The ballot has given the House the opportunity to hold a timely debate—timely because it is taking place soon after the return of my right hon. Friend the Deputy Prime Minister from the climate negotiations in Buenos Aires. I was fortunate to be called to speak last July in the Adjournment debate secured by my hon. Friend the Member for Islington, North (Mr. Corbyn) on the preparations for the Buenos Aires talks. I am sure that the House will join me in paying tribute once again to the Deputy Prime Minister for his considerable achievements in that vital process.

The Government pledged to put the environment at the heart of policy making. We all know that they are committed to ambitious targets for reducing emissions that are seriously damaging the environment both directly and indirectly, through climate change. The two are often connected.

The Select Committee on Environmental Audit, of which I am proud to be a member, was set up to be, in the Deputy Prime Minister's words,

"a terrier snapping at the Government's heels".

Some of us believe that we have been not a terrier, but a rottweiler. We have tried to live up to those expectations.

Today's debate should be seen as an extension of that activity. Its subject is the environmental effects of taxation. There are many aspects of that—such as transport, housing, energy and agriculture—on which other hon. Members will want to speak. I shall give a brief introduction and concentrate on some aspects of energy taxation, a matter that is relevant to my constituents in Peterborough.

The basic aim of green tax reform is to shift the burden from "goods" to "bads". "Goods" are economic activities such as income generation, job creation and added value. "Bads" are pollution and excessive use of resources such as energy—excessive from the point of view of society. For example, petrol creates costs in terms of pollution and congestion, which are borne by society. Thus, the consumption of petrol is excessive from a societal point of view. Measures could be designed to help energy-intensive industries to adapt.

Will the hon. Lady give way?

No, I have just started and I want to make progress.

Other policy instruments could protect potentially disadvantaged groups, such as the rural poor, who are more reliant on cars and would suffer unduly from increased fuel duties.

There is a much greater role for indirect taxation in promoting energy efficiency. Far too many anomalies discriminate against energy conservation materials, whose present high VAT rating is a disincentive for householders to invest in them.

Will my hon. Friend give way?

I am pleased to give way to my hon. Friend.

I thank my hon. Friend, and I welcome the debate. As she considers it important to conserve fuel, does she agree that it would have made more sense if the battalion headquarters of the Royal Electrical and Mechanical Engineer 101 Battalion, which was based in my constituency, had stayed there, where there is a population of 300,000, rather than being moved to Queensbury, where there is not a similar population, which will mean more vehicle movements from Lancashire to Wales?

I thank my hon. Friend for his comments and sympathise with the sentiments that he has so eloquently expressed.

In his March Budget the Chancellor announced partial VAT relief, with a drop in VAT from 17.5 per cent. to 5 per cent. on the installation of energy-saving materials funded under certain Government grants. That was designed to help people suffering from fuel poverty. My right hon. Friend said that the cut in VAT would help to insulate 40,000 more homes a year, which is good, but it is not a significant benefit to the environment, and it does not cover payments by householders over and above Government grants received.

I know that the Government are pursuing with their European partners the legality of a reduced or even a zero rating, about which there has long been disagreement. Perhaps the Minister will tell us later about progress on that front. I look forward to his comments.

Will the hon. Lady give way?

I am making progress.

Low-polluting road fuels such as liquefied petroleum gas and so-called city petrol produced by Sainsburys are on sale in my constituency, Peterborough, among other places. Their use would similarly be encouraged by a lower VAT rating. I welcomed some moves in that direction in the last Budget. There is a much larger potential market for such fuels, but if manufacturers and distributors are to make the necessary investment and commitment, they need to know that any policy changes will remain in place and progress for a number of years.

Last February, the Treasury promised

"a new approach to environmental taxes that will be fair to future generations."

In the recent pre-Budget report, we read that the Government are

"committed to exploring scope for using taxes in the strategy of sustainable development".

However, there are few clues as to when we might expect the results of apparently on-going deliberations. Bound with the bundle of pre-Budget reports issued to all hon. Members—and appearing to be part of them, in the same green and white format—was the Marshall report on economic instruments and the business use of energy. When Sir Colin Marshall, the former chairman of British Airways, was appointed to head a panel of industrialists tasked to investigate energy taxes, one commentator said that it was like

"putting King Herod in charge of child care since aviation is one of the worst contributors to climate change and the industry has lobbied hard to ensure that it pays no green taxes."

None the less, the report concluded:

"there probably is a role for a tax if businesses of all sizes and from all sectors are to contribute to improved energy efficiency and help meet the UK's emissions targets."

The United Kingdom should obviously make its own decisions about meeting its own considerations. However, there are precedents in other European countries concerning the effects of carbon tax from which we may learn some lessons.

A carbon tax was introduced in Sweden in 1991, and the most recent evaluation found that it had delivered a 9 per cent. cut in CO₂ emissions in three years. On the one hand, district heating—which pays the full rate of tax—showed a dramatic switch from fossil fuels to biomass, and fossil fuel use shifted significantly from coal to gas. On the other hand, when the tax rate for industry was reduced in 1993 to 25 per cent. of the full rate, fossil fuel consumption rose, with a corresponding rise in CO₂ emissions by 21 per cent. in one Swedish district between 1992 and 1994.

Sir Colin Marshall recommended that a clear signal be given as to the long-term direction of policy in order to help businesses plan for future investment and maximise the environmental impact of a tax. He also said that any measures should be subject to detailed consultation. I am particularly happy to endorse that proposal, especially as the economic and social costs of some proposed taxes may be too high. Other measures, such as voluntary self-regulation, which are often based on enlightened self-interest may work much better—and, indeed, may already be in place. The agricultural interests in my constituency would certainly support that view.

Other proposals might appear to be environmentally friendly in a narrow context—for example, some recycling initiatives—but they involve extra environmental costs, such as transportation, when considered more widely. Consultation is not only desirable but absolutely necessary, often on a case-by-case basis, in order to weigh the advantages and disadvantages and the different interests involved. I know that that is happening now in some cases. However, consultation should not be a recipe for unnecessary delay.

The first report of the Environmental Audit Committee—I am pleased to see members of that Committee from both sides of the House present in the Chamber today—made a recommendation concerning the potential of the tax system to deliver environmental objectives and make economic development more sustainable. It called on the Government to establish an advisory body on environmental taxation—the Committee has certainly been a terrier, if not a rottweiler—preferably in the form of a green tax commission. I take this opportunity to reiterate that recommendation.

Such a commission, by whatever name, would bring together the different interests involved in a more transparent and neutral forum—the Government are committed to openness—leaving the final decisions to Government. It would invite interested bodies to submit evidence on proposed environmental taxes, and examine the potential pitfalls and trade-offs that might arise from particular decisions.

For example, it would have to establish whether a proposed measure would have an adverse impact on competition, and decide whether that was outweighed by any other advantages that would result. Such bodies need not be yet another layer of bureaucracy. Importantly, the existence of a green tax commission would make it much easier to take an overall strategic view of environmental tax making. I hope that we will not go down the route of a fragmented, "here today, gone tomorrow", piecemeal approach.

The Marshall report concluded that revenues should be recycled in full to business

"with at least some of them channelled into schemes aimed directly at promoting energy efficiency … low carbon technologies and/or energy audits/advice for SMEs."

I particularly welcome the latter, as a pioneering audit of city-wide energy, conducted by the Environment City Trust with support from our largest local employer, Perkins Engines, was launched recently in my constituency. I am pleased to report that that launch took place in the presence of the new Under-Secretary of State for the Environment, Transport and the Regions, my hon. Friend the Member for Mansfield (Mr. Meale). Marshall's last recommendation was:

"the design of any tax should ensure that Combined Heat and Power (CHP) is not disadvantaged. It should also aim, where possible, to increase incentives for the take-up of renewable sources of energy."

That is good, but perhaps too cautious. I hope that that will not be the last word on the subject. I regard Marshall as a beginning and not an end in itself.

A major finding of the Peterborough energy audit was that nearly half the city's share of the Kyoto target—which, I am told, is 220,000 tonnes of CO²—could be met by small CHP schemes in business and industry. That sector accounts for about two thirds of CO² emissions and two thirds of energy spending in the city. We are still awaiting the Department of Trade and Industry's review of renewables—the Environmental Audit Committee is certainly awaiting it with bated breath.

The United Kingdom has a target to produce 10 per cent. of electricity from renewable sources by 2010. At present, we have the lowest rate in Europe at around 1 per cent. Studies show that both wind and wave power could meet the United Kingdom's electricity needs three times over and that solar power could provide two thirds of our needs. However, all those forms of power generation require Government support whether by way of interdepartmental co-operation—as occurred between the DTI and the Ministry of Agriculture in the development of energy crops—research and development or changes to the structure and functioning of the electricity market. The non-fossil fuel obligation, which obliges power companies to buy from more expensive renewable sources, has helped to get the renewables industry going and, in some cases, has driven the price down. However, progress has been intermittent, with modest targets. Recent research shows that the extension of NFFO alone will not allow Government targets to be met. Government investment in renewables has been insignificant compared with the billions of pounds in subsidies granted to the nuclear and fossil fuel industries.

European industry leads the world in wind and solar power, and the United Kingdom is a leader in combined heat and power. There are major United Kingdom export opportunities at present, and some of the large oil companies —such BP and shell, to name but two—are beginning to invest heavily in renewables the Government should do all in their power to encourage the development of renewables for the development of renewables for the benefit of the country as a whole and to help avoid catastrophic climate change.

Attending the launch of the energy audit in my constituency—I was particularly pleased to be there—were many of those engaged commercially and otherwise in the promotion of renewables and CHP. I was extremely impressed by the extent and quality of the involvement. Business certainly understands the potential opportunities for creating wealth and employment in this field. A key manufacturer in my constituency, Peter Brotherhood, has just obtained a multi-million-pound contract for supplying wind turbines for a renewable energy scheme in the Fens. That scheme will obviously create jobs both in Peterborough and where the turbines are installed.

I have come to realise that another advantage of renewable energy is that it is localised rather than centralised, and therefore can act to regenerate local communities by creating employment, with a knock-on benefit for the local and regional economies. However, many of those present at the launch made it clear that they need some help—and they need it now. They need a kick start to enable them to obtain a viable toehold in the market, from which to develop, before others gain the crucial lead that in business often means that the weakest and those left behind are driven to the wall.

The current situation has been described by my hon. Friend the Minister for Energy and Industry as "win, win, win". By that, he meant that the encouragement of renewable energy means that the United Kingdom can simultaneously meet its emission targets, boost industry—which is what the Government are pledged to do—and create jobs. In the summer, my hon. Friend the Financial Secretary to the Treasury told the all-party environment group that the general approach of the Treasury to environmental taxation might be described as "prudent enthusiasm". "Prudent" is a favourite word in Treasury-speak.

I hope that the debate will highlight the degree of enthusiasm in the House—and, indeed, the country—for environmental taxation, and signal that the need for it is rather more urgent than people appear to believe at present.

I am grateful to have caught your eye, Madam Speaker. I congratulate the hon. Member for Peterborough (Mrs. Brinton) on securing this important debate. As a fellow member of the Environmental Audit Committee, I agree with her that the Committee has turned into a rottweiler, and has rottweilered many Ministers in its 12-month span. Environmental taxation is especially important to that Committee; indeed, it is important to us all—it is the coming issue with which the House will be involved.

The hon. Member for Peterborough referred to the Labour party's repeated commitments on the environment, and mentioned the manifesto commitment to

"put the environment at the heart of policy making".

When the Financial Secretary appeared before our Committee, she reiterated that she wanted to

"ensure that the environment is placed at the centre of our objectives for the tax system".

One would hope that the Government considered the issue to have equal importance, but, alas, the warm words are not being matched by action.

As one who has been a member of the Finance Bill Standing Committee for the past two years, I know at first hand how difficult it is to put amendments relating to the environment—which, in most cases, are tabled by Opposition Members—on to the agenda. During the Committee's consideration of this year's Budget, only one amendment on the environment tabled by an Opposition Member—and precious little from Labour Members—was accepted. It dealt with a tiny technical issue which I happened to raise, in respect of the taxation treatment of company cars that had been converted to road fuel gases.

In the whole of the 1998 Budget, there was no mention of preferential treatment of taxation for road fuel gases; no mention of incentives to promote oxidation catalysts; no mention of incentives to promote use of brown-field sites in preference to ripping up the green belt, and the discrepancy between value added tax on renovation and new-build remains; and no mention of corporate incentives to promote the preferential tax treatment of company public transport season tickets. There was nothing to tackle the distortions on company car mileage rates—we still encourage the absurdity of an incentive for people to drive more miles; nothing to deter water pollution through pesticides; and nothing to encourage the more environmentally sustainable use of rural land.

That bears out the fears of the Environmental Audit Committee, whose pre-Budget report said:

"It is difficult to reconcile the status of environmentally sustainable growth as a 'core feature' of the Government's economic policy."

Indeed, on environmental matters the previous Budget amounted to an action-free zone. Friends of the Earth called it "green as smog". More politely, the Royal Society for the Protection of Birds said:

"So far, the Treasury has made little substantive progress in using the tax system to protect the environment."

More recently, the green Budget failed to tackle the issue, with the exception of the bludgeon measure of the energy tax and a consultation paper on vehicle excise duty. The comprehensive spending review made virtually no mention of environmental considerations, but there was a lot about spending more money on the back of dodgy growth estimates, with no link to their environmental impact.

The job of the Environmental Audit Committee has been the auditing of the environmental impacts of Government policy. In the Chancellor's speech to the Confederation of British Industry conference on 2 November, there were plenty of old chestnuts about global turmoil, being prudent and cautious, productivity top-up, Europe, prudence and investment—that old one again—and mature patriotism. Despite the fact that the energy tax announced a few weeks ago will have the biggest impact on business, there was not a single word about the environment or the use of environmental taxes on business.

Even the Prime Minister's Mansion House speech a few days ago to the heart of the business and investment community—which these days might be expected to act as an antidote to the Chancellor's own thoughts—contained not a word about the relationship between business and the environment and green taxes. What Conservative Members fear most is that the broad-brush use of tax in the name of environmental improvement is a surrogate measure to fill the coffers of the Treasury.

The insensitive use of tax alone can be counter-productive. There has been no more stark example of that than the state of the British road haulage industry, where the combination of the increased 6 per cent. fuel escalator and the ending of the European cabotage regulations on 1 July has meant a flood of French and Belgian lorries on United Kingdom roads which pay no tax and import diesel from France and Belgium. Diesel is taxed at 24.5p per litre in France and at 19.1p per litre in Belgium. In the United Kingdom, it is taxed at a whopping 43.7p per litre. That is hardly a level playing field.

As the Government have been in office for only a year or so, most of that difference came about through the imposition of the fuel price escalator by the previous Conservative Government, who raised £25 billion in extra taxation. Does the hon. Gentleman now think that that was wrong or right?

Not at all; the hon. Gentleman misses my point. I said that a combination of the increased escalator and the ending of cabotage rules on 1 July has been a dangerous combination and has had an immediate effect on the British freight haulage industry. If the hon. Gentleman had remained a member of the Environmental Audit Committee for more than 10 days, he might have been aware of those facts. As a result, British lorry firms are seriously considering moving to the continent to avoid the extra taxes—taxes which, by the end of 2002, are likely to be costing the freight haulage industry an extra £5 billion a year.

Who wins in all this? Not the environment, because we are simply exchanging British fumes from British lorries on British roads for Belgian fumes from Belgian lorries on British roads. Who wins? Not the British freight business, because about 26,000 jobs are at stake. It is not enough, as the Minister may say, that the allowance of £500 against vehicle excise duty for particular traps being fitted will compensate, when it costs £3,500 to fit those systems. Who wins? Not the Government, as business moves to the continent and pays taxes to other European Governments.

The aggregates tax is another example; a broad-brush approach to taxing quarrying will not result in reduced quarrying of material, unless we shut down the schools, hospitals and road-building programmes.

I shall deal briefly with the energy tax and Lord Marshall's report, which the hon. Member for Peterborough mentioned. The report turned out to be a downstream tax levied on business consumers. It is not a carbon tax, because a genuine carbon tax would be levied upstream: coal-fired power stations would pay most; gas-fired power stations would pay less; and nuclear power stations would pay nothing.

The Government have prejudged the issue by blocking the expansion of gas-fired power stations for political reasons, but the switch to gas has had the biggest effect on reducing CO₂ emissions. Indeed, it has been calculated that

"burning 25 million tonnes of coal, rather than getting the same power from gas, produces in extra pollution an extra 28.7 million tonnes of CO₂, 425,000 tonnes of SO₂, 14,000 tonnes of particulates and 6,000 tonnes of black smoke. Sticking with coal cuts gross domestic product by 0.15 percentage points for each of the next five years, according to the Treasury's own model."

Manufacturing industry could be damaged most, when it is suffering from the high levels of the pound and the shrinking economy. Costs will be passed on, which will be inflationary, and we need to know from the report which sectors of business will pay most.

What about high energy users such as the chemical industry, which is already suffering extensive international competition? What about the biggest area of energy waste by business—shops that blow hot air on to the high street and offices, where energy demand has increased by 140 per cent. in the past 12 years as a result of air conditioning?

The report is full of contradictions, with the Government already having tried to rig the market in favour of environmentally unfriendly coal. As the Chancellor will have found when he delivered his speech earlier this month, the CBI is firmly against it. The additional costs of £2 billion a year will be a big tax on industry, at a time when it can least afford to pay it. Even if the recommendations are introduced in a tax-neutral way, they will encourage a further switch away from manufacturing to services.

The one redeeming feature of the Marshall report is the reference to tradeable emissions permits. I hope that the Government will today give a commitment that they will introduce those well before the 2008 date that was suggested by the Kyoto protocol.

We have much to learn from the United States, where emissions trading is well advanced as a market mechanism that promotes cost-effective reductions by allowing countries or companies to trade emissions allowances. Every emitter must have an allowance for each tonne of sulphur dioxide that it emits. So far, acid rain-causing emissions are being cut ahead of schedule, at 50 per cent. of the expected cost. Trading gets incentives right by encouraging cuts where they can be achieved at the lowest cost.

The United States is already working with several developed and developing countries to help to strengthen their capacity to measure emissions and to participate in an emissions-trading system with high standards. In Australia, just the other day, the Sydney futures exchange announced plans to launch a market in permits to emit greenhouse tax. The exchange will operate spot, forward and futures markets in the permits, to be issued under legislation to meet the Kyoto targets. The exchange could become a hub for greenhouse-gas trading in the whole Pacific region. In this country, British Petroleum has established, off its own bat, a pilot scheme for trading carbon emissions among its subsidiary companies.

Those are all market structures with incentives to promote environmental good practice and to reduce costs. The Government need to get on with a similar system in this country, but we need much more imaginative thinking on linking environment and taxes. On road fuel gases, we need to follow the example of cutting taxes drastically on lead-free petrol that was set by the previous Government. Liquid petroleum gas, which is more environmentally friendly, costs 318.2 ecu for every 1,000 litres in the United Kingdom. The next nearest costs only 201.9 ecu. In France, the cost is 63 ecu. In Sweden and Belgium there is no tax on LPG.

We need a bold move such as that, where taxation as one tool can be effective. We need the rent-a-room scheme, for example—another innovation that was set up by the last Conservative Government. We need to encourage more diverse use of homes on brown-field land before ripping up green-field sites.

On taxation on company cars, we need incentives to encourage more car sharing among people going to work, preferential taxation for company season tickets for public transport travel, disincentives to do more mileage, and proper incentives to convert to LPG—well above and beyond the tinkering in the Budget. There should not be just a blunt increase in fuel, which we know prejudices most the rural driver who has little choice.

There has been another innovative idea in my constituency. Northbrook college has just bought at its own expense and on its own initiative 50 bicycles through a deal with a local bicycle seller. It has made them available free of charge to its students on a year-by-year basis to encourage more cycling to college rather than car use. If the Government were to kick-start such schemes throughout the country, the attractions to colleges, businesses and industries alike would be immense, but they need some kick-starting by the Government.

I agree with the hon. Member for Peterborough. One of the recommendations of the Select Committee on Environmental Audit was to set up a green-tax commission. The Government have gone the route of a Monetary Policy Committee and independence, in certain terms, for the Bank of England. Surely a green-tax commission that is independent of political interference could bring some benefits.

Remember that environmental taxes can mean lower taxes for good practice, not inevitably higher ones to clobber everyone indiscriminately. Decisions on environmental taxes must be made on a case-by-case basis, with due regard to the most effective mix of tax, regulation, voluntary agreements and other instruments.

A few weeks ago, the New Statesman, not a Conservative-minded magazine, said:

"It is hard to detect any sign of commitment by this government to an energy policy that will shift our entire system on to a sustainable footing in the longer term. It has quite a lot to do with a complete lack of enthusiasm for the environment on the part of No. 10."

By contrast, the previous Secretary of State for the Environment, my right hon. Friend the Member for Suffolk, Coastal (Mr. Gummer), enjoyed a reputation as the most influential Secretary of State for the Environment ever, according to Friends of the Earth. He was responsible for setting up the Environment Agency, for implementing a comprehensive biodiversity plan and for introducing ambitious recycling targets, among many other measures. That followed the "green-blue", effective and practical approach to environmental good practice that was started by Baroness Thatcher.

Conservative Members believe in sensible environmental taxation, but only as part of a range of measures, including the use of sensible regulation that harnesses the power of the market, the promotion of property rights, the creation of a low-tax regime, the favouring of voluntary action and local impact, the trusting of technology, insisting on sound science and working at an international level.

It was Conservative Ministers who set the pace on environmental good practice over many years. I look forward to Labour Ministers starting to show signs of wanting to catch us up soon.

I join in the congratulations to my hon. Friend the Member for Peterborough (Mrs. Brinton) on securing this important debate. It is a particular pleasure to join her in an Adjournment debate, as I am also a member of the Select Committee on Environmental Audit, and we campaigned for many years together in Kent before her migration to Peterborough. She was a feisty campaigner, and I know that she continues to represent her constituents with the steel with which she approached campaigning in Kent.

I wish to focus on one green taxation issue which has been referred to briefly by my hon. Friend the Member for Peterborough and by the hon. Member for East Worthing and Shoreham (Mr. Loughton)—taxation on the renovation of empty properties. It is essential that we harmonise value added tax at 5 per cent. for the renovation of long-standing empty properties. It is currently applied at the full rate of 17.5 per cent., yet, for newly built homes on green-field sites, it is applied at a zero rate.

My contribution follows the excellent report on housing by the Select Committee on Environment, Transport and Regional Affairs. It marked a vital contribution to the White Paper "Planning for the Communities of the Future." In its recommendations, it concurred with the earlier recommendation of Environmental Audit Committee calling for VAT on conversions and renovations to be reduced to as low a level as possible.

The Government's response was positive. They agreed that the current situation was an anomaly. Indeed, since the response, my hon. Friend the Minister for the Regions, Regeneration and Planning has said that the way in which we apply VAT on old properties and not on new ones is a massive anomaly.

In the response, the Government said:

"Unifying VAT rates would help to provide a more level playing field for conversions and thus be more consistent with our objectives for accommodating household growth."

However, the report went on to say:

"There are other economic and technical issues to be considered, such as the impact on House prices and tax administration and the legality under European Law."

I have spoken on the issue in an Adjournment debate and during a 10-minute rule Bill debate. I have tabled an early-day motion, which was signed by nearly 100 Members from both sides of the House. This morning, I want to deal with some of the economic and technical issues that were mentioned in the Government's response to the report of the Environment, Transport and Regional Affairs Committee.

The environment faces considerable pressure if we are to provide all the homes that we need. Therefore, it is essential that we have a tax framework that encourages us to make more use of what we already have. Unlocking the empty homes is just one way in which to do that, but, to begin with, we need to be clear about how many properties we are talking about.

There are some 800,000 empty homes in England and Wales, a wasted resource. If we put them all together, we would have the sixth largest urban conurbation in the country next to Tyneside; that gives the scale.

In a written answer in June, my hon. Friend the Financial Secretary to the Treasury said that the cost of reducing VAT for the refurbishment of all those properties to 5 per cent. would be £1.1 billion. In a further reply, my hon. Friend said that the income generated by the introduction of 5 per cent. VAT on all new-build homes would be about £550 million. There is a huge gap.

We need to be clear about the numbers involved, and about what we are defining. In February this year, the Department of the Environment, Transport and the Regions published its annual housing investment programme returns from local authorities, which showed that there were 230,000 long-standing empty homes in the private sector—that is, homes that had been empty for a year or more. It is on that figure that the argument for harmonisation of VAT should focus.

Members of Parliament see such homes in their constituencies year in, year out. They are the homes that blight our inner cities, and they could be put to better use. We could provide decent dwellings for families, protecting the countryside and regenerating our inner cities, and also meet the housing needs of the future. The present VAT arrangements only provide disincentives to builders, as the Government's response recognises.

I am not sure whether the Department is aware of the figures. When, in July, I asked what was the total number of long-standing empty properties, the Department said that it was not available—that it could only provide the number of homes that had been empty for six months, which was 400,000. When I asked the Treasury what would be the cost of reducing VAT on that number to 5 per cent., I was told that it would be £300 million. Eventually, then, we can arrive at an approximate figure of £160 million in loss of revenue for the Treasury if VAT was reduced to 5 per cent. on the 230,000 long-standing empty homes in England. If the introduction of 5 per cent. VAT on new build would generate £550 million, the Treasury would actually be better off.

What about administration? I understand the concern about fraud, but systems are already in place. As I have said, local authorities have information on empty properties, which they are required to provide as part of their council tax returns. They could provide exemption certificates for the properties identified.

European law is clearly a difficult hurdle, but I am confident. The Treasury team won the argument on the reduction of VAT on fuel, to which we were committed, and I think that they could win this argument too. Given the way in which VAT exemptions are currently being applied to new build, it is difficult to argue that they are consistent with the criteria. Article 17 of the sixth directive allows VAT exemptions provided that they are maintained for

"clearly definable social reasons and for the benefit of the final consumer".

It follows that the current VAT arrangements allow a millionaire's new home to be built on a green-field site for "social reasons". It is certainly of "benefit", but it is not for social reasons in housing terms.

The conversion of a barn is zero-rated. How many families in housing need were rehoused in such conversions in 1994, the year in which that exemption was introduced? Just one.

In Medway, our empty homes strategy enabled us to bring 100 homes back into use, working in partnership with housing associations. Social landlords are not exempt from VAT, but, with harmonisation, we could have provided 15 more homes for families on low incomes. There are some 3,000 empty homes in my borough, which could make a significant contribution to the requirement in the local plan for Medway to provide 13,000 homes.

We should also consider the matter of house prices. The average value of arable land is £3,000 per acre, which can increase to £400,000 per acre when planning permission is given. There is plenty of room for a modest 5 per cent. increase.

I believe that harmonising VAT on long-standing empty properties would provide the building industry with the necessary incentives, protecting our countryside and regenerating our inner cities. I am confident that the Treasury team will examine the possibilities closely, working in conjunction with the DETR, so that we can improve the environment and provide a sustainable taxation base for housing.

I congratulate the hon. Member for Peterborough (Mrs. Brinton) on securing this welcome debate. I believe that environmental taxation could underpin a huge reform of our tax system, but such a reform will require imagination and courage.

In February, the Treasury promised such a new approach to environmental taxes. It echoed that promise in a recent pre-Budget report, saying that the Government were

"committed to exploring the scope for using taxes"

in their sustainable development strategy. A welcome process of consultation has been embarked on, not least through the Marshall report, but so far little action has been taken, and no timetable has been drawn up.

What concerns me most is the lack of vision in regard to the place of environmental taxation in the overall tax system, and how it should be introduced. So far, we have seen no more than a continuation of the Conservative Government's record. Ad hoc increases in what are described as environmental taxes have been seen as tax-raising rather than as tax-changing—in my view, the latter is the fundamental principle of environmental taxation. There has been an increase in the fuel tax escalator, but no commensurate cut in other taxes. There has been an increase in the landfill tax, but, unlike the original introduction of the tax, that increase involves no hypothecated cut in another tax. Previously, employers' national insurance was cut, and that was seen as a benefit of the introduction of that "green" tax. If the process continues, we risk destroying any public support for, or belief in, environmental taxation.

How does what the hon. Gentleman has said tally with the last Government's 25 per cent. cut in duty on LPG, and the fact that the landfill tax was introduced with a compensatory allowance for a reduction in employers' national insurance contributions? Those were not overall tax-raising measures.

The hon. Gentleman cannot have been listening to what I said about the landfill tax. I said exactly that. As for his first point, the last Government raised £25 billion in increased fuel duties; nothing like that was spent on the small cuts in duty on LPG and unleaded fuel. I welcome those cuts, but there was no deal. The last Government raised an extra £25 billion net through increases in fuel taxation. That is why I believe that we should return to first principles.

Environmental taxation provides incentives for the continuous improvement of environmental performance. It thus introduces a market-led mechanism to find cost-effective ways of securing change. That is one clear benefit, but taxation is not an alternative to regulation. Regulation lays the base: it underpins the level of what can be allowed. Taxation must come on top of that. It can raise revenue to pay for improvements, and I welcome the Government's saying that they may introduce road pricing to finance better local transport. When charges are introduced to provide a clear benefit, it is appropriate to use the revenue for such investment.

As for the wider issue of general environmental taxation, I believe that, to win support, it requires a larger vision. Income, jobs and added value are all heavily taxed, although we want higher incomes, more jobs and more added value. Instead, we should be taxing pollution and the excessive use of resources. We all talk about that—the hon. Member for Peterborough rightly did so herself—but we need to strike a genuine bargain with the public. We need to make it clear that, when we talk of environmental taxation, we are talking not of a general process of tax increases dressed up in a green gown, but of radical reform of the tax system.

I can give two examples that demonstrate the importance of such reform. The first is the petrol price escalator, on which, as I have said, the last Government raised £25 billion, and on which the new Government plan to raise some £9 billion. However, neither the previous nor the current Government expressed a clear commitment to a substantive shift in taxation alongside those escalators. So far, Governments have been protected from real public anger about the escalators because raw material prices have been falling, so that there has been little real-terms impact at the pump. As raw material prices have been falling, the escalators have had nothing like the impact implied by their size. However, the situation may change if oil price increases reach the pump.

Given the massive scale of revenues, there is a real opportunity to do something that will not only help to maintain public support for the process and match the rhetoric of taxing bads rather than goods, but emphasise the principle that the problem with car ownership is excessive use—specifically excessive use of fuel—and not vehicle ownership itself. For most people—certainly in rural constituencies such as my own—vehicle ownership is a necessary part of daily life. However, very often, people can use more fuel—efficient vehicles and think again about making the very large proportion of very short journeys—which is where the fuel escalator comes in.

If the issue is vehicle use and not vehicle ownership, we should stop taxing ownership as such. I therefore believe that a part of the income that we are raising by such means should be used to abolish vehicle excise duty for all but the most gas-guzzling vehicles. Although there is a principle that we may want to provide a direct disincentive against choosing ownership of the most gas-guzzling vehicles, the issue for the great majority of people is use and not ownership. Abolition of vehicle excise duty would be a strong signal to that effect.

The Government are consulting on vehicle excise duty changes, but we have to face the fact that the difference between £150 a year and £100 a year—as the Chancellor suggested last year—is unlikely to change people's habits when deciding which vehicle to buy. In the context of car ownership, that sum—although it will undoubtedly be pocketed with cheer—is too small.

Abolishing vehicle excise duty could make a real difference in people's decisions on which vehicles to buy. Most significantly, abolition could make a difference in which vehicles fleet buyers decide to buy. We know that most larger-engine vehicles were purchased originally by the company car market and sold subsequently into the second-hand market. Those vehicles' lack of fuel economy is discounted by the low prices that they achieve on the secondhand market. Buyers of the cars therefore compensate themselves in advance. Vehicle excise duty would be a direct way of dealing with that situation. If we do not do something about such situations, we shall lose basic public support for the principle of environmental taxation.

The second issue that I should like to deal with is the carbon tax and energy taxation. The Marshall report was very good news on the issue. Given Lord Marshall's background as an extremely experienced business man in an industry in which fuel costs comprise a significant part of overall costs£I do not think that anyone had thought of him as a great environmentalist before he was appointed to his new role£it was extremely significant that his report argued for energy taxation.

One conclusion of the Marshall report was:

"there probably is a role for a tax if businesses of all sizes and from all sectors are to contribute to improved energy efficiency".

Although that sentence sounds rather full of caveats, the report goes much further, arguing comprehensively for the introduction of energy taxation. The point—it is often lost—that is being made in that quotation is that Marshall does not believe that a trading system, which is the explored alternative, would be an effective mechanism to embrace all business. He believes that such a system could apply to the largest businesses—although it would be complex and difficult to introduce—but could not be introduced for all business. He therefore favours taxation over the alternatives that have been examined, and that is an important part of his conclusions. I have a couple of important reservations about the matter. The first is that Lord Marshall suggests that such taxation should cover all energy and not only carbon energies. Taxation would therefore apply as much to energy from renewable sources as it does to energy from the most polluting sources. He said that he had reached the conclusion that it would not be possible to differentiate between the types of energy, because there would not be such taxation of domestic fuel.

Liberal Democrats have argued that such taxation should be applied across the board precisely for those reasons, and could be introduced now, at a time of falling energy prices—so that energy prices are at least kept roughly at current levels and are not expected to fall, thereby reducing incentives to invest in future energy savings. That would be one solution to the dilemma.

The Government will have to find a way in which they can target carbon fuels without imposing a general energy tax. If they cannot, the tax would fall at the first—environmental—hurdle of justification. That is precisely where VAT on fuel came a cropper for the previous Government. Not only was that tax self-evidently targeted at the non-polluting fuels: it was a financial tax-grab rather than part of a tax change. There was no big tax cut to go with it.

Lord Marshall made my next point, which is that revenues raised from an energy tax must be recycled into other tax cuts. I believe that such a proposal is likely to receive as much support from the business sector as it is from ordinary people. At the general election, Liberal Democrats fought on a policy of cutting VAT and employer's national insurance, to boost jobs and to help those who pay extra energy bills by cutting their other bills.

We now suggest being more direct and using the revenue gradually to raise income tax thresholds so that £10,000 is tax-free for every individual. That would be a very direct incentive for jobs, income, earning and hard work. It would also be direct compensation for any extra costs that people may pay, more than outweighing any increase in domestic fuel costs—which are nevertheless falling.

Those examples show clearly not only the role that environmental taxation can play but the pitfalls surrounding such taxation. The biggest single message must be one of vision, by placing the role of environmental taxation clearly in the context of reform of the wider tax system. Such taxation will not have public support if it is seen as a back door way of raising taxes—which the Chancellor can claim are good ones, whereas everyone realises that they are simply paying more. Such taxation has to be part of a process of tax reform. If the Government do that, they will make it possible to have a truly reforming series of Budgets in this Parliament.

I add my congratulations to my hon. Friend the Member for Peterborough (Mrs. Brinton) on securing this important debate. I congratulate also my hon. Friend the Member for Chatham and Aylesford (Mr. Shaw) specifically on his campaign to highlight the differences between VAT treatment of empty and new-build properties.

The Government, and particularly my right hon. Friend the Chancellor, have been enormously courageous in asking Lord Marshall to draw up a report on the business use of energy and possible tax measures to reduce business energy use. Like other hon. Members, I look forward to hearing the comments of my right hon. Friend the Chief Secretary on the Treasury's thinking on the Marshall report. As I, too, am a member of the Environmental Audit Committee, I should like to take this opportunity to welcome him to one of our meetings, so that he can tell us in detail how the Government will make progress on the energy tax agenda.

I shall concentrate this speech on measures that my right hon. Friend the Chief Secretary to the Treasury might take to encourage the renewable energy sector. The Government have already taken some important initiatives in supporting renewables. The Government's reversal of the previous Administration's cuts in renewables research and development spending—which they had planned to eliminate entirely by 2005—is very welcome. Investment in renewable technologies is essential for lowering their cost, and for ensuring that Britain will be in a position to reap the benefits of the global expansion in renewables, not only creating employment in the United Kingdom but realising the huge benefits of preventing climate change.

Other fiscal measures and tax incentives to stimulate the levering of private finance into the renewables industry could be usefully considered by the Treasury in helping us to meet our targets. The non-fossil fuel obligation has been successful in reducing costs of renewables, but many non-governmental organisations and the International Energy Agency have recommended that other measures to develop the green electricity market—both to complement the NFFO and to encourage the commercial take-up of energy generated by renewable sources—should be taken.

Some electricity companies offer a green tariff for those willing to pay extra for renewable energy. That may attract some subscribers, but I fear that they will be in a minority. It will be a significant time before sufficient funds are generated for substantial investment in renewables.

Countries such as the Netherlands have successfully levered private finance into renewable energy through simple tax incentives. Since the introduction of a green tax break in 1995, almost £200 million of private finance has been invested in funds established by Dutch banks for environmental projects. The majority of investment has been in renewables, although there have also been small investments in organic farming, eco-offices and the development of natural habitats and country estates. Similar tax breaks have been advocated by the New Economics Foundation and others to stimulate investment in initiatives, including environmental initiatives, to tackle social and financial exclusion. Other Treasury Ministers are considering such proposals.

The interest or dividends on the green funds are exempt from income tax, allowing the bank to pass on favourable terms to the investor and the project being financed. The initiative has been greeted with considerable enthusiasm by the Dutch public and financial institutions. The certificates of the first green interest fund issued by Rabo-Robeco bank to the value of £150 million were sold out in nine days. The ABN-AMRO fund for a £25 million wind farm was similarly popular. The green funds have succeeded by harnessing the public's desire to invest their savings in an environmentally sound and ethical way while still receiving an acceptable return. They have also provided much-needed capital for renewable energy projects, which could not have been secured through public expenditure or other means. The green funds are carefully regulated through the Dutch central bank. Proposals by project developers are assessed by the Ministry of Housing and Environment. The initiative has already resulted in 25 new energy projects, mostly on wind energy.

There is a fund for investing in wind power in Britain, established by the Triodos bank, but it is on a small scale compared with the Netherlands and does not have the advantages of the Netherlands tax system. My hon. Friend the Minister for Energy and Industry has welcomed the fund as an example of extending community involvement in the planning and ownership of green energy schemes.

We must carry the public with us if we are to achieve our renewables target. The Dutch system has so far favoured large-scale projects, but attention must be given to promoting renewable energy at community level. Tax incentives for communities that want to invest in renewable technology should be actively promoted. It has been demonstrated in other countries that, where communities have a stake in renewable facilities—such as through a co-operatively owned structure—and can see the financial benefits, they are more positive about the development of renewables. Tax incentives for community-based renewable projects would help to stimulate interest in, and take-up of, renewable energy, particularly if any surplus electricity could be taken by the grid at a reasonable price.

A tax incentive scheme could be a useful complementary measure to the NFFO. It would help us to meet our renewables and carbon dioxide targets and ensure that Britain was at the forefront of the development of the renewables sector. I hope that my right hon. Friend the Minister will give careful consideration to such a scheme.

I congratulate the hon. Member for Peterborough (Mrs. Brinton) on securing the debate. I should like to concentrate on why it is so important.

I recently became a trustee of an international body that is concerned with the crisis in the world's fisheries. The UN Food and Agriculture Organisation estimates that 60 per cent. of the world's fisheries require urgent management, and that 30 to 40 per cent. of them are about to be exhausted. It is essential that Governments take a lead and mean what they say. This should not be an issue of party politics. The previous Government passed on a good record on the environment to the new Government. However, more needs to be done. The link between the environment and taxation is crucial. I agree with the hon. Member for Truro and St. Austell (Mr. Taylor) that a serious tax reform must consider the role of the environment.

The Deputy Prime Minister recently returned from the conference on climate change in Buenos Aires. He went out with a great deal to say and high hopes, but most of us know that he returned with very little agreed. One of the major agreements was that 146 unresolved items would be deferred to a future climate change meeting.

The world must face up to the crisis. Countries such as the United Kingdom must take a lead and the Government must take action. The Government have shown a spirit of wanting to get on with addressing the problems of the environment. There has been a great deal of consultation. Indeed, as Charles Secrett of Friends of the Earth recently said, the Government's motto is fast becoming "Carry on Consulting". Lord Marshall's recent report on business energy use and the proposal for an energy tax is a start, but, for all the criticisms that might be levelled against the report, the Chancellor's response was that we must have more consultation.

Some of the problems require not just consultation, but action. The Marine Stewardship Council came into play because Unilever and the World Wide Fund for Nature put up about £1 million for urgent research on the state of the world's fisheries. That was not done with whole-hearted benevolence, but there was philanthropy involved. Unilever owns Bird's Eye. It realised that, in 10 years, there will be no more cod for its fish fingers. It is a long time since an 18th-century cabin boy could report that he was unable to get the boat out from the shore into the Baltic sea for three days because of the shoals of fish. Today, he would be lucky to find a fish in the Baltic.

The MSC wants to launch two major projects: one on the state of Alaska salmon and the second on South African hake. Those fisheries will soon be exhausted, but it is difficult for such bodies to find the funding that they need. There are suggestions of hypothecated taxation or the creation of an independent resource such as an environmental investment bank from which bodies such as the MSC or the Forest Stewardship Council could draw. Action is essential.

The Government's pre-Budget report has been criticised by many green bodies, including Friends of the Earth, because it fails to make core links between the environment and taxation. One of the projects mentioned in the pre-Budget report involves changes to vehicle excise duty. We have heard that there is to be a cut of £50 for cars with low emissions—a total incentive from the Treasury of £1.7 billion or £1.8 billion. However, we can guess that the Government will increase vehicle excise duty on other cars, which will net the Exchequer the same amount of money.

What will happen to that money? Will it be specifically linked to innovation in new technologies to protect the environment? Will it be made available to bodies such as the Marine Stewardship Council, which could use it to get on with the crucial work of certification, which has been agreed around the world? It has a set of principles that the whole world will sign up to, including the industries and the retailers involved.

The problem is that we cannot get the money to progress to the next stage. This is an opportunity for the Government. The environment needs to be at the heart of the economy, because we are talking about a common inheritance, as John Stuart Mill recognised. It should be at the heart of a civilised society to recognise its duty to husband the environment.

If the Government and the Chancellor are serious about the environment, they should use the change in vehicle excise duty as a way of helping the environment rather than a way of raising taxes. I am glad to see the Chief Secretary to the Treasury in his place, because his presence is a recognition of the importance of the debate. Will he consider ensuring that the money is not used simply as a way of raising taxes for general revenue purposes, but will be hypothecated in some form, and find its way into environmental concerns, to help bodies such as the Marine Stewardship Council and the Forestry Stewardship Council?

The tax changes should not simply penalise people who drive cars, they should change behaviour. That is at the heart of the issue. The problem is that changes to vehicle excise duty will probably hit people in rural communities hard, while people in urban communities go on driving their cars, and congestion, emissions and pollution continue. The crucial challenge on the environment and taxation is to find a meaningful way in which to encourage people, industry and businesses to change their behaviour. That is at the heart of the debate, and a civilised society must think about it.

Sustainable development is not a slogan, but a crucial task for the Government to take on. I urge the Chief Secretary to tell the House that sustainable development is not mere rhetoric but will be translated into policy, and that the Treasury will firmly underline that fact.

The hon. Member for Peterborough (Mrs. Brinton) has chosen well in selecting this important subject for debate, but she has also chosen a minefield for the Government. Several of the mines have already been trodden on by Labour Members, so we look forward to the response to the debate by the Chief Secretary to the Treasury.

I support my hon. Friend the Member for Witney (Mr. Woodward) in saying that sustainable development should be a core aim in any civilised society. The Conservatives have always believed that tax measures have an important part to play in delivering environmental aims. For instance, we used tax measures to achieve the successful switch from leaded to unleaded petrol.

Another example that has already been mentioned is the landfill tax, which we introduced, and which was designed to deter and tax the dumping of waste in landfill sites. Crucially, we used the revenue—nearly half a billion pounds a year—to cut employers' national insurance contributions by an equivalent annual sum. By taxing pollution, we cut the taxes on employment.

We can contrast that with what the present Chancellor of the Exchequer has done. He has announced a 43 per cent. increase in the standard rate of landfill tax, but the money will not be recycled into industry or used to reduce the costs of employment. Instead, it will simply be bagged by the Treasury for general expenditure. Taxation comes first, and the environment a poor second. It is therefore not surprising that, in March, the director of Friends of the Earth, Mr. Secrett, said:

"Last week's Budget was unforgivable. At a stroke, Gordon Brown broke the Government's manifesto promise to put 'the environment at the heart of policymaking'."

We shall undoubtedly hear several ideas from the Government about aggregate taxation, taxing water pollution and so on—but those ideas were first announced in July 1997. Since then, they have put up taxes 17 times and revolutionised the British constitution, but they still have not introduced any of those environmental ideas.

Rather than trying to gaze into a crystal ball, we are now entitled to examine the Government's record, and we see that little has been done for the environment, while great damage has been done to industry and commerce. My hon. Friend the Member for East Worthing and Shoreham (Mr. Loughton) made a good point about fuel taxation. The Library has calculated that the additional fuel escalator and future tax increases in future Budgets will add £9 billion to the costs of transport and motoring during this Parliament. That will not do anything for the environment; it will simply raise revenue.

The Government have a problem with carbon dioxide reduction, because they are stopping the development of any more gas-burning power stations, and nuclear power will start to be phased out soon, as the older Magnox reactors are decommissioned. However, imposing a burden on the motorist as a substitute will not do the trick. Indeed, the Budget documents make it clear that, by 2010, reductions due to the fuel duty increases will amount to only 1.7 million tonnes of carbon a year, compared with an annual emission of 206 million tonnes. After 12 years of fuel tax increases, the benefit will be an 0.8 per cent. reduction in carbon emissions at best. That is a ludicrously expensive way of achieving not very much. A fraction of that money used in other ways to reduce carbon emissions or to control pollution would bring a far greater return.

The Government are not only hitting the motorist, in rural areas and elsewhere, but damaging the haulage industry—a subject on which the House had a good debate last week. The whole of manufacturing industry is being hit, and productivity undermined, by huge and continuing cost increases. The Government lecture manufacturing industry about productivity. That is their new excuse for economic problems—lazy workers not doing enough at plant level. Yet, at the same time, they are imposing wave upon wave of extra regulations and tax increases on the firms in which people work.

Will the right hon. Gentleman give way?

I hope that the hon. Gentleman will forgive me if I do not. I have only a few minutes and I must complete the points that I want to make, most of which are in response to what has been said in the debate.

Despite their declared belief in tax harmonisation in Europe, the Government have made diesel fuel the most expensive in Europe—if that is untrue, 1 hope that the Minister will correct me now. The Financial Secretary to the Treasury sits on a committee dealing with unfair tax competition in the European Union, which means increasing United Kingdom taxation where it is below continental levels. Yet, although the Government have unquestioned discretion on fuel taxation, successive Budgets have widened the gap between our fuel taxes and those on the continent.

That is not harmonisation but the economics of the madhouse. The Government are making a bad situation worse. French lorry drivers come over here with full tanks to take freight round the United Kingdom, while British lorries fill up on the continent. We are exporting not only jobs but revenue.

Smuggling in Northern Ireland leads to a loss of about £100 million in revenue every year, because of the tax differentials across the border. When I asked the Treasury about that, the answer was that it had made no estimate. The Government think that they can estimate carbon reductions in 2010, but they have no idea how much revenue is lost today. Those are the finances of the madhouse.

Instead of making things better, the Government have announced that things will get worse, because they have signalled that successive Budgets will continue to increase fuel taxes year on year. The damaging differential between our fuel tax rates and those on the continent will widen.

There is another threat, which is mentioned in Lord Marshall's report on a possible energy tax. I am not impressed by the report, which has a curious omission. A Government document on climate change says that air transport is the fastest growing source of carbon dioxide emissions. However, aviation fuel is not taxed at all. The document by Lord Marshall is silent on that sector. I find that surprising, because Lord Marshall is, of course, the chairman of British Airways and has a great deal of knowledge and expertise in that sector. He might have been expected to tell us what should be done to bring those emissions under control, instead of dishing it out to the poor old haulage industry. The report is partial and incomplete, and it will, if we are not careful, impose huge additional costs, making British industry less competitive and driving investment away.

What we see is not the use of taxation to deliver environmental goals—that, perhaps, we could support—but the use of the environment to justify huge tax increases. The Chief Secretary to the Treasury is about to reply, and I welcome that. He is still relatively new to his job. Let him use his influence to reverse this high-tax strategy, which has failed. It is doing very little for the environment, it is undermining businesses and it is costing jobs.

In this area at least, can the Government make a start on bringing their rhetoric into line with their performance—or, perhaps, more accurately, start to bring what they do in practice into line with their pre-election rhetoric?

The Government welcome today's debate on the environmental effects of taxation. I add my congratulations to my hon. Friend the Member for Peterborough (Mrs. Brinton) on securing this debate. I was interested to hear about the Peterborough energy audit and the valuable role played by Perkins Engines in that initiative. My hon. Friend has been a doughty campaigner in Peterborough and elsewhere on environmental matters.

I also welcome the several members of the Environmental Audit Committee who are in the Chamber. I received a kind invitation from my hon. Friend the Member for Harrow, West (Mr. Thomas) to attend one of the Committee's meetings in the near future, and I am due to do so in December. I look forward to that with some trepidation, given the quality of speeches in today's debate.

As we face the century ahead, we need a focused programme of environmental modernisation—a programme that is not simply about environmental protection, but one that can achieve objectives that are central to the Government's policies. Those policies are clearly set out in the Government's approach to sustainable development, and are based on four broad objectives: first, the maintenance of high and stable levels of growth and employment; secondly, the effective protection of the environment; thirdly, prudent use of natural resources; fourthly, social progress which recognises the needs of everyone.

In the context of the Government' s commitment to sustainable development, will my right hon. Friend agree to look again at the code for fiscal stability? Is he aware that, in the recent version of the code which came out with the pre-Budget report, there is a single reference to the word "environment"—and that is the economic environment? Does he agree that it is worth looking at the five criteria used in the code and perhaps including a sixth—sustainability? Would that not be a way of effectively locking in fiscal policy with the Government's commitment to putting the environment at the heart of government?

There are a number of ways in which we can address those environmental concerns. My hon. Friend will be pleased to hear that, early next year, the Government will publish our strategy on sustainable development. That will outline our aims, as well as measures already in place, and will highlight what further action might be undertaken to achieve our objectives. Those objectives will make it clear that we believe that economic development must take place in a sustainable way to ensure a better quality of life for everyone, both now and for future generations.

We recognise that what matters is not just the quality but the level of growth. The debate has shown that the tax system clearly has an important role in underpinning sustainable development. Our strategic approach was outlined in our statement of intent on environmental taxation, published at the time of the Budget in July 1997. How and what the Government tax sends clear signals about which economic activities we believe should be encouraged or discouraged. Just as work should be encouraged through the tax system, environmental pollution should be discouraged.

I listened with interest to several hon. Members—including my hon. Friend the Member for Peterborough and the hon. Member for East Worthing and Shoreham (Mr. Lough0ton)—who mentioned the need to establish a green tax commission, something that was proposed by the Environmental Audit Committee in its response to the pre-Budget report. A number of European countries have such a commission, but the experience is variable—it works well in some countries, and not so well in others. We are keeping under review the possibility of establishing such a commission. We do not want duplication. There are many organisations doing valuable work in this area, and we shall need to look carefully to see whether a green tax commission can play a valuable role.

My hon. Friend the Member for Chatham and Aylesford (Mr. Shaw) referred to the harmonisation of VAT on the renovation of empty properties. We keep all tax matters under review—that is the nature of any Government. It will be for my right hon. Friend the Chancellor of the Exchequer to decide whether any changes will be made in that direction. I am sure that my right hon. Friend will look with interest at my hon. Friend's comments.

The hon. Member for Witney (Mr. Woodward) raised the two main issues, in my view. First, he referred to the difficulty caused by the Government consulting so much. We make no apologies for that. This is one of the areas where we need to take people with us and to explain the direction in which we wish to go. By doing that, we can command broad and popular support for our proposals. Secondly, the hon. Gentleman referred to hypothecation. We judge each case on its merits, and we will look carefully at each proposal. Once again, we have noted with interest the hon. Gentleman's specific proposals this morning.

It would be a mistake to believe that taxation is the only way in which we can address environmental issues. Clearly, a key part can be played by taxes, but they are not always the solution to every environmental problem. Environmental taxation must meet the general test of good taxation. It must be well designed to meet its objectives without undesirable side effects. It must keep deadweight compliance and administrative costs to a minimum, and care must be taken with regard to implications for the competitive position of UK companies in international markets.

The hon. Member for East Worthing and Shoreham was critical of the Government's spending commitments, which he felt did not address sufficiently environmental concerns. I wish to give the House an example of how the spending—£40 billion for schools and hospitals over the next three years, with which the Conservative party disagrees—can be used to address environmental concerns.

The House will know that the Government have started a large-scale programme of capital investment in our schools and –30 million has been allocated for improvements in energy management, including the replacement of heating systems. Decisions have just been taken to allocate to some 891 schools some of the money. It is estimated that they will achieve average savings on fuel costs of 20 per cent., with further savings on maintenance costs. This should, in total, amount to more than £2 million in savings a year which can be ploughed back into the individual schools. It is not merely pupils who will benefit. There will be a reduction of 44,000 tonnes in the level of carbon dioxide emissions due to the programme, which is the equivalent of 23 million average car journeys, or a reduction of 24,700 in the number of cars—a real contribution that can be made.

The Government will consider the issues in the round. We will study taxation and other measures that can be taken to improve our environment. We intend to do that with people—to consult and move forward on an ambitious agenda that will be based, not on dogma but on putting the national interest first. On the basis of those principles, I commend our approach to the House.

Order. We now move on to the debate on the pig and livestock industry.

I am grateful for the opportunity to speak on this subject, and I am sure that hon. Members will forgive me if I start with livestock before moving to the pig sector. I am also grateful for the support that I have received from a number of my colleagues, including some who are unable to be here but who have contacted me on the subject.

The debate is timely, coming only two days after the announcement by the Minister of Agriculture, Fisheries and Food of an aid package. Farming is in crisis, and it is the worst depression in the industry since the 1930s. Some farmers are leaving the industry because they cannot see any light at the end of the tunnel, and some are leaving because they have no choice as they are going bankrupt. The majority of farmers are staying in the industry, but getting poorer. Any savings that they have been able to build up through a number of years of hard and long toil have been eaten away and, for some, overdrafts are increasing daily to dangerous levels.

Put simply, the prices paid for animals have decreased dramatically in the past two years. In some cases, farmers are paid less for their animals now than they were 20 years ago. I do not know whether any other industry is facing similar difficulties. Part of the problem is that consumers do not appreciate the fact that that is happening. One farmer told me that 18 months ago he was paid between £1.10 and £1.20 a kilo for his cattle, but now it is between 75p and 80p. For lamb, the price used to be £1.10 to £1.30 and now it is 65p a kilo.

However, consumers visiting the larger supermarkets do not appreciate the fact that such dramatic falls have taken place. Farmers are being bled dry and consumers are being ripped off. Current supermarket prices are a conspiracy to clobber the producer and cheat the shopper. It is about time a new deal was struck for British farmers and consumers, and if our supermarkets are not going to do that job, who will? Lower prices in the shops would at least encourage increased consumption by more people. That is not the answer to all the industry's problems, but one can imagine the anger and frustration of farmers whose incomes have declined dramatically in the past two years when they see others maintaining or even increasing their margins.

The National Farmers Union has predicted that incomes will fall by a further 67 per cent. this year. Clearly, the situation is not tenable. For farmers to be told that aid will help them in the short term is no comfort when the crisis is long term—it has been going on for two years for many farmers. Obviously, banks have become concerned and relationships between farmers and bankers are strained. The banks will not carrying on lending when they see no prospect of a return.

I understand that the Minister of Agriculture, Fisheries and Food will be meeting bankers to discuss the farming crisis, for which I am grateful. Perhaps the Minister can tell us today what his right hon. Friend will say to the bankers when they meet. What fresh hope of an improvement in the plight of farmers can be given to bankers to help them sustain farmers through this crisis?

The majority of my contribution will concentrate on pig farming, but I wanted to put that part of the sector into the context of an industry that is reeling. The £120 million of aid announced on Monday is better than nothing, but that is as much as I can say about it. Will the Minister ensure that that money gets through to farmers as quickly as possible, because those with overdrafts see their bank managers weekly and will need to put it in the bank as soon as possible?

Does my hon. Friend agree that one of the most noticeable features absent from the announcement on Monday was that, whereas £48.3 million is being made available for the beef industry, not one penny is to go to the pig and poultry industries? Does he not think that that is a disgrace?

The pig industry has a distinct problem, but the crisis is hitting all sectors of farming. While the Government are targeting certain areas, the pig and poultry industries, which are also reeling from the same sort of problems as the rest of the industry, are getting no support. My hon. Friend is right about that, and I will be interested to hear what the Minister has to say about the rest of the sector in his reply.

Ben Gill of the NFU stated that the £120 million will

"act as a short-term safety net for some farmers teetering on the brink of financial collapse."

Also, interest rates have increased and the extra costs that farmers have incurred as a result more than swallow up the aid package announced on Monday. Frankly, for many farmers the aid package is not only too little but too late. We need a new approach to the industry—one that will give it greater security for the future—and a new attitude on the part of the Government.

The common agricultural policy is a disastrous method of taking money off the taxpayer in large amounts and ensuring that, in some cases, farmers have to live on less than the proposed minimum wage, which is not sustainable. We know that there are inefficiencies within the European Union. Only yesterday, we heard that there have been about £3 billion-worth of inefficiencies/fraud and that the gravy train is speeding out of control. Something needs to be done to deal with the problem, and capital is needed urgently, in particular because the EU is to increase in size and some of the countries that are about to join are enormous producers of agricultural products, which will impact on United Kingdom farming.

Farmers are reeling from lower prices, but they are also swamped by paperwork. There are new rules and regulations and new welfare standards to obey. Costs are being heaped upon them, with Meat Hygiene Service charges the final insult for many. One farmer told me yesterday that he knows of an abattoir owner who has nine employees at the abattoir, plus seven people from the MHS and two vets to inspect what is going on. Clearly that is not sustainable either. All those costs are passed on. When will those escalating costs to farmers and the industry be controlled?

Some Norfolk farmers told me last week that a number of inspectors are recruited from eastern Europe and some do not speak English properly. One inspector is from Hungary. This is not an insult to them as people, but obviously the communications problems need to be solved.

There is certainly a communications problem, but it may not be between the Hungarian inspector and the people with whom he works. The communications breakdown is between the farmers and those working in the industry and the Government. We need some control of costs so that farmers and people in the industry have some security for the future. For instance, will the Minister tell me whether our continental neighbours face similar costs to those heaped on our industry by the Meat Hygiene Service? Do they have the same sort of hygiene service and similar numbers of inspectors and vets in their abattoirs as in the UK? If not, why not?

The veterinary inspection procedures derive from a European Union directive and are exactly the same in other member states. Eastern European and other EU vets are working in our abattoirs because of recruitment problems in the United Kingdom, but I assure the hon. Gentleman that all of them speak English.

That is reassuring. As the Minister knows, all EU directives are enforced in this country—everything that we sign up to, we obey—but there is widespread scepticism in the industry about whether other EU countries would know an EU directive if they fell over one. The Minister, with his colleagues, must ensure that no competitive advantage is given to our EU neighbours.

My hon. Friend is more than generous in giving way twice. Is he aware that the standards of inspection in many European countries are much lower? In France, for example, only a vet is required to attend, whereas in this country a vet and a meat processor are needed. Moreover, in many European countries, inspection is paid for by the Government, whereas in this country the industry pays 100 per cent. of the costs. That is straightforward evidence from the Meat and Livestock Commission of the difference between European countries and the UK.

I am grateful for that contribution, which demonstrates the disparity between Britain and Europe. If British farmers and the British industry have to meet all the costs when farmers in other European countries do not, our neighbours will have a competitive advantage in the export market, and British farmers will suffer. That must be sorted out as quickly as possible.

The pig industry has been largely ignored in the current crisis. I saw a photograph of the Minister of Agriculture, Fisheries and Food in his wellies on a farm in Devon—he was surrounded by pigs. That was a great photo opportunity for him, and no doubt the pig farmers there bent his ear about the problems that the industry faces.

I pay tribute to Greg Smith and Philip Edge, two pig farmers in my constituency, whom I consulted in preparing for this debate. Their plight is typical. We must remember that the crisis is affecting small family businesses—individuals whose families have, in some cases, worked for generations in the industry. As my hon. Friend the Member for North Wiltshire (Mr. Gray) said, of the £120 million that was announced on Monday, the pig industry will receive nothing.

It did not ask for anything.

The Minister says that it did not ask for anything, but it is asking for help. Only a few weeks ago, I attended the Meat Livestock Commission breakfast at which he said: "Of course we know that the pig industry is in deep crisis, but how marvellous it is that it does not get any support." That is like watching a ship going down, not sending any support vessels to help it and, when the ship disappears, saying: "How marvellous. It did not ask for any support." The problem is that it did not receive any support.

There are no EU mechanisms on subsidies—as the hon. Gentleman said, the pig industry has never received subsidies. I emphasise that, although the pig industry has asked for a range of measures, which I shall outline, it has never requested direct subsidies.

That may be so, but we must recognise that the industry is reeling from the same pressures as the rest of agriculture. It is pointless saying that the sector has not asked for any subsidies; it is asking for help and a range of measures irrespective of subsidies. Farmers in neighbouring countries do not have to face the costs that are being heaped on the British industry.

Pig farmers are deeply concerned about the price that they are receiving for their products. The other day, Farmers' Weekly said:

"Despite Brussels' recent decision to raise export subsidies, UK prices have continued to slip and are now less than half the cost of production. The number of casualties is mounting, most notably this week with the bankruptcy of Scotland's biggest pig farmer, Arthur Simmers. But the pain is not being shared equally and supermarkets continue to profit from the crisis. Since the market peaked in June last year, producer prices have slumped by a massive 55 per cent. Retail values over the same period, however, have dropped by just 13 per cent."

I am grateful to my hon. Friend for giving way again. He is no doubt aware that Norfolk produces more than one tenth of all this country's pigs; it is estimated by local experts that the county has lost £58 million in the past 11 months because of the crisis in the industry. A farmer told me last week that his family business had lost £7,500. We do not want the Minister to give descriptions of the problems; we want answers to the specific questions that I know my hon. Friend will raise.

Norfolk is an important area for pig production, but the whole of the United Kingdom is affected. I have received a letter from the Ulster Farmers Union, whose members are also reeling from the crisis. All sectors of agriculture and all parts of the United Kingdom are affected.

The strong pound has had an impact on exports. Because of the difficulties in Asia and Russia, two markets that the EU has traditionally supplied, there have been many lost contracts, which has led to an over-supply. Moreover, many farmers in the UK and elsewhere have been increasing production to try to make up for the lost money, but that depresses prices even further.

Another problem is the welfare rules. We support the ending of stalls and tethers, but we must recognise that that has led to further costs for the industry. One of my farmers told me that he had had to spend £35,000 on new production methods for his pigs, but that sum is probably at the lower end of the range—some farmers will have had to spend much more than that. Animal welfare policies are being implemented in the United Kingdom well before they are in the rest of the European Union, with which we have to compete.

The capital investment that my hon. Friend mentions may, on paper, become an asset, but it is hard to do anything with it, as it is not transferable or flexible. It is often said that farmers have a lot of land and capital, but that capital is not very useful in a time of crisis.

My hon. Friend is absolutely right. The capital investment is not an asset when the pig farmer has had to borrow the money and now has to pay it back, with interest charges, as prices for his product fall. The welfare standards are tremendous, but I wish that they were met elsewhere, so that farmers in other European Union countries did not have a competitive advantage. What message on welfare standards will the Minister give to pig farmers? Will he ensure that pigmeat coming into this country meets the same standards as pigmeat that is produced here?

indicated assent.

I see the Minister nodding. We are giving our European Union neighbours, such as Holland, Denmark and France, a competitive advantage. It may be four or five years before some of those countries abandon stalls and tethers, in which time they will be able to kick British pigmeat out of the market and dominate it themselves. In that time, our farmers will go out of business, and it is very difficult for those starting up to make any impact.

Let us not give our neighbours a competitive advantage. We must fight for welfare standards throughout the whole of the European Union. If we are too far ahead of the game, we will do the British industry no service.

I well understand the hon. Gentleman's serious point about welfare standards, but I do not agree that our competitors who do not have the same standards as ours have a marketing advantage. The British Retail Consortium's recent announcements about the sourcing of fresh pigmeat and bacon, and about extending the schemes to other processed products, show that our quality assurance schemes and buying practices give our producers a welfare and a marketing advantage over our competitors, as demonstrated by the fact that some of our continental competitors are voluntarily applying the same standards.

It remains to be seen what competitive advantage British pig farmers will gain, as 30 per cent. of all bacon goes to catering concerns, which will continue to go on price: if it is cheaper, they will buy bacon from Denmark, where there are stalls and tethers. A lot of bacon goes under brand names, in any case. The Danish pig industry has done a tremendous marketing job for many years. In my local supermarket last week I could not buy any bacon other than Danish, and I am in a rural area. If the supermarkets have shown the way, I do not put much faith in the support that we will get in the future.

I believe that the Minister is considering banning certain antibiotics, including growth enhancers. If that is done simultaneously throughout the European Union, there will be no competitive advantage to other countries, but if we do it even before the science says that growth enhancers are wrong, we will heap more costs on British pig farmers. I understand that, for every £1 that will no longer be spent on antibiotics, £6 will have to be spent on feeding the animals. How does the Minister intend to ensure that any ban is science-based and applied equally throughout the European Union?

Pig feed made from meat and bone meal is banned here, but not in the rest of the European Union. What hope can the Minister give the British pig farmers for progress on that?

Consumers should be given as much information as possible. They do not know that farmers are getting less for their product, because prices in the shops are virtually the same as they were two years ago. How can we ensure that consumers have the information to make intelligent decisions about what they buy?

Pig farmers used to get something for the waste from the pig, but now they get nothing: in fact, they have to pay to get all the waste destroyed.

My greatest fear is that, with all the extra costs and higher standards, British pigmeat will be more expensive and supermarkets will simply go for what is cheaper. Housewives will certainly go for the cheaper option, because many of them are on fixed incomes and cannot afford to make ethical or moral choices. What consultations is the Minister holding on support for the British pig industry?

I read in The Daily Telegraph this morning that 1.3 million extra eggs are being sold every day because Delia Smith demonstrated some recipes using eggs. Do British pig farmers have to rely on Delia Smith to concoct a wonderful recipe including British pigmeat to give the industry a boost, or can they rely on the Minister for some support?

We are looking for a level playing field, even though I hate that phrase. We are in a competitive, cut-throat world, and we are heaping extra costs on British pig farmers, giving the rest of Europe a competitive advantage. The industry will be listening when the Minister replies.

There is all-party support for the British pig industry, and I was a little saddened that the hon. Member for Ribble Valley (Mr. Evans) sought party advantage in what is obviously a dire crisis for the whole of agriculture, and especially the pig industry. The idea of intervention, at which he was hinting, is not historically justified. According to my researches, pig fanning has not historically received state support, and I do not believe that pig farmers want subsidy, although I understand that they face particular problems.

Veterinary inspection is required not only for pigs: I recently visited a turkey farm—run by a family firm since the 1920s—where people made the same points to me as the pig farmers made to the hon. Member for Ribble Valley. They are most anxious that the charges for continuous veterinary inspection should be on a headage or a weight basis, because the small operator is bound to suffer if there is a time-cost charge. In this time of agricultural crisis, I see some merit in the Government's at least considering some assistance with the cost of veterinary inspection for those involved in animal husbandry.

One understands that universal subsidies cannot be applied across the board, especially in the arable, pigmeat and poultry sectors, but specific, targeted and focused help for exactly the sort of producers that the hon. Gentleman highlighted—in Essex and Lincolnshire—might have been expected from the statement earlier this week. I hope that the Minister will bring a more helpful proposal to the House.

My judgment was that my right hon. Friend the Minister of Agriculture, Fisheries and Food was warmly received and that it was generally accepted that he had consulted widely and listened, and had taken almost all the financial steps that the hon. Member for South Suffolk (Mr. Yeo) had urged him to take about two weeks earlier.

Mixed farms used to be much more common than they are today and, perhaps not in Norfolk but in many other areas, people used to move into and out of pig farming according to the state of the market, but that is no longer possible, because pig production has become much more capital-intensive. As far as I can gather, all farmers welcome the improvement in welfare standards, but that has added to capital costs, so people can no longer do pigs one year and chickens the next.

I am a little anxious if the only solution to the pig farming problem is thought to be discussions with our European neighbours about bringing all welfare standards up to the same level, because, if we wait for those negotiations to reach a proper conclusion, there will be few pig farmers left in this country to produce a product that has been so successfully improved over recent years.

Encouraging figures were given in a recent Adjournment debate, showing the progress that the pig farming industry had made over the past few years. A much leaner product has been produced to satisfy popular consumption demand. Until recently, the figures showed that the amount of pigmeat exported from this country had almost doubled.

However, what the industry cannot do—we probably cannot do it either, and it has been skirted around this morning as if it does not matter—is to solve the financial crisis in Russia and the far eastern economies. It is not just our pigmeat producers who cannot export to those countries; our European competitors face the same problem. In a declining world market, everybody will jostle and tussle, almost like pigs in a pen, for what is left in the market. I am not surprised that the Danish and Dutch producers are seeking to enter our markets, just as we would seek to enter theirs.

At present, our people are disadvantaged because of the strength of the pound. I appreciate that there is no easy answer to that. In all my reading of the proceedings in this Chamber going back over many decades, I have not yet found any Government saying that it is their policy to weaken the currency. That is not the answer. We have to accept that there is a problem because our competitors' products are cheaper than ours and because they have not advanced as far as we have in welfare considerations. Many of our producers have implemented those welfare considerations voluntarily. We need to be a little careful about horror stories about the wickedness of our competitors. We were warned about that during the beef crisis, when German producers sought to do that about our beef. In fact, they frightened their own consumers so much that they ate less beef of any kind, from whatever country.

It is right to aim some criticism at the supermarket monopolies. They have enormous power in the agricultural community. It is right that my right hon. and hon. Friends at the Ministry of Agriculture, Fisheries and Food have entered into discussions with the supermarket chains, or the organisation that represents them, to secure certain assurances for pigmeat producers in particular and for the producers of more general meat products.

The assurance which already exists is that the product will be labelled according to the country of rearing and birth rather than the country of packaging. It has always seemed absurd to state where something is packaged. There is no earthly point in my being told that Somerset cider is bottled in London. I want to know that it comes from Somerset. The same would apply to any other regional product. I want to know that I am buying British bacon if that is what I choose. I believe that my right hon. and hon. Friends have made considerable advances, bearing in mind the power of the supermarket chains in retail sales.

I believe that things have gone further. As was announced earlier this week by my right hon. Friend the Minister of Agriculture, Fisheries and Food, supermarket chains are saying that, from I January, they will offer for sale only pork or bacon products which are produced to the same level of welfare standards as ours. I have a degree of faith in British consumers and I believe that, once that proposition becomes more widely known, they will seek to purchase our products rather than those which are deemed to have been produced in a less humane manner.

I accept the point made by the hon. Member for Ribble Valley—that, while the supermarket chains are in their benevolent phase, one may be able to make a judgment about what type of bacon or pork to buy, but it is different when one dines in a restaurant. I suppose one could ask whether the bacon on the plate is British. I am sure that the waiter would say, "Certainly sir, of course it is British. We serve nothing else." Of course the restaurant is unlikely to expect anyone to be particularly seeking Dutch or some other sort of bacon. There is a problem, and there is no instant solution.

I am encouraged by the representations that my right hon. and hon. Friends have made to Government Departments to encourage them to consider the purchase of British meat products. Opposition Members sometimes seem to slide back in time and act like socialists of the old school when they ask why it is not possible to demand that the armed forces serve only British bacon. They seem to have forgotten that we now operate in a world of competitive tendering and best value, and that people have no choice but to go for the cheapest as long as it is of equal standard.

We would say that that can be overcome by the proposition that our meat products are of a superior standard and that, even if they are fractionally more expensive, one can still make a choice according to best value. It is not a question of ministerial edict. We cannot say, "You must buy British products." We would have the whole system of European law come down upon us if we sought to restrict our Government Departments to using only our products.

I am encouraged by the steps that the Government have taken so far in the areas where they have the power so to do. I hope that they will consider providing, perhaps at some public expense, the ability to store pigmeat products so as to take them out of the market. I hope that they will also consider some assistance with veterinary charges.

I speak as a Member of Parliament in the county of Suffolk. That county relies to some extent on the pig industry for agricultural production.

The crisis in the livestock industry is manifest. The depression facing my county is the worst it has seen since the 1930s. There has been a great deal of constructive dialogue with the Ministry of Agriculture, Fisheries and Food, and I pay particular tribute to those bodies that have advised me and other local Members of Parliament—the National Farmers Union branches in Bury St. Edmunds, Stowmarket, Eye and Stanton, and the British pig industry support group, eastern region, which has been trying to find a way to influence the Government and to brief hon. Members in an effective way.

The small amount of progress that has been made on behalf of the pig industry has, to a large extent, been the result of initiatives taken by bodies outside Government. Although the Ministry has been making warm noises and saying that it wants to listen and consult, in reality the little progress that has been achieved has been the result of direct action by Members of Parliament who have been lobbying the supermarket chains on behalf of the National Farmers Union and other industry groups to try to get some practical measures under way.

One example of those practical measures is the "buy British" campaign. Many hon. Members, including myself, have written to all the supermarkets in their constituencies. I have written to the chairmen and chief executives of all the supermarket chains in my constituency asking them to go out of their way to publicise the benefits of British pigmeat and to organise the labelling on their own-brand products to identify pigmeat as being British reared and produced, not just British packaged.

In a debate in the House in July, initiated by my hon. Friend the Member for Ludlow (Mr. Gill), there was a suggestion that Ministers should do what they could to ensure that, as far as possible, the source of pigmeat used by local authorities for school meals and by the armed forces should be the United Kingdom. I take the point made by the hon. Member for Braintree (Mr. Hurst) that we cannot have a socialist-style diktat to ensure that local authorities and the armed forces' procurers demand British pigmeat. That cannot be achieved overnight.

Nevertheless, under the terms of best value, Ministers should be able, on welfare grounds alone, to flag up the fact that we produce the highest standard of pigmeat. On quality, we are better than foreign pigmeat producers, and price does not come into it. I hope that the Minister will be able to give a detailed explanation of how local education authorities and the armed forces are trying to use British-produced pigmeat. The aid package announced by the Minister of Agriculture, Fisheries and Food did not do anything for the pig industry, and my local NFU representatives will be intrigued to hear claims that there has been no demand for state help or some public spending assistance for the pig industry. However, I wish to discuss not what the Government have not done, but what they can do in the future and I have two specific issues to raise.

My first concern is the level at which supermarkets set retail prices for pigmeat. My hon. Friend the Member for Ribble Valley (Mr. Evans) produced figures that I believe understate the fall in United Kingdom producer prices in the pig industry. He mentioned 55 per cent., and that figure was true in August this year. The Library advises me that 55 per cent. may be the fall in producer prices, but the average fall in retail prices over the same time is 13 per cent. That differential is troubling to pig producers in my county. It is bad enough that producer prices have fallen through the floor, but it is even more galling to discover that the supermarkets' policy is not encouraging British consumers to buy British-produced pigmeat.

What can the Government do about that problem? They may say, "We do not live in a socialist dictatorship: it is a matter for the private sector to determine retail price levels." That is largely true, but Ministers could hold serious discussions with the Office of Fair Trading to investigate the policy under which the price of pigmeat seems to be stuck at a high level when producer prices are so much lower. The British consumer is suffering and so is the British pig producer. My constituents and those who write to me regularly on the subject want to know what Ministers have said to the OFT, and what steps they are taking within the regulatory regime to ensure that falls in producer prices are sensibly passed on to the British consumer.

My second question needs a direct response from the Minister. Our regime for pig welfare is, without doubt, the best in Europe, and probably the best in the world. It was initiated by the previous Government and has been—in my view, sensibly—continued by the Ministry. However, producers in the pig industry are disturbed when they face a regime that prosecutes them for using meat and bonemeal in their pig units or for using sow stalls and tethering, but supermarkets can import pigmeat reared and produced using those production techniques.

If it is illegal for British meat produced in such a manner to be placed on supermarket counters, how can it be legal, just, right and fair for those same supermarkets to sell imported meat produced by the very techniques that are banned in this country? What legal advice has the Ministry received on that point? British pig producers do not have a level playing field, but worse still, potentially dangerous meat products are allowed on our shelves. If meat and bonemeal cause problems when fed to pigs in this country, they must also cause problems in imports from Holland and elsewhere on the continent. I hope that the Minister will answer that question in legal terms, and tell us what advice he has received.

My hon. Friend the Member for Ribble Valley raised a question about the official veterinary inspection service. The number of hours that are imposed on small producers and the cost per hour are increasing. I am indebted to a long briefing by Mr. Arthur Diaper, who is a poultry producer in Horley in my constituency. He gives a toe-curling analysis of the additional costs that he, as a small family business man, faces from the increased inspection charges. He makes a point about inspection levels on the continent, to which I would like a response from the Minister.

The Minister of State wrote to me and said that, if the rules were not observed in, for example, Greece, the Commission could take infraction proceedings. That is the legal position, but, to give confidence to poultry producers such as Mr. Diaper, will the Minister confirm that he will ask the Commission to give examples of infraction proceedings that it has brought against producers outside the United Kingdom, but within the European Union, for breaches of inspection rules and regulations relating to the official veterinary service?

We are told that the issue is a matter for the Commission, but the Minister needs to give confidence to producers in this country that they operate under the same rules and regulations as other parts of the European Union. Nothing less than an assurance that the Minister will talk to the Commission will do for producers in my constituency.

The Minister does his best to be an amiable and genial defender of Government policy, and he and his colleagues do their best to listen. They are good at warm words and the soft, fluffy-edged skills that are so characteristic of the new Labour party. There is nothing intrinsically wrong with that. It makes for good soundbites, and it looks good.

The Minister has been good enough to notify me that he will address a meeting in Bury St. Edmunds next week. That will be the first sighting in my constituency of any shadow Minister or Minister of any description from the Labour party during the three years in which I have been there. It is such a first that we all wonder why he is turning up. If he wants to listen to us, that is fine, but the people who attend the meeting will not want to hear just warm words. They want to know what practical and effective steps the Government will take to help farming in general and livestock in particular.

I should like specific answers to the three specific points that I have raised today, and my constituents would like those answers, too. If the Minister does not reply today, he will certainly be asked for answers when he visits my constituency.

I welcome the opportunity to discuss farming, and I congratulate the hon. Member for Ribble Valley (Mr. Evans) on gaining a debate on both the pig industry and the wider livestock situation. We went along the same path some weeks ago when the hon. Member for Ludlow (Mr. Gill) raised a related issue.

I want to respond to several of the points made by the hon. Member for Ribble Valley, and to make some general points of my own. While he and I can agree that there is a crisis, the House has heard some rewriting of the history of how we got into it, and of how the Government are trying to deal with it. I did not hear the letters BSE emanate from the hon. Gentleman's mouth, but we cannot forget that many of the problems facing British agriculture stem from that crisis. I was intrigued to hear the hon. Gentleman and the hon. Member for Bury St. Edmunds (Mr. Ruffley) say how unfair was the ban on feeding meat and bonemeal to pigs. I challenge them to say whether they suggest that we should end that ban.

Our speeches made it clear that we welcomed the ban because it contributes to our high welfare standards. The question is whether the same high standards are being observed on the continent, and the answer is that they are not.

I thank the hon. Gentleman for that. I share his wish that the same standards should apply. There is clearly a need to pressure retailers, caterers and meat processors, who have not been mentioned so far, into adhering to the same standards.

We have heard a lot about welfare standards. Like other hon. Members, I have spoken to the Meat and Livestock Commission and it would seem, from the commission's consumer profiling, that welfare standards are not foremost in consumption decisions made by individual customers. Interestingly, however, when irradiated food was offered to customers, almost all of them chose not to buy it, despite the inducement of lower prices. There is a job to be done in ensuring that consumers understand the need for higher welfare standards, as well as higher quality and environmental standards. The House, and the trade itself, must ensure that we get that message across to the consumer.

My main point is that we must understand that the pig industry operates in a dysfunctional market. When it comes to the over-supply of pigmeat, one problem not raised so far is that the market is not only open—that has been said—but cyclical, a fact that raises its own difficulties. Many farmers chose to begin production of pigmeat at the very time when excess supply problems were likely, and that has made those problems worse. As my hon. Friend the Member for Braintree (Mr. Hurst) has made clear, the loss of markets because of both declining demand and excess supply, particularly in Russia and south-east Asia, makes it little wonder that we have reached the nadir—at least, I hope we have—of prices and over-supply.

A more difficult tie-in is the fact that some market segments within agriculture are controlled, and others are not. People can see that their livelihoods may be affected by those controls, and that is particularly so for the beef and lamb sectors. There is a temptation to move to the freer market areas, and that has happened to a limited extent in my constituency. My farmers are principally dairy farmers, but there is some beef and sheep production. Some farmers decided 18 months or so ago to move into pigmeat production, and they have caught a cold. They have suffered a difficult decline because agriculture is not—to use a favourite phrase—a level playing field. The field is not even level within agriculture itself, and we cannot underestimate the damage that results from that.

No one doubts that we are discussing changes to our whole production process. Even the laggards in the rest of the European Union, let alone those in the rest of the world, understand that we are moving away from supply constraints towards lower prices with direct support. That support may come through mechanisms for environmental support, or it may be direct economic support. My right hon. Friend the Minister of Agriculture, Fisheries and Food announced a package of support earlier this week, and some of us welcomed it greatly. We shall soon see its overall impact on agriculture.

In the meantime, however, we must manage the crisis that none of us would deny. We must realise that difficult decisions are needed if we are to move to freer markets in the medium term, and if we are to recognise more global markets in the long term. As I learn more about farming, I am interested to find that some pig producers in the south-west are already global operators. I have met people who are already farming in Brazil and in eastern Europe. That is not uncommon. To suggest that the problems are purely domestic is to underestimate greatly the significant changes that have happened. That does not detract from the fact that there is an excess of supply, and that that is driving down prices.

Ben Gill, president of the National Farmers Union, has produced an interesting document for the European Policy Forum. It includes a graph showing that the retail price index for all items has risen since 1987 from a base of 100 to 160. The RPI for food only has risen from 100 to about 138, but farmgate prices have dropped off dramatically since about 1996. The graph ends with 1997, and I cannot pretend that the situation has not got a lot worse since then. It is clear, however, that farmgate prices, which had previously risen far less steeply than had the comparable sectors, have declined dramatically since early 1996.

There are serious problems, and we must deal with them. I agree with the solutions suggested by the NFU, and by Ben Gill in particular. We must seek value added at the root of the food chain, rather than having supermarkets deciding their margins, then passing them down the food chain as reverse benefits. That simply is not acceptable. At the same time, we need to recognise that farmers can collaborate more, which may allow them at least to hold down the increases in costs, if not to seek a reduction in costs through economies of scale.

I return to the point that we are moving towards more globally driven markets in all agricultural products, but we must provide opportunities for people to produce on a localised level and seek niche markets.

The pig and livestock sector will recover. It must proceed along a rocky path at the moment, but I have every faith that fanners will find a way to rebuild the sector and ensure a much healthier future.

I am grateful to the hon. Member for Ribble Valley (Mr. Evans) for initiating this important debate. We shall listen to the Minister with great interest.

We are talking not about a complaint, but about a crisis across all agricultural sectors, which is felt nowhere more acutely than in pig farming. Farmers in my constituency are being driven to ruin. I fear that they will be driven to worse than ruin. There was recently a tragic case of a farmer's suicide in the neighbouring constituency of Macclesfield. We have to turn the situation around.

I shall read briefly from a letter that a pig farmer in my constituency wrote to me. He said:

"There are no words to describe the financial plight of the pig industry at the moment. It really is criminal what the supermarkets are doing and the government are not doing. The supermarkets are claiming all the rewards from the general public through the drastic price increases they add onto the farmers prices. I am at this time getting half my break even price for my pigs, that is about £30.00 a pig loss and I sell 110 pigs a week."

That man has spent £50,000 updating his facilities. He has no way of getting a return on that investment. He is facing ruin, and he sees no future for himself or other pig farmers in the constituency. I wonder what we can do to help. Of course, we look to the Government for action to alleviate the crisis, but we can use the bully pulpits of our speeches, our meetings with constituents and the little articles that we write in our local weekly papers and urge people to buy British. They are patriotic, and they know that we produce the best.

The same applies to our poultry industry, which in my constituency is suffering greatly and is about to suffer even more acutely from the demand that there be full-time vets on site. Family businesses cannot survive in that way.

My father was a fanner and a country writer of some distinction. He farmed through the recession in the early 1930s. In the second world war, he wrote urging soldiers to go back, when the war was over, to life on the farm and agriculture, because then it offered the prospect of a decent living. Now it does not, and I suspect that, if he were alive today, under no circumstances would he make such a recommendation. There is not a living to be made.

The Government must turn the situation around, and I am sure that we, as Members of Parliament, can help. It is the responsibility of us all to make sure that the pig industry survives and that our farms are not a wasteland.

I, too, congratulate my hon. Friend the Member for Ribble Valley (Mr. Evans), who, with typical charm and acumen, obtained this debate and started it so well. It is a great pleasure to speak in a debate to which the hon. Members for Stroud (Mr. Drew) and for Braintree (Mr. Hurst) have contributed. They always make thoughtful speeches in our deliberations on agriculture, as do my hon. Friend the Member for Bury St. Edmunds (Mr. Ruffley) and the hon. Member for Tatton (Mr. Bell).

I want to make several points and a plea. First, the greater specialisation that is the consequence of an appropriate drive for quality and the greater focus and expertise that will be produced will make the livestock industry more vulnerable. The hon. Member for Braintree said that, in days of old, people would go into and out of sectors: for example, they would go into pigs or out of poultry. That was also the case in the arable sector. It is becoming less and less true. That specialisation will create an inevitable inflexibility when a particular sector is hard hit, and it must be taken into account in any future regime that we establish.

Secondly, there is an interdependence born of fellowship in agriculture, but there is also a more commercial interdependence. The price of and demand for grain is critical to the livestock producer and the effect on morale of a blow to one part of the industry is felt widely. There is far greater interdependence than is recognised and acknowledged.

Thirdly, demands for quality will also result in a need for greater capital investment. That was mentioned earlier in relation to pigs, but, not wishing to tether us to pigs, I am trying to speak a little more widely. That capital investment will mean that farmers find that they cannot move in and out of products and will exacerbate the trend that I mentioned in my first point. Farmers will also have to borrow more to invest. It is often said that farmers have had good times and now they have bad times, and that they should have spread their money across the years. We all know that life does not work like that, but the claim is particularly untrue in farming, where good years tend to produce the greatest capital investment and lean years mean that farmers depend on that investment to get them through. Greater capital investment is now necessary, and will certainly be significant in the future.

My fourth point is about the extension of Community regulations on co-operatives. We need more co-operation in the industry, particularly on sharing best practice and on more appropriate and more skilled joint marketing. I wonder if it would be possible to extend the Community regulations and directives on co-operatives to private amalgamations and collaborative organisations. A number of those already exist in the arable sector, as the Minister will know, and in the livestock sector. That is a growing trend.

indicated assent.

I see the hon. Gentleman nodding. He also mentioned that point. We need to consider how we can most effectively support that trend.

My fifth point is to nail the point about the market. I am a business man and I made my money in business, but we must recognise, as The Times said earlier this week:

"Market collapse, followed by an exodus of farmers, could threaten the land's husbandry. The Government and public must acknowledge that preventing this costs money."

The plant of a fanner—the buildings and the land—is our vista, our horizon and our rural idyll. I know that critics will say that that is a suburban misinterpretation of the rural world, but there is little apart from farming that one can do with land. It is not flexible like commercial property, such as offices and factories. Reskilling and the re-use of plant and investment is much harder in agriculture, and we must acknowledge that the Government will always have to intervene to pay, incentivise and reward farmers for that role in land husbandry. Their countryside is our countryside, and we should not be ashamed to say so.

My plea is for the Government to take a strategic view, and to develop a vision for agriculture. What we had earlier this week—it was presented as nothing else—was an emergency aid package. It was accident and emergency treatment, not preventive medicine. It did not reflect a bigger picture or a long-term goal or vision. If we are to talk about restructuring the industry, we must know into what we are restructuring it.

When the Select Committee on Agriculture considered the beef industry, one of our greatest complaints was that there seemed to be an absence of long-term vision. How big will the industry be? How many producers will there be? What will the level of production be? We need to make those judgments now if we are to work to a meaningful and realistic agenda and give farmers the faith that we have a clear sense of direction that can be coherently and consistently communicated to them. At the moment, everything appears to be reactive. I do not say that particularly of this Government—it is not a party political criticism.

We have tended to react, rather than to plan strategically. That is my plea: let us have a strategic division. Let us not be buoyed by events. Let not Europe dictate the terms. This is a matter of national interest. I shall not repeat all the valid points that have been made about supermarkets, although I could wax lyrical on that topic all day—not that you would let me, Mr. Deputy Speaker.

There is a need for a clearly defined, long-term plan that will be supported by all parties and the industry, and which will revitalise agriculture and give it a place in the next millennium.

Because of the short time available to me, I cannot deal in detail with the contributions that we heard from my hon. Friends the Members for Ribble Valley (Mr. Evans)—who introduced the debate and spoke with great passion and concern as he outlined the problems—for Bury St. Edmunds (Mr. Ruffley) and for South Holland and The Deepings (Mr. Hayes). We also heard contributions that we on these Benches have learnt to enjoy from the hon. Members for Braintree (Mr. Hurst), for Stroud (Mr. Drew) and for Tatton (Mr. Bell). It is notable that the only contribution from the Liberals is the fact that one of their spokesmen has just walked into the Chamber.

rose——

The hon. Gentleman is not entitled to walk into the Chamber at the last moment and take up the time of those who have been present throughout the debate. [Interruption.] I shall not give way. The hon. Gentleman should sit down and listen.

The debate takes place against the background of steps that the Government have taken, which I value. In large measure—I do not say this in a partisan sense—those are points that we put to the Government, as did farmers. I welcome the action that has been taken in respect of agrimonetary compensation, HLCA payments and the calf processing scheme. All that is right and proper, and I commend the Government for it.

There has been comment this morning about the amount of money in the Government's package. I do not dismiss £120 million as a derisory sum; it is not. However, the crisis involves far more than money. That contribution represents less than 5 per cent. of the decline in farm incomes over the past three years. If it were simply a matter of money, the position would be entirely different. As we have said repeatedly, what we need from the Government is not so much an effort of money as an effort of will. They must recognise that there is a problem of unprecedented proportions, and be prepared not only to take fiscal measures, but to listen to what people want and to act on it.

The Minister of Agriculture, Fisheries and Food made much play in his recent statement about the arrangement that he had reached with the British Retail Consortium. That has been mentioned in the debate by other hon. Members, and I make no apology for returning to it. Although I particularly enjoy the contributions of the hon. Member for Braintree, he is simply wrong when he sums up the deal—if it amounts to that—that has been reached as ensuring that supermarkets will not sell products that have not been produced to the same standards as ours.

It is instructive to study the short and unhappy genealogy of the deal. In the House on 4 November, the Minister pulled a rabbit out of a hat, if I may mix metaphors. Referring to the British Retail Consortium and major retailers, he said:

"They have assured me also that, from I January 1999, all pigmeat sold in their outlets will be from animals raised to high welfare standards, with no stalls and tethers and no meat and bonemeal feedstuffs."—[Official Report, 4 November 1998; Vol. 318, c. 952.]

The British Retail Consortium promptly decided to reinterpret what it had agreed with the right hon. Gentleman. On 12 November he was forced to say:

"The British Retail Consortium assures me that its agreement regarding pigmeat sold in its outlets—being stall and tether-free and meat and bonemeal-free—applies to not only fresh pork but processed products, such as bacon, and is being extended to cover ham, sausages and even pork pies."—[Official Report, 12 November 1998; Vol. 319, c. 466.]

Great joy and felicitation and the issuing of much bunting, perhaps, but still the British Retail Consortium was concerned about that gloss being put on its deliberations.

On 16 November, the Minister stated:

"The industry's intention was that that covers not only fresh meats but processed meats, including bacon and products such as pork pies. Supermarkets were willing to take responsibility only for those processed products over which they had direct control—in other words, their own brands.—[Official Report, 16 November 1998; Vol. 319, c. 632.]

In that form, the assurance is not worth the paper that it is written on. With their buying power, supermarkets can decide what they will and will not put on their shelves. They have the combined might to tell suppliers that they do not want products that do not meet the standards that apply in this country. The existing assurance is worse than meaningless, although I accept that at the time the right hon. Gentleman must have thought it was an assurance worth having. I hope that the Parliamentary Secretary will tell us what steps the Government intend to take to make sure that it amounts to something.

Steps can be taken now. They require an effort of will from the Minister and his colleagues to stand up for this country's interests in Europe. It has been suggested to me by the National Farmers Union, to which I am grateful for these points, that various steps could be taken with regard to the pig industry. The NFU tells me that it has given the Government evidence that state aid is being given by other countries in the EU, specifically France, to help their domestic pig industry.

We know what will happen. The matter will be investigated, and, in due course, the farmers will be told to give the money back. That is how it is done over there, but it is not sufficient. Farmers are entitled to ask the Government to find out what is going on in the EU and to put their foot down. That requires an effort of will.

Fiscal measures could be taken in the Budget, but I do not have time to go into detail. In Europe, the Government should fight to ensure that export credit guarantees are given so that we can compete on equal terms with the United States. We need an early food package for Russia, coupled with a higher rate of EU export refunds for such commercial transactions as can take place.

It is clear that, at present, there is a surplus in Europe. The Government should vigorously initiate discussions with our EU partners about the steps that will be taken to remove the surplus. With reference to livestock, we have heard what could be done through meat inspection charges in the industry. Time does not permit me to elaborate. We know what could be done to meet the cost of enforcing specified risk material. We know what could be done in terms of the date-based export scheme. Other measures are needed to promote flexibility and an early retirement scheme for farmers.

It is not good enough to claim that nothing more can be done. I have great regard for the Parliamentary Secretary, but it is not good enough for him to bleat, as he did in an intervention, "There is not much that we can do—it is all down to Europe." It is not.

I did not say that.

The hon. Gentleman will want to check Hansard. I made a careful note of what he said. This is not the first time that we have heard the Government say, "We would like to help, but we cannot help because of Europe." We want a commitment from our Government to stand up and fight for this country's interests in Europe. It is no good the Government saying that they represent a bridge into Europe, if their idea of a bridge is simply to lie down so that other people can walk over them.

I want a commitment from the Government to get the right deal for British farmers in Europe, in the same way as the Spaniards seek the best deal in the interests of their fishermen.

I recognise that the Government are taking measures, and that part of the problem is the cyclical nature of the farming industry—there are good years and bad years. However, one overriding issue distinguishes this crisis in agriculture from any other: the Government's mismanagement of the economy. The pig, livestock and poultry sectors are all feeling the effects of a pound that is so strong not as a result of deliberate Government action, but as a result of deliberate Government mismanagement of the economy.

That is why the Government are ultimately responsible for the depth of the crisis. That is why it is fair for the farming industry and Conservative Members to point out that the unique strength of this crisis is the fault of those who inhabit Downing street. I would like to think that, as a result of this debate, the Minister might comprehend the scale of the problem and what Government economic mismanagement is doing to our agriculture. However, I suspect that, instead of comprehension and empathy, there will be a yawning void.

I regret that the hon. Member for Teignbridge (Mr. Nicholls) has tried to make a partisan point in what has been a good debate about the real crisis facing agriculture. He suggested that that crisis is a result of the Government's economic mismanagement, when we know very well that much of the pressure on agriculture is due to the collapse of traditional markets, the strength of our currency—although that has devalued by 10 per cent. in recent months—and to a significant increase in production in certain agricultural sectors. There has been a 16 per cent. increase in pig sector production over the past two years. Those factors, as the hon. Gentleman pointed out correctly and fairly in his opening remarks, have contributed to the current problems.

I congratulate the hon. Member for Ribble Valley (Mr. Evans) on a very good and knowledgeable speech, which outlined the pressures that his farming constituent—particularly those in the pig industry—face. I shall try to answer the various points raised in the debate in the limited time available.

Several hon. Members mentioned the supermarkets. They will know that the Office of Fair Trading is investigating the supermarkets and examining such things as the disparity between the prices of goods on the shelves and the prices paid to producers. That report will be published next year.

The Minister and 1 have met the banks—I understand that there will be further meetings—to discuss the current farming situation and emphasise the need for support. In my discussions—I did not meet all the banks, but certainly some of the major agricultural lending institutions—it was made clear that the banking sector has confidence in agriculture and will support farmers, their customers, during this difficult time.

The banks also made several predictions that have so far proved to be quite accurate. At a meeting earlier this year, the banks predicted that the pound would fall in the fourth quarter of this year and that interest rates would peak and decline, and that has occurred. The hon. Member for Teignbridge claimed that interest rates had risen, but they have fallen recently, and the long-term borrowing rate is currently at a 30-year low. The banks also predicted that farm incomes would fall last year and this year, but they are predicting an upturn in 1999. Several factors bear out that prediction.

The long-term borrowing rate is mentioned time and time again. Will the Minister concede that farmers borrow not on the long-term rates but on the commercial rates that are available today and those that have been available for the past two years? That is the problem.

I think that some farmers do borrow on long-term rates: it depends on their commercial judgment and the size and nature of their operations. I do not think that the hon. Gentleman can rule that out.

Several hon. Members mentioned European Union directives. I emphasise that we comply with those directives in this country, and it is not fair to say that other countries do not do likewise. We have repeatedly told several industry sectors that, if they are aware of disparities within the EU, we will not hesitate to investigate them, raise them with the Commission—the hon. Member for Bury St. Edmunds (Mr. Raney) made that point—and press for immediate action in cases where other member states are not implementing regulations in the same way as we are. I give the House that absolute guarantee.

Some pig producers have claimed that France, in particular, is subsidising its domestic industry. Will the Minister challenge that practice in the Council of Ministers?

I was about to come to that. We have already challenged it, together with other member states, and France is not paying anything towards its pig industry at present as a consequence. I assure the hon. Gentleman that we will remain vigilant on that point.

I touched upon the issue of competitive advantage earlier by way of intervention. The House may not be aware that United Kingdom exports of pigmeat to Europe this year increased by 17 per cent. on last year, which was a record year. Some 236,000 tonnes of pigmeat was exported from the United Kingdom to the EU. We have some marketing advantages that we can exploit—indeed, we exported pigmeat to Denmark, which is quite an achievement.

Offal control imposes extra costs, and I would not want to pretend otherwise. However, we all know that that is a result of bovine spongiform encephalopathy—the worst crisis to hit agriculture in the history of this country. We are determined to eradicate BSE from the United Kingdom and deal with those problems. Unfortunately, that means that we must have offal control.

rose—

I hope that the hon. and learned Gentleman will forgive me, but I want to try to answer the points that have been raised in the five minutes remaining.

The review of antibiotics is an EU issue, and it is being approached in that context. Any change in antibiotics will take the form of an EU, and not a unilateral, measure.

My hon. Friend the Member for Braintree (Mr. Hurst) adopted a very reasonable approach based on significant knowledge of the industry. I welcome his support, and I shall reassure him about storage aids in a moment. The hon. Member for Bury St. Edmunds referred to labelling, supply and flagging up standards in the industry. We certainly intend to address those issues.

Any imports into this country must comply with the law, but we can set higher standards if we choose to do so. We have done that in relation to welfare standards in the pig industry, and I emphasise that that has marketing advantages in terms of meat and bonemeal.

My hon. Friend the Member for Stroud (Mr. Drew) emphasised the importance of consumer choice and marketing. I agree with him absolutely. The hon. Member for Tatton (Mr. Bell) made a powerful case on behalf of his constituents. I assure him that the Government fully recognise the impact of the present difficulties on the agriculture industry. That is why we introduced the recent package, which is in addition to the package introduced last year and the regular subsidies that I will mention in a moment. The hon. Member for South Holland and The Deepings (Mr. Hayes) made several sensible points, particularly regarding marketing and co-operation. The Government will consider how to take those matters forward in the near future.

We have announced a package of £120 million for the livestock industry. The sum is additional to the overall subsidy for the agricultural sector, which is the equivalent of £50 for every man, woman and child in this country. That is a significant amount. I emphasise that the pig industry—on which this debate has focused—is unsubsidised and is a very light EU regime. We have held talks with the United Kingdom pig industry and, although it has certainly requested a package of support measures and equal treatment and raised several points that were mentioned in the debate, it has not asked for any subsidy. The industry asked the Government to take action against French and German state aid to their domestic industries. We have acted on both counts, and neither Germany nor France is supplying state aid to its pig industry. We are trying to ensure that all member states abide by the rules.

Time is limited in terms of compiling a package of measures for the pig industry, but a further increase of 30 per cent. in the rate of export refunds on fresh and frozen carcase meat was agreed on 15 October. At yesterday's meeting of the pig management committee in Brussels, the decision was taken to increase the level of export refunds from 40 to 70 ecu per 100 kg for fresh and frozen cuts and carcases that are exported to Russia. That is a generous increase that reflects both the economic problems in Russia and the position of the EU pig market. In respect of the EU pig industry, the total package of storage aids, which apply in our country, is the equivalent of more than £100 million. That is going towards helping the pig industry now.

I make it clear that considerable financial support is being given to the pig industry, and in practical terms we have raised continuously that industry's high standards. The British Retail Consortium statement was welcome; the major supermarkets have made it clear that they will be sourcing only fresh pigmeat and bacon, and sourcing their own-process brands—including sausages, pies and so on—from systems that produce stall-free, meat and bonemeal-free pigmeat; and we will be meeting the branded manufacturers to find out whether we can extend that to a wider range of products to assist the pig industry.

The Government will not hesitate to give the pig industry, the livestock industry and agriculture in general what support they can. We have shown that, both financially and through our commitment to give those industries the backing that they deserve.

Wales has a reputation for rain, but the rain that fell between 21 and 23 October and during the following week was exceptional. Compared to the horrific and unimaginable effects of Hurricane Mitch in central America, our experience was relatively mild, but what happened may be related to the increasing incidence of severe weather, which is attributed to the climatic change caused by global warming.

The aim of the debate is to reflect the concerns of people who were directly affected in those floods, to consider the role of the public services, and to call on the Welsh Office to review the readiness and capacity to respond to incidents of serious flooding in the context of global climatic change.

On the morning of 23 October, I saw in my constituency the effects of the worst floods that south Wales has experienced since 1979, when 7,500 properties were affected. Some would say that the floods were the worst since 1945. The Environment Agency interim report on the October floods states that 500 homes in Wales were flooded; rainfall generally exceeded 150 mm, or 6 in; and in certain locations, such as Treherbert in the Rhondda valley, up to 9 in of rainfall was recorded.

The worst-affected areas have been Merthyr Vale and Aberfan, where residents reported a "surge of clean water" from the Afon Taff, which flooded 160 properties in a few minutes; Pontypridd was flooded by the Taff and Rhondda rivers; Forth, New Tredegar and Ystrad Mynach were affected; in Llandovery, the Afon Bran flooded 155 properties; in Pencoed, near Bridgend, 61 properties were affected; in Aberdulais, 17 properties were flooded; and in the Vale of Glamorgan, about 30 properties were flooded as a result of the level of the River Thaw, and there was widespread disruption to traffic.

The extent of the damage due to flooding in Vale of Glamorgan as portrayed in the Environment Agency's interim report greatly understates the damage that was caused. It is a miracle that no one was killed in my constituency. One old-age pensioner—Mrs. Jennings of Ham Manor Park—waded almost neck deep in flood water, late on the Saturday night. There was total confusion about who my constituents could turn to, and who is responsible in such situations. Should my hon. Friend call for an inquiry, I would support him.

My hon. Friend makes a valid point on behalf of his constituents. What he says adds force to the argument that there should be an independent inquiry into these floods.

I visited homes that were flooded near Abergavenny.

I would echo the call for an inquiry, because not only south Wales was affected by the floods. Herefordshire and the borders were severely affected; indeed, in Herefordshire, one person died in the flooding. Hon. Members will want to commemorate that, and send their condolences to that farmer's family.

May I ask the hon. Gentleman two questions? He mentioned environmental changes. Two physical changes have been cited—certainly in Herefordshire—in respect of the problems of the recent flooding. One is that Welsh Water allegedly opened the sluice gates from reservoirs to release pressure, which caused a surge. That allegation has been denied by Welsh Water, but it has been constantly repeated, and he will have heard it.

The second change to be cited is that, because of the problems associated with agriculture, there have been changes in farming practice, most notably stopping cattle grazing near river edges, which has led to the planting of potatoes. That has caused an increase in topsoil going into rivers, which is silting them up. Will the hon. Gentleman comment on that?

Order. I remind all hon. Members that this a brief debate. Time is precious.

The hon. Gentleman makes a valid point on behalf of his constituents. The whole House will express its condolences to the family of his constituent who lost his life during the floods. I understand that the issue relating to sluice gates may be mentioned by the Minister in his response.

In respect of the homes that I visited near Abergavenny, there was dispute about whether red warnings were issued in time. I met residents in Usk whose homes had been flooded in Llanbadoc. The homes that I visited had been flooded as a result of the failure of the drainage system to cope with the flooding, not because of the River Usk bursting its banks. Despite warnings that there would be a major incident in Usk, that was prevented as a result of the investment in flood defences introduced since 1979.

At a farm near Glangwryne near my constituency, I saw dozens of sheep that had been drowned. Near Usk, more than 40 cattle were reported to have been swept into a flooded river, but, miraculously, all survived. Farmers have experienced a depressing time in recent years, but these incidents have tested to the limit their commitment to farming. As the hon. Member for Hereford (Mr. Keetch) said, at least one farmer lost his life trying to save livestock.

Following the floods, roads were damaged and rendered impassable; drains were blocked, which caused further flooding; wide areas of farmland and open space were transformed into lakes; on the A4042 at Llanellen, near Abergavenny, the River Usk broke its banks with such rapidity that vehicles were stranded, and some drivers and passengers in lorries and cars were rescued in the dead of night.

I have no doubt that, without the efficient and heroic actions of the police and fire services, there could have been serious tragedies. I pay tribute to the retained fire service crew at Abergavenny fire station, which answered numerous calls for assistance during the night. Many of those retained fire officers would have already done a day's work in their normal place of occupation, and may have had to go to work afterwards as well.

South Wales fire services responded to 320 calls about flooding in Gwent alone, and Gwent police placed considerable resources into a gold command at police headquarters in Cwmbran. I also commend the work of Monmouthshire county council and the Environment Agency in my area, and the many individuals who gave their time to assist their neighbours. In Usk, the town council reported problems in the provision of sandbags, and properties prone to flooding were not protected. Concern has also been expressed about the provision of water pumps and dehumidifier equipment, and about whose responsibility it is to provide such equipment.

The following weekend, some properties were flooded in Monmouth town as a result of the dangerous rise in the level of the River Wye, but more widespread flooding was prevented by the flood prevention measures to which I have referred. As the Environment Agency has stated, a key outcome of success is the absence of a flooding incident. Such outcomes are, by definition, unmeasurable.

In recent weeks, we have seen the horrifying effects of the hurricane and the flooding in central America. The apparent worsening of weather conditions has raised many questions about the impact of climate change caused by global warming. The latest findings from the United Kingdom Hadley centre on the changing face of the United Kingdom's weather do not bring good news.

Temperatures are rising. The average global temperature in 1998 is likely to exceed that of 1997, which is the hottest on record. Rainfall will increase during the winter and autumn across the United Kingdom, especially in the north-west and Wales. Consequently, it is predicted that we will experience an increase in climatic extremes such as greater risk of flooding. Although the Government are taking a leading role in the world in addressing the threat of climate change, this evidence shows that the events in south Wales are likely to recur.

I am not certain whether the Territorial Army was involved in dealing with the floods in Monmouth and the rest of south Wales, but would not the hon. Gentleman concede that, in general, the armed services, including the TA, become involved when such emergencies happen, and that that is one reason why we should be cautious about reductions in the TA, such as that announced yesterday by the Secretary of State for Defence?

I assure the hon. Gentleman that I will discuss the Army and the TA later in my speech.

Following the Easter floods, which affected mainly Northamptonshire, but also Skenfrith in Monmouthshire, the Government established an independent inquiry. I have written to the Under-Secretary of State for Wales, my hon. Friend the Member for Cardiff, Central (Mr. Jones), to ask for an independent inquiry into the recent floods, and I am disappointed that, in his parliamentary answer, he has rejected my request.

I ask him to reconsider, and to conduct a general review into flooding in Wales. The review could assess the preparation for climatic changes that seem to affect our country and other nations more frequently; whether our public services are equipped and prepared for civil emergencies such as major flooding, as occurred in south Wales recently and in Towyn in north Wales a few years ago; progress in establishing automatic warning systems; whether the powers of local authorities with respect to flooding should be reviewed and whether local authorities are adequately resourced to deal with flood emergencies; and what role the regular Army or Territorial Army can play in civil emergencies such as flooding.

I acknowledge what the hon. Member for Ribble Valley (Mr. Evans) says, but it is important to remember that the aim of yesterday's announcement on the Territorial Army was to ensure that the TA can be modernised to respond more effectively to emergencies in this country and abroad when necessary. However, there appears to be a grey area as to when and under what circumstances the Army and the TA in my area are brought in to respond to a civil emergency. I am concerned that the TA tells me that, under a provision of the previous Government, local authorities are billed for the response of the TA, which often makes them reluctant to call it out.

There is also a need to review planning guidelines on development on flood plains, following the recommendations of the Bye report into the Easter floods. One of the lessons of the October floods must be that planning guidelines need to be revised and consistent between Government Departments and the Environment Agency.

On that point, does the hon. Gentleman agree that prevention will be far cheaper than the cost of clear-up afterwards?

The hon. Gentleman makes a valid point. Surely the thrust of this debate is that prevention is better than cure.

The flooding of any person's home must be one of the most traumatic personal experiences. Some people have experienced flooding on more than one occasion. Many people live with the constant threat of flooding. For every one of those 500 or 600 families that were affected in October, it was a tragic event. They will naturally ask questions about the circumstances in which their properties were flooded and about the response of the public services.

The aim of the debate has been to raise the concerns of those who have been affected by the floods, to ask for a review into the response of the public services, and to ask the Government to consider whether we are capable of responding effectively to major incidents such as flooding that is caused by global warming.

At the Buenos Aires conference, the Deputy Prime Minister said:

"The cost of climate change could be dwarfed by the cost of ignoring"

it. That applies in Wales as it does everywhere else.

I am grateful to my hon. Friend the Member for Monmouth (Mr. Edwards) for allowing me to participate in the debate. I shall confine my remarks to the local situation. As he pointed out, nearly 200 households in my constituency were seriously affected; they were in Merthyr Vale, Aberfan, Abercanaid, Quaker's Yard, New Tredegar and Tirphil. All suffered the heart-breaking consequences of flooding. I agree with my hon. Friend: there is nothing more heart-breaking than walking into a flooded home. Many people are proud of their homes. To see them covered in sludge and mud is terrible.

The heart-breaking consequences of flooding were brought home to us that weekend—more so in our case, because some of the same streets and communities were hit 20 years ago. Because we had believed that, in many cases, we had put up sufficient defences against a repetition of those heart-breaking events of Boxing night and afterwards 20 years ago, it was all the more heart-breaking to see the same streets and communities affected—not all; some streets were not affected this time, but, in many cases, the same households were hit 20 years ago.

Therefore, rightly and understandably, there is a justifiable demand for answers about why the flooding happened. In the case of my constituency, there are three or four major questions. First, with all the elaborate processes that were supposed to be in place, why was there no flood warning alert until extremely late in the day—impossibly late to take any meaningful action in Merthyr Vale and Aberfan?

Secondly, many residents in my community testified to surges of clean water coming down the valley. The allegation has been made that, somehow, the water was released from reservoirs at the top. I know that it has been denied, but it has not been explained—another reason why we need an inquiry and the sort of assurances that an inquiry would bring.

Thirdly, the culverts just could not take it. We understand that the weather was exceptional, but I have heard residents say that some culverts and drains had not been maintained properly, supervised or regularly checked, despite repeated requests by local people, so there is the whole issue of maintenance of water systems.

Finally, there is river management: maintaining river banks, cleanliness and the safety of river flows. That was a factor in Tirphil and New Tredegar, where concerns had already been expressed to the Environment Agency some time ago.

All that points to a series of unanswered questions by all those in the communities most affected, and demands for action. In that case, I believe that my hon. Friend the Member for Monmouth is right. Besides the great climatic issues that he has properly raised—he has put flooding into the broader context—there is a need for answers to questions.

The Under-Secretary of State for Wales, my hon. Friend the Member for Cardiff, Central (Mr. Jones), has the power to appoint an inspector, so that evidence can be brought openly and fairly by residents and witnesses to the events to an independent inspector. The Environment Agency, Welsh Water and local authorities can then come to that inspector, explain and, I hope, discover openly and publicly the reasons for those events, and the action that can be taken to prevent them from happening again. Therefore, I hope that my hon. Friend does not slam the door on an inquiry, which is necessary to remove the understandable anger and scepticism that exists as a result of communities and households being flooded so tragically for the second time in 20 years.

I congratulate my hon. Friend the Member for Monmouth (Mr. Edwards) on raising this important issue, my hon. Friend the Member for Merthyr Tydfil and Rhymney (Mr. Rowlands) on supporting him, and the many hon. Friends who are also on the Benches to support my hon. Friend the Member for Monmouth and to represent constituents who have suffered grievously in the floods.

Twenty years ago, on 27 December, while in Aberdare, I was one of those unfortunate residents who was flooded in that severe flood. As I lived in a bungalow at the time, it was particularly problematic, so I genuinely recognise the difficulties facing many of the constituents of my hon. Friend the Member for Monmouth.

Unfortunately, floods are a fact of life, and some flooding is inescapable. Nevertheless, although we cannot prevent flooding, we can take action to reduce the risks. When flooding does occur, we must ensure that we do all we can to issue appropriate warnings and to mitigate its effects.

I pay tribute to the strenuous efforts of all those involved in alleviating the effects of the recent flooding in Wales, particularly the staff of the Environment Agency, who worked very long hours to provide round-the-clock forecasting and warning. I was able to see them in action on the Saturday that much of the flooding occurred, and was impressed by the way in which they were handling matters.

The Environment Agency work force, from both Wales and England, who came to provide relief, were extremely busy checking the security of the agency's defences, reinforcing them as necessary, and otherwise assisting whenever they could. Likewise, staff from many local authorities were keeping their defences in order, clearing debris from culverts, and sandbagging, saving many properties from the effects of flooding. Unfortunately, despite their best efforts, some areas were flooded. Our sincere thanks must go yet again to the police, fire service, local authorities and voluntary organisations that were involved in evacuation, providing temporary accommodation and assisting with clean-up operations.

I am sure that the whole House will wish to join me in sending our sympathy to all the people whose homes and businesses were damaged and whose lives were affected by the event, and, in particular, to those who suffered bereavement. I offer my sincere condolences to their families and friends.

I am aware that, for various reasons, some people were not insured. Help may be available to flood victims in receipt of income support or income-based jobseeker's allowance from the social fund by way of community-care grants or interest-free budgeting loans. People who are not receiving income support may be eligible for a crisis loan. Guidance has recently been issued to all social fund staff on the payment of grants to victims of disasters such as fire floods; that does not, of course, change the policy of successive Governments that, in the case of individuals and most organisations, responsibility for their property is a matter for them.

The rainfall that lead to the flooding was severe. Up to 9 in was recorded between 20 and 25 October, when the flooding was worst in the south Wales valleys. There was further heavy rain on 27 and 31 October, which caused flooding in mid-Wales and the Vale of Glamorgan respectively. The ground was already saturated, and the rainfall simply ran off the hillsides towards the rivers, with little being absorbed.

That rainfall led to large increases in the flow of water in many rivers. Reservoirs overflowed—as they are designed to in such events, for safety reasons. Some, including hon. Members today, have asked whether the flows downstream were increased by discretionary releases that exacerbated flooding, but I am assured that they were not. The hydrological data requested by the hon. Member for Brecon and Radnorshire (Mr. Livsey) will soon make its way to him. I have overall responsibility for flood defence in Wales, and administer grant aid for capital schemes, but the planning, design, construction, maintenance and operation of defence measures on main rivers is the responsibility of the Environment Agency. In the case of ordinary watercourses, responsibility rests with local authorities and internal drainage boards. The Environment Agency, however, is also required to exercise general supervision of all matters relating to flood defence, and I have therefore asked the agency for a full report on the floods.

In an interim report to me, the agency has said that the impact on some rivers in south Wales was on a par with that of 1979. On that occasion, flooding of towns and villages was widespread: more than 7,500 properties were flooded, including several hundred in Monmouth. I understand that, on this occasion, only about 700 properties were flooded throughout Wales. That reflects well on investment in flood defences on rivers in south Wales over the past few decades.

I am sorry to press the Minister, but the flooding of the River Wye in Herefordshire, which subsequently affected Monmouth, was considerably worse than the flooding in 1979: indeed, local experts have described it as the worst since 1960. Will the Environment Agency's interim report, and the full report, cover the English borders?

My responsibilities cover the borders within Wales. I am not sure of the answer to the hon. Gentleman's question, but I will write to him as soon as I have discovered it.

I must give credit to the work of the regional flood defence committee for Wales, and to the relevant local flood defence committees. With the support of the Environment Agency and its predecessors, they have guided and overseen the investment. Much of the money for the work has been provided by local authorities through levies, and I acknowledge the part that those authorities have played in the improvement of defence to protect their towns and villages. That is, of course, in addition to local authorities' own expenditure on flood alleviation in the smaller watercourses and local drainage.

As a result of that expenditure, no properties were flooded on this occasion in Monmouth, where enhanced protection has been provided. It is simply not physically or economically possible to protect everyone, which is why the Government have given flood warning the highest priority.

My hon. Friend says that there was no flooding in Monmouth. According to the Environment Agency, four properties were flooded, but they were outside the defended area.

I apologise. I was not informed that properties in Monmouth were flooded.

Flood warning is one of the functions of the Environment Agency. Just two years ago, it was asked to take over the dissemination of such warnings from the police, and to expand the service over a period of five years. For that purpose, new technology has been introduced in the form of automatic voice messaging, so that anyone whose property is at risk of flooding can be dialled and given warning. More general warnings are given to local authorities, emergency services and other organisations, including the media.

General warnings of serious flooding to properties were given on 19 rivers simultaneously at the height of the event. Although not all whom the agency wishes to be on the system in the long term are connected yet, it used the system to issue 16,500 individual flood warnings between 20 and 25 October.

The areas worst affected by flooding from rivers were Aberfan, Llandovery, Pencoed and Aberdulais. At Pontardawe in the Swansea valley, serious flooding was caused by a breach in the bank of the Swansea canal. There were also instances, too numerous to mention, of flooding from blockage of culverts, and from surface water drains that were unable to cope with the deluge.

May I briefly make a point that no one has made so far? One of the most alarming and depressing features of flooding, especially in urban areas, is the contamination of flood water by sewage. Will my hon. Friend be touching on that? One of the fears that people experience when they are cleaning up and deciding whether to throw carpets away is that fear of sewage contamination.

I know that it is a big problem, but I do not know at this stage whether it can be avoided, either practically or financially.

I look forward to the Environment Agency's more comprehensive report on the flooding. Work is being commissioned separately from independent consultants on the situation at Aberfan, and their findings will be made available. The British Waterways Board has commissioned an independent report on the flooding at Pontardawe. We shall look closely at those reports, for there are always lessons to be learnt. I expect central Government, flood defence committees, the Environment Agency and local authorities to learn from the experience, so that we may do better in the future. We cannot stop rain or flooding, but, when cost-effective action can reduce the risks, we must ensure that it is taken.

I have been asked today for a separate independent inquiry into the flooding. I have considered the matter carefully, but, in the light of the work that is to be undertaken, I do not believe that such an inquiry is needed on this occasion. The Environment Agency commissioned an independent review of the flooding at Easter from Mr. Peter Bye. The need for an independent review arose on that occasion because of a widespread concern about the failure to issue warnings, and other significant operational issues.

My hon. Friend the Parliamentary Secretary to the Ministry of Agriculture, Fisheries and Food made a statement on the Bye report to the House on 20 October. As he said then, the Government and the Environment Agency take the report very seriously, and are moving swiftly to deal with the vital issues that were identified in it.

My hon. Friend said that the inquiry was held because of flood warning problems. Flood warning is one of the big issues affecting Aberfan and Merthyr Vale. Does not the fact that warnings were not given there strengthen our case for the appointment of an inspector?

At the time of the Easter floods, there was widespread concern about the failure to give warnings, but that was not the case in Wales. The report arising from the English floods, however, has identified numerous issues, and an action plan will be announced before the end of the month. A comprehensive series of measures will be taken, all of which will affect the way in which we deal with floods in Wales in the future. It is not felt at this stage that an additional independent inquiry is necessary in Wales.

Naturally, the conclusions and recommendations of the Bye report will be foremost in minds when considering what lessons might be drawn from the recent flooding. I note that, during the debate on the Bye report, my hon. Friend the Member for Monmouth queried whether Welsh Office planning guidelines needed to be revised so that there is a presumption against new housing development on flood plains. Responsibility for preparing development plans and determining planning applications rests with local planning authorities.

Current planning guidance that local planning authorities should take into account in carrying out those duties is stated in the document "Planning Guidance (Wales): Planning Policy". The guidance advises authorities to ensure that development plan policies and planning decisions take account—

Order. We must now turn to the next debate.

I am very glad to have this opportunity, in a very brief Adjournment debate, to raise the issue of trial at the Hague. I know that my interest in the subject is shared very much by the hon. Member for Linlithgow (Mr. Dalyell), who has fought so hard over the years to get the truth told about Lockerbie. I certainly hope that it will be possible for him to speak in the debate.

One point that we have to bear in mind straight away is that, without this half-hour debate, there would be absolutely no opportunity to debate a rather dramatic, significant and expensive initiative by the Government before 21 December 1998, which is the date on which the United States has been quoted publicly, perhaps incorrectly, as saying that the plug will be pulled on the proposals and that an endeavour will be made to impose more comprehensive sanctions. The House is therefore entitled to ask a few questions about the proposals.

The first and most obvious question is whether there is any time limit on the proposed agreement. The resolution was proposed in the United Nations and the agreement on the trial made between the United Kingdom and the Netherlands. However, as the United States seems to have taken on the role of emperor of the world, in a position superior to that of such rather pedestrian institutions as the United Nations, it would be helpful if the Government would say whether there is a relevant time limit.

Secondly, is it the case, as reported in the press, that the premises of the proposed Scottish court will be located on a former United States airbase? As is well known, that suggestion has caused great suspicion in Libya. It would be helpful if the Government would say whether a decision has been made on the location and whether there might be some merit in locating the court in an existing building. The third and most obvious question that the House should ask is, what is the estimated cost of the trial and who will pay for it?

I want to make it abundantly clear that I have absolutely no doubts about the integrity of the Minister of State, Foreign and Commonwealth Office, the hon. Member for Manchester, Central (Mr. Lloyd), whose attendance I appreciate. I appreciate also the attendance of the Minister for Home Affairs and Devolution, Scottish Office, who is very busy indeed, but has a great interest in the problem.

It is very important that the Government should be aware of the real suspicions of the Libyans, who, in the normal course of events, have a very good bargain in sending over two of their citizens for trial in exchange for an end to sanctions and all that goes with them. Ministers should be aware that some in Libya have a suspicion that the whole business is a plot by the US, which put the matter before the UN simply because it thought that it would not be able to renew sanctions.

Some specific issues arise from the proposals. The first is the agreement between Britain and the Netherlands. Can that be changed without the agreement of the Libyan authorities? That is a very important point. As the trial procedure appears to have been set out entirely on the basis of an agreement between Britain and the Netherlands, there seems to be absolutely no reason why the two countries cannot propose changes. Is that the case? Secondly, what is the reason for a provision in the agreement for a possible transfer of the trial to Scotland if the two suspects agree to it? It seems difficult to understand why the provision was included, and I should like to know why it was. Thirdly, will sanctions be suspended and not terminated? That matter, too, causes suspicion and is something on which the Minister should comment.

There are wider issues that I hope the Government will consider. First, there has been massive press coverage and television programmes in Libya—I have seen them myself—about the alleged plot to assassinate Colonel Gadaffi, which was revealed by Mr. David Shaylor, a former MI5 official. The Foreign Office has said that the report is without foundation, that it did not approve it, and that the whole thing is a figment of someone's imagination. However, the assassination attempt was real and several people were killed. It is all recorded on film.

Secondly, Mr. Shaylor, who we understand was the head of the Libyan desk in MI5, not only stated that MI6 had initiated the plot, but gave full details about an amount of money, alleged to be £100,000, and to whom it was paid—a Mr. Tonworth, who was an intermediary for a fundamentalist group. Thirdly, it was stated that documents about the assassination attempt were circulating freely within Government offices. Fourthly, it has come to my notice that about a quarter of the material that was to be used in the "Panorama" programme was removed on Government instructions. Substantial and significant injunctions on publication of the details have been imposed on newspapers and television programmes.

As the Minister is well aware, it is alleged that the whole business was thought up not by the current Government, but by the previous Government. However, it would be very helpful in trying to resolve the dispute with Libya if the Government said that there would be a proper inquiry. It would be helpful to know if there was no such sum, if the man who allegedly received the money does not exist, and if the organisation in London which seemed to start the business does not exist. If there were such an assassination attempt, I can think of nothing wrong in telling the truth. I have often taken the view that truth is the secret weapon in politics. Indeed, I think that many of our problems in international relations would be resolved and removed if the truth was told.

I should make it abundantly clear that that particular assassination attempt has been shown widely on television in Libya. There have been full details of all that went before it; details of people allegedly giving information about it; and details of its background. We have not seen many of those details in the United Kingdom, undoubtedly because of the injunction. However, some comment should be made on the matter.

It would be helpful if the Government would state—as I am sure the Minister could for himself—that they had no part in the mass of damaging and wholly untrue stories printed about Libya. I could mention many such stories, but will concentrate specifically on one that was published very recently. The Sunday Telegraph—a respectable newspaper that I always buy and enjoy reading—published one of the many stories circulating. It was headed "New Clue Points to WPC's Killer".

As we well know, there has recently been a great deal of evidence on television programmes and in the press that the killer of WPC Fletcher was not someone from the Libyan embassy, and that the bullet came from another building. I do not know the truth, but the story has stirred up some sentiment on the matter.

The dramatic story in The Sunday Telegraph stated that Scotland Yard had launched a fresh investigation into the murder of WPC Fletcher after receiving new evidence about the identity of her killer. It seems that that new evidence pointed to a Libyan, because the story went on to say that, because of "dramatic new information", there would soon be an attempt to extradite the guilty party from Libya. The newspaper, to strengthen the story, added a long comment from the Home Secretary, who said that there would shortly be a conclusion of the review.

Ever since I visited Assistant Commissioner David Venness in Scotland Yard, I have believed that Scotland Yard is doing its utmost to resolve the problem of what it called "one of its own". It is a matter not only of a television programme but of the evidence, on camera, of George Styles, one of the British Army's senior ballistics officers; of Hugh Thomas, consultant surgeon at the Royal Victoria hospital, Belfast; and of Bernard Knight, the Home Office pathologist—who was considered responsible enough to be put in charge of Cromwell street and much else. It is a formidable case.

As usual, the hon. Gentleman knows all about the situation. A report into the problem has been initiated, and we shall be interested to see it when it eventually emerges. I phoned the assistant commissioner whom the hon. Gentleman named. He kindly put me on to the inspector in charge of the inquiry, who courteously explained that, as I had suspected, the story in The Sunday Telegraph was, in his words, "a load of codswallop". There had been no new evidence. The Metropolitan police had not been consulted about the story. There was no new inquiry. I asked him if I could quote our conversation in this debate, and he gladly agreed.

The inspector further explained that the original inquiry, which had been proceeding for a long time, was nearing completion. However, the damage done by the story is pretty obvious. It is a shame that it appeared in a paper that I have always respected. The quotation in the story from the Home Secretary came from a written answer some time ago in response to a question about the inquiry.

There have been many other such stories. There was one about a secret chemical arms factory in a mountain, which I know contained nothing but a pipe taking water to Tripoli. It was important to Libya. We asked for an independent investigation, and the facts were confirmed. Another rather strange story was published after the terrible recent events in Northern Ireland, suggesting that the new IRA had connections with Libya. Again, every inquiry that I made showed the story to be nonsense. Such stories are printed all the time and cause concern in Libya. I am sure that the Government will confirm that the story that I have referred to is untrue and that there was no question of the Government being involved in circulating such stories. Are the Government aware of the impact on British trade and industry of the negative opinions resulting from such activities as we have witnessed over the alleged assassination? When I visited Libya for a couple of days recently, I was very worried by a widely circulated document entitled "Embargo on Goods of US and UK Origin". It tells a supplier:

"As for your argument regarding the easy nature of the procedures applied in dealing with UK companies, this is not a sufficient reason for you to disregard the instructions issued in connection with this matter. You are to note that GMRA's approval of some equipment from the UK was an exception intended to assist the company in specific circumstances and should not be used as a rule for what comes later."

That worried me a great deal, because, although I have no interest in firms dealing with Libya, I know that Britain had a good trade relationship with Libya. There is a good sentiment towards the United Kingdom in Libya, particularly because of the events of the second world war. My fear is that, as has happened in other places, Britain is being outsmarted. I am sure that the Minister is well aware that it is difficult to move in Tripoli for Frenchmen these days.

The Minister should be aware that, although the sanctions have been imposed by many countries, the resentment felt in Libya is towards Britain and the United States. My fear is that the Government's well-intended initiative will collapse because they are not prepared to go the extra mile to resolve the situation. The Government have gone to extraordinary lengths to try to bring about a settlement in Northern Ireland, where the problems are frightening. We all hope that they succeed.

The issues that need to resolved could be sorted out in private, meaningful, detailed discussions. Such discussions took place some years ago on Libya's previous links with the IRA. I understand that full information was given on the basis of private discussions in which respect was shown. If the Government initiated such private discussions between officials and the Libyan authorities, nothing would be lost and a great deal could be gained. There would be a better chance of success, an opportunity to remove fears and proof of good will. If things went wrong, at least the Government's case would be strengthened by having gone all the way and tried all they could to resolve the situation.

As the Minister is aware, I received a letter from the Libyan Foreign Minister saying that Libya agreed to the trial if certain assurances were given. The letter ended:

"Libya has emerged from a horrendous endeavour to destroy it with greater strength and unity. We will be glad to co-operate with any honest endeavours to resolve the dispute, but will insist that our nation and people be treated with the dignity and fairness which this victory makes appropriate."

I have no doubt that, on the basis of his previous experience in the House and his work in the Foreign Office, the Minister intends to try to resolve the issue. However, I fear, particularly for the sake of the relatives of those who lost their lives at Lockerbie, that things will go wrong because of a lack of understanding, a lack of commitment and, perhaps, a lack of awareness of what is involved in the various discussions. We have a duty to those who lost their lives to ensure that the truth is told. I welcome what has been proposed, but I hope that the Government realise that to make it happen there could be a case for endeavouring further to resolve the fears and suspicions of Libya. The Government may regard those fears and suspicions as unjustified, but they certainly exist.

I wish the Government every success in what they are doing. They should be driven by the feelings of those who lost relatives in the dreadful bombing at Lockerbie. They want the truth to be told. That can happen only if there is a proper trial. To achieve a trial, the Government must show the necessary good will. I hope that they will, and that progress will be made.

I wish that the Crown Office and the Foreign Office would start to talk directly to the Libyans.

As the hon. Member for Rochford and Southend, East (Sir T. Taylor) has said, the Government have already taken part in a dramatic and significant initiative on the issues surrounding Lockerbie. That initiative was driven by the same sentiments that the hon. Gentleman expressed at the end of his speech. My right hon. Friend the Foreign Secretary and my noble Friend the Lord Advocate were exercised by the position of the families, as was I. At that time the families had been looking for truth and justice for nearly nine years and had found little of either—only frustration.

When we came to power, we looked to see what we could do to break the impasse. We were also conscious of the words of friends of Britain, such as President Mandela, who asked whether it was possible to begin to look at ways of moving the situation forward. We considered carefully how that could be done, consistent with certain principles, which had to include the need for real justice to be seen to be done, the need to maintain the integrity of the Scottish judicial system and the need to ensure that no one could regard it as a search for a political compromise, because our prime concern was to ensure that what was offered served the interests of the families.

We took that important initiative in good faith in a public domain. We look for that good faith to be returned. Enabling the Scottish justice system to operate effectively in the Netherlands was not an easy undertaking. The legal and administrative issues were many and complex. We are deeply grateful to the Government of the Netherlands for all the work that they have done to make the trial possible. Our painstakingly worked-out proposal of 24 August was unanimously endorsed by the United Nations Security Council in resolution 1192 on 27 August. It is fair, comprehensive and workable.

Our objective is what it has always been: a free and fair trial—nothing more, nothing less. In discussing the elements of the initiative with the Governments of the United States and of the Netherlands, we were acutely aware of the need to ensure that the proposal was fair not only to the prosecution but to the defence. It would not be right, nor would it serve any of our interests, to engage in a flawed process. The demands of justice require a fair trial.

We have made it clear that the terms of the initiative are not negotiable. That is right and proper, and I repeat that it is now supported by the Security Council resolution. However, we have been willing to provide comprehensive clarification where requested by Libya, and it may be helpful if I explain what some of those clarifications have been. It is right that we should be ready to explain why we are satisfied that the proposal provides for a fair trial.

The answers that we have provided show that there is no hidden agenda, that the trial will be of the two accused alone, that any witnesses who may travel from Libya will have safe passage and immunity from arrest for any offence committed before arrival in the Netherlands, and that sanctions will be suspended when the two accused arrive in the Netherlands for trial. We want Libya to understand that we are acting in good faith.

In response to his question, I can tell the hon. Gentleman that we have provided that clarification through the good offices of Kofi Annan as United Nations Secretary-General. That was foreseen in the Security Council resolution. It is important because it provides transparency and an additional assurance to the Libyans that we mean what we say. What we say is there for all to see.

Why are sanctions being suspended rather than terminated?

If the hon. Gentleman will bear with me, I will address several of the issues that he has raised, but first I shall run through the main points about the process in which we are engaging.

We want a transparent process. It is helpful if the process is dealt with through the Secretary-General, because that makes it clear that Lockerbie is not simply a bilateral British-Libyan operation, or even an issue between the United States and Libya, but is now of international interest. The will of the international community, unanimously expressed through the Security Council, is that Libya should accept the terms of the Security Council resolutions.

The hon. Gentleman suggested that we should enter into discreet negotiations with Libya. However, the families of those who died on Pan Am flight 103 demand to know the truth. Secret bilateral deals would not help them, and are not necessary. The channel of communication through the Secretary-General has worked well in providing Libya with the information sought, and we have answered fully every question put to us.

The hon. Gentleman asked me several questions, and I shall try to answer them. There is no formal time limit on the process, but he will realise that that does not mean that we can wait around indefinitely for a response. The offer was made in good faith, and good faith on the other side demands some reciprocity, which we have yet to see.

The hon. Gentleman also asked about the location of the trial. It is true that the place is a former air base that was used by, among others, the United States. That does not happen now and has not happened for some time. There are no United States troops there now, and the area is sovereign Dutch territory again. Even the Libyans do not now see its former role as a major obstacle.

The hon. Gentleman asked about the costs of the trial. Various estimates can be made, but it is a measure of the spirit in which the Lord Advocate and the Foreign Secretary entered into the process that cost was not an issue. Justice is the issue. Yes, the suggested trial will be significantly more expensive than a trial in Scotland, but because we are determined to seek proper justice, costs are not a determining factor. I hope that the hon. Gentleman will welcome that assurance.

I was also asked whether the agreement with the Dutch could be rewritten or unwritten. That agreement is underwritten by an Order in Council, and as it is of the nature of a treaty, it is not amendable. None the less, it is inconceivable that a process that has been transparent could be altered without the alteration being equally transparent. I hope that, even if the hon. Gentleman is cynical about what the British Government might do, he would accept that the Dutch Government come here with clean and honest hands. There would be no reason why they should want to amend a treaty for nefarious purposes at a later stage.

The hon. Gentleman asked about the suspension of sanctions. The Security Council resolution is specific on that point, and says that, when the two accused are delivered to The Hague for trial, sanctions will be suspended. I assume that the hon. Gentleman fears that sanctions will somehow be reimposed later, but it would be incredible if we tried to get away with that in the court of world opinion.

I can reassure the hon. Gentleman further. Even if that were the hidden agenda of the British Government, once sanctions had been suspended, a decision by the Security Council would be required to alter the sanctions regime from suspension. Neither the British nor the Americans could do that; it would require action by the whole Security Council. That is a protection for the Libyans.

The hon. Gentleman also asked me about the allegations by Mr. Shayler. It is far from unknown for those who seek to make money out of their former careers to go way beyond the bounds of fact and enter a world of romance, and the Foreign Secretary has made it clear that there is no truth in the allegations. I stand by that statement, and I can tell the hon. Gentleman openly that neither under previous Governments nor under the present Government has there been any shred of evidence to support Mr. Shayler's allegations.

I shall almost repeat what my hon. Friend the Member for Linlithgow (Mr. Dalyell) has already told the House about the case of WPC Fletcher, when I say that it is under active investigation by the Metropolitan police, who will report to the Home Secretary when their findings are complete. There is no connection between the Lockerbie situation, involving the trial and the sanctions, and the case of WPC Fletcher. It is important that the House and the world know that.

We want the WPC Fletcher case to be resolved. We still believe that the action was committed by the Libyan authorities, and it would be helpful if the Libyans conceded that point and accepted liability for compensation. That would be a positive step forward in building good faith.

We have already provided clarification, and I have, I hope, provided some more today. In principle, clarification about the trial process has been provided through the offices of the United Nations Secretary-General. We have not taken those steps lightly, and they are not merely a gesture. We are serious; we want a trial before a Scottish court sitting in the Netherlands, so that this distressing issue can be brought to an end. We have done, and are still doing, everything possible to ensure that outcome. We introduced the necessary changes to Scots law by Order in Council on 16 September, and the Foreign Secretary has told the House that an agreement between the United Kingdom and the Netherlands was signed on 18 September. We want to make progress, and we are confident that in proposing to agree with the Government of the Netherlands on an early date for the agreement to enter into force, we are acting with the will of the House. Work is under way to prepare the trial site. All we need now is a positive response from the Libyans.

I want to reiterate that sanctions are not designed to punish the Libyan people. It is neither our wish nor our intention to keep Libya under UN sanctions indefinitely for some undefined political purpose. The UN sanctions have a legitimate purpose—they are designed and mandated by the UN Security Council to press Libya to fulfil its obligations under UN resolutions. When Libya conforms to the resolutions, sanctions can be brought to an end.

I hope that the hon. Member for Rochford and Southend, East takes my words to heart. We will support the suspension of sanctions in accordance with UN Security Council resolution 1192 when the accused arrive in the Netherlands for trial. Given the purpose of sanctions and the way in which we propose to make progress, it would be wrong and illogical—

Order. It is time for the next debate.

Very often, an Adjournment debate can be a lonely business, with sometimes just oneself and somebody else on the Front Bench. However, Mr. Deputy Speaker, I thank you for allowing me to come here accompanied by a box which contains the signatures of some 35,610 objectors to various plans made by West Hertfordshire health authority. I understand that another 36,000 people from Watford are similarly inclined to object to the use made by the authority of the private finance initiative.

In asking for a debate on this matter, I was not trying to be a fundamentalist about the use of the PFI. In my constituency, I have been desperate to try to get a new initiative for a matter on which the public authorities seem to have become locked into inaction. In particular, I am trying to get a road from St. Albans road in Hemel Hempstead—a dual carriageway—into the wonderful new £5 million accident and emergency unit at Hemel Hempstead hospital. I hope to get that road, and I will be happy to trade with anyone in the private sector who wishes to provide the necessary expertise, energy and financial input.

Sometimes, the PFI might allow one to get something done which previously was not being done. However, looking at the Government's strategy for health, I am forced to suggest to the Minister of State, Department of Health, my right hon. Friend the Member for Darlington (Mr. Milburn) that perhaps there is a conflict between the untrammelled operation of the PFI and the Government's strategy for improving health care. After all, the Government want to invest in a better NHS. Indeed, they have made £21 billion available for that investment over the next three years.

We all want that investment to be used for the kind of capital investment that would achieve substantial revenue savings. For instance, a hospital that is poorly insulated is often in that condition because of desperate neglect over many years. If the insulation is improved in a poorly insulated hospital with a high energy bill, revenue savings will be made. In the case of the general hospital in the constituency of my hon. Friend the Member for Watford (Ms Ward), such neglect has resulted in a backlog of repairs of some £7 million. That ought to be rectified by a Government who are committed to investing in the NHS. If the insulation is improved in a poorly insulated hospital with a high energy bill, revenue savings will be made.

Revenue savings can also be made by appropriate investment in information technology. Revenue savings can be made—this is a case close to my heart—by trying to improve nurses' accommodation, so that they are attracted to living near a town centre hospital, such as Hemel Hempstead or Watford, where medical staff have the amenities of a town centre, and of affordable housing. Where such investment in accommodation has been made, the health trust will not have to pay ludicrous amounts to get or to manage temporary or agency staff.

Revenue savings can lead to real improvements in health, and I commend the Government's strategy for investment. Capital investment initiatives can lead to a virtuous circle, in which hospitals and trusts begin to think of real improvements in the quality of care they give their patients. In Hertfordshire, there is the possibility of a link with the newly emerging health faculty at the university of Hertfordshire, which could lead to the county becoming an attractive place for practitioners and nurses to work. I shall be having lunch with the current vice-chancellor of the university after this debate to discuss that very matter.

I understand the strategy adopted by the Government, but the strategy adopted by West Hertfordshire health authority seems to be about as far removed from the Government's as it is possible to imagine. To start with, the authority wants to attack the five hospitals that are built, operating and functioning. These include hospitals in Hemel Hempstead and Watford—I am sorry that the hon. Member for Ruislip-Northwood (Mr. Wilkinson) is not here to defend Mount Vernon hospital—which have produced more than 70,000 people who support their retention. The people of west Hertfordshire are worried by the prospect that the wonderful deposit of NHS resources, built up since the start of the NHS in 1948, might be frittered away on the PFI-inspired philosophy of the health authority.

The PFI is inappropriate for our current circumstances. A House of Commons research paper on the matter states that the need for the private finance initiative was initially put in place so that up-front capital funding for new developments was replaced with a long-term revenue commitment by the public sector. It said that no longer would the NHS own an asset—it would lease it. Assets that were publicly held would be lost.

That is not the situation in which we find ourselves. The Government want to make capital investment and to save on revenue—yet the PFI points the other way.

Despite the language of the West Hertfordshire health authority—which talks about a "new super—hospital"—the proposal represents a substantial cut in the facilities available to the people of west Hertfordshire. According to the authority's figures, there will be a cut from 1,170 acute places to between 695 and 730. This cut is portrayed in the authority's documents as if it were somehow a benefit. If that is a benefit, I would rather do without it.

There is also the problem that the process has cost a huge amount of public money in consultation.

Is my hon. Friend aware that the health authority has conducted consultation, and that the response that it has received from the public–80,000 signatures collected by a pressure group—local Members of Parliament and the local authorities has shown that there is objection to the proposal and to the favoured option of the building of a new hospital?

That is true, and the public's understanding of such matters often transcends that of hon. Members in this Chamber.

In the consultative process, it is unclear what the terms of reference of any PFI contract are to be. I do not know this to be the case, but what I call a "BOOT" system may be in operation—that is, build, own, operate and transfer. In such a case, at the end of the contract the assets are held by the private consortium. In west Hertfordshire, acute facilities at four hospitals could be downgraded and any number of them could close down, with the remaining community hospital at Harpenden closing as well. In west Hertfordshire, the operators of the NHS system have carte blanche, under their current plans, to do what they like with current assets.

Does my hon. Friend agree that the objection of local people to the West Hertfordshire health authority is not necessarily an objection in principle to the PFI, but to the proposals that the authority has put forward? It has not made a case for its option, either financially or strategically.

That is a good point, but the trouble with the PH is that, when the previous Administration introduced it, it was a recipe for inactivity and for saving public money. This Government have made large amounts of money available for investment, and what worries many of us is that that investment could destroy public assets. In west Hertfordshire, we have the example of an asset that is held by the public—five hospitals. In 30 years' time, we could end up publicly not owning one brick or a trowel full of mortar.

Another important aspect is that the revenue projections of the process are extremely unclear. In a representation to the Treasury Select Committee two years ago, Christopher Bland, head of the private finance panel said that when he asked such questions as, "What are the revenue implications of the PFI contracts signed for, say, 2005?" Lo and behold, the answers were not forthcoming. We are in strong danger not only of losing public assets, but of buying an expensive pig in a poke.

I agree that the revenue projections are exceedingly shaky and that they have to be fleshed out in greater detail, but is not the basic reason why the process is taking place—unless the Minister is going to give us some good news at the Dispatch Box right now—that the Government will not give the money to maintain the status quo?

The hon. Gentleman fails to recognise that the status quo is deeply unsatisfactory because the Conservative Government introduced an odious system called capital charges, which required all health operators to study their asset base and to make substantial payments—on average 9 per cent. of their income. West Hertfordshire health authority would not be in deficit if it were not for the capital charges—

I agree with the hon. Gentleman about the way in which capital charges are operated. If they were removed, we would have no problems in west Hertfordshire and could continue with the status quo.

I am grateful for the hon. Gentleman's support for what appear to me to be policies designed to ensure that public assets remain in the public sector, rather than the policies of the previous Government, who did their level best to ensure that a haemorrhaging of public assets into the private sector.

Apart from threatening the very fabric of the NHS in west Hertfordshire, the overall impact of the plans, assuming that we do not have the BOOT system and the asset is not transferred but is kept within the public sector through some devious route—possibly a joint venture in which each party gets 50 per cent., for example—would be that the asset base on which the health authority has to pay capital charges would be greater than it is now, according to all the figures that I have seen. Therefore, the authority's deficit would be even larger. Therefore, implicit in its plans must be a substantial reduction in the asset base, which means that an awful lot of hospital closures that have not been accounted for must be in the pipeline.

I suggest to my hon. Friend the Minister that a conflict exists between retaining the PFI as, potentially, a force for squeezing out public sector holdings and assets, and retaining it for its potential to be used in new and improved schemes. It is a major mistake to retain a PH that is designed to erode, compromise or put into joint venture holdings capital assets that are publicly owned.

Those matters are all relatively new, and many of us have been awaiting the comprehensive spending review to find out precisely what sort of shape we may be able to put the NHS in over the next few years. I have already said that I strongly welcome what the Government are doing in that regard, but there is a head-on conflict between substantial capital investment and continuing to keep the PH, which could result in the haemorrhaging of the very resources that one wants to put at the disposal of the health service. We want a system of public investment and expenditure that is not designed to erode the very basis of health provision.

The reservations that my hon. Friend has expressed about private finance developments in Hertfordshire are shared by people in Birmingham, who are worried about private finance initiatives there. Resources are being diverted from care into paying for the raising of capital by private sector companies, which is more expensive than it would be in the public sector.

My hon. Friend has a good point, and I hope that it will be considered. The present 20-year interest rate for public finance is 4.77 per cent., whereas the cheapest possible rate for private finance is more than 6 per cent. We are already faced with a spread or differential that makes it extremely difficult to manage the interest payments that will be required through such initiatives. That in itself represents a haemorrhaging of resources. I look forward to the Minister telling me that PFIs that have the capacity to undermine public assets and provision will not be welcome in his Department.

I am happy to have the opportunity to respond to the debate launched by my hon. Friend the Member for Hemel Hempstead (Mr. McWalter) and congratulate him on securing the time for it. The issue is of considerable concern to his constituents and, indeed, to some hon. Friends and other hon. Members in the Chamber.

I can assure my hon. Friend that the Government share his aim to provide a high-quality national health service for the people of this country, wherever they live. The national health service was founded on the principle that the very best health care should be available to everyone—a principle that the previous Government did their best to erode and which this Government are determined to restore.

We are doing that by modernising the national health service, by making its services faster and more convenient for patients, by tackling variations in quality, by improving standards and by developing integrated services around the needs of individual patients and across the traditional care boundaries. Above all, we are doing it by transforming the NHS from a sickness service into a service that works in partnership with others to reduce the appalling health inequalities that are a scar on our nation.

The Government's modernisation programme is extremely ambitious—it will take time and a great deal of money. From next April, as my hon. Friend the Member for Hemel Hempstead rightly said, a record £21 billion of extra investments will start to come on line to help to modernise the NHS. All parts of the country will benefit.

The comments of the hon. Member for South-West Hertfordshire (Mr. Page) could not have been wider of the mark. The Government have made available extra investment over and above that planned by the Conservative Government. In the past 18 months, we have provided West Hertfordshire health authority with an extra £15.4 million. Moreover, we recently announced next year's allocations, which include a further £19 million for West Hertfordshire—a cash increase of 6.38 per cent., which I hope will be warmly welcomed by hon. Members on both sides of the House. That money is necessary to modernise and sustain services.

The money is also necessary to sort out the mess that the Government inherited. When we came to office, 72 of 100 health authorities, including West Hertfordshire, were in deficit. Across the country, we reduced the total deficits in health authorities from £238 million to less than £20 million at the end of 1997–98. In West Hertfordshire, the deficit has been reduced from £4 million to less than £2 million.

The Government are delivering on their promise not only to save the NHS but to modernise it as well. I remind my hon. Friend the Member for Hemel Hempstead that we were also elected on a manifesto promise to sort out the problems that have plagued the private finance initiative so that it could work for the benefit of the health service. We have delivered on that promise, too.

We inherited a PFI process under which no new hospitals had been built. A lot of money—£30 million, I think—had been spent on management consultant and legal fees, but no bricks had been laid and no bulldozers had been moved. Today, because of our actions, work has started on the construction of eight hospitals under PFI. Since we came to office, we have been able to announce the biggest new hospital building programme in the history of the NHS–31 new hospitals worth almost £2.4 billion, 25 of which will be built through PFI, with a total value of almost £2.2 billion.

We will give the go-ahead to PFI proposals only after it has been shown that they are affordable and offer taxpayers better value for money than a publicly funded alternative. Unlike the previous Government, we will not allow any clinical services to be included in a PFI deal. We are also making the whole PFI process more open, and we have considered how better to protect the interests of staff who are included in PFI deals.

I know that there are concerns, both in the House and beyond, about PFI in the NHS, but public-private partnerships are here to stay. As my hon. Friend the Member for Watford (Ms Ward) said, patients are not worried about whether hospitals are built through cash from the PFI or through cash from the Exchequer; their concern is, rightly, that new hospitals should be built.

The situation in west Hertfordshire is complex. The proposal to build a brand new hospital in the health authority's area has been submitted, with nine others, to the capital prioritisation advisory group. I established CPAG to advise me on which major hospital developments were most needed in the NHS—under our arrangements, NHS needs, not the whims of the private sector, but to decide where new hospitals will be built. I will shortly be considering CPAG's advice on the proposals in west Hertfordshire, but I will not give the go ahead to any new hospital unless it is part and parcel of a proper local plan for delivering and sustaining high-quality local health services.

Will my hon. Friend assure me that he will not allow the proposals to be acted on until the health authority has answered the genuine points that have been raised by members of the public and the local authority and until it has investigated every other option, which it has so far failed to do?

I shall speak about that in a moment. In the consultation process—in west Hertfordshire or anywhere else—I expect those who play a decision-making role in the NHS to listen seriously to what concerned patients, organisations and communities say. Inevitably, difficult decisions have to be taken, but I expect to see evidence that local concerns have been analysed extremely carefully.

Any proposal for local hospital developments must be part and parcel of a properly worked through local health plan to deliver quality and sustainable services. There have been far too many cases of ad hoc hospital developments, which have proved to be unsustainable precisely because they were not considered as part of the local configuration of services.

There is no final agreed plan for the make-up of local hospital or broader health services in west Hertfordshire. The health authority has consulted widely on its radical proposals for changes to hospital services. As my hon. Friend the Member for Hemel Hempstead is aware, the health authority agreed at its public meeting on 30 October to take a staged approach in changing local health services. That was in response to the strength of local feeling and to the need to provide further information on the authority's proposals. Indeed, he and my hon. Friend the Member for Watford have reflected those concerns today.

As I understand the position, the South-West Hertfordshire community health council will formally object to the proposals, so the matter will be referred to Ministers. I am sure that my hon. Friends will understand that my position as a Minister prevents me from commenting on the proposals at the moment. If the local community health council formally objects to the proposals that the health authority adopts after the consultation period, the matter will be referred to me for a decision.

I assure my hon. Friends that the Department of Health is fully committed to the provision of high-quality, up-to-date treatment in a modern and responsive health service. If the matter is referred, Ministers will uphold the health authority's decision only if we are satisfied that adequate alternative services are available. I have heard what my hon. Friends have said and I assure them that their points will be borne fully in mind when we consider the matter. I also give the specific assurance that I will not approve any proposal through the CPAG process for a new hospital until Ministers have considered the make up of health services in the area.

I have listened carefully to what my hon. Friend the Member for Hemel Hempstead and others have said. I know that their concerns are shared by many people in the community. Difficult decisions have to be taken, not least because of the financial problems that the previous Government left in the health service.

My hon. Friend also knows that the NHS in west Hertfordshire and elsewhere cannot stand still. Progress in medical technology and in doctors' training and the alterations in our population and in public expectations are all driving change. No change is not an option for the NHS. Our job is to ensure that change delivers improvements in the care and treatment of patients. I assure him that any proposals for change in west Hertfordshire that the Government consider will be judged against that criterion.