sector.

That point is of great interest. I was, alas, unable to continue as a member of the Committee during the stages when these matters were considered, but I have had the opportunity to read the official record. I find to my intense surprise that the Minister for Competition and Consumer Affairs has not brought forward any analysis of the economic cost of continuing with resale price maintenance for rural pharmacies. There is a good reason why he has not. It is extremely difficult to identify a significant economic cost in that case.

If one looks at the cost of providing alternative NHS services, the economic and, in particular, fiscal gain of having these pharmacies is fairly easy to ascertain. A cost-benefit analysis of the amendment, so to speak, could easily identify the costs of not having the amendment, but trying to identify the benefits of not having the amendment—the economic gain to the country from abolishing RPM—is quite a task.

Alas, we discovered at a much earlier stage in the proceedings of the Committee that the President of the Board of Trade had conducted a compliance cost assessment that was probably wrong by some magnitude. Therefore, it is not surprising that the Minister has been reluctant to conduct any economic analysis in this particular case, but, if he had done, he would probably have found that the figures would have worked against him.

This is a remarkable case. We have a system, which is theoretically imperfect, but nevertheless produces what I think is by universal accord a practically beneficial result, with probably a low economic cost—it has certainly not been ascertained—almost certainly a high fiscal gain and hence an economic gain. There is no certainty about any replacement and there is an extreme danger that, if there were to be a replacement, it would come under attack from a future Chief Secretary.

That chain of argument suggests that there is a strong reason for seeking to retain the ability for this industry to engage in resale price maintenance. That is the substance of the matter. In rising, my main intention was not to address that issue.

Before my hon. Friend moves on to a separate argument, does he agree that, in this respect, it is not so much the compliance cost assessment that is the mechanism through which the Government should assess what the costs and benefits of proceeding through legislation are, but the regulatory appraisal? While he was speaking, I have taken the opportunity to look at the regulatory appraisal and it is silent on the issue of the economic costs and benefits that might result from the abolition of a number of pharmacies as a result of the Bill.

It was one of the abiding sadnesses of being removed from the Committee that I was no longer able to benefit from the shafts of wisdom that my hon. Friend so often cast on aspects of the Bill. He is right to remind me that it is not the compliance cost assessment, but the regulatory appraisal that should have contained the information. To say that the regulatory appraisal is silent on this issue is, in the now immortal words of Mr. Draper, the understatement of the century. The regulatory appraisal is silent on almost every issue. It is a document of such extreme gnomic quality that it is rather like the holy Roman empire, which was neither holy nor Roman nor an empire. The regulatory appraisal is to do neither with regulation nor with appraisal; it is a piece of paper. However, it would have been possible for the Under-Secretary to produce a serious analysis in Committee, had he wished to do so. I have no doubt that he did not do so because he would not have liked the results.

Will my hon. Friend also think about the plight of the retail pharmacist? He will also need reassurance from the Government that the complicated arrangements to remunerate him for his NHS work will not fall foul of the Bill. Presumably, the Government will have to make use of the public policy provision or the general economic service provisions to exempt retail pharmacists. Would not it be helpful to the pharmacists to be reassured at least about one of their strands of income? Otherwise, they might find that all their income was under threat from the Bill.

My right hon. Friend is absolutely right. He will recall, as I do very poignantly, that both the Under-Secretary and the Minister were wholly unable to deliver to the Committee the slightest remnant of a definition of general economic service that would illuminate the question whether that point would actually apply. Manifestly, there are serious issues about whether the Bill will allow provisions to be made to support rural pharmacies. That has wider implications because it is not just rural pharmacies or even pharmacies generally with which we are concerned; it is the general principle of whether a Competition Bill ought simply to take into account the narrow focus of industrial economics, or whether some kind of social cost or social benefit—especially when there are fiscal consequences—should be taken into account.

I come now to the major topic that I want to discuss. I am afraid that I shall make a very grave accusation. I hope that it can be rebutted; I hope that the Under-Secretary will produce evidence to show that I am wrong. No one would be happier than I to withdraw my accusation, in an open and fulsome way, if it turns out that it is false. My accusation has to do with the character of government. It is raised, in particular, by the response to this amendment and by the interchange between my right hon. Friend the Member for Wokingham and the Under-Secretary earlier.

I begin with a question. What was the treaty base upon which the Commission was operating when it produced the letter to which the Under-Secretary referred? I stand open to correction. The hon. Gentleman has vast legal resources at his command, while mine are negligible. It may be that I am, therefore, wholly misled, but I imagine that the treaty base was article 85—subject to the Under-Secretary's correction. I should be grateful if he would save me and himself from further embarrassment, and intervene at any stage of my argument if he feels that something that I am saying is incorrect.

Article 85 is very clear, unlike its transposition into English law in the Bill, which is very unclear. It states in its first clause:

"The following shall be prohibited as incompatible with the common market: all agreements between undertakings, decisions by associations of undertakings and concerted practices"—

I have not the slightest doubt that resale price maintenance falls into those categories—

"which may affect trade between Member States."

Alas, Mr. Deputy Speaker, you were not the Chairman of our Committee. Those who were present during our sittings will remember that on many occasions during the deliberations of the Committee—and I find on reading the Official Report that this persisted beyond the time when I ceased to be a member—points were made about the contrast between the specific clause

"which may affect trade between Member States"

and its transposition into UK law in the Bill. We frequently pointed out the clarity of the statement in article 85 and the fact that it made it clear that the Commission, in applying the article, was to restrict itself to those sorts of action that affected interstate trade. We drew attention to the difference between that and the lack of clarity about the Commission's scope for action within the United Kingdom.

The Under-Secretary and the Minister had ample opportunity to challenge us on that point in Committee. They had ample opportunity to say that they or their legal advisers thought that we were misinterpreting article 85. In short, they had ample opportunity to tell us that article 85 was not restricted to interstate trade. However, I would have found it odd if they had said that because if we look back through the legislative history of article 85 to the early writings of Monnet and Schuman on the origins of the competition sections of the treaty of Rome, it is clear that in the minds of those who formed the treaty, it should restrict itself—admirably to my mind, and, I suspect, that of my right hon. Friend the Member for Wokingham—to interstate trade.

The two Ministers, both by their silence throughout my hon. Friend's remarks and by what they said in Committee, have to accept that the treaty is about interstate trade. That is why we are debating a law for Britain to deal with intrastate trade. The treaty does not directly act on intrastate trade—if it did, we would not need all this rigmarole tonight and we could just let Brussels get on with it.

One of the annoyances of dealing with a Bill on which my right hon. Friend leads is that he is inevitably one and a half steps ahead of me. He precisely anticipates the next leg of my argument. It is not simply that we would have been surprised if the Under-Secretary or the Minister had told us that article 85 applied more widely than to interstate trade—had they done so, we would have told them that the Bill was not required as it would not be necessary to have the prohibition if it already existed and applied to intrastate trade. Therefore, it must be the case that Ministers accept that article 85 does not provide a treaty base for intervention by the Commission in matters such as resale price maintenance, unless the Commission can satisfy itself that the practice concerned

"may affect trade between Member States."

This is where I have to make a grave accusation. If the Commission were to satisfy itself that resale price maintenance in pharmacies—and I think in particular of rural pharmacies—in this country might affect "trade between Member States", the Commission would have to be on some sort of elaborate hallucinogenic drug. I cannot think of a single reason why RPM, desirable or undesirable as hon. Members may think it to be, between the suppliers and a pharmacy in, for example, Beaminster in my constituency,

"may affect trade between Member States."

I cannot imagine that the pharmacist in Beaminster spends much time shopping around for arbitrage possibilities in buying his supplies from a wide range of European suppliers. I cannot suppose that he much affects the balance of trade between member states. It would require the most extraordinarily tenuous logic for the Commission to have argued to itself convincingly—or to be able to argue to anyone else convincingly—that RMP, in this particular case,

"may affect trade between Member States."

The Under-Secretary has already had, and will again have in his reply, the opportunity to challenge each leg of my argument. I hope that he will tell me that I am wrong about article 85 being the supposed treaty base. I hope that if he cannot tell us that, he will tell me that I am wrong to suppose that there is no good argument for supposing that such resale price maintenance

"may affect trade between Member States".

However, if he cannot say either of those things, we have to ask why the Commission wrote that letter.

I genuinely believe—again I make it abundantly clear that, if I am wrong, I should be happy to be disproved by evidence to the contrary—that the Commission wrote the letter because someone in the United Kingdom Government, acting via the agencies of the UK Government in Brussels—presumably the UK permanent representative in Brussels—made it known by formal or informal means to the Commission that it would be helpful to the UK Government if the Commission wrote that letter and told, or suggested or halt-hinted to, the Commission that it did not too much matter whether there was a treaty base for the letter and that, in the meanwhile, a letter might solve a parliamentary problem. Moreover, it may have been suggested that if the letter did solve that problem, there would, regardless, be UK legislation preventing such resale price maintenance. Therefore, the Commission, having written the letter, would never be subject to legal challenge, as the letter would never become an effective one. I repeat that I should be happy to have those assertions disproved. However, if proved, they are very grave.

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I fear that my hon. Friend may be on to something, that there is a pattern and that the Government may be hoping to avoid embarrassment—and not only in this case. Has he thought about the recent allegations on the "Panorama" programme—that Mercedes and Volkswagen are arranging their prices in the United Kingdom in an anti-competitive manner? Is he aware that the Government have said that they want nothing to do with that, but would rather that Brussels investigated the whole matter on their behalf? Is it not another case in which Ministers seem to wish not to take responsibility for anything in United Kingdom competition competence?

I agree with my right hon. Friend that it may be part of a pattern. It is a bad pattern if it is an overt one. It is bad because the United Kingdom Government should not rely on the Commission to take action on matters in which—for UK policy reasons, especially when the Government agree with the action—the Government not only have the capacity to act, but should be acting. My right hon. Friend's example of the automobile industry is pertinent.

I regret to say that, in this debate, we may be dealing with something that is far worse and far more insidious—a covert attempt to have the Commission do the Government's work. Moreover, it would be a covert attempt by the Government to have the Commission do a piece of political work for them. If that is what has happened, it would be an attempt by the Government to have the Commission spare the Government a political embarrassment because of a division within the Labour party's own ranks. That is not a way in which it would be reasonable or decent for the Government to use the Commission.

Does the hon. Gentleman have a shred of evidence for that conspiracy theory?

I have been at pains—I do not want to be irresponsible—to point out that every leg of my argument is something that I believe may be the case, but is open to rebuttal. I have suggested to the Minister that, by intervention or in reply, he can rebut any part of the argument. If he does so, I shall fulsomely withdraw. I am making an allegation for which I realise I currently have no proof. However, the Minister has so far been notably silent. I hope that, in his reply, he will challenge one or another part of the argument. I make the accusation not recklessly, but because I cannot myself find another explanation for a letter that seems to be based on so thin a treaty basis.

Is not the nature of reckless allegation such that it has absolutely no evidence behind it?

No, it is not. It is the purpose of Parliament to expose arguments and to have answers. I think that it is a reasonable proceeding for an hon. Member conscientiously to make an argument that would have a devastating effect if it were true, to pose it for the Minister and to allow the Minister there and then to refute it. It would, of course, not be reasonable for me to repeat the allegation if the Minister had disproved it. However, the allegation has to be answered.

My hon. Friend is generous in giving way again. If he was wrong, should not Ministers have leapt to their feet and produced evidence that they have been trying to lobby Brussels in the right direction rather than the wrong one?

Again, my right hon. Friend takes me to the next leg of my argument. It will not be enough for the Government to establish that they did not engage in the piece of shady dealing that I am alleging that they might have engaged in and that I am asking the Minister to disprove. They will have to show that they tried to avoid production of the letter, because it is ill-based on treaty—unless they can show that the Commission is not basing it on article 85. If the letter is ill-based, and if many hon. Members agree that it would have a bad effect on an important part of our social fabric, which they do, it behoves the United Kingdom Government to argue the case against the letter, and then to take their own domestic action.

I am following my hon. Friend's comments with interest, and realise that he is arguing from circumstantial evidence. Will he add to that circumstantial evidence the fact that the Minister parades a letter—which he says is dated 8 May—that was, presumably fortuitously or coincidentally, received by Ministers before Second Reading, on 11 May? Therefore, the proposition that the letter was related to the Government's pursuit of the legislation's passage is not an idle point, but is backed by circumstantial evidence.

I agree entirely with my hon. Friend that the circumstantial evidence is, if not compelling, quite considerable. His point about the timing makes it all the greater.

The problem goes one stage deeper. We are dealing not merely with the possibility—I admit it to be a possibility rather than a certainty—that the Government covertly prayed in aid the Commission to issue a letter on a frail treaty basis that, if it were true, would have undermined the whole of the Government's logic in their Bill. The Government have also brought pressure to bear through a lobbyist, who is intimately—as we now fortuitously discover—connected with the Government, upon a group of people who should, at least in my view, be representing those whom they purport to represent and who should be making that argument.

We have reached the point at which there is a connection between the first and second legs of my remarks. If the case for maintenance of RPM were not so very strong substantively, one could well understand that representatives of rural pharmacies might have been in two minds on the subject and might have been wavering between results. One could also understand those representatives taking their own view on the matter. One might also understand that they might have been influenced by a letter, however frail, from the Commission.

However, when a substantive case for retention of RPM for rural pharmacies is not only in itself so strong but—as so many hon. Members on both sides of the House know—is also felt to be so strong by very many or, I speculate, almost all, of those whom that body is meant to be representing; when the letter in question is based on a treaty basis that is so frail; and when the Government must have known how frail the basis was—or they would not have introduced the Bill in its current form, as they would have had to take the view that article 85 had a scope wider than merely interstate trade—one is driven to the conclusion that it must have been by heavy-armed tactics that the Government used the offices of that lobbyist to persuade that group of representatives to change their minds in the light of the letter.

Mr. Deputy Speaker, at the beginning of my rather—I regret to say—over-lengthy speech, I said to your predecessor in the Chair that I had a grave accusation to make. I have made it in good faith—[Interruption.] I have made it in utterly good faith. I believe that it probably is true. It may not be true—I have admitted that, and I admit it now. It now falls to the Minister, in replying to this debate, to go through the logic—as I did not see him do in most of the Committee stage—of the allegation, to take it seriously, and to show that I have got wrong one of my propositions. Have I got it wrong that the treaty basis of the letter from the Commission is article 85?

Order. As the hon. Gentleman said, I have just taken the Chair. However, I should draw it to his attention that we are considering narrow amendments. The hon. Gentleman appears to be referring to a treaty. Can he explain what that treaty has to do with the two amendments before us?

I was not interrupted by your predecessor, Mr. Deputy Speaker, because I explained the relevance of the treaty at the beginning of my speech. So as not to try your patience, let me briefly repeat the logic of my argument; it is very straightforward. The amendment seeks to protect resale price maintenance, which was being advocated by a particular group. That group has withdrawn part of its advocacy of that on the basis of a letter from the Commission to which the Minister has referred. The letter is meant to have some treaty basis, which I believe is article 85. I have been asserting that the Minister concocted the letter from the Commission in order to change the attitude of that group to resale price maintenance—and hence the necessity of the amendment. That is the structure of my argument.

In conclusion, I repeat that if any leg of my argument is false, it falls to the Minister to show it. It is for him to show that article 85 is not the treaty base, that I have misinterpreted its scope or effect, or that the Commission genuinely acted on its own initiative and is at fault because he can show that he tried to get the letter withdrawn.

It is, indeed, unusual to hear the Opposition filibustering on their own amendment, but the amendment relates to a subject that is particularly embarrassing to them. It is a subject that they ignored for years—the plight of community pharmacists. Indeed, when the right hon. Member for Wokingham (Mr. Redwood) was in the Cabinet, 178 pharmacists ceased trading.

The Opposition have had no long-standing dialogue with community pharmacists, and, in speaking to the amendment and the new clause, cannot command their support. They asked us about representations and I shall be happy to deal with that, along with the treaty basis for what is happening. The right hon. Member for Wokingham made no representations to the Director General of Fair Trading about the complaint. In 1996, when the Commission was liaising with the Office of Fair Trading in respect of the Asda complaint, the right hon. Gentleman was too busy with the downfall of his own Government to make any representations to Brussels. I understand that he has made no representations on the matter, either to the Office of Fair Trading or to the Commission, during the passage of the Bill or previously. We will take no lessons from the Opposition about commitments to community pharmacists.

As my right hon. Friend the President of the Board of Trade told the House:

"My right hon. Friend the Secretary of State for Health has made it clear how important community pharmacies are to his vision of health in the next century."—[Official Report, 11 May 1998; Vol. 312, c. 34.]

The amendment and the new clause put at risk all the representations made to the OFT and the Commission.

The right hon. Member for Wokingham does not care whether amendment No. 2, which is, after all, a political stunt, puts at risk all that community pharmacists have been fighting for. It would disapply the prohibition and effectively pre-empt the findings of the restrictive practices court. It is carelessly drafted in that it does not distinguish between retail price maintenance agreements in the over-the-counter medicine sector which are exempt under section 14 of the Resale Prices Act 1976 and all other retail price maintenance agreements. New clause 4 refers to agreements that have been exempted from section 14. Both proposals would have the effect of stopping proceedings in the United Kingdom and handing them over to Brussels—coming from the right hon. Member for Wokingham, that is a paradox.

The Commission has made it perfectly clear that article 85 is directly applicable in the United Kingdom, irrespective of the Bill. On several occasions in Committee, Opposition Members highlighted the fact that an agreement of conduct must have an appreciable effect on trade between member states if articles 85 and 86 are to apply. They went on to argue—as they have this evening—that that requirement somehow makes the competition test for the application of the domestic prohibition different from that for the application of article 85. The right hon. Member for Wokingham nods in agreement, but that view is mistaken.

The hon. Member for West Dorset (Mr. Letwin) asked whether he was wrong and I can confirm that he is wrong on that and most of the other matters that he raised.

6.45 pm

Will the Minister give way?

I shall give way in a moment, with great pleasure.

The requirement that the application of article 85 would affect interstate trade is a jurisdictional hurdle. It does not affect the meaning of the prohibition itself in the sense of determining whether or not an agreement is anti-competitive. Nor does it affect the meaning of the prohibition in determining whether conduct is abusive of a dominant position.

The Minister has made some quite remarkable statements. First, he has admitted that article 85 is the treaty base. Secondly, does he agree that if article 85 has the scope that he claims for it, the reason for the clause that creates a prohibition under English law is nullified? He has undermined the whole purpose of his own legislation.

The hon. Gentleman had left the Standing Committee at that stage, as he put his career before chemists. He also sought to spare the Opposition the embarrassment of the publication in the 1980s that he and the right hon. Member for Wokingham produced on financing the health service. Their report is germane to today's debate on community pharmacists, as it advocated a pill tax. They wanted to ensure that the prescriptions that are the life-blood of so many chemists were operated, if not for profit, at least by charging enough to ensure that demand matched supply. So the hon. Gentleman's history is certainly not in support of community pharmacists—which is why Opposition Members have shown absolutely no interest in the issue for so long.

Will the Minister give way?

I shall make some progress, but I shall give way to the hon. Gentleman before I sit down.

It is important to be aware that the proposals would stop proceedings in the United Kingdom. The Commission has made it clear—not just to the Government but to the Director General of Fair Trading, with whom it has been liaising for more than two years on the matter—that if that happened, it would have to take action. It did so under the previous Administration, without a finger being lifted by Ministers or Conservative Back Benchers at the time to support community pharmacists. I can confirm, as I have it here, that a letter from the Commission was sent to the Director General of Fair Trading. I am sure that it is part of one of a number of dialogues over the past two years since Asda lodged its complaint in 1995.

Amendment No.2 would have dire consequences. The Commission has made it clear that if the restrictive practices court were not looking at the issue, it would take lock, stock and barrel the evidence that the Office of Fair Trading has collected over a long time. Let us look at just how long it can take for the Commission to act. A recent investigation into the Italian tobacco sector took around two years. The decision on Volkswagen took around three years. That means that the present arrangements could unravel alarmingly quickly for community pharmacists.

The Bill provides a five-year transitional period if the court decides that there should be an exemption for over-the-counter medicines. I urge my hon. Friends to reject the amendment and the new clause.

The Minister will know that the letter from the Commission on 8 May related to whether proceedings before the court were stayed under the previous amendment tabled in another place. When the court's proceedings continue, will the Commission investigate and intervene on RPM on over-the-counter medicines if the chapter I prohibition in this country is not applied but the court's decision is sustained?

The Commission has made it very clear that, if the court comes to a decision that the community pharmacies deem favourable—the same decision at which it arrived, having weighed up the evidence, the last time that it considered the matter—and if due processes have been followed, it should be satisfied. That is an important point. We went into this matter in some detail in Committee.

rose—

I shall not let the hon. Gentleman detain the House further, given that his questions as a member of the Committee that considered the Bill were answered.

The do-nothings when they were in government are lecturing us about doing something. Owing to the inadequacies of Opposition Members' explanations in favour of the amendment and the new clause and the patent lack of support from the Community Pharmacy Action Group, I urge the House to reject the amendments.

I hope that the Minister will answer this question. If he is saying that article 85 extends into activities that do not affect interstate trade, how can the prohibition clause that he is enacting be necessary?

The hon. Gentleman was honest enough to say to the House that he might be wrong. He is completely and utterly wrong in this matter. I wonder whether his lack of a grasp of these issues was the reason why he was moved off the Committee.

There is no support for the amendments. Indeed, I have a card—I suspect that the right hon. Member for Wokingham does not have one—from David Sharpe of the Community Pharmacy Action Group, thanking me for my support for community pharmacies. The number that I rang this morning was that of the group's legal adviser, Sue Sharpe. We have support for our policy; no one supports the Opposition's amendment and new clause.

What a dreadful statement from the Minister. He ended with a strange statement that no one supports the amendments. We are shortly to show that quite a few Members support them. Many people outside the House want a solution to the problem, and the Government have left them without one.

I shall deal briefly with the Minister's attempt at a response. He said that I have made no representations to Brussels or to British competition authorities. I have made endless representations through debates on this Bill. As the shadow spokesman responsible for such matters, I believe that the right way in which to make representations is through the House, when parliamentary opportunity presents itself. I know that the Government do not like the House—but we do. This is a proper way in which to proceed.

The Minister said that a certain number of pharmacies closed while I was in the Cabinet, and that that proves that the outgoing Government did not care. It is not possible to prevent some pharmacies closing for commercial reasons. We are debating not whether the Minister can prevent commercial closures—I am sure that he will not be able to do so—but whether he can prevent deliberate closures on top of those that will be forced through as a result of the Bill and his inability to sort things out in Brussels. He has not confirmed the figures that have been bandied about in the trade, suggesting that perhaps 3,000 pharmacies will close as a result of the legislation and of the Brussels decision that he fears.

The Minister asked why I have not made representations to Brussels. There is no need to do so at the moment because, at the moment, the issue can and should be sorted out here, in the United Kingdom—either at the restrictive practices court or in the House by suitable amendment to legislation.

The Minister and I agree on one thing: community pharmacies will be very important to health care and health services in the next century. That makes the Government's attitude even more stunning. As my hon. Friend the Member for West Dorset (Mr. Letwin) said, pharmacies provide a very important service in smaller market towns and the suburbs. If they are removed or destroyed by the Government, Brussels or some combination of the two, considerably more cost will fall directly on the health service as it struggles to replace the services.

Neither my hon. Friend the Member for West Dorset nor I come easily to defending practices which, in all other industries and areas, we are happy to see go—and which, at times, we have helped to go. Normally, we prefer open, competitive markets, where prices and services are determined in the marketplace by people spending their money as they see fit. We make an exception for this issue. I urge the House, knowing, as it does, that both my hon. Friend and I nearly always come down on the side of free markets and complete choice, to think very carefully before rejecting the amendment. I stressed to the House—and shall do so again—that we are satisfied of two things: first, that there is quite enough price choice in the market for those who think that price is the most crucial aspect. Secondly, such community services are important and would be much more expensive to provide at the taxpayer's expense if they are demolished as a result of this ill-considered legislation.

I shall pass over the Minister calling our actions a political stunt; that is not worthy of him or of the Government whom he serves. We are seriously arguing a case for many small businesses in our communities that need some help and are looking to the Government for it—the Government whom they thought might represent them.

I agree with the Minister that the effect of the amendment would be to stop proceedings in the court. That is the point; the idea of the amendment is to settle the matter following democratic debate in the House of Commons. We could always return to it if we had second thoughts, if the commercial and service argument had moved on.

Does my right hon. Friend agree that if the Government object to the amendment on the ground that it would stop proceedings in the court and would lead to intervention by the Commission, they could take the route of new clause 4, which would not stop proceedings in the court?

Indeed; I am grateful to my hon. Friend for clarifying that point. That was my understanding of his new clause. The Minister seems to have a different view of it.

I gave the Minister due notice in Committee of the problems with Brussels and how I, on behalf of many people, expected the Government to go to Brussels to try to get a better deal for our pharmacies and to sort the matter out for them. I did not want the House to be left with Hobson's choice—either accepting my amendment then worrying about what Brussels might do as a results of our actions, or not being able to do anything at all to help community pharmacies. The inaction of the Minister and his colleagues places us in such a position.

If the Minister had taken my advice in Committee, he would by now have had productive discussions in Brussels. He would have explained that the practice has not driven a coach and horses through Brussels competition law during our membership of the Community. He would have explained that the practice matters to people in Britain—and that, for once, he could swing the will of the whole Parliament in favour of keeping our community pharmacies. He could surely have pleaded for some special treatment—an exemption, an agreement that the practice was in the public interest, not against it. Evidence from the previous Restrictive Trade Practices Act case in Britain and the previous RTPA finding were already available.

There was a most extraordinary dialogue on the Government Benches on the legal position of article 85 and direct action under the treaty. Of course my hon. Friend the Member for West Dorset is right: the idea of the treaty, as set out by the founding fathers and in the debates when we joined the European Community, was to regulate competition between states and between firms in different member states. There was no presumption at all that the organisation also had to interfere in intrastate trading.

We wish to make clear that we believe that the measure is an extension of jurisdiction from Brussels and that it is about intrastate trade. The Minister needs to propose new legislation because the European Community should not have that power to start with. There is, as has been said, a jurisdictional hurdle, which we are addressing. The Government have got it wrong, and have misinterpreted the matter. They should not allow Brussels to intervene in this case and they should accept our amendment. We urge the House tonight to do something decent for the retail pharmacies and for health care in our country. The only way to do that now is to accept the Opposition amendment.

Question put, That the amendment be made:—

The House divided: Ayes 161, Noes 328.

Division No. 330]	[7 pm
AYES
Ainsworth, Peter (E Surrey)	Gale, Roger
Allan, Richard	Garnier, Edward
Amess, David	George, Andrew (St Ives)
Ancram, Rt Hon Michael	Gibb, Nick
Arbuthnot, James	Gill, Christopher
Atkinson, David (Bour'mth E)	Gillan, Mrs Cheryl
Baker, Norman	Gorman, Mrs Teresa
Beggs, Roy	Gorrie, Donald
Beith, Rt Hon A J	Green, Damian
Beresford, Sir Paul	Grieve, Dominic
Blunt, Crispin	Hamilton, Rt Hon Sir Archie
Body, Sir Richard	Hammond, Philip
Boswell, Tim	Hancock, Mike
Bottomley, Peter (Worthing W)	Harris, Dr Evan
Brake, Tom	Harvey, Nick
Brand, Dr Peter	Hayes, John
Brazier, Julian	Heald, Oliver
Breed, Colin	Heathcoat-Amory, Rt Hon David
Brooke, Rt Hon Peter	Hogg, Rt Hon Douglas
Browning, Mrs Angela	Howard, Rt Hon Michael
Bruce, Ian (S Dorset)	Howarth, Gerald (Aldershot)
Bruce, Malcolm (Gordon)	Hughes, Simon (Southwark N)
Burnett, John	Hunter, Andrew
Burns, Simon	Jack, Rt Hon Michael
Burstow, Paul	Jackson, Robert (Wantage)
Cable, Dr Vincent	Jenkin Bernard
Campbell, Menzies (NE Fife)	Jones, Nigel (Cheltenham)
Cash, William	Keetch, Paul
Chapman, Sir Sydney (Chipping Barnet)	Kennedy, Charles (Ross Skye)
	Key, Robert
Chidgey, David	King, Rt Hon Tom (Bridgwater)
Chope, Christopher	Kirkbride, Miss Julie
Clappison, James	Kirkwood, Archy
Clarke, Rt Hon Kenneth (Rushcliffe)	Lait, Mrs Jacqui
	Lansley, Andrew
Clifton-Brown, Geoffrey	Leigh, Edward
Collins, Tim	Letwin, Oliver
Colvin, Michael	Lewis, Dr Julian (New Forest E)
Cotter, Brian	Lilley, Rt Hon Peter
Cran, James	Livsey, Richard
Curry, Rt Hon David	Lloyd, Rt Hon Sir Peter (Fareham)
Davey, Edward (Kingston)	Llwyd, Elfyn
Davies, Quentin (Grantham)	Loughton, Tim
Davis, Rt Hon David (Haltemprice)	Luff, Peter
Donaldson, Jeffrey	McIntosh, Miss Anne
Dorrell, Rt Hon Stephen	MacKay, Andrew
Duncan, Alan	McLoughlin, Patrick
Duncan Smith, Iain	Madel, Sir David
Evans, Nigel	Major, Rt Hon John
Ewing, Mrs Margaret	Mates, Michael
Fabricant, Michael	Mawhinney, Rt Hon Sir Brian
Fallon, Michael	May, Mrs Theresa
Fearn, Ronnie	Michie, Mrs Ray (Argyll & Bute)
Fisher, Mark	Moore, Michael
Flight, Howard	Moss, Malcolm
Forth, Rt Hon Eric	Nicholls, Patrick
Foster, Don (Bath)	Oaten, Mark
Fowler, Rt Hon Sir Norman	Öpik, Lembit
Fox, Dr Liam	Ottaway, Richard
Fraser, Christopher	Page, Richard

Prior, David	Taylor, John M (Solihull)
Randall, John	Taylor, Matthew (Truro)
Redwood, Rt Hon John	Townend, John
Rendel, David	Tredinnick, David
Robathan, Andrew	Trend, Michael
Robertson, Laurence (Tewk'b'ry)	Tyler, Paul
Robinson, Peter (Belfast E)	Tyrie, Andrew
Rowe, Andrew (Faversham)	Viggers, Peter
Ruffley, David	Wallace, James
Russell, Bob (Colchester)	Wardle, Charles
St Aubyn, Nick	Webb, Steve
Salmond, Alex	Wells, Bowen
Sanders, Adrian	Whittingdale, John
Sayeed, Jonathan	Widdecombe, Rt Hon Miss Ann
Shephard, Rt Hon Mrs Gillian	Wigley, Rt Hon Dafydd
Simpson, Keith (Mid-Norfolk)	Willetts, David
Smith, Sir Robert (W Ab'd'ns)	Willis, Phil
Spelman, Mrs Caroline	Winterton, Mrs Ann (Congleton)
Spicer, Sir Michael	Yeo, Tim
Spring, Richard	Young, Rt Hon Sir George
Steen, Anthony
Streeter, Gary	Tellers for the Ayes:
Syms, Robert	Mr. Nigel Waterson and
	Mr. Stephen Day.
NOES
Abbott, Ms Diane	Clarke, Charles (Norwich S)
Ainger, Nick	Clarke, Rt Hon Tom (Coatbridge)
Ainsworth, Robert (Cov'try NE)	Clelland, David
Alexander, Douglas	Clwyd, Ann
Allen, Graham	Coaker, Vernon
Anderson, Janet (Rossendale)	Coffey, Ms Ann
Armstrong, Ms Hilary	Cohen, Harry
Ashton, Joe	Coleman, Iain
Atherton, Ms Candy	Colman, Tony
Atkins, Charlotte	Cooper, Yvette
Austin, John	Corbett, Robin
Banks, Tony	Corbyn, Jeremy
Barron, Kevin	Corston, Ms Jean
Battle, John	Cousins, Jim
Bayley, Hugh	Cranston, Ross
Beard, Nigel	Crausby, David
Beckett, Rt Hon Mrs Margaret	Cryer, John (Hornchurch)
Begg, Miss Anne	Cunliffe, Lawrence
Bell, Stuart (Middlesbrough)	Cunningham, Rt Hon Dr John (Copeland)
Benn, Rt Hon Tony
Bennett, Andrew F	Cunningham, Jim (Cov'try S)
Benton, Joe	Curtis-Thomas, Mrs Claire
Bermingham, Gerald	Davey, Valerie (Bristol W)
Best, Harold	Davidson, Ian
Betts, Clive	Davies, Rt Hon Denzil (Llanelli)
Blackman, Liz	Davies, Geraint (Croydon C)
Blizzard, Bob	Davies, Rt Hon Ron (Caerphilly)
Blunkett, Rt Hon David	Dawson, Hilton
Boateng, Paul	Dean, Mrs Janet
Borrow, David	Denham, John
Bradley, Keith (Withington)	Dismore, Andrew
Brinton, Mrs Helen	Dobson, Rt Hon Frank
Brown, Rt Hon Nick (Newcastle E)	Donohoe, Brian H
Brown, Russell (Dumfries)	Doran, Frank
Browne, Desmond	Dowd, Jim
Burden, Richard	Drew, David
Burgon, Colin	Dunwoody, Mrs Gwyneth
Butler, Mrs Christine	Eagle, Angela (Wallasey)
Byers, Stephen	Eagle, Maria (L'pool Garston)
Campbell, Mrs Anne (C'bridge)	Edwards, Huw
Campbell-Savours, Dale	Efford, Clive
Canavan, Dennis	Ellman, Mrs Louise
Caplin, Ivor	Ennis, Jeff
Casale, Roger	Etherington, Bill
Caton, Martin	Fatchett, Derek
Chapman, Ben (Wirral S)	Field, Rt Hon Frank
Chisholm, Malcolm	Fisher, Mark
Church, Ms Judith	Fitzpatrick, Jim
Clark, Rt Hon Dr David (S Shields)	Fitzsimons, Lorna
Clark, Paul (Gillingham)	Flint, Caroline

Flynn, Paul	Kumar, Dr Ashok
Follett, Barbara	Ladyman, Dr Stephen
Foster, Michael Jabez (Hastings)	Lepper, David
Foster, Michael J (Worcester)	Leslie, Christopher
Foulkes, George	Levitt, Tom
Fyfe, Maria	Lewis, Ivan (Bury S)
Galbraith, Sam	Lewis, Terry (Worsley)
Gapes, Mike	Linton, Martin
Gerrard, Neil	Livingstone, Ken
Gibson, Dr Ian	Lloyd, Tony (Manchester C)
Gilroy, Mrs Linda	Lock, David
Godman, Dr Norman A	Love, Andrew
Goggins, Paul	McAllion, John
Golding, Mrs Llin	McAvoy, Thomas
Gordon, Mrs Eileen	McCabe, Steve
Griffiths, Jane (Reading E)	McCafferty, Ms Chris
Griffiths, Nigel (Edinburgh S)	McCartney, Ian (Makerfield)
Griffiths, Win (Bridgend)	McDonagh, Siobhain
Grocott, Bruce	Macdonald, Calum
Grogan, John	McDonnell, John
Gunnell, John	McFall, John
Hain, Peter	McGuire, Mrs Anne
Hall, Mike (Weaver Vale)	McIsaac, Shona
Hall, Patrick (Bedford)	McKenna, Mrs Rosemary
Hamilton, Fabian (Leeds NE)	McLeish, Henry
Hanson, David	McNulty, Tony
Heal, Mrs Sylvia	McWilliam, John
Healey, John	Mahon, Mrs Alice
Henderson, Ivan (Harwich)	Mallaber, Judy
Hepburn, Stephen	Mandelson, Peter
Heppell, John	Marsden, Paul (Shrewsbury)
Hesford, Stephen	Marshall, David (Shettleston)
Hewitt, Ms Patricia	Marshall, Jim (Leicester S)
Hill, Keith	Marshall-Andrews, Robert
Hinchliffe, David	Martlew, Eric
Hodge, Ms Margaret	Meacher, Rt Hon Michael
Hoey, Kate	Meale, Alan
Home Robertson, John	Merron, Gillian
Hood, Jimmy	Michael, Alun
Hoon, Geoffrey	Michie, Bill (Shef'ld Heeley)
Hope, Phil	Milburn, Alan
Hopkins, Kelvin	Miller, Andrew
Howarth, Alan (Newport E)	Mitchell, Austin
Howarth, George (Knowsley N)	Moffatt, Laura
Howells. Dr Kim	Moran, Ms Margaret
Hughes, Ms Beverley (Stretford)	Morgan, Rhodri (Cardiff W)
Hughes, Kevin (Doncaster N)	Morley, Elliot
Humble, Mrs Joan	Morris, Ms Estelle (B'ham Yardley)
Hurst, Alan	Morris, Rt Hon John (Aberavon)
Hutton, John	Mudie, George
Iddon, Dr Brian	Mullin, Chris
Illsley, Eric	Murphy, Denis (Wansbeck)
Jackson, Ms Glenda (Hampstead)	Murphy, Jim (Eastwood)
Jackson, Helen (Hillsborough)	Murphy, Paul (Torfaen)
Jamieson, David	Naysmith, Dr Doug
Jenkins, Brian	Norris, Dan
Johnson, Alan (Hull W & Hessle)	O'Brien, Bill (Normanton)
Johnson, Miss Melanie (Welwyn Hatfield)	O'Brien, Mike (N Warks)
	O'Hara, Eddie
Jones, Barry (Alyn & Deeside)	Olner, Bill
Jones, Mrs Fiona (Newark)	Organ, Mrs Diana
Jones, Helen (Warrington N)	Osborne, Ms Sandra
Jones, Ms Jenny (Wolverh'ton SW)	Palmer, Dr Nick
	Pearson, Ian
Jones, Jon Owen (Cardiff C)	Pendry, Tom
Jones, Dr Lynne (Selly Oak)	Pickthall, Colin
Jones, Martyn (Clwyd S)	Pike, Peter L
Jowell, Ms Tessa	Plaskitt, James
Kaufman, Rt Hon Gerald	Pollard, Kerry
Keeble, Ms Sally	Pound, Stephen
Kemp, Fraser	Powell, Sir Raymond
Kennedy, Jane (Wavertree)	Prentice, Gordon (Pendle)
Kidney, David	Primarolo, Dawn
Kilfoyle, Peter	Prosser, Gwyn
King, Andy (Rugby & Kenilworth)	Purchase, Ken
King, Ms Oona (Bethnal Green)	Quin, Ms Joyce

Quinn, Lawrie	Strang, Rt Hon Dr Gavin
Radice, Giles	Straw, Rt Hon Jack
Rapson, Syd	Sutcliffe, Gerry
Raynsford, Nick	Taylor, Rt Hon Mrs Ann (Dewsbury)
Reed, Andrew (Loughborough)
Roche, Mrs Barbara	Taylor, Ms Dari (Stockton S)
Rogers, Allan	Taylor, David (NW Leics)
Rooker, Jeff	Temple-Morris, Peter
Rooney, Terry	Thomas, Gareth R (Harrow W)
Ross, Ernie (Dundee W)	Timms, Stephen
Rowlands, Ted	Tipping, Paddy
Roy, Frank	Todd, Mark
Ruane, Chris	Touhig, Don
Ruddock, Ms Joan	Trickett, Jon
Ryan, Ms Joan	Turner, Dennis (Wolverh'ton SE)
Salter, Martin	Turner, Dr Desmond (Kemptown)
Sarwar, Mohammad	Turner, Dr George (NW Norfolk)
Savidge, Malcolm	Twigg, Derek (Halton)
Sawford, Phil	Twigg, Stephen (Enfield)
Sedgemore, Brian	Vaz, Keith
Shaw, Jonathan	Vis, Dr Rudi
Sheerman, Barry	Walley, Ms Joan
Sheldon, Rt Hon Robert	Ward, Ms Claire
Skinner, Dennis	Watts, David
Smith, Rt Hon Andrew (Oxford E)	White, Brian
Smith, Angela (Basildon)	Whitehead, Dr Alan
Smith, Rt Hon Chris (Islington S)	Wicks, Malcolm
Smith, Miss Geraldine (Morecambe & Lunesdale)	Williams, Rt Hon Alan (Swansea W)
Smith, John (Glamorgan)	Williams, Alan W (E Carmarthen)
Smith, Llew (Blaenau Gwent)	Wilson, Brian
Snape, Peter	Winnick, David
Soley, Clive	Winterton, Ms Rosie (Doncaster C)
Southworth, Ms Helen	Wise, Audrey
Spellar, John	Wood, Mike
Squire, Ms Rachel	Worthington, Tony
Starkey, Dr Phyllis	Wright, Anthony D (Gt Yarmouth)
Stevenson, George	Wright, Dr Tony (Cannock)
Stewart, David (Inverness E)	Wyatt, Derek
Stewart, Ian (Eccles)
Stinchcombe, Paul	Tellers for the Noes:
Stoate, Dr Howard	Mr. Greg Pope and
Stott, Roger	Ms Bridget Prentice.

Question accordingly negatived.

Clause 18

Abuse Of Dominant Position

I beg to move amendment No. 48, in page 10, line 38, at end insert—

'(2A) For the purposes of this section "market" means a market the whole or part of which is in the United Kingdom but in relation to the abuse of a dominant position in a market which extends beyond the United Kingdom the prohibition imposed by subsection (1) shall not be regarded as infringed unless that abuse occurs in the United Kingdom.'.

Clause 18 outlines the chapter II prohibition on an abuse of dominant position in a market, which is one of the two key prohibitions contained in the Bill. In Committee, we did not debate an amendment that had the same purpose as amendment No. 48, but we discussed some of the related issues—indeed, I tabled the amendment in the light of some of our discussions.

In the execution of the prohibition, it is obviously necessary to define a market, but that is done neither in clause 18 nor elsewhere in the Bill. The draft guidance issued by the Director General of Fair Trading makes it clear, in paragraph 2.12, that a market definition comprises two dimensions:

"a product and a geographic area".

It cites the example of the Commission's consideration of a complaint about ice cream cabinets in Ireland. The Commission defined as the relevant market

"impulse ice cream in Ireland"—

that contains a product and a geographic definition.

7.15 pm

In paragraph 4.9, the director general makes it clear that, where there are significant imports of a product, the relevant market is international. The contrary is not necessarily implied where there is a lack of imports; the example cited is that of the bus market in Germany, on which the Commission decided that, although imports were low, there were no significant barriers to entry to the market, so that one could substitute domestic German providers with imports. Again, the definition of the market was held to be international.

In paragraph 6.7, the director general states:

"If the market is international, market shares should be calculated to cover the whole geographic market."

That makes it clear that he intends, under the Bill, to use a definition of a market that, if the evidence demanded, extended beyond the United Kingdom.

Similarly, in Committee, the Minister for Competition and Consumer Affairs, responding to some of my remarks, said:

"I entirely agree with the point made by the hon. Member for South Cambridgeshire that the relevant, geographic market should not be limited to the United Kingdom."—[Official Report, Standing Committee G, 4 June 1998; c. 235.]

The intention, which seems to be shared by the Government and the Opposition, is that the relevant market should extend beyond the United Kingdom.

How will the market be defined under clause 18? I tabled the amendment not to provide a substitute for the Government's intentions, but to fulfil them. One of the problems of earlier competition legislation was that, from time to time, the market was construed too narrowly. A market that was considered for public interest purposes may have been a regional market inside the United Kingdom, even though that regional market was capable of substitution from beyond its boundaries. It is important to look beyond the boundaries not only of any region but of the United Kingdom itself.

Subsection (3) says that a dominant position

"means a dominant position within the United Kingdom".

That is the problem, because it is the only place in the clause where "market" is arguably defined. The director general and the Minister may believe that they can look beyond the United Kingdom to define the relevant market, but I am not sure that the clause allows that to happen. Taking account of such markets may be open to challenge.

It is possible that, on the question of dominance, the boundaries will move back within the United Kingdom, so that the director general's decision will be made in relation not to the relevant market but to some subsection of that market. It is important to avoid that.

The amendment would allow the definition of "market" to extend beyond the United Kingdom, when the evidence requires that, and would avoid the problem of extraterritoriality by showing straightforwardly that, for the prohibition to come into effect, the abuse of the dominance would have to occur within the United Kingdom. It would helpfully create a clear hierarchy.

For example, someone could be dominant in the market for ice cream cabinets in the whole of Ireland, but the dominance could occur only in the Republic, and not in Northern Ireland. The market would include Northern Ireland, but if the abuse occurred only in the Republic, it would not be subject to the prohibition.

I commend the amendment to the Minister as a positive attempt to give appropriate effect to the Government's intentions.

The Opposition support the amendment. We have found many examples of poor, misleading or inadequate drafting in the Bill. In this case, we have produced a form of words to clarify the meaning for the sake of business. Our general worry about the Bill is that it is badly drafted and loose, and will be a lawyers' charter, enabling many lawyers to do well and many businesses to do badly, because of the enormous fees that will be demanded. The amendment would clarify the meaning and give business greater certainty.

We think—as did Ministers in Committee—that penalties should be limited to a fine on the turnover in the affected market in the United Kingdom in which the offence has occurred. That is part of our process of trying to refine the legislation and make it a bit more realistic.

I agree with the hon. Member for South Cambridgeshire (Mr. Lansley) that the clause is an extremely important part of the Bill. I reject the view of the right hon. Member for Wokingham (Mr. Redwood), expressed in his usual manner, that our drafting has been poor and misleading. That is entirely without foundation.

We made it entirely clear in the other place and in Committee that our intention was that the Committee stage should be used to assess and improve the Bill. That is not an admission of poor or misleading drafting; it is evidence of a co-operative, partnership approach with those who will be directly affected by the provisions. The right hon. Gentleman's comment was entirely unacceptable and, inadvertently I assume, damaged the case of the hon. Member for South Cambridgeshire.

It is clear that, in the modern commercial world and, indeed, in the single market in the European Union, many economic markets will extend beyond the United Kingdom. That may be true for a wide range of goods and services, from banking and financial services to air transport, the sale of aeroplanes, computer software, engineering products—the list is almost endless.

We entirely agree that the relevant geographic market should not be limited to the UK under the Bill, but that is already the effect of the Bill as drafted, and we believe that the amendment is unnecessary. In fact, amendments designed to clarify the drafting of the clause on exactly this point were accepted in another place.

In moving those amendments, my noble Friend Lord Simon of Highbury stated clearly that their purpose was to ensure that subsection (3) would not be read as limiting the relevant geographic market for assessing dominance to the United Kingdom. Clearly, there will be many circumstances in which the relevant market includes, but is wider than, the United Kingdom. The drafting of the clause does not cut across that in any way. We see no reason to revise the drafting.

The issue is important, and I accept that the hon. Member for South Cambridgeshire raises it because he genuinely wants confirmation and clarification, so I should like to explain in a little more detail why we do not think that the amendment is needed.

Any analysis of whether there has been an abuse must start with an analysis of the relevant market in terms of both the relevant products and the relevant geographical area. Under the Bill, the relevant market will have to be determined according to the economic circumstances in the case concerned, as it would be in applying articles 85 and 86. The Director General of Fair Trading will issue advice and information to provide further guidance on that point. He has already published a draft of his guidance on market definition for consultation. I will ensure that the hon. Gentleman's remarks are sent to him so that they can become part of the consultation process.

Subsection (1) requires that there must be dominance in a market. Subsection (3) provides that that dominance must exist within the United Kingdom or any part of it. There is a two-stage process. Once the relevant market has been identified, it must be established whether the undertaking is dominant in the UK or a part of it. It is plainly right that both those elements should be present. We are not interested here in dominance that exists elsewhere, but does not extend to the United Kingdom. The clause does not require that the market that must be considered when the prohibition is being applied must be entirely contained within the United Kingdom.

Should the courts consider that the meaning of the clause is ambiguous or obscure in that respect, they will be entitled to consider the statements that Lord Simon made in another place, and those that I have made here. That follows the decision in the case of Pepper v. Hart that reference can be made to statements in Hansard in certain circumstances to clarify the meaning of legislation. However, we do not believe that there is any ambiguity in the current drafting or that the amendment would represent an improvement.

I hope that those detailed comments will assist the hon. Gentleman and that he will withdraw the amendment.

I am grateful to the Minister for responding so positively and sympathetically to the amendment. I confess that I am still uncertain whether in practice when a court is asked, presumably by way of judicial review, to consider the phrase, "dominant position" in this context, meaning within the United Kingdom, it will look for the legislative means by which the director was empowered to consider the relevant market as subsisting beyond the United Kingdom or to consider dominance within the United Kingdom as a self-contained matter. I take the point that if such matters are not set out in the legislation, the courts can consider them on a Pepper v. Hart basis. On that basis, and given the Minister's comments, I am happy to beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

I beg to move amendment No. 1, in page 10, leave out lines 40 and 41 and insert

"dominant position" means a position of economic strength which enables an undertaking to act independently of competition, customers and ultimately consumers within the United Kingdom; and'.

With this, it will be convenient to discuss the following: amendment No. 8, in page 10, leave out lines 40 and 41 and insert

"dominant position" means—
(a) in relation to the national newspaper market, a substantial degree of market power, and
(b) in relation to all other markets, a dominant position within the United Kingdom; and'.

New clause 1—National newspapers—

'.—(1) This section shall apply if a monopoly situation exists, within the meaning of section 6 of the Fair Trading Act 1973, in relation to the supply of—
(a) national newspapers; or
(b) national newspapers of any description
And where this section applies, it applies to any person or persons in favour of whom that monopoly situation exists, within the meaning of section 49 (2)(b) of the Fair Trading Act 1973.

(2) Any conduct on the part of any person to whom this section applies shall be prohibited if—
(a) it constitutes an anti-competitive practice, and
(b) it may reduce the diversity and independence of the national newspaper press in the United Kingdom.

(3) For the purposes of this section, an anti-competitive practice is a course of conduct which has, or is intended to have, or is likely to have the effect of restricting, distorting or preventing competition.

(4) The prohibition imposed by subsection (2) is referred to in this Act as the press diversity prohibition.'.

7.30 pm

I must remind the Minister and hon. Members what was said on this subject on Second Reading. Many hon. Members, including myself, believe that there is a prima facie case showing predatory pricing by The Times in the broadsheet market. In the past five years, the newspaper has consistently been priced below cost—often considerably below. At the moment, one has to pay only 30p for a copy.

Apparently, that is a special offer for the world cup, or so we are told by the editor. That is not merely a marketing ploy, but a deliberate predatory pricing strategy, the purpose of which is not only to win extra readers but to put The Independent out of business and attract at least some of its readers, so that The Times can get closer to its objective of overhauling The Daily Telegraph.

I said that there was a prima facie case, because we cannot prove it until we have all the facts and figures. It is up to the Office of Fair Trading to prove it. At the moment, the pricing practices of The Times are being investigated by the OFT, although that is under the existing and not the new law.

I am not claiming that other newspapers do not employ some types of predatory pricing, although I would argue that, in most cases, it is a reaction to what The Times has done. Such predatory behaviour is dangerous for the newspaper market. If one paper is knocked out, the market will be less diverse. The practice has an impact on other newspapers in the broadsheet market as most feel the need to react to the actions of The Times, which takes money out of the market, which means that there is less profit and less money to spend on journalists and improving the quality of the newspaper.

The hon. Gentleman said that the price of The Times was below cost. What are the costs of The Times?

If the right hon. Gentleman knows, he knows more than I do. There have been a number of estimates, but The Times has told us that it is making considerable losses, so I assume that the price is below cost. It is widely thought to be, and that is precisely the purpose of the investigation. I should have thought that the right hon. Gentleman would know that, and I am surprised at his intervention.

When The Times was previously investigated, the question upon which the case hinged was not whether it had a dominant position, which was being abused. It was understood that the newspaper could be investigated and that it had satisfied that criterion. It was let off the hook because it could not be proved that it was selling below cost. My hon. Friend's amendment would reduce the threshold at which it is necessary to prove dominance, but that was never the question. How will it help with the need to prove that The Times is selling below cost?

I will come to that. My hon. Friend is an expert on the matter, having been a member of the Standing Committee.

I would hardly say that I am an expert. The right hon. Member for Wokingham (Mr. Redwood) was a member of the Committee, and I would not call him an expert.

It is not the purpose to have experts in Committee.

It makes it more difficult.

I was about to point out that such below-cost pricing makes it more difficult for new newspapers to enter the market, because they have to pay the extra cost of pricing below their costs, which is bad for competition.

The question for us—it also relates to the other amendments in the group—is whether the Bill will enable the Office of Fair Trading to deal effectively with predatory pricing in the newspaper industry. The Lords did not believe that it would: hence clause 19, which was taken out of the Bill in Committee and which dealt with that industry. The Government's case, which they made on Second Reading—they did not make it strongly in the Lords, which is probably why there was such a special clause—was set out by the President of the Board of Trade. I have also read the excellent statement by the Minister of State in Committee. Their case was that the Bill would introduce a tough regime on predatory pricing.

Clause 18 sets out certain conducts, including predatory pricing, which would amount to an abuse of dominant position, and clause 60 sets out various ways in which the principles of European legislation—perhaps this is the point of the intervention by my hon. Friend the Member for South Thanet (Dr. Ladyman)—are to be introduced into British law. Those principles are laid down by treaty and by the European Court of Justice. Any decision of that court must be taken into account by the Office of Fair Trading and British courts, which also have to take into account any relevant decision or statement by the Commission. As I understand it, that means that we have to consider cases in Europe.

One famous case was that of Tetra Pak in 1994, which I am sure my hon. Friend the Member for South Thanet knows all about. It said that, if pricing by a dominant firm was below the average variable cost of production, predation should be presumed, and the proof of intent was not required. It also defined "dominant position". One problem is that The Times has only 28 per cent. of the market, and one could argue that that is not a dominant position. However, the Commissioners have made it clear that a dominant position is one in which a firm can act independently of competition, and that it does not specifically relate to market share, so that is a stronger position than we have at present.

The case to which my hon. Friend refers, which covers freedom to act independently, is that of United Brands v. the Commission, which includes almost identical language to that in his amendment, which makes it superfluous, because that language will be in the Competition Bill as it stands and as the Government propose it to be.

If my hon. Friend would listen to my argument before he knocks me down, I should be most grateful.

He already has.

We shall see. He thinks so. He is acting in a predatory manner.

Not, unfortunately, from a dominant position.

No, from a sitting position.

My hon. Friend argues that the Bill as it stands provides a powerful mechanism for dealing with predatory pricing. I said on Second Reading that I was impressed by that case, and that I would consider it seriously. I said that I would take the best legal advice. Having spoken to a considerable number of lawyers, I find that, like economists, they have different opinions. There has been some support for the Government's interpretation of the Bill, but also some dissent. The hon. Member for Eastleigh (Mr. Chidgey) is aware of the advice of Richard Fowler QC, the lawyer used by The Independent. Some may say that one can hire one's lawyer to suit the case, but I do not make that point.

I note the hon. Gentleman's feeling that The Independent has a particular line to pursue, but does he agree that an eminent QC's opinion is an independent opinion? There would be no other point in seeking it.

Let me cite Mr. Fowler. He said that it is unlikely to be possible to establish a relative dominant position as that concept is defined in Community jurisprudence. He is concerned that that will not do the job. Lord Borrie, a person respected by the whole House, shares that view.

I want to strengthen the Bill by adding to it the words of the President of the Board of Trade and the Minister of State. There are conflicting views of what the Bill will do, and my amendment would make the position more certain by saying that a

"'dominant position' means a position of economic strength which enables an undertaking to act independently of competition, customers and ultimately consumers within the United Kingdom".

That is a good description of the dominant position of The Times, which is able to use the profits of the Sunday Times, and perhaps other undertakings owned by the Murdoch empire, to persist in a policy that it could not otherwise afford.

I understand what my hon. Friend is getting at, but I do not understand why he did not go along with amendment No. 8, which is more specific to the newspaper industry. It makes the point that, in buying peas or Tetra Paks, one does not need much choice. However, buying ideas, which is what newspapers are about, is another matter.

I am sympathetic to amendment No. 8, but one would have to define "substantial", and that would lead to a circular argument, because there is no definition—certainly there is none in the Bill—of that word. Amendment No. 8 would throw us back to European legislation. I am sympathetic to my hon. Friend's idea, and I consider that we are trying to do the same thing, but I think that my way is perhaps better, despite the criticisms offered by my hon. Friend the Member for South Thanet.

rose—

7.45 pm

Does he want to criticise me a third time?

My hon. Friend seems to minimise the impact of European legislation on the Bill. Clause 60 makes that legislation central to the Bill, so that all European jurisprudence can be used. As my hon. Friend's amendment contains the same wording as European case law, what is its purpose?

My purpose is to put the position beyond peradventure. I am interested in listening to the Minister, and to my hon. Friend, and I may well be persuaded by them, but I want to try to tease out a strong definition that can be used in the courts.

May I helpfully suggest an answer that my hon. Friend might have given? European case law as adumbrated in the Bill by clause 60 may change, and that is one reason for enshrining the principle in our own legislation, to set it in stone.

I am most grateful to my hon. and learned Friend. I sense another helpful intervention.

If Mr. Murdoch had a vote tonight, he would certainly vote against the amendment and new clause 1. The Murdoch empire and the media do not want to see them carried.

They might even vote against the Bill.

More so against the amendment.

Probably.

I have covered my amendment, which is about predatory pricing and a dominant position in the national newspaper market. It is not about the Murdoch press, or about the fact that The Times is no longer a paper of record. It is not about the fact that The Sun is sometimes disgracefully xenophobic. Nor is it about the fact that News International has perhaps too big a share of the United Kingdom newspaper market. This is not the place in which to express my concern about how an unelected Australian-American media owner interferes, through The Sun, in British politics. [HON. MEMBERS: "Go on."] I am having a good try, but I might be ruled out of order.

Order. The hon. Gentleman is not debating the amendment with his immediate circle of hon. Friends, but addressing the whole House. Let me say to some of his hon. Friends that they must be quiet, as they are being unfair to the rest of the House.

Lord Beaverbrook once said, "What I want is power: kiss 'em one day, kick 'em the next." Rudyard Kipling, whose words were later quoted by his cousin Stanley Baldwin, said:

"Power without responsibility—the prerogative of the harlot throughout the ages."

Those words still apply. I shall not ask the Minister for his views on them or on their relevance today.

For the record, the last gentleman that tried to kiss me one day and kick me the next, spent 12 months at Her Majesty's pleasure.

I congratulate my hon. Friend on his robust attitude. I ask him either to accept my amendment, or to reassure me that the Bill will enable us to take tough action against predatory pricing wherever it occurs, including in the newspaper industry.

Most hon. Members know that, during the Bill's passage, we have had several opportunities to debate the issues before us. It stands out from our deliberations in Committee and on Second Reading that Ministers have been accused several times—not by me, I hasten to add—of altering course and changing their position. At times, they have argued that an action should be ruled out in the interests of avoiding putting undue burdens on business. At other times, they have said that action is unnecessary.

The one thing in which the Government have been constant throughout our proceedings is opposing any additional safeguards on predatory behaviour in the national newspaper business. The Government's position is surprising, because, when Labour was in opposition, it was boisterous and vigorous in promising action. It is surprising that, in office, it appears less interested in that promise; some might say that it has betrayed it. The Government seem determined that no one should have the opportunity to help them with it. That is the nub of this debate.

I want to discuss some of the issues raised in Committee, and some of the objections that Ministers made to amendments in Committee, particularly in respect of new clause 1 and amendment No. 8, which was tabled by the hon. Member for Sunderland, South (Mr. Mullin) and which I have signed, which would take us some way forward.

There is a need for a clause specific to the newspaper press. I strongly believe that competition law should contain specific, and stricter, provisions on the press. Ministers have argued that it is wrong in principle to have different prohibitions in different sectors, but perhaps they forget that schedules 2 to 4 are devoted to excluding certain sectors from the Bill altogether. There is an inconsistency there.

With the press, diversity of provision, and hence of expression of comment, are necessities in their own right. That need goes beyond the need for competition in the supply of goods and services. Competition is a means to an economic end, but a diverse press is an end in itself. Where the diversity of the press is concerned, competition law must go further than it does for ordinary goods and services.

That need has always been recognised in mergers policy. I think that sections 57 and 62 of the Fair Trading Act 1973 are devoted entirely to establishing stricter criteria to apply to newspaper mergers alone. The Government should recognise that the same need exists in other areas of competition law—notably the control of anti-competitive conduct, which is the subject of the Bill. That is the gap that new clause 1 and amendment No. 8 seek to fill.

Is the chapter II prohibition sufficient in the case of predatory behaviour in the newspaper business? Ministers have argued that it is enough to rely on the Bill as it stands. They point to clause 18, which prohibits the abuse of a dominant position, to clause 60, which imports European jurisprudence into the interpretation of that prohibition, and to European case law on predatory pricing.

I agree with the hon. Member for North Durham (Mr. Radice) that those claims have been exploded by the recent opinion of leading counsel, in particular that of Mr. Richard Fowler, QC. He has shown that European jurisprudence sets a very high threshold before dominance can be established. That is unsustainable when the diversity of the press is at issue. Such diversity could easily be threatened by anti-competitive conduct long before a newspaper reached the point of dominance set out in the jurisprudence.

Ministers also argue that clause 18 will make predatory pricing easier to establish than it is under present competition legislation. They point again to European case law, which says that predation should be presumed whenever prices are below the average variable cost of production. Mr. Fowler has again made it clear that, for newspapers, with their reliance on advertising revenue, that precedent would not run. Another ministerial reassurance is thus undermined, if not negated.

Will the hon. Gentleman give way?

I could see the hon. Gentleman's enthusiasm mounting. In a spirit of generosity, I am delighted to give way.

Far be it from me to suggest that the learned gentleman whom the hon. Gentleman quotes was talking poppycock, but he claims that in Europe there is a high threshold for establishing a dominant position. It is clear from what the Commissioners have said that, under some circumstances, they would regard a 20 per cent. market share as dominance. Does the hon. Gentleman seriously suggest that less than 20 per cent. should still be considered dominant?

I am somewhat confused by that question. I think that the hon. Gentleman referred to me as learned, or perhaps it was to someone else. He accused a leading counsel with an international reputation of talking poppycock. I cannot comment on that, but the opinion is on the record. It differs from the Government's legal opinion, but where there is conflicting legal opinion, there is a problem with legislation. If he contains his enthusiasm while I continue my remarks, I think that I shall be able to demonstrate why that is important.

Will the hon. Gentleman give way?

We have a new face in the Chamber. What a pity the hon. Gentleman was not here for the opening remarks. Nevertheless, I shall be generous and allow him to contribute.

The hon. Gentleman's generosity is clearly not matched by his courtesy. My point supports what he said. He will be pleased to learn that not only leading counsel but European case law supports his argument and not that of the hon. Member for South Thanet (Dr. Ladyman).

I am grateful for that point. I quickly withdraw any discourtesy. I was perhaps momentarily excited; it was meant merely as part of the usual cut and thrust of our friendly behaviour in the Chamber, particularly at this hour.

I contend that counsel's advice is clear. The comfort that Ministers have held out on the adequacy of clause 18 is illusory. It will leave untouched a range of anti-competitive practices that could threaten the diversity of the press. Those threats will remain unless the House enacts specific safeguards against them.

It has been argued that it is wrong to use legislation to target a particular case—an issue addressed several times in Committee. Ministers argued that legislation should provide a general framework, and should not be used to target individual abuses by individual companies or even against individual companies. That is clearly right. A vital aspect of press diversity is that the market should be open to newcomers.

The amendments are couched sufficiently generally not to prejudge the facts of any particular case. Findings of fact are for the relevant enforcement authorities, not the legislators. The purpose of the amendments is to establish a general safeguard for press diversity and make it a new and free-standing responsibility of the Director General of Fair Trading, and, as necessary, the new Competition Commission.

I am concerned about how the Minister may respond on new clause 1. I trust that the House will welcome its provisions. Its purpose is to stand in place of, and improve on, the clause 19 that was added to the Bill in another place before it reached Committee here and the Government were able to remove it through their votes there.

New clause 1 would prohibit any anti-competitive practice that threatens to reduce the diversity of the national newspaper press, but only if the author of that practice enjoys a monopoly situation. Both "anti-competitive practice" and "monopoly situation" have existing statutory definitions, in the Competition Act 1980 and the Fair Trading Act 1973 respectively. Therefore, their meaning will already be familiar to the business community affected by the Bill.

Let me deal with the question of dominant position and monopoly situations. On Second Reading and in Committee, Ministers criticised the original clause 19, because, it was claimed, it relied on a special definition of a dominant position, including any

"substantial degree of market power".

Ministers claimed that the clause was too wide, because, they said, practically any established newspaper will hold substantial market power.

The new clause meets that criticism by confining its reach to monopoly situations as defined in the Fair Trading Act, which entails a market share of 25 per cent., which is common knowledge. The scope of the new clause is thus confined within existing strategy limits. Surely nobody would argue that practically any established national newspaper company will hold a market share of 25 per cent.

8 pm

Turning to the definition of the abuse that will be prohibited, the old clause 19 was also criticised by Ministers because it prohibited any conduct, within certain limits, which might reduce the diversity of the national newspaper press. It was thought that the clause would throw the baby out with the bath water, because it applied, or could be seen to apply, to any conduct, legitimate or illegitimate, that might reduce the diversity of the national newspaper press; it could even condemn good journalism. However, in new clause 1, anti-competitive practices are defined in the same way as in section 2 of the Competition Act 1980, which I believes overcomes the problem.

Let me now turn to advertising revenues of newspapers. Much has been of the costs of producing The Times, and the accounting procedures of News International. In our debate on the old clause 19, we focused on its reference to "selling prices", which was thought to imply that a low cover price could be an abuse regardless of advertising revenues. Obviously, that argument on its own is unsustainable, because no one would be able to support a principle that prohibited the publication of free sheets. Therefore, the issue is not selling price, but overall costs.

The new clause meets that criticism by eliminating all reference to selling price; instead, it deals only with anti-competitive practices that threaten to reduce the diversity of the national newspaper press. It would be for the competition authorities—the Director General of Fair Trading and the new Competition Commission—to identify such anti-competitive practices, according to their practised judgment. If accepted, the new clause would leave them entirely free to consider advertising revenues in whatever way they thought right.

Ministers should recognise and acknowledge that all their objections have been heard, heeded and fully catered for in new clause 1. The new clause now applies only where there is a monopoly situation, and only to actions that constitute an anti-competitive practice. It prohibits such practices when they may reduce the diversity of the national newspaper press. Surely nobody could doubt the justification for that.

I rise to speak to amendment No. 8, which stands in my name and those of several colleagues, including the hon. Member for Eastleigh (Mr. Chidgey).

Let me say out the outset that I welcome the Bill. It contains many desirable measures and I shall have no difficulty voting for it on Third Reading. However, the acid test is the one that I mentioned on Second Reading, during an intervention on the Secretary of State: whether the Bill deals with predatory pricing in the national newspaper market, which is the worst example of predatory pricing and abuse of the market and is all the more serious because, unlike predatory pricing in other sectors, it has implications for the democratic process. The Bill as drafted does not pass that test; therefore, the purpose of my amendment is to bring predatory pricing in the newspaper industry within its scope.

The issue is one in which my hon. Friend the Member for North Durham (Mr. Radice) and I have taken a serious interest. It will be evident from the signatures of seven Select Committee Chairmen to amendment No. 8 and that of the distinguished Chairman of the Liaison Committee to amendment No. 1 that our concern is widely shared. We have not tabled the amendments lightly. We have talked to the Secretary of State, who has listened courteously to our concerns, to Lord Borrie and to representatives of the industry—including the editor of The Times and the chairman of News International—and we have taken advice from experts.

I had an open mind on Second Reading, after the effect of clause 60 was belatedly explained to us, but I have been impressed by two things: first, that Lord Borrie, a former Director General of Fair Trading, is of the opinion that the Bill as drafted will not catch what is going on in the newspaper industry and, secondly, the opinion of Richard Fowler QC, who shares that view. They are both of the view that the Bill will be ineffective against the five-year war of attrition conducted by News International against its rivals, which is the fundamental reason why I tabled the amendment.

The background to the problem has been outlined by my hon. Friend the Member for North Durham. For the past five years, News International has been selling The Times and occasionally The Sun for far less than the cost of production. That is not a temporary promotional activity; it has been going on for five years. It is dragging down other newspapers: for example, The Daily Telegraph and the Daily Mirror have felt obliged to respond in order to compete. It is having an extremely damaging effect on our national newspaper market, especially the broadsheet market.

Be under no illusions, The Times is making huge losses. When the chairman of News International came to see my hon. Friend the Member for North Durham and me, we asked him how much it had cost the company so far. Although he was the chairman, he did not appear to know the exact figure, but "under £75 million" was the figure he mentioned. It is unclear whether that comes from the profits of The Sunday Times or from other parts of the empire. Subsequent to our meeting, I wrote to the chairman asking whether the profits of The Sunday Times over the same period exceed the subsidy to The Times and, if so, by how much. Mr. Hinton replied:

"We do not break out the profit and loss of The Times and Sunday Times separately"

so there is no way of telling.

News International argues that the increase in advertising revenue resulting from the increase in sales of The Times should be taken into account, and I agree—that is a perfectly reasonable point—but I am assuming that the £75 million loss Mr. Hinton talked about already takes account of that. The figure is in addition to any increase in advertising revenue. Let us not be distracted: it is clear that News International's war of attrition could be sustained only by a corporation with huge resources.

Those are the facts so far as we are able to discover them. The result is that hundreds of millions of pounds, much of which might otherwise have been invested, has been drained out of the national newspaper industry. The Independent, which I accept has other problems, has been forced to the brink of extinction. It is bogus to describe what has been going on as normal promotional activity—it is not normal; no other national newspaper engages in such sustained price cutting. If the purpose was to make The Times the market leader, the strategy has not succeeded; nor has it succeeded, after five years, in making the newspaper profitable, even when advertising revenue is taken into account. However, it is no defence to say that the strategy has not worked. As to whether the strategy has worked and what was the goal of the strategy, the jury is still out. It could go on for years with consequences on which we can only speculate. Who knows where it will end?

There is another possibility—a different interpretation from the one that News International would like us to believe is the purpose of its activity—and that is to inflict damage on or to sink rivals. Mr. Murdoch has said in public that by the early part of the next century there will be only three national daily newspapers left—The Times,The Sun and the Daily Mail. He did not say whether that was a desirable target or an inevitable and regrettable fact of life. Whatever view one takes, were it to come to pass—I hope that it will not—it would mean that the British public would be left with a choice of lie machines, either the Harmsworth or the Murdoch lie machine. I do not want that day to arrive.

Happily, there is no shortage of ex-Murdoch executives. A fax may arrive from Los Angeles or New York and they are here today and gone tomorrow. Who knows, that fate may yet overtake one or two of those who are giving us the lavish assurances about how this is just a normal promotional activity. If that fate does overtake them, perhaps they will be in a position to be more frank with us about what it is all about.

As I have said, even now there is no shortage of ex-Murdoch executives. One such person told me that he was in the presence of the man and heard him ask, "How do we sink The Daily Star?" As he said, Murdoch does not need to do that. It is almost an irrelevance to his interests, but he cannot resist the challenge. That is a little glimpse of his mind set.

Another former senior executive of News International has been overheard talking in similar terms about how to sink The Mirror. The strategy has certainly inflicted some damage on that paper over the years.

I do not want to get bogged down by arguing about the purpose of all this. If it is any help, for the purposes of argument, I am willing to assume that Mr. Murdoch's motives are purely honourable and commercial. I want to concentrate on the effect. It is deeply damaging to our democracy to limit or threaten to limit the diversity of our national press.

So far there have been three investigations by the Office of Fair Trading and a fourth is under way. As my hon. Friend the Member for North Durham said, since it is taking place under the existing competition regime, we should not have any high hopes of it. That is the background.

As my hon. Friend ably explained, amendment No. 1 makes explicit what is at present implicit. It is welcome, but, in my view, it is not sufficient to solve the problem. As the Bill stands, it is necessary to demonstrate that there is an abuse and that the abuser has a dominant position in the market. New clause 1, tabled by the Liberal Democrats, attempts to address both those points by lowering the test for national newspapers. I believe that it is not difficult to prove an abuse. After five years, it is surely no longer possible to argue that News International is engaged in a temporary promotional activity. I have concentrated on lowering the test of dominance in relation to national newspapers. That is the purpose of amendment No. 8.

European law is based on cases where a company such as Tetra Pak, having 80 or 90 per cent. of the market, seeks by means of artificially low pricing to squeeze rivals out of the remaining 10 or 20 per cent. It is true that the Commission has indicated that it might be willing to look at cases where the alleged abuser has a much lower percentage of the market, but, in those circumstances, market dominance is a hurdle which will prove difficult to cross in the national newspaper industry.

Depending on which definition one takes, News International has somewhere between 28 and 33 per cent. of the market. I was interested to hear the chairman of News International say on the "Today" programme that News International has only 19 per cent. of the market. That is evidence of how much reliance we can place on News International figures because, as I have said, the true figure is somewhere between 28 and 33 per cent.

Lord Borrie and Mr. Fowler, an expert on competition law, take the view that market dominance is a hurdle which will prove difficult to cross in the national newspaper industry. In an opinion commissioned by The Independent, Mr. Fowler says:

"whether the relevant market is defined as broadsheet newspapers or national newspapers generally, it is unlikely in my opinion that the position of The Times, or of News International, would meet the European Court of Justice tests for dominance."

So, we could sit back and say that nothing can be done about predatory pricing until one of the abusers—it is likely to be Murdoch—has, by fair means or foul, obtained a 50, 60 or 70 per cent. share of our national newspaper market.

What Government would dare to take on a corporation with that percentage of the market? Heaven knows, it is difficult enough to get anyone in high places to think sensibly about Murdoch when he has only one third of the market. Instead of waiting for a bad situation to get worse, I am seeking to rectify the matter now. My amendment does that by lowering the test for national newspapers from dominance to

"a substantial degree of market power".

8.15 pm

The Government have two principal objections to my proposal. First, they say that they are not in the business of singling out Rupert Murdoch or any other proprietor. My amendment does not do that. It seeks to outlaw predatory pricing among national newspapers regardless of the identity of the proprietor. As we have seen, The Daily Telegraph and The Mirror would also be affected. Any newspaper corporation that attempts to subvert the market by predatory pricing would be caught by my amendment. Mr. Murdoch's name crops up more than most because he is the greatest living practitioner of predatory pricing. I am sorry about that, but it is an unavoidable fact of life. My amendment makes no mention of Mr. Murdoch or News International. It would apply across the market.

Secondly, the Government object to singling out national newspapers. That is the key issue—it is the core difference between us. It is a difference of principle and we should not shy away from it. I am grateful to Ministers for not arguing that my amendment is technically defective—it is not. We are discussing a straight issue of principle and my argument is simple.

The free flow of information is the life blood of democracy. A diverse media is a precondition of democracy. Any practice that, by accident or design, is likely seriously to limit newspaper diversity therefore threatens democracy. That is why newspapers are a special case. As the hon. Member for Eastleigh said, previous Governments have accepted that in relation to merger policy and other aspects of competition law. Clauses 57 to 62 of the Fair Trading Act 1973 are devoted to establishing stricter criteria for newspaper mergers. That Act was passed by a Conservative Government.

It is disappointing to see so few Conservative Members today. I saw a poll which suggested that 95 per cent. of Conservative Members thought that the Government were too close to Murdoch. If they really thought that and were concerned about it—

They want to be close to Murdoch.

My hon. Friend is right; it is jealousy. I had hoped that one or two Conservative Members would come to the House to express their concern on this issue. Alas, that is not the case.

In case anybody thinks that the Government have changed their mind, I can say that that is not so. In the consultation document that preceded the Bill, the President of the Board of Trade said:

"We do not propose to use the Bill to amend the Fair Trading Act newspaper merger provisions. The original rationale for these provisions was that increasing concentration of newspaper ownership could threaten freedom and variety of expression in the press. We consider this rationale remains valid."

Those are the words of the President of the Board of Trade within the past 12 months. In other words, when it suits them, the Government accept that newspapers are a special case.

I could not put it better myself. However hard I try, I am unable to distinguish between a threat to newspaper diversity caused when a large corporation seeks to take over its rivals and a threat to diversity caused by a corporation that already has an enormous share of the market seeking to expand its share by a practice so blatantly unfair as predatory pricing. In any case, it is not strictly true that the Bill applies across the market. As the hon. Member for Eastleigh pointed out, schedules 2, 3 and 4—no doubt for good reasons, which I do not dispute—list all sorts of areas to which the new competition regime will not apply. It would be a simple matter to make an exception for newspapers. The Fair Trading Act is a healthy precedent. All that is required is the political will, which is the purpose of my amendment. In the absence of a miracle, I intend later to put the amendment to the vote.

I support the amendment, which is not specifically anti-Murdoch or anti-News International. I declare an interest: I write reasonably regularly for The Sunday Times, which is, of course, part of News International. In the past few weeks, I have written about the potential catastrophic effects of the third way, the vulgarity and vast waste of the millennium dome and the abolition of the Lord Chancellor. I very much hope that I shall in future be given the opportunity to write other articles that are helpful to the Government. I do not attack News International or Rupert Murdoch and I am very happy to write for his newspapers and take his shilling.

The point needs to be made that this is a commercial Bill, the purpose of which is to regulate commercial dealings and promote the purifying oxygen of competition. It is a perfect Bill. It is strong and good in every respect except one: it fails to address the unique commercial position of the newspaper industry, which is worth £700 million a year and, notwithstanding that, succeeds in making an aggregate net loss of £50 million. Why is it unique? That question is essentially the argument that the Government have against the amendment. Why single out the newspaper industry? I shall attempt to answer that in one sentence. No other major commercial undertaking is owned for the express and specific purpose of obtaining and using political power and influence. That is the difference between the newspaper industry and any other. Protestations to the contrary are not worth even considering.

The Sun did not run a banner headline, "It Was The Sun Wot Won It" because of mere vulgar braggadocio, but because it believed that it was true. The Prodi incident caused consternation not because it was an unedifying example of politicians operating at the behest of business men, but because the business man was Rupert Murdoch, who is, in effect, a strong and established politician.

What is the effect of that single difference between the newspaper industry and every other? I suggest that it has two effects. First, we have a legitimate interest in debating the industry in the House because it affects politics and democracy. The second effect, which is far more important in the context of the amendment, is that the political power that is wielded within the industry, which it conceals, distorts the commercial strategies of the market. The Bill deals with those commercial strategies and is predicated on commercial reality.

In normal commercial considerations, no commercial entity can or does afford, for a long period, to trade at a loss. It can do so only for a limited period to drive its competitors to the wall. That does not apply in the newspaper industry. The normal capitalist impulse to destroy one's competition is based always on the desire to obtain a monopoly position to manipulate price. That is not the motive in the newspaper industry, where the impulse is to destroy one's competitors to obtain a monopoly of power. That imports into the industry completely different commercial realities. One has only to test that against what has recently happened in the industry to realise that it is true.

Nobody but a commercial lunatic would have purchased The Independent for commercial reasons. It was purchased not because it is a commercial concern but because it is a newspaper and is likely, let us face it, to make a loss for a considerable period. Precisely the same may be said—topically—of the New Statesman. Nobody but a commercial lunatic would have purchased that, but it was purchased by a gentlemen of enormous commercial acuity, not because it would make a profit but because it is a newspaper.

The difference in the commercial considerations imported into the industry by the reason people use, purchase and run newspapers is extremely important for the purposes of clause 18. As we know, one must break two separate rules to transgress clause 18. The first relates to predatory pricing, which is set by Tetra Pak because of the European provisions of clause 60. There is no problem in the House with the conditions that Tetra Pak lays down. If one applies those rules there is a near certainty that Rupert Murdoch has been predatorily pricing with News International and, in particular, with The Times. I cannot tell the House that that is true because I am not privy to the inner workings of News International, but every objective test suggests that Rupert Murdoch has transgressed the Tetra Pak principle. That is not the problem, which is why amendment No. 8, which bears my name, does not even contemplate examining predatory pricing.

The single issue here is what is domination in the market, and, on that issue, the newspaper industry is different from others. The reason the Bill and European legislation and jurisprudence apply only to dominance in the marketplace is that that is the only place where it matters. No one who is not dominant in the marketplace will predatorily price. If they do, it will not be for long because if they do not hold a dominant position in the marketplace, predatory pricing is commercial suicide. Ultimately, if such a war is started, the person who holds the dominant position will always win on the well-known General Haig principle that there will always be one man left standing at the end. That is why legislation, in commercial terms, applies itself to the dominant position in the marketplace.

That does not apply to newspapers because the reasons for using and owning them mean that those with a substantial share in the marketplace will sustain losses for years, as News International has done, to break their competitors not commercially but politically and to gain a greater political share. The implicit danger is commercial. News International holds 33 per cent. of the market. I have to say to my hon. Friend the Member for North Durham (Mr. Radice) that, under any test, 33 per cent. will not be enough to guarantee that a court or the Office of Fair Trading will find that a company holds a dominant position in the marketplace.

A little law that I know proves that that is the case. The United Brands or Michelin test, which began its life in the ninth or 10th version of the Commission's report on competition, is that dominance exists if the nature and structure of the market enable a company to act independently of competition. I shall not bore hon. Members to tears with the reasons, but my view, which coincides with those of other silks who have been quoted, is that that test will not guarantee a finding of a dominant market position for Murdoch's empire or any other newspaper empire in this country.

If the House is to safeguard the principles that my hon. Friend the Member for Sunderland, South (Mr. Mullin) articulated so well—the democracy of the House and the continuation of a healthy, democratic newspaper industry to support it—the only way for it to do so is for the House, united, one hopes, without party, to vote for the amendment.

It has been said that amendments Nos. 1 and 8 and new clause 1 do not refer to Mr. Murdoch, but we all know that we are debating the Murdoch clauses, and there is no doubt whom we have in mind.

I do not regard Mr. Murdoch as being responsible for all, or necessarily most, of the ills of the media world. If, for example, we looked at The Independent, we would probably conclude that it had been an excellent newspaper and that, unfortunately, a decline took place. The Independent started as a very good newspaper—it was highly welcome—but, in the past two or three years, it was undoubtedly the author of its own decline. I am pleased that, as a result of a change of editor, there now seems to be a good prospect that The Independent will be the type of newspaper that one wants to see, and will provide honest competition for the other broadsheets. One need only compare The Independent with what it was under some previous editors and my point is made.

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I might be accused of making a wrong point, but I do not believe so, when I say that some of the anti-Murdoch sentiments come from those who dislike the political line that he—or at least his newspapers—is advancing on the single currency and against economic and monetary union. I support amendment No. 1, despite the question that I shall now pose. If the Murdoch newspapers—The Times and The Sun—were very pro economic and monetary union, and were in favour of Britain joining the single currency at the first opportunity, would there be the same amount of criticism? Undoubtedly, my hon. Friend the Member for Sunderland, South (Mr. Mullin) would not change his opinion—he would be making the speech that he has just made, and doing very well indeed—but I wonder whether some of the critics are motivated by the line on the European Union that Mr. Murdoch or at least his newspapers are advancing.

The other broadsheets, The Guardian and The Daily Telegraph which have also been mentioned, are excellent newspapers, well able to look after their own, and one hopes that that continues to be the position, even if I would not tend to support the politics of those newspapers—especially, of course, of The Daily Telegraph.

There are three main reasons why I believe that new clause 1 and amendments Nos. 1 and 8 are necessary. First, the point has been made, and cannot be reiterated too often in the debate, that the pricing of The Times is unfair—that the purpose of such pricing arrangements is to drive competitors out of business. When recently I had a meeting—with one other colleague—with the editor of The Times, the fact that such pricing arrangements would drive competitors, especially The Independent, out of business was hotly denied, as though the thought had never come into the mind of those who control the Murdoch newspapers in this country.

We know that that is nonsense. We know that the sole purpose—perhaps it is unfair to say that, but one of the main purposes—of the pricing of The Times as it is at the moment in comparison to its broadsheet rivals is to drive at least one, perhaps two, of those rivals out of business. We also know—the point was made by my hon. Friend the Member for North Durham (Mr. Radice) when he moved amendment No. 1—that if The Times was not so heavily subsidised by all the other Murdoch outlets, it would simply not be possible to have such a pricing arrangement. That is the first reason why I am, and have been for some time, very critical of what is happening. If The Independent were forced out of business, that would undoubtedly be a serious blow to the broadsheet market, to British politics and to British democracy.

The letter that we have received from the executives of The Daily Telegraph and The Guardian, containing the views of the lawyer, Mr. Fowler, has been mentioned. I agree that the executives have an interest, but Mr. Fowler's views should be noted.

The second reason why I am opposed to the present situation regarding the Murdoch media empire is that far too much media power is undoubtedly concentrated in the ownership of Mr. Murdoch—in Britain, as has been stated, in Australia and in the United States. I do not believe that that is desirable, or that it is healthy in a democracy. The danger is that if other broadsheets went out of business—certainly if The Independent did so— that would give the Murdoch press empire even more power than it has. That is why I say that that concentration of media outlets in the hands of Mr. Murdoch, not only in the press, but very much in television, is undesirable. One would hope that the Government would recognise that and act accordingly.

My third reason is somewhat different. In my view, Mr. Murdoch believes that he has any Government in Britain in his pocket and that his power—that word is very appropriate in this context—is such that no one in the main stream of British politics or, to put it more clearly, the two main parties, whether in government or not, is likely to take any position that will endanger his press empire. Although I appreciate what the Liberal Democrats have done in another place and here, I nevertheless have to say that, if they stood a realistic chance of forming the next Government, it is not likely, although I may be wrong, that they would be pushing new clause 1 with as much enthusiasm as they have been, and it is more than likely that they would be adopting the same position as the Conservative Opposition.

I am grateful to the hon. Gentleman for giving way; he realises that he has offered me a bait that I cannot refuse. I was not aware that he had some magical orb in his hand with which he could predict the future electoral success of any political party in this country. Perhaps he would reveal the secret.

I am merely saying that it is interesting to note the attitudes of political parties. The Conservative Opposition, for example, are staying silent. They certainly will not vote for the amendments; that was made clear at a previous stage of the Bill's passage. The reason is pretty obvious: they do not want to give Mr. Murdoch the impression that they will act, or vote, in any way that will cause him offence.

That is the sort of power that Mr. Murdoch has. His feeling is that, with all the media power that he already possesses, he has the Government in his pocket. I do not believe that my Government are in his pocket at all, but I do believe that there is a feeling—I am speaking as frankly as I can on the Floor of the House—that, in order to be re-elected, we should not do anything by way of legislation that will give offence to the person who owns so much of the media in this country.

I think that that feeling is highly undesirable, and that it is not—I hope that it is not—the purpose of British democracy for one person virtually to decide who should be the Government of the day. It is not for one person, be it through The Sun or The Times—but especially the tabloid Sun—to say, in effect, that if the Government displease Mr. Murdoch, he will campaign to get them out of office. At the moment—I am being as frank as I can—both the Government, whom I enthusiastically support, and the main alternative Government give the impression that they do not want to take any action that would offend Mr. Murdoch.

I conclude by saying that in a democracy, there are bound to be—there always have been in this country, I suppose—powerful people in the media world, such as the late Lord Beaverbrook who was mentioned, who hold a good deal of power. I suppose that, by the very nature of capitalism, that is bound to be the case. Mr. Murdoch is somewhat exceptional in that he has more power than previous media tycoons. He would like to concentrate even more power in his empire and the time has come for the Government, and certainly for Parliament, to say that enough is enough. The most effective way in which to do that is to accept the amendments and the new clause.

Unusually, I want to support the Government's line and oppose the amendments. I cannot support the amendments because the Government's definition of predatory pricing in the Bill is perfectly adequate to deal with the situation. What has been added to that is an explosion of impotent anger against Rupert Murdoch, and the reasons for that are many and varied. My hon. Friend the Member for North Durham (Mr. Radice) is obviously upset because Rupert Murdoch is voicing the views of British people on the euro. Others do not like The Sun on taste grounds and some, particularly on the left, do not like Rupert Murdoch's politics. As we spent more than 20 years attacking the politics of The Sun and have now come to accept so many of them, that is a rather curious ground on which to attack Mr. Murdoch.

Some hon. Members, such as my hon. Friend the Member for Walsall, North (Mr. Winnick) and the Liberal Democrats, do not like the fact that Rupert Murdoch is so close to the Government. The Liberal Democrats would rather that the right hon. Member for Yeovil (Mr. Ashdown) was close to the Government. I do not agree with any of those notions because they do not seem to do anybody any credit. I certainly do not come to praise Rupert Murdoch, but I certainly do not intend to bury him. I admire him as a stirrer and a brilliant newspaper man, many of whose actions have been good for the newspaper industry. I also admire him as a risk-taker and innovator who successfully gave us Sky television. When I say that I admire him, I do so with no implication of vested interests.

My hon. Friend used to do a television programme for him.

As my hon. Friend reminds us, I used to do a television programme for Rupert Murdoch but, thanks to one of his many commercial mistakes, my programme was dropped. That shows that even Rupert Murdoch is capable of bad judgment. The Sky television management have gone flabby because they took off the best current affairs programme on the network. I am trying to look at the matter in the light of the arguments, decide on the facts, and do myself a little credit with the Government. A reshuffle is coming and my hopes are strong. I have not yet received any word from Downing street, although I sit at home every night waiting for the phone not to ring. I hope that my speech will encourage the process. I want the Newcastle Brown award for meritorious conduct in this matter.

On the grounds of clarification and job insecurity, may I ask my hon. Friend whether he is after my job?

Certainly not. I could not do it anything like as well as my hon. Friend after all those conversations we had.

We should oppose the amendments for a number of reasons, the first of which is that it is wrong to use a Bill that deals with competition to reduce competition and increase prices. What on earth will we achieve by increasing prices? That is a distortion of the Bill's role. If there is a problem about Murdoch's share of the market, let us have the guts to tackle it directly rather than in a back-door, covert way.

Will my hon. Friend give way?

No. We can all whinge about Rupert Murdoch. I am slightly embarrassed because I differ from my hon. Friend the Member for Sunderland, South (Mr. Mullin). Like him, I am on the extreme left of the party. I am there because the party has moved so far to the right behind me. My hon. Friend and I are all that is left and I am a Gaitskellite.

Murdoch has been successful: The Sun is a success. He kept it alive and boosted it to a mass circulation newspaper. He kept Today alive far longer than would have been the case under any other management. The Times and The Sunday Times have been built up into successful papers. It is true that there is a threat to The Independent, but that is The Independent's fault, not Rupert Murdoch's. If The Independent has gone off, it is because it is no longer independent, has lost its way and has been a wandering, bad paper. It has pulled itself together and enormously improved, but the fault lies with The Independent, not with the attack on it by predatory pricing.

I did not notice The Independent being particularly squeamish, when it set up The Independent On Sunday, about deliberately smashing The Sunday Correspondent, which it duly did; The Sunday Correspondent sank. We did not get this concern and desire for protection then.

I do not notice The Daily Telegraph avoiding predatory pricing. About a quarter of its circulation is sold on much-reduced subscription rates and it gives away 33,000 copies. I love it, but I much prefer reading it for free and I am happy to be deluged with free copies wherever I go. However, that is another form of unfair, unreasonable competition. Why is the paper whingeing about predatory pricing when it gives copies away on that scale?

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Competition is endemic in the newspaper industry. My hon. and learned Friend the Member for Medway (Mr. Marshall-Andrews) is wrong to say that we are talking about a lust for power. We are talking about someone's pride in their product—in their newspaper. Does my hon. Friend not want his articles to be read by the maximum number of readers? Is that not what journalism is all about—competition? If we suppress competition in terms of pricing, will it not come back in all sorts of other ways?

I grew up in a home that was weighed down with encyclopaedias because predatory-pricing newspapers had been going from door to door, giving encyclopaedias away with a subscription to this and that newspaper. We never read any of them. We never read the papers, but we were festooned with encyclopaedias.

rose—

I know that my hon. and learned Friend is going to say that I should have read the newspapers and encyclopaedias, and that I would not be making this speech if I had done so. I am not going to give way.

In any case, what has predatory pricing done for Rupert Murdoch? He has the same proportion of sales now that he had in 1988. The only newspaper that has gone under in the intervening period is his own paper, Today, so what has predatory pricing done for him? Is it such a powerful threat?

To go on in this fashion about predatory pricing assumes that people are stupid. Price is only a marginal factor in buying newspapers. Most people buy a newspaper because they identify with it. They feel that it expresses their character.

My hon. Friend has just said that he got The Daily Telegraph for free.

In my case, I hope to buy more newspapers than that. My point is that getting them for free does not kill newspapers. It widens the circulation of quality newspapers. However, in the main, people buy a newspaper because they feel comfortable with it and it expresses their personality. They have an empathy and bond with it; that is what it is all about. It is not about the price being reduced one day a week. People look for quality.

A symptom is that red-top newspapers are all losing circulation while that of the quality papers is increasing, a helpful and hopeful sign. However, the Daily Express lost circulation when it lost its way. Fortunately, it has pulled itself together recently, but it is the fault of newspapers when they lose circulation. They cannot establish that empathy with their readers any longer because they do not have a personality with which readers can identify.

That point is what we need to emphasise, not predatory pricing, which is a marginal factor in such decisions. My hon. Friend the Member for Sunderland, South says that he wants diversity. So do I, but I do not want it at the expense of closing other newspapers. The enemy is bad newspapers and newspapers without character or identity, not predatory pricing. That is a failure of the newspapers. Therefore, I cannot support the amendments. They are mostly an expression of anger at Rupert Murdoch—an impotent and somewhat pathetic rage against the man—which does not become us.

I say loyally that the amendments are not a critique of our leader, who is on close terms with Rupert Murdoch. I am not going to put myself in the position of criticising our leader in any way, but, more importantly for practical purposes, what is proposed will not work. I do not think that my hon. Friend the Member for North Durham will even vote for his amendment because he will not want to rebel against the Government, so why are we wasting our time with this futility?

This is an excellent Bill, which will be even further improved if the Government find it in their heart to accept the amendments. I want to deal with the particular point that the Government have made: they see no case for creating a special clause to deal with circumstances in the newspaper industry.

It has been put to the House this afternoon that the newspaper industry is a special case, for a number of reasons. The first is that newspapers are, above all else, a means of circulation of information—a free, unfettered and generally competitive circulation of information, which is vital to a healthy civil society. The Government are committed to recasting civil society—we want more people to be volunteers, to be aware of their rights, to be involved in local authorities and so on. We cannot shape a healthy civil society without the freest possible flow of information. A monopoly in newspapers, predatory pricing by newspapers, or an unhealthy dominance by any individual newspaper proprietor fatally hinders the free flow of information. That is the first reason why the newspaper industry is different and why specific measures are needed to deal with undue dominance and monopoly.

The second reason, which has been touched on by my hon. Friends, is the relationship between newspapers and politics. It is nonsense to argue, as some of my hon. Friends have done, that people go into newspapers because they want to make a profit. Beaverbrook, the archetypal proprietor, said it clearest and said it best—as he said so many things—when he said that he owned his newspapers to make propaganda. People become newspaper proprietors not because of profit—there are easier ways to make a return on their money—but for political and social influence and power. It must be unhealthy in politics for there to be undue dominance and monopoly in political and social power and influence.

Because of the importance of freedom of information and the free flow of information, and because of the relationship between newspapers and politics, it is all too easy to make a special case for dealing with monopoly and undue dominance in the newspaper industry. I declare an interest as one of the few remaining members of the parliamentary Labour party who will admit to having picketed Wapping by candlelight at the beginning of the 1980s.

My point is not an ad hominem point about Murdoch—it is that twice in recent times the Murdoch empire has driven a coach and horses through the clear intentions of monopoly legislation. The first time was when Murdoch acquired The Times. Anyone who doubts me needs only to read Harold Evans's book about that acquisition. Harold Evans is one of the legion of ex-Murdoch executives. He makes it perfectly clear in his very carefully documented book—as one might expect from one of the leading journalists of our generation—that the way Murdoch acquired The Times was wrong, was in breach of the legislation, and was based on a phoney presentation of statistics and undue pressure on the politicians of the time. Murdoch drove a coach and horses through the clear intentions of politicians when he acquired The Times.

The second time was Murdoch's acquisition of Sky, on top of his control of the newspaper and magazine market. I served on the Committee that shaped the regulations covering Sky and other outlets. It was clear to me that, for a second time, Murdoch was being allowed to get away with it—through his power, through politicians' fear of him and through the need not to be seen to cross Rupert Murdoch.

Now, at the beginning of this Administration, we have a Competition Bill and an opportunity to deal with the issue of undue dominance and monopoly in the media. Many people outside the House will not understand if we do not do something. We do not need to look in the crystal ball; we can read the book. Time after time, in Britain, Australia and America, Murdoch has driven his way through the intentions of the people and the legislators on the issue of monopolies. We have an opportunity, which will not come again, to deal with the issue. I urge my hon. Friend the Minister to consider accepting the amendment, even at this late hour.

It must make bad legislation first to find a villain and then to find the legislation by which to condemn him. We are in danger of doing just that if we follow some of the arguments that have been deployed in this debate. The real issue is whether the rules that apply in a vast range of industries to abuse of a dominant position—or anti-competitive behaviour—apply also to the newspaper industry, or whether that industry requires special treatment.

The Standing Committee considered the clause that had been included by the other place—which deemed that special treatment was required—and removed it from the Bill for very good reasons. The first reason was that the clause did not meet certain of the Bill's principles—such as that it should be universally applicable right across industry, thereby giving it greater clarity. The second was that the Bill should be consistent with European legislation, so that the two legislative regimes could evolve in harmony. The third was that the clause introduced absurdities. The fourth was that the clause introduced a test for predatory pricing that was completely inappropriate and at odds with European precedent.

Each of the proposals in this group falls for one or more of those reasons. New clause 1—taking the proposals in reverse order—like the clause from the other place, speaks of any activity that reduces diversity. Applying that definition produces some absurd examples. Is a newspaper that recruits many gifted writers and attracts readers towards it and away from another newspaper, thereby endangering that other newspaper's existence, to stop recruiting talented writers? Of course not. Many other examples can be concocted to demonstrate the absurdity of the definition.

Amendment No. 8 would reduce the threshold in distinguishing whether there is a dominant position. However, when the matter is analysed and considered within the European context, it is doubtful whether there is such a distinction to be made. The European regime introduces a definition of dominant position that can catch abuse of dominant position in the newspaper industry if there is such a dominant position. In many of the examples cited in this debate, there seems to be an assumption that there is a dominant position for The Times, although very few facts and figures have been quoted to demonstrate it.

Currently, a dominant position will be interpreted as one in which anyone can operate without regard to competition or customers. That definition may very well apply to someone who is using cross-subsidisation from another business to operate predatory pricing. The solution for such practice is for the Director General of Fair Trading to investigate the matter according to the precepts that are already included in clause 18, to reach a conclusion and to operate accordingly. There is no evident reason why newspapers require a special definition of dominant position that is any different from that applying to any other part of industry.

Amendment No. 1 is very close to the likely definition in European legislation of dominant position. The weakness of including that specific definition in the Bill is that we would freeze the definition at the time when the legislation is passed, whereas European definition of dominant position might evolve and diverge from the Bill's definition. There is therefore a weakness that we will end up with two divergent pieces of legislation, whereas the intention was to have them in close harmony.

I do not think that any of the cases that have been cited in this debate justify a belief that clause 18 cannot deal with abuses and anti-competitive behaviour in the newspaper industry. The amendments are also in danger of introducing absurdities and breaking from some of the Bill's very basic principles—such as its universality and consistency with Europe.

I do not believe that the situation has changed since the Committee considered the Bill. I therefore believe that all three proposals in this group should be rejected, and that the principles applying in the newspaper world should be those stated in clause 18.

Some of my hon. Friends have railed against Mr. Murdoch and that is fine by me. I hold no candle for Mr. Murdoch and—short of my growing mammaries—I doubt whether he will ever say anything nice about me. I certainly hold no brief to defend his position. Nevertheless, I do not believe that my hon. Friends have shown that the Bill does not deal unamended with the position as they perceive it.

Let me reiterate how the Bill works. Clause 18 defines what cannot be done and who cannot do it. Clause 60 pulls in all European case law in order to define what is not allowed and who cannot do it. As a result of clause 60, anything that we can scrape out of European case law can be used. The provision is not optional. It does not say, "You may," or "You can if you want to." There is no choice in the matter. The Bill provides that European case law must be used in interpreting the Bill.

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As my hon. and learned Friend the Member for Medway (Mr. Marshall-Andrews) said earlier, that includes the Tetra Pak judgment, which provides a mechanistic definition of what predatory pricing involves. Under a mechanistic definition it is not necessary to prove intent. Previous investigations into what Mr. Murdoch and The Times have been doing failed because at the moment it is necessary to prove intent. When that is no longer necessary, as my hon. and learned Friend said, given what everyone is alleging about Mr. Murdoch's predatory pricing activity, if the figures can be demonstrated to prove that, he will be found guilty and prevented from predatory pricing. I do not know whether the figures will prove that or whether the arguments used by The Times are true and the newspaper is not selling below cost. If it is selling below cost, it will be dead meat.

The only question arises in respect of dominant position. As I said earlier, European case law in United Brands v. the Commission says that organisations or individuals may be acting from a dominant position if they can influence the market and have the power from other sources to act independently. It uses almost identical language to amendment No. 1, so in my view amendment No.1 is superfluous. If that is the case and my hon. Friend the Minister confirms my interpretation when he replies to the debate, I assume that my hon. Friend the Member for North Durham (Mr. Radice) will not find it necessary to press the amendment to a vote as the provision is already in the Bill.

Amendment No.8 seeks to introduce a new definition of dominant position in respect of newspapers, including the word "substantial". Under European case law, it is not necessary to have 80 per cent. of a holding in a marketplace to be dominant. European case law specifically says that a holding of 40 to 45 per cent. is almost certainly dominant and that a holding of as little as 20 per cent. might be dominant given the right circumstances. If we interpret "substantial" as being different from "dominant" and representing a lower threshold—otherwise the amendment would have no purpose—the amendment is saying that a holding of less than 20 per cent. of the market might represent a "substantial" position and could therefore result in anti-competitive practice. I am sorry to say that that would bring in not only The Times but all the other broadsheet newspapers that would be in a "substantial" position.

My hon. Friend makes my point for me. The amendment is not an anti-Murdoch amendment, as it would apply to anyone—including The Daily Telegraph or the Daily Mirror—who attempted to engage in predatory pricing.

My hon. Friend is certainly right, but if the definition of predatory pricing according to the Tetra Pak judgment is selling below the cost of production and making a loss on a consistent basis, that is doubly the definition of The Independent. The day we knock on Mr. Murdoch's door and say, "You must stop doing this because you are breaking the law," he will say, "If you bring me to court, I want The Independent taken to court with me because it is also making a loss. It has a substantial holding in the marketplace and is every bit as covered by amendment No.8 as I am." That is why amendment No.8 is dangerous as well as unnecessary.

My hon. Friend the Member for Bexleyheath and Crayford (Mr. Beard) described the absurdities that the new clause would introduce. Under new clause 1, an attempt by The Independent or The Guardian to hire new and better journalists to improve their newspapers could be defined as acting to try to close down competitors. That makes a nonsense of the Bill. The Bill, as the Government have defined it, is strong enough to deal with Murdoch and The Times if it can be shown that Murdoch is selling below the cost of production. If my hon. Friends who fear that that is what he is doing are right, the Bill as it stands is already perfectly adequate to deal with such behaviour. I call on my hon. Friends to reject the amendments and the new clause.

I rise with some diffidence on behalf of Her Majesty's Opposition to intrude on what is clearly the Labour party's private grief. This has certainly been an interesting and illuminating debate, perhaps characterised more by heat than light. It has been characterised more precisely by hon. Members' vain attempts to distil their dislike of a particular individual—Rupert Murdoch—and his empire into a series of penal measures that would be imposed on that empire.

I should make it clear from the start that the Conservative party is not against competition. Indeed, we Conservatives favour vigorous competition. Our reservations about the Bill more generally reflect the fact that it does not always achieve the objectives that it claims to seek. As a party, we are not in favour of predatory pricing or the abuse of a dominant position. As the hon. Member for South Thanet (Dr. Ladyman) made fairly clear, the issue is whether the measures proposed in the clutch of amendments are appropriate to the ills that are seen.

I should like to make it clear, as my right hon. Friend the Member for Wokingham (Mr. Redwood) did in Committee, that we accept that, in certain specific cases, competition legislation, as it has operated in this country over the years under different Governments, may be required to address some specific problems concerning the newspaper industry. It is clearly appropriate to legislation on mergers and the allocation of titles.

Although I do not have a detailed knowledge of the genesis of legislation, it is fair to say that one of the major concerns was that titles might disappear or be bought for the purpose of closing them down. Regardless of whether that is the intention of any individual in the present scene, we have clearly not failed to secure vigorous competition among broadsheets and tabloids—as well as, increasingly, dare I say, between them—and a wide range of differing titles. That may change. One reason for such a change, to pick up a point made earlier, may be the falling away of the propensity of persons to buy titles that are making losses, in order to advocate a particular position. At the moment, however, we have a very lively newspaper scene and must therefore identify what specific ill the amendments address.

We look forward to the Minister's remarks. I agree with recent comments that a case has not yet been made that any problem can be tackled in the way that is suggested. I apologise to the hon. Member for North Durham (Mr. Radice) for picking up only a few of his latter remarks. I turn particularly to the remarks of the hon. Member for Sunderland, South (Mr. Mullin), who clearly dislikes Murdoch—an opinion to which he is entitled. He moved round several different ways in which the Murdoch problem, as he sees it, could be addressed. It could be predatory pricing, the abuse of a dominant position, something done in the past, motive or effect. It was difficult to pin down how it was to be tackled.

I wish to refer to the most likely of the candidates—the predatory pricing test. As my right hon. Friend the Member for Wokingham pointed out in Committee, it is very difficult in practice to differentiate that consideration from ordinary commercial pricing and keen marketing. As has been mentioned—I declare an interest in this—many of us benefit from subscription arrangements, either to daily newspapers or periodicals which are priced at a considerably lower figure than would apply if we were to buy them day-by-day at the newsagents. Other people may be able to intercept a copy given away on their way to work. There is a wide variety of effective pricing arrangements.

How on earth can we find what is predatory and what is not? That is still not clear to me. It is clear that if one seeks a remedy along those lines, it could be encompassed by the Bill as drafted and it should be possible to do so by generality, rather than by a specific case.

Another possibility would be to look at predatory pricing in terms of cost, and that was addressed. However, it is clear that most national newspapers, by definition, price themselves at below the cost of production or at an uneconomic level. They make that up by advertising, or they may run at a loss from time to time. One should look at another test, which is that of a formerly dominant position, I was interested in the exchanges that have just taken place, because it is possible to synthesise the situation in which—to take the case of the argument by the hon. Member for South Thanet—a newspaper might have a substantial position in the market; shall we say The Times. However, The Daily Telegraph, which sells many more copies, might have, within the terms of the Bill, a dominant position—so those two newspapers could be subsisting. However, it is not clear whether they would be subjected to the same or different tests.

I mention those examples because I feel that it is difficult to pick our way through to a fungible solution to what I am far from convinced is an actual problem, given the strength and diversity of the press and the weapons that the Bill will give the Government as part of their general approach to competition legislation. This is essentially an argument between the soul and the head of the Labour party as to the way forward. We shall look forward to the Minister of State's effort to wrestle with what are, in the words of the preacher, "doots" among his colleagues.

In conclusion—this is in no sense an attempt to subvert Government Back Benchers, or to discourage them from supporting the Minister; that is a matter for them—in declining to oppose the Government's position, as I anticipate it to be, I would commend the Government on a strange phenomenon. Their characteristic phenomenon is to find a public ill—or, if they cannot find one, to invent one or make a fuss about one—and then to tackle it with a great flourish. People are named and shamed, and action is taken, or threatened to be taken. Something is done about it, particularly if the focus groups say that something should be done.

Quite exceptionally, unusually and, in this case, sensibly, the Government have not bowed to the pressure to produce a specific remedy for a specific ill. They are relying, wisely, on principles of general application. We shall listen to the Minister of State with interest, and I am sure that, his hon. Friends will be listening with even greater interest. We shall—as they say in the history books—then await events.

My hon. Friend the Member for Hackney, North and Stoke Newington (Ms Abbott) asked me to find it in my heart to support the amendments. No one can accuse me of being anything but a big-hearted person, but tonight I am not going to let my heart rule my head. We want intelligent decision making.

The Bill is not about ownership; it is about dealing with abuses of dominance and other anti-competitive behaviour. It will provide much stronger powers to deal with such behaviour. The media industry will continue to be subject to the existing merger control and newspaper merger regimes under the Fair Trading Act 1973 and to media ownership regulations under the Broadcasting Act 1990.

The Government have made clear their belief in the importance of a strong, diverse and independent press. That is why we are keeping the special merger provisions for newspapers in the Fair Trading Act, which protect plurality of ownership and diversity of content. The Bill deals with anti-competitive practices, which are wrong wherever they occur. The Government believe that abuses of dominance, such as predatory pricing, should be stamped out whatever the market. Clause 18 clearly covers firms that abuse their dominance by predatory pricing, which is vital.

9.15 pm

The principles established in European case law will apply under the Bill by virtue of clause 60(2) which makes it clear that there must be no inconsistency between the principles applied by courts in applying a domestic prohibition and those laid down by

"the European Court, and any relevant decision of that Court".

The principles on predatory pricing established in AKZO and Tetra Pak will apply under the Bill.

Hon. Members have referred to briefings sent to them by executives of The Independent and The Daily Telegraph newspapers and to the opinion of the Queen's counsel that those briefings quote. It is important to distinguish between allegations about The Times and questions of principle about the interpretation of the Bill, but The Independent and The Daily Telegraph executives mix them together to suit themselves. The briefings entirely wrongly imply that what the Government have said about the European Court case law is dubious. I do not accept the assertion that

"many lawyers disagree with this interpretation".

I have seen nothing to back up that assertion, and no hon. Member has said anything tonight to persuade me that it is right. On the contrary, even those who have tabled the amendments have, in their arguments, accepted that the European Court case law is very clear on the relevant points.

The suggestion in the briefings that Rupert Murdoch can operate with immunity from competition law should be treated with the disdain that it deserves. I take exception to the fact that hon. Members have said that the Government are in the pocket of Rupert Murdoch. The socialist Member for Makerfield in Rupert Murdoch's pocket? No one can say that I have ever worn a Sun lover's T-shirt.

Hon. Members should consider what the Government have done in the past few weeks: we have introduced automatic recognition, removing Wilson and Palmer—which allowed the newspaper industry to discriminate against employees on the ground of their trade union membership—and permitting those sacked for taking part in lawful industrial action to claim unfair dismissal. Moreover, we have introduced a national minimum wage, against which The Times has campaigned, and continues to campaign, vigorously.

This is a Government of fairness, not favours. No one can suggest that a Government in the pocket of Rupert Murdoch could introduce such workers' rights legislation. It is nonsense, and Labour Members should not claim that the Government are in the pocket of a vested interest. The Government are in the pocket of no vested interest. We were elected to tackle vested interests, which is precisely what we are doing in the Bill.

I did not say that the Government were in the pocket of Murdoch. I said the opposite: that Murdoch believes that he has in his pocket the Government and the Conservative party, which is a highly undesirable state of affairs. That does not in any way mean that the Government, whom I support, are in Murdoch's pocket. Will my hon. Friend say whether he believes that the Murdoch empire has too much power and, if so, what steps should be taken to deal with that?

I thank my hon. Friend for that clarification. I think that I made the Government's position on dealing with vested interests absolutely clear. I accept what I believe was an attempted apology, but it is invidious to give the impression, inside or outside the House, that the Government are treating anyone differently. That is not the case. We are a Government of fairness, not favours.

Much has been said about the actions of News International and The Times. It would be wrong of me to comment on whether the actions of an individual undertaking are or are not anti-competitive, as that is a matter for the competition authorities, both under the Bill and under existing legislation. The House should note, however, that the director general has asked News International to provide detailed information about The Times, to enable him to assess the impact on its competitors of its trading strategy.

I am surprised that that was not mentioned in the debate, especially by those who spoke in favour of new clause 1. This is the proper way forward. I do not accept the arguments of those who are out to get The Times and who say that, if its actions are not caught by the legislation, we must alter it to catch them.

That is not the purpose of the Bill or of the legislative programme. If someone has a case against Murdoch or any other individual, he can pursue that case, but we cannot distort the Bill as has been suggested. That would undermine the concept of the Bill, and our ability to prevent abusive and anti-competitive behaviour in the marketplace. Let us remember that, when such abuse takes place, small, medium and large enterprises suffer, and it is the responsibility of the House to improve legislation to prevent that from happening and to ensure that, if it does happen, we have the capacity to stop it and to take action to ensure that any loss is recognised.

Does my hon. Friend accept that there is a problem in the newspaper industry that should be dealt with in the Bill? If the Bill were to fail to deal with the problem, what action would he take to remedy it?

I thought that I made it clear that such matters are for the competition authorities. We are responsible for providing a legislative framework, and we have not only done that but improved on the existing framework. We oppose the amendments and the new clause because we do not believe that the framework is inadequate; we believe that it is rigorous and that it is constituted in the context of European jurisprudence, taking account of articles 85 and 86. It has been recognised from the outset as the only way of ensuring that we have an effective regime to deal with anti-competitive behaviour, including predatory pricing.

I want to make it clear from the outset that I sympathise with the thinking behind amendment No. 1. I entirely appreciate the fact that the object is to clarify what is meant by dominance under the Bill, drawing on the relevant EC jurisprudence. I and other Ministers have defined dominance in similar terms in debates in Parliament. We have no quarrel with the definition itself. I have no objection to the description of dominance set out in the amendment, as far as it goes. It is consistent with the explanations that I and other Ministers have given.

I am grateful to my hon. Friend the Member for North Durham (Mr. Radice) for highlighting these important principles of interpretation. There is common ground between us on the substance, but the amendment itself is unacceptable. It could inadvertently do serious damage to the central policy of the Bill, which is to align the domestic prohibition of abuse with that of article 86.

European jurisprudence is clear that dominance means a position of economic strength that enables an undertaking to hinder the maintenance of effective competition on the relevant market by allowing it to behave to an appreciable extent independently of its competitors, of its customers and, ultimately, of the consumer. That test is laid down in case law, for example in the Michelin case.

Those EC principles of interpretation will apply under the Bill, by virtue of clause 60. Subsection (2) makes it clear that there must be no inconsistency between the principles applied by the courts in applying the domestic prohibition, and those laid down by the European Court, and any relevant decision of that Court.

Market share is not determinative of dominance, but it is an important factor. The Commission has expressed the view that while, in general, companies with market shares below 40 per cent. are unlikely to be regarded as dominant, undertakings with market shares as low as 20 per cent. may none the less be dominant if the nature and structure of the market enable them to act independently of competition.

Clause 60(3) requires our courts to have regard to relevant statements of the Commission, such as this one, in applying the domestic prohibition. Therefore, the assessment of dominance under the Bill will need to have regard to the Commission's statements. In short, the principles of interpretation on dominance, which are established in EC case law, will apply under the Bill.

Either the words of the amendment correctly define what is a dominant position under Community law, in which case they are unnecessary because that definition is already supplied through clause 60, or the words do not set out the test correctly and fully, in which case they should not be included. Where unnecessary provisions are inserted in legislation, they tend to go septic—that is to say that the courts look for some meaning to give them, rather than accept that they were not intended to have any effect of substance. In that way, in time they are likely to have effects that were entirely unintended. That uncertainty could cause business a major problem. If the latter interpretation were to prevail, it could lead to a UK prohibition being interpreted significantly differently to article 86.

The amendment would freeze the position in domestic legislation. That would carry the risk of the application of the domestic law diverging from that of EC law in an important area. As we stressed many times in Committee, we should not seek to specify or alter how the prohibitions themselves apply, but should rely on the governing principles clause. So, while I sympathise with the thinking behind the amendment, I hope that my hon. Friend will accept that it would be seriously counterproductive in practice. Having heard my assurances on the meaning of dominance under the Bill, and the principles of EC jurisprudence on the matter, I hope that he will be prepared to withdraw the amendment.

Amendment No. 8 tackles the issue by lowering the threshold of what is "dominant" in the national newspaper market. I see no justification for treating newspapers differently in that respect. Frankly, it smacks of fixing the legislation to catch The Times regardless of the proper merits of the case.

I have explained carefully what is meant by dominance in the Bill. That is a soundly based test drawing on established European jurisprudence. It would be wrong to replace that with a different test which would in any case be highly uncertain.

Is the Minister saying that under the definition that he prefers The Times clearly is not dominant?

The right hon. Gentleman is trying to be far too clever by half, as is his nature. I set out clearly what the Bill does, which is to provide a legal framework to deal with abuse of dominance in the marketplace, including predatory pricing. Whether someone is abusing the marketplace through predatory pricing is a matter for evidence, which should be taken properly by the competition authorities.

If the right hon. Gentleman has any bottle and if he thinks that the Government's policy is correct, he should go through the Lobby and support us on that basis. I assume that he will not do so, not because he wants to curry favour with News International, but because he believes that the Government's policies in that area are far too tough. He wants to be weak on competition policy and to allow abuses of dominance on occasions. Throughout the passage of the Bill, he has been at great pains to find ways out of dealing with those types of abuses in the marketplace. It is no surprise to me, even at this late hour, that he is still attempting in a few weasel words to place the Government in an unfavourable position. Once again, he has failed spectacularly—well, that got that out of the way.

New clause 1 introduces a press diversity prohibition and is similar to the clause that was thrown out in Committee. The earlier clause was wholly unworkable. I am glad to say that the supporters of new clause 1 have half met the criticisms that I made in Committee. They could have met my criticisms fully by withdrawing the proposed clause altogether. They have replaced the earlier threshold of a substantial degree of market power with the Fair Trading Act 1973 threshold, broadly at 25 per cent. of market share. I have already explained that there is no justification for a lower threshold to apply solely in the newspaper sector.

We said that the previous clause was too wide ranging and that any conduct—legitimate or illegitimate—may reduce the diversity of national newspapers by reducing competition. Now it is suggested that the concept of anti-competitive behaviour should be built in. That might be an improvement, but I have yet to hear a proper justification for applying tests to the newspaper market that are different from the tests in the economy at large. If conduct is anti-competitive and constitutes an abuse, it should be dealt with, whatever the sector. That is what the Bill does, and I urge the House to reject the amendments.

I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Amendment proposed: No. 8, in page 10, leave out lines 40 and 41 and insert

'"dominant position" means—
(a) in relation to the national newspaper market, a substantial degree of market power, and
(b) in relation to all other markets, a dominant position within the United Kingdom; and'.—[Mr. Mullin.]

Question put, That the amendment be made:—

The House divided: Ayes 68, Noes 301.

Division No. 331]	[9.29 pm
AYES
Abbott, Ms Diane	Jones, Dr Lynne (Selly Oak)
Allan, Richard	Jones, Nigel (Cheltenham)
Austin, John	Keetch, Paul
Baker, Norman	Kirkwood, Archy
Beggs, Roy	Lewis, Terry (Worsley)
Beith, Rt Hon A J	Livingstone, Ken
Benn, Rt Hon Tony	Livsey, Richard
Best, Harold	Llwyd, Elfyn
Brake, Tom	McAllion, John
Brand, Dr Peter	McDonnell, John
Breed, Colin	Marshall-Andrews, Robert
Bruce, Malcolm (Gordon)	Michie, Mrs Ray (Argyll & Bute)
Burnett, John	Moore, Michael
Burstow, Paul	Mullin, Chris
Campbell, Menzies (NE Fife)	Oaten, Mark
Canavan, Dennis	Öpik, Lembit
Chidgey, David	Rendel, David
Clwyd, Ann	Robinson, Peter (Belfast E)
Cohen, Harry	Russell, Bob (Colchester)
Corbyn, Jeremy	Sanders, Adrian
Cotter, Brian	Smith, Sir Robert (W Ab'd'ns)
Davey, Edward (Kingston)	Swinney, John
Donaldson, Jeffrey	Taylor, Matthew (Truro)
Dunwoody, Mrs Gwyneth	Tyler, Paul
Ewing, Mrs Margaret	Wallace, James
Fearn, Ronnie	Webb, Steve
Flynn, Paul	Wigley, Rt Hon Dafydd
Foster, Don (Bath)	Willis, Phil
George, Andrew (St Ives)	Winnick, David
Godman, Dr Norman A	Wise, Audrey
Gorrie, Donald	Wood, Mike
Hancock, Mike	Wyatt, Derek
Harris, Dr Evan
Harvey, Nick	Tellers for the Ayes:
Hopkins, Kelvin	Mr. Andrew F. Bennett and
Hughes, Simon (Southwark N)	Mr. Neil Gerrard.
NOES
Ainger, Nick	Banks, Tony
Ainsworth, Robert (Cov'try NE)	Barron, Kevin
Alexander, Douglas	Battle, John
Allen, Graham	Bayley, Hugh
Anderson, Janet (Rossendale)	Beard, Nigel
Armstrong, Ms Hilary	Beckett, Rt Hon Mrs Margaret
Ashton, Joe	Begg, Miss Anne
Atherton, Ms Candy	Bell, Stuart (Middlesbrough)
Atkins, Charlotte	Benton, Joe

Bermingham, Gerald	Foulkes, George
Betts, Clive	Galbraith, Sam
Blackman, Liz	Gapes, Mike
Blizzard, Bob	Gardiner, Barry
Blunkett, Rt Hon David	Gibson, Dr Ian
Boateng, Paul	Gilroy, Mrs Linda
Borrow, David	Godsiff, Roger
Bradley, Keith (Withington)	Goggins, Paul
Brinton, Mrs Helen	Golding, Mrs Llin
Brown, Rt Hon Nick (Newcastle E)	Gordon, Mrs Eileen
Brown, Russell (Dumfries)	Griffiths, Jane (Reading E)
Browne, Desmond	Griffiths, Nigel (Edinburgh S)
Burden, Richard	Griffiths, Win (Bridgend)
Burgon, Colin	Grocott, Bruce
Butler, Mrs Christine	Grogan, John
Byers, Stephen	Gunnell, John
Campbell, Mrs Anne (C'bridge)	Hain, Peter
Campbell-Savours, Dale	Hall, Mike (Weaver Vale)
Caplin, Ivor	Hall, Patrick (Bedford)
Casale, Roger	Hamilton, Fabian (Leeds NE)
Caton, Martin	Hanson, David
Chapman, Ben (Wirral S)	Heal, Mrs Sylvia
Chaytor, David	Healey, John
Chisholm, Malcolm	Henderson, Ivan (Harwich)
Church, Ms Judith	Hepburn, Stephen
Clark, Rt Hon Dr David (S Shields)	Heppell, John
Clark, Paul (Gillingham)	Hesford, Stephen
Clarke, Charles (Norwich S)	Hewitt, Ms Patricia
Clarke, Rt Hon Tom (Coatbridge)	Hill, Keith
Clarke, Tony (Northampton S)	Hodge, Ms Margaret
Clelland, David	Hoey, Kate
Coaker, Vernon	Home Robertson, John
Coffey, Ms Ann	Hoon, Geoffrey
Colman, Tony	Hope, Phil
Cooper, Yvette	Howarth, Alan (Newport E)
Corbett, Robin	Howarth, George (Knowsley N)
Corston, Ms Jean	Howells, Dr Kim
Cousins, Jim	Hughes, Ms Beverley (Stretford)
Cranston, Ross	Hughes, Kevin (Doncaster N)
Crausby, David	Humble, Mrs Joan
Cryer, John (Hornchurch)	Hurst, Alan
Cunliffe, Lawrence	Hutton, John
Cunningham, Rt Hon Dr John (Copeland)	Iddon, Dr Brian
	Illsley, Eric
Cunningham, Jim (Cov'try S)	Jackson, Ms Glenda (Hampstead)
Curtis-Thomas, Mrs Claire	Jackson, Helen (Hillsborough)
Darling, Rt Hon Alistair	Jenkins, Brian
Davey, Valerie (Bristol W)	Johnson, Alan (Hull W & Hessle)
Davidson, Ian	Johnson, Miss Melanie (Welwyn Hatfield)
Davies, Rt Hon Denzil(Llanelli)
Davies, Geraint (Croydon C)	Jones, Barry (Alyn & Deeside)
Davies, Rt Hon Ron (Caerphilly)	Jones, Mrs Fiona (Newark)
Dawson, Hilton	Jones, Helen (Warrington N)
Dean, Mrs Janet	Jones, Ms Jenny (Wolverh'ton SW)
Denham, John
Dewar, Rt Hon Donald	Jones, Jon Owen (Cardiff C)
Dismore, Andrew	Jones, Martyn (Clwyd S)
Dobson, Rt Hon Frank	Jowell, Ms Tessa
Donohoe, Brian H	Kaufman, Rt Hon Gerald
Doran, Frank	Keeble, Ms Sally
Dowd, Jim	Kemp, Fraser
Drew, David	Kidney, David
Eagle, Angela (Wallasey)	Kilfoyle, Peter
Eagle, Maria (L'pool Garston)	King, Andy (Rugby & Kenilworth)
Edwards, Huw	King, Ms Oona (Bethnal Green)
Ennis, Jeff	Kumar, Dr Ashok
Etherington, Bill	Ladyman, Dr Stephen
Fatchett, Derek	Lepper, David
Field, Rt Hon Frank	Leslie, Christopher
Fisher, Mark	Levitt, Tom
Fitzpatrick, Jim	Lewis, Ivan (Bury S)
Fitzsimons, Lorna	Linton, Martin
Flint, Caroline	Lloyd, Tony (Manchester C)
Follett, Barbara	Lock, David
Foster, Michael Jabez (Hastings)	Love, Andrew
Foster, Michael J (Worcester)	McAvoy, Thomas

McCabe, Steve	Rooker, Jeff
McCafferty, Ms Chris	Rooney, Terry
McCartney, Ian (Makerfield)	Ross, Ernie (Dundee W)
McDonagh, Siobhain	Rowlands, Ted
Macdonald, Calum	Roy, Frank
McFall, John	Ruane, Chris
McGuire, Mrs Anne	Ruddock, Ms Joan
McIsaac, Shona	Ryan, Ms Joan
McKenna, Mrs Rosemary	Salter, Martin
McNulty, Tony	Savidge, Malcolm
McWalter, Tony	Sedgemore, Brian
McWilliam, John	Shaw, Jonathan
Mahon, Mrs Alice	Sheerman, Barry
Mallaber, Judy	Skinner, Dennis
Mandelson, Peter	Smith, Rt Hon Andrew (Oxford E)
Marsden, Paul (Shrewsbury)	Smith, Angela (Basildon)
Marshall, David (Shettleston)	Smith, Rt Hon Chris (Islington S)
Marshall, Jim (Leicester S)	Smith, Miss Geraldine (Morecambe & Lunesdale)
Martlew, Eric
Meacher, Rt Hon Michael	Smith, John (Glamorgan)
Merron, Gillian	Smith, Llew (Blaenau Gwent)
Michael, Alun	Snape, Peter
Michie, Bill (Shef'ld Heeley)	Soley, Clive
Milburn, Alan	Southworth, Ms Helen
Miller, Andrew	Spellar, John
Mitchell, Austin	Squire, Ms Rachel
Moffatt, Laura	Starkey, Dr Phyllis
Moran, Ms Margaret	Stevenson, George
Morgan, Rhodri (Cardiff W)	Stewart, David (Inverness E)
Morley, Elliot	Stewart, Ian (Eccles)
Morris, Ms Estelle (B'ham Yardley)	Stinchcombe, Paul
Morris, Rt Hon John (Aberavon)	Stoate, Dr Howard
Mudie, George	Stott, Roger
Murphy, Jim (Eastwood)	Strang, Rt Hon Dr Gavin
Murphy, Paul (Torfaen)	Straw, Rt Hon Jack
Naysmith, Dr Doug	Stuart, Ms Gisela
Norris, Dan	Sutcliffe, Gerry
O'Brien, Bill (Normanton)	Taylor, Rt Hon Mrs Ann (Dewsbury)
O'Brien, Mike (N Warks)
O'Hara, Eddie	Taylor, Ms Dari (Stockton S)
Olner, Bill	Taylor, David (NW Leics)
Organ, Mrs Diana	Temple-Morris, Peter
Osborne, Ms Sandra	Thomas, Gareth R (Harrow W)
Palmer, Dr Nick	Timms, Stephen
Pearson, Ian	Tipping, Paddy
Pendry, Tom	Todd, Mark
Perham, Ms Linda	Touhig, Don
Pickthall, Colin	Trickett, Jon
Pike, Peter L	Turner, Dennis (Wolverh'ton SE)
Plaskitt, James	Turner, Dr Desmond (Kemptown)
Pollard, Kerry	Turner, Dr George (NW Norfolk)
Pond, Chris	Twigg, Derek (Halton)
Pope, Greg	Twigg, Stephen (Enfield)
Pound, Stephen	Vaz, Keith
Powell, Sir Raymond	Vis, Dr Rudi
Prentice, Ms Bridget (Lewisham E)	Walley, Ms Joan
Prentice, Gordon (Pendle)	Ward, Ms Claire
Primarolo, Dawn	Watts, David
Prosser, Gwyn	White, Brian
Purchase, Ken	Whitehead, Dr Alan
Quin, Ms Joyce	Wicks, Malcolm
Quinn, Lawrie	Williams, Alan W (E Carmarthen)
Radice, Giles	Wilson, Brian
Rapson, Syd	Winterton, Ms Rosie (Doncaster C)
Raynsford, Nick	Worthington, Tony
Reed, Andrew (Loughborough)	Wright, Anthony D (Gt Yarmouth)
Robertson, Rt Hon George (Hamilton S)	Wright, Dr Tony (Cannock)
Roche, Mrs Barbara	Tellers for the Noes:
Rogers, Allan	Jane Kennedy and
	Mr. David Jamieson.

Question accordingly negatived.

Schedule 3

General Exclusions

I beg to move amendment No. 69, in page 53, line 38, leave out 'which'.

With this, it will be convenient to discuss Government amendments Nos. 70 to 72, 11, 16, 26, 15, 28 to 32, and 38.

These are minor and tidying amendments. Government amendments Nos. 69, 70, 71 and 72 tighten the definition of "trading practices" in relation to the European economic area regulated markets, and bring it into line with the definition of practices in relation to recognised investment exchanges in the Financial Services Act 1986.

Government amendments Nos. 11 and 15 tidy up a matter which was dealt with in Committee. Clause 50, which was inserted in Committee, enables the Secretary of State by order to provide for any provision of part I to apply in relation to land or vertical agreements, with such modifications as may be prescribed.

Government amendments Nos. 16, 26, 28 to 32 and 38 are minor, and are part of the overhaul of the transitional provisions. I hope that the House will accept the amendments.

Amendment agreed to.

Amendments made: No. 70, in page 53, line 39, after '(a)', insert 'which'.

No. 71, in page 53, line 41, leave out '(b)' and insert 'and which'.

No. 72, in page 53, line 43, after '(c)', insert 'which'.— [Mr. Nigel Griffiths.]

9.45 pm

I beg to move amendment No. 6, in page 53, leave out lines 44 to 49.

With this, it will be convenient to discuss amendment No. 51, in page 54, line 37, leave out from beginning of line to end of line 6 on page 55.

It was a pity that the Minister of State, in responding to my intervention in the previous debate, chose to make a crude and inaccurate political point during what was meant to be a civilised exchange to elicit information about whether The Times was in a dominant position under different definitions.

The Minister of State alleged that the Opposition are keen to water down the competition legislation, and that, by implication, we favour anti-competitive practices. One of the principal purposes of this amendment is to show that the contrary is true. As we argued in Committee, so we argue on the Floor of the House; we believe that, in several important respects, the Bill is sadly lacking. It does not have sufficient bite to deal with potential abuses of the marketplace by monopolies. Indeed, the Bill could be more accurately called the competition and protection of monopolies Bill, particularly if one looks at schedule 3 and the enormous loophole it contains. That is what we are trying to excise with our amendment.

The House will know that I have declared two interests and my wife's interest in the Register of Members' Interests. The House should know that I am not furthering those interests by anything that I say or do in these debates.

The right hon. Gentleman must clarify the statement he made in Committee on 21 May. He said:

"The Minister must know that our case against the Bill is that it is either unnecessary or premature …we are against it in principle."—[Official Report, Standing Committee G, 21 May 1998; c. 48.]

That is quite right. We made it clear that we are against the Bill because we do not think that it fulfils what the Government say is a joint aim, which is to have a strong and fair competition policy in our country. We have said that we do not think that the Bill can fulfil the Government's aim of clarifying between European and British law and avoiding double jeopardy. We do not think that it would sharpen the attack of the British competition authorities on those revenue-producing monopolies that are most undesirable.

I am conscious, Mr. Deputy Speaker, that at this relatively late hour you will want me to keep strictly in order. With the Under-Secretary's agreement, I shall deal with the words that we are seeking to excise from the schedule.

We wish to leave out paragraph 4 of schedule 3 on page 53. It might be for the convenience of the House, since not all hon. Members have the schedule before them, to remind the House of the words. It is headed:

"Services of general economic interest etc."

It states:

"Neither the Chapter I prohibition nor the Chapter II prohibition"—

the two effective prohibitions that the legislation is about—

"applies to an undertaking entrusted with the operation of services of general economic interest or having the character of a revenue-producing monopoly in so far as the prohibition would obstruct the performance, in law or in fact, of the particular tasks assigned to that undertaking."

I accept that the last line and a half offers some limitation on what is otherwise a breathtakingly wide definition of exceptions. However, I think that it would be possible for clever lawyers operating for revenue monopolies or even companies with a dominant position who claim that they have a general economic interest that they are delivering through their services, to draw the attention of the courts to the big loophole in the legislation. Some will doubtless use it to good effect.

In Committee, we moved a specific amendment to try to improve competition in the water industry. The Opposition are strongly committed to the idea that water services could be improved, and that water prices could be lowered if proper competition was introduced into the industry. We had an interesting debate in Committee, and I was delighted that the Under-Secretary expressed some sympathy for the general thrust of my argument about the need for more competition in the industry.

It is well known that the Labour Government have been critical of the standards and practices of some in that industry, and of some companies in the industry. The Opposition are no friend of poor services or of anti-competitive practices. We would like to see rapid progress in the case of water. It is one very big example where we think that paragraph 4 of schedule 3 would make the Under-Secretary's task more difficult in the courts, and perhaps in persuading his colleagues in the Government that some action should be taken. Indeed, with the Bill before the House, this is the obvious time, and the Bill is the obvious vehicle, to make the water industry more competitive, but the Government seem to want to throw away that heaven-sent opportunity, and they voted against our amendment accordingly.

I urge the Under-Secretary, even at this late stage, to see the wisdom of removing the words that we seek to excise from the Bill, or tabling another amendment so that the words will not be as damaging as I fear they could be. We must think again.

How nice it is to be arguing with the right hon. Gentleman again, rather than with my hon. Friends. The right hon. Gentleman said that the last line and a half of paragraph 4 provide some limitation. If he means the words beginning "in so far as", they provide an absolute limitation on the schedule. Why does he not believe that?

There is nothing absolute about those words. They provide limited circumstances for the competition authorities to counter-argue that a monopoly is going too far. They are limited, because the monopoly could always say that, if it were not allowed to continue with its price fixing or special agreement or deal, it could no longer fulfil the tasks assigned to it.

If a water company wanted to defend a particular agreement or pricing practice, it would argue that it could no longer supply clean water in the required quantities to all households. That would be a serious threat, and the court might believe the company, because it is the monopoly producer. It presumably has some credibility, and knows whether it can provide water on different bases. The court might judge that the company was right, and allow it to continue its anti-competitive practice.

How much better it would be if there were a market test for that practice. If another company could enter the market and provide a better service without such a restriction, it would be allowed to do so, and it would not be possible to argue through the courts in defence of the restrictive practice or the special agreement.

I was pleased, after my recent discussion of the subject in Committee, to discover that some leading companies in the water industry agree that more competition could be introduced, and that they might benefit because they are active and innovative. They believe that if there were more freedom in the market, they might be beneficiaries. That is a good sign that there would be an entirely positive response to more competition. In that case—I could think of many others—we should like the words in the amendment removed, or modified by the Government's statements, so that there is scope for introducing competition.

Before the House votes on whether to retain the words, we should also learn a little from the Government about what services they have it in mind to exempt under this wide-ranging paragraph. They must have had something in mind when they drafted it.

In Committee, it was suggested that such words are found in the treaty, so they had to be found in the Bill, but I am sure that the Government have done a little more research and thinking than that. The Bill creates a British law for British markets, as we have often argued, so we need the Government to tell us what would be permissible by way of a general economic interest service or a revenue-producing monopoly to exempt companies from the otherwise sensible provisions of the Bill and earlier competition legislation.

I am sure that my hon. Friend the Member for South Cambridgeshire (Mr. Lansley) will eloquently argue the case on his amendment No. 51, which attempts to test out or achieve something similar on the Bill's other substantial loophole, which relates to public policy. The House is owed an explanation of how often the public policy rubric would be used, and why we need it as well as the conditions of revenue-producing monopoly and general economic services, which might cover similar cases. Certainly the cases that I have in mind could be covered by either of those conditions.

I am sure that my hon. Friend has tabled his amendment partly to test out the exclusion and how wide it will be. The competition authority and the Bill will be very weak if those large loopholes remain and are generally used, so we shall urge the House to vote for the amendments.

I am grateful for the opportunity to support my right hon. Friend the Member for Wokingham (Mr. Redwood) on amendment No. 6, and to speak briefly to amendment No. 51, which would delete from schedule 3 paragraph 7, relating to issues of public policy. I want to add a few points in relation to paragraph 4, which relates to services of general economic interest.

My right hon. Friend is right to say that, in Committee, there was speculation about the purposes for which the Government were proposing paragraph 4. It was suggested—I confess that I cannot remember by whom—that the paragraph was inserted at the request, or at the behest, of the Post Office, which, in United Kingdom circumstances, may be regarded as both a service "of general economic interest" and "a revenue-producing monopoly". That raises the question whether, in any case, the Post Office would be allowed to carry on its activity without infringing a chapter 1 prohibition by virtue of paragraph (5), which relates to a legal requirement, as, if the Post Office is obliged by legal requirement to provide a universal service at a uniform tariff, it might be exempted for that reason.

My right hon. Friend is right to say that the Government have taken that path ostensibly, as argued in Committee, because there is parallel text in the treaty on European Union: article 90. However, we should reconsider the matter, not only to repeat the argument that my right hon. Friend eloquently made about the desirability of promoting competition and not giving the Government a let-out to protect monopolies when it suits them, but to question in this context—as I believe was not done in Committee—whether, even in their terms, the Government have gone about the process of introducing article 90 into the UK context appropriately. I question that, for three reasons.

First, it is obvious that the Government have not gone about the process appropriately in the context of article 90, which consists of three limbs. Limb 1 makes it clear that one is talking about public undertakings and undertakings to which member states grant special or exclusive rights. That rubric, which introduces article 90 and makes clear the circumstances in which article 90 and questions of services of general economic interest are to be interpreted, is not carried through into schedule 3 or paragraph (4).

As a result, it is not obvious, in the context of the language used in paragraph (4), that we are dealing with essentially public undertakings, or those that exercise public functions. We are simply talking about services of general economic interest or revenue-producing monopolies, entrusted—the paragraph does not say by whom—with the operation of those services, and where the "particular tasks" are "assigned to that undertaking." Again, the paragraph does not say who assigns those particular tasks. It is all implied that it is the state that assigns those tasks. In the context of the treaty, it is perfectly clear, under article 90, that the tasks are assigned by the state, but that is not carried through into the Bill.

The second problem is the manner in which the Bill is constructed. It would be tedious of me to go on about the form of the language, but essentially there is a difference between the form of article 90, which effectively applies the rules except in so far as that would obstruct the performance of the duties, and that of paragraph 4, which disapplies the rules except

"in so far as the prohibition would obstruct the performance"

of those tasks.

It is not simply a case of asking whether the bottle is half full or half empty. It is important in law that the prohibitions are applied, but with limits—as distinct from the prohibitions being disapplied, except in so far as they could be reapplied, as it were. That may, in practice, come to be quite a different distinction, and the Minister did not address that in Committee.

A third matter is that, in the context of article 90, the paragraph has a final sentence, which is not carried through into paragraph 4. That sentence reads:

"The development of trade must not be affected to such an extent as would be contrary to the interests of the Community."

I understand why the Government have not tried to carry that sentence through into the Bill: it would not make sense, in the context of UK domestic legislation, to talk about the interests of the Community. They could have left that out, and said that the development of trade must not be affected to an extent that would be contrary to the public interest. They could apply an overall public interest test.

In the Community context, the protection that is offered to member states should not be allowed to go so far as to hinder trade unduly, but the Government have not taken that important factor into account. I appreciate that the Government should not look at the widespread application of the measure in the way that, for example, the EU contemplates the protection of tobacco or alcohol monopolies in some member states. However, it is important to know under what circumstances the Government wish to proceed.

Amendment No. 51, which deals with public policy, is more straightforward. By their own admission, the Government have introduced paragraph 7 as a catch-all, or perhaps I should say a catch-nothing, because in Committee—

Business Of The House

It being Ten o'clock, the debate stood adjourned.

Motion made, and Question put forthwith, pursuant to Standing Order No. 15 (Exempted business),

That, at this day's sitting, the Competition Bill [Lords] may be proceeded with, though opposed, until any hour.—[Mr. Betts.]

Question agreed to.

As amended (in the Standing Committee), again considered.

Question again proposed, That the amendment be made.

In Committee, Ministers said that they had no intention of using the paragraph 7 provision, and two questions arise in relation to that. First, if there is no intention to use the provision, why have it? Secondly, if it is intended to be used, under what circumstances will it be used?

I was struck by the debate on "exceptional and compelling". Ministers took great pains to stress how high the test of exceptional and compelling would have to be before Ministers were convinced that it would be right to use the provision—and they said that they had no intention of using it. About two weeks ago, during debate on the Human Rights Bill, there was a question about the circumstances under which Ministers should use a statutory instrument to amend primary legislation rather than waiting for an opportunity to change it by primary legislation.

There were two competing arguments about the circumstances in which Ministers should resort to this Henry VIII measure. The first was under compelling reasons, and the second was under exceptional reasons. As we had recently debated "exceptional and compelling", I told the Home Secretary that Ministers in the Department of Trade and Industry had used the phrase "exceptional and compelling" and regarded it as the appropriate high test. I asked whether it would be an appropriate test in that context.

The Home Secretary has no function to defend Trade and Industry Ministers and, with his customary perspicacity, asked why, if their intention was not to use it, they were proposing it. That is precisely the question. The paragraph 7 provision has no parallel in the treaty on European union, so under what circumstances do Ministers propose to use it? If they do not intend to use it, why not accept the amendment and delete it?

I cannot accept amendment No. 6 to delete paragraph 4 of schedule 3, which contains a limited exclusion that is drawn from article 90 (2) of the EC treaty. Including article 92 will mean that the activities that benefit from that article in relation to articles 85 and 86 will not be put in a less favourable position with respect to domestic prohibitions.

It is important to appreciate that article 90 (2) has been interpreted as providing only a limited derogation from the competition rules, and that its definitions are to be strictly interpreted. By virtue of clause 60, we are applying that jurisprudence, which means that the same will be true of the exclusion in paragraph 4 of schedule 3.

Revenue-producing monopolies are undertakings that have been granted monopolies by the state to raise money for the state. When this matter was raised in Committee, we mentioned some European countries that have such monopolies, and we agreed with the hon. Member for Daventry (Mr. Boswell) that tobacco was one instance and alcohol was another. In that instance, it is clear that the application of the exclusion will be limited. In such circumstances, we believe that it is entirely right that the prohibitions should be disapplied. Otherwise, the purpose of the act of public authority that entrusted the undertaking with the service would be frustrated.

Let me give some examples of the services that a vote on the amendments would put in jeopardy. They include not just some of the public utility networks, but uniform letter pricing. Is it the real intention of the Opposition to threaten uniform postal pricing and to make it very difficult for many people living in rural and remote areas to post a letter at the same price that people enjoy in the capital city and in major conurbations? That is the effect of amendment No. 6.

I hardly think that that can have escaped the notice of the right hon. Member for Wokingham (Mr. Redwood). I believe that that is a hidden way in which to try to drive a coach and horses through uniform letter pricing and to open it to the private sector, which could greatly damage rural and other areas that require uniform letter pricing. It must be a viable service. I wish just that he had come clean on that.

On amendment No. 51, by its nature the power in paragraph 7 could be exercised only in rare circumstances. Before its exercise, the Secretary of State must be satisfied that there are "exceptional and compelling" reasons of public policy for her to act. That is a high hurdle to surmount. The power is, in that sense, a "reserve" power.

Not surprisingly, we have no present plans to exercise the power. However, if there are grounds to exercise the power, it should be available to us. The hon. Member for South Cambridgeshire (Mr. Lansley) may at some point feel that there are exceptional and compelling reasons of public policy why the prohibitions should not be applied, but this amendment would ensure that they would nevertheless apply. That cannot be right.

The power in paragraph 7 is a necessary safeguard. I note that the previous Administration also considered the power necessary, as it was included in the draft Bill that they published in August 1996. I urge the right hon. Member for Wokingham to withdraw his amendment.

The Minister should know that the Opposition's policy is to maintain a uniform tariff for a national postal service. We have made that clear, and we have no intention tonight of undermining or destroying that. We believe that it is possible to guarantee that system, which I believe is favoured by hon. Members on both sides of the House, by a director general exemption, or even perhaps by using the public policy power; I am sure that my hon. Friend the Member for South Cambridgeshire (Mr. Lansley) will not wish to press his amendment to a vote.

It is our case that having both the public policy power and this rubric about services of general economic interest weakens the Bill too much, and that this could be handled easily by one or the other. The Minister has to agree that if the postal system cannot be accommodated under other parts of the Bill where we think that it can, it could certainly be accommodated under the public policy power, and should be accommodated as quickly as possible, so that there is no doubt.

If that is the case, why did the right hon. Gentleman and his hon. Friends not table an amendment that would protect our uniform letter pricing service? They have not done so, and passing the amendment would threaten that vital service.

I have just told the Minister how it is very easy to accommodate our mutual wish. He is a member of the Government, for heaven's sake. He is the one who has to sort out all the consequences of our important debates on the big principles of the Bill. I have told him that the Opposition would give a fair wind to anything that did that. Given his majority, I think that he could probably do it even without that Opposition guarantee, but it has been and remains Opposition policy to support the current national tariff for the postal system. There are many ways in which to accommodate it under the Bill—through director general rules or other exemption powers in the Bill—without needing this enormous blockbuster of paragraph 4 to schedule 3.

I am not persuaded by what the Under-Secretary has said. I find it odd that British legislation should be framed to exempt a continental tobacco monopoly. We do not have tobacco monopolies in this country, so there is no need to make special provision for them in British law. However, we do have other types of services of general economic interest or revenue-producing monopolies. The Under-Secretary cannot be sure how the courts will construe these phrases. Despite clause 60, there is always the danger that they will be construed in other ways.

It would be much safer, and would produce better competition legislation, if this very general clause were struck out. If it is only about continental tobacco monopolies, nothing will be lost; if it is there to protect real monopolies in Britain, we do not want it. I have already told the House how the one example that the Under-Secretary has produced, where we are in agreement, can be accommodated in other ways

With the permission of my hon. Friend the Member for South Cambridgeshire, I suggest that we do not press his amendment to a vote, but that we should vote on this fundamental issue of whether the Bill should be heavily diluted by paragraph 4 of schedule 3.

Question put, That the amendment be made:—

The House divided: Ayes 117, Noes 291.

Division No. 332]	[10.10 pm
AYES
Ainsworth, Peter (E Surrey)	Bruce, Ian (S Dorset)
Amess, David	Burns, Simon
Ancram, Rt Hon Michael	Cash, William
Arbuthnot, James	Chapman, Sir Sydney (Chipping Barnet)
Atkinson, David (Bour'mth E)
Beggs, Roy	Chope, Christopher
Beresford, Sir Paul	Clappison, James
Body, Sir Richard	Clark, Rt Hon Alan (Kensington)
Boswell, Tim	Collins, Tim
Bottomley, Peter (Worthing W)	Cran, James
Bottomley, Rt Hon Mrs Virginia	Curry, Rt Hon David
Brazier, Julian	Davies, Quentin (Grantham)
Brooke, Rt Hon Peter	Davis, Rt Hon David (Haltemprice)
Browning, Mrs Angela	Donaldson, Jeffrey

Dorrell, Rt Hon Stephen	Mates, Michael
Duncan, Alan	Mawhinney, Rt Hon Sir Brian
Duncan Smith, Iain	May, Mrs Theresa
Evans, Nigel	Moss, Malcolm
Faber, David	Nicholls, Patrick
Fabricant, Michael	Norman, Archie
Fallon, Michael	Ottaway, Richard
Flight, Howard	Page, Richard
Forth, Rt Hon Eric	Prior, David
Fraser, Christopher	Randall, John
Gale, Roger	Redwood, Rt Hon John
Garnier, Edward	Robathan, Andrew
Gibb, Nick	Robertson, Laurence (Tewk'b'ry)
Gill, Christopher	Robinson, Peter (Belfast E)
Gillan, Mrs Cheryl	Rowe, Andrew (Faversham)
Gorman, Mrs Teresa	Ruffley, David
Green, Damian	St Aubyn, Nick
Grieve, Dominic	Shephard, Rt Hon Mrs Gillian
Hamilton, Rt Hon Sir Archie	Simpson, Keith (Mid-Norfolk)
Hammond, Philip	Spelman, Mrs Caroline
Hawkins, Nick	Spring, Richard
Hayes, John	Steen, Anthony
Heald, Oliver	Streeter, Gary
Heathcoat-Amory, Rt Hon David	Syms, Robert
Hogg, Rt Hon Douglas	Tapsell, Sir Peter
Howard, Rt Hon Michael	Taylor, Ian (Esher & Walton)
Howarth, Gerald (Aldershot)	Taylor, John M (Solihull)
Hunter, Andrew	Townend, John
Jack, Rt Hon Michael	Tredinnick, David
Jackson, Robert (Wantage)	Trend, Michael
Jenkin, Bernard	Tyrie, Andrew
Key, Robert	Walter, Robert
King, Rt Hon Tom (Bridgwater)	Wardle, Charles
Kirkbride, Miss Julie	Wells, Bowen
Lait, Mrs Jacqui	Whittingdale, John
Lansley, Andrew	Widdecombe, Rt Hon Miss Ann
Leigh, Edward	Wilkinson, John
Letwin, Oliver	Willetts, David
Lewis, Dr Julian (New Forest E)	Winterton, Mrs Ann (Congleton)
Lidington, David	Winterton, Nicholas (Macclesfield)
Lloyd, Rt Hon Sir Peter (Fareham)	Woodward, Shaun
Loughton, Tim	Yeo, Tim
Luff, Peter	Young, Rt Hon Sir George
McIntosh, Miss Anne
MacKay, Andrew	Tellers for the Ayes:
McLoughlin, Patrick	Mr. Stephen Day and
Madel, Sir David	Mr. Nigel Waterson.
NOES
Abbott, Ms Diane	Borrow, David
Ainger, Nick	Brinton, Mrs Helen
Ainsworth, Robert (Cov'try NE)	Brown, Rt Hon Nick (Newcastle E)
Alexander, Douglas	Brown, Russell (Dumfries)
Allen, Graham	Browne, Desmond
Anderson, Janet (Rossendale)	Burden, Richard
Ashton, Joe	Burgon, Colin
Atherton, Ms Candy	Burstow, Paul
Atkins, Charlotte	Butler, Mrs Christine
Austin, John	Byers, Stephen
Baker, Norman	Campbell, Mrs Anne (C'bridge)
Barron, Kevin	Campbell-Savours, Dale
Battle, John	Canavan, Dennis
Bayley, Hugh	Caplin, Ivor
Beard, Nigel	Casale, Roger
Beckett, Rt Hon Mrs Margaret	Caton, Martin
Begg, Miss Anne	Chapman, Ben (Wirral S)
Beith, Rt Hon A J	Chaytor, David
Bell, Stuart (Middlesbrough)	Chisholm, Malcolm
Benn, Rt Hon Tony	Church, Ms Judith
Bennett, Andrew F	Clark, Rt Hon Dr David (S Shields)
Bermingham, Gerald	Clark, Paul (Gillingham)
Best, Harold	Clarke, Charles (Norwich S)
Betts, Clive	Clarke, Rt Hon Tom (Coatbridge)
Blackman, Liz	Clarke, Tony (Northampton S)
Blizzard, Bob	Clelland, David
Blunkett, Rt Hon David	Clwyd, Ann

Coaker, Vernon	Hopkins, Kelvin
Cohen, Harry	Howarth, Alan (Newport E)
Coleman, Iain	Howarth, George (Knowsley N)
Colman, Tony	Hughes, Ms Beverley (Stretford)
Cooper, Yvette	Hughes, Kevin (Doncaster N)
Corbett, Robin	Humble, Mrs Joan
Corston, Ms Jean	Hutton, John
Cousins, Jim	Iddon, Dr Brian
Crausby, David	Illsley, Eric
Cryer, John (Hornchurch)	Jackson, Helen (Hillsborough)
Cunliffe, Lawrence	Jenkins, Brian
Cunningham, Jim (Cov'try S)	Johnson, Alan (Hull W & Hessle)
Curtis-Thomas, Mrs Claire	Johnson, Miss Melanie (Welwyn Hatfield)
Darvill, Keith
Davey, Valerie (Bristol W)	Jones, Barry (Alyn & Deeside)
Davidson, Ian	Jones, Mrs Fiona (Newark)
Davies, Rt Hon Denzil (Llanelli)	Jones, Helen (Warrington N)
Davies, Geraint (Croydon C)	Jones, Jon Owen (Cardiff C)
Davies, Rt Hon Ron (Caerphilly)	Jones, Dr Lynne (Selly Oak)
Dawson, Hilton	Jones, Martyn (Clwyd S)
Dean, Mrs Janet	Kaufman, Rt Hon Gerald
Dismore, Andrew	Keeble, Ms Sally
Donohoe, Brian H	Keetch, Paul
Doran, Frank	Kemp, Fraser
Dowd, Jim	Kennedy, Jane (Wavertree)
Drew, David	Kidney, David
Dunwoody, Mrs Gwyneth	Kilfoyle, Peter
Eagle, Angela (Wallasey)	King, Andy (Rugby & Kenilworth)
Eagle, Maria (L'pool Garston)	King, Ms Oona (Bethnal Green)
Edwards, Huw	Kumar, Dr Ashok
Efford, Clive	Ladyman, Dr Stephen
Ennis, Jeff	Lepper, David
Etherington, Bill	Levitt, Tom
Ewing, Mrs Margaret	Lewis, Ivan (Bury S)
Fatchett, Derek	Lewis, Terry (Worsley)
Fisher, Mark	Linton, Martin
Fitzpatrick, Jim	Lloyd, Tony (Manchester C)
Fitzsimons, Lorna	Llwyd, Elfyn
Flint, Caroline	Lock, David
Flynn, Paul	McAllion, John
Foster, Michael Jabez (Hastings)	McAvoy, Thomas
Foster, Michael J (Worcester)	McCabe, Steve
Foulkes, George	McCafferty, Ms Chris
Fyfe, Maria	McCartney, Ian (Makerfield)
Galbraith, Sam	McDonnell, John
Gapes, Mike	McGuire, Mrs Anne
Gardiner, Barry	McIsaac, Shona
Gerrard, Neil	McKenna, Mrs Rosemary
Gibson, Dr Ian	McWalter, Tony
Gilroy, Mrs Linda	McWilliam, John
Godman, Dr Norman A	Mahon, Mrs Alice
Godsiff, Roger	Marsden, Paul (Shrewsbury)
Goggins, Paul	Marshall, David (Shettleston)
Golding, Mrs Llin	Marshall, Jim (Leicester S)
Gordon, Mrs Eileen	Marshall-Andrews, Robert
Gorrie, Donald	Meacher, Rt Hon Michael
Griffiths, Jane (Reading E)	Meale, Alan
Griffiths, Nigel (Edinburgh S)	Merron, Gillian
Grogan, John	Michael, Alun
Gunnell, John	Michie, Bill (Shef'ld Heeley)
Hall, Mike (Weaver Vale)	Milburn, Alan
Hamilton, Fabian (Leeds NE)	Miller, Andrew
Hanson, David	Mitchell, Austin
Heal, Mrs Sylvia	Moffatt, Laura
Healey, John	Moore, Michael
Hepburn, Stephen	Moran, Ms Margaret
Heppell, John	Morgan, Rhodri (Cardiff W)
Hesford, Stephen	Morris, Ms Estelle (B'ham Yardley)
Hewitt, Ms Patricia	Mudie, George
Hill, Keith	Mullin, Chris
Hinchliffe, David	Murphy, Jim (Eastwood)
Hodge, Ms Margaret	Norris, Dan
Hoey, Kate	O'Brien, Bill (Normanton)
Home Robertson, John	O'Hara, Eddie
Hoon, Geoffrey	Olner, Bill
Hope, Phil	Organ, Mrs Diana

Pearson, Ian	Stevenson, George
Pendry, Tom	Stewart, David (Inverness E)
Perham, Ms Linda	Stewart, Ian (Eccles)
Pickthall, Colin	Stinchcombe, Paul
Pike, Peter L	Stoate, Dr Howard
Plaskitt, James	Stott, Roger
Pollard, Kerry	Strang, Rt Hon Dr Gavin
Pond, Chris	Stuart, Ms Gisela
Pope, Greg	Sutcliffe, Gerry
Pound, Stephen	Swinney, John
Prentice, Ms Bridget (Lewisham E)	Taylor, Rt Hon Mrs Ann (Dewsbury)
Prentice, Gordon (Pendle)
Primarolo, Dawn	Taylor, Ms Dari (Stockton S)
Prosser, Gwyn	Taylor, David (NW Leics)
Purchase, Ken	Temple-Morris, Peter
Quin, Ms Joyce	Thomas, Gareth R (Harrow W)
Quinn, Lawrie	Timms, Stephen
Radice, Giles	Tipping, Paddy
Rapson, Syd	Todd, Mark
Raynsford, Nick	Trickett, Jon
Reed, Andrew (Loughborough)	Turner, Dennis (Wolverh'ton SE)
Rogers, Allan	Turner, Dr George (NW Norfolk)
Rooney, Terry	Twigg, Derek (Halton)
Ross, Ernie (Dundee W)	Twigg, Stephen (Enfield)
Rowlands, Ted	Vis, Dr Rudi
Roy, Frank	Wallace, James
Ruane, Chris	Walley, Ms Joan
Ruddock, Ms Joan	Ward, Ms Claire
Russell, Bob (Colchester)	Watts, David
Ryan, Ms Joan	Webb, Steve
Salter, Martin	White, Brian
Savidge, Malcolm	Williams, Rt Hon Alan (Swansea W)
Sedgemore, Brian
Shaw, Jonathan	Williams, Alan W (E Carmarthen)
Sheerman, Barry	Wilson, Brian
Sheldon, Rt Hon Robert	Winnick, David
Skinner, Dennis	Winterton, Ms Rosie (Doncaster C)
Smith, Rt Hon Andrew (Oxford E)	Wise, Audrey
Smith, Angela (Basildon)	Wood, Mike
Smith, Miss Geraldine (Morecambe & Lunesdale)	Woolas, Phil
	Wright, Anthony D (Gt Yarmouth)
Smith, John (Glamorgan)	Wright, Dr Tony (Cannock)
Smith, Llew (Blaenau Gwent)	Wyatt, Derek
Snape, Peter
Squire, Ms Rachel	Tellers for the Noes:
Starkey, Dr Phyllis	Mr. John McFall and
	Mr. David Jamieson.

Amendment accordingly negatived.

Clause 13

Notification For Guidance

Amendment made: No. 9, in page 8, line 22, leave out from 'with' to end of line and insert—

'such date as may be specified in a notice in writing given to the applicant by the Director when the application has been determined.

() The date specified in a notice under subsection (4)(b) may not be earlier than the date on which the notice is given.'.—[Mr. Nigel Griffiths.]

Clause 14

Notification For A Decision

Amendment made: No. 10, in page 8, line 40, leave out from 'with' to end of line and insert—

'such date as may be specified in a notice in writing given to the applicant by the Director when the application has been determined.

() The date specified in a notice under subsection (4)(b) may not be earlier than the date on which the notice is given.'.—[Mr. Nigel Griffiths.]

Clause 26

Powers When Conducting Investigations

I beg to move amendment No. 76, in page 14, line 2, at end insert—

'(7) In exercising the powers conferred by subsection (6)(a)(ii) above, the Director shall afford the undertaking under investigation a reasonable opportunity for its legal or other representative to be present when the employee or officer is required to provide an explanation of the document.'.

With this, it will be convenient to discuss amendment No. 77, in clause 66, page 37, line 10, at end insert—

'(5A) In exercising the powers conferred by subsection (5)(a)(ii) above, the Director shall afford the person notified a reasonable opportunity for his legal or other representative to be present when the employee or officer is required to provide an explanation of the document.'.

I do not want to detain the House too long at this late hour. It is widely accepted that the powers proposed in the Bill are extensive. We ought, therefore, to consider for a few moments amendments Nos. 76 and 77, which seek to introduce a couple of safeguards that are vital to the protection of companies that may find themselves under investigation. Although I fully accept that powers currently available to the director general are insufficient and that the Government feel, as I do, that they should be strengthened, it is important to ensure that companies receive fair treatment when they are under investigation and subject to the Bill's extensive powers.

Powers to question employees and officers both past and present of any company are critical to the effective enforcement of action, particularly if a company has been committing an infringement over a long time. Although it is not disputed that it is appropriate that there should be power to seek information from employees and officers who have since left the company, it is surely sensible and in a spirit of natural justice to afford a company at least a brief—I emphasise brief—opportunity to comment on the role of any employee or officer who is to be questioned and on the appropriateness of so doing, and allow a company to have a representative present at any interview.

The proposed powers are extraordinarily extensive in their force and reach. Before the director or his or her staff exercise any investigatory powers, they should be balanced by some safeguards. Let us consider potential ex-employees or officers who may be interviewed in the process of an investigation. First, an ex-employee or officer may have been made redundant or been dismissed and may have a grudge or be prejudiced against the company personally or through sympathy for a former colleague. Secondly, an ex-employee may be working for a competitor and under contractual agreements that prevent them from disclosing information to anyone. They would find it difficult under such questioning.

Thirdly, an ex-employee or officer may wish not to answer any questions because they feel that it may incriminate them or someone else, or because they are not certain of information. That should not be seen automatically as casting any doubt on the activities or motives of the company under investigation. Finally, an ex-employee or officer may genuinely have forgotten—or at least not remembered well enough—all the facts or information for which they are asked, but may feel obliged to give opinions rather than facts and knowledge.

Those are practical examples. I recognise that the Bill provides a right of challenge, albeit only at the appellant stage, which is rather too late. I also recognise—[Interruption.]

Order. There is too much background conversation in the House; I cannot hear the debate properly.

I recognise that speed is important in such investigations. The Government have made it clear on several occasions that they want the investigations to progress and not be bogged down. In some cases, however, it might be wise to allow a company a brief opportunity to comment and to have a representative present, not to influence, control or make any decision on whether the investigation should go ahead but simply to help avoid the time and expense of future challenges, which can certainly arise on appeal.

If the Government accepted the amendments, they would slightly redress the balance on behalf of companies that find themselves under the significant powers of the investigations, which are heavy and extensive. If the Bill proceeds unamended, companies may well find that those powers are so extensive as to be difficult for them to comply with—even if they want to.

I have listened carefully to the speech of the hon. Member for South-East Cornwall (Mr. Breed) on a matter to which we have given considerable thought. I hope that he may consider withdrawing the amendment in the light of assurances that I can give him.

The matter of legal advice being available during an investigation has arisen in various ways and has been debated at length in this House and the other place. In relation to clause 27, the Government gave an assurance in Committee that the right to legal advice was an important matter and would be covered by the director's rules under clause 50. Those rules are subject to the Secretary of State's approval and annulment by vote of either House. The amendment, if I have understood it correctly, is rather different. Investigations under clause 26, and under the Fair Trading Act 1973 as strengthened by clause 66, are "off-site" in character—that is to say they will not involve entry to premises.

10.30 pm

The Office of Fair Trading expects generally to exercise those powers by correspondence and therefore will allow time for legal advice to be sought. If the powers are exercised by requiring the production of documents at a specified time and place, the employee or officer concerned could be accompanied by a legal adviser. The right of an employee or officer to be accompanied by a legal adviser should be dealt with in the director's rules, and I am happy to give that assurance.

I am happy with what the Minister has said so far, but I ask him to clarify one point. If the matter is conducted in correspondence with an ex-employee, will the company be advised that such correspondence is in operation?

In terms of the effectiveness of the investigation, it is for the director general to weigh up whether the employee is likely to be the subject of any undue pressure, but being always mindful that, with an established appeals procedure, any actions of the director general that are not considered to be within the competence of the new Act would give people some recourse to justice and review. It is clear that the director's rule will cover the issue of access to legal advice. I hope that, in the light of my explanation, the hon. Gentleman will feel able to withdraw the amendment. I am grateful to him for raising this important issue.

The Minister has addressed part of the problem. The amendments seek to ensure that companies have notice that ex-employees are to be approached, thus giving them the opportunity to comment early in the investigation on the appropriateness of the background information concerned with the employee, which would perhaps provide helpful information to the director general and staff anyway. However, I accept the Minister's assurances that the matters will be worked out only in practice as cases happen. On that basis, I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Schedule 7

The Competition Commission

I beg to move amendment No. 49, in page 64, line 8, leave out from 'person' to end of line 16 and insert 'is—

(a) a puisne judge of the High Court;

(b) a judge of the Court of Session; or

and before appointing as a member of the appeal tribunal any person who holds the judicial office mentioned in paragraph (a), (b) or (c) he shall consult the Lord Chancellor, the President of the Court of Session or the Lord Chief Justice of Northern Ireland, as he considers appropriate.'.

With this, it will be convenient to discuss amendment No. 50, in page 64, leave out lines 19 and 20.

The amendments work together in the sense that amendment No. 50 leaves out the requirement for consultation with the Lord Chancellor and other Law Officers, since that is incorporated into the proposed structure of amendment No. 49. The purpose of amendment No. 49 is to replace the requirement laid upon the Secretary of State in the existing paragraph 4 of schedule 7 to appoint someone with legal qualifications. It would make explicit that the person to be appointed was a High Court judge. In a similar debate in Committee, it was made clear that the Government intended that the person to be appointed would be not a High Court judge, but equivalent to a High Court judge.

The appeal panel will represent the Competition Commission in considering appeals against the decisions of the director general. It was certainly understood in Committee that the Government intended to be free to appoint to the panel members who had not only suitable legal qualifications, but the ability to assess the economic character of the judgments. Those who bring appeals will believe that it is in their interests regularly to go to the courts rather than to rest on the decisions of the panel if they feel that the panel does not have the necessary legal credibility to give robust judgments that are likely only in the most exceptional cases—such as where high principles are at stake—to be overturned by the courts in a further appeal. We were at pains to make that point in Committee, but I do not feel that it was sufficiently taken on board.

To ensure that the appeal panel functions in the best way, the panel and the president of the appeal tribunals should bring the maximum legal credibility to their judgments, but that will not be achieved if the president is appointed on the ground of his or her economic credibility. The director general and other members of the commission are likely to have economic credibility, but those who appeal against the director general's decisions must have sufficient faith in the legal credibility of the system not to make a further appeal or even to circumvent the procedure.

I am grateful to my hon. Friend for giving way, as I want to deal with the matter by way of intervention, not in a substantive speech. Does he agree that there is a real risk that there will be a much higher incidence of appeals against a tribunal's decision to a higher court and that it would be counter-productive not to incorporate into the Bill a provision such as the one suggested in the amendments?

I agree. Our intention is to make the process work in the best interests of British industry, but industry will not be well served if it finds that, because of tribunals' lack of legal credibility, it regularly has to have recourse to the higher courts. The tribunals must provide a forum in which economically and legally credible decisions can be made straightforwardly and inexpensively. It is difficult to see how that could be achieved without a High Court judge as president of the tribunals.

Like the hon. Member for South Cambridgeshire (Mr. Lansley), I am convinced that we need robust decision-making processes that have clarity as their central focus. I also believe that the membership of the panels must be credible in terms of the law, of business practice and of economics. The panels will be similar to the restrictive practice courts, where all three key pillars are consistent throughout the membership.

That is very important. If the process is to work, there must be a clear understanding from the outset that the membership must have a quality and credibility that ensure that people can accept a tribunal's decisions. We can all agree that access to full and independent appeal on the merits of the case is essential in ensuring that the new regime is fair and transparent. The Bill provides for precisely such a right of appeal.

Our proposals provide a clear separation between the body that has the investigative and original decision-making function and the body that hears appeals. Such a separation is essential to ensure a fair, independent and transparent appeals process. We achieve the separation by making the appeals tribunal a completely separate body from the Office of Fair Trading, which has the primary responsibility for investigating and dealing with infringements.

In its response to the consultation document, the Confederation of British Industry said:

"We are pleased that the Government has taken into account the suggestions put forward by the CBI and has chosen to preserve an independent body with the power to conduct a full review of the DGFT's decisions."

Fairness demands that appeals can be dealt with efficiently and by people with the necessary expertise and experience. We believe that our proposals for a specialised tribunal will best achieve that aim. We are clear that the person appointed to be president of the tribunal will be a senior figure, with status at least equivalent to that of a High Court judge.

The tribunal itself will have equivalent status to the High Court and appeals from its decisions on points of law or levels of penalty will be direct to the Court of Appeal. It is clearly essential that the president should have appropriate legal qualifications, experience and standing, and strict minimum requirements are set out in schedules to the Bill.

We do not think that it would be right to limit further the range of people and expertise available to fill this vital post, as the amendments would do. General legal standing is vital, but so are special knowledge and experience of competition matters. We do not believe that it would be in the interests of the users of the appeal tribunal to limit the field of potential candidates to High Court judges alone, as the amendments propose. Our proposals will open up a much wider range of potential candidates. We believe that that is very important in what is, after all, a complex and specialist field.

I hope that, having heard that explanation of our position, the hon. Gentleman will be prepared to withdraw the amendment.

I am grateful to the Minister for that reply. He has made clear the Government's intention to meet the tests of legal credibility that were implicit in the amendment, rather than limiting the tests to other kinds of credibility that will be vested elsewhere, in the activities of the director general and the commission. I therefore beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 50

Vertical Agreements And Land Agreements

I beg to move amendment No. 41, in page 26, line 4, at beginning insert 'Subject to subsection (1A)'.

With this, it will be convenient to discuss the following amendments: No. 53, in page 26, line 4, leave out

'The Secretary of State may by order provide'

and insert

'The Director may recommend that the Secretary of State by order provides'.

No. 54, in page 26, line 4, leave out 'Secretary of State' and insert 'Director'.

No. 42, in page 26, line 8, at end insert—

'(1A) Subject to subsection (1B), the Chapter I prohibition does not apply to a vertical agreement.

(1B) If the Director is satisfied that there is a vertical agreement which, but for the exemption in subsection (1A) would infringe the Chapter I prohibition, he may issue a notice to each of the parties to the agreement bringing that exemption to an end in relation to that agreement on the date specified in that notice.'.

No. 55, in page 26, line 14, leave out from beginning to 'is' in line 15 and insert

'The Director shall have power to give directions that an exclusion, exemption or modification made under subsection 1'.

No. 57, in page 26, line 15, leave out 'in prescribed circumstances'.

No. 58, in page 26, line 17, at end insert 'or category of agreement.'.

No. 56, in page 26, line 17, at end insert—

'(3A) Prior to making an order in relation to vertical agreements under subsection (1) the Secretary of State shall carry out and publish an assessment of the benefits to consumers of such an order.'.

No. 43, in page 26, line 21, at beginning insert "'connected" and'.

No. 44, in page 26, line 21, leave out 'and "vertical agreement" have' and insert 'has'.

No. 45, in page 26, line 23, at end insert—

'"price fixing agreement" means an agreement which seeks to control the price charged for the goods or services which are the subject of that agreement, whether or not by purporting—

(a) to fix a particular price, a minimum price or a price band, or

(b) to impose a requirement, make a recommendation or offer an incentive,

other than an agency agreement under which the principal establishes the price at which the agent sells the goods or services which are the subject of the agreement or an agreement which relates exclusively to the price of an interest in land.

"vertical agreement" means an agreement between two or more undertakings (other than connected undertakings) under which one undertaking acts as purchaser and another acts as supplier of the goods or services which are the subject of that agreement and includes an agency or distribution agreement but does not include a price fixing agreement.'.

The amendments are designed to clarify the characteristics of vertical agreements and to restructure the clause to give effect to the Government's apparent intentions. I think that it is common ground on both sides of the House that, like any other aspect of the activity, one has to judge whether the impact of vertical agreements on competition and consumer benefits is beneficial. Whereas one would judge many other classes of agreement simply on their effects, there is more of a presumption that vertical agreements are benign, and the President of the Board of Trade stated earlier that she would try to find a mechanism by which such agreements could be excluded from the scope of the prohibition.

10.45 pm

The difficulty is that, throughout the passage of the Bill, we have been waiting for the Government to tell us by what means they propose to exclude vertical agreements. We have been awaiting the views of the task force established between the Government, the Confederation of British Industry and other bodies to look into the matter. In Committee, we were told that there was a further reason for delay because we had to take on board the Commission's final view of the matter. When we began to understand the thinking behind the Commission's approach, there was all the more reason to amend the legislation so that the House could lead the Commission to an appropriate definition of vertical agreements, rather than simply wait for what it would tell us.

I will not dwell on all the other incidental matters, but, for me, what gave rise to most concern in Committee was the Under-Secretary of State making it clear that the Commission was considering a definition of vertical agreements that would encompass operations at different economic levels. Rather, therefore, than having an effects-based approach, we would have a narrow, form-based approach to the exclusion for vertical agreements. It seemed an unhappy precedent for the Commission to go down that path as it would be perfectly possible to define such agreements differently. Indeed, the purpose of the amendments is to undertake that definition. For example, price-fixing agreements will clearly be excluded from the vertical agreements that should obtain the benefit of exclusion from the prohibition; one amendment would achieve that.

Clearly, there must be a proper clawback provision. If the director feels that a vertical agreement that has the benefit of the exclusion would infringe the prohibition, he must have the right to take that agreement back under the terms of the prohibition. All that is set out in the amendments, including the requirement that vertical agreements should relate to two or more unconnected undertakings.

There are a number of benefits, on which I will not dwell at great length as they were set out well in Committee. However, it is important to recognise that, the vertical agreements that the Commission seems to be moving towards are necessarily those that operate at different economic levels, whereas those that we meet in practice often have horizontal aspects. One instance weighs heavily on my thinking and that is that, where a franchise agreement forms the vertical agreement, the franchise holder will often have a small number of units in his own control at a particular level to protect the brand, demonstrate the franchise and show how the agreement should be manifested. The sort of definition that the Commission is considering would exclude such vertical agreements. We do not have the benefit of its final document, so it is not clear how it will disinter such an agreement to separate out the vertical and horizontal aspects.

If Ministers intend, as they stated at the outset, to provide an exclusion for vertical agreements, we should give effect to that provision, but with suitable safeguards and definitions. The amendments pick up on those points and would give effect to them. In contrast to their stated intention to exclude vertical agreements, all that Ministers have come up with—in months—is a bold enabling power, with no specifics. Nor have they, as yet, given us any clear definition of the terms on which they would be likely to produce statutory instruments to give effect to their intentions.

The amendments have two purposes. They challenge Ministers to tell us, even at this late stage, the basis on which they propose to handle vertical agreements, and they ask the Government to incorporate in the Bill an exclusion and subsequent definitions of the kind they ought to have proposed in the first place.

Amendments Nos. 53 to 58 attempt to address concerns raised in parts of the British music industry. Vertical agreements are vital to the industry, particularly for songwriters, composers, music publishers, record companies and collecting societies. The success of the music business depends on its ability to license musical works effectively and efficiently to parties who wish to use them. The important point is the variety of agreements concerned, and I hope that the Minister can clarify the position.

One-off agreements may allow use of a piece of music in specific circumstances, such as for television advertisements. Agreements may comprise collective licences, allowing frequent music users, such as television or satellite broadcasters, to play a licence holder's repertoire without seeking authorisation for each composition. Vertical agreements concerning copyright are different from other vertical agreements, for several reasons. Unlike transactions involving other types of property, copyright licences do not transfer ownership from one party to another. They merely give permission for use of copyright work. It is right that such agreements should specify the circumstances in which the licensee is permitted to use the work. Anything else would render rights worthless.

European Commission case law already recognises that intellectual property contracts must contain conditions of use. Regardless of specific terms and conditions, licences grant freedom to those who wish to use music. Should the Bill result in uncertainty for rights holders about whether licence agreements are valid, they may choose not to enter into such agreements rather than risk losing control of their work, the source of their income. Members of British Music Rights, songwriters, composers and music publishers need certainty in their business relationships. We want the Government to assure rights holders that they do not consider agreements to be restrictive, and that the Director General of Fair Trading will not regard agreements as falling within the Bill's scope.

The National Consumer Council is concerned about clause 50. A balance needs to be struck between ensuring that the Office of Fair Trading is not overwhelmed by dealing with vertical agreements, and making sure that the director general has adequate powers to act against malign vertical agreements. The NCC feels that that balance is not struck sufficiently in favour of consumers. Broadly, we are concerned that the powers will not be sufficiently robust to deal with vertical agreements and anxious about the use of the clawback power in clause 50(3), which is the key to protecting consumers from malign agreements. We are worried that, unless the director general has sufficient powers to consider all vertical agreements that have been exempted or excluded, the provision will fail.

Our amendments are designed to probe the operation of clause 50. The purpose of amendments Nos. 53 and 54 is to probe why it should be the Secretary of State who makes the relevant order. Why should it not be the director general, or even the Secretary of State on the advice of the director general? Will the director general have any role in making the order?

Those questions have been raised in the context of the other powers in the Bill, particularly the Secretary of State's exclusion powers in clause 3, the director general's power to make individual exemptions under clause 4 and the block exemptions under clause 6 that may be made by the Secretary of State at the director general's recommendation. In clauses 3, 4, and 6, there is a clear distinction between the roles of the Secretary of State and the director general, but it has been lost in clause 50.

In the past, the National Consumer Council has feared that there has been too much scope for unfettered Executive action on competition policy. The director general should have the final say on competition issues while the Secretary of State should have it when broader economic issues must be considered. Clause 50 confuses that distinction. We look to the Minister for clarity.

Amendment No. 56 provides that, before making an order, the Secretary of State should justify why vertical agreements should be excluded or exempted from the prohibition. In doing so, he should assess the benefits to consumers of the order. The assessment should be published as part of the consultation process. That should make the process of making the order as open and accountable as possible.

Openness is important because clause 50(1) does not specify the criteria for making exclusions or exemptions. The situation in the Bill is different from what has been proposed in the European Union document, "Draft communication on the application of the EC competition rules to vertical restraints". The EU proposals, by comparison, are based largely on market share triggering the blacklisting of prescribed practices.

The main thrust of amendments Nos. 55, 57 and 58 is to ensure that the director general's clawback power is not too limited. As currently drafted, clause 50 means that the order will have to specify whether the director general has such a power or not. We believe that he should be able to use it whenever he considers it appropriate and not only when specified in the Secretary of State's order. The worst case scenario is that the Secretary of State could exclude or exempt all vertical agreements under clause 50(1) without empowering the director general to use any clawback power at all. Should that happen, no vertical agreement would be exposed to competition scrutiny. That would be unacceptable and we do not believe that that is the meaning of the legislation.

Amendment No. 57 would ensure that the director general does not have to be too constrained in his use of the clawback power. Clause 50(3) limits the use of the power to "prescribed circumstances". What are the prescribed circumstances likely to be? If such circumstances were confined to a merger inquiry identifying problems, it would be far too restrictive. The director general should have the power to consider any vertical agreement brought to his attention as being potentially malign. He should then be able to assess it, judge its anti-competitive effects and, if necessary, use the clawback power under clause 50(3) to bring it within the chapter I prohibition.

I have set out as clearly as I can our concerns about clause 50 by tabling probing amendments and providing background information on the specific concerns of the National Consumer Council and of the music rights fraternity, in particular British Music Rights. I expect the Minister to address the issues seriously and I hope that he will give some words of encouragement when he winds up the debate.

11 pm

I should begin by reassuring hon. Members that I do not intend to dwell on this matter at the length at which I dwelt on a previous matter this evening.

Clearly, at some point after I found myself dislodged from the Committee, my hon. Friends had an attack of extreme moderation, for they have tabled amendments that are minimalist. From an early stage in the Bill's progress, we were assured by the Secretary of State that action of a firm and decisive nature would be taken to remove vertical agreements from the scope of the Bill. We were assured repeatedly throughout the Committee stage—I have checked the Official Report of the later part of the Committee's proceedings—that we would be given a judgment of Solomon, if not something better, on the issue as a result of the prolonged deliberations of the Government and their chosen parties that would tell us exactly how that would be done.

Yet what do we find? We find provisions in the Bill that are simply a replication of the Government's general tendency to insert clauses that either are, or bear a striking resemblance to, Henry VIII clauses—clauses that give the widest possible discretion under regulation. My hon. Friends have tabled amendments that would make provisions that might be described as presumptive—they would still allow a considerable degree of discretion. The Minister owes it to the House to explain how he intends to use clause 50 as it stands; and why he would not be prepared to accept amendments that slightly constrain that regulation-making power.

I shall go further, because there is a point here that connects with proceedings earlier this evening. If my hon. Friend the Member for South Cambridgeshire (Mr. Lansley) is right and the reason why the Government have wholly failed to bring forward a clear and concrete definition of the sorts of vertical agreement that will be exempt and those that will not is that they await the views of the Commission on the matter, the Government are once again guilty of entirely failing to distinguish between interstate and intrastate commerce. The views of the Commission on this matter are of exactly the same academic interest as might be the views of a range of economists: if the Commission has superior economists, its views are of greater interest; if inferior, as is all too often the case, its views are of less interest. The Commission has no jurisdictional interest whatever in this matter. As we have been repeatedly assured, it is precisely the purport of the Bill to deal with intrastate commerce. In such matters, the Government cannot hide behind the views of the Commission.

Therefore, we have before us the straightforward spectacle of the Government having spent many months considering an issue only to bring before the House something that they could perfectly well have brought before the House six months ago—provisions that enable the Government to decide in due time what the Government want to do. I would venture to say that my hon. Friend the Member for Daventry (Mr. Boswell) could have drafted such provisions immediately—indeed, his research assistant or secretary could have done so.

The clauses tell us nothing, so, if the Minister intends to reject the amendments, he owes it to the House to tell us exactly why he is doing so. He owes it to the House to tell us how he will go about exercising the wide latitude given to him; and why he would not be able to exercise sufficient latitude if he accepted the amendments tabled by my hon. Friend the Member for South Cambridgeshire. If the Minister cannot give that explanation, we owe it to the country to explain that this is yet another case in which the Government intend to abrogate responsibility over intrastate trade to an external power that ought not to have jurisdiction in that matter.

The issue of vertical agreements was considered at length in Committee. Clause 50 was added to the Bill at that stage to allow additional flexibility in the treatment of vertical agreements. Since that time, the CBI has written to hon. Members—and specifically to members of the Committee. The letter was dated 7 July. I shall quote the CBI's views on the clause added in Committee. The letter states:

"The Government amended the Bill at Standing Committee to allow for an exclusion to be brought in at a later stage—the CBI supported this."

The CBI supports the position the Government have taken in respect of these matters.

Will the Minister give way?

On that specific point?

Yes. I had intended to make a speech, but an intervention is simpler. I sat through the debate on Second Reading and tried to find out from the Government what they were trying to achieve with the Bill. Can the Minister give us one or two examples of cases in which he feels that vertical agreements are not working and tell us what the Government intend to do about it so that we can judge whether the clauses will do what they intend?

With all due respect, we are trying to achieve a fair and effective competition regime, which includes the capacity to exclude vertical agreements. The vast majority of vertical agreements are benign, but there are circumstances in which a vertical agreement may not be benign. We must have provisions in place to deal with that. That is why the Government, after discussion with interested parties, came forward with clause 50. I repeat that that is why the CBI went out of its way to write to hon. Members saying that it supports the way in which the Government are proceeding.

The Minister is quoting a letter from the CBI, dated 7 July, which, as he rightly said, has been circulated to members of the Committee and others. The hon. Gentleman has given the House the impression—I am sure he did not mean to—that the letter contains a complete endorsement of the Bill. The Minister knows that it does not. There are seven points in the letter which express the concerns that the CBI still has. I am not saying that I agree with those concerns, but it is only right and proper that the record should show that, although the CBI welcomes the Bill in principle, it does still have seven specific concerns.

With all due respect, I thought that I had made it absolutely clear that I quoted the CBI's view of what has happened on vertical agreements since the Committee stage. I quoted it accurately. I made no attempt, either generally or specifically, to attribute to the CBI any other remark—nor would I attempt to do so. I was trying to be helpful to the House. I have been dealing specifically with the issue around clause 50. I did that because that clause came about as a result of the consultations that took place. I believe that it was legitimate for me to quote the CBI's view. I assume that the CBI sent that note to hon. Members so that they could be clear about the process involved in achieving clause 50.

rose—

I cannot think for a moment what the hon. Gentleman wants to add to that. Perhaps he will wait until I get a little further into the body of my speech.

We have said on a number of occasions that we believe that there is significant merit in recognising the special features of vertical agreements as a whole under the chapter I prohibition. The prevailing view among economists is that vertical agreements do not normally give rise to competition concerns, except where one of the parties holds market power or there exists a large network of agreements. In recognition of that, using the powers under clause 50 will reduce the burden on business of unnecessary notification. That will enable the better concentration of regulatory resources on areas of competition concern.

As hon. Members may be aware, the European Commission has been conducting a review of the treatment of vertical restraints. Papers that we have received recently from the Commission contain possible definitions of vertical agreements which could form the basis of a description for the purposes of the chapter I prohibition.

There is, of course, great merit in using the same language as proposed by the Commission, if possible. Many UK businesses are already subject to EC competition law and it might be burdensome to apply two different tests at EC and UK level when deciding how they will fall to be treated under the UK and EC prohibitions. This is a matter we are actively considering with the vertical agreements task force, which includes representatives from the CBI, the Monopolies and Mergers Commission and the Office of Fair Trading.

Nevertheless, we recognise that some vertical agreements can cause serious competition concerns that might not be readily dealt with by reliance on the chapter II prohibition or the complex monopoly provisions of the Fair Trading Act. Clever lawyers—there are a few in the House—may also test the terms of the special treatment and squeeze agreements within it which were not intended to benefit. In particular, we do not propose to give special treatment to price-fixing vertical agreements.

It is essential that the director general is able to claw back individual agreements to examine them. That is a quid pro quo of a wide-ranging exclusion.

We have discussed our approach in detail with representatives of the CBI and it has their support, as I noted earlier when I quoted the body's parliamentary briefing.

I turn now to the specific amendments proposed by the hon. Member for South Cambridgeshire (Mr. Lansley). True to his tradition, he spoke to them in a reasonable and cogent manner. That sounds trite, but he understands what I mean. The definition suggested in amendment No. 45 for a vertical agreement is at odds with that suggested by the European Commission in its papers. As I have said, businesses may find it burdensome to have two different tests that they have to apply. Our approach in this area, as in many others, is to assist businesses by introducing a prohibition that is consistent with article 85.

I want to press the Minister on the point about the CBI. Opposition Members entirely accept that the CBI prefers the current position to the original position, in which vertical agreements might have been entirely prohibited. Does the Minister not accept that, if the CBI was offered the alternative of total or possible total prohibition, compared to what is currently in the Bill, it would be very likely to favour the latter? He has not addressed the question whether it might favour over that the amendments in the name of my hon. Friend the Member for South Cambridgeshire (Mr. Lansley).

I cannot say what the CBI thinks about the amendments. I suppose that, having read them, it decided to say in its briefing that it agreed with the Government's position on the matter, which would indicate that, on reflection and consideration, and after discussions with others who are stakeholders, it believes that the Government's proposal is the best way forward. If that was not the CBI's view, it would have told hon. Members so in no uncertain terms in its note to us, because this issue is as important to the CBI and its members as it is to other businesses.

Even without the objection that I described, I am concerned that the definition provided in the amendment may allow anti-competitive horizontal agreements to slip through by masquerading as vertical agreements. For example, two parties at the same level of trade could enter into reciprocal agreements for the supply of a particular good, setting conditions that relate to the supply of the good to consumers.

The amendments do not allow flexibility to amend the definition of vertical agreements over time. That is the key difference between the Government's approach and that of the hon. Member for South Cambridgeshire.

Amendment No. 45 would limit our ability to make adjustments to ensure consistency with the European regime. It would also preclude amendments to the definition if it proved to be defective. Some flexibility of that nature is desirable to ensure that special treatment remains of real value to businesses but does not open a loophole in the operation of the prohibition. Hence, clause 50 allows the special treatment to be altered, but only by affirmative resolution.

I acknowledge that the route that I suggest might lead, in the initial stages, to a contest between a definition derived here and one proposed by the Commission. I want to tax the Minister on whether he believes that the definition towards which the Commission is moving is one with which he is content. Is it acceptable for the Commission to have a definition that includes operating on different economic levels, since that is more about form than effect and may have a significant adverse effect for franchise holders?

Ian.

Thank you, Mr. Deputy Speaker. You call me that because we have known each other since childhood—I was the child.

I would not have prefaced my remarks on the necessity to provide the opportunity in clause 50 to use the wording of the Commission's proposals as I did if the Government were unhappy or thought that the proposals would not work as we want them to. The fact that we are rejecting the hon. Gentleman's amendments means that, as I have said, we believe that the proposals from discussions in Europe will meet the objectives of the Government and business for vertical agreements. I understand that the hon. Gentleman will not accept that. Although I understand his reasons, there is a genuine disagreement between us. I hope that the judgment that I am making will prove to be correct. I spent a great deal of time discussing it with the CBI and others, to ensure that the decisions that we took, in relation to the principle of clause 50 and in relation to what comes out of it, genuinely met the requirements of business. There would be no point in the Government dealing with the matter in any other way.

The amendments proposed by the hon. Member for Eastleigh (Mr. Chidgey) tackle the issue of vertical agreements from a different perspective. Amendments Nos. 53 and 54 give the Director General of Fair Trading a role in the making of an order for vertical agreements. Amendment No. 58 also gives the director general power in relation to the scope of the prohibition, allowing him to remove the benefits of an order from a category of agreements.

11.15 pm

As my hon. Friend the Minister for Competition and Consumer Affairs said in Committee, where a power extends to the scope of the prohibition, it is right that it be subject to affirmative resolution of both Houses of Parliament. Equally, it is right that a Minister, rather than the director general, is responsible for making orders.

Amendments Nos. 55 and 57 would both give the director general an ability to exercise clawback whenever he wishes to do so. As we have said, we think it right that the director general be able to exercise clawback, but only when he considers that an agreement would, if clawed back, infringe the chapter I prohibition, and that he would not be likely to grant it an unconditional exemption. That test will allow him to exercise clawback when an agreement is seriously anti-competitive, while giving businesses that enter into benign vertical agreements the proper certainty that they require.

By removing a test for clawback, the amendments could undermine the purpose of clause 50. If businesses are not given reasonable confidence that there is an appropriately high threshold before clawback, they may well seek to notify benign vertical agreements that are covered by an order to obtain that greater certainty.

I fully accept the sentiment that gave rise to amendment No. 56, but do not view it as necessary. We intend to consult widely with consumer groups, such as the National Consumer Council, as well as business before making an order under clause 50.

The hon. Member for Eastleigh raised the issue of intellectual property. We do not believe that there is a need to cover such agreements in the special treatment proposed. The licensing of intellectual property rights has been subject to article 85 in the United Kingdom for more than 25 years, and a licence to use intellectual property rights as such is not restrictive; it is granting a freedom. Other copyright issues are covered by the Copyright, Designs and Patents Act 1988 and recent European Community directives. I shall send the hon. Gentleman copies of the recent directive, because discussions of it took place upstairs. I do not think that the hon. Member for Daventry (Mr. Boswell) had quite joined the DTI team from the Treasury at the time—one of his hon. Friends dealt with it—so, if that would helpful, I shall send the hon. Gentleman a copy too, so that both Front-Bench Teams are aware of the position.

Let me return to amendment No. 56. The Department would expect as a matter of course to conduct an assessment of the costs and benefits for all legislation—primary or secondary. That assessment is placed in the Library when legislation is introduced to Parliament. In addition, my right hon. Friend the Chancellor of the Duchy of Lancaster has undertaken to issue guidance requiring Government Departments to publish such an assessment when a proposal is consulted on. That new guidance is likely to be in place by September this year.

On that basis, I invite the hon. Members for South Cambridgeshire and for Eastleigh not to press their amendments.

I am grateful to the Minister for the manner in which he responded, although I feel that on this occasion—although not in some of our earlier debates—the substance was not sufficient. It is like trying to grasp a hologram; one looks for the Government's proposals on vertical agreements, and they are just not there.

I am prepared to accept that the objective should be to arrive at a definition of vertical agreements which is workable, consistent and aligned between ourselves and the European Commission, and which, as the CBI proposes, should presume that vertical agreements are excluded in the vast majority of cases with appropriate clawback and definitions. The proposed amendments do that.

The difference between Conservative Members and the Minister is that we feel that we should be leading the Commission to an appropriate definition, not simply resting upon the proposition that the Commission will, in due course, come up with a definition. Judging by the first accounts that have been presented to us in Committee and in the Chamber tonight, I believe that there may be practical difficulties with the definition when the time comes. Rather than resting on the proposition that flexibility is all and that we must go with the Commission when the moment arrives, it would be better to legislate rationally and in accordance with our objectives, and to press the Commission to come on board. However, I appreciate that the Minister was trying to respond helpfully and, as I understood him, he was not rejecting the definitions in the amendments so much as trying to see whether in due course some of those thoughts about price fixing and so on could be taken on board. On that basis I see no purpose in pressing the amendment. I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Amendment made: No. 11, in page 26, leave out lines 24 and 25.— [Mr. Ian McCartney.]

Schedule 9

Director's Rules

Amendment made: No. 16, in page 77, leave out lines 12 to 16.— [Mr. Ian McCartney.]

Clause 53

Fees

I beg to move amendment No. 5, in page 27, line 39, at end insert—

'(1A) a fee charged to a business for the discharge of functions by the Director shall not exceed the costs of fulfilling that particular function in that case.'.

I am conscious of a rather unsatisfactory discussion in Committee about the charging of fees, during which the Under-Secretary of State made it quite clear that the Government had not yet decided whether to charge fees or what they would be. As my hon. Friends said, that made it difficult to see whether the fees that might be charged had been taken into the compliance cost assessment, about which we have considerable reservations.

The amendment cannot be contested in principle. It seeks to ensure that in charging fees—we do not at this stage reopen the question whether fees would be charged—the director should not exceed the cost of fulfilling the function for which the fee is charged. That is basic natural justice and proportionality, and I have two points to support it, the first of which is at the macro level. It is important that the competition legislation and the suite of advice and fees to be charged by the director should not be used, to use the phrase in schedule 3, as a revenue-producing monopoly. The idea is not to charge greater amounts than the costs would require.

The second point is at the micro level and, in a sense, it is embodied in the amendment. It would be possible for the regulator to produce a schedule with a discriminatory function. For example, if the director or the Government prompting him were to take against the press or pharmaceutical companies or public utilities, the fees schedule might be arranged in a way that would discriminate between those businesses, or one of them, and other businesses that requested services from the director. Those services could be of more or less the same character and involve approximately the same cost.

As I have said, the amendment seeks to establish the principle that fees should not exceed the costs of the case, although it leaves open the principle that the fees could be lower—they could be rebated—or might not be charged at all. I hope that Ministers will consider those matters and give some assurances on them.

When we discussed the issue of the director's fees in Committee, it was recognised that it can be appropriate to charge fees when a genuine service is provided by the public sector. It was also recognised that fees for the giving of guidance and decisions might be a way of managing the director's work load in concentrating resources on where they are most needed and discouraging frivolous applications. However, the Government have not decided whether fees should be charged, still less the basis on which they might be set. I cannot accept the amendment because, if we decide the director should charge fees, it would narrow the range of options for calculating them. In particular, it would contradict subsection(2)(a), which provides that the rules may in particular provide for the amount of any fee to be calculated by reference to matters that may include

"(i) the turnover of any party to an agreement"

and

"(ii) the turnover of a person whose conduct the Director is to consider".

That provision was inserted by an amendment in another place because some respondents to the consultation exercise had argued that it might be appropriate to set differential fees for applicants to the director, based on their ability to pay.

I do not suggest that that is the basis on which any fees will be charged. As I have said, we have not taken any decision on whether fees will be charged, or how any fees would be calculated, but I do believe that it is an option which the Bill should make available. I recall that, in Committee on 11 June, the hon. Members for Eastleigh (Mr. Chidgey) and for Daventry (Mr. Boswell) raised co ncerns about the burden of fees on small companies, and the hon. Member for Daventry recognised the value of being able to consider the possibility of relating the fees to the size of the undertaking. However, I can give some assurances about the exercise of the power to charge fees.

First, the Bill will enable fees to be set only at a level intended to cover the costs of the director in providing the particular services to which they relate; the fees could not be set at a level designed to generate a profit. Secondly, as any fees would be set by the director's rules, they would have to be consulted on, by virtue of clause 51(3). Business will therefore have an opportunity to consider and comment on the amount of any fees and the basis on which it is proposed to calculate them. I hope that that helps the hon. Member for Daventry in his consideration of whether to withdraw the amendment.

Although I am not entirely satisfied by that response, in the light of the assurances that the Minister has been able to give at this stage, I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 54

Regulators

I beg to move amendment No. 46, in page 28, line 15, at beginning insert

'Subject to subsections (4) and (5)'.

With this, it will be convenient to discuss the following amendments: Government amendments Nos. 12 and 13.

No. 47, in page 28, line 18, at end insert—

'(4) A regulator shall not exercise any functions under this Part in respect of any matter until he has consulted—

(a) the Director, and

(b) any other regulator who may have jurisdiction in relation to that matter, and they have jointly determined whether and, if so, the manner in which, any of them are to exercise any functions under this Part in relation to that matter.

(5) In respect of a matter which—

(a) disregarding the concurrent jurisdiction of a Director, is not exclusively within the jurisdiction of one regulator, or

(b) affects or may affect competition outside the jurisdiction of that regulator,

any decision within the meaning of section 46 in relation to that matter shall be made jointly by that regulator, the Director and any other regulator who has jurisdiction to a material extent in relation to that matter.

(6) A regulator shall not exercise both—

(a) his functions under this Act, and

(b) his functions under the enactment from which he derives his regulatory jurisdiction, at the same time and in respect of the same matter.'.

No. 60, in schedule 10, page 78, line 7, at end insert

'if, but for those subsections, regard could be had to that general matter.'.

Government amendments Nos. 17 to 25, 33 to 37, 39 and 40.

May I direct attention to amendments Nos. 47 and 60 in particular? It is helpful to have seen Government amendment No. 13. I recognise that it is, in substantial measure, a response to the issues that were raised in Standing Committee. I welcome the amendment in principle for that reason. Therefore, I will focus just on one important difference between amendment No. 13—which tries to create a structure that enables joint working between the Director General of Fair Trading and the other sector regulators—and amendment No. 47.

Subsection (6) of amendment No. 47 is intended to prevent a regulator, who has both Competition Bill powers and sector statute powers, from acting in relation to any given matter using powers from both Acts. To put it in a nutshell, it is intended to prevent a regulator from using Competition Bill powers in the first instance, but giving effect to decisions through regulators' powers.

Of course, not only does the director of the utility sector acquire additional powers, not least in relation to investigation and enforcement, through the Competition Bill, but, by using sector statute, he might be able to avoid some of the due processes that are contemplated in relation to the Bill. Therefore, the mixing of the two is an unhappy situation. Using the two together might lead to an unsatisfactory blurring of the distinctions between the exercise of Competition Bill powers and of regulators' powers.

To cut a long argument to a simple point, we all recognise that regulators have competing objectives. In this particular instance, they are often seeking to meet what are essentially structural objectives in relation to the industry: for example, the reduction of market share on the part of an operator within the utility that they regulate. They may pursue that objective through the exercise of regulatory powers, but they may try to use Competition Bill powers in the first instance, or undertake investigations, and so on. It would be undesirable for there to be a blurring between the two things. There may be circumstances where they want to reduce dominance, but in doing so try to assert abuse where abuse does not necessarily exist.

11.30 pm

The intention of that part of amendment No. 47—which I continue to commend to the Government, and which is not really reflected in Government amendment No. 13—is to take away the opportunity to move between the two jurisdictions in relation to the same matter. I welcome the Government's response to that point.

We could tie ourselves up in discussing amendment No. 60, so suffice it to say that, in Committee, the Under-Secretary took the view that the Government amendments were sufficient to bring the powers of the Director General of Telecommunications directly in line with the other utility statutes. However, my view is that, given that the Telecommunications Act 1984 does not operate in precisely the same way as other sector statutes, that would be true only if this further tailpiece was added on to the relevant part of schedule 10. I hope that the Under-Secretary will reflect on whether he has achieved the objective of trying to bring the powers directly into line.

To save time, I will not dwell on any other arguments. Given that the Under-Secretary has been looking for assistance from industry, I was grateful to receive from the electronics industry—to cite just one example—confirmation that it saw benefit in some of my amendments, especially amendment No. 47. It is concerned to ensure that there is clarity in the manner in which the utility sector regulators use their powers.

At 11.31 pm, I can offer the House my 18-page briefing or the truncated Griffiths two-page version. I hope that the two-page version will cover the key points. In particular, I want to spend a little time on amendments Nos. 47 and 60.

There are Government amendments in this grouping. They would allow regulators to co-ordinate their activities under the Bill in a more effective manner. They are a response to the concerns voiced by the hon. Member for South Cambridgeshire (Mr. Lansley) in Committee. It was suggested that the present arrangements imposed artificial constraints. The amendments would replace the present inflexible arrangement with a more flexible regulation-making power.

Amendment No. 60 would add clarification to new section 3(3C), which this Bill inserts into the Telecommunications Act 1984. Section 3(3C) deals with the ability to have regard to the subject matter of statutory duties when the duties themselves are disapplied. I assure the House that no amendment is needed, as section 3(3C) achieves its intended effect. It makes specific provision about consideration of the subject matter of statutory duties in the context of the exercise of the Director General of Telecommunications' concurrent functions under the Bill. However, it makes no change to the ability to have regard to the subject matter of statutory duties, where it is relevant, in respect of other functions in the Telecommunications Act where the statutory duties themselves have been disapplied.

As the hon. Member for South Cambridgeshire was generous enough to admit, amendment No. 47 covers the same ground as the Government's amendment in dealing with the consultation and joint determination on who should exercise functions—subsection (4). However, it would also require joint decision making where jurisdictions overlap—subsection (5)—and it would preclude a regulator from exercising Bill functions and sector-specific regulatory functions at the same time in relation to the same matter—subsection (6).

The effect of the third part of amendment No. 47 would seem to be to import uncertainty about the lawfulness of use by a regulator in particular cases of information that he has obtained under Bill powers when subsequently exercising his functions under the regulatory Act. The amendment, by creating a firm division between the two sets of functions, increases the scope for challenge to the original use of the powers—for example, on the grounds that the chances of being able to take any enforcement action under the Bill were so small that the use of Bill powers to gather information was unreasonable.

I believe that amendments Nos. 60 and 47 would—I put it no stronger—weaken the Bill.

I hope that my explanation satisfies the hon. Member for South Cambridgeshire. However, if he would like me to deal with further points, I shall be more than happy to do so from my 18-page briefing.

I am grateful to the Minister for the character of his reply. On that basis, I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Amendments made: No. 12, in page 28, line 16, leave out 'exercised' and insert 'exercisable'.

No. 13, in page 28, line 18, at end insert—

'(4) The Secretary of State may make regulations for the purpose of co-ordinating the performance of functions under this Part ("Part I functions") which are exercisable concurrently by two or more competent persons as a result of any provision made by Part II or III of Schedule 10.

(5) The regulations may, in particular, make provision—
(a) as to the procedure to be followed by competent persons when determining who is to exercise Part I functions in a particular case;
(b) as to the steps which must be taken before a competent person exercises, in a particular case, such Part I functions as may be prescribed;
(c) as to the procedure for determining, in a particular case, questions arising as to which competent person is to exercise Part I functions in respect of the case;
(d) for Part I functions in a particular case to be exercised jointly—
(i) by the Director and one or more regulators, or
(ii) by two or more regulators, and as to the procedure to be followed in such cases;
(e) as to the circumstances in which the exercise by a competent person of such Part I functions as may be prescribed is to preclude the exercise of such functions by another such person;
(f) for cases in respect of which Part I functions are being, or have been, exercised by a competent person to be transferred to another such person;
(g) for the person ("A") exercising Part I functions in a particular case—
(i) to appoint another competent person ("B") to exercise Part I functions on A's behalf in relation to the case; or
(ii) to appoint officers of B (with B's consent) to act as officers of A in relation to the case;
(h) for notification as to who is exercising Part I functions in respect of a particular case.

(6) Provision made by virtue of subsection (5)(c) may provide for questions to be referred to and determined by the Secretary of State or by such other person as may be prescribed.

(7) "Competent person" means the Director or any of the regulators.'.—[Mr. Ian McCartney.]

Schedule 10

Regulators

Amendments made: No. 17, in page 78, line 23, at end insert—

'() In subsection (4), omit paragraph (c) and the "and" immediately after it.'.

No. 18, in page 79, line 12, after '(5)' insert '—

(a)'.

No. 19, in page 79, line 13, at end insert—

'(b) after paragraph (b), insert "and";

(c) omit paragraph (d) and the "and" immediately before it.'.

No. 20, in page 80, line 9, at end insert—

'() In subsection (4), omit paragraph (c) and the "and" immediately after it.'.

No. 21, in page 81, line 4, at end insert—

'() In subsection (5), omit "or in subsection (3) above".

() In subsection (6), omit "or in subsection (3) above".'.

No. 22, in page 81, line 39, at end insert—

'() In subsection (4), omit paragraph (c) and the "and" immediately after it.'.

No. 23, in page 82, line 37, at end insert—

'() In paragraph (4), omit sub-paragraph (c) and the "and" immediately after it.'.

No. 24, in page 83, line 26, after `(4)' insert `—

(a)'.

No. 25, in page 83, line 27, at end insert—

'(b) after sub-paragraph (b) insert "and";

(c) omit sub-paragraph (d) and the "and" immediately before it.'.

No. 26, in page 89, line 49, at end insert—

'() Omit section 131 (modification of Restrictive Trade Practices Act 1976).'.

No. 52, in page 90, line 12, at end insert—

'() In section 21 (duties as to exercise of regulatory functions), in subsection (6), at the end of the paragraph about regulatory functions, insert "other than any functions assigned to him by virtue of section 67(3) of that Act ("Competition Act functions").

(7) The Regulator may, when exercising any Competition Act function, have regard to any matter to which he would have regard if—
(a) he were under the duty imposed by subsection (1) or (2) above in relation to that function; and
(b) the matter is one to which the DGFT could have regard if he were exercising that function.".'—[Mr. Ian McCartney.]

Clause 59

Interpretation

Amendment made: No. 14, in page 31, line 31, at end insert—

'() The fact that to a limited extent the Chapter I prohibition does not apply to an agreement, because of an exclusion provided by or under this Part or any other enactment, does not require those provisions of the agreement to which the exclusion relates to be disregarded when considering whether the agreement infringes the prohibition for other reasons.'.—[Mr. Ian McCartney.]

Clause 60

Principles To Be Applied In Determining Questions

I beg to move amendment No. 61, in page 31, line 40, leave out from 'concerned)' to end of line 43 and insert

'the provisions of this Part are applied in a manner which is consistent with the application of the corresponding provisions of Community law.'.

With this, it will be convenient to discuss the following amendments: No. 62, in page 31, line 44, at beginning insert

'Subject to the other provisions of this Part,'.

No. 63, in page 31, line 44, leave out 'determines a question' and insert 'deals with a matter'.

No. 64, in page 31, line 45, leave out from 'act' to `whether' in line 1 on page 32.

No. 65, in page 32, line 4, leave out 'determining that question' and insert 'dealing with that matter'.

No. 66, in page 32, line 6, leave out from 'time' to 'Community' in line 7 and insert

'dealing with a similar matter under'.

No. 67, in page 32, line 13, at end insert—

'(4A) Subject to subsection (4B), where any question arises concerning the interpretation of this Part and, in particular, whether for the purposes of this section—
(a) a provision of Community law is a corresponding provision,
(b) a relevant difference exists between a provision of this Part and a corresponding provision of Community law,
(c) a matter arising under Community law is a similar matter, or
(d) a decision or statement of the Commission is a relevant decision or statement,
any person with sufficient interest in the matter to which the question relates may apply to the relevant court for the determination of that question and the court may determine that question and make such declaration as it considers appropriate.

(4B) Where any question concerning the interpretation of this Part arises in proceedings before an appeal tribunal, an application for the determination of that question by a relevant court in accordance with subsection (4A) may only be made with the leave of that tribunal.

(4C) In subsections (4A) and (4B) "relevant court" means—
(a) in England and Wales, the High Court;
(b) in Scotland, the Court of Session;
(c) in Northern Ireland, the High Court.'.

No. 68, in page 32, line 18, at end insert—

'(7) In this section "a provision of Community law" includes the general principles of Community law and decisions of the European Court.'.

New clause 3—Decisions on matters subject to a Commission investigation—

'.—(1) Subject to subsection (3) below, the Director shall not make a decision that—
(a) an agreement infringes the Chapter I prohibition; or
(b) conduct infringes the Chapter II prohibition, if that agreement or conduct is the subject of an investigation by the European Commission under a provision of Community law relating to Article 85 or 86.

(2) Nothing in this section shall prevent the Director from conducting in respect of that agreement or conduct—
(a) an investigation in accordance with section 25; or
(b) a Director's investigation or Director's special investigation within the meaning of Part II.

(3) If the Director has grounds to believe that the European Commission will conclude that agreement or conduct to which subsection (1) applies will not be found to be within the Commission's competition law jurisdiction, he may proceed to make a decision under sections 14 and 22.'.

At this late hour, the House will forgive me if I do not explain the arguments in their full form—the 18-page version. Earlier in the debate, the Minister was at pains to say that the Government believe that it is important to respond to representations—not least from the Confederation of British Industry, for example. He will be aware that, like my hon. Friends and members of the public, the CBI is very concerned that the provisions in clause 60 will have to be better defined in the legislation if the Government's intentions are to be realised accurately. We essentially believe that the issues should be better defined in legislation rather than waiting for the courts to do the job.

The matters of "corresponding question" and "relevant difference", for example, have not yet been defined in the Bill. If the Government's intention is to align UK and Community law as closely as possible, they should be able to tell us what constitutes the relevant differences. Otherwise, over time, the principles may begin to diverge again. For example, clause 60 deals with incompatibilities. Will the Government list them? Where do the Government expect the Bill to depart from European Community law?

In respect of the purpose of amendment No. 61 and the others grouped with it, I am attempting to do the Government's job for them. If we cannot have the legislation that we want, we may as well amend the Bill to achieve the secondary objective of which industry is seized—clarity and certainty. We will end up with lack of clarity and uncertainty if we proceed with clause 60 without knowing what the corresponding questions are and how they are to be determined. The clause should be amended so that all the provisions in the Bill are treated as corresponding in effect. We should not have relevant differences—those that exist should be specified. Instead of including phrases or provisions from Community law, we should replace corresponding provisions or inconsistency with a much clearer definition.

Amendment No.67 is additional and stands alone. It seeks to provide a better mechanism for determining the issues that arise on clause 60 by permitting a person with sufficient interest in the matter to apply for a determination by the relevant courts so that a declaratory ruling may be obtained.

I have provided an unsatisfactory explanation of a matter on which I could have spent considerable time. I am concerned that so far—even in Standing Committee—Ministers have not examined clause 60 sufficiently. The phraseology used in the clause opens up precisely the differences between UK and EC law to which they objected in other respects. It should have been replaced by a provision that aligned the two systems of jurisprudence instead of one that served the Government's purposes without telling us in what respect they envisaged that the relevant differences and incompatibilities would emerge over time.

First, I thank the hon. Member for South Cambridgeshire (Mr. Lansley) for his constructive approach to the matter. I accept that, because of an agreement to complete proceedings on the Bill within an appropriate time, neither he nor I will be able to set out in detail why he feels the amendments should be accepted and why I would resist them. Therefore, I shall write to him setting out the points that I do not have time to make tonight so that he can consider them before the Bill returns to the House. That is inviting opportunities, but it is only fair to the hon. Gentleman and to myself.

Clause 60 is important. It exists to ensure that, as far as possible, UK and EC prohibitions are interpreted and develop consistently with the EC competition law system. That is critical in minimising burdens on business.

Although I welcome the spirit of the amendments, I cannot accept that they would improve the wording of the clause or the operation of the regime and I am happy to explain briefly why that is the case.

Amendment No.67 is significant as it introduces a new and separate step into the operation of the Bill—the right to apply to the High Court, or the equivalent in Scotland and Northern Ireland, to determine questions. The questions include whether a provision of Community law is a corresponding provision; whether a relevant difference exists between UK and European law; whether a matter arising under European law is similar and whether a decision or statement of the Commission is relevant.

The amendment is wrong in principle. It appears to be based on the mistaken view that there is a choice of law between UK and European systems and that the choice should be made even before the substance of a case is addressed. There is no such choice of law. There are not two rival sets of principles. There is but one set of principles. Accordingly, interpretation of the Bill is not a two-stage process. One cannot construe the prohibitions and then compare them. They must be construed from the outset on the basis of clause 60.

The Government have made it clear on a number of occasions that it would be wrong to allow appeals on interim stages of the decision-making process. If we allowed appeal at every step of way, we would end up in an interminable process. The appropriate course is to allow the director to make a decision and to confine appeals to substantive decisions. Those arguments apply in this context.

The hon. Member for South Cambridgeshire also tabled amendments Nos. 62 to 66. We believe that we have followed the right formulation and approach in clause 60. I shall give the hon. Gentleman a more substantive reply on the amendments in writing, and hope that he will feel able, even given this stilted debate, to fight another day.

New clause 3 covers similar ground to the subject of the discussion in Committee of various amendments to clause 42, especially the then proposed new clause 12. The amendments were broadly concerned with avoidance of forms of possible double jeopardy, where agreements or conduct may fall both within the scope of domestic prohibitions under the Bill and European prohibitions under articles 85 and 86 of the treaty. It will probably come as no surprise to the House that we do not see any need to alter the Bill's provisions for dealing with parallel jurisdiction, particularly in investigations.

More particularly, I reiterate that, when the Commission is actively investigating an agreement or conduct, there will be no practical point in the director's starting a separate investigation. The practical assurance of unnecessary duplication of investigation between the Commission and the director is achieved by the alignment of the UK prohibitions with those of articles 85 and 86 and the practical co-operation that will exist between the Commission and the United Kingdom. For those and a number of other reasons, we find the new clause unacceptable. I ask the hon. Gentleman to withdraw the amendment.

I was quite fond of new clause 3, and quite sad to forgo the opportunity to explain it in detail. In fond expectation of further communication from the Minister, I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 71

Regulations, Orders And Rules

Amendment made: No. 15, in page 39, line 20, leave out 'or' and insert—

'() section 50, or'.—[Mr. Ian McCartney.]

11.45 pm

I beg to move amendment No. 59, in page 39, line 20, leave out 'or' and insert—

'() section 51, in the case of the first order made by the Secretary of State under that section, or'.

This evening is only the second time that I have played hookey from the proceedings of the Bill. On Second Reading on May 11, I hung on the lips of the President of the Board of Trade during her 52-minute speech. I stayed on the ramparts while what seemed like half the Labour party attacked Mr. Murdoch, and at about a quarter to 9, I made my own plea to serve on the Committee that considered the Bill. It is perhaps forgivable at that late hour that I misquoted an interlocutor of the Duke of Wellington.

The Committee of Selection graciously put me on the Committee, on which I served with constant admiration for my right hon. Friend the Member for Wokingham (Mr. Redwood) and my hon. Friends, and occasional amazement at the ramshackle quality of the arguments deployed by the Government. Until late this evening, I have been serving on the Select Committee on Northern Ireland Affairs, the members of which very properly feel that one cannot make a mature decision until after dusk.

My first absence from the proceedings of the Bill was on the morning of June 23, when I was absent from the Committee on lawful occasions, which, in all piety, I indicated to the Minister. A little after 11 o'clock that morning, the Minister for Competition and Consumer Affairs embarked on the long furrow of moving and speaking to his new schedule, which affected community pharmacies. He concluded the furrow with a passage of the new schedule three and a half hours of debate later at 6 o'clock.

Very early that morning, my hon. Friend the Member for South Cambridgeshire (Mr. Lansley) moved the amendment that served as a jewel-like harbinger to the matter before us. He moved it with the same coruscating clarity that characterised his actions throughout the Committee, which makes it such an honour that his name is attached to mine on amendment No. 59.

I shall not rehearse all the arguments that my hon. Friend the Member for South Cambridgeshire deployed on June 23, which occupy three columns in the Official Report of Committee proceedings. The issue related to the fact that, in what was then clause 70, now clause 71, there is a power to make regulations and orders. My hon. Friend sought to make the Secretary of State's orders under clause 51 subject to affirmative resolution.

The Minister resisted the amendment on two grounds—first, the slowness and greater difficulty imposed on the process of introducing any necessary adjustments to the rules, and secondly, that the rules concerned only procedural matters, which fell below the level of primary legislation or matters subject to affirmative resolution.

My hon. Friend the Member for South Cambridgeshire responded by reminding the Minister of the weight that the Government had attached throughout the Committee to the clarificatory rules that the director will make. He said that the rules might be procedural in content, but were substantive in effect. My hon. Friend added that, although he understood the Minister's case—that multiple use of the affirmative resolution procedure might be difficult in practice when the rules were amended—it was still desirable to have the fullest possible scrutiny on the first occasion that the director's rules were made.

The Minister's total silence in response to that reasonable suggestion by my hon. Friend the Member for South Cambridgeshire has provoked him and me to bring the concept back on report. In making this tiny personal scratch on the Government's adamantine front—this is the only time I have bothered the House on report—I remark that, on the Government's other objection, EU experience has shown that the procedural elements of competition law can be of immense importance. In a number of key cartel cases, appeals have turned on procedural points.

In schedule 9, there are matters on which rules may be made which are not merely procedural. If I may give examples where the rules provide for the circumstances in which the director may act, the imposition of conditions or the cancellation of them in relation to parallel exemptions under paragraph 9—and, likewise, in relation to third-party rights on disclosure of information under paragraph 12—will serve.

What will be of particular interest in such matters—the House will be delighted to hear that I am concluding—is the extent to which the rules will depart from EU principles in similar circumstances. Finally, rules under clause 51 are not limited to the matters in schedule 9, and I draw the Minister's attention to clause 51(2). I hope that the Government will look with favour on this small amendment at this late hour.

I should like to be able to accommodate the right hon. Member for Cities of London and Westminster (Mr. Brooke), whose contributions to the Committee have been entertaining from first to last.

I recognise that the right hon. Gentleman is proposing only that the first exercise of the power to make orders under clause 51 should be subject to the affirmative resolution. Nevertheless, I do not think that the rules under clause 51 are of such significance that they should be subject to affirmative resolution. Lest he does not wish to rely on my judgment, I pray in aid two other important bodies.

We are reflecting the guidance of the then Joint Committee on Delegated Legislation, which, in its second report in 1972-1973, suggested that the affirmative resolution procedure might normally be appropriate for powers substantially affecting provisions of Acts of Parliament. The powers under clause 51 do not fall into any of those categories. Similarly, the House of Lords Select Committee on Delegated Powers and Deregulation did not question the fact that this power was subject to negative resolution when it reported on the Bill.

I want to reassure the right hon. Gentleman that clause 51 (3) requires the director general to consult when he is preparing rules, so those likely to be affected will have the opportunity to make their views known. I hope that that will allow the right hon. Gentleman, on reflection, to withdraw the amendment.

I am disappointed by the Minister's response, as is my hon. Friend the Member for South Cambridgeshire (Mr. Lansley). However, the Minister knows the way to my heart. The original Committee set up in the House of Lords to look at delegated legislation was chaired by my late noble father. When it was decided that there should be a Joint Committee of both Houses, my father was approached by the Leader of this House, who said how desirable it would be to have at least one member of the House of Lords Committee serving on the Joint Committee, and how helpful it would be if he would chair the Joint Committee. My father did that as well.

Under those circumstances, it would be churlish of me to resist the plea that the Minister is making—although I hope that the Government will not rue the day. I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Schedule 13

Transitional Provisions And Savings

Amendments made: No. 27, in page 101, line 31, at end insert—

'() The fact that to a limited extent the Chapter I prohibition does not apply to an agreement because a transitional period is provided by virtue of this Schedule does not require those provisions of the agreement in respect of which there is a transitional period to be disregarded when considering whether the agreement infringes the prohibition for other reasons.'.

No. 28, in page 105, line 16, after 'proceedings' insert

'under section 3 or 26 of the RTPA'.

No. 29, in page 106, line 26, at end insert—

'() There is no transitional period for an agreement to the extent to which, before the starting date, a person has acted unlawfully for the purposes of section 27ZA(2) or (3) of the RTPA in respect of the agreement.".'

No. 30, in page 106, line 42, after 'period' insert

'for the exempt provisions of the agreement'.

No. 31, in page 106, line 44, at end insert—

'(2) In sub-paragraph (1) "exempt provisions" has the meaning given by paragraph 14(3).'.

No. 32, in page 112, line 25, leave out '(other than section 131)'.— [Mr. Nigel Griffiths.]

Schedule 14

Repeals And Revocations

Amendments made: No. 33, in page 118, line 37, at end insert—

'In section 50(4), paragraph (c) and the "and" immediately before it.'.

No. 34, in page 119, line 16, at end insert—

'In section 36A(5), paragraph (d) and the "and" immediately before it.'.

No. 35, in page 119, line 49, at end insert—

'In section 43(4), paragraph (c) and the "and" immediately after it.'.

No. 36, in page 120, line 22, at end insert—

'In section 31(5), "or in subsection (3) above".

In section 31(6), "or in subsection (3) above".'.

No. 37, in page 120, line 49 at end insert—

'In section 67(4), paragraph (c) and the "and" immediately after it.'.

No. 38, in page 120, line 52, at end insert—

'Section 131.'.

No. 39, in page 122, line 4, at end insert—

'() in paragraph (4), sub-paragraph (c) and the "and" immediately after it.'.

No. 40, in page 122, line 40, at end insert—

'() in paragraph (4), sub-paragraph (d) and the "and" immediately before it.'.

—[Mr. Nigel Griffiths.]

Order for Third Reading read.

11.56 pm

I beg to move, That the Bill be now read the Third time.

First, I thank the hon. Member for South Cambridgeshire (Mr. Lansley) for his assistance. If he keeps it up, he may be in for a job on this side of the House. [Laughter.] This is new new Labour.

The Competition Bill is a major step forward for British consumers, business and competitiveness. It will radically reform and strengthen the laws to deal with anti-competitive behaviour, such as cartels and abuses of a dominant market position.

Both consumers and business deserve a better deal, which the Bill will deliver. The Government have acted swiftly, whereas the Conservative Government dithered for years and did nothing. Anti-competitive behaviour hits ordinary people; it means lower quality, at higher prices. Competition is vital to ensure choice and value. The vast majority of businesses that work so hard to compete also deserve better protection from the few that seek to cheat and bully.

The current competition regime is often bureaucratic, slow and ineffective. The powers for rooting out and dealing with serious anti-competitive behaviour are notoriously weak. In the meantime, customers and competitors suffer. Smaller companies have been driven out of business while complaints were investigated. Even the most blatant cartels can get away with little more than a slap on the wrist. As a result, there is very little deterrence to anti-competitive behaviour, and no recompense for firms and consumers that are on the receiving end of it.

The Bill will put those failings right. The Director General of Fair Trading will be able to act swiftly to stamp out anti-competitive practices. Those on the receiving end of such practices will have new rights to seek damages. Moreover, the Bill will sweep away the existing bureaucratic restrictive practice laws, which require many thousands of harmless commercial agreements to be registered.

The Bill modernises our competition law to bring it more in line with the prohibition regimes that already operate in the European Union and in many of the Organisation for Economic Co-operation and Development countries. Many UK firms already have to deal with EU competition laws. The Bill will greatly simplify matters for such firms by introducing prohibitions that are modelled on those in the EU rules.

Reform of the current regime is long overdue. The Bill will give us a really modern and effective competition regime at last. The result will be stronger markets, a better deal for consumers and more opportunities for good British businesses to thrive. I commend the Bill to the House.

11.58 pm

We have all enjoyed listening to the Minister's press release. The Government have been ambitious, even courageous, in introducing a complex Bill which attempts to merge the European philosophy on competition with British domestic legislation. The attempt is massive in scale, but it has by no means wholly succeeded.

In preparation for tonight, I read my Second Reading speech, and I have never before found that so many queries that I raised on Second Reading remained on Third Reading. Many additional issues of concern arose in Committee. My old philosophy tutor used to say, "Always start your essay with a query, try to answer it, and end with another." The Minister must have been one of his pupils, too.

There are some concepts in the Bill about which industry may be happy, but the CBI and other representative and responsible organisations retain considerable y areas reservations on various aspects. In our haste to consider the Bill, one or two issues were not fully rehearsed. For example, the CBI brought to our attention in its latest letter the interaction of the continuing powers on scale monopoly with the new prohibitions. Much will depend on how the Government and the director general interpret the law.

There is a need for clarity in explanation for businesses, and especially small businesses, at all stages of implementation. As has been clearly revealed tonight, there is a huge, and in my view unhealthy, reliance on the order-making process—for example, in relation to the director general's rules and issues such as fees, of which we know nothing yet. The House will need to give those subjects further detailed scrutiny.

Real concerns remain about the compliance costs, even conceptually. We have not explored tonight, as we did in Committee, the imperfections, inconsistencies and incoherence in the Government's analysis of compliance costs, which does not do nearly enough to acknowledge the problems that businesses will face in seeking legal advice.

Most businesses are legitimate and want to trade fairly, so it is incumbent on the Secretary of State and the director general to proceed whenever possible by exception, and with sensitivity. We move now from press release to implementation, which affects business, whose costs need to be kept to a minimum.

There are still gross imperfections and a tendency to excessive intrusion in the Bill, which has been greatly oversold in its effects, but we do not think it appropriate to divide on Third Reading: like the Minister, no doubt in his case with his fingers crossed, we stand back to see how it will work in practice.

12.3 am

This is the first Bill on which I have served throughout its passage through the House. I apologise to my hon. Friends for irritating them at times, and beg their indulgence. I am grateful to Opposition Members for the challenge that they have offered throughout.

Opposition Members seem on occasions to have minimised the crimes with which the Bill is designed to deal. When people act anti-competitively, they are stealing just as much as someone who burgles or steals from one's house, so it is important that we take the matter seriously. The Government have done so; they have done good work in producing the Bill, and I am proud to have helped with some parts of that process.

12.4 am

I, too, do not intend to detain the House for long—[Interruption.]—although I am grateful for the support that I seem to be gathering from all corners of the House; the longer it goes on, the longer I will go on.

The Liberal Democrats have made it clear since Second Reading that we support the main principles in the Bill and welcome the strengthening of competition law by the tow major prohibitions: the chapter I prohibition on agreements to prevent, restrict or distort competition, and the prohibition of abuse of a dominant position. We have had many interesting, but not necessarily satisfactory, debates on those. We also agree with the principle of providing for a new regime to be applied and enforced by the Director General of Fair Trading and giving powers to investigate if reasonable grounds for suspecting that either of those two prohibitions have been infringed.

However, it is about the body of the Bill, the substance of the debate and the detail of the arguments that our reservations have remained—reservations which the Government have failed to overcome in spite of extensive debates, attempts to amend the Bill and lengthy probing in Committee.

Hon. Members will recall that the Bill came to the House from the other place with key amendments, which in the main met our fundamental reservations about the Bill. During our debates, the Government have seen fit in every case to overturn those amendments—specifically, measures to clarify the exclusion of vertical agreements, to resolve the issue of retail price maintenance on over-the-counter medicines and the effect that that will have on community pharmacies, and to tackle the dangers of predatory anti-competitive practices in reducing the diversity and independence of our national newspaper press.

The last is the key issue—the Government's refusal to recognise the limitations of the Bill in dealing with predatory anti-competitive practices in the national press. The Government have claimed that the various amendments tabled at different stages were all unnecessary and unworkable, yet they know only too well that independent and highly respected legal advice has argued to the contrary. At the very least, the Government's legal advice is saying one thing and equally eminent, reliable and respected advice is saying the opposite. That means that we may enact a Bill which will be a field day for lawyers and a great benefit to those organisations that intend to pursue predatory practices.

The Government should reflect on that, as this Bill could well be a Pandora's box for the future. I hope that it will not be, and that, through the various processes, we will find some strength in it. If we do not, the Government know where the blame will lie.

12.7 am

I shall be exceptionally brief.

In the first debate of this Parliament, I said that the battle of Isandhlwana was over, and the defence of the mission station at Rorke's Drift was about to begin. The Minister of State, who was good-humoured throughout our proceedings, paid me the, perhaps unconscious, compliment of echoing that thought. In Committee, he picked up a reference of mine to faith and bestowed the soubriquet of "Faith, Hope and Charity" on my right hon. Friend the Member for Wokingham (Mr. Redwood) and my hon. Friends the Members for Daventry (Mr. Boswell) and for Westmorland and Lonsdale (Mr. Collins), the Whip.

Whether consciously or unconsciously, the Minister bestowed upon them the names of the three Fairey Swordfish biplanes that, at the start of the world war two assault on Malta, represented the entire British aerial defence of the island available to the Governor. The Government may mock the resources available to this side of the House, but the three Fairey Swordfish successfully defended Malta, and we went on to win the war.

12.8 am

As perhaps one of the few Members of the House who have run businesses around the world, I welcome in principle an improvement in competition law. It has been my experience that north America and even Asia have considerably more open and competitive economies than continental Europe or the United Kingdom. However, I am not entirely sure whether the primary objective of the Bill is harmonisation with European competition law or the improvement of competition in Britain.

The Bill has grave weaknesses. We have already heard of the problems of harmonising with European law relating to intrastate versus interstate under article 85. We need to harmonise on whether cases will be heard in one jurisdiction when they could be dealt with in two. Companies will have the problem of requiring clearance both in Europe and in the United Kingdom. There is the problem of whether UK authorities can vary exemptions obtained in Europe, which could add to the muddle.

The Bill will create uncertainty, and it will give too much power to the Director General of Fair Trading, rather than providing democratic accountability through the President of the Board of Trade. It will be a burden on medium and small businesses. I am particularly concerned that those who run oligopolistic companies seem too relaxed. I hope that the Bill will improve competition, but I fear that it tries to do two different things, and that it will fail adequately to achieve either.

Question put and agreed to.

Bill accordingly read the Third time, and passed, with amendments.

Economic Development (North Northumberland)

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

12.10 am

The Minister for Competition and Consumer Affairs has been on the Treasury Bench for most of the past seven hours, but I must detain him a little longer. A matter of importance to people in my constituency has arisen from the announcement last week by the Dawson Group of more than 700 redundancies. The group, which owns Pringle, the knitwear company, has blamed the high pound, a reduction in far east markets and general economic conditions, all of which have presented severe obstacles to exporting companies, particularly those producing quality products for the far east. However, the company has had its own failings in the United States and in its marketing strategy.

It is a tragedy for Berwick that so many jobs should be lost in the borders. Pringle has been in Berwick for 50 years, and the factory that is to close currently employs 280 people. The remainder of the 700 jobs are in other parts of the borders. Pringle used not say much about the Berwick factory; I think that it thought that too high a profile for the significant part of its product that was expertly made in England would undermine its claim to be Pringle of Scotland. Privately, however, Pringle recognised how successful that manufacturing unit was.

The shock closure follows many years of job losses in a small town that cannot stand so many losses. Recently, 200 jobs were lost at Pringle. More than 100 jobs were lost when Polychrome left Berwick. About 100 seasonal jobs in the salmon fishing industry have been lost. More than 150 went when the shipyard closed. Other trades, including agriculture and engineering, have also had significant job losses. The latest blow is devastating for the families involved. The loss to the local economy will add up to millions of pounds in wages that passed through the town's businesses and contributed to the welfare of all.

We need help, on both sides of the border, and some of the crisis can be dealt with on a cross-border basis. Reports in London newspapers have referred to closure of two Scottish factories by Pringle, carefully omitting to mention that one of them is in England. That is why the English Minister responsible for industry—Scotsman though he is—is here to answer this debate. His counterpart at the Scottish Office, the Minister for Education and Industry, has also been closely involved in discussions since the redundancies were announced. He said:

"I recognise that a significant proportion of the people working in the Berwick factory are resident on [the Scottish] side of the border."

There are many reasons why the Scottish Office must remain interested in what is happening not only in Scottish parts of the borders, but in Berwick-upon-Tweed, for which the English-based Minister is responsible.

The Minister for Education and Industry, Scottish Office visited Hawick two days after the closure announcement. He announced a package of measures at a meeting arranged before the closure by my hon. Friend the Member for Roxburgh and Berwickshire (Mr. Kirkwood). The package aroused much interest. My hon. Friend described it as the beginning of an answer, feeling grateful that the measures had been announced but that more needed to be done. From the English side of the border, the question that comes to mind is: what is our equivalent of those measures? That is one of the things that I hope the Minister will tell us tonight.

The Scottish Office Minister announced an additional £1 million for Scottish Borders Enterprise immediately; a commitment to best endeavours to find additional extra funding if Scottish Borders Enterprise can bring forward further viable projects; the setting up of a new rural inward investment unit within Locate in Scotland, which will attract investment to areas such as the borders; a commitment to provide the borders with reallocated, unused European structural funds if any become available; and a commitment to keep discussions with the Dawson Group open and to assist it in redevelopment. We are anxious that that may lead to the funding of new factory development on the Scottish side of the border to replace factory capacity still available on the English side. That would make no sense.

The Scottish Office Minister also announced Scottish Office support for an IT link between Heriot-Watt university and the Scottish college of textiles and mentioned other measures already announced, such as the designation of Hawick as a property employment support programme area and the expansion of telecoms infrastructure in the borders. In some parts of the borders, it is even less developed than it is in Berwick. The package must have some English counterpart, and I hope that the Minister will say what it is.

I wish to put to the Minister some other measures that should form part of the response on the English side. On European funds, we are already anxious about the potential loss of objective 5b funds, which have been a source of some help for industrial projects in north Northumberland. Northumberland and Durham's joint bid for objective 1 funding has been jeopardised by the claims of European statisticians that it is not a cohesive area. I contradict that argument. I hope that the Government will continue to press actively for objective 1 status.

I wonder whether the Retex scheme for textile areas still has funds in it that could be made available to help replace lost textile jobs in the area. The loss of jobs in the textile industries is recognised across Europe as requiring special help.

There are employment measures that could be taken. The Government could accelerate the new deal programme for over-25s. On present plans, it will be some time before they become eligible, and redundant Pringle workers would not be become eligible until they had satisfied the 12-month rule. In other areas, I think that measures have been taken to exempt redundant workers from that limitation. It could be done alongside bringing forward the new deal measures for over-25s so that they become available more quickly in Berwick. I hope that the Minister will press his colleagues to pursue that course.

To attract new industry to the area, we want to press ahead with infrastructure projects that make the area attractive to and viable for industry, of which the best known is the need to complete the dualling of the Al, which remains on either side of Berwick an unsatisfactory single carriageway road and a deterrent to industrial development. There is cross-party agreement that dualling should go ahead. We await the announcement of the roads review with trepidation. I hope that the news about Pringle has been telegraphed to the Department of the Environment, Transport and the Regions so that it realises that A1 dualling has assumed even further importance as we try to make the area attractive to industry.

Berwick has longer-term plans for a rail freight terminal. We want that development to be encouraged. There are also various local projects in different Government Departments and with other bodies which, in these circumstances, Ministers should try to help along and give a sympathetic nod to. There is a private finance initiative bid by the council for 250 houses to be built by housing associations in the town and the surrounding area; I hope that that will be encouraged. There is a foyer project for young people in the Old Granary in the town centre. There is a heritage lottery bid for completion of townscape work that has already been begun, but has been set back by a change in the national heritage fund rules and system of bidding. I am concerned about that, because we need such work to continue; it provides some continuing employment during the present crisis and helps to attract people to the town.

I emphasise that many of my suggestions go beyond the Department of Trade and Industry. What needs to be done is interdepartmental, involving many Government Departments, and cross-border. We used to have an eastern borders development association that recognised, by its very existence, that the eastern borders had a coherence. Indeed, the borders as a whole, with their shared dependence on the textile industry and agriculture, have many features in common; people travel across the border, and businesses ignore the border as their activities cross it continuously. We have to look at the impact on both sides of the border of measures of this sort.

A practical way forward is to respond to the present crisis by getting the relevant agencies together and knocking heads together so that we can get some co-ordination of possible solutions. That could be done by forming a task group, which could meet in Berwick and draw together all those who have a contribution to make, ensuring that action in Berwick was related to that in the adjoining borders. That group could include the local authorities from both sides of the Border—Northumberland county council, Berwick-upon-Tweed borough council and the Scottish Borders council—the Northumberland training and enterprise council, Northumberland business link, English Partnerships, the Northern Development Company, the Government office for the north-east and Scottish Enterprise. The group would embrace the means to cover local business development, training measures, the attraction of new activities to the town and the provision of the new infrastructure and facilities to support new growth. In addition, it could press the European funding issues I mentioned.

The work would be greatly helped if the Government looked again at Berwick's status for development purposes. Berwick lost its assisted area status in 1984, but, much more recently, the Rural Development Commission excluded Berwick from the areas in which it did economic regeneration work, even though that work was vital to the rural hinterland around Berwick, whose population's prospects depended on what happened in the town. Now that the factory closure has taken place, surely this is the moment to reintroduce the RDC work into Berwick. That work is in the process of being transferred to the regional development agency, but, before that process is completed, a decision should be taken that Berwick should be included within the rural project work that used to be undertaken by the RDC.

All that work can be better advanced if we get the various agencies together, recognise that many Departments, governmental bodies and local government bodies have a contribution to make, and acknowledge that the problem is a cross-border issue. We have to get people moving to draw together the resources that are already available through existing channels and to put in bids for the new funds that will be needed for significant new action.

Over the years, the nominal unemployment rate in Berwick may have appeared low, but, as in much of the borders, that is partly because young people simply give up and go away to find work elsewhere. The actual unemployment rate will be increased by 50 per cent. as a result of the closure of the Pringle factory. The situation has worsened significantly, so action of the sort that I have outlined is now essential.

12.24 am

I congratulate the right hon. Member for Berwick-upon-Tweed (Mr. Beith) on securing this important debate. The right hon. Gentleman has represented his constituency for 25 years and he spoke with considerable knowledge. I grew up in the borders and I have always taken a keen interest in the issues affecting Berwick, Galashiels, Hawick and the other conurbations. I am pleased to be able to respond on behalf of the Government.

I worked briefly in a textile mill and I have some first-hand knowledge of the sector. I am sad, but not surprised, that neither the shadow President of the Board of Trade nor any of his Conservative colleagues have appeared in the Chamber to listen to this important debate on the problems facing the textile industry, particularly in the Berwick area. I am afraid that it is yet another example of the Opposition failing to know or care about the problems that have been raised.

The textile and clothing sector is of great importance to the United Kingdom economy, to local employment and to regional economies. The sector is the ninth largest UK manufacturing industry, if we include footwear. Manufacturers' sales total over £17 billion and the value of exports was over £7 billion in 1996, the latest figure available. With employment totalling over 421,000, it is clearly an important and significant employer. That is why my hon. Friend the Minister for Science, Energy and Industry has met representatives of the textile, clothing and footwear industries over the past six months. He has had the opportunity to discuss with them the important issues affecting that sector.

The Government are supporting a range of activities aimed at improving the competitiveness of the textile and clothing industries. These include projects to help improve marketing skills, develop supply chain partnerships, encourage better links with industry and academia and improve environmental performance, as well as promoting the profile of the industry and assisting young fashion designers, which I know that all right hon. and hon. Members will welcome. My hon. Friend has also initiated a dialogue with the leading trade associations and with the trade unions with a view to reviewing and establishing a national strategy for the textile and clothing industries.

Let me indicate the help that has been given and then go on to deal in more detail with some of the other points raised by the right hon. Member for Berwick-upon-Tweed. In the five years from April 1993 to 31 March 1998, enterprises in Northumberland received 127 offers of financial assistance from the regional selective assistance scheme. That totalled almost £24 million. The projects involve a total investment of £156 million, and they aim to create 3,340 new jobs and safeguard 865 existing jobs.

The right hon. Gentleman told us of some of the ways in which the Scottish Office has been able to respond to the Pringle closure, which demonstrate the value of regional autonomy. That is not yet available in the English regions, but the Government have introduced legislation that will result in the creation of regional development agencies. They will be in operation in April 1999. Until then, the Government's response will be as strong and positive as possible.

A number of steps have been taken so far in response to the local crisis to which the right hon. Gentleman referred. The regional director of the Government office for the north-east has already been in contact with Berwick-upon-Tweed borough council and will be visiting soon to co-ordinate a response group. That group already includes the Northumberland training and enterprise council, the Employment Service, Northumberland county council, Berwick-upon-Tweed borough council, Scottish Border Enterprises and representatives from Pringle. Initially, it is trying to help those affected by the redundancy by improving counselling, careers guidance and advice on retraining opportunities. The group will also examine ways in which to make better use of resources, including the Government's new deal programme and funding from a range of European sources.

The right hon. Gentleman has asked me whether his constituency is eligible for Retex assistance. Berwick-upon-Tweed is eligible for assistance under the EU's Retex II initiative. The purpose of that scheme is to provide assistance to areas affected by the decline in the textiles industry. The closure of the Pringle factory makes the area an obvious choice for funding from the scheme.

Over £500,000 is still available and can be used to provide business support to small and medium-sized enterprises, and for the conversion of former textile buildings to put them to commercial use. Another source of EU funds is the objective 5b northern uplands programme, which provides funding support for four main priorities: economic development and diversification, tourism, community development and environmental enhancement and conservation. Some £2 million of assistance is still available from that resource.

The creation of a response group provides the basis for a robust reaction to the Pringle factory closure. My officials in the Government office for the north-east understand the priority that I attach to ensuring that the group gets all possible Government support. I urge the right hon. Gentleman to liaise with the group to ensure that it benefits from his considerable expertise, which he has built up over a long period.

Can the Minister assure me that there is no obstacle to the response group drawing in expertise and interest from bodies on the Scottish side of the border?

I can confirm that. Scottish Border Enterprises is a member of the group and is working with representatives of Pringle and the right hon. Gentleman's local council. I hope that their excellent input will ensure that all possible local and national resources are devoted to ameliorating the problems that he has rightly highlighted in the debate.

Question put and agreed to.

Adjourned accordingly at twenty-nine minutes to One o'clock.

Volume 315: debated on Wednesday 8 July 1998

House Of Commons

Prayers

Points Of Order

Eu Structural Funds (London)

Disadvantaged Areas (Wales)

Illegal Encampments

Village Schools

Women (Science And Engineering)

Private Business

Alliance And Leicester Plc (Group Reorganisation) Bill Lords

Oral Answers To Questions

Duchy Of Lancaster

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Community Hospitals

Ministerial Visits

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Strategic Defence Review

Points Of Order

Empty Homes (Value Added Tax)

Empty Homes (Value Added Tax)

Orders Of The Day

Competition Bill Lords

Clause 3

Excluded Agreements

Clause 18

Abuse Of Dominant Position

Schedule 3

General Exclusions

Business Of The House

Clause 13

Notification For Guidance

Clause 14

Notification For A Decision

Clause 26

Powers When Conducting Investigations

Schedule 7

The Competition Commission

Clause 50

Vertical Agreements And Land Agreements

Schedule 9

Director's Rules

Clause 53

Fees

Clause 54

Regulators

Schedule 10

Regulators

Clause 59

Interpretation

Clause 60

Principles To Be Applied In Determining Questions

Clause 71

Regulations, Orders And Rules

Schedule 13

Transitional Provisions And Savings

Schedule 14

Repeals And Revocations

Economic Development (North Northumberland)