This debate on the future of sub-post offices could not be held at a more appropriate time. The level of interest shown here today and the number of colleagues who have expressed an interest in the outcome of the debate demonstrate what a live political issue it is. During what I hope will be a relatively short speech—it had better be even shorter now, given the number of people who will no doubt want to speak—I hope to identify clearly that sub-post offices have a future, to illustrate by my own experience in my constituency how to deal with the problems that we face and to look to the future with interest and hope.

I have tabled this subject for debate because, in recent months, if my local and regional newspapers are anything to go by, the matter has become a live issue. So much has been written and so many column inches covered—or perhaps nowadays I should say column centimetres—that it is no exaggeration to say that the stories on the subject have dwarfed those on the dome, the flu epidemic and even what David Beckham wears under his football shorts.

I was told last night that my regional newspaper, the Western Daily Press, has collected some 150,000 signatures for a "save our post office" campaign. Much of that is laudable, because it displays the heartfelt love and trust that are felt towards local post offices—it is important that people also use their post office. The petition will be presented in due course; today, I want to examine the underlying causes of the current position and advance the debate, so as to secure the future of the post office network and put it in a stronger position.

My interest in sub-post offices is not new. Stroud is fortunate to be one of the first areas in the country to introduce the new Horizon system into its offices. In fact, the first two offices to do so were in Leonard Stanley and Kings Stanley in my constituency. Unfortunately, the former has since had to close for reasons beyond anyone's control, although it was pleasing to witness a community initiative led by the parish council, especially Phil Herbert and Jean Smalley, to try to reopen it.

During my investigations, and especially over the past few months, I have spoken to as many people as possible in an effort to understand the prevailing circumstances and what the future may hold. I have talked to Post Office Counters Ltd., the National Federation of Subpostmasters, the Countryside Agency, Stroud district council and the Department of Social Security Benefits Agency. I visited ICL Pathway in order to examine properly and explore the Horizon system and to talk to those responsible for its integration into every post office by the end of 2001. I also read the Select Committee on Trade and Industry's report on the inquiry into the Horizon project.

I have also visited, spoken to and corresponded with several sub-postmasters in my constituency, especially Penny Knibbs, the area secretary of the National Federation of Subpostmasters, who runs Kings Stanley post office, and Max and Ayreen Ahmed of Bath road, Stroud, who showed me how Horizon works in their businesses. Subsequently, I visited Tony and Vanessa Walsh at Chalford, who opened my eyes to computerisation in all its glory, and showed me how ways are being conceived to access the new technology. I have also been contacted by John Stone at Upton St. Leonards, Mr. and Mrs. Appleby at Painswick, Tony Hinsbey at Brimscombe, Maria and Rick Bailey at Frampton on Severn, and Simon Lewis at my own post office in Stonehouse. Many of my illustrative points depend on their views.

We are fortunate to have such a network. As hon. Members know, there are more than 18,000 post offices, spread throughout Britain. Although most of my speech will concentrate on the rural part of the network, many of my points relate just as much to market town or even suburban offices. I am sure that other hon. Members will speak from their own experiences and their own contexts. The sub-post office network is crucial if we are to stop rural decline. Although my interest is not exclusively in rural issues—I spoke in the debate on the Postal Privilege (Suspension) Order 1999 (Revocation) Order 1999 on 8 December—many of my examples will show how important the network is to the rural domain.

My main anxiety relates to benefits, and I start my analysis by examining the current hoo-hah about the payment of benefits. Hon. Members will know how important the payment of benefits is to the Post Office. Various figures relating to the extent of its importance can be cited, but the facility generates up to 35 per cent. of Post Office income. It is easy to cast aspersions on the decisions taken by and the motives of the Benefits Agency, whose decision to encourage recipients to have their benefit paid directly into bank accounts may have a serious impact on the revenue of individual sub-post offices. The possiblity of wholesale closure of post offices has become a major social and political issue, although, as I shall show, opportunities are available that match and outweigh that threat.

The decline of the network did not begin in May 1997, much as the main Opposition like to allege otherwise in certain publications that I have read. Statistics show that we have been losing post offices—mainly sub-post offices—at a rate of approximately 1 per cent. a year for the past 20 years. That decline has a variety of causes, not least because the post offices are independent small businesses that can fail for all sorts of reasons or, indeed, be closed for all sorts of reasons other than failure.

Automated credit transfer is part of a wider programme to computerise the post office network, the Horizon project, which was initiated by the previous Government and is being developed by this Government and ICL Pathway personnel. My hon. Friend the Minister for Competitiveness might want to make some comments about that, because allegations have been made about the decisions that have been made, why they were taken and their impact.

Like the Select Committee on Trade and Industry, we should consider the implications of the adoption of ACT and whether it precludes smart card application. Many of us hope that it does not and that a middle way will be found that combines the best elements of the two. It has been suggested to me that we are dealing with a killer application. If we can implement the smart card, it will prove how beneficial that software and, indeed, the hardware that supports it can be, because it presents all sorts of opportunities. Likewise, it would be good to hear that, even with the introduction of ACT, the timetable of 2003 to 2005 is flexible and that we can monitor and evaluate the impact on the different parts of the Post Office.

Our bywords should be choice, responsibility and reasonableness—choice in that no benefit recipient should be denied the right to choose where they want their benefit to be paid; responsibility in that we should make it as easy as possible to provide payment to those most in need; and reasonableness in that the place where payment is drawn should be made as accessible as is practicable. In so doing, we highlight the advantages of the post office network. The opportunities presented to sub-post offices by the introduction of new technology throughout the network has been given far too little attention. If the postal network is to modernise and not be left behind by technological innovation, it needs to be positively encouraged and supported in developing new services that local communities will value and use.

Today's debate serves to highlight the vital role that sub-post offices play in their local area. The post office, often combined with the village shop, is the focal point for most communities, especially rural communities, which have already lost too much. The loss of such post offices, where they still exist, would be a serious blow to the vitality and sustainability of those communities, so it was pleasing to hear the Government's announcement over Christmas about strengthening the mechanism whereby local communities can appeal against the closure of their local post office. Perhaps my hon. Friend the Minister will tell us how that will affect the role of the Post Office Users National Council and local advisory committees.

The hon. Gentleman makes many sensible points. However, does he accept that one of the main reasons for closure is that, when a post office becomes available for re-let because the person running it retires, the Post Office tries to reduce its opening hours, so creating the cause of the closure? An appeals system on whether a closure should take place will be no good unless an assurance can be given that the hours offered to the previous incumbent of a sub-post office will be offered to the new one.

That is a fair point. Clearly, every case is different and we must take each one on its merits. Businesses must be viable, and the more viable they are, the more secure their future is likely to be. We cannot exclude the planning system from such considerations, because people often have to get planning permission to open such a facility; more particularly, permission for change of use is involved when it closes. The decisions are intricate and difficult. We all await the performance and innovation unit report, which was initiated directly on the orders of the Prime Minister and is due out at the end of February. I do not wish to put the Minister in an invidious position, but I hope that we can debate the parameters of the report and examine what progress it makes and what impact it has on the Post Office Bill, which I hope will appear soon.

Sub-post offices provide a social as well as commercial service, especially to the elderly, the disabled and those on low incomes, who face isolation and social exclusion.

If the sub-post office in a village in a far-flung rural constituency, such as mine and that of many other hon. Members, closes, how are elderly people to get cash? If they go by bus to the local town, which may be 15 or 20 miles away, it might cost around £5 or £6 and take a day of their time. If local post offices close, how does the hon. Gentleman envisage elderly people getting their weekly cash?

Constituents, especially those who run sub-post offices, have made that point to me. The simple answer is that we need to turn post offices into banks, or branches of a bank. If we can join that circle, we will get the best of both worlds. I hope that the ways in which we can secure the future of the sub-post office network will be highlighted in both the rural and urban White Papers, which are to come out after the PIU report—although I hope that, in the interests of joined-up government, they all come together.

What are the issues facing the Government? The Government want to modernise the service and have negotiated with the Post Office to make that happen. We are talking about a £1 billion investment in 18,000 outlets by the end of next year—a not inconsiderable achievement on which my hon. Friend the Minister might want to comment. We are talking about tackling benefit fraud and thus gathering a not inconsiderable saving, about addressing social and financial exclusion and about promoting sustainable communities.

The Horizon project, of which I am sure all hon. Members know something, is the method and mechanism by which that can be achieved. There is no alternative but to computerise the network. The vital questions are how that is to be done, at what speed, and whether we can get the best application from the project software and hardware, rather than allow it to become a missed opportunity. As I said, I have visited the ICL Pathway project and seen it in operation in the post offices in my constituency.

We will concentrate on the threat that that poses to the benefits system, without looking at the three benefits that it can bring, which I mentioned in the debate on 8 December. First, enhanced postal and communication services will make it advantageous for the Post Office to take back business from couriers, which exist close to almost every community. We have seen how that can be taken forward in various projects. Secondly, although entering the banking network is a somewhat fraught question, it is pleasing that a number of banks have already signed deals with the Post Office, such as the Co-operative bank—as a Co-operative-sponsored Member of Parliament, I declare an interest—Girobank and Barclays. Other banks have also entered or will enter into such arrangements. That needs to be encouraged: although the Minister may say that it is not directly his responsibility, ways in which the Government can encourage the Post Office should be considered. Thirdly, there is electronic government—or, as the network refers to it, the gateway.

The hon. Gentleman may be right to say that technology offers potential in the long term. However, does he agree that the problem is short-term loss in income to those businesses and short-term lack of transferability of business? That is the real threat to the network. Once the network has gone, it will be very difficult to rebuild it.

The network has been depleted, but, rather than be defensive about that, I say that it should be opened up again. People do not talk about the other side of the coin—that it could lead to communities taking back their services. However, I agree that, unless we get hold of the issue, there will be a decline in service.

How can we advance in this respect? I am pleased that an electronic government group in Gloucestershire is examining co-ordinating services and considering what can be provided through the local government network. My challenge to the Minister is how to take that forward in national Government. With smart card technology, it should be possible for people to renew their driving licence or passport and engage in all the front-line services on which the Government annually spend around £8 billion. If we can tap into the major investment that is being made, as well as save the benefits business—people want to draw their benefit money from post offices—there will be real opportunities which will save the Government money and make the service much better and more accessible. All those benefits can give the Post Office and the various parts of the network a real competitive edge. It is about giving people the choice of where to draw their money from.

I have used the words choice, responsibility and reasonableness. I hope that everyone can agree with those objectives and see ways in which they can be taken forward in their own area. Community sustainability and social exclusion are important considerations: people often choose not to have a bank account or to use one because they prefer, for all sorts of reasons, to use their post office. That has something to do with social exclusion, but more to do with the trust that people feel for the institution. Why should they not have trust in it and want it to flourish? I have talked to people from a variety of backgrounds and to the Countryside Agency, which has tracked the future of the rural network in particular. It is pleasing to hear of the many ideas from Norfolk and Cumbria about improving the service.

What is on offer? Twenty-eight million people a week visit their post office, which must make it far and away the most popular service in the country. There are 18,000 outlets. People trust and believe in their post offices and see them fulfilling the community functions for which they were designed. We must overcome the benefits payment issue and be reasonable in giving enough time to allow a natural changeover. The problem is not insuperable and additional benefits may be derived from the solution to it.

In conclusion, I would like—with apologies—to compare the situation to a cake. We have baked the cake and now have a choice: we can cut it into slices, which means that the cake will ultimately crumble away, or we can put icing on it, to show people that it belongs to them and has a future. Only then can we receive all the benefits of using the service.

Order. Before I call the next speaker, I should like to say that, because many hon. Members want to speak, brief contributions would be appreciated.

9.50 am

I congratulate the hon. Member for Stroud (Mr. Drew) on securing the debate and on the thoughtful way in which he introduced it. It follows on from a debate on 15 July, introduced by my hon. Friend the shadow Secretary of State for Trade and Industry. We have had two debates in a relatively short time on the subject of sub-post offices and the post office network because every Member of Parliament knows that post offices perform a vital function in our constituencies, be they rural or urban. The sub-post office is invariably a shop as well. It serves families, the elderly and the disabled. It becomes a focus for the whole community and helps to sustain it, especially in country areas.

My interest in the subject deepened when I became Secretary of State for Trade and Industry—or, as I subsequently realised I was, President of the Board of Trade. I realised that I had responsibility for the network and was instrumental in ensuring that we made a 1992 manifesto pledge to sustain a nationwide network of post offices.

When I moved to the Department of Social Security, my interest deepened further, as I saw how essential the network was to the effective delivery of benefits to many of the most vulnerable people in our communities. I helped to ensure that that delivery mechanism and the network would continue by agreeing to the Horizon project, about which the Government are now trying to rewrite history; I shall set the record straight. The contract was originally awarded to ICL Pathway because it had experience of setting up a similar system in Ireland, which, for historic reasons, has a similar network of sub-post offices. ICL Pathway had practical experience and we knew that it could do the job. We also knew that computerisation and mechanisation of the sub-post office system would be paid for by the potential savings from eliminating the fraud that was possible under the old order book system.

Contracts have to be not only signed, but managed. It is important that those who manage—Ministers—make sure that they know what goes on. I have always made it a practice, in business and in government, to ensure that I know the bad news, which travels slowly up large organisations. If the person at the top is no good, he will not know what has gone wrong. I asked always to be told what went wrong, as well as what went right. If there were problems, we addressed them immediately and announced the changes.

It is not clear that the current Government have been aware of what is going on—I do not want to go into the history at length, as I set it out on 15 July. We are still waiting for answers from the Government. Why did Ministers assure the House—they did so on four or five occasions over two years—that the contract was proceeding and was likely to be completed on target by the end of 2000, but then suddenly perform a volte face? Were the Ministers who gave those assurances simply ill informed or did they mislead the House? The Select Committee on Trade and Industry concluded that there were suggestions that

"Ministers have been less than candid in their responses to the House and to this Committee"

about the problems facing the Horizon project. Unfortunately, the report was slipped out during the recess, so that grave indictment of Ministers did not receive the publicity it needed.

The only explanation is that the Treasury won. It has always been determined to close down the network of sub-post offices, if possible, to move to ACT and to make what it regards as a short-term saving in public expenditure. I doubt whether that saving will ever arise, and I doubted it when I was a Minister at the Treasury, at the Department of Trade and Industry and at the Department of Social Security. It was only when two former Chief Secretaries to the Treasury occupied the Department of Trade and Industry and the Department of Social Security that the announcement was suddenly made that the project would be scrapped and people would be compelled to have their payments made into bank accounts.

What really matters is not the history but the future and the consequences of that decision for some of our most vulnerable people. Fifteen per cent. of those on benefits do not have bank accounts, so how will they receive their benefits if they live in areas where sub-post offices have to close down because of the changes the Government are making? The Government admit that 1 million of that 15 per cent. of people could not reasonably be expected to operate a PIN number system because they are elderly or frail. Such people would be vulnerable if they gave PIN numbers to neighbours or others to receive their benefits. We need answers today as to how the Government will tackle the problems of people without bank accounts, and of people too elderly and confused to handle PIN numbers for themselves.

We want to know whether banks will be compelled to give accounts to those whose income derives solely from benefits, such as those who are dependent on income support and jobseeker's allowance. If they are to be compelled to take such people as customers, how will that be enforced? Which banks will be forced to take which customers? Will people have to pay a pound or two in bank charges from their benefits, which no one here pretends are excessively generous?

What will be the impact on families? Many wives use child benefit separately to pay for some of the needs of their children, as was specifically foreseen when it was introduced instead of a tax allowance. If that money must be paid into an account, and if a wife has only a joint account with her husband, how is she to keep the money separate for her children's needs? Must she open a separate account? Will she then have bank charges deducted from the child benefit paid into it? We need answers to those questions.

Is my right hon. Friend aware of an allied problem? When there is an overdraft, possibly for perfectly good reasons, the benefits money will go straight to pay off the overdraft, rather than to people in need.

My hon. Friend makes a good point. That is why the existing arrangements have been satisfactory. They were largely introduced by the Labour party in 1978, so it is odd that it is now threatening and undermining them.

We need to know what the impact will be on the revenues of sub-post offices. How much revenue to the post office network will be lost because of the changes? If there is a saving to the Treasury, there must be a loss to the sub-post offices, but how much? What will be the subsequent loss to post offices through the loss of footfall—people coming into the shops, dispensing money and creating revenue? That creates no gain to the Treasury, but it is a loss to the system and so undermines its viability. Sub-post offices are very unusual in that people usually leave with more money than they had when they entered. They dispense some of that money in the process, but that will not be possible if their money is paid out through ACT.

How many sub-post offices will be closed throughout the country? If the Government are seriously determined to maintain a network of sub-post offices, will they not have to renegotiate the contract with Post Office Counters Ltd. as they do every two or three years? That contract is made up of two elements, one of which is about keeping the network open, while the other relates to actual usage of post office services. We will have to jack up the lump sum that Post Office Counters Ltd. is paid to keep the network open, offsetting any savings that it is making on the individual transactions; therefore, the saving that the Treasury is hoping to make may well prove to be illusory.

We must recognise that the Government's decision to scrap the Horizon project will damage the quality of life for disabled people, elderly people and families throughout the country. It will undermine communities, especially in rural areas. It is another threat to the countryside and, ultimately, it will be a threat and a cost to the taxpayer. Questions have been asked in previous debates, but they have not yet been answered by Ministers. I hope that we shall receive some answers today.

10 am

I, too, thank my hon. Friend the Member for Stroud (Mr. Drew) for enabling today's debate to take place. We all want to participate in it because we believe in the future of sub-post offices in rural and urban areas. However, if we are not careful, the debate will end up rewriting history and defending 18 years of neglect of our post offices. We have at heart the best interests of sub-post offices in our constituencies. I hope that this debate will ensure that they have a future and that their plight is taken seriously. That did not happen during the 18 years of Conservative government—in fact, the majority of closures took place during that time. It is no use Conservative Members trying to defend themselves. The previous Government were guilty of turning a blind eye to the closures that took place throughout the country.

What can we do to save the future of the post office? I have received letters from those who manage sub-post offices. Mrs. Friend from Brindle in my constituency told me of her worries about the future for local people, and about what will happen to the post office and the business she runs. I agree with her that we must do something. There is a lot of uncertainty at the moment and the newspapers rightly publicise that worry. There are no two ways about it; we must explain what we want to happen and make sure that those who run post offices have a long-term future. Local communities will then become more settled, too.

We hear questions about whether all post offices should be able to sell tax discs, but tax discs alone will not make a future for sub-post offices. By all means, let them be able to sell tax discs and national lottery tickets and operate a new rural banking system for people who have so far been excluded from holding bank accounts. At present, high street banks want only a certain clientele; they operate an exclusion procedure for people who can hold bank accounts. We must ensure that high street banks face competition by opening a chain of rural banking facilities. That will put banking back into the rural community and allow all people in society to open a bank account. There do not necessarily have to be bank charges: free banking can be given to the people.

Rural post offices should always be able to dispense electricity tokens, which does not happen in all areas. Such a service will also help to sustain post offices.

I agree. Whether electricity tokens or stamps for gas and water, sub-post offices should be able to provide all the services that are offered by main post offices. We must ensure that sub-post offices have a future. We must remember that they are part of the community—they are probably the last piece of communal rural society. Many public houses have been converted into domestic houses and rest homes; they have been removed from community. Traditional butcher shops have gone. We are left with the post offices, which have become the newsagent and local shop. They are the last piece of the jigsaw.

We must add more pieces to the jigsaw to ensure the future of the sub-post office. Without doubt, we can achieve that and, hopefully, end social exclusion in rural areas. People on low incomes do not have a chance to hold a bank account. Furthermore, pensioners may not want a high street bank account—and rightly so because of their difficulty in accessing it. Bringing banking services to the rural community should be the Government's goal. We want to engage rural society; we want to ensure that there is no exclusion in rural areas and that there is a future for all sub-post offices. We must end the 18 years of closures.

Is the hon. Gentleman saying that technology should be used not to close post offices, but to expand the facilities available, especially in important areas such as Powys and Ceredigion?

I am sure that that will happen, especially when such places receive electricity—indeed, the two services might run in tandem in Powys. We should not take a luddite approach to new technology. We must embrace it and ensure that we all benefit from it, and that rural areas do not suffer exclusion.

10.6 am

I, too, congratulate my hon. Friend the Member for Stroud (Mr. Drew) on enabling this debate to take place. I agree entirely that rural and sub-post offices have been promoting social inclusion for several years, well before the current Government began to implement their policies.

I also agree with my hon. Friend about the importance of choice. That is of great concern to many of my constituents. For example, at my surgery last month I received a deputation of 15 people from the community of Blairhall: they handed me a petition signed by nearly everyone in the community expressing concern about the future of the local sub-post office. People were especially worried about the possibility of benefit payments in cash being ended. Many similar representations have been made to me. By my calculations, villages in west Fife have 13 sub-post offices and Dunfermline has at least six sub-post offices. This is certainly a matter of concern to the many, not the few.

I accept that the current system of benefits paid in cash is costly, bureaucratic and open to fraud, but I welcome the Government's assurances that many people will be able to pick up their pension or benefit from the post office, if they wish to do so. I wish to pass on to the Minister questions that my constituents have asked me. Will the payment of a pension or benefit from a post office be in cash if that is what an individual wants? Will existing claimants be able to maintain their cash payments and will future recipients be able to opt for cash payments from their local post office?

Why is the claiming of cash payments from post offices so important? First, about a third of the income of sub-post offices is linked to the payment of cash benefits over the counter. It helps to make them viable businesses, especially because, as has already been said, many of them are also shops.

Secondly, the Government should accept that some form of saving is derived from the fact that many people—especially pensioners on low incomes—pay out a large part of their cash as soon as they pick it up. They pay their gas and electricity bills, or buy power cards and power tokens. That used to be the case in Scotland until the Post Office and Scottish Power ended their contract, which is a matter that I hope the Government will pursue. Pensioners pay for their television licence, telephone, rent, council tax and so on, thereby ensuring prompt payment of bills to large commercial companies and to central and local government. Those savings should be recognised.

Thirdly, many of my constituents have always relied on cash in hand to manage a very low income—whether a weekly wage or a pension. They take their money and immediately pay their bills so that they know exactly what they have left to live on. That has helped to keep people away from making demands on central and local government services—an additional saving.

Fourthly, picking up the point made by the right hon. Member for Hitchin and Harpenden (Mr. Lilley), I have met women for whom the only guaranteed cash that they have for their children for that week or fortnight is their child benefit. The problem exists in every constituency in the country. Women in relationships with unreliable husbands and partners cannot depend on money being put in their bank account, or on money that they have handed over being used to provide for the family. All too often, it is spent in the local pub, betting shop or elsewhere. That, too, should be recognised.

A fifth reason why cash payments are so important has already been mentioned: many people do not have a bank account. I reckon that about one fifth of the pensioners in my constituency do not have a bank account and do not want one. Having cash is how they have managed their money all their lives. The banks are not interested in them. In the west Fife villages, where there are 13 sub-post offices, there is only one small bank branch. To those who have spent their lives following the rule, "neither a borrower nor a lender be", the idea of paying bank charges or living on credit is totally alien.

Although I accept that payments in cash and the use of order books can be open to fraud, the Government must recognise the value of staff at sub-post offices being easily able to detect a stranger who comes through the door, or someone who tries to claim cash using an order book that the staff know does not belong to that individual.

I support my hon. Friends the Members for Chorley (Mr. Hoyle) and for Stroud and many others who have urged the Government to look at ways of combining the tradition of sub-post offices with innovation. They should consider introducing cashpoint systems and using other means to attract even more business. Sub-post offices in my constituency have an arrangement whereby repeat prescriptions can be either collected by pensioners, or delivered to them, thus saving a costly bus trip. Why cannot other systems of shopping be developed, so that sub-post offices can become even more of a focal point for the community?

I hope that my hon. Friend the Minister and the Government will recognise how crucial sub-post offices are in maintaining strong community links. It is possible to combine the tradition and innovation—to look at new ways of working, while ensuring that policies of social inclusion continue to be delivered effectively and well by the sub-post offices in our communities.

10.14 am

I congratulate my constituency neighbour, the hon. Member for Stroud (Mr. Drew), on securing the debate and on his characteristically thoughtful and well- informed contribution. The hon. Gentleman and I tabled an early-day motion on the subject some weeks ago, which attracted support from hon. Members on both sides of the House. The turnout today is indicative of the support that there is for sub-post offices.

The drafting of our early-day motion revealed the Government's lack of honesty about their intentions. The original draft was suggested by the National Federation of Subpostmasters. The federation used the C-word—not choice, but compulsion. I asked one or two hon. Members whether they would be willing to state that they were unhappy about the compulsion to have money paid into a bank account; they said, "No, it will not be compulsory," but this is the Government's intention. I hope that the Minister will be honest and use the C-word—compulsion, rather than choice.

The Secretary of State for Trade and Industry wrote to the Federation of Subpostmasters in a letter that was meant for publication that he envisaged that all benefits would be paid into bank accounts by 2005. Answers from the Department of Social Security have said that payment into bank accounts will be the norm, with limited exceptions. I asked what "limited execeptions" meant, and the only example that I was given was those who are bankrupt—not poor people who did not have bank accounts. In other words, people will not have a choice. If we are about anything in the House, we should be about choice.

There is evidence that people do not want to be forced to have bank accounts. Child benefit and the retirement pension are the two benefits that are most likely to be paid direct into bank accounts. Barely half the new claimants of those two benefits opt for payment into a bank account, despite the loaded question that they are asked. For income support, which presumably applies to the most vulnerable in our communities, the figure is just 10 per cent. Nine out of 10 income support recipients do not choose to have their money paid into a bank account. How will they be provided for?

Although we have talked about 2003 and 2005, I warn my hon. Friends and others that things are already starting to go wrong because of the working families tax credit. I tabled a question recently, which revealed that the working families tax credit, which currently can still be paid through sub-post offices, had 300,000 new awards in the 10-week period before Christmas paid by giros in post offices. Three hundred thousand people went to post offices to pick up their working families tax credit, as it is now called. From April this year, virtually none of those 300,000 claimants will go to post offices. Lone parents will be forced to receive the credit in their pay packet, as will most others. The damage is being done now, so today's debate is timely.

The cost of an ACT payment is 1p, so the Government will save a great deal of money by switching to ACT, but how much of that saving will post offices retain? It is not good enough for the Government to say that people can still use a post office if there is no post office there through which the money can be delivered. If we go over to ACT, what will post offices get for handing over the cash that has gone through a bank account, for acting as an agent? Unless it is comparable to the sums that they currently receive, the measure will tip many post offices that are already on the borderline over the edge.

It is not sufficiently reassuring to tell my constituents that they can still go to a post office, unless they are sure that one will be there. I hope that the Minister will give an assurance that, for the foreseeable future, the sum that post offices receive for handling transactions and for acting as agents for banks will be comparable to that which they now receive. If they lose such a vital stream of revenue, many will simply cease to exist.

10.18 am

I am pleased to contribute to the debate introduced by my hon. Friend the Member for Stroud (Mr. Drew). I hope that he will forgive me if I have not recorded every elector in his constituency—we had a fair spread. Like everyone else, my speaking time is limited, so I shall not dwell too long on the benefits of the proposals.

In the age in which we live, like it or not, computerisation is with us. If post offices are to compete in the financial world, they need to be udpated with such machinery. It would be foolish to stand against that trend, so the scheme must proceed. I also understand the benefits that will come from reducing fraud in the collection of benefits, if there is a move towards direct payment.

Like other hon. Members, I am concerned, first, about the consequences for the poor and elderly in our communities if real choice disappears and, secondly, about the financial effect that such a lack of choice will have on small post offices. I have a letter from the Department that says that people will still have a choice, but the hon. Member for Northavon (Mr. Webb) doubts that. I look forward to the Minister's conclusive answer on that point.

There is a difference between choice and choice: between the choice that leaves people free to choose and the choice that people were given in plebiscites in middle Europe during the 1930s—woe betide those who did not vote for the winning side. At the moment, it seems that direct computerised payment into bank accounts is winning. A constituent from Essex kindly sent me a copy of a child benefit form. It claims to be a letter, but it is a standard form, the main purpose of which is to encourage people to receive their child benefit every four weeks in arrears instead of weekly. There are exceptions, but that is a subject for another debate.

That form mentions choices of the method of payment, but not much emphasis is put on payment by cash: the choice is mainly between direct payments, either through the bank or building society, or through Giro or the Post Office National Savings bank. One can choose to receive cash, but that is not made abundantly clear; indeed, when the letter was sent to me I was told, "There is no choice." We must make it abundantly clear that people do have a choice; equally, those who campaign for rural and suburban post offices must say, loudly and clearly, that people have a choice. Those of us who fear the loss of post offices may be agents in engineering their end if we do not encourage people to exercise their choice in favour of cash.

Choice is not sufficient in itself. Every person who moves to direct payment will be one person fewer going to the post office, which means one small item of cash revenue less for the post office. That will result in fewer people buying Mars bars or boxes of tissues—or whatever else people buy when they go to the post office. That will be equally true if they go to the post office only once every four weeks rather than once every week; the number of visits to the post office will be diminished and the number of purchases that can be made will be reduced. Small village post offices operate on narrow profit margins. A few people electing not to use them may make the difference between profit and loss, staying open or closing.

As my hon. Friend the Member for Stroud said, post offices have been closing for many years. In the village where I lived 25 years ago, the post office was to be found in a man's house. When he retired, the post office disappeared because no one wanted to take it on. I went back to that village recently, and there is still no post office; there is no longer a chapel, any form of shop or a school. The village post office, the school and the village shop are all part of the chain of community that has rapidly disappeared. I realise that other factors are involved: for example, as villages become home to commuters or weekenders, less purchasing power is available to be used in the post office.

Banks seem almost to rule the world these days—I hope that it is not terribly unfashionable to say so—and they work on computer systems. If post offices are to operate on equal terms with the banks, they, too, will need to use a computerised system. As mentioned earlier, they will also need to be able to act as the village, small town or suburban bank. Not only are banks unable to fulfil that function, but they seem almost purposely to have gone out of their way not to fulfil it. Within a two-mile radius of my law office, there used to be five branches of Barclays bank; now, there is only one.

I regularly go to the bank in Earls Colne, one of the villages in my constituency—except that it is no longer a bank, but the office of the National Farmers Union. We can go to lots of banks that are no longer banks but restaurants, printing works and so on. The choice is no longer available. All of us know of villages that have lost their banks or that have only one branch hanging on by a thread. The post office could be the answer to that problem, but we must ensure that it still exists, that customers still use it and that it still forms part of the community.

The newest phrase is "social exclusion". We use some funny phrases nowadays; I wonder whether people in the countryside understand what we are talking about. One of the biggest factors that makes people feel socially excluded is new technology that they cannot use or that they are not minded to use. For instance, if I were to start talking about Switch cards and PIN numbers to an 80-year-old who has lived all her life in the countryside and has never been further than 50 miles from her place of birth, she would not have a clue what I was saying, and I can understand why. We are creating the mechanisms that prevent such people from taking advantage of the benefits that are being created. However, it is worse than that: we are also taking away from them things that they have known all their lives. Because of the decisions that we and the world have made, some of their local—and social—facilities no longer exist.

Although I welcome progress, hand in hand with it must go the public assurance that traditional methods of receiving pensions and benefits will remain intact and on an equal footing with computerised banking. That must go at the same pace as the Government's initiatives to ensure that post offices enjoy full clearing bank facilities and to turn them into local bank branches.

10.26 am

I, too, congratulate my neighbour, my hon. Friend the Member for Stroud (Mr. Drew), on securing this debate. Many hon. Members are worried about the future of post offices, and those who represent rural seats are deeply concerned about the future of rural post offices, which are often the only service centre within their communities. Rural post offices are vulnerable. It is interesting that my hon. Friend did not say that the future of the sub-post office was rosy, but many of us think that it would have been better if he had said that it was bleak. The policies of local authorities and of Government are not improving matters. It is crucial that rural post offices are not only service centres but that they become financial centres. As other hon. Members have said, they should become rural banking centres.

I am concerned about the performance and innovation unit's December 1999 report. It was about rural economies, but contained not one mention of post offices or the financial services that they provide. It spoke at length about the need to build up IT centres, business link centres and financial centres, but no mention was made of the role that the post office already plays. I hope that the rural White Paper takes closer note of the post office network and ways to enhance it, so that we can have the financial centres that we need in rural areas.

In the Forest of Dean, that change is beginning to happen in a big way. Ruardean Woodside post office is small but necessary. It is running the first of eight pilot schemes in Gloucestershire with a grant from Gloucestershire rural community council. It has set up an information site, and it has access to Glosnet. One can e-mail from there, use the worldwide web, use the system as a word processor, print from it and do all the things that can usually be done in a telecottage. Because of the grant from the rural community council, it is being provided free to the local community, and people pay only for the telephone charges. It has been most successful, and it has brought more people into the post office, especially kids doing their homework. Such a project can help to prevent information poverty in rural areas.

Does my hon. Friend agree that there is a danger of social exclusion for the information poor? Will she go further and join me in urging the Minister to consider introducing a citizen's entitlement to time on the internet, for which post offices could serve as the access point?

That is a very good suggestion, which might be the way forward for local post offices.

I have two issues for the Minister arising from my meeting with rural postmasters in my constituency. They expressed concern about the future, 2003 and the changes to the payment of benefits. First, I hope that we shall retain choice. Many people cannot have a bank account—indeed, many people would not be able to use one, have never had one and do not know how to start. I want people to have a real choice, so that they can get their cash over the counter. I also want to know what my hon. Friend the Minister means by cash. Does he mean a cheque that has to be cashed or the current system?

Secondly, the Government and the Post Office could set up an advertising campaign, or the Government could put money into advertising services already provided by the post office network. Post offices currently provide 162 services, but we are not even aware of some of them. People can obtain health insurance, foreign currency and a range of other services at post offices; if they knew that, they would use post offices more. The Post Office does not have the money to do all the advertising, but I hope that the Government and the Post Office will invest some money together, so that the Post Office can extend its services and make people more aware of them.

It is crucial that post offices remain in our local community. The local post office should be the financial centre and the social centre of rural communities. Many rural post office staff are very aware of the people they serve and notice when, for example, a pensioner does not come in to pick up his or her pension. Those staff fulfil a social function as well as a financial one, and they must have a rosy future.

10.31 am

I, too, thank the hon. Member for Stroud (Mr. Drew) for initiating the debate. He may be building up a record on the number of times an hon. Member has been congratulated in a single debate. I also congratulate my local paper, the Western Daily Press, on its campaign against the Government's plans to pay benefits directly into the bank. I believe that it has so far collected about 150,000 signatures for its petition.

Much has been said about the importance of post offices in the community. They give people in their area a chance to meet, interact and, most importantly, to access vital services that they need in their everyday lives, which might in future include the internet. The post office is at the centre of community life, especially in rural areas but also in towns. The sub-post office is also a small business. About 90 per cent. of the post office network is run by small business people, and a recent report asserted that about 90 per cent. of small businesses with fewer than nine employees used post offices for banking and deposit facilities, for obtaining cash and for access to mail services. That is an important aspect of the service provided by sub-post offices.

Postmasters and mistresses are concerned that they will lose money because of the reduction in Benefits Agency business and that related problems will build up. They are concerned that, if the Government's plans go ahead, by 2005 they will have less business from benefits. They believe that it will be difficult for post offices to be viable, even if they are given extra business.

I agree with comments made by other hon. Members about freedom to choose how our benefits are paid. My hon. Friend the Member for Northavon (Mr. Webb) made some key points, and I look forward to hearing the Minister's response. Having visited several post offices during the recess, I was concerned to hear that people read the letters sent to them and assumed that they had to ensure straight away that their benefits were paid through the banks. Perhaps those people did not read their letter well, although some have suggested to me that it was misleading. Several post office staff told me that they would like to display a notice in their post offices informing people that they can still get their benefits paid there. What is important is that many people appear to have been misled, whether intentionally or not.

I have referred to the importance of sub-post offices both to and as small businesses. Many people have put their savings into a sub-post office with a view to retirement or selling up. Such people feel dispirited that they may not now have a resource to sell. We are concerned about closures of sub-post offices not only because of their impact on rural communities and communities generally, but because of jobs. A recent survey conducted by the National Federation of Subpostmasters states that as many as 30,000 jobs will be lost if the predicted number of sub-post offices closes because of the Government's action. That is concerning, especially as many sub-post offices are situated in rural areas where jobs are difficult to find.

The Minister has been reported as saying:

"In many ways the Post Office has had an unhealthy over-reliance on benefits work."

It may be fair to say that, but it is not an answer. We want the Minister to answer today. The benefits work given to post offices was felt—especially by sub-postmasters taking on the job of running sub-post offices—to be an integral part of their income. The removal of that income will worry sub-postmasters and be a defining point for them.

The issues to which I have referred are clear and are relevant to all constituency Members of Parliament. Some of those issues might be regarded as small, but the ability of retired people and people on low incomes to go into a post office, to obtain their cash and to decide what to do with the money on that day is very important. Sometimes such people will want to spend a little bit here and a little bit there or buy a Mars bar, as the hon. Member for Braintree (Mr. Hurst) said. All such transactions help the local community, perhaps through a nearby shop. It has been pointed out to me that sub-post office staff are aware of local people: they are likely to notice if an old person does not arrive to collect a benefit payment and to try to find out whether that person is ill. Such action can often be the first line of defence for vulnerable people.

I hope that the Minister will have time to deal with all of the points made, so I shall draw my remarks to a conclusion. I hope that he will convince us that things will not be as bad as we believe. I look forward to hearing his comments.

10.37 am

Today is a marvellous opportunity for the Minister. Since the debate on post offices in the Chamber on 15 July, which was initiated by the Conservatives, hon. Members have had the chance during the long summer recess to visit post offices in their constituencies to see how they are coping with the changes facing them. We have heard about some such visits today. We have also had the chance to hear post office staffs predictions on how the Government's policy decision of May to move to ACT payments will affect them. As a Front-Bench Member of Parliament, I have insisted when visiting the constituencies of other hon. Members on being taken to local post offices. The picture is the same throughout the country, wherever one goes, whether it be Wales, England or elsewhere. Hon. Members of all parties have expressed grave concern about the impact of Government measures on communities and individuals and about the future of sub-post offices.

At the beginning of the debate, my right hon. Friend the Member for Hitchin and Harpenden (Mr. Lilley) spelled out clearly the track record of the Conservative party. The hon. Member for Chorley (Mr. Hoyle) had a good go at the party, as he usually does, but the facts are clear. When we left office, we left in place a framework in which the future payment of benefits through post offices would continue, funded from the taxpayer by remuneration made through Post Office Counters to individual post offices. That function represents, on average, 30 per cent. of post offices' annual revenue.

As we have heard, the Labour Government not only accepted that policy, but told the House of Commons in both oral and written answers that the new Horizon project was going ahead, that all would be well and that they were trialling it. They gave the impression that, apart from one or two hiccups with the technology, which were being overcome, we had no reason to believe that any substantial changes would be made.

Will the hon. Lady give way?

I hope that the hon. Gentleman does not mind, but I have only a short time to speak.

I congratulate the hon. Member for Stroud (Mr. Drew) on bringing the matter to our attention again. Unless the Government reconsider in short order, we shall pass the point of no return. I should say that we are already passing that point. I have a huge rural constituency containing more than 50 sub-post offices. Post offices often come up for sale when those running them retire and want to dispose of them. Those considering taking them on look and say, "In two years' time, we will have to run the business"—and they are businesses—"with a 30 per cent. drop in revenue." The Government flagged up during the summer several proposals in the pipeline to boost the revenue and the viability of those businesses. If the measures have common sense and tangibility behind them, I welcome all of them.

The use of computers will help especially the tiniest post offices to offer a range of services. In my constituency, some really tiny post offices do not have room even for a proper shop—they have a few postcards, a bit of stationery and that is that. Being able to sell tickets and to provide other services will be a help, but we should not forget that we are poised on a technology revolution whereby ever more people will be able to access services at home through either their PC or, as we see coming up and as is more likely, through interactive digital television. Post offices will not be able to offer services exclusively, helpful though that might be to pensioners unable to access them otherwise.

Let us not think that the computer in the post office will solve post offices' problems—it will not. I was concerned during the summer when we heard that the Post Office was to join forces with Camelot in the new lottery bid. The Secretary of State for Trade and Industry immediately announced that that would be a great help to post offices. I question that view because it will not be viable to put a lottery terminal in a rural post office or shop, unless it can process 3,000 transactions a week.

The Government have shown one of their hallmarks. They have taken a Treasury-driven political decision to save £400 million a year for the taxpayer or, rather, for the Treasury, because the taxpayer would be willing to see the money continue to be so used. They have created a huge problem and are now clutching at straws to discover how they can shore up the situation and solve it.

I should say to the hon. Member for Dunfermline, West (Ms Squire) that people have been assured that they will be able to collect their benefits in cash. There will be a transaction between the clearing banks and whatever form of terminal is in a village post office, if there still is one. The Government have failed to answer the question, although we have repeatedly asked it, about who will bear the transaction costs. Again, they do not seem to have a clear view of how they will process and advance that.

The Minister recently appeared in national newspapers saying how concerned he was. He knows that I genuinely have great respect for him. He is well placed in the House to know the post office sector and to feel from the heart its need for a future. The answer is in his hands. He is the one person present with the power to do something about the problem with which we are all concerned. He is not tainted by having served in the Treasury. Will he please stand up to the Treasury? We have already heard that it is unlikely to save that much money. There is time—just—to think again, to change the decision and to advance the matter so that we will not have to keep coming to beg the Minister to save our fragile communities.

10.44 am

It is a great pleasure to reply to the debate, which is not the first on the Post Office with which I have dealt. There have been three such debates, and an Adjournment debate on this precise issue soon after we returned from the summer recess.

I should like to join the fan club of my hon. Friend the Member for Stroud (Mr. Drew) and perhaps to become its honorary secretary, and thank him not only for having raised an important and currently vital political issue, but for the way in which he addressed us. His speech was balanced, intelligent, well informed and, most of all, it was about the future of rural post offices rather than the past.

The hon. Member for Tiverton and Honiton (Mrs. Browning) touched on an important aspect of the debate. If we are not careful—if we surround the debate with gloom and doom, as if it is about a negative future for post offices—we shall create the very climate that we should all be seeking to prevent.

Will the Minister reflect on what he has just said? He said "rural post offices". They have dominated the debate, but will he accept, as I do, that we are considering a national network and that the situation also affects urban and suburban post offices?

I agree absolutely, and I shall address the matter. It is important that I put the Government's position on the record during the debate.

I hope that the hon. Gentleman accepts that, as my hon. Friend the Member for Stroud made clear, it is important that we consider the matter constructively. The beauty of this and of all other debates on the Post Office is that I have an opportunity to reassure hon. Members again of our commitment to a nationwide network of post offices.

The right hon. Member for Hitchin and Harpenden (Mr. Lilley) mentioned what happened in the past. We are unable to access some of the records from the benefits payment cards project. The project was well intentioned, and I supported it in a previous capacity. However, when we took office, the contract was running three years late and was vastly overspent.

If the project was running three years late when the Government took office, why, on four occasions over two years, did Ministers assure the House and the Select Committee on Trade and Industry that it would be complete on time by the end of 2000?

I shall correct that. It was running three years late when we took the decision to move to the new arrangements. When we took office, the contract had already been renegotiated; and it had been established in May 1996 and renegotiated in February 1997. I was party to those discussions in a previous capacity. The previous Government spent two years trying to privatise the Post Office, two years trying to plunder it and a year establishing a well-intentioned project that the Trade and Industry Committee said was "blighted from the outset".

On assuming office, our choice was between continuing with a failing private finance initiative scheme running well behind schedule and well over budget, and getting a proper grip on the issues through a workable arrangement to computerise the network with a phased approach to the migration of benefit payments to ACT. There is no doubt that the process has accelerated, is accelerating and will accelerate. There has been a concerted and co-ordinated push to attract new business.

Had we not created the need to consider the future, we would not be having the debate. The post office network that everyone is applauding, saying how vital it is to our communities, has been seeping away at the rate of 1 per cent. a year for the past 20 years. There would have been no debate. The choice might have been easy for Government—to leave alone and to walk away, with it becoming someone else's problem in five, six or 10 years' time. There would have been a continual, gradual decline until it became too late to do anything about it. The push to attract new work for the network and the discussion about getting network banking back to rural areas that lost it years ago is a crucial element of the debate. It is also important to take advantage of the computerisation from 2001 and the access criteria that we are introducing, which will be established in law and monitored by an independent regulator so that the random effects of the past 20 years' gradual erosion can be tackled.

We recognise that there are concerns about how the matter is being approached and the requirement for what today's jargon calls a cross-cutting response from Government, if what we propose is to be successful. That is why, on 21 October, very quietly and before any local newspaper campaigns or fuss in the press—in fact, we tried to make more of it than we managed to, probably because of my inexperience as a Minister—we announced that the Cabinet Office would set up a performance and innovation unit study, reporting directly to the Prime Minister, to identify post offices' contribution to the vitality of communities; to consider how the post office network could best contribute to the Government's objectives for the future; and, in the process, to formulate objectives for the network itself. The report is important. It takes into account ideas such as internet cafes and bringing back services such as electricity payments in Scotland; I, too, remember that those disappeared years ago.

The transition from paper-based methods of paying social security payments to ACT does not start until 2003—a full three years from now. I know of the fuss about the letter sent by the Benefits Agency and mentioned by several hon. Members. I do not have time to explain that, but I assure hon. Members that child benefit payments have been paid monthly since 1982; there was no change in that respect. Some ambiguity was found in the relevant form, but we are tackling that. It was a one-off exercise that will not be repeated. The implications of the transfer to ACT are being given particular attention in the PIU study. We are taking positive and concrete steps to establish a framework for the network's future.

Of course, we are computerising. By spring 2001, we shall have dealt with the whole vast network—vast even after it has shrunk: if W. H. Smith, Tesco and Boots were added together and multiplied by 10, they would not amount to the Post Office network of 18,500 offices. To computerise it at a rate of 300 offices a week is an immense task which is being undertaken very successfully. We are up to date and the new project will produce a proper computerised network which will be essential to the future of the business.

The access criteria that we are planning to announce in the next few months will be the benchmark against which the Post Office Users National Council— revamped and given more teeth—and the new independent regulator, the Postal Services Commission, will monitor the Post Office proposals for the network and its evolution. For the first time, there will be a requirement in law for close, independent monitoring of the nationwide network of post offices to ensure that proposed closures that would present significant problems of access to Post Office Counters services will be taken up with the Post Office and ways of maintaining access investigated.

The question that was raised about how services might be guaranteed should a sub-postmaster move away misses the point, which is that post offices have closed and that prestigious, main post offices on the high street have been converted—that took place under the previous Government; we put a moratorium on the process from day one in office—and the services they offered moved into the back of hardware stores. That had been happening for years: the public's complaint was that they were not consulted properly and that there was no proper system of appeal; the community could not decide together how best to replace the facilities.

The appeals procedure is, in the light of such issues, very important. It is one of a range of pragmatic proposals to ensure the future of not only rural post offices but the post office network as a whole. It is not enough to admire the history of this vital piece of our social fabric, or merely to read "Lark Rise to Candleford" by Flora Thompson, which I advise hon. Members to read if they do not understand how important post offices were in the 19th, never mind the 20th, century. We do not need to make those places into a rustic museum. We need to think about how the network can face the future, given the changes going on.

Our decision to make a substantial contribution to the capital cost of the Horizon counters automation project, which we have radically restructured and put back on track, represents a major investment in the future of the network. The Post Office already provides banking services for Alliance and Leicester, Girobank, Lloyds TSB and the Co-operative bank. Given that 60 per cent. of rural villages have a post office and only 5 per cent. have a bank, that is a tremendous opportunity. Already, as hon. Members may have read last week, the Post Office is installing 3,000 cash machines in post offices as part of the drive to reintroduce banking to rural areas. Currently there are only a couple of hundred.

What is being done—and this is joined-up government—will help to tackle social exclusion. The terminology bores us all sometimes, but that is an important aspect of the programme. Every study demonstrates conclusively that financial exclusion is a cause and an effect of social exclusion. We want to encourage and support people without access to a bank. I shall deal later with the points that were made about the C-word. We want banks to offer people proper facilities, because that is an important part of the attack on social exclusion.

We have set a time scale in which the transfer will not even begin until 2003, and will then continue until 2005. We believe that, with the developments in banking technology and the introduction of new, simple banking products, it will be possible to cater to individual circumstances and provide accounts suitable to individual needs. While the vast majority—80 to 85 per cent.—of benefit recipients already have access to bank accounts, we recognise that some may still be unwilling to use a bank account. We will not compel them to do so. For those people, we are considering what alternative, simple electronic money transmission system using ACT that could also be accessed at post offices might be commercially available. We recognise that benefit recipients want to withdraw every penny of their benefit at one time. That means, first, that the facility must ensure that a person who is entitled to £20.68 gets £20.68—it is the Government's commitment to pay them that benefit—and, secondly, that no charges should be made against that £20.68, otherwise that person would not receive his or her full benefit.

My right hon. Friend the Secretary of State for Social Security made it clear—I invite hon. Members to read the report of the Select Committee on Trade and Industry—that we are not aiming to withdraw, reduce or dilute benefits that people draw. I emphasise again that there will be no change before 2003 to existing methods of benefit payments. All benefit recipients and state pensioners who want to will continue to be able to access their benefits in cash, across the counter at the post office, both before and after the changeover.

There is much more to do—in urban as well as rural areas. My points about those who are socially excluded are important in constituencies like mine. We can achieve much if we set our minds to planning the future of the network, which was unhealthily overdependent on the benefits system. There would have been a gradual move to ACT, and even a benefit payments card was not conceived as a solution that would last for ever.

The Post Office has had some marked success in introducing new work, such as bureaux de change and lottery work, but more can be done. The easy choice would be for us to allow the network to seep away in an uncontrolled fashion, to ignore the increasing shift to ACT, to refuse to tackle the deep-seated problems of financial and social exclusion, and to allow a failing PFI to continue. We could put the problem off until decline becomes crisis and crisis becomes collapse. These are difficult problems, but rural communities can be assured that we intend to resolve them, so that post offices will continue to meet the changing needs of the communities they serve as effectively in this century as they did in the last one.

Is the hon. Member for Meriden (Mrs. Spelman) present for the next debate?

I apologise, Madam Deputy Speaker. I am not familiar with the procedure in the new Chamber.

Perhaps I should make it quite clear to hon. Members that if they are not present when the Adjournment debate is called they lose their debate. On this occasion, as I was able to see the hon. Lady, although she was not in the Chamber, I am prepared to accept her presence.

I was waiting in the wings.

First, I should like to thank Madam Speaker, through you, Madam Deputy Speaker, for selecting this subject for an Adjournment debate. It is a particularly good subject for such a debate because many hon. Members of all parties will have a case in their constituency of the type that I am about to outline, so they can all participate. That is the spirit in which Adjournment debates should be conducted when they are at their best. The Minister will be pleased to hear that I do not intend to turn this into a party political debate because the debate should as far as possible rise above narrow party political arguments. He will be relieved to see that I have resisted the temptation to divert into the question of fuel taxes, which would rapidly become a party political debate. I intend to focus exclusively on the plight of the independent retailers in the petrol market and to urge the Government to act.

I shall begin by setting the scene a little. My attention was drawn to these problems by the unfortunate experience of my constituent, Mr. Parekh. He first came to my surgery in 1998 and I have tried all the avenues at my disposal as a Member of Parliament to help him, but without success. It was only as I pursued his case that it became clear that many other people were in the same position and that this would be a good subject for debate. Mr. Parekh's experiences need to be seen in the context of what has happened in the petrol retail market during the past three years. The oil companies responded to the competition from cut-price petrol sold by supermarkets with a price-cutting campaign. Esso's price watch campaign is just one well-known example of how the companies have fought back and, of course, the other oil companies responded in similar ways.

In the Office of Fair Trading report entitled "Competition in the supply of petrol in the UK", published in May 1998, it was estimated that, following supermarket competition, there were 5,000 fewer traditional filling stations. The OFT made a fairly superficial assessment of the causes of decline among independent retailers, blaming bad sites and a lack of competitiveness. But that seems to contrast with the interpretation put on events by the Federation of Small Businesses, quoted in the OFT report, which said:

"Competition between the oil companies and the hypermarkets had directly resulted in closure of independent solus-tie sites."

I just leave those two contrasting views about what really happened after this pretty vicious cut-price petrol war. I hope that my explanation of my constituent's case will make it clear where I think the truth lies.

I should like to focus the Minister's attention on the fact that, as I see it, the pain of the petrol price war was displaced by the oil suppliers on to the backs of the independent retailers by changes in the terms and conditions of their contracts, and the oil companies' failure to honour the undertakings given to the OFT to protect those who entered into agreements to retail petrol for them. Against that backdrop, world oil prices have stayed fairly stable since 1986, but the price of crude oil is a relatively small part of the pump price. More than 80 per cent. of the price of fuel at the pump is excise duty and VAT.

I do not wish to take a sidetrack to a debate on the consequences of the fuel escalator, because a lot of parliamentary time has been devoted to that, but I am sure that other hon. Members would like to draw attention to it. One aspect that is worth mentioning is the distortion in the retail market caused by Britain's high fuel tax regime. That is causing difficulties with cross-border smuggling, particularly between Northern Ireland and the Republic of Ireland. I know that the hon. Member for Lagan Valley (Mr. Donaldson) will seek to catch your eye, Madam Deputy Speaker, to speak about that.

I wish to highlight those global market conditions and their interaction with our own domestic fuel tax arrangement to warn the Minister that, as crude prices have more than doubled in the last 12 months, oil companies may no longer be able to absorb the impact of fuel duty by cuts to profits. Consumers may feel that high tax regime more directly in future.

My constituent, Mr. Parekh, used to run a petrol station under what is known as a solus-tie agreement with Esso. Such agreements are common in the industry and mean that an independent retailer is exclusively tied to one wholesale supplier for a period. There have been concerns about agreements in the past, and as long ago as 1965 the Monopolies and Mergers Commission undertook a report on the supply of petrol to retailers in the UK which raised the issue of the degree of control exercised by the oil companies over the independent retailers. It concluded:

"Solus agreements seem to us to have some disadvantageous features as operated at present and to be potentially dangerous for the future unless certain safeguards are introduced."

Consequently, in 1966 the oil companies gave the then Board of Trade a set of undertakings, although they were subsequently amended in 1968, 1976 and 1984. Responsibility passed from the Board of Trade to the OFT in 1973.

This is where my constituent's story begins. He borrowed thousands of pounds from relatives and a bank to run an Esso petrol station. He signed a three-year contract that appeared to be regulated by the Department of Trade and Industry and the OFT. Within a short time of issuing the contract, the amount of rent demanded became quite unreasonable in relation to the turnover of the business and he was faced with breaching the agreement or becoming insolvent. He appealed to the OFT to arbitrate the dispute but was rebuffed by a standard reply from Mr. Bridgeman, the director general, stating that the OFT could not involve itself in individual disputes, despite the fact that numerous similar complaints had been lodged. Indeed, it was reported to the House that 57 such complaints had been lodged to the OFT in 1998 alone.

Just to backtrack for a second, in 1980 the then competition Minister, Mrs. Sally Oppenheim, wrote to one of her colleagues, who was concerned about the lack of legal protection for independent retailers, to say that the oil company was bound by those undertakings, as amended in 1976, and that there would be an arbitration scheme to settle disputes. In 1996 the oil company informed a Select Committee inquiry that an arbitration scheme was in place to resolve disputes with licensees but, faced with a real dispute, Mr. Bridgeman refused to arbitrate because he accepted the oil company's view that there was no dispute.

On 17 July 1996, the Select Committee on Trade and Industry recommended

"that a code of practice be drawn up through negotiations between the OFT and the petrol retail industry, covering the contractual relationships between wholesalers and retailers and including provisions for speedy and binding arbitration disputes. We further recommend that the code of practice be the subject of undertakings given by wholesalers and retailers to the Secretary of State for Trade and Industry."

It added:

"We recommend that the petrol retailing industry is continuously monitored by the Director General of Fair Trading, using the indicators suggested by the MMC."

There is plenty of parliamentary evidence that the matter has been raised in various Select Committees on many occasions, but the problem remains. A large number of independent retailers cannot get disputes arbitrated adequately. Many feel let down by the Office of Fair Trading, which failed to ensure that undertakings given by the oil companies were honoured. The undertakings enshrined an automatic right to renew licences but, under the new licence agreement, that right was withdrawn from my constituent, Mr. Parekh.

The undertakings envisage that the right of renewal of a licence can be withdrawn only in special circumstances—where a petrol station is to be knocked down and rebuilt, where a site is to close, where a site is to be leased to a third party, or where an oil supplier chooses to run the site itself. Mr. Parekh was given the fourth reason for non-renewal but, in practice, the site is being run by an agent under licence. Where is the difference? The criterion for denying the right to renewal was not met by the oil company. Mr. Parekh is not alone in his experiences. There have been 1,200 forecourt closures each year since 1996, with rural closures creating virtual petrol deserts and high prices for people living in remote areas.

Another specific example was given to me by an hon. Member who cannot speak on the subject because he has a registered interest, but who was directly affected by exactly the same situation. Under a three-year agreement struck with an oil company in 1989, a very reasonable fee of £932 was to be paid by him to the company for his petrol filling station outlet. In 1992, the fee jumped dramatically to £21,150. With other charges thrown in on account of the sale of products on the filling station forecourt, the shop and so on, the charges came to £26,000 a year. On his £3 million turnover in 1992, the profit came down to just £13,000. That is a dismal return on anyone's investment: That independent retailer surrendered the lease in 1994 when he was told of a further increase in fees which would take effect from 1995. The filling station is now run by a manager for the oil company. That is one more example of the way in which independent retailers have suffered at the hands of oil companies.

What would I like the Government to do? The OFT reviewed the petrol undertakings, but thus far has failed to make significant changes. Following publication of the OFT's report "Competition in the supply of petrol in the UK" in May 1998, the then Under-Secretary ordered a review of petrol undertakings. In February last year, the present Under-Secretary answered a question on the Floor of the House, stating that he expected to receive advice from the Director General of Fair Trading "within the next month". Almost a year later there is still no announcement that a review has been undertaken. Will the Minister for Competition and Consumer Affairs tell us why the review is taking so long, when he expects it to be completed, whether it will be published and when? Perhaps the review will shed some light on the injustices suffered by independent retailers.

The OFT has been sadly lacking in its responsibility to monitor the outworking of those undertakings. The stock reply is that the matter is not the responsibility of the OFT; that it is concerned only about competition. Given the experiences of independent retailers, that is woefully inadequate. The OFT ruled that the terms of agreements offered by the major oil companies must be fair and reasonable. However, when the Total oil company advised the OFT that it intended to change the compensation given to retailers who went out of business, and announced that it would cut by nine tenths its payment to licensees whose licences would not be renewed, the OFT failed to respond.

The OFT dedicates only minimal resources to monitoring the forecourt industry and currently has less than one person on the job of acknowledging responsibility. I ask the Government to launch a fresh inquiry into why so many small and medium enterprises among petrol retailers have gone out of business since 1996. I want the inquiry to go beyond the trite assessment that there is a lack of competitiveness on the part of retailers and to examine whether there has been unfair practice by oil companies.

Would the hon. Lady care to look at another issue that affects my constituency— what I would call the area setting of prices? I do not know whether she intends to come to that. The bizarre situation in my area is that my most rural garage, which is run by Mr. Roger Budgen in Bisley, near Cheltenham, has until recently been able to sell the cheapest petrol, which is almost the reverse of what we might expect. I cannot get to the bottom of why that was possible for him, whereas in Stroud, where one would expect to buy cheaper petrol, retailers have to sell their petrol at a higher price. Has the hon. Lady had a similar problem in her area?

It strikes me more as an isolated case. My own experience from driving around the country over the Christmas and new year period was of a predictable pattern. In urban areas, especially those with a supermarket outlet, there is a remarkable conformity in prices. I cannot recall how many times I have driven past petrol stations displaying prices of 75.9p or, if one was lucky, 74.9p, in which case there was a queue. That is remarkable uniformity in pricing. In the more remote—especially upland—areas, such as the Cumbrian hills, small filling stations have to pay a significant premium because of the distribution costs. I am nonplussed by the hon. Gentleman's example. As his filling station is still in business, I suggest that all of us try to get to the bottom of that market success.

I am disquieted by that remarkable uniformity in prices. It certainly leaves me sceptical of the OFT's findings after it looked into competition in petrol sales. Such uniformity in pricing leads me to believe that competition is not as strong as the OFT would have us think.

I invite the Minister to think about a change of direction in policy in the United States of America and Australia, where, faced with similar problems, the Governments of those countries have ruled that oil companies cannot be both retailers and suppliers of petrol, other than having a token presence for the purpose of keeping a finger on the pulse of what is happening in the marketplace. Hon. Members will understand what I mean by a token presence if I say that that is just one filling station per American state, as state Governments have decided to separate the supply and retail of petrol. That really is a token presence. In Australia, the token presence is slightly higher, with six filling stations allowed per state. None the less, that amounts to a sparse representation of oil companies as supplier and retailer, and could be described as merely testing the temperature of the waters.

It is significant and interesting that those two Governments went down that route, perhaps for precisely the reason that I mentioned—that others are disquieted by the remarkable uniformity in prices. At global level, three, possibly four, major players in oil supply are emerging, along with several minor players. With so few major players and increasing market concentration, vertical integration—in which the major suppliers both supply and retail their product—is unhealthy for consumers in the longer term. That applies in other countries as well as in the UK.

This is no time for complacency. The demise of independent retailers is likely to hasten market concentration to the point where it becomes monopolistic. In some rural areas, there is already a virtual monopoly. The issues are complex, and I have resisted the temptation to highlight several smaller injustices in order to focus debate on the major injustices from which independent retailers have suffered.

In the light of the history of the parliamentary proceedings leading up to today, I hope that we do not lose sight of the fact that several individuals have suffered personally as a consequence of the failure to act appropriately to address the problem. I shall finish by citing one more example, which drives the point home.

After a lifetime in the teaching profession, a retired headmistress invested her savings in a local petrol filling station. She was encouraged by the household name of the oil company to think that the investment offered a degree of security. Having been shown figures of the sort of business return that she could expect from her investment she was encouraged by the prospect of a decent return. However, the turnover had been inflated and she found that when her rent was taken into account, her business was simply not viable. She had to pull out, losing her investment. Her tenure was followed by that of yet another victim—victim is not the wrong word—who was attracted by inflated prospects, but five months later was no longer trading. I ask the Minister: how many more casualties will there be before the Government act?

11.23 am

I congratulate the hon. Member for Meriden (Mrs. Spelman) on raising this important matter in this morning's proceedings. She made many relevant points, but I should like to say a few words about Scotland because the cost of petrol and related issues remain within the purview of Westminster rather than the Scottish Parliament.

Petrol retailing has a significant effect, particularly in the highlands and islands of Scotland and in my constituency of Argyll and Bute. Petrol prices are prohibitively high in remote areas and on the islands. Last year, a petrol retailer on the island of Islay had to charge 85.9p per litre for four-star petrol, 79.9p per litre for unleaded petrol and 80p per litre for diesel. That compares with averages of 74p, 66p and 69p respectively.

The hon. Member for Meriden said that she did not wish to make party political points. I do not either on this occasion. However, it is important to understand the background to the debate on retailing. My constituent keeps going only because his retail business serves a particular part of the island. He and his wife keep going because they believe that they are providing a service—we spoke earlier about the importance of post office outlets, which provide another important service. However, because of a low turnover, my constituent told me that he did not qualify for the rebates that other petrol stations receive for large-volume sales. In addition, he provides approximately 60 per cent. of his petrol on credit because most of his customers are self-employed fishermen and farmers, so at any one time he could be owed as much as £18,000, which makes it difficult to survive.

We must remember that cars are a necessity, not a luxury, in remote rural areas. No matter how good public transport becomes, it will never be a substitute for cars in such areas. I hope, of course, that we will one day have a much better rural transport system in this country, but I cannot imagine buses ever going into little villages to pick up a few people.

The rise in the cost of diesel has increased overall costs, particularly in remote areas such as the highlands and islands of Scotland and Argyll and Bute. Many goods have to be hauled by road. We would like more goods to be transported by sea, but we cannot transfer goods to railways that do not exist: railways do not go to places such as Campbeltown, Dunoon and Lochgilphead. There have been constant hikes in petrol prices, and the escalator, without meaningful compensatory measures in rural areas, has been one of the most unpopular and deeply resented measures ever introduced by both Conservative and Labour Governments.

The Petrol Retail Association told me that 1,200 forecourt closures have taken place every year since 1996, and an average of 850 since 1969. At the end of 1997, Scotland had 1,299 petrol stations and by the end of the following year that number had shrunk to 1,200— a loss of nearly 100 primarily remote rural stations in vulnerable areas. It is lunacy for people to drive 40 miles to fill up their cars with petrol, consuming the fuel that they have just bought in getting home again, yet that is exactly what happens when so many retail forecourts close down.

We must know what is going on and why. The OFT has conducted investigations in the highlands and islands area, but its reports have not been enlightening. It claims that nothing is wrong, that companies do not operate cartels, and offers explanations such as higher delivery costs, higher fixed costs per litre, lack of favourable contract arrangements with major oil companies, the effects of VAT and limited competition. As the hon. Member for Meriden said, we need to know why the OFT has not completed its review of petrol undertakings, which it promised to do in June 1998.

Finally, what measures will the Government take to try to stop petrol retail stations closing in rural areas and particularly in the north and west of Scotland?

11.31 am

The crisis is at its worst in Northern Ireland, particularly the border counties. I can fill my car with fuel in my constituency, but, if I drive a mile down the road and cross the border, I can save 22p a litre or £1 a gallon. That is crazy and it will destroy the petrol station industry. The problem will not be solved by talking or by reports that were written months ago and about which nothing has been done. Action is required. The problem is serious for the towns and villages of Northern Ireland's border counties because the industry will be wiped out. The Secretary of State should meet representatives of petrol stations in Northern Ireland to produce an immediate plan to resolve the problem.

11.32 am

I congratulate the hon. Member for Meriden (Mrs. Spelman) on securing the debate because it is important to highlight the problems facing small petrol retailing firms.

I, too, support an inquiry into petrol retailing. Previous Governments and the Select Committee on Trade and Industry have investigated petrol retailing and produced reports, but somewhere along the way the issue has been swept under the carpet and recommendations have not been fulfilled. It should be brought out from under the carpet. There should be an inquiry and it should have teeth because many problems face many constituencies throughout the United Kingdom.

Every year there are 1,200 forecourt closures. The Government should support small and medium enterprises, but those closures have been allowed to happen since 1996. We must do something about the thousands of people who lose their jobs when those thousands of businesses close. We cannot continue to turn a blind eye. We must ensure that rural forecourts remain for the future because, like rural post offices, they are at the heart of the rural economy. We must ensure that something is done. Why have we allowed the creation of rural deserts? When a rural petrol station closes, it does not become something else overnight. Far from it. The site begins to wither and becomes overgrown, subject to tipping and, eventually, an eyesore.

The Government must focus on the future of small businesses in petrol retailing. They should get involved in the contract between small businesses and major oil companies. Oil companies were heavily squeezed by the previous Government and the present Government with the fuel escalator and they have not had an easy time, but they should play fairly and not squeeze small businesses. They do not want their profits to fall because they must consider their shareholders, but it is not acceptable to resolve the problem by closing small petrol stations. The petrol companies should embrace small petrol stations for their loyal service over many years.

There was an inquiry 35 years ago into agreements between oil companies and small petrol stations. Those agreements were thought to have a five-year future, but oil companies may give 30 days' notice of termination. Petrol forecourts often have a shop to make a little more money, but the products in the shop must be bought through the oil companies and the prices are decided by the oil companies. That is anti-competitive. Previously, if money was not being made from petrol, it could be made from the shop, but the oil companies recognised another opportunity to squeeze money out of petrol retailers.

Why did the European Commission allow the block exemption to be renewed? It exempts oil company agreements from examination until a single company exceeds 30 per cent. of the national share. But an oil company may have a regional monopoly. The country may have been nicely carved up between the oil companies, but it is even nicer for an oil company if it has a monopoly in one region because it can then dictate terms, prices and conditions throughout that region. That is what is happening. There is no point in having a national agreement if there are regional monopolies.

My hon. Friend will be aware of the matter raised by the hon. Member for Meriden (Mrs. Spelman) who referred to the earlier Select Committee report, which recommended that a code of practice be drawn up with the Office of Fair Trading through negotiation with retailers and wholesalers so that grievances between retailers and wholesalers could be considered. Does he believe that such a mechanism between retailers and suppliers would be advantageous to the retailers?

Of course. I respect that view, which should be encouraged. My hon. Friend was a member of Select Committee that has investigated fuel retailing. I hope that we shall have a response from the Government on that today.

There are only three national marketers of motor fuel and they have a combined market share of 85 per cent. We begin to see that the real muscle is in those big three companies. Petrol retailers in rural areas provide a service, which generation after generation may have provided, but such family connections have had to end because of the muscle power of major oil companies. I am lucky in having good rural petrol stations in my constituency of Chorley. They provide a loyal service, but I wonder how long that can continue. The petrol station in Ulnes Walton is lucky because it became wine retailer of the year. It is successful and provides a great service not only in petrol but in fine, quality wines. But not every petrol retailer has the ability to do that and not every oil company will allow that. That petrol station is a huge success, but it cannot be replicated up and down the country.

My local petrol station, Walkdens in Aglington—I use it regularly and my family has had an account there for 30 years—has had BP, ICI, Fina and now Shell petrol. Each time the oil company changes, the agreement changes. I do not want to lose that local filling station. I want it to continue because it provides a good service, but I am worried that it will be squeezed by the oil companies.

Our friends in Northern Ireland have experienced the squeeze and petrol filling stations have been closing daily. The problem is not only that small businesses are closing in Northern Ireland—a problem that is not being addressed—but that fuel smuggling represents a cost to the Chancellor of the Exchequer. People in Northern Ireland can make good money out of smuggling petrol. Not only does that cost the Exchequer millions of pounds, but it means a loss of employment and the closure of small businesses. Unfortunately, it is a sad fact that petrol smuggling is seen as an alternative. Petrol smuggling is happening in Northern Ireland and Scotland, and now in England as well. It will force even more small retailers out of the market as people look for alternative sources of fuel.

11.41 am

One of my constituents, Mr. Peter Avery, who runs the Lanehouse Rocks road Esso garage and is also a motor retailer, alerted me to the fact that he had written to me at the beginning of 1999 and that I had made representations on his behalf to the Government. The Government told us not to worry because the Office of Fair Trading was looking at petrol retailing. I had to admit that I had lost sight of the fact that the OFT had done nothing about the issue. I ask the Government to explain their original policies.

It simply is not true that the OFT has done nothing. It has been attempting, as I hope it always will, to carry out an exhaustive investigation of the issue. The OFT has told me that it is due to report to us at the end of February or the beginning of March. I assure the hon. Gentleman that I shall make that information available to the House.

I am most grateful to the Minister for that comment. I spoke to Mr. Avery on the telephone yesterday. He asked, "Is the debate worth while?" I replied, "Funnily enough, Governments tend to forget that they have made commitments." I predicted that the Minister would jump to his feet and say, "Ah, but we are about to get the report and take action." I do not accuse the Minister of making those comments in bad faith, but I am glad that this welcome debate, initiated by my hon. Friend the Member for Meriden (Mrs. Spelman), is having an effect.

Normally, when business men go into business and sign leases with landlords, they are covered by the Landlord and Tenant Acts and their rent cannot be jumped up immediately. They normally know that, as a retailer, they can buy from anyone. If they sell baked beans, they can buy many varieties or only one. They take the decisions. However, I understand that the Landlord and Tenant Acts do not apply to petrol retailing contracts.

In the past, the Government said that it would be difficult for petrol retailers to be covered by those Acts because they cannot easily change the petrol in their tanks, or the signs outside their stations. The fact that they were selling on a branded basis would make any change difficult. So the petrol companies agreed that they would give certain undertakings about how they would deal with their retailers. I understand that those undertakings have simply not been kept. Therefore, a mechanism is needed to protect those business people, like all other businesses, from unfair practices.

I served on the Committee that considered the Competition Act 1998, which is quite comprehensive. The Opposition spent time asking Ministers what they would use the Act for, but answer came there none. They would not give a single example of what they intended to do with that Act. It has been on the statute book for some time, so people are entitled to ask the Government, who came to power with many consumer and business-friendly policies, to do something about competition.

On Monday, travelling on the motorway, I passed a car transporter, which, like the Government, seemed in perfect order. The problem was that it was full of burnt-out cars. That is a metaphor for the Labour Government. They still look as though they know where they are going and as though they have wheels on their vehicle, but they are carrying burnt-out policies. If the Government believe that they will make a difference and that things can only get better, surely they should do something for petrol retailers.

11.47 am

I add my congratulations to the hon. Member for Meriden (Mrs Spelman) and thank her for bringing this matter before Parliament. She referred to Northern Ireland, as have other hon. Members. I should like to echo the comments of the hon. Member for Foyle (Mr. Hume), who suggested that the Secretary of State for Northern Ireland should take urgent action to meet petrol retailers in the Province to discuss the serious crisis that has affected petrol retailers in that part of the United Kingdom.

I want to give an idea of the impact that fuel smuggling and the differentials in fuel prices between Northern Ireland and the Republic of Ireland are having on the petrol retail industry in Northern Ireland. Just before Christmas, petrol prices in the United Kingdom were the highest in the European Union, whereas in the Republic of Ireland they were the fourth lowest. In the United Kingdom, petrol cost 73.37p a litre, whereas in the Republic of Ireland it was 51.13p a litre. That is a significant difference. The cost of a litre of diesel in the United Kingdom was 75.27p, but in the Republic of Ireland it was 46.68p.

Those fuel differentials are causing significant problems for petrol retailers in Northern Ireland. First, they are having an impact on their customers. Many people travel across the border to purchase fuel. That means that business for retailers in Northern Ireland has slumped. For example, estimates suggest that petrol retailers in the border area have lost between 25 and 50 per cent. of their trade as a result of the fuel differentials. The Petrol Retailers Association estimates that about 50 petrol stations have closed in the border area. That is a significant number of petrol stations in a small area such as Northern Ireland, but it is even more significant given that the estimate is for the border region only.

The other cause of difficulty for petrol retailers in Northern Ireland is fuel smuggling. The differential in prices has unfortunately meant that smuggling has increased substantially. Fuel smuggling has several impacts. It has an impact on petrol retailers, as I have already mentioned. It also has an impact on the Government, who lose revenue. It has been estimated that in the past 12 months in Northern Ireland the loss of revenue due to smuggling amounts to more than £100 million—a substantial sum in terms of public expenditure in Northern Ireland. We, like other parts of the United Kingdom, are facing a crisis in the availability of hospital beds. How many beds could be provided in Northern Ireland with that £100 million?

What is the Government's response? Last year the Select Committee on Northern Ireland Affairs issued an excellent report on the impact of cross-border road fuel price differentials, which I commend to all hon. Members. During cross-examination on the Government's response to the report, the Economic Secretary said:

"£100 million in the context of £21 billion overall from fuel duties as a whole is really a very … small part of the overall picture."

But in respect of Northern Ireland, it is a big part of the picture, and the Government should not take that attitude towards the loss of even £100 million in revenue. They must act, not only to help petrol retailers in Northern Ireland and elsewhere, but to stop that loss to the Exchequer.

The hon. Member for Chorley (Mr. Hoyle) said correctly that the problem of fuel smuggling was no longer unique to Northern Ireland but was spreading to other parts of the United Kingdom. There are reports of illegal fuel being offered for sale in Scotland and Wales. Indeed, even in London there have been reports of tanker loads of illegal fuel arriving and cut-price deals being offered to retailers. The cancer of fuel smuggling is spreading. It is not just a Northern Ireland issue which the Government can sweep under the carpet; it needs to be addressed on a UK-wide basis.

Petrol retailers in Northern Ireland continue to suffer from both fuel differentials and the smuggling of illegal fuel from the Republic of Ireland. I urge the Government to reconsider the recommendations of the Northern Ireland Affairs Committee because their response to its report was inadequate. They need to do more, because the issue does not impact only on petrol retailers. In its report, the Committee said:

"There is no doubt that the differential in fuel prices across the land boundary in the island of Ireland is a difficult issue and one that has serious consequences for fuel suppliers and road hauliers. It is also a wider problem in that, besides distorting trading patterns, it appears to have become a means of funding paramilitaries and racketeers. It is therefore damaging the social fabric of Northern Ireland."

As we seek to make progress in Northern Ireland, we need to remove the opportunities for paramilitary organisations to continue with their illegal activities— smuggling illegal fuel is a major such opportunity. That is another reason why Government agencies need to co-ordinate their approach to the issue.

There is also the impact on the road haulage industry in Northern Ireland. Because we are part of an island, we are especially dependent on our road haulage industry, particularly for our export trade. At the moment, the Northern Ireland road haulage industry is suffering severely from the high fuel costs in Northern Ireland. It is estimated that fuel and excise duties account for between 25 and 40 per cent. of the operating costs of haulage operations. That is a huge amount. Their competitiveness is undermined if fuel costs are significantly higher in Northern Ireland than in the neighbouring state of the Republic of Ireland. I therefore agree with the hon. Member for Meriden that the problem in Northern Ireland is acute and spreading to other parts of the UK. It must be addressed by the Government, whose approach to date has been inadequate. More resources need to be made available to Customs and Excise to combat fuel smuggling. Something must also be done to address the issue of fuel price differentials.

I conclude by noting that the Northern Ireland Affairs Committee stated:

"We recommend that the Government investigates further the experience of other EU Member States in dealing with the problems of price and duty differentials across national boundaries in relation to road fuels."

The Government could do more. I acknowledge that the scheme that was operating in Holland has run into difficulties with the EU, but that does not mean that a solution to the problems of illegal fuel smuggling and fuel price differentials between member states cannot be found. As we operate in a single market, perhaps the solution could be EU-wide. Petrol retailers, the road haulage industry and the community in Northern Ireland would welcome a much more proactive approach by the Government to these important issues.

11.55 am

I, too, thank the hon. Member for Meriden (Mrs. Spelman) for initiating this debate, which we welcome, particulary in respect of Northern Ireland.

I endorse what my hon. Friend the Member for Lagan Valley (Mr. Donaldson) said. I represent the border constituency of West Tyrone, where six major petrol stations have already closed and others are on the brink of closing because of the differential between petrol prices in the Republic of Ireland and those in the United Kingdom. Even miles away from the border, some large petrol stations have seen a reduction of up to 50 per cent. in sales.

Figures for consumption in Northern Ireland and the Republic of Ireland show that, of total petrol sales for the whole of Ireland in 1994, 35.9 per cent. were conducted in Northern Ireland. That figure has now decreased to 24.2 per cent. Likewise, in 1995 Northern Ireland had 27.7 per cent. of total diesel sales, but it now has 16.1 per cent. That illustrates the change in the balance of sales between Northern Ireland and the Republic of Ireland. As my hon. Friend said, that means that the Exchequer is losing up to £100 million per year.

There is a lot of smuggling. As one travels in Northern Ireland, one can see adverts for diesel at 56p per litre and an arrow pointing to where to go to get it. I rang the police and asked why they could not follow the arrow and do something about the problem, but they said that it was a matter for Customs and Excise. When I asked Customs and Excise to go along and find out how diesel was being sold at that price, it said, "It wouldn't be worth our while investigating such a small issue; we work in a different way in a larger field." When asked why they are not succeeding, they say that they do not have the personnel to do the job. We need more people on the ground to trace the illegal importers and we need co-operation and co-ordination between the police, Customs and Excise and other bodies to try to defeat the smugglers. I appeal to the Government to give this issue serious consideration and to co-ordinate the various agencies that are trying to stop smuggling. We must also examine more seriously the possibility of greater parity between fuel prices in the United Kingdom and the Republic of Ireland.

12 noon

I congratulate the hon. Member for Meriden (Mrs. Spelman) on introducing the debate and on her choice of subject. She made her case in a firm, measured way, thus helping to set the scene for ensuing speeches.

There has been a high degree of unanimity between speakers from different parties, which I intend to continue. I hope that that will be matched by the Minister's comments at the end of our debate. Clearly, Northern Ireland has a special problem, which hon. Members representing it have expressed more eloquently and in greater detail than I could. The hon. Member for West Tyrone (Mr. Thompson) said that sales are bleeding across the border. The Minister and the Secretary of State for Northern Ireland must give that matter serious consideration.

As a representative of the Liberal Democratics and as a local Member of Parliament contacted by independent retailers in one's constitutency I am worried. Like other hon. Members, in recent years I have witnessed independent petrol stations closing with monotonous regularity. There has been an horrific contraction of the independent sector. According to the Evening Standard, the number of filling stations has fallen from 40,000 to only 13,000 in the past 30 years. That is a drop of almost 70 per cent. Of the surviving stations, 10 per cent. closed last year. If that rate of decline were attributed to an animal, it would be regarded as an endangered species facing extinction. Contraction of the independent sector is not in the retailers' or public's interest, as it will lead to a concentration of power in a few oil companies, which will be detrimental to consumers and those employed in the industry.

Does the hon. Gentleman agree that, in a slightly different context, the planning process has a part to play? Obviously, the provision of petrol retailing has been key to out-of-town shopping, having a dramatic impact on retailers in the immediate vicinity and sometimes those up to 30 miles away. People drive to such outlets to do their shopping and buy petrol at the same time, which is blatantly unfair to independent retailers.

I agree, and I hope that the Minister will take account of the matter and refer it to his colleagues in the Department of the Environment, Transport and the Regions.

The hon. Member for Meriden avoided using the word "cartel", speaking instead about passive collusion, which is an interesting phrase. However, perhaps "cartel" is not too strong, as there is evidence that oil companies are working together—passively, if not actively—to drive independent businesses out of petrol retailing. I am not confident that the Department of Trade and Industry or the Office of Fair Trading understands that. I hope that the Minister will persuade me that they do.

If the hon. Gentleman has evidence of oil companies acting as cartels, he should give it to the Chamber.

I shall give the Minister evidence from Select Committee reports and representations from my constituents.

The Select Committee report already referred to shows that 50 per cent. of four-star petrol sold between April and August 1996 was sold at or below cost. In 1997, petrol price competition was so fierce that British Petroleum is alleged to have lost £130 million selling petrol to the public. That may be compared with predatory pricing arrangements in the newspaper market. The Times, for example, has been sold for some time at an artificially low price which, many believe, will drive The Independent and other newspapers out of the market. Those who are strong in the market can take losses over a period in order to drive those who cannot out of the market.

The price at which petrol is sold involves a curious arrangement. We have been told that it is more costly to deliver petrol to upland parts of Cumbria than other areas. No doubt that is true. In Asda's opinion, the additional cost of delivering petrol to rural areas is a maximum of 1.5p a litre. However, the difference in petrol prices is rather more than that. My hon. Friend the Member for Argyll and Bute (Mrs. Michie) referred to the position in Scotland. According to The Scotsman, the BP filling station at the entrance of the Grangemouth refinery charges more for petrol than the BP station in Edinburgh. Arrangements for petrol retailing are not as clean as the oil companies would have us believe.

I shall give some anecdotal evidence. For 13years, I have written regularly to petrol companies, asking why petrol prices in South Dorset are 3p a litre more than they are elsewhere. In the past three months, delivery problems have suddenly disappeared, and petrol is now sold at the standard price of 74.9p a litre throughout almost the whole of my constituency. Somehow, as if by magic, petrol companies reached a common position. Naturally, there was no collusion.

The hon. Gentleman may be able to claim credit for that in party literature at the next election.

I shall.

The hon. Member for Meriden spoke about vertical integration, which is another worrying issue. Again, a comparison may be drawn with other parts of industry. The previous Government rightly took action on the retail and supply of beer. They were worried that those who were producing beer were distorting the retail market. Action was taken to prevent beer suppliers from having too many public house outlets. No such action has been taken to deal with the problem of vertical integration in petrol retailing.

Is the hon. Gentleman not worried that going down that route would lead to umpteen pub closures throughout the country? The worst thing to happen to pub landlords was changing the rules. We should not do the same to petrol retailers.

I am not sure that I agree with that. However, we must take action to change the balance of power between the independent sector and major oil companies supplying petrol and operating filling stations. That balance is currently heavily weighted in the oil companies' favour. If separating supply and retail is not the solution—even though that is perfectly sensible—we must find an alternative. We cannot carry on as we are because if we do there will be no independent sector when the House debates the matter in 10 years' time.

Oil companies have been accused of putting pressure on small retailers to tie them into contracts compelling them to buy a large amount of petrol at predetermined prices. An OFT review is, quite properly, taking place. Like other hon. Members, I am worried that the OFT is taking an inordinate period to report. I hope that that means that it is making a detailed examination of petrol retailing, which would help it to reach the conclusion that current arrangements must be changed to give more weight to the independent sector and less to oil companies. However, in the meantime, petrol stations are closing throughout Britain: they cannot all survive for months on end until the report is published.

Of petrol sold in Britain, 90 per cent. is suppled by four companies—Shell, Esso, BP and Texaco. Big petrol retailers—oil companies and supermarkets—account for 85 per cent. of sales. However, independent retailers sometimes act as a brake on prices—their own, although their margins are smaller, and those of oil companies and supermarkets. I am therefore pleased that there are independent retailers close to Lewes and elsewhere in my constituency. Indeed, I have noticed prices creeping up when independent retailers close down. Keeping independent retailers in business is important in offering choice to customers buying fuel.

Those who have the opportunity to use muscle in a market are not unlikely to do so. That is how capitalism works. Part of Government's role is to implement controls and restraints to ensure that a fair market operates and prevent exploitation. I shall relate one anecdote from my constituency, which demonstrates how supermarkets can operate. It concerns an independent petrol retailer in my constituency, at Denton corner, Newhaven, who was struggling to survive, not least because of an unhelpful road realignment by the county council.

Shortly afterwards, opposite that retailer, a Sainsbury's supermarket opened. It offered artifically cheap fuel and put up a huge banner advertising that fact within the view of those who bought petrol from the independent petrol station. The independent retailer then moved to a 24-hour operation to try to survive, and the supermarket followed suit. The independent petrol retailer closed down, and the supermarket withdrew its 24-hour operation within seven days and hiked up the price of its petrol. Who benefits from that, apart from the supermarket and perhaps the oil company? Such predatory behaviour gives supermarkets a bad name.

What are the remedies? First, the Government should state that they value the role of the independent sector and the diversity that it provides. They should also recognise that diversity in the petrol retailing industry is an issue for consumers. If that is the Government's position—I have no reason to think otherwise—they should understand the present arrangements operating in this country. Independent retailers in my constituency have told me that, under those arrangements, they pay more per litre for their petrol than the supermarkets and the petrol-supplying oil companies. They are being overcharged in comparison with the big boys.

The Minister must recognise that the current situation is unsustainable. The Office of Fair Trading report must be delivered as soon as possible, and the Government must make a commitment to act on that report if, as I assume it will, it finds that the market is not structured fairly.

Secondly, the Government should implement the Select Committee recommendation to which the hon. Member for Lagan Valley (Mr. Donaldson) referred. A code of practice should be drawn up, through negotiation between the Office of Fair Trading and the petrol retail industry, which would cover the contractual relationships between wholesalers and retailers. It would include provisions for speeding and the binding arbitration of disputes. The code of practice would be the subject of undertakings given by the wholesalers and retailers to the Secretary of State for Trade and Industry. That was an absolutely sensible recommendation, which should be given due weight now.

Lastly, I refer the Minister to early-day motion 18 on independent petrol forecourt operators, which was tabled on 17 November by the hon. Member for Chorley (Mr. Hoyle). It has now been signed by more than 100 Members. This is not a party political matter—all parties have concerns about the issue—and I hope that the Government will act to remedy the damage that is being done to the independent retail sector.

12.13 pm

I congratulate the hon. Member for Meriden (Mrs. Spelman) on securing this debate. It has been a good debate, which the Government needed to hear, and I am glad that I have been present for it. The Whip was surprised when I walked in to speak on behalf of the Government in this debate—a colleague of mine, who is not of the same sex, had been expected to reply. However, I can assure hon. Members that I am very interested in the subject.

I assure the hon. Member for Meriden that the Government appreciate that many small businesses find it difficult to compete in modern markets, especially against larger companies. However, would more and tighter regulation be the best and most appropriate means of action? I ask that question because, whenever I speak on the Floor of the House, Conservative Members usually ask me about deregulating the economy, not increasing regulation. I shall try to explain why I am in favour not of adding to regulation but of trying other means to resolve the situation.

It has been argued that oil companies have too much control over petrol retailers. However, the key question is whether the consumer is benefiting. It is not the Government's role to second-guess markets or to try to determine who should and should not survive. I am a firm believer in competition. It brings the greatest benefits to consumers, who are at the heart of my brief.

The Office of Fair Trading works to ensure that, through strong competition in the petrol market, the consumer gets a good deal in the supply of road fuels. In 1998, the OFT's report on the supply of petrol found that competition was strong and that consumers were benefiting. Competitiveness has increased in recent years, especially since 1994, when price competition between supermarkets and the oil majors started to become more vigorous. That is when these problems began to manifest themselves. In real terms, petrol pump prices, net of VAT and duty, have fallen by a quarter since January 1990. The director general concluded that he did not need to intervene to improve the already vigorous competition in the market.

The report recognises that independent petrol retailers have been badly affected by competition between the oil companies and supermarkets. However, the director general concluded that overall competition was strong and working to the benefit of consumers. The director general must consider competition in the market as a whole; that is his job.

Does the director general think that, if the independent sector were removed altogether, competition would still act in the interests of the consumer and prices would still be decreasing? Alternatively, does he think, as I do, that that would provide an opportunity for a smaller number of suppliers to increase prices?

I am sure that the Director General of Fair Trading shares my view that the more independent retailers we have as real competitors to the big companies, the better. The barriers to entry must be as low as possible. However, if we have an independent competition regulator—the Director General of Fair Trading—we must pay attention to what he tells us. Allowing short-term political considerations to distort markets is ultimately to the detriment of consumers.

More recently, an OFT investigation after the 1999 Budget showed that increases in pump prices were accounted for—as certain hon. Members have said—by tax increases and sharp rises in the price of crude oil. This morning, I looked at the quoted crude oil price. It has increased by a dollar in a week. It is now more than $24 a barrel, whereas a year ago it was $11 a barrel. We must take that into account.

Recent figures show that increases in retail prices do not reflect the full increase in the crude oil price. Margins in the industry have become much tighter in recent years. That indicates weak competition or anti-competitive behaviour, but the opposite. It can be seen as a reaction to the increased competition provided by the entry of major supermarkets into petrol retailing. It is a competitive market with keen prices, which ultimately benefits consumers. That is a fact of life, and oil companies and their retailers have little choice but to deal with it.

This morning, we have been considering vertical agreements. The Government believe that vertical agreements are unlikely to be anti-competitive unless there is horizontal market power. In his thoughtful and extremely interesting contribution, the hon. Member for Lewes (Mr. Baker) alleged that cartels were working, which would imply horizontal collusion between companies. If he has the evidence to prove that—I did not hear it in his contribution—I would be glad to hear it. It is a serious allegation, and a serious criticism of the veracity of the reports by the Director General of Fair Trading.

We should remember that those undertakings have been in place since 1966. Mr. John Bridgeman and his predecessors are neither blind nor stupid. They would not fail to notice if major oil companies were operating a cartel, and I will not accept that they are so doing until I see evidence of it. Nor can I accept the characterisation of vertical controls as anti-competitive. No major European Union economy regards them as anti-competitive. Indeed, there are exemptions for vertical relationships between companies and between sectors throughout the EU.

Retailers have complained repeatedly about contractual abuse on the part of suppliers. A contractual issue is usually a matter for the parties concerned and, in the absence of serious competition concerns, does not constitute a competition issue. That is defined by the way in which this country's competition law works and has worked under previous Administrations since the second world war.

As I have said, competition in the petrol market is strong and is benefiting consumers. Over the years, the OFT has investigated a number of complaints about agreements between petrol retailers and suppliers. So far, it has concluded that such complaints were contractual matters that did not raise competition concerns. I appreciate that complainants may not agree with the OFT's verdict, but if it finds no evidence of anti-competitive behaviour that is detrimental to consumers, the OFT has no grounds for taking action under competition legislation. In that respect, this morning's debate has proved useful, because it may have highlighted an area that needs to be examined.

The Minister is right to emphasise the competition issue. He says that the Government cannot intervene in what is a contractual matter between an independent retailer and an oil supplier, but the truth is that there is limited competition for the supply of the raw material to the retailer. Such disputes involve small units that can hardly afford to go to the courts, and powerful players with huge resources at their disposal.

That is true, and I shall try to answer the hon. Lady's point. I appreciate the difficulties that small traders experience in such circumstances.

I pointed out in my speech that I wrote to the Government in the early part of last year about contractual issues that arose between a petrol company and a retailer in my constituency and was told not to worry because the matter had been referred to the OFT. If that is the wrong body to which to refer contractual issues, what will the Minister do about such problems?

The OFT is precisely the right place to refer such issues because it is the main competition regulator and the body with which such issues must ultimately be discussed on Parliament's behalf. The hon. Gentleman told us that he was a member of the Competition Bill Committee. If he was not asleep during its proceedings, he will know that the Act will not come into effect until March 2000, because the Confederation of British Industry, the Institute of Directors and others told us that there must be a period of grace in which preparations can be made for the onslaught of the new legislative regime. To the shame of previous Administrations, when the Competition Act comes into effect in March 2000, it will be the first time that the competition regulator will have the teeth with which to attack market abuses.

The Director General of Fair Trading has tried to foster constructive discussion in the industry on the handling of disputes between wholesalers and retailers. In October 1997, he hosted a meeting between representatives of petrol retailers, supermarkets and petrol wholesalers, to assess the scope for improving relations between retailers and wholesalers. That meeting fulfilled a commitment made to the Select Committee on Trade and Industry in December 1996, but it was not a success. As the hon. Member for Lewes properly noted, those retailers and wholesalers who were present seemed unwilling to agree, even in principle, to any acceptable code of practice. Nor were they prepared to take other action that might improve relations between the two sides. That is extremely regrettable. I make an undertaking to the Chamber today that, if the two sides wish to meet again to discuss seriously the possibility of signing up to a code of practice and are prepared to compromise where necessary, my Department will do everything possible to broker such a meeting.

Clearly, tensions between retailers and their suppliers are always likely to arise. Each side will always strive to gain more concessions than the other is prepared to make. That is particularly true of an industry in which margins are tight and competition is strong at all levels. It is not always possible quickly to induce a more constructive approach. We must remember that these undertakings have been in place since 1966. Since the mid-1970s, when price watch was introduced and supermarkets began to compete strongly, people have complained about the undertakings. Perhaps that was a coincidence, or perhaps the complaint is that competition has intensified and margins have reduced.

In conclusion, I shall address the extremely important issue of fuel in Northern Ireland, which is of great concern to those hon. Members who have spoken so eloquently on it. Treasury Ministers and Customs and Excise are aware of the illegal importation of fuel for resale into Northern Ireland, and recognise the associated problems. Since the beginning of 1998, Customs and Excise has seized 93 vehicles and 1.27 million litres of fuel, and has secured admissions of the smuggling of a further 30 million litres. Fifty-three people have been arrested, of whom 41 have been charged. Of those cases that have been completed, seven have led to prosecution and four to custodial sentences. I shall point out to my right hon. Friend the Secretary of State that hon. Members who have spoken today have asked that he meet representatives of petrol retailers in Northern Ireland. I undertake that, if he is unable to do so, I will meet those representatives. I shall travel to Northern Ireland soon to discuss carbon monoxide poisoning, and could meet them then.

Many hon. Members have spoken, but insufficient time prevents me from dealing with all the issues that have been raised. The hon. Member for Lagan Valley (Mr. Donaldson) made an important point when he said that there must be a way in which to combat the problem of significant price differentials across frontiers, and I agree that it should be regarded as a European Union-wide issue. Reference was made to a problem at the Dutch-German border, where the Dutch were subsidising petrol stations within 20 km of the border. They were taken to court by the European Commission on the grounds that such subsidies constituted unfair state aid. These are difficult problems, but I hope that we can discuss them with representatives of petrol retailers in Northern Ireland.

I sympathise with the hon. Member for Meriden, who put her case in an articulate and, as was noted, measured way. I am sure that we all share her concern for small petrol retailers. The same problem has arisen in my own constituency. However, we must look at the big picture—

Order. Time is up.

Thank you, Mr. Deputy Speaker. I am grateful for the opportunity to hold this debate.

The House is no stranger to the case of ex-PC Gordon Warren, which was debated here on 15 April 1994. It was raised by my predecessor, Nigel Forman, and reported in Hansard at column 613. In his speech, Mr. Forman said that it was his longest-running constituency case. For Mr. Warren's sake, I do not intend it to become mine as well. I would like to take this opportunity to commend Nigel Forman for his efforts in trying to secure a satisfactory outcome in for the case.

Ministers are no strangers, either, to the case of ex-PC Gordon Warren. I held meetings with two Ministers when they were at the Home Office: the right hon. Member for Cardiff, South and Penarth (Mr. Michael), and the hon. Member for Vauxhall (Kate Hoey). The Metropolitan police are also familiar with the case. I held meetings with Sir Paul Condon as recently as last week, and with John Stevens, and also with Michael Bennett and Glen Smyth of the Police Federation. I am sure that the Minister present today is also familiar with the case.

However, for the benefit of hon. Members, it is worth running through some of the key events of this sad saga. It started in April 1982 when Mr. Warren, a serving police officer, was asked by a senior officer to attend a party at Sutton police station while on duty. He of course refused and it is this event that Mr. Warren believes triggered the whole sorry affair. Another key event took place in January 1985 when a medical certificate was issued by Dr. Bott, a medical officer with the Met, certifying Mr. Warren as medically unfit. He was suffering from paranoia, it would seem. This was overturned by the medical referees to the Home Office, but almost a year later another medical certificate was issued by the same doctor.

In 1988, Mr. Warren won damages for wrongful dismissal, and further damages in the Court of Appeal in 1989. In February 1994, an ex gratia payment of £85,000 was offered by the Met, and in April 1994, as I have already mentioned, there was an Adjournment debate in the House on the subject. In 1995, Gordon Warren received an apology from Sir Paul Condon. [Interruption.]

Order. There appear to be members of the public in the Chamber. Would they please withdraw from the Floor of the Chamber as quickly as possible? They should not have been admitted through the Members' entrance.

Thank you, Mr. Deputy Speaker.

In 1995, Sir Paul Condon wrote to Mr. Warren to issue an apology. Thirteen years after this sorry affair started he received a written apology, in which Sir Paul stated that there were absolutely no grounds for Mr. Warren's dismissal, and no question of mental instability or paranoia.

I could also refer to meetings that I have held over the past couple of years with Ministers and with the Met. It is an extensive case history, and I have some of the correspondence here today. I know that Mr. Warren has a much more extensive file. Although there is an extensive case history, there are still, regrettably, certain outstanding issues.

I shall start by mentioning something that is no longer required, which is the apology to which I have already referred. That is the one issue on which progress has been made in the six years since this case was last raised in an Adjournment debate. The apology was issued, and in the letter Sir Paul Condon said:

"you are entitled to a full apology, which I unreservedly give and regret the distress caused to you."

Mr. Warren has accepted that apology.

I turn now to the first obstacle in the case, which I do not believe is insurmountable. It concerns the certificate of conduct stating when Mr. Warren left the police force. He has a clutch of certificates of conduct—I believe that there are seven in total—which contain six or seven different dates for when he was supposed to have left the force. The issue can be resolved, and a mutually acceptable leaving date can be found by the Met and Mr. Warren.

The second sticking point is much more challenging. It concerns the reluctance of the Metropolitan police to record the allegation of perjury made by Mr. Warren against Dr. Bott. The relevant section of the police training manual is unequivocal. It states that

"whenever an allegation is made that a crime has been committed, an entry must be made in the crime complaint form, even if the police officer concerned doubts the authenticity of the complainant's story."

One cannot misinterpret the police training manual. Yet, according to the House of Commons Library, the practice differs significantly between police forces, with some requiring corroborating evidence that an offence has been committed before an allegation of a crime of any nature is recorded.

I hope that the Minister can inform me—in writing at a later date, if necessary—whether the police are required, as the police training manual clearly states, to record every allegation of crime, or whether they can exercise a degree of flexibility in this respect, as they have informed me. Can the Minister cite any precedents? Has the issue been tested in court? I would like an answer on that point in the near future, if not now, because the allegation of perjury and its recording are central to the case.

The Metropolitan police will say that the matter has been investigated, but no investigating officer was appointed and Mr. Warren was never asked to produce in evidence his taped conversations with Dr. Bott, against whom he made the allegation of perjury. Mr. Warren is adamant that those tapes would show that Dr. Bott had subsequently knowingly distorted the medical facts, which would constitute perjury. If there has been an investigation by the Met into the allegation, it would appear to have been very one-sided. Is it too much to expect that Mr. Warren's allegation against Dr. Bott should be recorded? He is not even asking for it to be investigated. He simply wants the matter recorded.

The next impasse relates to the compensation figure. In fairness, I should point out that this matter has been before the Court of Appeal, which did not award aggravated or exemplary damages. However, the Court of Appeal might have been more generous to Mr. Warren if it had not been misinformed about the pension that he was receiving. Their Lordships believed that it was a higher rate disability pension, rather than the ordinary pension that he was in fact receiving.

Regardless of what has happened in the High Court and the Court of Appeal, the Met has offered an ex gratia payment of £85,000. That is the offer on the table. There has also been at least one letter suggesting a higher figure of £95,000, although that offer has subsequently been withdrawn. Mr.Warren and I do not find that acceptable. He has not worked for the past 15 years, or thereabouts, yet he could have expected to work for perhaps a further 13 years in the Met, were it not for the apparent vendetta against him. The offer of £85,000 is insufficient, especially when one takes into account the legal costs that he has incurred, which amount to more than £30,000.

If the Metropolitan police and the Home Office are confident that the compensation on offer is more than adequate, why will they not allow the financial settlement to be determined by an independent arbitrator? Mr. Warren is willing to allow such an independent assessment to take place and to be bound by its outcome. He is also willing to sign a document of full and final settlement promising to take no further action. However, he would of course require a similar commitment to the outcome of that review from the Met and the Home Office. The risk must be shared by all the parties involved.

Can the Minister confirm whether, if the Met authorises such an assessment and agrees to be bound by its recommendations, the Home Office will allow it to proceed? What value would the Home Office place on such recommendations if the arbitrator recommended that Mr. Warren should receive more substantial compensation?

The case smacks of the bad old days of the Met. It features attempts by less principled colleagues to throw a straight policeman out of the force. Dr. Bott, the medical officer working for the Met, produced a medical certificate stating that Mr. Warren was suffering from a personality disorder with paranoid tendencies, which was later found in the courts to be unlawful. It contained offers of unjustified—in Mr. Warren's view—medical pensions designed to get him to leave the force. Perhaps that was because his superiors felt that his face did not fit, or because he was too honest.

Eighteen years down the track, it is time for justice to be done. Mr. Warren has received an apology, but cannot live off an apology. He deserves financial compensation that is commensurate with the injustice that he has suffered, and is entitled to have his allegations against Dr. Bott recorded. Nothing less is required from the Met and the Home Office.

12.42 pm

I begin by congratulating the hon. Member for Carshalton and Wallington (Mr. Brake) on securing the debate. This is a long-standing issue, as he explained, and I respect his sense of duty as a constituency Member of Parliament in taking up his constituent's case in the way in which his predecessor did. I acknowledge the tribute that he paid to his predecessor's work in that respect.

The case is unusual in that it has continued for 15 years. It was considered by the High Court in 1988 and by the Court of Appeal in 1989, and was raised in the House in 1994. It has been the subject of much correspondence.

Before going into the details of the matter, I should like to respond to an aspect of the hon. Gentleman's speech which was unwarranted. His use of the word "vendetta" was not appropriate. The Metropolitan police has demonstrated at very senior levels its keenness to resolve the matter. Indeed, the hon. Gentleman testified to meetings that he and his colleagues have had with senior police officers. That belies the charge that a vendetta of some kind is preventing agreement from being reached.

I thank the Minister for giving way. I should put on the record the fact that I have had very positive dealings with senior officers in the Met, who are willing to put some effort into securing a resolution to the case. However, if one looks at the beginning of the case history, it is clear from the behaviour of some of the characters who were initially involved that there was a concerted effort on the part of a small number of officers to get Mr. Warren removed from his position.

I acknowledge the hon. Gentleman's allegations regarding the time at which the matter first arose. I thought that he was suggesting that a current vendetta was making it more difficult to resolve the situation. I apologise if I misunderstood him, and take it from his remarks that he is not suggesting that that is the case. The hon. Gentleman's correspondence with the Commissioner of Police of the Metropolis, copies of which he has sent to me, makes it clear that the hon. Gentleman is making positive efforts to resolve the matter, and the police are clearly trying to move in the same direction.

Many of the salient facts of the case are not in dispute, but it has still proved to be impossible to resolve. It is primarily a matter for the Commissioner, who has expressed to the hon. Gentleman his view that it is a matter of great sadness that Mr. Warren has been unable to agree a settlement, despite the efforts that have been made over the years by all parties. Everybody involved in this regrettable case is keen to achieve a resolution, and I appreciate that that is the spirit in which the hon. Gentleman made his speech.

I shall not repeat the detailed history of the case, because the hon. Gentleman has already fairly and accurately summarised the key points. The courts—I emphasise that it is the courts—have determined that the appropriate procedures for Mr. Warren's compulsory medical retirement from the Metropolitan police service were not followed. It is accepted that Mr. Warren was treated unfairly and unlawfully. It is important to place that acceptance on record, because it acknowledges some of the hon. Gentleman's points.

The courts awarded Mr. Warren a total sum of about £16,800 in respect of pay and allowances due to him, plus interest. However, in the light of the references that have been made to the history of the matter, it is important to reinforce the point that the courts declined to order Mr. Warren's reinstatement. Although they acknowledged the points that the hon. Gentleman has made, and made an award in respect of pay and allowances, they did not think it right to order the reinstatement of Mr. Warren after they had taken the full situation into account.

The courts—I emphasise that it was the courts, rather than the Commissioner, the Government or me—expressed the view that

"there has been no intention to injure Mr. Warren on the part of anybody".

I put that quotation on the record in the light of my exchange with the hon. Gentleman about the attitudes of various concerned parties. I understand from my experience of grievances that my constituents have raised with me that people are by no means always satisfied with the verdicts that come down through the legal system and seek redress in a variety of ways. I understand why the court's view may be unpalatable to some people, but it is important that it should be placed on the record.

I turn to the hon. Gentleman's four points about seeking redress and resolving the matter. In addition to the sums awarded by the courts, which is a separate consideration, the Metropolitan police have sought to offer redress in a number of other ways. First, Mr. Warren has received a formal apology from the Commissioner, and I place on the record my appreciation of the generous spirit in which the hon. Gentleman acknowledged that in his speech. I accept, as he said, that it took some time to reach that point. However, the apology was made—and generously made—and I am glad that he acknowledges that fact.

Secondly, Mr. Warren has been offered a further apology, as well as the reissuing of a certificate of service. That is in line with Mr. Warren's wishes. As the hon. Gentleman said, some outstanding matters remain to be resolved—in relation to precise timings, for example. However, the Metropolitan police believe that it will be possible to arrive at a resolution of those matters following good-hearted discussions by all sides.

Thirdly, the hon. Gentleman raised the question of money, specifically the ex gratia payment. As he noted in his speech, the Metropolitan police have offered Mr. Warren an ex gratia payment of £85,000 in respect of the various judgments and decisions that have been referred to. I understand that Mr. Warren is unwilling to accept that proposed settlement. He believes that the quantum of the ex gratia payment is insufficient—for the reasons that the hon. Gentleman explained in his speech—and wishes the allegations that he has made of criminal conduct on the part of the medical officer involved to be pursued. I shall deal with the latter issue in a moment.

If aggreement can be reached about the ex gratia payment, that is fine, but I have a duty to consider the proper use of public money. No Government would sign blank cheques in that way and I would have to look carefully at the matter. The offer from the Metropolitan police is reasonable and I very much hope that the hon. Gentleman will say so to his constituent and argue that it could form the basis of an agreement.

I come to the nub of the matter, which was the hon. Gentleman's third point: the issue of the allegations against Dr. Bott. I wish to emphasise several points in this connection. The first is on the history of the case. The then assistant Commissioner of the Metropolitan police, John Smith, considered Mr. Warren's allegation of perjury against Dr. Bott in 1988–11 years ago—and took the view that there was no evidence of an offence under section 5 of the Perjury Act 1911.

I am aware that that was the finding, but can the Minister explain how that conclusion was reached when no investigating officer was appointed to the case and the Metropolitan police did not listen to the tape recordings of discussions with Dr. Bott that Mr. Warren says are in his possession and support his allegations that Dr. Bott committed perjury?

That is not my function. I have not had a quasi-judicial role in looking at the history of the case. However, the courts have and I now come to that.

As I said, the then assistant Commissioner, John Smith, considered Mr. Warren's allegations in 1988 and took the view that there was no evidence of an offence under section 5 of the Perjury Act 1911. Mr. Warren's allegation then formed part of his application to the divisional court and the Court of Appeal, which both dismissed his appeal for reinstatement. Following that resolution of Mr. Warren's grievance, the current deputy Commissioner—soon to be Commissioner John Stevens, wrote to Mr. Warren on 11 January 1999, almost a year ago today, stating that the matter had been fully considered. As there was no further evidence, the deputy Commissioner did not consider it appropriate to reopen the case.

I am advised that Mr. Warren has produced no new evidence on the matter. I acknowledge the points about tape recordings and other matters, but unless genuinely new evidence is produced—evidence other than that which was considered by the deputy Commissioner and then by the courts—there are no grounds for reopening the matter. It has been dealt with through our legal system, by the divisional court and the Court of Appeal. That judgment will be unwelcome to Mr. Warren, and possibly to the hon. Gentleman, Mr. Warren's Member of Parliament, but a considered judgment of the court can be reopened only if it can be clearly demonstrated that new evidence and new circumstances justify doing so. At this stage, I see no such evidence.

My conclusion is therefore that the deputy Commissioner has made it clear that he feels that he has reached a point where he cannot reasonably do more to meet Mr. Warren's demand. I believe—the hon. Gentleman's speech confirmed this— that Mr. Warren's determination to pursue his allegation against Dr. Bott seems the major obstacle to making progress in the case. Of the four points raised by the hon. Gentleman, the first two are susceptible to resolution, the third, on the amount of money, is a matter about which everyone will have a different opinion, although I am bound by the consideration of the right spending of public money, and the fourth, on the allegations against the medical officer, appears to be an absolute block to reaching an agreement.

I understand that the hon. Gentleman is seeking further discussions with the Metropolitan police to try to achieve a settlement. I commend him and the Metropolitan police for trying to move the matter forward, but I am certain that reaching any satisfactory agreement is likely to involve compromise between the parties concerned, as in all cases of this type.

I raised two specific points that have not been addressed. Maybe the Minister will write to me about them in the next couple of days, but will he tell me now whether the police can avoid recording an allegation of crime and what view, if any, the Home Office has on an independent assessment of the financial compensation package?

I thought that I dealt with the second point in what I said about the money. Perhaps I was not clear enough. I was trying to say that, whatever investigation process is achieved, I shall still need to be satisfied that the amount of money proposed as a solution is a good and proper use of public funds. I acknowledge that one consideration in that regard is the desirability of achieving a solution to the situation so that it does not in various ways keep taking up time, resources and energy. An independent investigation may be agreed by all parties as an appropriate way forward, but I am not in a position to sign the Government up to saying that we will automatically fund whatever comes out of that process. We have to look at the amount of money that is recommended and come to a view about what is proper public spending. I did not address the hon. Gentleman's first point on the recording of allegations and will write to him on it, because he was making a general point about the way in which the police codes operate and how they can be addressed.

I conclude by saying that it is essential that any proposed settlement of the case be fair to the interests of all the parties involved, including the Metropolitan police, Mr. Warren and Dr. Bott. A settlement must be defensible in law and represent a proper use of public money and those criteria need to be taken into consideration in trying to reach a successful conclusion. I shall continue to look at the situation with those considerations in mind and hope that all parties involved seek to reach an agreement that respects those principles and moves them forward. As I think all parties would agree—certainly, judging from his opening speech, the hon. Gentleman would—the case has carried on for an unconscionable time. We must find a resolution that meets the honour of everyone concerned.

I studied the background to the case before the debate, as I knew nothing about it beforehand. I also listened carefully to what the hon. Gentleman said. I remain of the view that the main obstacle to achieving the kind of resolution that I have described remains how the questions and allegations about Dr. Bott's conduct are dealt with. There is a danger that we will be caught between a rock and a hard place and I urge the hon. Gentleman, on behalf of his constituent, to do whatever he can—as I know from past experience he will want to do—to ensure a proper solution.

This is a stuffy, smelly, airless room that is no substitute for the Chamber.

Since 10 June 1999, when the North Atlantic Treaty Organisation entered Kosovo, no fewer than 200,000 non-Serbs have left the province, and that trend continues. The new wave of refugees has added more difficulties to the economy, which was partly destroyed as a result of NATO bombing, with the additional burden of many years of sanctions.

This winter, only 30 per cent. of homes in Serbia are adequately heated. Those that are well heated are the ones with gas heating, and Russia has greatly alleviated the shortage of energy by providing gas. However, 70 per cent. of homes are poorly heated or not heated at all, and all the hospitals are inadequately heated.

We must bear it in mind that one element of Yugoslavia's energy system—oil—is in short supply because of sanctions. Those who have oil heating are trying to switch to electricity, which is costly. The problem affects pensioners in particular, whose pensions are often not more than DM60 a month—roughly £24. They simply cannot afford to pay the electricity bills.

Schools are also inadequately heated. In December and early January, the temperatures in Yugoslavia were as low as minus 13 deg. Yugoslav people, a great many of whom have little or no political persuasion, feel that the American and British Governments are putting an extra strain on their prolonged suffering. As a result of poor heating, the recent flu epidemic, which was serious enough here, hit Serbia even more seriously, and information is now emerging that doctors and pharmacists do not have even the most basic medication.

Owing to NATO intervention and the continuation of sanctions, the most vulnerable people in society are suffering—children, the sick and the old. As the Minister knows, along with my hon. Friend the Member for Halifax (Mrs. Mahon) and several others, I bitterly opposed the bombing before it happened and the hypocritical actions of politicians. The contrasts with Chechnya are becoming all too apparent.

In Kosovo, not a day goes by without Serbs being killed. Many non-Albanians are physically abused and kidnapped, and Serbian houses are being bombed and torched. Most information comes out of the region via refugees in Kosovo and radio amateurs. It is rather difficult to explain why the British Government and the British press are not reporting such news—of which they were full months ago—about what is really happening.

On 7 January, the Orthodox Christmas day, at 8.30 am, in Prizren, two Serb women on their way to church were killed by Albanian extremists. An effort has been made to find out about the incident, but I am told that neither the United Nations nor KFOR would co-operate. However, Susan Manuel, a UN spokeswoman, stated that on Wednesday 5 January, a 39-year-old Serb was shot three times in the head, also in Prizren. With the number of non-Albanians now being killed and the violence not decreasing, the authorities are withholding the names of those who have been killed or abused.

On 9 January, at 1.30 pm, an Albanian killed a Serb, Rodoljub Gasic, aged 47, who was sawing up logs in front of his house. KFOR members arrived to investigate the incident one hour later, even though it happened in Gnjilane, near the KFOR post. KFOR is overseeing what is little less than the genocide of Serbs in Kosovo. As a further example, in the town of Vitina, of a population of 3,000 Serbs many have been killed and only about 800 remain. Those who remain live in ghettos.

Further relevant facts illustrate the situation in Kosovo. Graveyards in Prizren and Urosevac, as in other parts of Kosovo, have been destroyed and desecrated. Fifty-six churches have been destroyed, and some were even bombed during the Orthodox Christmas. Unexploded cluster bombs that NATO dropped throughout Kosovo are taking their toll. The first question of which I gave notice related to cluster bombs. What is being done about the Human Rights Watch report?

Several hon. Members attended a very moving session with Professor Douglas Rokke, a patriotic American who was head of one of the investigating units. The Foreign and Commonwealth Office knew about his visit, and I said that there was a full report in The Scotsman under the bylines of Tim Llewelyn and Conal Urquhart. Does the Minister have anything to say about that? My third point relates to policy towards enclaves and the idea that, in order to protect such Serbs as remain, enclaves should be formed.

My fourth point is perhaps less weighty, but I ask for comment nevertheless. When my friend Craig Brown, the Scottish football team manager, proposed that the Scottish side might play in Belgrade, a ton of coals descended on his head for making such a suggestion. I may be wrong, but I thought that we had no quarrel with the Serb people. If that is so, what is the Government's attitude towards Craig Brown's proposal?

My fifth point relates to the speeding up of a film about the Grdelica train bombing, in which at least 14 civilians were killed. A videotape shown by NATO to explain the killing of those civilians on a train on a bridge in Serbia last April was shown at triple speed. The alliance has tried to excuse the killing of those civilians by saying that the train was travelling too fast for the missiles' trajectory to be changed in time. As I understand it, NATO war planes fired two missiles at the 50 m long bridge over the Juzna Morava river at Klisura, some 300 km south of Belgrade, on 12 April during the campaign to force Belgrade's troops to leave Kosovo.

NATO's supreme commander in Europe, General Clark, shortly afterwards showed two videotapes of the train apparently travelling fast on the bridge, and said that it had been impossible to alter the missiles' trajectories. The German press said that the two videotapes were shown at three times normal speed. A spokesman for NATO's military command in Mons in Belgium acknowledged in a telephone interview with Agence France-Presse that those images had been altered by "a technical problem".

Yesterday, along with George Alagiah and the hon. Member for Tatton (Mr. Bell), I took part in a long Esther Rantzen programme at Television Centre, in which I had an exchange with Jamie Shea on the issue. Mr. Shea's answers were totally unconvincing. I wonder whether the Government have a more convincing answer.

I leave time for the hon. Member for Uxbridge (Mr. Randall).

Order. The hon. Member for Linlithgow (Mr. Dalyell) suggested that he would like the hon. Member for Uxbridge to take part. Has either of them notified the Minister and sought his approval?

Of course. I sent copies of my letters to Madam Speaker to the Foreign Office.

I am grateful, as that is courteous and appropriate.

1.10 pm

I am grateful to have the opportunity to take part in the debate. I feel privileged to follow the hon. Member for Linlithgow (Mr. Dalyell). Not only do I agree with everything that he has said so far, even down to his comment about the atmosphere of the Chamber, but he provides an example to me as a new Member of the targets that a Back Bencher can and should achieve.

The hon. Member for Hereford (Mr. Keetch) and I were fortunate to visit Montenegro a few weeks ago as part of a delegation from the Westminster Foundation for Democracy. We had the opportunity to speak to representatives of all the political parties and many other organisations from that country, and were fortunate also to speak to members of Serbian opposition parties who had travelled to Podgorica to discuss matters with us.

Some of us have believed for a long time, although it is generally disregarded in this and other western countries, that the NATO bombing had only a negative effect on the opposition forces trying to bring real democracy to Serbia. The opposition parties told us repeatedly that their job has been made 10 times worse. One of the main culprits that they blamed for their lack of movement was the American Government, who for a long time sustained the Milosevic regime because they could do business with it. When there might have been an opposition boycott of elections, the American envoy pooh-poohed the idea. Opposition parties regarded that as a major setback to their own progress towards democracy.

The opposition is highly fragmented and demoralised, and there is a plethora of opposition parties. There are more than 180 political parties in Serbia and a current joke, if it can be called a joke, is that, if two Serbs are in a room, the result will be three political parties.

There are one or two encouraging signs. Students have started a movement rather than a political party, which is called Otpor, and I sincerely hope that the British Government will give not only moral support but something more concrete to those who want to bring real change to the country.

There is a great feeling among the people in Serbia that they have been victimised, although we keep saying that our argument is not with them. A readily acceptable way to show that would be to have some visits from sports teams, such as the visit from the Scottish football team that the hon. Member for Linlithgow mentioned. Something of that nature would establish relations not at a political level, but at a human one. I suggest that Red Star Belgrade, which has now been depoliticised, might be a suitable opposition. There is an hon. Member connected with Coventry City football club—I believe that Coventry is twinned with Belgrade—so something of that sort could be possible. Such an event would help the Serbian people to realise that our argument is not with them, but with the regime.

I cannot stress the need to relax sanctions strongly enough, especially those on air travel, which affect Montenegro as well as Serbia. It was suggested to me that the sanctions against certain members of the regime and the ruling party would be more effective if other people could travel freely while they were denied access. The blanket nature of sanctions means that we are victimising a nation for the actions of a few.

I cannot think of a better way to start the process of bringing Serbia back into the international community than building bridges, which would be symbolic and actual. It would not simply be moral or intended to improve people's lives. There is also a commercial reason. I have heard that many of our European Union partners are busy quietly behind the scenes, working to establish contacts, and I fear that when relations are normalised, the British Government and the British people will be the losers.

1.17 pm

I congratulate my hon. Friend the Member for Linlithgow (Mr. Dalyell) on securing the debate. He is one of the Members of Parliament whom I most admire, and I know that he has deep concerns about the issue. I recognise his generosity in allowing the hon. Member for Uxbridge (Mr. Randall) to contribute to the debate. I know of his interest in the matter.

My hon. Friend the Member for Linlithgow referred to the situation in Kosovo and Serbia. I hope that hon. Members will find it useful if I address the subject of what Britain and our partners in the international community are doing to tackle the challenges, both immediate and longer term, that we face in the Balkans.

The successive crises of former Yugoslavia over the past decade show that the greatest obstacle to progress remains the policies of ethnic hatred and violence pursued by the regime of President Milosevic. He laid the seeds for conflict in Kosovo 10 years ago when he robbed that province of its autonomy.

Throughout the 1990s, despite international pressure, Milosevic refused to address legitimate demands from Kosovo Albanians for a political settlement. When those demands became radicalised, his forces responded with wholly disproportionate violence. Milosevic threw away the chance for a peaceful solution to Kosovo. That was bad enough, but, at the same time as his delegation pretended to negotiate a Kosovo settlement, his forces began an offensive, not only attacking the Kosovo Liberation Army but terrifying innocent men, women and children and driving them from their homes.

Faced with the need to avert an humanitarian disaster, all 19 Governments of NATO were clear that the alliance had to act. NATO's intervention was an important setback to the policies of extreme nationalism, which have done such damage in the former Yugoslavia during the past decade. We now have the opportunity to press home our advantage and push for genuine change throughout the region.

Let me start with Kosovo. My hon. Friend kindly contacted my office yesterday to forewarn me of several questions that he was planning to ask today, which he has indeed asked. In the time available, I can give him only brief answers, but if he wishes, I should be happy to write to him after the debate to give him more details.

My hon. Friend referred to the recent press reports about the air strike on 12 April on the railroad bridge at Grdelica, in which a train crossing the bridge was hit accidentally. NATO has acknowledged that, by accident, the video footage of the incident was played back at higher than normal speed. It went to great lengths to avoid civilian casualties. A handful of accidents occurred out of 8,000 bombing missions. NATO's painstaking approach stands in stark contrast to the brutality of the Milosevic regime's ethnic cleansing policy.

My hon. Friend referred also to the use of cluster bombs in Kosovo. KFOR, including United Kingdom troops, has made a major effort to clear cluster bombs from Kosovo. The United Kingdom sector is now 80 per cent. clear. KFOR has also had the huge task of clearing mines left by Serb forces in Kosovo. Clearance efforts have concentrated on highly populated areas, including schools, of which more than 600 have now been cleared. Several deaths and injuries have occurred as a result of unexploded cluster bombs, which is why the clearance effort is so important.

My hon. Friend also referred to the use of depleted uranium. That was not used by United Kingdom troops. It is not prohibited by any international convention. It is not regarded by the International Commission on Non-Ionising Radiation Protection as a health hazard.

My hon. Friend also wrote to my right hon. Friend the Foreign Secretary about the press reports that the Scotland football team had been invited to play against the former Yugoslav republic, a point that he repeated today and that was also referred to by the hon. Member for Uxbridge. We do not discourage sporting links with the FRY, but the Scottish Football Association will doubtless wish to take into account the Foreign Office's advice on travel to Serbia and the lack of international flights into Belgrade.

Let me cover briefly the Government's approach to Kosovo. We have an opportunity in Kosovo to build a society based on modern European values: plural democracy, free media, open markets and the rule of law. The rebuilding of Kosovo is a massive task after decades of neglect and destruction wrought by Serbian oppression. The international community is making a massive investment through the UN mission, the NATO-led Kosovo force and bilateral aid via charities and non-governmental organisations. Britain continues rightly to play a leading role.

Since March last year, the Department for International Development has committed £90 million to Kosovo: first, for humanitarian relief and now for rebuilding. British expertise, our soldiers and police officers have played an exceptional role. Progress has been made, but serious problems remain.

My hon. Friend raised the situation of minorities in Kosovo. The security situation, particularly for the minorities, remains of real concern to the Government. Many Serbs and other minorities fled Kosovo following the withdrawal of Serb forces in June. Some may have had good reason to flee, fearing indictment for war crimes, but many simply feared that they would be victims of revenge killings. Many left following violence and intimidation.

The European Union has made clear our condemnation of ethnic violence on any side. We have said that our substantial contribution to rebuilding Kosovo—as much as 500 million euros next year—would be affected if ethnic violence and intimidation continued. KFOR and the United Nations mission in Kosovo—UNMIK—are devoting a lot of time and effort to protecting the Serbs and other minorities in Kosovo. British soldiers live with Serb families in Pristina. They escort old people to the shops and younger people to schools and places of work, but that can be only a temporary solution, dealing with the symptoms rather than the disease. The lasting answer lies in building confidence among the communities and fostering hope and reconciliation.

Hon. Members have asked today why we are not helping to rebuild Serbia as we are helping in Kosovo. Our response is quite clear. The responsibility for what has gone wrong in Serbia rests with Milosevic, not with us. The targets that NATO hit in Serbia were chosen because of their high military value to the regime, which was conducting appalling repression in Kosovo. NATO's campaign was legitimate: it was necessitated by the actions of the Belgrade Government and Belgrade must take full responsibility for the results.

We have no quarrel with the people of Serbia. Our problem is with their leadership. We want Serbia to take its rightful place in the mainstream of modern Europe. It should, like its neighbours, including Montenegro, be participating in the stability pact and thus benefit from foreign investment, trade and co-operation, but Serbia cannot take part while it is ruled by men who are indicted for crimes against humanity. The EU and NATO are united on that, which is why we believe economic sanctions targeted on the regime should remain in place until there is real political change.

International policy is neither passive nor negative. We want to act to encourage change in Serbia. The European Union has set out in a public declaration to the people of Serbia the new opportunities of trade, investment and closer relations that will open up once again when they replace their current Government with a body that embraces the values of democracy, pluralism and tolerance. Last year, the British Government set up a special £3 million fund to provide help and support for the independent media and civil society across the Federal Republic of Yugoslavia. We are working to develop a professional, liberal media. We are running a series of conferences to bring together leading figures in Serbian society and the democratic opposition with their counterparts in Britain. We are building co-operation between United Kingdom local authorities and municipalities in Serbia that are run by the democratic opposition.

What did the Secretary of State for International Development mean when she said that the west was ready to move if there was a health catastrophe in Serbia? Do we have plans to help in the event of such a catastrophe?

We are always watching and monitoring the situation carefully. My right hon. Friend the Secretary of State for International Development was saying that Britain stands ready to help in any way. I have demonstrated in my speech today how much support we have given in Serbia.

The international community is in place on the ground in Serbia providing genuine humanitarian help. That will continue throughout winter and beyond. We must be wary, however, of playing into Milosevic's hands. His regime exercises control, often through corruption and cronies, across much of the Serbian economy, public and private sector alike. He, his family and their political and business allies have grown rich over the years as they have led their country into economic isolation and impoverishment. We must ensure that our aid is targeted carefully and that it goes to the families of those in need, not to the bank accounts of those who seek to exploit them.

I am sorry that I have not had the time this afternoon to answer all the points about Montenegro that my hon. Friend has mentioned. However, my door is open if he wishes to discuss with me the results of his visit to Montenegro and I shall be more than happy to see him. The Government remain committed to ensuring that the region is peaceful and prosperous once again.

I am grateful for the opportunity to tell hon. Members about the situation facing some 3,300 tenants in Stockport who have tenancy agreements with private landlords and who are in receipt of housing benefit.

Housing benefit is a complex area of benefits legislation. I shall focus on one aspect only, which is the support given by the Rent Service. To prevent abuse of housing benefit, there is a ceiling on the amount that will be paid to landlords for a property, which is based on its size and geographical location. The determination of that ceiling is in the hands of the rent officer service—recently renamed the Rent Service. Today's debate is necessary because of the arbitrary behaviour of the service for Greater Manchester and its determination of rent levels in Stockport. It has set rents at a different and inappropriate level, compared with those of a short time ago.

This time last year, the rent officer said that the standard reference rent—the fair rent—for a three-room property in Stockport was £98 a week. In setting that rent, the rent officer was also providing an opportunity for a prospective tenant to approach him and say, "I am considering taking out a tenancy agreement. What is the ceiling for the property?" That is a pre-tenancy determination. The rent officer issued certificates saying, "We will give your landlord £98 a week in support of your tenancy." Reassured by that offer, many of my constituents went on to make tenancy agreements with landlords; they paid deposits and moved into the property. Many of them may have subsequently sent their children to school, taken up local training courses and settled into a peaceful life in the community where they live.

During the course of last year, the rent officer changed his mind. Instead of offering £98 a week support for tenancies, he said that it would be reduced to £75 a week. That is a reduction of £23 a week for the standard reference rent for three-roomed accommodation. Housing benefit is paid not to the tenant, but direct to the landlord. For many tenants, the first time that they became aware of the problems was when the landlord got in touch with them to say, "Your arrears are running at £23 a week. Your deposit is being eroded, so what are you going to do about it?"

What is going to be done? The Government's official advice, which is contained in their benefits leaflets, is that tenants should try to negotiate a lower rent with their landlords. That is completely unrealistic. The Government rent and lease property in Stockport. The idea that even they can go to their landords asking to renegotiate the rent downwards because they do not have the money is absurd. To expect those at the bottom of the economic pile to be able to do so is not feasible.

What alternatives do tenants have? They can surrender their tenancies or sit it out and face eviction. In either case, they are likely to find that the deposit that they need to go into another property has been eaten up by arrears. Many approach the council to draw on its exceptional hardship fund, which is a statutory requirement that the council has been drawing from in considerable amounts in the past few months. The exceptional hardship fund is exactly that: it must be for exceptional hardship. The council has received advice that it cannot make a class decision that all such people so affected can be paid.

Tenants can do what a number of them have done in Stockport and band together to take legal action against the Rent Service. There are plans for judicial review on the grounds of the unreasonableness of decisions, but tenants cannot appeal against a decision. There is no appeals system. Instead, they can go for a reassessment, which is not an appeal but a retrial. There are dire warnings to tenants who set off on this course that it is a retrial, so the sentence could be increased. They will not necessarily benefit from such action.

That official advice is also somewhat misleading. I made some inquiries to discover the position regarding reassessments in the north-west. About a quarter of all reassessments result in the tenant benefitting; about three quarters result in no change on the original rent officer's assessment; and about 3 per cent. result in a worsening of the tenant's position. Understandably, tenants who have already taken a hit of £23 a week, or more in some cases—we have recorded cases of more than £35 a week drop in support—are reluctant to opt for reassessment, with the possibility of their position being made worse.

I wonder whether I can tempt you to take a short journey along the A6, Mr. Deputy Speaker—a road that we both know well—from Manchester, somewhere around the area of Longsight, through to Poynton in your constituency. In October 1998, if I had wanted to take out a tenancy of four rooms in Manchester, let us say in Longsight, the rent officer believed that the support that I should get was £75.55 a week. By the time we have reached the middle of Stockport, for the same accommodation, the rent officer thought that the amount should be £90 a week. If we go a little further, to High Lane, the amount is £107.50 a week. In Disley and Poynton the rent support is £121.59 a week.

I know that you cannot participate in the debate, Mr. Deputy Speaker, but you may be able to nod and encourage the Minister to make a helpful reply. That gradient of increasing property values fairly reflects the position along that stretch of road. There is a £15 increase from Longsight to Stockport, another £17 to High Lane and a further £14 to Disley and Poynton. I can still get my £76 a week in Longsight, but in Stockport and Hazel Grove, I am restricted to £84. If I am in Disley or Poynton, I can continue to receive £121.

The differential between the centre of Manchester and High Lane is 10 per cent. and the differential between High Lane and Poynton and Disley is 44 per cent. That is a manifest and gigantic step which is out of kilter with reality.

The hon. Gentleman ought to make at least some comparison between the private sector and the semi-public sector. Will he say what housing association rents are along that same gradient for probably rather better property? Does he accept that rents for housing association properties are about a third lower and that council rents along that same gradient are probably half that level? Is it not a problem that private landlords in Stockport, in particular, have been ripping off the public purse with the levels of rent that they have been charging?

No, it is not, I cite my own experience. About nine years ago, I rented property in my constituency. I was looking for the most economical accommodation and I was paying £390 a month. That is similar to the sum that was permitted until a year ago. The private rented sector in Stockport is no different from elsewhere. It reflects the pressure of demand. I remind the hon. Gentleman that about 6,000 people in Stockport are awaiting accommodation. The council cannot house them and only private rented accommodation is available. The overall result is that it is not now possible to rent private accommodation in my constituency and receive 100 per cent. payment of housing benefit. As a result, people are having to leave home and withdraw their children from school. We are facing economic cleansing. Poor people who need rented accommodation are no longer able to live in Hazel Grove.

Why is there such a discrepancy? Perhaps the answer is connected to the point raised by the hon. Gentleman. When I approached the rent officer, the first reason that he gave me was that Stockport has two separate locations, which makes no sense, and that there should be only one. His argument appeared to be that one area has one ceiling, that the other area has a different ceiling and that both areas should clearly have the same ceiling. Fair enough, it is a thought; but surely the solution is not to reduce the lower ceiling by £6 and the higher one by even more.

The rent officer's second reason was that rents in Stockport are too high. My personal experience is that market forces appear to be operating exactly as one would expect. However, his third argument was the one that I found most difficult to accept. He suggested that the people affected should buy, not rent. He said that mortgage rates are now so low that it would be cheaper to buy a property than to rent it. He ignored the fact that those people are on benefit. They are on the poverty level, in many cases with no source of employment. For them, the option of buying does not exist.

Next, there is the "nod, nod, wink, wink" reason, which seems to be used in private whenever rent officers from other areas visit Stockport to make their reassessments; but the visitors, too, are puzzled. They do not understand why it happens, but they know that it helps to reduce expenditure. Will the Minister tell us whether the rent officer is conforming to a genuine Government directive, or what he believes to be a Government directive to reduce public expenditure—or has he simply decided to leave a time bomb for the newly reorganised service to face?

What I want to hear from the Minister is exactly the same as Stockport council wanted to hear when it wrote to the Department of Social Security on 12 November 1999—a letter to which, as of yesterday, no answer has yet been received. First, I want him to call off the rent officer. He should make a clear statement today that the Government do not want the housing benefit system to be used to cause the wholesale disruption of local communities. Tenants should not be used as a battering ram to knock down Government expenditure. I want the Minister to tell the rent officer to reconsider the idea of restoring—

Will the hon. Gentleman give way?

Order. I do not know whether the hon. Gentleman has sought the permission of the hon. Member for Hazel Grove (Mr. Stunell) to intervene. It is a grey area. I shall permit interventions, provided that they are brief, but this is a private debate between the hon. Member for Hazel Grove and the Minister.

On time grounds, I do not think that I can give way now. The hon. Gentleman had not approached me previously.

I want the Minister to ask the rent officer to consider restoring the two localities and to consider whether rent levels from Manchester, through central Stockport, to the suburbs and commuter villages beyond were not more realistic in October 1998 than in October 1999.

Next, I want pre-tenancy determinations to be valid for longer than the existing six months, which will create a cushion. When tenants take out annual tenancies, which is common in Stockport, they sign them in good faith. Those tenancies should not be put in peril by a rent officer's decision that they can neither avoid nor appeal against. When tenants initiate a redetermination following the rent officer's assessment, and it results in a further worsening of the tenant's position, I want a guarantee that it will in turn be frozen, because it is the only appeals system available. It is entirely unjust that a tenant should be prevented or restrained from resorting to the system simply because he might make his situation worse.

Lastly, I want to hear the Minister say that those problems will be carefully considered in the long-promised White Paper on housing policy, and that the Government intend to safeguard tenants from such abrupt and arbitrary changes and reductions in benefit—and to give them effective remedies when it happens.

I am grateful to have had the opportunity to raise this matter. I look forward to the Minister's response.

1.46 pm

The hon. Member for Hazel Grove (Mr. Stunell) has raised an important matter. He asked about the role of the rent officer. It is to assess whether housing benefit claimants are being asked to pay more than the going rate in the open market. Rent offices do that by identifying what a person not on housing benefit would be prepared to pay for the dwelling concerned. The process involves a number of determinations, including the local reference rent, which effectively places a cap on the amount of housing benefit that a tenant can obtain, and it is linked to the general level of rents for similar properties in the area. It is therefore vital to ensure that rent officers perform their valuations accurately and consistently.

I should make it clear that rent officers are independent and that their advice should be impartial. Neither I nor my ministerial colleagues have any authority to intervene in or overturn their decisions. However, my Department has responsibility for overseeing the work of rent officers, and I clearly have a duty to ensure that they are organised in a professional manner and are accountable for their decisions.

Our drive to modernise and improve Government was the main reason why we decided, in October 1998, to establish an agency for rent officers. Previously, the service consisted of 77 separate and largely unaccountable rent registration areas. Of course, there is no question of the independent status of rent officers diminishing under the agency. However, the establishment of the agency means that, for the first time, rent officers will operate within a central management framework that is committed to greater openness, more accountability and greater consistency.

I listened carefully to what the hon. Gentleman had to say about the difficulties that some of his constituents face because of the recent determinations made by rent officers, and I am sympathetic to those difficulties. I recognise the serious consequences that flow when a tenant who has lived in a property for several years is faced with the stark choice of having to move because he can no longer afford to pay the rent.

The overriding objective of the housing benefit system is to enable those with no income of their own and those on low incomes to provide for their reasonable housing costs. The housing benefit system should cover reasonable rents that reflect the general level for similar properties in the area. However, housing benefit should not subsidise someone to live in a property that is unreasonably expensive. If it did, tenants would understandably have no incentive to look for more reasonably priced accommodation and landlords would have no incentive to seek more reasonable rents.

A fundamental principle of the regulations that the rent officers are required to follow is that their determinations must be based on rent levels that are being achieved in the open market. In that way, the possibility of housing benefit leading the market is negated. Of course, a rent officer does not endear himself to landlords or tenants by bearing down on rent levels. However, if all the evidence points to determining the rent lower than the expectations of the landlord and tenant, that is usually the right thing to do.

To understand the problems that have arisen in Stockport, it is important to bear in mind the local rental market conditions to which rent officers must have regard and which the hon. Gentleman described. Evidence collected by rent officers suggests that there is an oversupply of accommodation to let and that rent levels in the open market have been falling as a result. I accept that that is not likely to be the case in all parts of Stockport or for all types of accommodation, but the fact is that rent officers have taken the view that there is generally no scarcity of accommodation stoking up rent levels in the area.

Rent officers must regularly test the accuracy of market evidence and keep their market evidence database constantly under review. I understand that a comprehensive review of the rental market throughout Greater Manchester was undertaken in November 1998 and that it was repeated in June and December last year. I also understand that senior management in the Rent Service has considered circumstances in Stockport closely and it concluded that rent officers have been following good and professional valuation practices. I have no reason to doubt that. However, the hon. Member for Hazel Grove has rightly dwelt on the consequences of some of the decisions, however reasonable, and it is right that we should attempt to address them.

rose—

Please be very brief.

Ms Coffey: I thank my hon. Friend the Minister for giving way. The circumstances are very complicated, and he will be aware that more than £21 million of Government subsidy came into the private market in Stockport last year. At the same time, there are empty council properties, although I accept the remarks of the hon. Member for Hazel Grove (Mr. Stunell) about his constituency. As a way forward, will my hon. Friend agree to meet all Stockport Members of Parliament to discuss the matter in greater depth? The hon. Member fror Hazel Grove has made a valid point about the consequences in individual cases.

Order. I must ask the hon. Lady to resume her seat. I do not believe that she has done the hon. Member whose debate this is the courtesy of asking him whether she can intervene.

On a point of order, Mr. Deputy Speaker. I understood that the conventions of Westminster Hall were to be the same as those in the main Chamber, where an hon. Member can seek to intervene without notice and the hon. Member making a speech may give way if he or she wishes. If we wish to take part in the debate, and want time to do so, we should ask the hon. Member in question. Surely we are entitled to the same conventions as those of the Chamber, which allow us to intervene if the speaker is prepared to give way.

The hon. Member is right to say that the procedures in this place are the same as those in the main Chamber. During an Adjournment debate, it is important for hon. Members who wish to intervene to seek not only the permission of the hon. Member who has initiated the debate, but that of the Minister. Two interventions are allowed, and I have allowed them. We are taking time from the debate initiated by the hon. Member for Hazel Grove.

My hon. Friend the Member for Stockport (Ms Coffey) made a reasonable suggestion, which I am minded to accept and to which I shall return in a moment.

I should put some figures on record. Stockport council's welfare rights units reports various difficulties relating to recent rent officer determinations in the area. Of 2,110 tenants covered by the relevant housing benefit regulations, 400 have so far received a decrease in their benefit. Shortfalls are between £5 and £30 a week, although I know that the hon. Member for Hazel Grove referred to one of £35. As he said, such tenants have to negotiate a lower rent, find the difference from another source or move. The council has so far awarded 140 exceptional hardship payments, at a cost of £51,000. As far as I am aware, no evictions have yet been made.

I am in a difficult position. I have had very short notice of the points that the hon. Gentleman wants me to consider, although I make no complaint about that. My powers are limited, and I cannot direct a rent officer. I am sure that he agrees that it is desirable that landlords should not be able to milk the housing benefit system, especially when a great deal of public housing that might be better used is lying idle. I acknowledge the difficulties faced by some of his constituents, which he outlined graphically.

I cannot promise to satisfy the hon. Gentleman, but it would be helpful to consider the matter in more detail than has been possible in the short time available to me. I propose that all three Members of Parliament representing Stockport constituencies—

There are four.

I beg the hon. Gentleman's pardon. There are four. I propose that those four hon. Members, representatives of Stockport council and the rent officer should come to see me so that we can discuss the matter rationally and calmly, first, to understand the consequences and, secondly, to find out whether there is a way of mitigating them.

Question put and agreed to

Adjourned accordingly at four minutes to Two o'clock.